Retained EU Law (Revocation and Reform) Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Callanan

Committee stage
Wednesday 8th March 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

I thank all three speakers. I first thank my noble friend Lord Hodgson; I know he takes this subject extremely seriously, as do I. It was a pleasure, albeit a gruelling experience, to give evidence to his committee. He knows my personal commitment on impact assessments is substantial; I do believe that they are important. As he said, I did have responsibility for it before the machinery of government changes, and I did my best working with the Regulatory Policy Committee to impress on other government departments the importance of producing impact assessments for some quite major pieces of legislation. Some Secretaries of State have chosen not to. My noble friend Lady Neville-Rolfe, talking from a sedentary position here, has just said, “I hope you produced one for the Procurement Bill”.

So, let me address the points that my noble friend has made on Amendments 134ZA and 134B. I hope to explain to my noble friend why we are taking the actions that we are. Starting with Amendment 134ZA, my noble friend’s amendment seeks to reintroduce a duty to insert review provisions in secondary legislation by removing the Bill’s proposed exemption to Section 28 of the Small Business, Enterprise and Employment Act 2015—which, as my noble friend said, was produced by my noble friend Lady Neville-Rolfe. It is amazing how these things come around.

It is correct that the Government should commit to review any new regulatory provisions that may arise from the use of powers in this Bill, including by secondary legislation. However, if we were to reintroduce Section 28, there are concerns that at a future date there will be a huge surge in the volume of reviews requiring assessment in a fairly limited window of time, which would put tremendous pressure on the Civil Service and independent resources. The amendment also calls for a requirement for a review within 3 years. This is in fact more frequent than the current review process of five years. It is my submission that, for some policies, a review at this point would be based on too small a data sample to make a meaningful judgment.

Finally, many of the relevant instruments are in an existing review cycle that is due to be undertaken within the next three years. I hope my noble friend will accept that forcing a further regulatory review would create duplicate or conflicting review cycles. Therefore, for new regulatory provisions introduced under this Bill, we are proposing a bespoke approach to our REUL analysis. Where applicable, such as when retained EU law is being amended significantly via a statutory instrument, departments may be subject to additional independent scrutiny. If the expected economic impact of REUL changes is of £5 million or more, departments will be expected to submit the impact assessment for independent scrutiny by the Regulatory Policy Committee, as in general happens now.

Where measures are being sunset, departments will undertake proportionate analytical appraisal. Each department will be expected to produce an aggregate analysis of REUL that it is choosing to sunset. This aggregate analysis will be published by departments. Each department’s aggregate analysis will be divided into groupings, such as “inoperable” or “defunct”. No doubt the noble Lord, Lord Fox, will study my noble friend Lord Benyon’s famous examples with great interest for the impact on the fighting bulls of the West Country.

Should the total impact of any grouping exceed the de minimis threshold of plus or minus £5 million, which is the limit used, then the department should submit an impact assessment to the RPC for independent scrutiny. This approach balances efficiency by requiring reviews only where necessary, alongside delivering an ambitious programme of REUL reforms which we hope will deliver real economic benefit for UK businesses and citizens.

My noble friend’s other amendment, Amendment 134B, seeks to introduce a duty for departments to conduct a regulatory impact assessment when they lay a statutory instrument or a draft of a statutory instrument containing regulations via the powers in this Bill. To address the question raised by the noble Lord, Lord Fox, properly assessing the impact of government policy is an important principle of good governance, and this Government will continue to be committed to the appraisal of any regulatory changes relating to retained EU law. The nature of the appraisal will depend on the type of changes that departments make and the expected significance of the impacts.

Where applicable, such as when retained EU law is a regulatory provision and is being amended significantly via a statutory instrument, departments will be expected to put their measures through the Government’s systems for regulatory scrutiny, which is the better regulation framework. Where measures are being revoked, departments will be expected to undertake proportionate analytical appraisal. We are currently exploring the appropriate steps we can take to appraise the resulting impacts. Furthermore, the Government have, as the Committee knows, published an impact assessment relating to the Bill as a whole. The noble Baroness, Lady Chapman, referred to it extensively. In addition, an internal exercise is under way between departments and the Ministry of Justice to appraise potential impacts on the justice system from the Bill.

However, given that proper and proportionate cost-benefit analysis will be undertaken by departments in relation to amendments to retained EU law, and efforts are under way to understand potential impacts of sunsetting, I hope my noble friend will agree that there is no need to include in the Bill the amendment that he has proposed. I hope I have been able to reassure him and that he will feel able to withdraw his amendment.

