Public Services: Corporate Governance of Businesses

Lord Henley Excerpts

Tuesday 13th March 2018 Lords Chamber

[Lord Haskel]

To ask Her Majesty’s Government what steps they are taking to ensure a high standard of corporate governance at businesses that provide essential public services.

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

My Lords, the Government’s corporate governance reform package will strengthen the United Kingdom’s corporate governance framework. Secondary legislation to be brought forward will require reporting on how company directors take their employee, supplier, customer and other stakeholder interests into account when carrying out their duties. It will also require quoted companies to publish and explain the ratio of their CEOs’ pay to the average of their United Kingdom employees.

[Lord Haskel (Lab)]

My Lords, I hear what the Minister says but this is the second Question we have had this afternoon about public services. Does this not indicate that the system of fines and regulation is just not working? Will the Government introduce a new purpose-driven classification to be adopted by companies which are privately owned but publicly guaranteed, because we have to ensure continuity of their essential public services? It must be a classification that ensures a standard of behaviour that is responsive to the public and ensures that company policy and company metrics are aligned to the public interest and not just to shareholder value.

[Lord Henley]

My Lords, we have always made it quite clear that the importance of public services will come first. In terms of the affair of Carillion, which I think the noble Lord was alluding to without mentioning its name, my right honourable friend the Secretary of State made the situation clear in his initial responses. We have also made it clear that we need to see some degree of reform of corporate governance. That is why we brought forward that reform package and why the Financial Reporting Council has been consulting on its revisions to the code; when those come forward we will take that on further.

[Lord Naseby (Con)]

Is my noble friend aware that the current Lord Mayor of London has launched a campaign to restore trust in corporate governance and businesses throughout the United Kingdom? In that context, will he join the Lord Mayor of London and extend it beyond that franchise to possibly involve the Institute of Directors, the CBI, the TUC and trade bodies throughout the United Kingdom? As I am sure my noble friend is aware, there is a problem with public trust in the corporate world. Will he make sure that Her Majesty’s Government are absolutely in the vanguard of ensuring that that trust is restored?

[Lord Henley]

I am grateful to my noble friend for that response and I am aware of the Lord Mayor’s campaign. In fact, I was present—if I remember the precise event—at the launch of that campaign by the Lord Mayor. My right honourable friend the Prime Minister has also always made her views clear about the importance of corporate governance and reforms thereof. That is why we have brought forward this package and why, as I said, the Financial Reporting Council is consulting on it.

[Lord Fox (LD)]

My Lords, the role of the shareholder is very important in maintaining corporate governance, but increasingly the share registers of Britain’s companies are dominated by passive shareholders who do not have the capacity to oversee the corporate governance of the companies they own. Will the Minister explain who, in the absence of the shareholder, is the prime overseer of the board to maintain corporate governance?

[Lord Henley]

My Lords, as I said, the code and its revisions will be important, but it is also important that shareholders play their part in this process. We have considered that and it is why we have already brought forward certain reforms to increase shareholders’ knowledge. For example, shareholders can now see when companies have significant shareholder opposition to directors’ pay. The Investment Association’s public register was launched in December and a number of investors—that is, shareholders—are already using this information as a tool to inform their voting in the upcoming reporting season. If we can improve shareholders’ knowledge, that will improve what they can do in controlling their companies.

[Lord Watts (Lab)]

My Lords, would it not be a good idea to have representatives from the workforce on these boards to break up the old boys’ network that exists on a lot of boards? That way we would get some proper public accountability.

[Lord Henley]

My Lords, we think it is very important that the voice of those working for companies should be heard on the board. In the Corporate Governance Reform Green Paper we made it clear that companies should have flexibility to choose how best to engage with their employees, and there are a number of different ways they can do that. They can have an independent director who represents employee views, an employee advisory council or a director directly from the workforce. There are a number of options. It is certainly something that should be looked at.

[Lord Stevenson of Balmacara (Lab)]

Does the Minister agree that one of the reasons we are now experiencing a bit of a run of scandals on outsourced public services is the lack of information available to public authorities which have to control them? Will the corporate governance changes which the Minister responded to give the Financial Reporting Council greater powers to regulate companies and to take action before things go badly wrong? It asked for those powers after the BHS collapse two years ago. When will we see the results of the lessons learned exercise on Carillion and the actions required by government, according to the Secretary of State, to strengthen,

“the oversight … of the public sector in terms of contractors”?—[Official Report, Commons, 30/1/18; col. 657.]

[Lord Henley]

The noble Lord is right to draw attention to the role of the Financial Reporting Council. We believe it has a range of powers that allow it to sanction, for example, individual auditors and accountants and to audit firms. In implementing our reforms, we certainly want to give further consideration to whether the FRC has the appropriate powers, resources and status to operate effectively.

Smart Meters Bill

Lord Henley Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th March 2018 Lords Chamber

Moved by

[Lord Henley]

That the Bill be now read a second time.

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

My Lords, the rollout of smart meters is a key enabler for the transformation of our energy system. Smart meters are a critical part of the platform for the development of a smart grid and demand-side measures. Smart meters will facilitate greater flexibility in the production and consumption of energy by providing better information and improving communication between consumers, suppliers and network companies. In particular, they will improve the ability to shift demand to match supply, allowing us to make use of excess renewable electricity when it is available and use less electricity at peak times when it is more expensive. They will also improve distribution network companies’ understanding of and control over the use of their networks, allowing more power to flow through the existing wires without reinforcement, improving reliability and safety as well as reducing costs.

The development of a world-leading smart energy system, which delivers secure, cheaper and cleaner energy, is an important part of our industrial strategy. The vision of a smarter energy system, built on a platform of smart metering, is a prize worth striving for. The smart metering programme is one of the most significant infrastructure projects our country has seen. Over 50 million gas and electricity meters are expected to be installed in over 30 million homes and small businesses. The Government are committed to ensuring that all homes and small businesses are offered smart meters by the end of 2020, and considerable progress has been made. The enduring national data and communications service has been built, tested and launched. The Government have also established much of the regulatory, policy and technical framework necessary for this programme to be a success.

Energy suppliers are now actively installing smart and advanced meters, backed by Smart Energy GB’s national consumer awareness-raising campaigns. By September 2017, over 8.6 million smart and advanced meters were operating in homes and businesses across Great Britain. Rates of installation are also increasing, with around 400,000 being installed each month. Households and small businesses can start saving energy and money as soon as their smart meters are installed. Indeed, smart meters are expected to take £300 million off domestic energy bills in 2020 alone, rising to £1.2 billion a year by 2030. These are not small sums of money, and it is right that the Government continue to oversee and monitor the rollout to ensure that it delivers effectively, bringing benefits to GB consumers.

The costs of the rollout were debated extensively in another place, and the Government have listened to the concerns raised. Along with the regulator Ofgem, we closely monitor progress and costs to ensure that the significant benefit case, estimated at £5.7 billion net benefits, is secured. It is worth highlighting to the House that, following those debates and as part of our broader commitment to transparency, we agreed to publish a further update of the cost-benefit analysis for the programme in 2019. The Bill received broad support at Third Reading in another place, as would be expected for a well-established programme that has its origins in the Energy Act 2008 and was considered further when its powers were amended in the Energy Act 2011. I hope that we can continue the same constructive debate that has characterised the Bill’s passage to date.

Let me turn to the Bill itself, which has three measures. The first measure in the Bill extends by five years the Government’s powers to direct the rollout of smart meters, which are due to expire in November 2018. The most important of these is the power to modify energy licence conditions and industry codes, for the purposes of supporting the smart metering rollout. The Government have used their powers to put in place minimum common technical standards and consumer safeguards, including in relation to data access and privacy. Extending these powers to 1 November 2023 is necessary to maintain coherence in the rollout of smart meters and ensure that relevant activities are co-ordinated. This could include situations where new technical solutions are required to address any residual challenges to full smart meter coverage to ease industry-wide delivery challenges. In addition, the Government will look to take opportunities to maximise benefits from smart meters once installed.

The second measure will enable the establishment of a special administration regime for the smart meter communication licensee—currently the Data Communications Company, or DCC—to ensure the continuity of the smart meter communication service in the unlikely event of the licensee’s insolvency. The DCC is a licensed private sector entity and provides the national communications infrastructure for smart metering. The DCC enables energy suppliers and networks to collect energy consumption data remotely and securely, supporting them in delivering the full benefits of smart metering. Meters operated within the DCC will also be fully interoperable, enabling consumers to switch their energy supplier and keep their smart services. The special administration regime for the smart meter communication licensee is similar to that for energy networks and energy suppliers. The provision of a special administration regime has also been adopted across other sectors, including rail and water. The DCC’s financial arrangements are constructed so as to make the risk of insolvency low. However, the special administration regime is a sensible precaution, with the aim of ensuring continuity of the DCC’s services and so protecting consumers and industry from the impact of any hiatus in service provision.

The third measure relates to the delivery of half-hourly electricity settlement by Ofgem. Half-hourly settlement is a key enabler of the move to a smart energy system and will help deliver benefits to consumers and the energy system by providing incentives on energy suppliers to develop and offer innovations such as time-of-use tariffs, which will enable customers to use energy when it is cheaper, reducing their bills and the costs of the future energy system. This will also help the energy system become more resilient as we move towards an increasingly low-carbon generation mix. Ofgem is currently working with industry and consumer groups to assess the costs, benefits and market design options for market-wide half-hourly settlement. It intends to take a decision on whether and how to implement it, informed by an impact assessment, by the second half of 2019. This third measure will provide Ofgem with new powers that would allow it to deliver these reforms more swiftly and smoothly than under existing processes by allowing it to directly modify relevant industry codes and documents.

In summary, smart meter rollout will deliver a much-needed digital transformation to our energy system, providing the platform for a smarter, more flexible energy system that supports innovation in new, smart products and services. For consumers, smart meters provide the foundation for smarter living, creating opportunities for the emergence of innovative products and services, and taking us to a future where, for example, smart appliances such as dish-washers and fridges use energy when it is cheapest and to help reduce peak demand and energy system costs; energy networks know who has been affected by a power cut; and new tools support assisted living. Access to detailed, accurate energy consumption information will also support the delivery of tangible and immediate benefits to households and small businesses across Great Britain. I beg to move.

--- Later in debate ---

[Lord Lennie (Lab)]

My Lords, I should start by making a declaration—or perhaps a confession. I am a smart meter user. I accepted the offer made by the company. It is a SMETS 1, so it is not doing me much good in terms of reducing my consumption or the cost—but at least I have one. That, I think, may be unique among Members of this House, but not so much so among the wider public. I also thought until yesterday that we might be able to have a debate which did not involve the European Union. However, having seen E.ON’s and RWE’s proposals, we are reminded that this is not taking place in a vacuum and that E.ON will now become the major provider for the customers of electricity while RWE is getting back into green research and the provision of electricity—reversing a decision that was taken before our decision to come out of the European Union.

I thank all noble Lords who have taken part in the debate. I share with everyone their support for the Bill—with reservations, and unfortunately it is those reservations which are going to take up most of my time. I thank in particular my noble friend Lord Grantchester for his analysis at the start of the debate. It has saved me a lot of time because he has already done the work. I shall try to avoid any repetition during the course of what I have to say. I also thank the Minister for the meetings and briefings we have had about the proposals prior to this debate. They have been very helpful in our preparations.

The Bill has three stated interrelated purposes. The first is extending the powers of the Secretary of State in regulations for smart meters. The second is introducing a special administrative regime, the SAR, with a Data Communications Company, the DCC, to ensure that service continues in the event of their insolvency. The third is to introduce new powers to allow Ofgem to facilitate half-hourly settlements.

First, the extension of powers that are currently due to expire on 1 November 2018. The Bill seeks a further five-year period, until 2023, during which time the completion of the rollout of the smart meters and their claimed benefits will have become evident. That is the plan. What are the chances of this and what benefits will consumers see? The rollout requires companies to have offered every household and small business, and there are 40 million to 50 million of them, a meter by the end of 2020. The offer of the smart meter 1 has been slowed down, while the smart meter 2 is in some kind of preparatory phase and is being tested for workability and interoperability. So the chances of meeting the 2020 deadline are fast receding, unless the Government announce some huge increase of capacity to achieve their intention. The benefits to consumers are deemed to be so positive that they will take little persuasion—but, in this House and in other places, the consumer seems less trusting of the benefits than the Government seem to think. The record tells a different story.

Thus far, the second-generation SMETS 2 have been installed in only 70, perhaps 100, households out of a total of 50 million. If the SMETS 1s can be upgraded to SMETS 2 capability, it will account for some of the increase—but it will still need three times the current rate of approach, interchange and offer of these meters to achieve the 2020 deadline.

The benefit for the customer is that he or she will be in control of their pattern of energy usage, with real-time information being provided and an end to estimated billing. That is true: the smart meter tells you how much you have spent today. At any point in time, it will give you a scare. You have spent £5, £10 or whatever it is you have spent today. It does not tell you anything about what it is that is consuming that money. The DCC will be provided with a half-hour readout of the overall usage of our electricity consumption in order to benefit its purchasing power and allow it to more accurately purchase electricity to meet our needs, each half-hour of the day, as I understand things.

That should lead to a reduction in the price it pays at certain times in the day. That will then be passed on to the consumer in reduced billing. Someone talked about half-hour billings; I do not know if that is going to come about any time soon, but we will certainly know when it is cheaper to run certain types of electricity consumption. In order to make those changes, the customer has to be sure of the benefits or they are not going to change anything. They are going to carry on doing what they do at the time they prefer to do it. The chances of the lower-end pre-paid customer changing their habits, given the other pressures that there are in their life, are more remote than for those who perhaps have more time on their hands, can study these things and can make adjustments to habits that have been ingrained for some years, as they go through life, with family, children who move away and so on.

How will the Government force the energy companies to pass on savings that they will make to the customers? There was some talk in the energy committee in the other place that the Government will make sure that this happens, but how do they intend to enforce it? The Energy Minister in the other place quoted Richard Nixon, who said:

“If you’ve got them by the balls, their hearts and minds will follow”,—[Official Report, Commons, Smart Meters Bill Committee, 23/11/17; col. 73.]


but if you have not, they are not going to. That is about the size of it. I am not sure that the squeeze is happening quite where it needs to happen. Do the Government anticipate a change of heart among the energy companies towards their customers? That is unlikely. They are private businesses; they are in business to make a profit. That is their right and that is what they are set up to do. Their shareholders are their principal guides and they expect a return. It is hard to see where the customer fits into the squeeze there might be on the price of electricity to suppliers. The Government need to think through how the customer benefits are to be realistically delivered.

Another thing concerning the change in our pattern of usage of night-time electricity for white goods is that there are increased risks that the Government should be aware of. Household fires are more likely with unsupervised white goods. Nuisance neighbour noise disputes will be on the increase as energy powers machines at night, particularly in places where people live one on top of another, in blocks of flats and so on. So the attractions of changing patterns of usage of electricity may not lead to the greenfield nirvana the Government seem to believe in.

One of the things that might have been possible—maybe the Minister will comment on this—was the Government taking responsibility for providing the customer with tariff information. Would it have been possible under SMETS 1? Is it possible under SMETS 2? SMETS 3 could possibly, if it has not been thought of before, inform customers about their best possible energy price sources. It is hard enough right now to know exactly where my best deal is, comparing tariffs within one supplier, let alone across a range of suppliers, with six major companies and a number of other minor providers. It is a complicated matter. Could the Government introduce this into the SMETS system and pass on the information to customers? That would be a real benefit and a real selling point for the meters being accepted by more customers.

