Growth Duty: Statutory Guidance Refresh

Lord Johnson of Lainston Excerpts

Monday 15th April 2024 Lords Chamber

Moved by

[Lord Johnson of Lainston]

That the draft Statutory Guidance laid before the House on 6 March be approved.

Relevant document: 18th Report from the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument.

Motion agreed.

Comprehensive and Progressive Trans-Pacific Partnership (IAC Report)

Lord Johnson of Lainston Excerpts

Tuesday 19th March 2024 Lords Chamber

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

I thank all noble Lords for the extraordinary, high-quality debate that we have enjoyed today. I hope people at home are watching this discussion, because it is great proof of the value of this House and its contributions.

[Lord Fox (LD)]

They are crowded around their television sets.

[Lord Johnson of Lainston (Con)]

They are hopefully crowded around their iPads; the noble Lord should know that we have updated from the old-fashioned wireless—which, of course, we have in my household.

I want to say thank you, genuinely, to the noble Baroness, Lady Hayter, and the noble and learned Lord, Lord Goldsmith. I thank the International Agreements Committee for its report. I have a draft set of responses to the report, which will be formulated appropriately and given to the noble Lords as soon as possible. It really was excellent, and I think all the points that the Government have been challenged on are worthy of a response. I am extremely grateful for the mature approach the report took to the value of this trade deal and seeing the optimistic benefits of the CPTPP, within the reasonable framework that we will operate to.

It is possible that noble Lords may hear cheering if they listen carefully, because a few moments ago the Bill was passed in the House of Commons. I am sure we all feel the ripple—the Mexican wave, which is appropriate as it is a CPTPP member—coming down the Corridor to us. Before I go further and answer many noble Lords’ points, I refer Members to my register of interest. I do not believe there are specific conflicts, but I do have interests in CPTPP countries.

I have tried to group the comments made in this important debate and so, if I may, I will go through them. I will try to refer specifically to noble Lords themselves. I will highlight a few individuals, particularly the noble Baroness, Lady Lawlor. I congratulate her for giving a succinct and powerful description of the benefits of free trade, which often we forget. It is right that, in a scrutiny environment such as this House, we look at the problems, issues or challenges that might present themselves with a piece of legislation or a new treaty. To have the truly positive case for free trade made so clearly and powerfully is something that I welcome, and I am very grateful to the noble Baroness for that.

I am very grateful to the noble Viscount, Lord Trenchard, for his words. Again, he has been a passenger on the free trade express over the last year and a half since I have taken this position. I am extremely grateful for his advice and expert opinion on Japan, and the very positive case that Japan makes in terms of our trade relationship with the CPTPP and the associated benefits we have, both through having a trade agreement and an association with it through this process.

I thank the noble Lord, Lord Marland, for his very generous comments about our joint efforts to spread the benefits of UK trade around the world. If anyone has the most air miles on these red Benches, it must be a close competition between the noble Lords, Lord Purvis and Lord Marland. Both noble Lords are doing such important work, whether in spreading democracy and helping complex situations be resolved, or in pushing the Commonwealth. While this is not a debate about the Commonwealth, it is important to note how many countries that make up CPTPP are Commonwealth members. It is absolutely right that we should use this as further leverage to work with our Commonwealth peers. I will certainly take to my colleagues in the Foreign, Commonwealth and Development Office the comments made by the noble Lord, Lord Marland.

I am always grateful to the noble Lord, Lord Kerr, for his comments as to how we can better manage our trade process. If I may, I will just draw his attention, as someone so distinguished and who lauded the EU’s FTA negotiation process, to the fact that I do not think the EU has done a trade deal in my political lifetime. The most recent one was after a culmination of 17 years of negotiation, and the current ones are all live after many years. We have managed to close this deal in an extremely effective time period.

I turn to the process of CRaG which has been well raised by noble Lords. We made a clear commitment under the Grimstone convention that, if there was time, we would have a debate, and this is exactly what we are doing today. My colleagues and I have made ourselves totally and freely available to engage on every issue. Officials have been extremely open in responding to questions and challenges and I am glad to see some of them here today. I am particular aware of issues, such as SPS protection which was raised by the noble Baroness, Lady McIntosh, or agriculture, raised by the noble Lord, Lord McNicol, as well as points made by other speakers on the Front Bench from all parties. I think we have exceeded expectations in the work we have done in order to project that necessary element of debate.

I am not trying to avoid the point, but it is not for me to comment on the activities of the other place. I will leave that to them. It is right to be very comfortable in knowing that any new accession will be equally bound by the CRaG process. This is extremely important. It would be completely unreasonable if that were not the case. The Government have committed to that and I am very comfortable in making a further Front Bench commitment to it.

It is worth touching on some of the sub-issues that have come up in this debate. The noble Lord, Lord Fox, wisely raised SPS measures, and comments were made about ISDS. I believe we had a discussion earlier in this Chamber about the brevity of speeches and the importance of avoiding repetition, but I am going to have to repeat myself, if I may, and test the patience of noble Lords. There is no derogation. It says so in Hansard. It has been in Hansard before. There should be a collected, bound edition of my repeated statements in Hansard about free trade agreements that do not derogate from the security of our sanitary and phytosanitary provisions. It is very important to be comfortable about this. Hormone- injected beef, chlorinated chicken or dangerous pesticides which are banned here are not allowed into the UK on account of the FTA. This is a matter under our own control. It is important that consumers hear this.