[Lord Hodgson of Astley Abbotts (Con)]

I am grateful to the Minister, to the Opposition Front Bench for its support, and to the noble Lord, Lord Fox, for his inquiries. Clearly, my interviewing of my noble friend at the committee was not gruelling enough in the light of the answers he has given me, but never mind. I accept the three to five years issue.

Then I get quite excited, because I hear about a bespoke approach. That sounds quite good, but then we hear “proportionate” and “only where necessary”. So we will set up something that we all would agree is great—even my successor as chairman of the SLSC, my noble friend Lord Hunt—but then we have so many escape clauses. Although I would not say that it is not worth the paper it is written on, I would say words to that effect. However, it is late. I will read carefully what my noble friend the Minister said, reflect on it, and then decide what further action needs to be taken. I beg leave to withdraw the amendment.

Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022

Debate between Lord Hodgson of Astley Abbotts and Lord Callanan

Tuesday 22nd November 2022 Grand Committee

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

My Lords, in moving that the Grand Committee do consider the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022, I shall speak also to the Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022, and the Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022, all of which were laid before the House on 31 October; and the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022; and the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022, laid before the House on 4 November.

Last Wednesday, I set out the details of the Government’s energy support schemes: the energy price guarantee, the energy bill relief scheme, or the EBRS, and the energy bills support scheme—the EBSS. I am in front of your Lordships today to explain the pass-through requirements in respect of these schemes.

The Government have responded rapidly to the unprecedented rise in energy prices by introducing emergency legislation on energy support. This support will protect homes and non-domestic consumers across the United Kingdom, so that families and consumers will be supported in their cost of living this winter. These pass-through requirements place a legal requirement on intermediaries to pass any benefits received through the various energy schemes to the end-user, thus ensuring that the support is received by the intended beneficiary.

These regulations have been created under the Energy Prices Act, which noble Lords will know received Royal Assent on 25 October 2022. They are essential secondary legislation to implement the energy schemes.

I am, of course, aware that the JCSI is still considering two of the instruments, and we will not move to approve them until that work has concluded. If that committee has any concerns, the Government will respond to them when we ask for approval, including time for debate if that is useful to the House.

I thank the Secondary Legislation Scrutiny Committee for its views on the pass-through requirements regulations. The committee raises three concerns: the definition of “just and reasonable”, inequality of arms, and vulnerable groups.

The committee’s first concern is that the meaning of “just and reasonable” is vague and open to interpretation. The pass-through regulations do not prescribe the exact method of the amount passed on by an intermediary. These requirements take into account the diverse range of contracting structures relating to the supply, resale, provision and charging of energy. We do not want any intermediaries to fall outside of the pass-through requirements by limiting the possible contracting scenarios through these regulations.

The definition of “just and reasonable” is long established in law. It essentially means what is fair and lawful under the circumstances. We believe that this would allow for the many different arrangements between an intermediary and end-user that these regulations are designed to police.

The committee’s second concern is inequality of arms: where a landlord who has multiple properties and receives all the energy schemes, and how they allocate the financial benefits received to their individual tenants. The regulations take this scenario into account. Where an intermediary receives energy support but has multiple end-users, they should determine a just and proportionate method of dividing the benefit among these end-users, and clearly communicate how they have arrived with the amount allocated to those end-users.

The committee’s final concern is the vulnerable groups affected by the pass-through regulations. We are keen to ensure that all end users, including those who are vulnerable, such as older people or people with disabilities, receive the benefits of the schemes where they are entitled to them. We have been delivering and building a communications campaign, which includes engaging with landlords, housing associations and charities, all of which protect those who are most vulnerable. Another statutory instrument will be laid later this month to correct some mistakes in the original heat supplier regulations.

The pass-through regulations ensure that the Government’s energy support reaches families and consumers. Rather than expecting intermediaries to act on their own accord, we are requiring that they pass on the financial benefit to their end users. An intermediary is any individual or organisation that is party to an electricity or gas contract and receives energy price support in relation to that contract, or a pass-through of reductions attributable to that energy price support. The intermediary then passes on the costs of the energy supplied and any reductions attributable to the energy price support to an end user—for example, landlords or property managers of a residential building. This also covers intermediaries supplying a product or service where, contractually, a component of the price relates directly to the use of energy or the supply of heating or hot water: for example, park home managers, heat networks and electric vehicle charging operators. Taken together, the regulations apply to all three energy schemes: the energy price guarantee, the energy bills support scheme and the energy bill relief scheme, including customers who are part of heat networks.