I turn to the DCC. The Government intend the regime to take back control should the company go into administration. A special administration regime is to be established. The provocation for this lies somewhere between the recent failure of Carillion, an oversight in the original setting up of the DCC and doubts about the performance of Capita, the current DCC operator. If the DCC fails, the customer will foot the bill. The risk of failure is said to be extremely low. However, the impact would be high. Could the Government provide some analysis or report to reassure us that the DCC’s remote chances of failure are so unlikely that no one can see it happening? What happens if the DCC decides to walk away from the contract? Are there penalties? What are they? Might the Government be left high and dry, not by the failure of the company but by the company no longer wishing to provide the service because it does not believe it will meet the 2020 deadline, let alone those beyond it?

These are some of the questions. We support the Bill. It is deficient in some areas and these will be explored more as we go through Committee and Report, but I would be grateful if the Minister could answer some of the questions raised so far.

[Lord Henley]

My Lords, on the last or second to last point made by the noble Lord, Lord Lennie, he looked forward to a world with a SMETS 3 or 4 that might be able to assist a customer in finding a new supplier and direct him in that way. I think we are already there. I imagine that the noble Lord reads the Guardian more often than I do, but the Guardian of 11 March was talking about one company that is developing some sort of dongle that can be plugged into one’s meter and will automatically switch one to the best supplier according to the programme one puts in. One can put in, “I want the greenest supplier” or “I want the cheapest supplier” and one could find oneself having a different supplier from month to month, possibly two or three times a year. The future is good. I refer the noble Lord to that article to see just what is happening out there and what smart meters, as they are at the moment, could possibly lead to.

I have to say that, listening to the debate, I felt that it was a fairly Eeyoreish performance, even by the standards of this House. The noble Baroness, Lady Featherstone, was politer—she referred to it as a masterclass in faint praise. The noble Baroness, Lady Maddock, was, as always, very kind to me: after making her Eeyoreish speech, along with her colleagues and all other noble Lords, she said that she expected something more optimistic from me, “Because the noble Lord always is very optimistic”. I think there is nothing wrong with being optimistic when one has technical developments that are going to bring great benefits to everyone. They are going to bring benefits to the consumer, as I made clear in my opening speech, but they will also bring benefits in terms of reducing our overall consumption and in many other ways.

Like the noble Baroness, Lady Featherstone, I was very amused by the picture of her noble friend Lord Teverson under the floorboards or somewhere—I am not quite sure where he was; it was rather a confusing picture, but he was in the rain with a torch. All I can do is refer the noble Lord to Hilaire Belloc’s “Lord Finchley”. The noble Lord will remember that Lord Finchley came to an untimely end because he tried to do these things himself. In future, the noble Lord can get someone else to look at these things, but smart meters will solve the problem for him.

Others, such as the noble Lord, Lord Whitty, and me, took us back to 2008. I was very grateful to him for doing that and for saying that back in 2008 he was giving warnings, in his Cassandra-like way, and now he could say, “I told you so”. The great thing is that he can say “I told you so” to everyone here, in that the 2008 Act, as the noble Lord and others on the Benches opposite will remember, was passed under a Labour Government. The 2011 Act that I referred to was passed under the coalition Government. I think that we had a Liberal Democrat in both the business department and the energy department during that time, so their fingers must have touched this at some point. Now, in 2018 we have a Conservative Government, so perhaps, like Peter Simple’s Dr Heinz Kiosk, I can just say, “We are all guilty!”, if something has gone wrong. I think, from the degrees of optimism I have listened to in the course of the debate, that there is a general acceptance that smart meters are going to be able to do something that has not been available before and that, as I said, that will bring great advantages to us.

A very large number of questions of a fairly detailed sort have been raised and I will try to address a number of them. However, I think that what a debate of this sort also shows is that even a Bill such as this—a Bill that is broadly welcomed on all sides, that has been through pre-legislative scrutiny, that has had a very useful trip through another place since that pre-legislative scrutiny and that is now here—will benefit from what your Lordships can do in Committee. I look forward to that Committee and hope that we can tease out just where the problems are so that I can give appropriate assurances on matters that are relevant to noble Lords and, if necessary, make amendments, but I do not think that that will be necessary. As the noble Lord, Lord Grantchester, put it, this is a largely technical Bill dealing with three small matters, but its title allows us to discuss the generality of smart meters, smart metering and how we get the rollout completed. I hope that in the course of this debate, Committee and further stages we can continue that process and provide the proper assurances.

This afternoon, I propose to answer a few of the questions to the best of my ability. I think it would be useful if I write another letter to all noble Lords who have taken part in this debate and place a copy in the Library, setting out a more detailed answer of the sort that one cannot properly give to some of the more detailed questions and very sensible suggestions made by my noble friend Lady Manzoor. I give that assurance that I will send that detailed response to all noble Lords.

In the meantime, I shall answer a few of the questions that have been asked. The first, and most important, is to give some sort of assurance that we believe that it is still possible, despite the numbers which the noble Lord, Lord Grantchester, quoted from Which?. The numbers probably appeared in the Daily Mail as well, for all I know—that was another publication that was mentioned. We believe that we will be able to get there in due course. The rollout to date has been growing. Around 400,000 smart meters are being installed every month. That has to get up to a bigger figure if we are going to get to the end in the three years that are available. I do not think that is representative of the next phase of the programme when most suppliers will be installing smart meters with greater numbers of installers and more types of customers across Britain. We will certainly continue to collect data—this was something that the noble Baroness, Lady Maddock, asked about—on the rollout, getting independent, official, quarterly statistics on progress by the large suppliers, and we will make sure that they are published quarterly, as I think they have been since September 2013. In addition, a summary of the annual rollout progress for the calendar year is published every March, so we should have that in due course. I do not know whether it will be before Committee, as no one has yet given me a suggested date for the next stage of the Bill.

[Lord Teverson]

As I said, I think it is impossible to get to that. Can I just be clear about the commitment? It is to offer everybody a smart meter. Are the Government clear with the suppliers about what “offer” means and that it is not just an email saying, “Do you want a smart meter”? Are we clear about the target? Not everybody wants one. Is that a potential get-out clause in this target?

[Lord Henley]

The noble Lord knows that we are not going down the route of saying that everyone will have one, but we hope everyone will see the benefits of them and that everyone will be offered one, and I hope that offer will be more than just the email that the noble Lord suggests. It is difficult to persuade people to change. Some months ago we discussed the ease with which one can change one’s electricity supplier. However, because of inertia, few people do. The easier that it becomes and the more benefits that there are, the more people will switch supplier. The same applies to smart meters: people will adopt them as they see the benefit. We shall continue to push suppliers to do what they can, because of the benefits. That is not only those benefits to consumers that we all recognise, but those to the country through reducing our overall electricity consumption by evening it out and those other benefits identified.

[Lord Grantchester]

I thank the Minister for giving way. It is the responsibility of Ofgem to report on the companies’ taking all reasonable steps to offer consumers a smart meter.

[Lord Henley]

The noble Lord is absolutely correct. I apologise for not making that clear. There will be information available from Ofgem.

On rollout, I agree with points made that there is more that we can do to engage with customers in moving to smart metering. This is important and we shall certainly do more. As noble Lords will know, we have required the establishment of Smart Energy GB. This is an independent not-for-profit organisation leading the centralised programme to raise national awareness alongside activities to drive behaviour change and help consumers to benefit from smart working. The situation is changing. I think that the noble Baroness, Lady Maddock, quoted figures about satisfaction rates, but on awareness of smart metering, this has increased from some 40% to over 80% in three years and has driven demand for millions. Research shows—I believe that this is a figure that the noble Baroness quoted—that some 80% of consumers who have smart meters would recommend them to friends and family.

The question of safeguards, safety of data and related issues, is a concern of my noble friend Lady Manzoor, the noble Lord, Lord Whitty, the noble Baroness, Lady Maddock, and others and it is something to which we shall come back in due course. National smart meter infrastructure has been developed from the outset in consultation with experts from industry and government including the National Cyber Security Centre, which is part of GCHQ. The smart meter security model establishes physical, regulatory and operational security controls backed by independent security assurance arrangements. For instance, critical commands will only be accepted by the smart meter if they are issued by the responsible energy supplier and authenticated through strong encryption. Moreover, they have to be countersigned independently by the DCC.

The Government have also put in place a strict data access framework that protects consumers’ privacy. This is important. I think that this was at the heart of some remarks of the noble Baroness, Lady Featherstone. Households will have control over who can access their detailed energy consumption data and for what purposes, except where this is required for regulated purposes—that includes billing.

I am beginning to run out of time. I shall write in greater detail. The final point that I shall address now is that of the noble Lord, Lord Broers. He highlighted the importance of more work to ensure that a promise of a connected home was delivered. The noble Lord will be aware of a joint BEIS-Ofgem smart systems and flexibility plan that was published in July 2017. That reaffirmed that smart meters are the foundation of a smart meter energy system. It included a commitment to work with industry to develop standards for smart appliances that will allow consumers to provide flexibility and benefit from demand-side response.

I appreciate that I was asked many more questions and that there is much detail that will need to be gone into. What I hope to do is to write a letter as soon as possible to all those who took part in the debate detailing all those points that need to be covered. The important point is that we can then sit down—or stand up—and discuss these matters in detail in Committee, make sure we have the Bill right when we send it back to the Commons and make sure that we can look forward to broad, sunlit, happy uplands. As I said, I will continue to be the optimist rather than one of the series of Eeyores I have heard speaking on this occasion. I look forward to a bright future for smart meters, whether that is SMETS 1, SMETS 2 or even SMETS 3 as mentioned by the noble Lord, Lord Lennie.

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

Brexit: Employment Protection for Women

Lord Henley Excerpts

Thursday 8th March 2018 Lords Chamber

[Baroness Gale]

To ask Her Majesty's Government how they will ensure that employment protections for women currently provided by European Union law will be maintained when the United Kingdom leaves the European Union.

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

My Lords, in her Lancaster House speech, my right honourable friend the Prime Minister made a clear commitment that all workers’ rights will be protected in negotiating Britain’s exit from the European Union. We will not roll back on employment protection for women.

[Baroness Gale (Lab)]

My Lords, I thank the Minister for his reply and for his reassurance, but is he aware of research carried out by the Equality and Human Rights Commission that documented the extent of pregnancy and maternity discrimination in the UK? It found that 50% of mothers of young babies indicated that maternity had impacted negatively on their opportunities, status and job security. What will the Government do to ensure that current employment law, which includes lots of EU law, is enforced and that women are protected from maternity discrimination in the workplace? This is of grave concern to many women who have suffered this discrimination. We have laws in place, but we have to make sure that they are carried out.

[Lord Henley]

My Lords, I am grateful to the noble Baroness for referring to that research, which of course I am aware of. We are also aware of the EU minimum standards and of where we are at the moment. As my right honourable friend the Prime Minister made clear, we will continue to meet those standards, but we will also be quite clear that we are ahead of European Union standards on a whole host of different areas, whether that is paternity leave or shared parental leave. We are doing our bit and will continue to do so; it is a matter for the UK Government to then decide in future.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend not agree that, when we have left the European Union, we will be able to enhance women’s rights in the workforce and not have to seek the agreement of 27 other member states and the Commission to do so? If the noble Baroness, Lady Gale, wishes to see improvements, it will be this Parliament that decides, and that is why we are leaving the European Union.

[Lord Henley]

My noble friend makes a very good point. There was an intervention in the debate on Monday from the noble Baroness, Lady Crawley, when she asked exactly this point about why we could not meet European standards and so on. She ended up by citing me and saying that I had replied,

“that the Government would take note of what the EU does in the future but that the whole point of Brexit was that we could make our own decisions”.

She went on to say:

“That is exactly what many of us are extremely concerned about”.—[Official Report, 5/3/18; col. 949.]


But as my noble friend has made clear, it is a matter for the United Kingdom Government and for the United Kingdom Parliament to decide these matters in the future.

[Baroness Burt of Solihull (LD)]

My Lords, we have listened with varying degrees of patience to the Government’s assurances that they have no intention of diminishing the rights of women post Brexit. I understand what the Minister says with regard to our current level of provision. Nevertheless, the Government have built a get-out-of-jail—through the back door and without primary legislation—Henry VIII card into the EU (Withdrawal) Bill. Will the Minister guarantee that such power, should it ever pass in your Lordships’ House, will never be used to diminish the hard-won rights of women either in EU legislation or elsewhere?

[Lord Henley]

Surely the noble Baroness accepts my right honourable friend’s statement that we will continue to maintain rights. Thereafter, it will be a matter for the United Kingdom, and for the United Kingdom alone, to decide on these matters. That is what we are going to do. Surely, the noble Baroness accepts that that is far better than these matters being decided elsewhere.

[Baroness Massey of Darwen (Lab)]

My Lords, is it not the case that we follow European directives regularly—for example, on pregnant workers’ issues. Will we continue to examine directives and fall in with them, or will we not?

[Lord Henley]

My Lords, obviously we will take note of all EU directives and look at them, but again would not the noble Baroness far prefer it that this Government and this Parliament decided these matters for themselves?

[Lord Cormack (Con)]

Will my noble friend agree that the very last thing we should refer to Henry VIII clauses is women’s rights?

[Lord Henley]

My noble friend makes a very good point about women’s rights: two of his wives lost their heads. I will think about that.

[Lord Foulkes of Cumnock (Lab)]

Will the Minister tell the noble Lord, Lord Forsyth, that we can go beyond EU standards now as far as women’s rights are concerned, while we are still a member of the European Union. This Parliament remains sovereign, which is why we are not instructed by an advisory referendum.

[Lord Henley]

I do not think that the noble Lord listened to my noble friend Lord Forsyth as he should have done. My noble friend Lord Forsyth made exactly that point. This Parliament is sovereign, and we are ahead of what happens in Europe on many things. Can the noble Lord look very carefully at what my noble friend said?

Nuclear Safeguards Bill

Lord Henley Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Thursday 1st March 2018 Lords Chamber

[Lord Teverson]

My Lords, as we are in Committee, it may be helpful if I quote article 77 of the draft treaty published by the European Commission yesterday, which is specifically around nuclear safeguards. It states:

“The United Kingdom shall implement a safeguards regime applying a system offering equivalent effectiveness and coverage as that provided by the Community in the territory of the United Kingdom until the end of the transition period”.


That accepts that there is to be a transition period, as long as we are not in a no-deal situation. There is a transition period—there is no disagreement between us and the EU about that—but the EU expects that to be at Euratom standards. I cannot see that that can be any different if we remain within the acquis during that period, which I think both sides are agreed to anyway.

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

My Lords, I start by offering my apologies to the noble Lord, Lord Grantchester, as he did not receive a copy of that letter. I will make sure that copies are made available. I thought that I had arranged for copies of all the letters—those I sent on the 20th, the one on the 28th to the noble Lord, Lord Carlile, and the one from my noble friend, I think again on the 28th, to the noble Lord, Lord Teverson—to be placed in the Library. After 40 years in this House, I still do not quite know exactly what that means—I think one can go along to the Library and get a copy, but I leave that to noble Lords. I will certainly make sure that copies are made available to all those who want them.

[Lord Grantchester]

One does not wander to the Library just in case there might be something there, so it would be useful.