When I talk to people about free trade deals, a lot of them worry that, somehow, this will result in a tidal wave of deadly products. The noble Baroness, Lady Bennett, referred to the UK becoming a dumping ground for dangerous products. Any decision to allow so-called dangerous products into the UK is a matter for the UK Border Agency, the food safety authorities and the Government. If that is the case, it has nothing to do with this FTA, which is important in the sense that it changes our position on tariffs and how we trade with each of the different countries. I just want to reassure noble Lords and the public that nothing will change.

[Baroness Bennett of Manor Castle (GP)]

To respond briefly to the Minister, of course, there is “allowing”, and there is also what checking is being done to make sure that it does not happen anyway. That is the kind of checking I was referring to.

[Lord Johnson of Lainston (Con)]

I thank the noble Baroness. The checking is a matter for the Food Standards Agency. We have made a number of assertions. It believes that this FTA will not result in additional risk for it. I do not wish to be contentious. I always listen very closely to the noble Baroness’s comment about free trade. We do not share the same views on its benefits. I listened to her very carefully and I noticed that at no point did she mention the principle of the consumer. I am particularly focused on making sure that the consumer benefits from these free trade deals—that they see prices come down and the range of products broaden.

A number of noble Lords, including the noble Lord, Lord Fox, and the noble Baroness, Lady Bennett, mentioned the concept of proximity being at the core of trade. For many goods, it is right and in fact efficient to have a proximous concept of trade. I think of the idea of swapping beef herds, in terms of practicality—although I think we sell better beef than the Australians, and certainly more specialist types—so there is a market in that sense. However, if we look at investment, which is an important element of the CPTPP, our two biggest investment partners in terms of growth and current value are the United States and now India. They are clearly not the most proximous countries to the UK, so it is important to understand that, in modern trade, in services, the digital provision of services and financial investment, the world truly is our oyster.

Speaking of investment: the ISDS concern is raised continually. As Investment Minister, I believe that strong investment protections for investors into the UK are at the core of our offering. If, at any point, investors felt that their investment rights would be derogated, it would be much harder for all of us—and whoever stands in my place as Investment Minister—to get the vital money that we need for our infrastructure into this country. These ISDS provisions are enormously beneficial for us. I feel totally safe in offering them to other countries. I do not believe that there is any derogation of our ability to manage our economy, our ambitions for net zero, how we treat our workforce or any other measure. Investing in these CPTPP countries protects our businesses, particularly in countries such as Malaysia where we now have these protections.

That brings me briefly to the services point—

[Lord Kerr of Kinlochard (CB)]

I entirely agree with the Minister about ISDS. Will he confirm that ISDS will be in any trade deal we sign with India?

[Lord Johnson of Lainston (Con)]

This is not in my notes. I cannot confirm what will be in our trade deal with India. I stress the importance of protecting our investor base when we invest internationally. It is right that the services principle has been raised. One of the most effective elements of the CPTPP treaty revolves around our agricultural access, where there is a high degree of compatibility between what we produce and what these markets want, as there is with goods. Noble Lords have raised this on a number of occasions. The noble Lord, Lord McNicol, raised the point about the Society of Motor Manufacturers and Traders, which particularly welcomes the relationship with Malaysia, where there is a different tariff approach. The rules of origin will simplify a lot of activity when we come to work with these countries. We do a lot of manufacturing trade with countries such as Japan, Malaysia, Vietnam and other CPTPP countries.

Services are the future. Some 80% of our economy and its growth are structured around services. The services chapters in the CPTPP can go further. This is a living agreement. We will build on the chapters, particularly on digital, that allow us to expand our services access. There are important basic building blocks around professional qualification recognition and plans to develop this effectively, to promote collaboration between professional qualification providers. It promotes collaboration between regulators. It allows for more effective business mobility, which is important. Someone who is posted to Canada on a work contract can take their spouse. There is first-time access and security for business mobility in countries such as Malaysia and Brunei, as well as other opportunities, such as transportation in Chile, and a number of other key points relating to digital provision and preventing data localisation. These all sound quite technical but are very important in firing the starting gun on further discussions.

A number of Peers, including the noble Lords, Lord Purvis, Lord Kerr and Lord Anderson, and the noble Baroness, Lady Hayter, have mentioned that these further discussions are encapsulated around a general review. This is a useful mechanism for us to participate in before we become a full member, as we are doing. This conversation will certainly include how to build on the services offering that is in the CPTPP. We welcome it. Our teams will be fully dedicated to it.

The noble Lords, Lord Kerr and Lord Marland, looked at the secretariat which will help us in these negotiations. I ask noble Lords to forgive me if I have missed any who also made this point. We have 14 full- time personnel who are part of the negotiating team and who now make up the CPTPP unit within the Department for Business and Trade. As I understand it, they are permanent and will not be moved to negotiate another deal. They will stay, I hope, to focus on making sure that we have a close relationship with the CPTPP countries. If a permanent secretariat is developed in the coming years, they would feed into that.

We want this organisation to grow, have deep roots and be strong for the future. I do not know what the plans are relating to the secretariat, but these are always live conversations, and of course we will feed in where appropriate. Once we become a full member, we will be able to put our platform forward with more vigour.

A question which is oft raised is how the department promotes the CPTPP to small businesses. I am very pleased that there is an SME chapter in the CPTPP; it is important, because it helps all economies focus on how they can help small and medium-sized enterprises to make the most of the CPTPP. This is at the core of all the economies that are participating in the treaty.

I am aware of the difficulty in promoting quite a complex treaty principle—there are rules of origin and comparable treaties, as we have treaties with many of these countries already, so it is not necessarily clear sometimes which treaty you should use, and you have to pick which of the two. We have done a great deal of work to ensure that our online access is powerful enough to enable people to make these decisions. We have a unit which specialises in promoting our free trade agenda and the treaties that we have signed up to. It has run a number of workshops. We need to work with the Chambers of Commerce to make sure that we get the message out.