If the intermediary does not pass on the benefit, the end user can pursue recovery of the benefit as a debt through civil proceedings. Should a court rule in the end user’s favour, they will be entitled to the payment due, plus interest. The interest is set at 2% above the Bank of England’s base rate; this will begin to accrue from 60 days after the intermediary first receives the relevant scheme benefit. The enforcement approach is the same across the schemes, with a slight nuance for heat networks under the EBRS. If heat network customers do not receive the pass-through or information from their heat supplier, they will be able to raise a complaint with the energy ombudsman.

We have published guidance on the pass-through regulations to help those affected understand how to comply with these regulations. This government guidance includes advice for landlords on how to meet their pass-through obligations. There are also template letters for tenants, should they wish to raise concerns with their landlords about their energy bills.

These regulations protect those most exposed to high energy costs. The pass-through requirements allow cost savings to reach the people the Government intend to support, such as tenants and other individuals. Importantly, the regulations also provide routes for end users to benefit from the discounts they are entitled to in the scenarios where intermediaries are not meeting their legal obligations. I therefore commend the regulations to the Committee.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am grateful to my noble friend for his explanation and for the way he has addressed some of the concerns of the Secondary Legislation Scrutiny Committee, which I chair. The SLSC, a cross-party committee, is of course not concerned with politics. That is for the House, the Government and, in due course, the electorate to decide.

My remarks now are therefore not about the energy policy but about the administration and process by which it is being delivered. We have quite narrow objectives in our terms of reference. The two that I think apply today are, first, that the instruments are

“politically or legally important and give rise to issues of public policy likely to be of interest to the House”;

and secondly, that they may imperfectly achieve their policy objectives. I particularly want to compare the unfavourable treatment of Statutory Instruments Nos. 1102, 1103 and 1125 with the other two in this group, Statutory Instruments Nos. 1101 and 1124. The first lot are about energy and the second lot are about heat.

As my noble friend the Minister has explained, this is about making sure that a fair share of the proceeds are passed on to tenants by landlords. He has gone through the rationale for “fair”, “reasonable” and so on and so forth, but it is worth while us putting ourselves in the position of an elderly widow. Let us say that she is in a block of 50 flats. Let us say that the landlord has two or three blocks of flats; they may have a couple of hundred tenants. The landlord may say, “Here is your rebate”. She may, for one reason or another, decide that it is not right. She must therefore begin proceedings to recover what she believes her fair and reasonable share is. That is what the committee was concerned about: inequality of arms.

We have to think about a single individual, maybe a vulnerable individual. I accept that I am exaggerating slightly to make a point, by taking one particular angle on the people who might be affected, but I am trying to explain to the Committee that this person is somehow going to have to have the courage, conviction, energy and money to take the landlord on and take them to the county court over what may not be a huge sum of money. Although I am sure my noble friend wishes to find ways of ensuring that tenants are informed and helped and that landlords are required to provide proper shares, records and so on, I am not sure that this is going to work in the real world as happily as the Government, I and the SLSC would wish it to. The inequality of arms—above all, in the power to delay and ask for more particulars; as I said, this should be looked at in a lot of detail—is likely to work in favour of landlords, particularly multiple landlords, against tenants, particularly tenants who are vulnerable, elderly or disadvantaged in one way or another.

When we come to the first three SIs, Nos. 1102, 1103 and 1125, there is no further appeal—that is the end—whereas when we get to Nos. 1101 and 1124, there is an appeal to the Energy Ombudsman and the General Consumer Council for Northern Ireland, in respect of activities in the Province. So, although I quite understand what the Government are doing and wish to do well, they will need to keep a very close eye on what is going on under these regulations to ensure that fairness is not only being sought but being achieved and that, in cases where people are less well equipped to fight their corner, they are properly protected and looked after.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts (Con)]

I am grateful to my noble friend for his very thorough answers. I might have misheard, but I do not think he said why there is an appeal procedure in respect of heat in Statutory Instruments Nos. 1101 and 1124 and not in respect of energy. Clearly, one of the things that answers the inequality of arms is an ombudsman who is there to step in if things go badly wrong. I was not quite clear why it was in one group and not the other.

[Lord Callanan (Con)]

The answer to my noble friend’s question is that there is already a regulator in place for heat networks, so it is appropriate to use the regulator. Unfortunately, for most of the other circumstances there is no regulator in place, which is why we have had to default to the court process. I totally accept his point about the inequality of arms. I am not unrealistic about the difficulties that many tenants and others will face in trying to enforce their rights under this, but all we can do is put the regulations in place, publicise them and make sure that people know their rights. We will keep the scheme under constant review. We will ensure that the payments are passed through and that people receive the benefit to which they are entitled. We will not hesitate to act further if there is widescale avoidance of this responsibility.