[Lord Henley]

I fully accept that. I think the idea is to make it clear that they have been made public and are available. I will make sure copies are made available to noble Lords.

Before dealing with precise matters relating to the amendment, I shall say a word or two about the implementation period and transition because that was raised by my noble friends Lady Neville-Rolfe, who has great experience in this matter as a former Minister in the department that I have the honour to represent, my noble friend Lord Trenchard and the noble Lord, Lord Teverson, who was in receipt of a letter from my noble friend Lady Vere. The second paragraph of that letter sent on the 28th stated that details and terms of an implementation period have yet to be agreed, that it is assumed that the United Kingdom will no longer be a member state of the EU or the EEA during the implementation period, that the base case for the length of the period is around two years and that the UK will continue to mirror the EU acquis—the entire EU legal framework—during that period.

We also note that the Commission has published its draft of the withdrawal agreement. The noble Lord, Lord Teverson, referred to this. It is just a draft at the moment. The exact content of the United Kingdom’s withdrawal agreement from the EU will be a matter for negotiation, and we are working hard to deliver the best possible outcome for the UK while making good progress on negotiating our deep and special future partnership with the EU. I do not think I can take the noble Lord or the Committee any further on that matter at this stage.

Amendments 7 and 18 ask for much greater consultation to be set down in law. My noble friend Lady Neville-Rolfe was rather worried by the precedent, should it be enacted, that we make a Written Ministerial Statement at certain stages. I hope I can give the appropriate assurances about what we intend to do to keep Members of the Committee and the House fully informed about what we are doing over the course of the coming year.

First, I shall clarify my Second Reading response to a question from the noble Lord, Lord Hunt of Kings Heath, I think, about the potential cost to industry of the new regime. I referred only to the cost to the ONR of setting up the domestic regime. The department has already committed to allocate to the ONR the funding necessary to establish the new regime. In respect of ongoing funding—the matter which this amendment is aimed at addressing-–I can make a clear commitment now that a decision on cost recovery and charging arrangements will be subject to close engagement with industry and other key stakeholders, as well as public consultation.

We intend to publish a public consultation and an impact assessment on the regulations later this year. I repeat to the Committee that we have made those regulations available in draft already. It is estimated that the ongoing costs of operating a domestic safeguards regime—

[Lord Davies of Stamford (Lab)]

Can the noble Lord give an assurance to the Committee that the industry will not be penalised as a result of Brexit—that is to say that the contributions that will be required of it post Brexit to fund the new regulatory regime that he has been describing will not be greater than any costs that it currently incurs under the present Euratom regime?

[Lord Henley]

The noble Lord will obviously not expect me to give firm commitments of that sort in advance of any consultation. This is a matter for consultation, but we are talking about the need to make sure we have the appropriate safeguarding regime. We are already charging industry, as he puts it, for the cost of safety and other matters. As I said, I will not give any commitment of that sort because this is a matter for consultation, but I will say that the ongoing costs of operating a proper domestic safeguarding regime—I am not talking about safety or security, but purely about safeguarding—will be broadly in line with the current cost to Euratom of its safeguards activity in the United Kingdom. This is estimated to be about £9.5 million a year, as set out in the impact assessment for the Bill.

I turn to the outstanding issues raised in Amendment 7. As the Committee will be aware, the Bill already requires that before making regulations under new Section 76A of the Energy Act 2013, the Government must consult the ONR and any other persons the Secretary of State considers appropriate. This is consistent with the approach for making nuclear regulations under Section 74 of the 2013 Act, which the noble Baroness will be familiar with. The amendment seeks to include a duty to consult both the IAEA and the National Audit Office. I agree wholeheartedly with the importance of consultation on the new domestic regime—I stressed that at Second Reading. Consultation is of vital importance in the development of any new regulatory system and even more so with a subject of such national importance.

As I have already made clear, we have published a pre-consultation draft of the regulations and have already begun early engagement with the industry on this. Prior to this, and since the referendum, the Government have had detailed and ongoing discussions with the nuclear industry and other interested parties. We have made it clear that the development of these draft regulations establishing the new regime will be subject to detailed consultation with both the regulator and industry, with which we have already been engaging.

The Committee will be aware that it is not standard practice for the Government to consult international bodies such as the IAEA on matters of detailed domestic legislation, and for good reason. The IAEA’s focus and expertise in respect of the United Kingdom’s safeguards lies with the voluntary international agreements rather than with the domestic legislation underpinning the domestic regime. The amendment also proposes including the NAO. I believe the NAO plays an incredibly important role, but I do not think that mandatory consultation, as proposed by this amendment, is appropriate, as it already has an established process for scrutinising public spending for Parliament.

We look forward to continuing to work closely with industry and other stakeholders to take the development of the new domestic regime forward. I particularly welcome, at this stage, any comments noble Lords make on the draft regulations, which were published in January and which I imagine all those interested in the Bill have been studying with great care ever since.

Amendment 7 would also require the Secretary of State to lay before Parliament a Written Statement that the ONR has the capacity and independence to implement a new safeguards regime. Again, the Committee will be aware that the Government have already committed to provide Parliament with quarterly reports on progress from across the Euratom programme. They will include information on ONR capacity and readiness.

We accept the immediate importance of this issue; that is why I wrote to all Peers on 20 February. I hope that the noble Lord, Lord Grantchester, received it and I think others did as well. I wrote twice on that day to all noble Lords and I have copies of those letters, but I do not think it is necessary to refer to them. At the same time, a bit later I also wrote to the noble Lord, Lord Carlile. Again, I have that letter available here and will make it available to other noble Lords if—

[Lord Carlile of Berriew]

In the Library?

[Lord Henley]

I will make it available in the Library, as well as to other noble Lords who want copies of it.

To summarise briefly what I tried to set out in that letter, and for the benefit of the Committee, we are working closely with the ONR to ensure that it will be in a position to regulate the new safeguards regime. The ONR is in the process of expanding its safeguards function by recruiting and training additional inspectors, building additional institutional capacity and developing the necessary IT systems. I want to stress—having made a visit to Sellafield, which has two of the three sites in this country where nuclear safeguarding takes place, with a senior representative from the ONR and others—that on the information given to me it is my assessment, based on current progress, that the ONR will be in a position to deliver to the international standards as required by the IAEA on withdrawal from Euratom in a year’s time, in March 2019.

[Lord Grantchester]

At this stage, I intervene only to ask: is the Minister aware of the full costs of all the measures to be implemented to enable the ONR to go ahead with this regime, or is that work still in progress?

[Lord Henley]

As I said earlier, we think that the costs will be broadly in line with the current costs of what we pay to Euratom, which is £9.5 million a year. But there may be certain funds to pay for the changeover, which again I dealt with at Second Reading by saying that money would be made available for it. Ongoing costs will be broadly in line with where we are, and that will be satisfactory.

[Lord Grantchester]

I apologise for coming back to the Minister but, as I understand it, we are talking about two items. One is the ongoing cost of £9.5 million, which I quite agree is defined already by the EU’s contributions to us for the Euratom programme. I meant the full cost of the set-up, which initially had a £2.275 million contribution from the contingencies fund. What does he think the full cost will be, and is he happy and confident that it will be kept within that contingency fund? Has he now completed the inventory and can he update us on what the full cost may be of implementing all the measures necessary?

[Lord Henley]

I think I answered that question at Second Reading and gave a figure to the noble Lord. Rather than trying to guess or remember what I said on that occasion, I will write to him. But I am perfectly happy that we have made that commitment. There will be sufficient funds and then there will be ongoing costs—the noble Lord is right to distinguish between the two—and again, we are happy about that.

[Lord Fox]

When the Minister writes that letter, and assuming we all get it, can he please include some indication of the Euratom assets that will be assumed by the new organisation and some estimate of the liability that comes with those assets?

[Lord Henley]

Obviously the noble Lord is right that assets belonging to Euratom are in there. I do not think I am giving away any secrets if I say that on my visit I saw physical things that were Euratom assets; there will also be software and other things. I am sure that deals will be done as part of the negotiations, and some of those will be transferred over. I do not think I can go any further at the Dispatch Box and I would not want to, but if there is anything more that I can say in a letter then I shall. I will make sure that my letter goes to all noble Lords by whatever means in this inclement weather—we will get it to the noble Lord—and place copies in the Library, which is where people like to find them.

[Baroness Neville-Rolfe]

Email is also very useful these days.

[Lord Henley]

My Lords, we have discovered email. I can use all possible methods.

I have given the assurance that I will ensure that noble Lords are kept informed. As I think I have made clear, I do not think the amendments are necessary or, for that matter, particularly helpful, and I hope the noble Lord will accept that we will do our bit to keep all noble Lords appropriately informed of these matters and will make the precise Written Statements that are necessary at the appropriate moment. With that, I hope the noble Baroness, Lady Featherstone, will feel able to withdraw her amendment.

[Baroness Featherstone]

Having listened to the debate across the House, I think it appropriate that I ponder what the Minister has said. For the moment, I am happy to beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Henley]

My Lords, I accept that this is a probing amendment and that the noble Lord wanted to go wider than the Bill itself and beyond safeguarding to problems facing the entire nuclear industry, and in particular the need for skilled workers. The noble Lords, Lord Hunt of Kings Heath and Lord Teverson, are worried about whether I and the department have sufficient backbone to take on the Home Office and others in these matters. I give him an assurance that we accept the importance of getting the right skilled workers in, just as we always have. I understand the importance of that because on my recent visit to Sellafield I saw some of the construction work and how very specialist it is. It is not just the skilled workers but the type of concrete that has to be used and all such matters—other noble Lords will know this far better than me. More generally on that point, BEIS knows that there are shortages in certain areas and will do its bit within government to make sure that the Home Office understands the importance of our being able to attract the right staff more generally.

On the question of having the right staff in the very specialised field of nuclear safeguarding, the amendment attempts to ensure freedom of employment for specialists employed in that area. That is obviously a matter of particular interest in the light of the Government’s preparations for establishing the domestic nuclear safeguards regime which, among other important work, means securing high-quality safeguards staff in the right quantity for the ONR.

We are working very closely with the ONR to ensure that it is in a position to regulate the UK’s new civil nuclear safeguards regime that will follow withdrawal from Euratom. That includes, among other preparations, recruiting and training additional inspectors and building additional institutional capacity. I have already outlined the ONR’s staffing numbers and estimates. I referred to that in the letters sent on 20 February—so all noble Lords should have had copies of those, even the noble Lord, Lord Grantchester.

Given the importance of attracting the right staff to work in this specialist field, the Government are committed to ensuring that the United Kingdom nuclear industry has the required skilled personnel to deliver robust regulatory regimes. The Prime Minister has been clear that we will always welcome those with the skills and the expertise that we need, whether they come from Europe or the rest of the world—as we do now. We will also ensure—if the noble Lord will bear with me—that we manage our immigration system in the way that best serves the national interest. That is why we will be using our best influence with the Home Office—and I am sure that the Home Office in due course will be able to respond. I give way now to the noble Lord.

[Lord Fox]

Picking on the language, the Minister talked a number of times about skilled people. The noble Lord, Lord Hunt, made the point that the definition of “skilled people” is the problem. Will the Minister acknowledge that issue and carry that point in the discussions he is having with other agencies?

[Lord Henley]

As I said, we are in discussions with the ONR in relation to the Bill to make sure that it can get people with the appropriate very specialist skills that we need for safeguarding. That is why we are going to have the right regime in place by next year.

The noble Lord then asked me to go further on the more general point—it might be construction for the nuclear industry or a whole host of other things. Yes, BEIS will continue to operate as it always does and to offer help and guidance to the Home Office as it develops policy in this field.

[Lord Fox]

For information, some of the researchers who work in the nuclear fusion project, for example, are paid below the threshold that gives them the privilege to come into this country. We are not just talking about steel fixers but about quite serious researchers who, because they have taken an academic career, are not paid above the threshold. So it is a very serious issue.

[Lord Henley]

I am fully aware of the concerns of the noble Lord and of the industry. Obviously it is a matter for the Home Office to develop these policies, and I am very grateful that a Home Office Minister—just by chance—happens to be sitting near me; she will listen to this and take it back to her colleagues. I repeat that we are satisfied that we can deal with safeguarding. Our concerns, the noble Lord’s concerns and other concerns will be dealt with. Proposals for a future immigration system will be set out shortly. That is something that my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy will play his part in.

The noble Lord said that his amendment was a probing one. I hope that I have given the appropriate assurances for him to withdraw it.

[Lord Teverson]

I thank the Minister for his response. No doubt this debate will continue when we debate the Brexit and energy security report on the Floor of the House. I will just say—to all Ministers who are present—that the whole of history tells me that this is going to be a very difficult ask. It seems obvious, in terms of getting it right for the nation, that it ought to happen, but I suspect that it will be a lot more difficult than perhaps the Minister hopes. I will reflect on the answer and see whether there is anything more exacting we can say on Report—but at this stage I beg leave to withdraw.

[Lord Teverson]

I thank the noble Lord for his contribution. He is absolutely right. Experts are needed not only for decommissioning but for keeping going the existing fleet of nuclear power stations, which provide some 20% of low-carbon energy to our energy system at the moment. We also need nuclear co-operation agreements so that we have not just people but spare parts and everything else for this sector. I can see that the Minister wishes to intervene.

[Lord Henley]

I just want to interrupt the noble Lord to offer him one further statistic to indicate how long this will continue. Again during my trip to Sellafield, I was reminded that decommissioning there will continue well into the next century—in other words, the grandfathers of the people who will be working on it then have not yet been born.

[Lord Teverson]

The whole area of the financing and decommissioning of Sellafield is the subject of another debate—and a contentious one—which we will not get into. At this stage, I beg leave to withdraw my amendment.

--- Later in debate ---

[Lord Henley]

My Lords, as the noble Lord, Lord Hunt, knows, I am always sympathetic, particularly to his amendments. On this occasion, what he wants are some reassurances, as does the noble Baroness, Lady Featherstone, about the genuine independence of the ONR and, importantly, that the IAEA sees it as an independent body and accepts it as such. I hope that, quite briefly, I will be able to provide those reassurances.

We have international obligations to ensure that the regulator is effectively independent. The provisions of the 2013 Act, which created the ONR and which I am sure the noble Lord knows well, were specifically designed to ensure that the ONR had appropriate independence. Those measures to guarantee its independence include providing it with independent public corporation status; significant restrictions on the Government’s ability to direct the ONR in the exercise of its functions; constraints on the conditions for dismissing senior ONR members; and transparency obligations that act as a safeguard against powers—which are already constrained—being used in an improper manner.

Noble Lords will be aware that as a public corporation the ONR is able to set its own employment terms and conditions, affording it greater freedom and flexibility than if it were a non-ministerial government department. If it were such a department, ONR employees would be civil servants, the organisation would be part of government and the level of its independence would arguably be more limited than it is now. The noble Lord, however, obviously takes another view.

In the factsheet we published on 19 February, we made it clear that the ONR is independent from government in its regulatory functions and decisions. The most important point to stress—this deals with the entire matter and goes to the core of the amendment—is that the International Atomic Energy Agency reported in 2013 that the Energy Act 2013 would,

“provide de jure independence, which will reinforce the de facto independence that ONR (and its predecessors) have enjoyed for many years”.

It is important that we listen to what the IAEA said; I cannot stress how important this is. The amendment the Committee is considering attempts to unpick the arrangements that the IAEA—the international body responsible for nuclear safeguards worldwide—considers provide the independence necessary for an effective regulatory safeguarding regime.