I am totally aware of the need to ensure that this is a success, and I welcome the challenge. Crucially, the department sees it as part of its conceptual and fundamental mission. This Government want to be proud of their post-Brexit vision of Britain. Therefore, it is up to us to ensure that we deliver, by making the necessary noise to get as many businesses involved, both in exporting and in taking advantage of this treaty.

I hope I have covered the majority of the points raised. I am always comfortable coming back to noble Lords and the committee. Again, I congratulate the committee, and the noble and learned Lord, Lord Goldsmith, and the noble Baroness, Lady Hayter, for the work they do and the high degree of collaboration that they have with me.

On the question of our trade policy, people hunt for a matrix or template of what tomorrow holds. Looking back on our accession to the CPTPP, I am reminded that it has been likened to the next-door neighbour’s cat with a cough—I cannot remember quite what the quote was from the noble Lord, Lord Purvis. But I think this is a lion that will roar. Think of the rather extraordinary counterintuitive decision to say that we are going to pivot—that we had a relationship with the European Union and are now going to look for bigger and better relationships around the rest of the world. That is exactly the sort of economic decision that a good businessperson would take. Unquestionably, there is no derogation in the need to have the highest-quality trading relationship with our European neighbours, but where is the future? That is the point.

If you asked any of the next generation coming through—some of them are in this Chamber today—they would say that we should look to Asia and the growing populations. My noble friend Lady Lawlor rightly pointed to the astonishing levels of growth coming from those economies. In this country, for a politician, Cabinet Minister or Prime Minister—the leadership in this great nation of ours—to decide to go for the Pacific in this way and join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership is an astounding jump of the mind that I am sure previous senior mandarins of the Foreign and Commonwealth Office must be aghast at—such out-of-the-box thinking.

I am enormously proud to have been party to bringing this legislation through this House and promoting it with all noble Lords in this place. If I can repeat them, the countries are Australia, Brunei, Canada, Chile, Peru, Singapore, New Zealand, Vietnam, Japan, Malaysia and Mexico. We are proud to join that phenomenal cohort. I am excited about the future and very positive about the opportunities that this trade treaty will bring. In my view, it will far outstrip the predictions made by everyone in this House, and even the Government themselves. I am grateful for this opportunity to discuss it.

UK Tradeshow Programme Closure

Lord Johnson of Lainston Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Leong]

To ask His Majesty’s Government what recent assessment they have made of the impact of the closure of the UK Tradeshow Programme on the ability of small and medium-sized enterprises to export to new markets

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

Although the DBT has closed the specific Tradeshow Access Programme, it still provides considerable support to small and medium enterprises to attend trade shows, ranging from training in language and culture and pitching and negotiations to networking receptions that use our embassies overseas and Meet the Buyer events.

[Lord Leong (Lab)]

My Lords, the Tradeshow Access Programme provided vital support to thousands of SMEs to attend international trade events. The return on investment was remarkable; then the Government closed it. Last year, UK exports were £860 billion—well short of the £1 trillion target. Does the Minister agree that we need to get out there and sell, sell, sell? Can he tell the House when the replacement programme for SMEs and their respective trade associations—the beating heart of our export economy—will be announced?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for his mantra of sell, sell, sell. Mine is ABC: always be closing. The DBT is doing this. It is unfair to say that we closed this programme; it was not necessarily yielding the benefits we hoped for. We must look for value for money; we have instead gone to a more targeted approach, where the UK will take a pavilion and crowd in businesses in specific instances. Recently we have been to Mobile World, led by my noble friend Lord Offord; the World Defense Show in Saudi Arabia; Bett, the education show; and the Hydrogen show in Chile. Although the Tradeshow Access Programme looked like a good idea and was very popular among certain businesses, it was not used in the way we wanted. This approach is far more effective for getting to our £1 trillion target.

[The Earl of Effingham (Con)]

My Lords, there are 5.5 million firms listed in Companies House, but only 9% of them currently export, which seems low, optically. What does the Minister believe is an achievable percentage to aim for and what is the Government’s strategy to reach that target?

[Lord Johnson of Lainston (Con)]

My noble friend is absolutely right. We have a cultural issue with companies in this great nation of ours actually deciding to export. The total is about 300,000, and we have a target of 500,000—the 500 club that was inspired by my noble friend Lord Offord. We will do this in a number of ways. The UK Export Academy is an important mechanism for teaching businesses and business leaders how to export. We have 160 international trade advisers around the country whose specific task is to hold the hands of these companies when it comes to exporting abroad. We have thousands of agents around the world, underneath our HMTCs, whose job is to help them on the ground and help them find distribution partners, most importantly. We have the Help to Grow programme, the export support service, and we now have growth hubs as well. There is more we can do, but we have made a phenomenal start and are starting to see the benefits of a very coherent action plan.

[Lord Razzall (LD)]

My Lords, will the Minister acknowledge that there has been a significant reduction in export sales by SMEs and small businesses since Brexit? Will he also acknowledge that, to take advantage of the limited number of trade deals that his department has managed to sign since Brexit, it is necessary to give significant help to SMEs and small businesses, if the gap is going to be closed?

[Lord Johnson of Lainston (Con)]

I would say two things to the noble Lord. First, exports are up over the past year by 13%—and tomorrow we have a debate on the CPTPP, which will allow this country to join an £11 trillion trading network, which will result in significant benefits to our businesses immediately and into the future.