Corporate Insolvency and Governance Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Callanan

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

[Lord Callanan]

My Lords, the Government have listened carefully to the concerns raised by noble Lords in Committee and elsewhere.

Where used appropriately, pre-pack sales can perform a useful rescue function. In some instances, sales to connected parties are beneficial. However, we accept that the nature of the transaction and the speed with which it is carried out might also provide some opportunities for mischief. This could particularly be the case during the current crisis. The Government acknowledge that there may be a risk of an increase in the use of pre-pack sales, which could adversely affect businesses already struggling as a result of Covid-19.

The Government therefore propose amendments to revive the power, which expired in May 2020, to regulate sales in administration to connected parties, and to introduce a similar power in Northern Ireland. These government amendments will revive paragraph 60A in Schedule B1 to the Insolvency Act 1986. This will enable the Secretary of State to make regulations to prohibit or impose requirements or conditions in relation to the sale of property of a company by the administrator to a connected person, in circumstances specified in the regulations. This power will expire at the end of June 2021, unless it is previously exercised.

The amendments will also insert a new power in Schedule B1 to the Insolvency (Northern Ireland) Order 1989 to enable similar regulation of sales to a connected person in Northern Ireland. This power will also be time limited until the end of June 2021, unless previously exercised. Regulations made under the power in Northern Ireland must be laid in draft and approved by a resolution of the Northern Ireland Assembly. And we are going further: ahead of using the power, we will publish the Government’s review of existing voluntary measures in respect of pre-pack sales this summer to help further inform the public debate on this issue. I beg to move.

[Lord Hodgson of Astley Abbotts]

My Lords, I have Amendment 45 in this group but, before I speak on it, perhaps I may say that I entirely support the Government’s Amendments 37 and 38. They are very sensible and have my unequivocal support.

I turn to Amendment 45, to which the noble Lord, Lord Vaux, the noble Baroness, Lady Bowles, and my noble friend Lady Altmann have added their names. I am most grateful to them and indeed to other noble Lords all across the House who have been in touch with me to say that it seems a sensible way of proceeding. We discussed this matter at length last Wednesday. I shall try to avoid repeating myself, although of course I need to fill in the story for those who have just joined in at this stage.

Like my noble friends Lord Callanan, Lord Leigh and Lord Holmes of Richmond, I recognise that pre-packs have their uses. As I said in the debate last week, they are a useful spanner in the toolbox of the insolvency practitioner. However, they are open to serious abuse, as my noble friend Lord Callanan admitted a moment ago. Let us quickly run through a real-life example, and here I will slightly repeat what I said last week.

I ask noble Lords to imagine the following. You are a director of a company that is struggling because of past operating losses, which have led to large debts being accumulated; or perhaps it is a very old, established engineering or industrial company that has a long tail of pension liabilities that get increasingly heavy. Insolvency and administration loom over you, but you and your fellow directors feel that somewhere in the business is a really profitable activity. However, the company is worth saving only if you can get rid of all your debts. Therefore, you, as a group of directors—maybe with some associates—find an administrator and say that you would like to make an offer for the bits that you want. That offer might be very substantial but, equally, it might be £1 or £1,000. That is the key to the problem that we are trying to tackle here. Nobody can say that anything is wrong where a fair-value, full-price offer is made.

You make a nominal offer on, say, a Friday, which means that the company is put into administration over the weekend. On Monday, you advertise it in the newspapers and after four days, if the administrator has had no competing offers, he or she can say that they have tested the market and have obtained a fair price. It is of course vanishingly unlikely, although possible, that within four days anybody will be able to come up with an offer de novo, from a standing start. Your group, having paid the money to the administrator, is now the proud owner of a company that is without all its liabilities to suppliers great and small, local and national, as well as to the Pension Protection Fund—but you might be the very people who led the company to the edge of disaster in the first place.

Many in your Lordships’ House would ask “How could this possibly be?” It has an awfully superficially attractive political ring to it. A Minister, a councillor or a Member of Parliament can get up and say, “Look, I’ve just saved 300 jobs.” That sounds awfully good, but nobody weighs on the scale what is happening elsewhere. For every debt that you have written off, another company loses money. It might be a small local supplier that might have to make redundancies of its own and might itself, in extremis, go into receivership. There is also the general damage to the local economy, as there is to the Pension Protection Fund. This has always seemed to me, at least, to be a very unfair way of proceeding unless it is properly supervised.