Having established that the ONR is independent, I would also like to note that, as well as fulfilling international obligations and best practice, this independence is crucial for the industry. It is important that the industry has recourse to appeal ONR decisions. Attempting to fundamentally change the ONR’s relationship with the Government by explicitly providing that the ONR acts on behalf of the Crown—the effect of the amendment—risks moving away from an approach deemed appropriate by the IAEA and would undermine the industry’s ability to hold the regulator to account.

I do not think I need to go any further than that. In the interests of time, it is probably best that I end there and ask the noble Lord whether he wants at this stage to withdraw his amendment. I hope that I have given him the appropriate guarantees.

[Lord Hunt of Kings Heath]

That has been a very helpful response and I am grateful to the Minister. However, I disagree with him: it is clear from the Cabinet Office guidance that a non-ministerial government department has more independence, whatever the status of officials. But he has given me considerable reassurance, for which I am most grateful, and I beg leave to withdraw my amendment.

Retail Trade: Online Suppliers

Lord Henley Excerpts

Wednesday 28th February 2018 Lords Chamber

[Lord Naseby]

To ask Her Majesty’s Government what discussions they have had with the Competition and Markets Authority about the impact on the United Kingdom retail trade of online suppliers, such as Amazon.

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

My Lords, Her Majesty’s Government want all parts of the retail sector to thrive. As such, we engage regularly with a range of retailers’ associations and the Competition and Markets Authority. If competition is not working effectively, the CMA has powers to investigate and to take action.

[Lord Naseby (Con)]

Is my noble friend aware of the extent of the dominance of Amazon and the threat that it poses to the retail trade in general and, soon, the grocery trade and pharmaceutical trade? Amazon already controls, in the £1 billion market, 39% of the UK and 57% of the States. Against that background, will the Government level the playing field and consider what France, Germany and so on are looking at in terms of digital taxation, a special sales tax like the USA or indeed a higher rate of VAT, which is possible under our legislation? At the very least, bearing in mind that figure of 39% of today’s £1 billion market in our country, will they set up a monopolies commission inquiry? If they do not, our retail trade as we know it will disappear.

[Lord Henley]

My Lords, It is a matter for the CMA to look at these matters. As I said in my original Answer, it has the power to look at that. With regard to some of the aspects of taxation, I believe that Her Majesty’s Government have led the way on this issue internationally. HMRC continues to work with the online marketplaces to ensure effective action against sellers who are, for example, breaking United Kingdom VAT rules and to prevent new non-compliant sellers joining the market. We believe all those multinationals in that world ought to be paying the taxes due and we will not settle for anything less. Other than that, I think my noble friend should accept that many of the changes that are happening in the marketplace are being driven by what the consumer wants, and our job is to ensure that the marketplace can adapt to that.

[Lord Carlile of Berriew (CB)]

Does the Minister consider it acceptable that a company that delivers its goods from a warehouse in the UK to a customer in the UK but has its headquarters in, for example, the Channel Islands should pay less VAT than a company that delivers its goods from the UK to the UK and has its headquarters in the UK? That is what is happening.

[Lord Henley]

I do not think I can take the noble Lord much further than I have at the moment. Colleagues in the Treasury and in Revenue & Customs are aware of some of these problems and are looking at them, and he will be aware of commitments that were made in our manifesto. I cannot take it much farther than that.

[Lord Fox (LD)]

My Lords, the Minister is very sanguine about what is going on in our high streets, but today, Toys “R” Us went into administration, putting about 3,000 jobs at risk and Maplin has called in the administrators. There is a crisis on the high street. What are the Government doing to recognise the pressure that the digital economy is putting on the physical shops on our high street?

[Lord Henley]

We recognise this. As the noble Lord will be aware, we have made changes to the rates system to provide some help to the high street and will continue to do so. We have also established the Future High Streets Forum, which is chaired by my honourable friend the Minister for the Northern Powerhouse and Local Growth, Jake Berry. That will look at what we can do with retailers, but it is obviously up to retailers, as I said, to adapt to a marketplace changing as a result of consumer demand.

[Lord Deben (Con)]

Is my noble friend aware that this is a dangerous situation and requires urgent action? I refer noble Lords to my entry in the register of interests. Retailers have to pay business rates, which means that they start off at a significant disadvantage. They have to contribute to the producer responsibility levies—another disadvantage. They have to pay the proper apprenticeship levy—another disadvantage. We cannot wait for a general statement; we must act now. The latest proposition is that retail trading may decline by 22% in the next year. It is time for the Government to move urgently.

[Lord Henley]

I made it clear that we have made changes in the Autumn Budget, with measures worth £2.3 billion by cutting business rates and trying to bring a degree of fairness to the system. There are limits to how far one can go and one must accept that a lot of what is happening is a result of what consumers want. It is obviously up to the retail sector itself to adapt and change in the face of changing consumer and social trends. The Government are doing what we can. That is why I mentioned the Future High Streets Forum, chaired by my honourable friend and why we have announced changes to rates. Thereafter, it must be for the retail sector itself to see what it can do to change.

[Lord Whitty (Lab)]

My Lords, is the noble Lord aware that a couple of years ago, a sub-committee of your Lordships’ EU Select Committee—under my chairmanship, as it happens—produced a report on online platforms? We found that the apparent consumer advantage was taken advantage of by the big online platforms, and the competition authorities at the European level were finding that difficult to come to terms with—witness the ongoing problem with Google. Is it not now important, post Brexit, that the competition authorities here tackle the domination and abuse of competition by the online platform giants?

[Lord Henley]

My Lords, that is why we set up the CMA in 2013. That is why it has the powers it has and the ability to investigate abuse when it sees it.

[Baroness Gardner of Parkes (Con)]

My Lords, has the Minister seen the story in the paper about Airbnb wanting to become as big as, or bigger than, Amazon? If that happens it will obviously threaten all the high street tourist agencies, which have said that it would take over tourism completely. Will the answers he has given today apply equally to Airbnb, if it becomes half as big as Amazon?

[Lord Henley]

My Lords, again it is a matter for the CMA to look at that, but the Government will obviously keep these matters under review as well. These are social changes happening in the marketplace, and very often because that is what consumers want.

[The Earl of Lytton (CB)]

My Lords, I declare my professional and LGA interests. Does the Minister agree that, in addition to the challenge of online retailing, rental levels, underinvestment in retail streets and the business rate system, which imposes one of the highest recurring taxes of its kind anywhere in Europe, conspire collectively to damage profits prospects and the public experience of many traditional shopping environments? Furthermore, does he agree that trying to shift the burden of reliefs for business rates on to hard-pressed billing authorities is not the right answer?

[Lord Henley]

The noble Earl makes some valid points. These are matters that can and will be looked at. The important point is that we have done what we can to help with rates, and we hope that that significant help will make it easier for the retail sector.

Nuclear Safeguards Bill

Lord Henley Excerpts

Committee: 1st sitting (Hansard): House of Lords
Thursday 22nd February 2018 Lords Chamber

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

My Lords, I am not sure whether I heard the noble Lord set out his own party’s policy more widely on Brexit, but perhaps that will be for another day. He can then assist the Committee, but I leave that with him. I offer my congratulations and thanks to him, to the noble Baroness, Lady Featherstone, and the noble Lord, Lord Warner, for introducing their amendments. I think that it was the noble Lord, Lord Warner, who compared the response last night by my noble friend Lord Callanan to a Geoffrey Boycott innings. For those of my age and beyond, I will go for a sort of Ken Barrington type of response, so it will be long and slow. However, it is important that I get it all in to make sure that we have a proper response to the debate so that we can consider these amendments again on Report. It is also important for noble Lords to understand in this sort of Ken Barrington response that I am going to give—

[Lord O’Neill of Clackmannan]

We want wisdom, not Wisden.

[Lord Henley]

The noble Lord knows that he always gets wisdom from me. I want also to say that I am not necessarily going to respond to all the points in the course of this debate because an awful lot of them apply to later amendments. Nevertheless I will give a fairly full response, but I shall start by making a pretty fundamental point, made by my noble friend Lady Neville-Rolfe. It is that we are where we are. My noble friend supports this Bill because, as she said, it is very important that we have plans in place for when we leave Euratom. We are going to leave Euratom at the same time as we leave the European Union in March of next year. That was dealt with in the notice of withdrawal Bill, now the European Union (Notification of Withdrawal) Act 2017. The legislation has been through both Houses of Parliament and has the support of the party opposite and others.

What I want to make clear to the Committee is that we are determined to continue to have a constructive and collaborative relationship with Euratom and with all our other international partners. The withdrawal of the United Kingdom from Euratom will in no way diminish our nuclear ambitions, and I make that clear to the noble Lord, Lord Broers, and others. Maintaining the continuity of our mutually successful civil nuclear co-operation with Euratom and international partners is going to be a key priority for us. As a member of the International Atomic Energy Agency, we are committed to have in place nuclear safeguards. I should remind the Committee that these have nothing to do with safety. Nuclear safeguards are reporting and verification processes by which states demonstrate to the international community that civil nuclear material is not being diverted into military or weapons programmes. The United Kingdom has been a member of the IAEA since its formation back in 1957.

Under the Euratom treaty, the civil nuclear material and facilities within member states are subject to nuclear safeguards measures conducted by the European Commission on behalf of Euratom. Euratom also provides reporting on member states’ safeguards to the International Atomic Energy Agency, which conducts nuclear safeguards globally. Nuclear safeguards measures include reporting on civil nuclear material holdings and development plans, inspections of nuclear facilities by international inspectors, and monitoring, including cameras in selected facilities. I repeat that nuclear safeguards are distinct from nuclear safety, which covers the prevention of nuclear accidents, and nuclear security, which covers physical protection measures. Those are the subject of independent regulatory provisions and we shall move on to them in due course.

As was made clear by my noble friend last night and I make clear again today, the European Union and Euratom are uniquely legally joined. Euratom shares a common institutional framework, making use of the same institutions; namely, the Council, the Commission, the European Parliament and the ECJ. For example, the European Commission has an active role in shaping and enforcing Euratom rules and it currently plays a central operational role on safeguards in the UK. As was further made clear by my noble friend last night, Euratom is also subject to the jurisdiction of the ECJ.

When the Prime Minister formally notified our intention to leave the European Union in June, she also commenced the process for leaving Euratom. That notification was debated and authorised by Parliament through the European Union (Notification of Withdrawal) Act 2017 which, as I have said, had the full support of both Houses of Parliament. The United Kingdom will therefore withdraw from Euratom in 2019 at the same time as withdrawing from the European Union. That is why we need the legislation before us now to be in place.

The United Kingdom’s current nuclear safeguards regime operated by Euratom will cease to function in the United Kingdom as a result of our withdrawal from Euratom. The Nuclear Safeguards Bill will ensure that we have the right regime in place for the Office for Nuclear Regulation to regulate nuclear safeguards. I reassure the Committee that the Government are meeting the challenges that clearly lie before us. We have already made great progress in the work that we are doing to secure continuity for our nuclear industry by establishing long-term arrangements to secure nuclear safeguards. The Queen’s Speech on 21 June last year included our intention to take up the powers that will set up a domestic nuclear safeguards regime, and that is what this Bill seeks to do.

[Lord Fox]

My Lords, perhaps I missed them, but what are the long-term arrangements that have already been established?

[Lord Henley]

My Lords, will the noble Lord bear with me? I said that I was going to play a fairly long innings and I want to explain these matters in full. There is no point in the noble Lord interrupting at this stage. I am going through this carefully and slowly in order to explain what we are going to do to make sure that we have the right things in place for when we leave Euratom and the EU in March of next year.

Our intention is for the new domestic regime to exceed the standard that the international community would require from the United Kingdom as a member of the IAEA. It will be run by the Office for Nuclear Regulation which, as the Committee will know, already regulates nuclear safety and nuclear security. We will also be agreeing a new voluntary offer agreement with the IAEA. I believe that we all recognise the special contribution—

[Lord Warner]

I am sorry to interrupt the Minister, but can he say what discussions have actually taken place with the IAEA to get to that point of an agreement before March 2019? What is the plan of meetings for those discussions that have taken place and are planned to take place?

[Lord Henley]

My Lords, discussions have already taken place with the IAEA. We will continue with those discussions to make sure that we are in the right place at the right time. If the noble Lord will bear with me, I will continue with my speech and set these things out in the proper manner.

[Lord Warner]

I understand what the Minister is saying, but none of us has moved amendments this morning that in any way suggest that we would not be leaving Euratom by next year. We have accepted that for the purposes of this debate. We are not slow learners: we do not need to be taken rather slowly through the arguments that we went through last night.

[Lord Henley]

My Lords, I am sorry if the noble Lord feels that he is not a slow learner. At times, I have felt that he and other noble Lords have been a bit slow on these things. That is why I am trying to spell it out very carefully and very slowly and I will continue to do so. I hope to make it clear so that the Committee and the House will understand that we will have the appropriate civil nuclear safeguards regime in place by next year, which is of paramount importance for us at that stage. We have had already considerable discussions with Euratom. There will be further discussions with the IAEA. I will not go into the details but I can no doubt write to the noble Lord in due course.

In a sense, this is an amending Bill. As noble Lords will be aware, it will amend the Energy Act 2013 by creating new powers so that we can put in place regulations that offer detail on the domestic safeguards regime, such as accounting, reporting, control and inspection arrangements. It also creates the limited power that I referred to earlier which we will get to in later amendments, allowing us to amend the Nuclear Safeguards and Electricity (Finance) Act 1978 and others. That power will mean that references in that legislation to existing international agreements can be updated once new international agreements have been reached. We will discuss that in greater detail later on.

I have listened carefully to what has been said on the agreements that we have before us on Amendments 1, 2, 12, 16 and 17. These amendments taken as a group cover the fundamental issue of the United Kingdom’s future relationship with Euratom and our strategy pertaining to this. I fully appreciate the sentiment and the intention behind these amendments. I shall try to address them all.

On Amendment 1, the new clause proposed by the noble Baroness, Lady Featherstone, would require Ministers, when negotiating and concluding the withdrawal agreement, to have regard to the desirability of associate membership of Euratom, and require the Government to report periodically to Parliament the progress to that end. Noble Lords will have heard many times before that there is no such thing as associate membership of Euratom. I made that clear at Second Reading. It is important that discussions on this matter focus on the actual treaty. The concept of associate membership does not exist in the treaty. Given the frequency with which the point comes up, I start my response by reading out exactly what the Government said to the BEIS Select Committee on this point in the autumn:

“There are two different articles in the treaty that deal with the relationship between Euratom and third countries. One of them is Article 101, which enables the community to enter into agreements with third states. That is the one that has been used in the research and training context with Switzerland. That requires a qualified majority vote. The other one is Article 206, which enables the community to conclude an agreement establishing a formal association involving reciprocal rights and obligations. That is the ‘association with’ part, not being an associate member. That requires unanimity.”


It is indeed the case that the Ukraine and Switzerland each have a form of association agreement with Euratom, but those agreements cover only research and training activities. Neither covers nuclear safeguards activities. These countries are not associate members of Euratom. Wanting to maintain a close relationship with Euratom is this Government’s stated objective so we need no persuading on that point. We have already stated very clearly in Statements to the House that the Government will be seeking a close and effective association with Euratom as part of the next phase of negotiations with the EU. We have made clear the desirability of this aim and that it forms part of our negotiation strategy.