[Lord Lansley (Con)]

My Lords, I remind my noble friend that, many years ago, I secured the outsourcing of the export marketing research scheme to the British Chambers of Commerce from the then department; that was very successful for over 20 years, and continues as a scheme under the department. That plus the grant support for introduction into markets provides a significant benefit to small businesses. Can my noble friend say whether he and the department are working very closely with trade associations and chambers of commerce to ensure that they are also delivery vehicles and multipliers for the work that the department is doing?

[Lord Johnson of Lainston (Con)]

I am very grateful to my noble friend for all the work that he has done to help exports and trade in this nation over his many years of service in this House and the other place. I draw attention to the fact that the British Business Bank also provides funding for small businesses to give them the training and skills to export, and UKEF provides billions of pounds to ensure that they have the capital to enable them to export. But my noble friend is absolutely right: we can do more with the chambers of commerce, and we have a specific group structured to enable us to have strong relationships with those organisations. On the ground, particularly in harder-to-reach markets such as China, they play an invaluable role, and I personally do everything I can to co-operate with and encourage them.

[The Senior Deputy Speaker (Lord Gardiner of Kimble)]

My Lords, the noble Lord, Lord Campbell-Savours, is taking part remotely. I invite the noble Lord to speak.

[Lord Campbell-Savours (Lab) [V]]

My Lords, with post-Covid demand for exhibition space now returning and with seed-corn start-ups reliant on new customer contact and wider market awareness, why cut or compromise this programme? Since the 1970s, we have had valuable DTI support for small business. Labour promoted it—indeed, all Governments have done so. Such programmes have helped a generation of young entrepreneurs penetrate export markets and build many of today’s successful companies. Why the restraint? Surely we should be expanding these programmes. The Minister referred to targeting, which too often leads to cuts, as we all know.

[Lord Johnson of Lainston (Con)]

I am always grateful to the noble Lord for the challenge but, actually, I believe that we have come to the right conclusion, which is to crowd in significant numbers of businesses to single and key focused trade shows. We provide a great deal of support beforehand, including language and culture training and skills training to make sure that these businesses are prepared. During the mission, a Minister normally accompanies the businesses to get greater penetration into the market that we are trying to sell into.

It is no good just giving a few hundred pounds to a small business to have a small trade stand in a very large trade show. What you need is to put a proper front on. Great Britain is selling its wares to the world and, by concentrating that firepower, we have far greater effect. I also believe that we have better value for money. It is worth talking to some of the businesses that have participated in these trade shows, where the feedback has been excellent. I say this without prejudice, but other countries are jealous of the extraordinary quality of the stands that we build, which project the union jack across these wonderful events.

[Earl Attlee (Con)]

My Lords, what are the Government doing about the problem of de-banking less popular businesses, such as defence and the oil and gas industry?

[Lord Johnson of Lainston (Con)]

I am not entirely sure whether that is a question for me, but the noble Earl touches on defence, and I would say that we have been doing a huge amount on defence and security exports to promote our industries. New arrangements, such as AUKUS, are also incredibly powerful in driving our exports in that area. I also draw this House’s attention to the Saudi Great Futures event, which will launch on 14 May. Over the past few days we have sent out literally thousands of invitations to businesses, and we will fly a huge quantity over to Riyadh in the middle of May to celebrate the enormous opportunities that we see in that country, working on projects such as NEOM. Across the board there is an enormous amount that we are doing. I shall have to refer the question about banking to one of my colleagues.

[Lord Anderson of Swansea (Lab)]

My Lords, the Minister has just said that there will be “significant benefits” to this country from the trans-Pacific partnership. How significant is “significant”? Does he recognise that the Government estimate that the benefit to our GDP will be 0.08% and the OBR believes it will be 0.04%? Should the Government not be careful not to overegg their pudding?

[Lord Johnson of Lainston (Con)]

Since many of our exports are going to be food and drink, I think overegging the pudding is precisely what we should be doing when it comes to encouraging our exports. The opportunities that CPTPP presents are, first, a new trade deal with Malaysia, which we do not have; far better arrangements around rules of origin, which noble Lords opposite who have been involved in motor manufacture will see the benefits from; and very important new opportunities to export our agricultural goods. CPTPP is not a single trade deal but a living agreement. We hope new members will join which are aligned to our ambitions. That will allow us to have access to even greater markets. I am very proud of this Government’s record of negotiating trade deals, but there is more to do, so I am excited about the future too.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend thank the department for sending a representative to local businesses in North Yorkshire to sell the business advice that they give from the new hub in Darlington? How widely known is the hub, and how available are such things to give such advice?

[Lord Johnson of Lainston (Con)]

I thank my noble friend for that point. Absolutely, promoting our activities is one of the key issues we face and we rely on chambers of commerce, and indeed the general body politic, to do that. There is always more work to do and I am grateful to her for amplifying our message.

[Lord Watts (Lab)]

My Lords does the Minister agree that we need to do much more to support small and medium-sized businesses, bearing in mind that there is no chance that we will do a deal with America, with China or with India in the foreseeable future, as we were promised under Brexit?

[Lord Johnson of Lainston (Con)]

I totally agree. Indeed, my own Secretary of State has made this the year of small business, very ably led by my colleague Kevin Hollinrake. As we speak—although it may have just finished—the Prime Minister has been hosting a very successful SME event in Coventry, which I hope will continue to amplify our message that we are doing everything we can to see this vital sector grow and flourish in this great nation of ours.

Post Office Legislation

Lord Johnson of Lainston Excerpts

Thursday 14th March 2024 Lords Chamber

[Lord Young of Norwood Green (Lab)]

My Lords—

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

We will come to the noble Lord shortly, although it is right to be hasty.