I fully recognise the importance of providing clarity on the progress of the Government’s plans for withdrawing from Euratom and our ambitions in respect of a future relationship with Euratom, which the noble Lord, Lord Warner, asked about earlier; it is relevant to Amendments 2 and 16, which I will deal with later.

--- Later in debate ---

[Lord O'Neill of Clackmannan]

The Minister referred to Article 206 and the agreement that has been arrived at with Switzerland and Ukraine in respect of training and research. Does that provision afford any opportunity for other areas to be incorporated in an agreement with Euratom? Could it be the portal for enabling us to be alongside Euratom in the way that the Ukrainians and the Swiss have been able to obtain for their preoccupations with training and research?

[Lord Henley]

My understanding is that it will allow them to do that. I am not aware that Article 206 could be used further as the noble Lord suggests. If I am wrong, of course I will write to him, but it might be a matter of interpretation. I should remind him in respect of Article 206 that I stressed when I read out the Government’s response to the Select Committee that any agreement required unanimity. That is obviously quite a big “if” in these matters. If there is anything further I can add, I will write to the noble Lord.

[Lord Hunt of Kings Heath]

The Minister is being very helpful. It is the first explanation we have had as to why the Government are leaving. He talked a lot about the influence of the EU over Euratom’s activities, which is no doubt something that we can test and explore. But I do not understand what “close association” means. The Government clearly could not go for a formal association because the relationship would be one in which the EU would set the rules, and we know that the Government have drawn a red line against that. Does “close association” mean that we would basically subcontract the inspectorate from Euratom to work under the auspices of the ONR, with the ONR as the regulator? Does it mean that, despite everything that the Government have said, we hope that we can simply replicate Euratom rules and that it will somehow oversee it, which seems unlikely? Until we know what the Government want to get out of Euratom, it is difficult to know whether the Bill will meet the circumstances if no close association at all is agreed.

[Lord Warner]

Can I amplify something from what the noble Lord, Lord Hunt, said? If the Minister looks at my Amendment 2, he will see that the suggested new subsection (1)(a) refers to,

“a report on the progress of discussions with Euratom on the scope and conditions for a form of association with Euratom”.

It does not talk about associate membership. Listening to what he said about what the Government aspire to sounded remarkably like seeking,

“a form of association with Euratom”.

In clarifying the Government’s intentions for the noble Lord, Lord Hunt, will the Minister explain the difference between what the Government want and the wording in my amendment? I am quite happy to change the wording if it helps the Minister.

[Lord Henley]

I was coming to the noble Lord’s amendment to make quite clear our ambitions for that future relationship and how we see it developing, before I was interrupted first by the noble Lord, Lord Hunt, and then by his noble friend Lord Warner interrupting him. I will now deal with how we want to ensure proper clarity on where we are going. The information I will provide to the Committee particularly relates to Amendments 2 and 16 from the noble Lord, Lord Warner.

The noble Lord will remember that we made a Written Ministerial Statement on 11 January. I am sure that he knows it off by heart by now. It included a commitment to continue to provide quarterly updates—it is information that noble Lords particularly want in this matter—addressing the progress on the wide range of issues relating to Euratom exit. That will include progress on those negotiations, but also on how they will develop into our future relationship with Euratom, as well as progress made by the ONR on establishing the United Kingdom’s domestic safeguards regime. I cannot tell where those negotiations will take place. The noble Lord will have to bear with me. What he wants, as far as I understand it from his Amendment 2 and the other amendments, is a guarantee that information will be provided by the Government. All I am saying is that we have made one Written Ministerial Statement—actually, we have made more than one—and we will continue to do so. That reporting commitment goes far further than the proposed amendment, by keeping Parliament regularly updated on the key issues that have been raised. I hope the Committee will welcome the fact that we will continue to provide further updates on those. The noble Lord, Lord O’Neill, asked for one. There will certainly be one before the Easter Recess.

I turn to Amendment 12 on our future relationship with Euratom. The Committee will be aware that in her speech on 22 September 2017 in Florence my right honourable friend the Prime Minister set out her desire for an implementation period after the United Kingdom has ceased to be a member of the EU. This is now well understood in the EU and I do not think that the amendment is consistent with this position. It remains the Government’s intention to ensure continuity for the nuclear industry and to avoid the possibility of the cliff edge that noble Lords referred to for the industry on exit day.

I hope that the Committee will not need to be reminded that the UK will not be a member after 29 March next year, whether an implementation period can be agreed with the Commission or not. That much is clear. If it is not, I will repeat from page 1 of the letter that the Prime Minister sent to President Tusk:

“I hereby notify the European Council in accordance with Article 50(2) of the Treaty on European Union of the United Kingdom’s intention to withdraw from the European Union. In addition, in accordance with … Article 50(2) as applied by Article 106a of the Treaty Establishing the European Atomic Energy Community, I hereby notify the European Council of the United Kingdom’s intention to withdraw from the European Atomic Energy Community. References in this letter to the European Union should therefore be taken to include a reference to the European Atomic Energy Community”.


In other words, there can be no question of separately attempting to prolong our membership of Euratom beyond the point at which we leave the EU. That is a very different matter from having an implementation period, which is something we are aiming at. That is a period after we have left the EU and Euratom, during which we continue to be covered by the EU acquis. By “acquis” we mean the regulatory framework that applies to EU member states. In exchange, the Government expect that the United Kingdom would be able to continue to benefit from its current access to the EU’s markets for the duration of the implementation period.

Again, I must emphasise that any agreed implementation period is not a way of delaying our departure from Euratom. It is a way of making the transition smooth, rather than sudden. My reason for asking noble Lords not to press their amendments is simple: the amendment does not seek to establish an implementation period after exit; it seeks a transitional period before exit. My honourable friend the Minister for Business and Energy set out on 7 February that there can be no question of separating the situation for Euratom from that of the wider EU. The two are, as we know, uniquely and legally bound. Again, I made that clear at earlier stages.

Finally, I turn to Amendment 17, which seeks to require the Government to lay a strategy for maintaining existing arrangements once the UK withdraws from Euratom and for this to be considered by both Houses before the main substantive provisions of the Bill can be brought into force. As I have said, the Government have made it absolutely clear that they will seek a close and effective association with Euratom in the future. As was mentioned in the Written Ministerial Statement, the Government set out the principles on which our Euratom strategy is based, including to aim for continuity with current relevant Euratom arrangements, to ensure that the United Kingdom maintains its leading role in European nuclear research, to ensure that the nuclear industry in the UK has the necessary skilled workforce, and to ensure that on 29 March 2019 the United Kingdom has the necessary measures in place to ensure that the nuclear industry can continue to operate. In respect of our future relationship with Euratom, we will also seek a close association with Euratom’s research and training programme, including the Joint European Torus and the International Thermonuclear Experimental Reactor projects. We will also want continuity of trade arrangements to ensure the nuclear industry can continue to trade across EU borders, and to maintain close and effective co-operation with Euratom on nuclear safety.

The Committee will be fully aware that the nature of our future relationship with Euratom is part of the next stage of negotiations, which is yet to begin. An implementation period may well be agreed and we hope that it is, but there are no guarantees. In any case, without such a period the United Kingdom will legally leave the EU and Euratom in March 2019. The Bill and the regulations made under it are crucial to make sure that we can establish that domestic nuclear safeguards regime to meet international safeguards and nuclear non-proliferation standards when Euratom’s safeguarding arrangements no longer apply in the United Kingdom. From that point, the United Kingdom will be responsible for its safeguards, including having its own state system of accounting and control.

[Lord Rooker]

In that case, are we not all wasting our time? Could the Minister say whether the International Atomic Energy Agency has already agreed in the discussions that have taken place that the contents of the Bill lead it to believe that the safeguards office will be able to demonstrate the independence it requires? If not, we are wasting our time.

--- Later in debate ---

[Lord Henley]

The noble Lord never wastes his time, nor does he waste the time of the Committee, but I can give an assurance that discussions continue with the IAEA, which is perfectly happy that we will be able to meet the appropriate safeguards regime to meet its standards by March next year. We will discuss that on later amendments. Processes have taken place in the ONR and it is engaged in recruitment. We will meet its standards—standards similar to those met by the Americans as fellow members of the IAEA. All that will be in place; that is the point behind the Bill. It is why I do not think these amendments are necessary—we will no doubt discuss them in much greater detail on Report. I hope that the noble Lord and the noble Baroness, Lady Featherstone, who is about to respond, will be happy and feel able not to press their amendments.

[Baroness Featherstone]

I thank the Minister. I listened carefully to his arguments in response to the amendments. I think that our work is not done; I did not hear a meeting of minds at this point. What I did hear was a universal view from across the Committee that surety and certainty are not there. We will probably want to come back on this on Report. For the moment, I beg leave to withdraw the amendment.

Nuclear Safeguards Bill

Lord Henley Excerpts

Committee: 1st sitting (Hansard - continued): House of Lords
Thursday 22nd February 2018 Lords Chamber

[Lord Teverson (LD)]

My Lords, I thank the noble Lord, Lord Rooker, for having gone through all that. That session of the committee which I chair was an eye-opener. That is why I tabled my Amendment 10, which we will consider in the next sitting of the Committee. The amendment is about labour mobility, which is an absolutely key factor in terms of not just safeguarding but the nuclear industry as a whole. I look forward to continuing that debate on that occasion and very much agree with the comments of the noble Lord, Lord Rooker.

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

My Lords, I hope that I can respond to and deal with the various points that have been made. I am very grateful for all the contributions that have been made, particularly from my former noble friend, the noble Baroness, Lady Featherstone, who stressed that she wanted reassurances. I think that was the gist of what the noble Lord, Lord Rooker, said as well. He was seeking reassurances on when the ONR would be ready and whether we would meet the appropriate standards under the IAEA and so on.

I will refer back to the letter that I sent to all noble Lords, to which the noble Lord referred, and remind them of that. I also remind the Committee that we have committed to a domestic nuclear safeguards regime that is equivalent in effectiveness and coverage to that currently provided by Euratom. That is the commitment that we have made and I repeat it to the noble Lord, Lord Grantchester. That means a level of inspections and other regulatory arrangements—it is not just inspections—that goes beyond the normal international standards as applied by the IAEA that would be expected from the United Kingdom: for example, additional assurance and verification activities at additional facilities.

It is crucial that we meet all those international standards following our withdrawal from Euratom. Compliance enables the United Kingdom to discharge international commitments and would also underpin international nuclear trade arrangements with key partners such as the US, Canada, Japan and Australia. It is right therefore that the ONR focuses its efforts on ensuring that the United Kingdom is able to meet those standards immediately on withdrawal from Euratom and seeks to move to Euratom standards as soon as possible thereafter. The important thing is that we get to the IAEA—I hope I have got the letters in the right order; it is difficult to remember sometimes—as soon as possible thereafter.

[Lord Rooker]

We all have the same problem.

[Lord Henley]

I am grateful to the noble Lord, Lord Rooker, and I will not refer to his socks, which might have been distracting me.

I also say to the noble Lord that we will be ready; the ONR is sure that it will be ready and we are working closely with it to ensure that it will be in a position to regulate the new civil nuclear safeguards regime following our withdrawal from Euratom. The ONR is in the process of expanding its safeguards function by recruiting and training additional inspectors, building additional institutional capacity and developing necessary IT systems.

The ONR requires a multidisciplinary team to be able to deliver safeguards responsibilities. The staff essential to its safeguards function include safeguards inspectors as well as nuclear material accountants and information management and reporting specialists—so a whole range of different specialists. Current estimates—I set this out in my letter—suggest that the ONR would require a team of 20 to 25 staff, which would include at least nine safeguards inspectors, with the precise number depending on the exact requirements of the domestic regime set out in regulations. I remind the Committee again that we have made the regulations available to the House, and I am sure that noble Lords are studying them in some detail.

The ONR already has 11 safeguards officers in post, who are all in training to become safeguards inspectors by 29 March 2019. It is my assessment, and that of my honourable and right honourable friends in the department who have specific responsibility for this as the Ministers responsible, that, based on current progress, the ONR will be in a position to deliver to international standards on withdrawal from Euratom.

However, the speed with which the ONR is able to move from international standards to a domestic nuclear safeguards regime that is precisely equivalent in coverage and effectiveness to Euratom standards obviously depends on a wide range of factors. In particular, timing will depend on negotiations with the EU and negotiations on future co-operation with Euratom and the level of its involvement in the United Kingdom’s safeguards. The ONR estimates that, to be able to deliver its functions—I emphasise its independence—to a standard equivalent in effectiveness and coverage to Euratom, it may require a team of around 30 to 35 staff, which would include around 20 safeguards inspectors.

The ONR is already—again, as I made clear in the letter—actively recruiting and interviewing further candidates to meet this level. I cannot give precise levels as to exactly where it is at this moment, but it is actively recruiting and interviewing. The first phase of recruitment last year was successful: four individuals were recruited and are currently in training to become safeguards inspectors. A further recruitment campaign is under way. Successful candidates will join the ONR’s training programme, and ONR assesses—again, this is its assessment—that it will take 12 to 18 months to upskill new recruits to inspector level.

I hope that the publication of preconsultation versions of draft regulations in January, which set out more detail on the proposed domestic safeguards regime, indicates our genuine intention to deliver standards that are broadly equivalent to the Euratom regime as quickly and effectively as possible. However, the important point to get over to the Committee—

[Lord Judd]

My Lords—

[Lord Henley]

Can I just complete a sentence before the noble Lord intervenes? The important point is that it will be able to deliver the standards that are broadly equivalent to the Euratom regime as quickly and effectively as possible. I give way now.

[Lord Judd]

I am very grateful. The Minister used the word “broadly”, which is very significant. Can he tell us a little more about what he means by that?

--- Later in debate ---

[Lord Henley]

As I think I made clear at Second Reading, I am not quite sure whether the noble Lord, Lord Judd, has fully grasped the difference between safeguarding and safety. On safeguarding, the important point is that we meet our commitments to the IEA—

[Noble Lords]

IAEA.

[Lord Henley]

I will try to get it right. We will meet those without any problem at all. Those are the same as the commitments that the United States and other weapon states—an expression that the noble Lord probably does not like—have to meet, and we will meet them. Euratom’s commitments are slightly different, and so that applies to ourselves and the French as the two weapon states within Euratom. They are marginally different. We will get to those in due course, but we will meet the appropriate standards under the IAEA by next year, just as we do now.

[Lord Judd]

Again, I am grateful to the Minister for giving way. Can he clarify one point? He said that he is not sure that I have grasped the difference between safety and safeguards. He is quite correct because I simply do not understand how there is a dividing line between the two. I just do not accept that that is the situation—the two are intimately related.

[Lord Henley]

My Lords, I could go back but I think that I would try the patience of the Committee if I repeated a great deal of what I said at Second Reading and at other points about safety. The ONR has been dealing with safety for many years and it will continue to do so. Safeguards are another matter. In effect, they relate to the transference of certain things, ensuring that they cannot be used for nuclear warheads or whatever. Safeguards are different from safety. This Bill relates to safeguards and that is what we are trying to get over to the noble Lord. We will meet our IAEA standards on safeguards under this Bill once we have the powers so to do.

I hope that that provides noble Lords—with the possible exception of the noble Lord, Lord Judd—with the appropriate assurances. I hope that the noble Lord, Lord Grantchester, will feel that the information I have provided is sufficient in stressing that we will have a domestic nuclear safeguards regime equivalent in effectiveness and coverage to that currently provided by Euratom. That is what the Bill is intended to do. We are leaving Euratom. We have to make sure that we have the appropriate safeguards regime in place, and that is what the Bill tries to do.