I am extremely grateful to the noble Lord, Lord McNicol, and the noble Baroness, Lady Brinton, for their input and will try to answer their questions as we go through. On the noble Lord’s wise point about why the sentence in the Explanatory Notes trails off, I think there is a typo. If I remember rightly, it should say “extinguish criminal convictions” at the end of that sentence. I am grateful to him for pointing that out.

Perhaps I may cover collectively the broad themes raised. The noble Lord, Lord McNicol, asked how we prevent the misuse or abuse of this measure. I was interested to hear a noble Lord speak in a previous debate about the quashing of convictions of soldiers in the First World War. This was a group conviction-quashing measure that was considered unique and was specifically designed for special circumstances. There was great concern that the process might be misused at a later date—I cannot remember exactly when; it must have been 20 years ago or more—and, clearly, that has not been the case. I think we are all apprised of the need to make sure that such constitutional situations are handled with extreme sensitivity and delicacy. In this instance, the Government, like Peers on all sides of this House—indeed, those in both Houses of Parliament—believe sincerely that it is only through this measure that we can be sure that people’s convictions are quashed. To confirm: this is an active statement of quashing of convictions; people are not required to apply to have their convictions quashed.

The issue of trust in the Post Office and the independence of the system and of the court processes has been raised, and this is the most effective way to ensure that we do the right thing by people who we believe have been wrongly convicted using evidence that we feel is clearly unreliable.

I would like to just cover the point the noble Baroness, Lady Brinton, made about the criteria in the Bill. The criteria governing who will qualify to have their convictions quashed are well laid out, and I am sure there will be a debate about the specifics when the Bill comes to this House. However, it is right that this applies between a set period of dates, that it relates to certain types of crimes linked to the Horizon computer system, that having used the Horizon system has to be part of the process of the conviction, and that, obviously, the person in question was working for the Post Office at the time. We are making, in my view, a series of pretty clear statements about what we are trying to achieve here. It is perfectly reasonable to raise the point about Capture. It was not felt appropriate to bring those cases into this process. However, Horizon trial periods, or the periods of beta testing for it, are included, as I understand it. If that is not the case, I will provide the House with a correction, but I believe that is right.

There has been a significant debate about the territorial scope of this Bill. The reality is that we operate different legal systems, and justice is devolved in Northern Ireland as it is in Scotland. This is not a question of the Government trying to get out of our responsibility or pass responsibility off. As the noble Baroness rightly said, the Government’s redress schemes cover the whole of the United Kingdom. There is no advantage to not having a system that covers the entirety of the United Kingdom. I am sure that many people believe that to be highly preferable, and it would make logical sense, but we have been especially careful to keep returning to the need to be sensitive to the constitutional realities of the unique action we are taking. It is right that, instead of looking at this stage for a complete UK-wide Bill, we allow this to be devolved to the common-law authorities in Scotland and Northern Ireland. I reassure the noble Lord and the noble Baroness that we are in regular contact. In fact, as we speak, a meeting is going on with the devolved nations about how to achieve this. Everyone has the same goal. I have not heard the comments made by the Scottish Justice Minister, but if anything, that continues to point to a high degree of collaboration.

We want justice to be done for these individuals as quickly as possible, across the whole United Kingdom. I have spoken to my colleague, Kevin Hollinrake, who has done a fantastic job in driving this process forward. We are all of the same opinion. Whatever measures are required to do this in the most appropriate and speediest way, we will certainly take. We will look into any way in which we can help the devolved authorities achieve their goals, in line with ours.

The principle of a target timeline for settlements, which was mentioned in the report cited earlier, was rightly raised. I feel strongly that it makes a lot of sense superficially, but the reality is that these are complex processes. We have already delayed having a cliff edge, which we did not think would be helpful. Some of these cases will take time to assess.

We agree on many things, but I am afraid that I do not agree with the idea that there is a huge amount of unpaid compensation, as if it is sitting in a bank waiting to be paid out. It does not work like that. In fact, over three quarters of the claims filed under the HSS scheme have been paid, a large proportion of those under the GLO scheme have been paid, and a large number of overturned convictions have been settled. We are working very fast. I can reassure this House that it is not in the interests of any member of this Government to delay in any way. We have made very good progress.

Importantly for noble Lords listening today, we have raised the fixed-rate payments so there is equality between GLO and HSS schemes, and I believe we have also raised the interim payment received. As soon as you submit a claim, you get £50,000 if you do not take the minimum £75,000 pay, and there is a £450,000 interim payment for overturned conviction compensation. That is important. We want to get money immediately into the pockets of people who need to be compensated. Clearly, there is a margin for discussion and debate, and it is absolutely right that that be done carefully. I hope that we can get the right outcomes. Of course, there is no limit to the compensation that can be paid.

The noble Baroness, Lady Brinton, asked about the accounts of the Department for Business and Trade and how this is accounted for. I believe that it would be too soon for last year’s accounts, but our next year’s accounts close in April and will be filed in July or August. I assume some element of the accounting will appear there. In terms of the billion or so that has been set aside, I am told by the Treasury that it does not sit in a ring-fenced account; it is part of the reserves that have been estimated as required. Of course, we also expect contributions from other areas as well. I am very comfortable coming back to noble Lords who will clearly ask in more detail how the accounting process works. I would be delighted to report to Parliament on that and I am sure that there will be plenty of discussions and question around it.

I hope that I have covered the main points, but I would like to return to two final questions. In terms of postmasters who have passed away, the estate is entitled to the compensation. There are also issues where families who have lost joint homes, or where there are additional complications around that, can receive compensation as well.