[Lord Rooker]

Perhaps I may come back on that point. We are in a very vulnerable position, are we not? As a country, we have not been in charge of safeguarding; Euratom has been doing that. It is quite clear that international staff, with free movement under Euratom, have been doing the work. We are hoping to create a cadre of inspectors who will upskill people from various offices, but I have no idea of the industry salaries and so on. We have recruited only four inspectors. Are they UK or EU citizens? I am curious and would like to know that. Are we applying any contractual arrangements to people once they have been upskilled?

Once they have been upskilled to carry out safeguarding, Euratom will be their world—not the UK. The career or job enhancement opportunities and so on will be marvellous for the individuals in question, but I am concerned about my country. Are we placing any restrictions on them? Are we going to say, “We’ll upskill you and get you trained but, by gum, you’ll have to work in the UK for five years”? I do not know whether that will be the case but if we do not do something like that, we will be laying ourselves open to the vagaries of the market. We are entering a completely new area here. We cannot recruit fast enough—we have only four inspectors so far. Upskilling these people places them in a very advantageous position. I am really supportive of that—I want them to be upskilled and better qualified, and to have the freedom to move to better jobs if they do not like what is on offer in the UK. Presumably they will not all be British. They might take advantage of getting skilled and then, because of how we have treated foreigners since the referendum, say, “Right, we’re off to the rest of Europe”. Therefore, are any restrictions being placed on upskilling and training these people?

[Lord Henley]

The noble Lord is enjoying himself, although I do not know why.

[Lord Rooker]

Answer the question.

[Lord Henley]

I am answering the question but the noble Lord is enjoying himself. The ONR is recruiting and will make sure that it has the right people to provide the appropriate safeguards regime on 29 March next year to meet IAEA standards. Obviously we are not going to impose restrictions on where employees go thereafter. Is this a new policy being developed by the party opposite, that once people are trained in any job, they cannot move on and have to stay? These people will be employed by the ONR, and it is then a matter for the ONR to make sure that they have an attractive career and wish to continue working for the ONR. I am sure they will find that it is an attractive career and will want to stay

I am equally sure that they will do the job very effectively and that the ONR will feel confident that, with its recruitment processes, it can provide the appropriate safeguarding regime to make sure that we meet IAEA standards by 29 March next year.

[Lord Teverson]

My Lords, I think it was the noble Lord, Lord Grantchester, who mentioned the requirement for information technology systems, which is always the other area that needs to be looked at. When we get to my amendment in the next Committee sitting, I will certainly come back on the points that the noble Lord, Lord Rooker, raised about churn, as that is important. However, are we also confident that we will have information technology systems in place? What nature will they take, in a very broad sense? Will they be Excel spreadsheets or something more involved?

--- Later in debate ---

[Lord Henley]

I know that Liberal Democrats live and die for Excel spreadsheets. They find them enormously exciting, although I do not understand that. However, the noble Lord makes a very good and serious point. This is not just about the appropriate individuals to be trained; it is also about equipment. Yes, again, the ONR is happy that it will have the appropriate equipment and IT systems in place for 29 March. The ONR has given a commitment that it will be ready to provide the right service, so that we can meet those IAEA commitments next year. It is very easy just to talk in shorthand about the number of people on the ground, but as the noble Lord, Lord Teverson, says, spreadsheets, which Liberals find very exciting, and other equipment are probably also involved. Yes, all of that will be ready—I can give those commitments.

[Lord Judd]

There is one other matter. Of course, one of the results of what has been in place, very successfully, under Euratom is the international nature of the inspection. We have to recognise that the implications of something going seriously wrong are not confined to British frontiers; there are implications for people—men, women and children—beyond our frontiers. How are we going to ensure that in the arrangements we make, we retain international confidence that we are taking, and are seen to be taking, that responsibility seriously, and are not judges in our own courts?

[Lord Henley]

The noble Lord talks about international obligations. The important thing to remember about the initials IAEA is that the first letter stands for “International”. It is an international body, we have been signed up to it since 1957 and we continue to be so. It will offer those guarantees.

[Lord Grantchester]

I hesitated to respond to the Minister because I was not quite sure what he was saying. Is he saying he accepts our amendment, because he seems to be saying that we will maintain our standards to the Euratom standards?

[Lord Henley]

As all noble Lords will know—particularly those who have been on the Front Bench in government from time immemorial—the lovely word “resist” appears at the top of the brief. No, I am not accepting the amendment. It does not add anything to the Bill. All I am doing is providing the appropriate commitment that we will meet the right standards at the right time.

[Lord Grantchester]

My Lords, I am still confused by the way the Minister goes from one stance to another, saying that he will meet these standards but somehow feels it is inappropriate to have that on the face of the Bill.

I am not satisfied with the Minister’s responses and I do not think the rest of the Committee is either. This is the key challenge to the Government—that they can and will do what they propose in order for there to be a credible nuclear industry in the UK, operating to Euratom standards. The noble Lord, Lord Fox, made a compelling remark earlier, saying that the Government have not appreciated the situation and undertaken a risk assessment of their handling of Euratom issues. On a corporate risk register—one axis being low and high impact, and the other axis being high and low probability—leaving Euratom must be placed at the worst quartile: high probability of an unsatisfactory outcome, coupled with high impact.

We will certainly be appreciating the Government’s response across all the Committee’s amendments, in order to determine the best framework to propose on Report. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord O'Neill of Clackmannan]

With the Liberals.

[Lord Henley]

We have had rather a lot of history lessons. I am grateful to the noble Lord, Lord O’Neill, for reminding us of the late Willie Ross. I remember his technique when in opposition of calling Divisions just for the sake of having one, so that he could go out to have a cigarette—but that was in another world and another time, and now we have to go further away to have a cigarette than is possible in the time it takes to have a Division.

The noble Lord also reminded me of the first ever committee I was on, many years ago. I remember with great pride when the Chief Whip approached me and asked me if I would go on the Joint Committee on Statutory Instruments. Many noble Lords will remember being asked to go on to such a committee, either in this place or the other place, and feeling that it was a great honour and how important it was. JCSI did a very good job and was very important, but not nearly as important—and I think we are all very grateful for it—as the Delegated Powers and Regulatory Reform Committee, which can look at the merits of the legislation. We are very grateful for its reports. We have taken note of exactly what it has said in relation to the amendment. We will look very carefully at those recommendations and I hope to be able to give a positive response in due course. I do not think that I can give that response at the moment because the words that are being queried—“civil activities”—have, as someone put it, their natural meaning, and we would accept that. But it might be that a change has to be made. I put it to the noble Lord, Lord Grantchester, that we will look very carefully at this matter and between now and Report we can have further discussions and see whether amendments are needed.

With that, I hope that the noble Lord will be prepared to withdraw his amendment. At that point, going back to the cricketing analogies that we had earlier, we might at this stage draw stumps.

[Lord Rooker]

I want to break the rules and come to the defence of the Box. It is quite unfair to attack the briefs that Ministers have. The briefs may be poor not because of those who prepared the brief but because of the policy behind it. We should not level an attack at the civil servants in the Box.

[Lord Henley]

I am very grateful to the noble Lord, Lord Rooker, for making that point. I followed the noble Lord into Defra some years ago. He and I know exactly what all those who have served us in the Civil Service do for us and how well they do it. If briefs ever fail, it is the failing of Ministers, and Ministers—including the noble Lord, Lord Rooker, and other noble Lords I see in this Chamber—know that it is our fault and we take responsibility for it. On this occasion, I think that everything we have said and done has been absolutely marvellous and wonderful and we will continue to argue our case.

May I now make my second attempt to draw stumps, if the noble Lord is prepared to withdraw his amendment?

[Lord Hunt of Kings Heath]

My Lords, it has been a long 24 hours for many of us, so I am delighted to say that is the nicest thing that the noble Lord has said to us. I take it that the Government will, in essence, be bringing an amendment back on Report. I am very grateful, and I beg leave to withdraw the amendment.

Small Businesses: Retention

Lord Henley Excerpts

Wednesday 21st February 2018 Lords Chamber

[Lord Aberdare]

To ask Her Majesty’s Government, in the light of the loss of retention monies by small firms following the insolvency of Carillion, what steps they are taking to provide protection against such losses in the future.

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

My Lords, the Government are committed to improving payment practices. Our consultation on the contractual practice of cash retention, alongside a parallel consultation on the effectiveness of the 2011 changes to the Construction Act 1996, closed on 19 January. We are now considering the responses.

[Lord Aberdare (CB)]

My Lords, retentions as currently practised mean that not only do small construction firms have to wait to be paid for work that they have done, often for several years, but that when a client company becomes insolvent they never get paid at all. Carillion alone held some £700 million of retentions, which its suppliers have now lost. Can the Minister assure us that immediate steps will now be taken to protect small firms from the loss of funds they are owed—for example, by ring-fencing retention funds in secure trust accounts? Will he look at the 10-minute rule Bill recently introduced in the other place by Peter Aldous MP, with widespread cross-party and industry support, as a possible approach to achieving this? When will something happen after all the promises we have had over the years?

[Lord Henley]

My Lords, I agree with some of the noble Lord’s analysis about problems related to retention, a practice that is common within the construction industry but which has negative impacts. That is why we had the consultation, as I think he knows. We obviously want to consider the results of that consultation and in doing so we will look, as he has suggested, at Peter Aldous’s Bill and see whether it is appropriate that we can take further steps. But the consultation having been completed, we need to consider it first.

[Lord Stevenson of Balmacara (Lab)]

My Lords, you have to wonder why this Government have it in for SMEs. We have a Small Business Commissioner who seems to have none of the powers necessary to do anything about the late payments scandal that they have to face; and on retention, as we have just heard, very good and well-argued proposals have been played into the long grass and will not see the light of day for some time, as the Minister seemed to suggest. Should this not be put immediately to the task force that the Secretary of State has put together to advise on how to mitigate the Carillion disaster?

[Lord Henley]

My Lords, as I said, we are considering these matters. The noble Lord quite rightly points out the task force that my right honourable friend has set up; I add that the Small Business Commissioner, Paul Uppal, will sit on that task force. We will consider all the options as a result of that but we will not rush into legislation; we are going to consider what is appropriate. Perhaps we can give some support to Peter Aldous’s Bill but these matters need to be considered and we will then deal with the problem.

[Lord Naseby (Con)]

My Lords, if the retention moneys at Carillion have gone walkabout, surely that is the legal responsibility of the board of directors of that company and prosecutions should follow accordingly. But in relation to retention moneys in general, in addition to what my colleague the noble Lord, Lord Aberdare, suggested, could we not consider the simple principle that if you buy a house and pay a deposit, that money rests with the lawyers for the transaction until such time as completion is made?

[Lord Henley]

My Lords, I am not going to comment on the first part of my noble friend’s question as that is obviously a matter for the official receiver and the legal authorities more generally. On his more general points about retention moneys, we believe they have negative impacts. We want to consider the right way forward, and will then take action.

[Baroness Burt of Solihull (LD)]

Retention has been described by the Federation of Small Businesses as a total scam. Now industry is coming together to abolish retention, to have project bank accounts to manage large procurement projects, and to remove the incentives for late payments and bad cash-flow practices by the Carillions of this world. I understand what the Minister said about considering the consultation, but will the Government join in and implement project bank accounts for large government projects?

[Lord Henley]

Again, my Lords, I am not going to make promises at this stage about what we will do because, as I made clear, we want to consider the consultation. We have also made clear that we recognise that retention, which is common in the construction industry, can have negative impacts. That is why we set up the Small Business Commissioner to assist on late payments. As the noble Baroness will be aware, we had a debate on that matter only the other day. Things are happening. Things will continue to happen. We will continue to look at that consultation and we will then take action.

[Lord Lea of Crondall (Lab)]

My Lords, will the Minister comment on the ongoing role and remit of the Financial Conduct Authority, not only on the narrow point but on such questions as its relation with the big four auditing companies? Is this within the scope of this separate inquiry?

[Lord Henley]

I think the noble Lord is going somewhat beyond the Question on the Order Paper and I do not think I ought to comment on that at this stage. We are looking at the practice of retention. I have made clear where we are, and we will act when appropriate.

[Lord O’Neill of Clackmannan (Lab)]

Is the Minister aware that his consultation process started as a result of an undertaking by one of his colleagues to have a review, which started some two years ago? I declare an interest in this as set out in the register. This is far too long a period to say that we are just awaiting a further consultation. How long does this process have to take and how many businesses are going to go bankrupt? It is not just the Carillions of this world. It is small builders, 95% of which employ fewer than 10 people, who are intimidated by companies from seeking the legal redress which would be the obvious route to get the money to which they are entitled.

[Lord Henley]

The noble Lord is quite right to point out that this started during the passage of the 2016 Act as a result of promises made by my noble friend Lady Neville-Rolfe. We instituted a report into this matter to gather evidence and following that report late last year we instituted the consultation. The consultation ended in January. That is why we are now considering that consultation, and we will act when appropriate.

Taylor Review

Lord Henley Excerpts

Wednesday 7th February 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 the Answer given to an Urgent Question in another place in relation to the Government’s response to the Taylor review of modern working practices. The Statement is as follows:

“Mr. Speaker, I am delighted to set out the government response to the review of modern working, which was led by Matthew Taylor. Matthew Taylor set out his ambition that government should place as much emphasis on creating quality jobs as it does on the number of jobs. Good work and developing better jobs for everyone in the British economy is at the centre of the industrial strategy vision. The Prime Minister has repeatedly said that as we leave the EU there will be no rollback of employment protections, but today, we are committing to go further than that and seek to enhance rights and protections in the modern workplace for even more people. We will support employers who give individuals their correct employment rights, but we will prevent undercutting by unscrupulous employers who try to game the system by clearly defining who is employed and who is not.

We will extend the right to receive a payslip to all workers, including stating the hours that they worked. We are requiring employers to clearly set out written terms from day one of the employment relationship and extending that to all workers. We are taking forward 52 of the 53 recommendations in the Taylor review, and all but one of the recommendations from the joint report of the BEIS and DWP Select Committees. For workers on zero-hour contracts, we are creating a ‘right to request’ a stable contract. For the first time, the state will take responsibility for enforcing a wider set of employment rights, including sick pay and holiday pay, for the most vulnerable workers. Employers who lose tribunal claims against staff and are found to have had no regard for the law will face fines of up to £20,000 from the tribunal, quadrupled from the current £5,000, and we will also ensure that when an employment tribunal award is made, it is paid correctly.

The Government are very grateful to Matthew Taylor and his panel, as well as to the many individuals and organisations who contributed to this review. I would also like to thank the BEIS, DWP and Scottish Affairs Select Committees for their contributions to this work. Through this response we are acting to ensure good work for all, to protect the rights of those on low pay and to ensure that more people get protection, security and certainty in the work that they do”.

My Lords, that concludes the Statement.

[Lord Grantchester (Lab)]

I thank the Minister for repeating in the form of a Statement the reply to the Urgent Question in the other place on the Government’s response to the Taylor review of modern working practices. This is a very disappointing government response. Against the challenges thrown up by employers using technological innovations in drawing up job specifications, pay and conditions, the Government should focus on the definitions of categories of employment to be clarified and monitored by the Employment Agency Standards Inspectorate. Enhancement of rights merely with payslips and written terms does not go far enough. Will there be clarity in the employment laws in relation to how workers are employed in the so-called gig economy? In the case of a dispute, to whom does a worker go? How will the state take responsibility for enforcement? What rights will apply to which workers on day one of employment, and how will they apply to those on zero-hours contracts? Will any new right to request a more stable contract result in an obligation on the employer? Will the role of trade unions be enhanced to protect and guide their members through any new procedures? A far more comprehensive response will be required after the consultation.

[Lord Henley]

I am sorry that the noble Lord was disappointed with my response, as I think that we went a long way. He failed to recognise that we are announcing further consultation on some of the grey areas in which there is a lack of clarity. The noble Lord will be aware that we have the Employment Rights Act 1996, and the law on the subject has grown and developed as a result of cases in the courts since then. We all accept that there are grey areas in which there is a lack of clarity regarding employment. That is why my right honourable friend wanted to set up this review and why he has responded with the Statement on good work today. He has also responded with a series of consultations, the first and most important of which is the consultation on employment status. We have responded as we did to get that correct so that we can then move on to legislate where it is necessary. We look forward to helpful contributions from the noble Lord and his party in due course.

[Lord Fox (LD)]

My Lords, on employee status, a central part of the Taylor review concerned dependent contractor status. The Government seem to be agnostic on that. They are going into consultation, but what mood are they in? Are they in favour of moving towards dependent contractor status? If not, why not—and how long will this consultation process take? People are already working in this economy and being exploited by it. Will this require primary legislation? If so, what timetable do the Government envisage before we deal with this issue on the Floor of this House?

[Lord Henley]

My Lords, the noble Lord seems to think that we need to look only at dependent contractor status but the whole question of the boundaries between employed status and being self-employed also needs to be looked at. That is part of the consultation and I look forward to hearing his comments on that in due course as part of the consultation. Thinking back to the Employment Rights Act 1996—I do not remember its passage, though it is not that long ago—it is very likely that inclarities, if I may call them that, will emerge as a result of the consultation and will need to be looked at, as has happened since 1996. For that reason we are consulting—just to keep the noble Lord busy, there are three other consultations as well, where we would again be grateful for his comments—and it is quite likely that we will need to legislate as a result. As to the likely timescale for bringing forward primary legislation, I am afraid that I cannot give any assurances to the noble Lord. He will be aware that both Houses are rather busy with quite a lot of legislation at the moment.

[Lord Monks (Lab)]

My Lords, we are not short of consultations in this area; Taylor himself carried out a very extensive consultative exercise which the Minister referred to in his opening Statement. It looks to many people as if this exercise is being kicked down the road, with yet more consultation before the Government act. Some modest measures have been announced today—I noticed that the general secretary of the TUC said that a “baby step” had been taken. However, this is not the ambitious approach that the Prime Minister originally set out regarding the insecure labour market which affects so many in Britain today. Many young people are struggling to get secure contracts, and many people who work for agencies feel that their job security is at risk. Many mothers in particular, but also parents generally, cannot plan their childcare arrangements. We recently read about the case of a man who died because he did not want to take up a doctor’s appointment because he would be fined. I am not saying that that is typical but there are such cases. For too many people out there the world of work is nasty, brutish and, occasionally, all too short. When will the Government seize the nettle and move forward in an ambitious way, as we were led to believe would happen when the Prime Minister originally made a Statement on this matter?

[Lord Henley]

Again, my Lords, I am sorry that the noble Lord takes this rather negative view of what has emerged. Regarding the government response, Matthew Taylor himself said:

“There is much more to be done to make good work for all a realistic goal, but the Government response to my review is substantive and comprehensive. It will make a difference to the lives of the most vulnerable workers and that is what matters”.


We are in a position where employment is at an all-time high and unemployment is at its lowest level for some 40 years. Whatever we do, we do not want to damage, but we want to make sure that we make the right changes at the right time and in the right way. That is why there will be further consultation on employment status and on the other matters that I talked about—agency workers, enforcement of employment law and transparency for employees. Let us get that right and then legislate where appropriate.

[Lord Holmes of Richmond (Con)]

My Lords, what is the Government’s view on unpaid internships? As the Taylor review chose to pull its punches on this point, does my noble friend agree that it is high time to legislate to put an end to these pernicious practices?

[Lord Henley]

My Lords, I am aware of my noble friend’s concern on this matter and of his Private Member’s Bill. A letter is on its way to him and to others who have been involved in that Bill offering a meeting on the subject. I hope that he will receive it in due course.

[The Lord Bishop of St Albans]

My Lords, a number of things are to be welcomed in the Government’s response to the Taylor report but perhaps I may pick up on one small thing. One recommendation is that the Government should develop a free online tool to provide individuals with an indication of their employment status and rights. However, do the Government not realise that a large proportion of the workers who are most vulnerable to exploitation are the very ones who will have least access to that sort of digital connectivity? Will the Minister make a commitment that the question of how more vulnerable people can access this information will be looked at closely when implementing this recommendation?

[Lord Henley]

The right reverend Prelate makes a very good point—some people do have problems with access to computers and such matters. I know that considerable work has been done on these matters in the Department for Work and Pensions, particularly in relation to universal credit and other benefits. I think that the department finds that most people can manage but I will certainly have a further look at what the right reverend Prelate has said and, if there is anything further that I can add, I will write to him.

[Lord Carlile of Berriew (CB)]

As welcome as the Taylor report is, will the noble Lord, as a fellow member of the legal profession, bear in mind that in that profession and in a number of others there are a large number of very successful limited liability partnerships, the members of which are self-employed and treated as self-employed by the Revenue? Those arrangements are often to the distinct advantage of the professional people concerned—men and women. Will the Government ensure that beneficial limited liability partnerships, which bring a great deal of money into the economy, are not affected by these proposals?

[Lord Henley]

The noble Lord does me the honour of claiming that I am a member of the legal profession. I suppose that I am legally qualified but I do not think that I could put myself at quite the same level as the noble Lord. However, he raises a very sensible point and it is one that I will certainly want to look at. As I remember my employment law, the important point is that whether you are employed or self-employed should not be a matter for the individual to decide; it is, as it used to be, a matter of fact and degree. I hope that whatever changes we make—particularly changes to limited liability partnerships and those working in them—do not affect that, but I will certainly make sure that the noble Lord’s point is taken on board.

Nuclear Safeguards Bill

Lord Henley Excerpts

2nd reading (Hansard): House of Lords
Wednesday 7th February 2018 Lords Chamber

Moved by

[Lord Henley]

That the Bill be now read a second time.

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

My Lords, before I set out the context surrounding, and the key features of, the Nuclear Safeguards Bill, I think it would be helpful to explain again the meaning of nuclear safeguards. Investing a little time in this will, I believe, help with our discussion of this important but rather technical issue.

Nuclear safeguards are about non-proliferation and demonstrating that the United Kingdom is a responsible nuclear power. Nuclear safeguards are the reporting and verification processes that nuclear states use to demonstrate to the international community that civil nuclear material is not diverted into military or weapons programmes. The Bill has a very specific purpose in a very technical area: it ensures that the United Kingdom can put a domestic civil nuclear safeguards regime in place.

It is important to make clear at the outset, as it is key to understanding the subject matter covered by the Bill, that civil nuclear safeguards are entirely distinct from nuclear safety and nuclear security. Nuclear safety concerns the prevention of nuclear accidents, and nuclear security concerns physical protection measures. Both nuclear safety and nuclear security are already the responsibility of the Office for Nuclear Regulation and are unaffected by the Bill.

As a responsible nuclear state, the United Kingdom is a committed member of the International Atomic Energy Agency, which provides international oversight of civil nuclear safeguards. The United Kingdom has voluntarily accepted the application of international safeguards through agreements with the agency and is seeking to conclude new agreements with the agency that follow the same principles as our current agreements. We were a founder member of the IAEA back in 1957 and we continue to be at the forefront of its activities. Leaving Euratom will not change that.

The United Kingdom’s nuclear safeguards regime is currently provided primarily by Euratom with some support from the Office for Nuclear Regulation. The European Union and Euratom are uniquely legally joined, so when the Prime Minister formally notified our intention to leave the European Union, she also commenced the process for leaving Euratom. The United Kingdom therefore served notice of its intention to withdraw from Euratom at the same time as withdrawing from the European Union. The Bill therefore enables the United Kingdom to ensure that a domestic nuclear safeguards regime can be put in place when Euratom safeguards arrangements no longer apply to the UK.

The United Kingdom’s withdrawal from Euratom will in no way diminish our nuclear ambitions. Maintaining the continuity of our mutually successful civil nuclear co-operation with Euratom and international partners is a key priority for us. We remain absolutely committed to the highest standards of nuclear non-proliferation, including safeguards, and the United Kingdom will remain a committed member of the global architecture that provides the framework for non-proliferation.

Civil nuclear safeguards and reporting, by assuring the international community about the proper use of certain nuclear materials, underpin international civil nuclear trade. Alongside the consideration of this Bill in the House of Commons, the Government have been engaging in negotiations with the European Union, the IAEA and third countries. The United Kingdom has held several rounds of discussions with the European Union in the first phase of negotiations and there has been good progress on Euratom issues.

Negotiations with the IAEA on future voluntary agreements for the application of civil nuclear safeguards in the United Kingdom have been constructive and fruitful, and substantial progress has been made. Substantial progress has also been made in negotiations to put in place new nuclear co-operation agreements. In particular, constructive progress has already been made in discussions with key partners such as the United States, Canada, Australia and Japan.

It is clear that we need continuity and must work to avoid any break in our civil nuclear safeguards regime if we wish to support the United Kingdom’s nuclear industry and its nuclear research community. A civil nuclear safeguards regime and safeguards agreements with the IAEA are critical for the continued operation of our civil nuclear industry and research. As set out in the Written Statement laid on 11 January, our strategy for withdrawal and our future relationship with Euratom is two-fold: first, to seek, through our negotiations with the European Commission, a close association with Euratom; secondly, and simultaneously, to put in place all the necessary measures to ensure that the United Kingdom can operate as an independent and responsible nuclear state from day one. This is vital to ensure continuity for industry, whatever the outcome of negotiations.

We will also seek to include Euratom matters within any negotiated implementation period. The Government also made the commitment to report back to Parliament every three months, by way of further Written Statements, about overall progress on this strategy, including in respect of negotiations. We have been working closely with the Office for Nuclear Regulation to ensure that it can be ready to take on new responsibilities for a domestic safeguards regime, in place of Euratom’s current regime.

As my predecessor, my noble friend Lord Prior, set out in a Written Statement on 14 September 2017, our intention is for the new domestic regime to exceed the standard the international community would expect from the United Kingdom as a member of the IAEA. The Government are aiming to establish as soon as possible after the United Kingdom’s withdrawal from the European Union a robust regime that is as comprehensive as that currently provided by Euratom.

[Lord Rooker (Lab)]

I am sorry to interrupt the Minister, but this issue was raised recently in the EU Energy and Environment Sub-Committee inquiry into energy security. The ONR cannot be independent in the same way that Euratom was. The accounting officer is appointed by the DWP accounting officer. The chair of the ONR is appraised by the DWP. How can it be sold to the IAEA that the ONR is as independent as Euratom?

[Lord Henley]

My Lords, I will take advice but my understanding is that the IAEA does not have concerns about this issue, which is part of the ongoing discussions with that body. As I said, discussions have taken place and they will continue. The Bill will be considered in this House for some weeks and in due course, I will give a further reassurance to the noble Lord to make sure that he and others are satisfied that the ONR can perform this role.

Perhaps I may continue with my remarks. Currently, under the Euratom treaty, all members including the United Kingdom subject their civil nuclear material and facilities to nuclear safeguards inspections and assurance which is carried out by Euratom. Euratom then reports specific information on member states to the IAEA, which has international oversight for those nuclear safeguards. The Nuclear Safeguards Bill ensures that the United Kingdom can put this domestic regime in place and it will enable the ONR to oversee nuclear safeguards when Euratom safeguards arrangements no longer apply to this country.

To ensure continued international verification and oversight of the United Kingdom’s safeguards, as I have said to the noble Lord, we will continue in our discussions with the IAEA to agree replacement voluntary safeguards agreements that reflect the fact that the Euratom arrangements no longer apply to the United Kingdom. This Bill provides us with the ability to implement those new agreements as well as the new domestic regime that underpins them.

[Lord Lea of Crondall (Lab)]

This part of the noble Lord’s speech suggests that it is a given that we are leaving Euratom, and the noble Lord is nodding in assent. Is he not aware that leaving the European Union does not necessitate leaving Euratom? If we were to stay in the European Economic Area by switching to being a member of EFTA, there is a whole raft of EU agencies which people can still belong to. Are the Government, even at this late stage in the negotiations, not clear about that?

[Lord Henley]

My Lords, I do not think that the noble Lord has been following what has been happening in this House and in the other place. We have the European Union (Withdrawal) Bill going through at the moment and last year we had the Bill which in a sense set off Article 50, which has gone through. By those means we are committed to leaving the EU and for that reason—

[Lord Lea of Crondall]

No.

[Lord Henley]

Yes, my Lords, we are leaving Euratom. That is the case, and the simple fact is that we have to make provisions for leaving Euratom and that is why we are doing this.

[Lord Lea of Crondall]

No, not true.

[Lord Henley]

The noble Lord says that what I have said is not true. I would ask that he withdraw that remark. We are leaving Euratom and that has been made clear.

[Lord Lea of Crondall]

I will withdraw that particular remark which used the words, “not true”, but if we stay in the European Economic Area, we would have withdrawn from the European Union but would still be able to be part of these agencies.

[Lord Henley]

My Lords, Euratom consists of the 28 members of the EU and no others. There are two countries which have some sort of associate membership, but that would not be appropriate for us. Being members of EFTA would not do that. The noble Lord will have to accept that we are leaving Euratom. That is the case and we therefore need to make provisions. If the noble Lord will bear with me, I will now tell him about the Bill.

Clause 1 will amend the Energy Act 2013 to replace the Office for Nuclear Regulation’s existing nuclear safeguards purposes with new nuclear safeguards purposes which reflect the nature of the new regime. The ONR will reflect the new nuclear safeguards regime primarily using its existing relevant functions and powers. Clause 1 will also amend the Act by inserting new powers so we can set out in regulations the detail of the domestic safeguards regime, such as accounting, reporting, control and inspection arrangements.

Clause 2 will create a limited power—I stress limited power—enabling consequential amendments to be made to the Nuclear Safeguards and Electricity (Finance) Act 1978, the Nuclear Safeguards Act 2000, and the Nuclear Safeguards (Notification) Regulations 2004. It is a very narrow power that will mean that references in that legislation to existing agreements with the IAEA can be updated once international agreements have been reached.

In addition, in January we published two sets of pre-consultation draft regulations to support consideration of the powers in the Bill, on which we have been working closely with the ONR. The Government are committed to an open and transparent approach as they continue to develop these regulations, which set out the detail of the domestic civil nuclear safeguards regime. We expect these draft regulations to continue to evolve in response to comments from and consideration by noble Lords and other stakeholders. To that end, the department is planning a series of stakeholder events and workshops in addition to the public consultation on the regulations, which we intend to take place later in the year. The drafts we eventually consult on will, of course, in certain respects differ from the working drafts that we have provided for the benefit of Parliament.