The question of independent oversight is absolutely to be raised, particularly regarding how these schemes are run. I am delighted to report that the overturned convictions compensation scheme will be run by the Department for Business and Trade, which I think was demanded by the postmasters. It is very important that people feel a sense of independent oversight, so we have therefore appointed a number of senior judges to provide us with that.

I do not have an answer on whether a postmaster will be included, for example, on the oversight board. I think that is an extremely good idea and I am sure that my colleague Kevin Hollinrake would agree that it is an excellent idea. I cannot commit to that now, but these are all very reasonable policy points to make sure that the postmasters who have been affected feel a sense of confidence. It is not just a question of having their convictions overturned and receiving financial compensation; they need to feel respected by the system that treated them so badly.

It is very important that all sides of the House feel able to make contributions in terms of how we can make the system work more effectively to achieve these goals. I am grateful for the ability to have this debate. I think we have made extremely good progress under the leadership of my Secretary of State, and particularly Minister Kevin Hollinrake. Clearly, there is more work to be done and we cannot move too fast to give these people redress. I hope that I can count on the support of all Peers in this House to bring this legislation through so that we can have these convictions quashed in July.

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[Lord Young of Norwood Green (Lab)]

My Lords—

[Lord Johnson of Lainston (Con)]

The noble Lord will have his moment; he will definitely be next, I am sure of it.

My thanks go to my noble friend Lord Arbuthnot. As we all know, a huge amount of thanks should go to him for his tireless efforts over many years. It is a huge lesson for all of us who want to make a difference in public life to see someone like him battle away at the forces of the machine. He has given me personally a great deal of inspiration and I am grateful to him also for the way that he has handled debates such as this and for the sensitive and thoughtful way that he has approached these complex subjects.

On the matter of claimants who have had their appeals refused or who, not being part of this scheme, have been unable to go forward to appeal, I have listened to that comment and will have further conversations with my colleagues about what we can do to ensure that the right level of information is given to those people to enable them to assess their position in the process. Noble Lords must forgive me, I am not a lawyer and there may be some specific issues around this, but I am told that those who have not been able to go through to appeal are not prevented from appealing again. It would strike me that, given the situation around this whole process, the system would certainly bear this in mind. I cannot speak on behalf of the courts; it is essential that they retain their independence on that front.

I was interested to hear my noble friend’s suggestion of support for those individuals, in terms of legal advice, or whatever it may be. I will certainly take that back to the department and I would have thought it would receive a very sympathetic hearing. My noble friend is absolutely right that it would be very unfair if there was a small section of individuals who lost out on this process simply because they had tried to appeal before their peers had done so. That would not be right and it is worth looking into in some considerable detail.

[Lord Young of Norwood Green (Lab)]

Third time lucky, my Lords.

First, I concur with everything that my noble friend Lord McNicol said from the Front Bench. I am not going to repeat all those points; he covered the waterfront. I share some of the concerns expressed by the noble Baroness, Lady Brinton. I also need to declare an interest because I was a junior Minister at the time. I was not dealing with this issue; I was dealing with what seemed a bigger issue at the time—the privatisation of Royal Mail, which never actually took place then.

Before I go on with my contribution, I pay tribute to somebody who I know wanted to be here today, but ill health prevented him: my noble friend Lord Clarke of Hampstead, whose track record on involvement with the Post Office and Royal Mail is second to none. I saw him last week and he was hoping he would manage to make it, but, clearly, he could not—that is for the record.

I come to paragraph 33 in the Statement, which says that

“we will exonerate those who were so unjustly convicted of crimes that they did not commit”.

Of course, I welcome that, but the people I want to focus on are those who did commit crimes; what are the Government going to do about them?

We heard recently that Fujitsu, unbelievably, was still being involved in government contracts, although it has given back some of the money. There are other people who ought to be held responsible for what turned out to be crimes: deliberate attempts to conceal a system that they knew was faulty. That includes Fujitsu itself. So I would welcome the Minister making some statement about when this particular aspect is going to be dealt with.

I understand that there will be some aspects of this that might be considered sub judice or whatever, but I would welcome an initial comment on when and how the Government are going to deal with this situation. The idea that Fujitsu should continue to be seen as a reliable contractor, working with the Government, is in my view somewhat doubtful. I look forward to hearing the Minister’s response.

[Lord Johnson of Lainston (Con)]

I thank the noble Lord, Lord Young, for his comments. I wholeheartedly agree with him about how the order has come out. Our first priority is to make sure that the victims are compensated and justice is speedily done.

The second part—which, I am afraid, will take longer—is a thorough analysis of what actually happened and why, over many years, there was a persistent type of activity and a culture in an organisation that was classified as an arm’s-length government body: who should have done what, and at what time. Of great importance is the role of the “state”—and I say that in inverted commas, because I am not trying to play party politics here. I am afraid that many people in this House over many years had positions of responsibility that should have enabled a higher degree of inquiry than clearly took place.

How do we make sure that these organisations function properly, and how can we make sure that government officials, Ministers, and so-called independent directors and other directors of these organisations behave in the right way to ensure that they are run properly, and we do not see a repeat of these activities? It is very important that we have a broad and wide debate. That is why it is always very important that we regard the untrammelled power of the “state” with great suspicion.

I refer briefly to the noble Lord’s comments in relation to Fujitsu. As I understand it, we are looking to work with Fujitsu on how it can assist in compensating victims. I think that conversation is ongoing, but at the end of the day, it is the inquiry that will allow us to decide what to do next. It is absolutely without question that there are people who need to be held to account for these actions over the past 15 or so years. I am grateful for this prompt; this will continue to be a part of the process.

[Baroness Buscombe (Con)]

My Lords, I join my noble friend Lord Arbuthnot in paying tribute to my noble friend the Minister and other Ministers in another place, along with all those in government who have got us to where we are so far. It has been a hard and difficult road, and it has been too long. The Minister is quite right that whatever happens, we must see that justice is done, and we must do all that we can in our power to ensure that this kind of abuse never happens again.

However, I am curious. I am probably being a little premature, but I do not understand why there has been no question, so far, about the role of the board directors who came and went through this appalling scandal: Tim Parker, Adam Crozier, Ken McCall, Carla Stent, Zarin Patel, Allan Leighton, Alice Perkins, and Susannah Storey—who I gather is now the Permanent Secretary at the Department for Digital, Culture, Media and Sport. What role did these people play? Is this being looked at thoroughly in the inquiry?

We do have something in our power: corporate manslaughter. That might sound extreme, but four people committed suicide because of what was done to them over a period of years, while this stellar list of, as Private Eye would call them, “City slickers” came and went, well paid as directors of the Post Office. Do they get off scot free? Is the inquiry going to take so long that it gets thrown into the long grass? Does my noble friend agree that we should at least consider how these people should perhaps be charged with corporate manslaughter, so that they can prove their innocence at their own expense?

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

I thank my noble friend for raising the salience of these very important issues. It genuinely would not be helpful or appropriate for me to make a comment on any specific case. The inquiry itself is, in my view, extremely well led and very detailed. We are going to draw a number of conclusions from the extremely forensic amount of investigation that is being undertaken at the moment.

On a broader point, my noble friend is absolutely right: the principle around the leadership of these organisations, how they function, how they report to their boards, the independence of various directors on those boards and how those boards interact with government departments and Ministers, is absolutely something that I believe everyone in this House wants to look more closely at. The principle of arm’s-length still being within the reach of Ministers and responsible entities is also extremely important. I hope that while that may not be the specific outcome of the review relating directly to the Post Office, it will be the next stage in the investigation by Ministers and Parliament.

Regulator of Community Interest Companies

Lord Johnson of Lainston Excerpts

Monday 11th March 2024 Lords Chamber

[Lord Harris of Haringey (Lab)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I refer to my interests in the register as chair of the Fundraising Regulator, which oversees charitable fundraising.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

The regulator is funded on a cost-recovery basis from fees and has significant powers, including the ability to investigate and dismiss directors. Community interest companies have been an enormous success since their introduction almost 20 years ago. There are now around 31,000 CICs delivering substantial benefits to communities throughout the UK. My department maintains ongoing dialogue with the regulator to ensure that this growing market continues to have the appropriate oversight applied.

[Lord Harris of Haringey (Lab)]

The very phrase “community interest company” generates a warm feeling among the public. It makes the organisations concerned sound like charities. But charities are subject to charity law and to regulation, in particular about how they fundraise or raise money on the street; they require licences and are obliged to follow a code of conduct. Why does the Minister think that there are organisations that decide they do not wish to register as charities but as community interest companies? Why are they trying to avoid that sort of regulation to protect the public? If he wants an example, perhaps he should look at the Inside Success Union, which has ignored a whole series of complaints against it. Why does the Minister think that is adequate?

[Lord Johnson of Lainston (Con)]

I congratulate the noble Lord, Lord Harris of Haringey, if I may, on his work to oversee the Fundraising Regulator. The comments he has made and recent example that he has just given are things that we take very seriously. I have communicated with the registrar at Companies House today and she is also ensuring that she is available for further inquiries relating to this particular situation. However, without giving too long an answer, community interest companies are a fabulous idea. They allow social entrepreneurs to take up opportunities in their community, to distribute dividends back into the company and to incentivise people to invest in social benefit. Communities across the country have benefited from these fabulous concepts, and we want to do more. They have been growing in number every year—we now have just over 30,000; I think that they have doubled in the past four years—and, frankly, this Government will do everything we can to see them continue and flourish.

[Lord Razzall (LD)]

My Lords, first, to follow on from the noble Lord’s question, bearing in mind that this has been going on—as the Minister indicates—for over 20 years, does the Minister not think that it might now be time to update the community interest test with clearer guidelines, which might meet some of the points that the noble Lord, Lord Harris, has made? Secondly, does the Minister not think that this might be an opportunity to increase the annual turnover test to encourage small companies to become CICs and to register accordingly?

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord for his input in this important area. These principles absolutely need to be kept under review. I have looked into this myself in great detail; only 38 complaints were made last year about these entities, which, considering there are 31,000, is not a significant amount. I do not believe that any CIC has been struck off the company register. We have updated the procedures around Companies House—director verification, statements of accounts, and so on—which will also apply to CICs. I am therefore very hopeful that we will see continuing reforms. I refer back to my original comment about the work that the noble Lord, Lord Harris, is doing to regulate fundraising. That is a separate point that is not necessarily related to company law, and we fully support his efforts in trying to make sure that it is properly regulated and ordered.

[Lord Leong (Lab)]

My Lords, as the Minister said, there are 31,000 CICs in the UK. They deliver significant benefits to communities across sectors including the environment, education, health and sports. However, the number of CICs being dissolved is increasing year on year, reaching an alarming 3,100 last year. What assessment have the Government made of whether dissolutions are the result of fraudulent activities, potentially putting community assets at risk?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord, Lord Leong, for that point. This is not an assessment that the Government have undertaken; it is the responsibility of Companies House. With more data now available following our reforms, the registrar will be able to undertake this research. I would say, however, that this is a sector where there will be relatively high turnover. A lot of these are social businesses with very limited amounts of capital; some are experimental and it is absolutely right that they behave like companies, with the element of success or failure. Ultimately, the number of CICs is growing every year, in significant compensation for those that are being dissolved, and we are very pleased to see that.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the rules allow for 35% of a CIC’s distributable profits in one year to be paid out in private dividends. What figures do the Government have on the average amount across the sector that is being paid out in dividends, and how is that monitored?