I now turn to one final issue that is not strictly relevant to the subject of the Bill but has been raised in another place and in meetings that I and others have had with noble Lords. It is the question of medical radioisotopes. I appreciate that the noble Lord, Lord Hunt of Kings Heath, has tabled an amendment to the EU withdrawal Bill on this very issue. It might be that that would be a better place to discuss these matters in due course rather than here. I could not possibly comment on what might be the appropriate Bill, other than to say that I do not think that it is, strictly speaking, relevant to this Bill, but because of the concerns that been expressed on this issue, it would be right for me to make a few points and give assurances to the House that the supply of medical radioisotopes is, and will continue to be, a very high priority for the Government. We share that concern about the well-being of patients receiving such treatment that results from being able to import such materials in good time, bearing in mind the relatively short lives that medical radioisotopes have.

We have made it clear that Euratom currently does not place any restrictions on the export of medical radioisotopes to countries outside the European Union. As they are not classified as special fissile material they are not subject to the international safeguards regime or to the approval of the Euratom Supply Agency, which governs the supply of special fissile materials. Although its role does not extend to ensuring the supply of medical radioisotopes, the Euratom Supply Agency established in response to the last shortage crisis in 2012 the European Observatory on the Supply of Medical Radioisotopes. The observatory aims to consolidate and share information between the EU, European Union member states, international partners, the medical community and industry stakeholders on supply, but crucially it does not have a decision-making or executive role in responding to shortages.

However, the Government recognise the concerns that changes to our customs arrangements after our withdrawal from the European Union could potentially affect the timely supply of medical radioisotopes. Therefore I offer an assurance to the noble Lord, Lord Hunt, and other noble Lords who have raised this point that the Government are committed to minimising any impact such changes might have. I have had meetings with counterparts in the Department of Health and Social Care and Her Majesty’s Treasury to step up our work in this area. We are working across government to prepare domestically and to negotiate a future customs arrangement with the European Union that ensures cross-border trade in this area is as frictionless as possible.

[Lord Carlile of Berriew (CB)]

I am grateful to the noble Lord for what he has just said, but are we to take it that the sentence in the factsheet on the Bill that was given to your Lordships’ House at some very useful meetings still applies in relation to radioisotopes:

“This will be part of the broader negotiations of the UK’s future with the EU”?


If so, will he tell us what that means?

[Lord Henley]

My Lords, it is exactly the same as what I have said—as part of our broader negotiations we will obviously want to ensure that, in the words I think I used, a future customs arrangement with the European Union is as frictionless as possible. We understand the importance of these matters. It is as frictionless as it can be at the moment; we want to make sure that that continues. I do not believe that it is strictly relevant to the Bill but it was important to bring the matter up. I am very grateful to the noble Lord, Lord Hunt, for tabling an amendment, which will be discussed, to another Bill, but I want to give assurances that the Government are doing everything we can to make sure that such imports are frictionless, just as their export from Europe will be frictionless and just as they are frictionless in their export from Europe to non-EU countries at the moment. It is a matter of giving assurances as to what the Government can do and I hope that that will help to reassure noble Lords.

[Lord Warner (CB)]

I did not quite understand what the noble Lord was saying in his attempts to reassure us about Euratom’s observatory. As I understand it, the observatory was an important part of smoothing out problems when there were supply issues around radioactive isotopes. Is he saying that the observatory will continue for all those who have the benefit of being in Euratom but those who leave will not have any equivalent benefits and it is impossible for the UK to achieve such access to those benefits?

[Lord Henley]

It is a body set up by Euratom for Euratom, therefore it has an interest in ensuring safe export from the EU. There is no problem of the export of radioisotopes from the EU to non-EU countries. We want to make sure that when we are no longer part of Euratom that continues to be the case. That is why I am trying to give assurances based not only on what is coming out but on what the United Kingdom Government can do at our end. I hope that that will deal with the noble Lord’s problem.

[Lord Warner]

I do not think that that answers the point. The noble Lord is saying that they will go on helping to smooth out the supply to EU countries, but the UK will be left over here somewhere, unable to benefit from that if there is a world shortage of radioactive isotopes. That seems to me to be what he is saying: will he just confirm that that is what he is saying?

[Lord Henley]

I have a sneaking suspicion that the noble Lord is deliberately misunderstanding me. What I am trying to make clear is that we have to deal with not only what we want to import but obviously what is being exported from Europe. Euratom has an interest in what is being exported. Euratom is quite able, through the advice offered by the European Observatory on the Supply of Medical Radioisotopes, to look after the export of such radioisotopes. We have an interest in their export because we will be importing them as a non-EU country in the future. What I wanted to do is to give the noble Lord, if he will accept it, and other noble Lords an assurance that everything that can be done by the Government, and everything that is relevant in the negotiations, is being done to ensure a continued supply from European countries, just as there will continue to be supply from countries such as South Africa, from which we also import medical radioisotopes. I hope I have given sufficient assurance to the noble Lord, Lord Warner, that he will accept that we are doing what we can. As I made clear earlier, I do not think it is relevant to this Bill but I wanted to deal with the concerns raised by the noble Lord, Lord Hunt, and others during the passage of the EU withdrawal Bill.

The powers in the Bill give the existing independent nuclear regulator—the ONR—a new role to regulate nuclear safeguards, alongside its existing role, which it performs very well, regulating the United Kingdom’s nuclear safety and security. The Bill sits alongside other work around our future relationship with Euratom, the IAEA and third countries. Of course, we do not know what the final arrangements will be so we are doing what any responsible Government would do by being ready to put in place a civil nuclear safeguards regime for the United Kingdom through the Bill. I reiterate that although the United Kingdom is leaving Euratom, we will continue to support Euratom and want to see continuity of co-operation and standards and a close future partnership with it. I beg to move.

--- Later in debate ---

[Lord Henley]

My Lords, I will come to the Henry VIII powers later, and I am grateful that the noble Lord feels that he does not want to discuss them in much detail at this stage. I believe that only this evening the Delegated Powers Committee has been looking at them. I hope that, on this one occasion, we will get a clean bill of health. But I think that noble Lords opposite who have been Ministers will know that there are occasions when Henry VIII powers are necessary. Moreover, all of them have probably been guilty at one time or other of having introduced legislation containing a Henry VIII power. However, I shall get to that later and touch on it briefly.

The noble Lord, Lord Fox, and the noble Baroness, Lady Featherstone, both wanted a much wider debate. I think that the noble Lord, Lord Fox, suggested that I was hiding behind the narrow remit of this Bill. That is not so. He wanted me to join in a wider debate on the nuclear industry, nuclear research and development and all those matters. I have given assurances about our commitment to the nuclear industry because they are important in relation to the Bill. I have also given assurances about how we will continue to invest in research and development, and I hope that my noble friends Lady Neville-Rolfe, Lord Inglewood and Lady Bloomfield will accept them. We are committed and, again, I hope that the noble Lord, Lord Broers, will accept that. But now is the not the time to be debating the wider issues. The noble Lord, Lord Fox, who acts as if he is some simple ingénue and cannot find ways of getting these matters debated knows perfectly well that there are plenty of means of securing a full debate on the nuclear industry, and no doubt he will institute one in due course.

The important matter at the moment is to debate this Bill at its Second Reading because it deals with a crucial point; namely, that we are leaving Euratom. I am grateful to the noble Lord, Lord Hunt of Kings Heath, for saying that although he regretted the fact that we will be leaving Euratom, he accepted that since we are doing so, there is a need for the Bill and, as I understand him, it is not the job of the Official Opposition to prevent it getting on to the statute book. What he wanted to ensure is not only proper scrutiny, but that we should provide the appropriate assurances that in a year’s time the ONR will be in the right place to take on the new responsibilities that it will have. I hope that I can deal with those points in the course of my remarks.

I shall start with the need to leave Euratom and repeat once again the point I have made that the Euratom treaty is legally distinct from the European Union treaty, but it has the same membership of all 28 states and makes use of the same institutions. Noble Lords will recall that the decision to leave Euratom formed part of the consideration by both Houses of the European Union (Notification of Withdrawal) Bill, which is now the European Union (Notification of Withdrawal) Act 2017. It is a done deal and we are leaving. It therefore behoves this House and another place to make sure that in a year’s time we are in the right place; that is, where the noble Lord, Lord Hunt of Kings Heath, wishes us to be.

It is important to say, in particular in response to the questions put by the noble Lord, Lord O’Neill, about maintaining public confidence because it is so important to the nuclear industry as a whole—here we are going wider than the question of safeguards—that this does not mean that we should not continue to have a relationship of some kind with Euratom, and we shall continue to discuss these matters. Our withdrawal will in no way diminish our nuclear ambitions or, I believe, our high international standing on nuclear matters. Maintaining the continuity of our mutually successful civil nuclear co-operation with Euratom and with international partners is a key priority. We will continue to have a constructive, collaborative relationship with Euratom. The United Kingdom is a great supporter of it. We have been working on its standards and we will continue to do so.

Our strategy is to continue to seek a close association with Euratom while putting in place all the necessary measures to ensure we can operate as an independent and responsible nuclear state from day one.

[Lord Lea of Crondall]

My Lords—

[Lord Henley]

Just before I give way to the noble Lord, I remind the House that I gave way six times in the course of my introduction. One of the six who intervened, the noble Lord’s noble friend Lord Rooker, has not felt it fit to stay, but I give way to the noble Lord, Lord Lea.

[Lord Lea of Crondall]

I was going to pick up a totally fresh point that has just been made, but if the noble Lord does not want to deal with it I will leave it. I am sure he will write a letter on many of these points.

[Lord Henley]

My Lords, I am always more than happy to take interventions. As I said, I took a total of six in the course of my earlier speech. I will of course write to the noble Lord and others on points that I cannot manage, particularly on points that are relevant to the Bill. Some of the interventions, when we got a bit confused about nuclear safeguards and nuclear safety, went somewhere beyond the Bill’s scope.

[Lord Lea of Crondall]

It is a very simple point. The noble Lord has made a fresh point along the lines that we have no basis on which we can do other than be a rule-taker. I thought that most people who are adamant that we must leave the European Union and all of its manifestations object to anything that leaves them in the position of rule-taker instead of rule-maker. The noble Lord is now saying, “Let’s keep being a rule-taker from Euratom”.

[Lord Henley]

I said nothing of the sort. I hope that the noble Lord will look very carefully at what I said. I said that we want to continue to develop our relationship with Euratom but that, of course, we will not be in it. Therefore, it is important for us to set up alternative arrangements, which is what this Bill is about, so that we can have the appropriate nuclear safeguards regime in place. Similarly—this point was made by the noble Lord, Lord Teverson, and others—we want to make it clear that we will have nuclear co-operation agreements with other countries around the world. We already have some, but our officials are engaging with some key international partners, including the United States, Canada, Japan and Australia, to ensure that we have essential nuclear co-operation agreements in place to ensure uninterrupted co-operation in trade and the civil nuclear sector. I confirm to the noble Lord, Lord Grantchester, on his questions on how we want to develop any further nuclear co-operation agreements, that our intention would be to present any new agreements to Parliament, as is appropriate, prior to the Government’s ratification, as provided for in the Constitutional Reform and Governance Act 2010.

I turn to medical radioisotopes, which have exercised a great many noble Lords. This is important. I am not sure that I can add much to what I said at the beginning, other than to stress how important the Government consider this issue. We will continue to make sure that appropriate arrangements are in place at our borders to allow their seamless import into this country. When I talked about customs arrangements I was not talking—if the noble Lord, Lord Hunt of Kings Heath, will bear with me—about a customs union but just about the usual arrangements that HMRC is responsible for, to make sure that things can come through quickly, particularly things that have a very short life, as the noble Lord, Lord Warner, and others reminded us, and as I think I reminded the House at the beginning. The important point to get over is that we take this very seriously, we will continue to discuss it and I will certainly write to all noble Lords, and in particular to the noble Lord, Lord Warner, to make it quite clear what we are doing. I will write before Committee and will probably continue to write on other occasions throughout the course of the Bill.

I turn to the role of the ONR and whether it feels that it can implement the necessary changes in the timescale that is before it. The first point to get over is the simple question of funding. I can give an assurance to the House that the Government are making another £10 million available to set up the new regime. When noble Lords talk about cuts to the funding that has been available to the ONR in the past one should remember—I think that there has been a degree of “economy with the actualité”, as someone once put it—that the ONR is actually very well funded and that changes to the level of the grant it gets from government are only a very small part of the overall ONR budget, which is actually growing and not shrinking. More than 90% of the ONR’s budget is recovered from industry; it is not coming from government. The safeguards work is being paid to ONR directly from BEIS’s budget, so I can again give the assurance to the noble Lord, Lord Hunt of Kings Heath, that there will be no charge on industry to pay for safeguarding work. The charges to industry are to cover other matters and, as I said, more than 90% of its budget comes from those sources.

It is important to get over just what the ONR is doing and the Government’s commitment to make sure that we have a robust regime that is as comprehensive as that currently provided by Euratom. Euratom standards, as has been made quite clear by me, by other Ministers and by many speakers in this debate, are considerably higher than those that other bodies would achieve. Achieving such international standards will allow the UK to discharge its international commitments and will underpin international nuclear trade arrangements with countries such as the United States, Canada, Japan and Australia.

The ONR is in the process of developing an expanded safeguards function by recruiting and training additional inspectors, building additional institutional capacity and developing necessary IT systems. It is aiming to have in place sufficient staff, including inspectors, from 29 March 2019 to meet international standards as applied by the IAEA. Current estimates suggest that the ONR would require a team of some 20 to 25 staff, which would include up to 17 safeguards inspectors. It already has 11 safeguards officers in post who are all in training to become safeguards inspectors by 29 March 2019. The ONR estimates that, to be able to deliver its functions to a standard broadly equivalent to Euratom standards, it may require a team of around 30 to 35 staff, which would include around 20 safeguards inspectors. It is actively recruiting and interviewing further candidates. The first phase of recruitment last year was successful: four individuals were recruited and are currently in training to become safeguards inspectors. A further recruitment campaign is under way. Successful candidates will join the ONR’s training programme and the ONR assesses that it will take a further 12 months or so to upskill new recruits to inspector level. So we have confidence that the ONR will be able to get up to the appropriate level. We also have confidence that, if necessary, it will be able to recruit from abroad. We are working with the Home Office to make sure that whatever happens with our future immigration system, that will be set out shortly and we will be able to ensure that the right people can get in at the right time.

The final matter raised by the noble Lord, Lord Hunt of Kings Heath, was the Henry VIII power. I admit that it is a Henry VIII power. It is quite clear that it is a Henry VIII power. I cannot remember who very politely said—I think it was the noble Lord, Lord O’Neill—that it was just drifting into being a Henry VIII power. It is a classic Henry VIII power—it is seeking to amend primary legislation by means of secondary legislation—but it is as limited as it can be. Clause 2 can amend any of the three Acts that I mentioned in my introduction,

“in consequence of a relevant safeguards agreement”;

in other words, it is limited to changes as a result of the safeguards agreement and can be only in consequence of that. It cannot be used in any other way. It is very specifically drawn. It is limited to those consequential changes and sets out the three pieces of legislation that may be amended. I look forward to hearing a little more about the views of the Delegated Powers Committee and I hope that it will, for once, give the Government a clean bill of health.

I hope I have dealt with most of the points that are relevant to the Bill but obviously I will write to noble Lords in due course, as is appropriate. In the meantime it behoves me only to beg to move that the Bill be now read a second time.

Bill read a second time and committed to a Committee of the Whole House.