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

The noble Baroness asks a good question. This is information I requested today, ahead of this Question, but have not yet received, so I will be delighted to provide that to her and other noble Lords. I am also interested in looking at some of the CICs which have become multimillion-dollar enterprises. This is not just a café or a local book-lending club, although those are to be lauded; they are significant community health businesses providing enormous value to the local community and to patients, and sometimes doing things differently and innovatively. This is charity entrepreneurship of the sort that this Government support.

[Lord Harris of Haringey (Lab)]

My Lords, I hesitate to prolong this, but the Inside Success Union is not the only example of a community interest company that has decided that it does not wish to be subject to regulation, in particular concerning raising money directly from the public. The Minister talked about the relatively small number of complaints received by the regulator. Is he aware that the regulator prides herself, in her last annual report, on the fact that she did not open any investigations into the complaints received? Surely we would expect a regulator to take those responsibilities more seriously.

[Lord Johnson of Lainston (Con)]

I am not delighted to hear that phrased in that way, but the noble Lord is right to suggest that these complaints should be properly investigated. I have received reassurance today personally from the registrar, Louise Smyth, who I believe does an extremely good job running Companies House, that any allegations around the behaviour of CICs in relation to their relationship with Companies House will be thoroughly investigated. It is important that we do not confuse this with their work in terms of fundraising, which the noble Lord has done an extremely good job of investigating. Of course, the Government support having a well-regulated fundraising sector so that all charities can operate effectively and the public can have trust in the philanthropic sector.

[Lord Naseby (Con)]

I thank my noble friend and the Government for the support they have given to the whole mutual movement and the support they are giving now to these community groups. There is a move in the country, and any of us who live outside London know that there is considerable interest in this sort of newish structure. Certainly, on behalf of those in Bedfordshire and Northamptonshire, I say a huge thank you to His Majesty’s Government.

[Lord Johnson of Lainston (Con)]

I am extremely grateful to the noble Lord for his comments. As he well knows, I support the mutual movement wholeheartedly. It actually goes hand-in-hand with CICs, and this Government are doing all we can to get more money into the philanthropic sector. My own office, the Office for Investment, working with my new noble friend Lord Petitgas, has been working very hard internationally to get more donors into the UK. I also congratulate the chairman of the Charity Commission, Orlando Fraser, who has been doing an excellent job in ensuring that our charity sector is seen as a beacon around the world.

[Lord Berkeley (Lab)]

My Lords, I declare an interest as a board member of a CIC. We were trying to buy a village shop in Cornwall which was about to close down and we found the regulations and the structure very easy to operate and it worked very well. But there are an awful lot of other pubs and shops in Cornwall and other places that are on the brink of financial failure at the moment and it is very important that CICs exist to help them. At the same time, when you are doing this with not very much money, my noble friend’s Question about regulation is also very important. We need the comfort to know that the regulator is doing its job properly if this is really going to work, as it needs to.

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for those comments. Of course, I wholeheartedly agree that it is very important that CICs have the confidence of the public. People are going to invest in them and they are expected to operate at the highest possible level of probity and integrity. That does not mean to say that all of them will be a success, but the principles of combining philanthropy with private enterprise, with the outcomes that that has achieved in a very easy to operate and low-cost format, seems to have been enormously successful. It is something that we want to continue, but I am very aware of the comments made to me today and I will make sure that they are passed on to the relevant authorities.

[Lord Vaizey of Didcot (Con)]

My Lords, my noble friend the Minister mentioned the importance of philanthropy. Echoing the spirit of these questions, I congratulate him wholeheartedly on a recent advertisement I spotted inviting appointments to an office of philanthropy for inward investment. It is a very perceptive move for the Government to have a strategy to contact foundations around the world to encourage them to invest in the UK’s cutting-edge science, for which we are justly world renowned.

[Lord Johnson of Lainston (Con)]

My noble friend, as always, says wise words in a passionate manner and I congratulate him on them. I appreciate the salience of raising the Office for Investment’s philanthropic division in this House. It is important that we are able to project the extraordinary opportunities for venture philanthropists in the United Kingdom and I call on Members on all sides of the House to assist me in projecting our incredible philanthropy opportunities to the rest of the world.

Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024

Lord Johnson of Lainston Excerpts

Wednesday 6th March 2024 Lords Chamber

Moved by

[Lord Johnson of Lainston]

That the draft Regulations and Order laid before the House on 22 and 23 January be approved.

Relevant document: 12th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 5 March.

Motions agreed.

Electricity Capacity (Supplier Payment etc.) (Amendment and Excluded Electricity) Regulations 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Electricity Capacity (Supplier Payment etc.) (Amendment and Excluded Electricity) Regulations 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

Motion agreed.

Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, as a matter of good practice, I refer the Committee to my interests. I do not believe that there is any conflict with these specific measures.

The Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024, the Electricity Capacity (Supplier Payment etc.) (Amendment and Excluded Electricity) Regulations 2024, the Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024 and the Renewables Obligation (Amendment) (Energy Intensive Industries) Order 2024 were laid on 23 and 24 January this year. I acknowledge that the Joint Committee on Statutory Instruments provided a helpful review of these instruments and did not draw the special attention of this House or the other place to them. I also acknowledge that the Secondary Legislation Scrutiny Committee has reported these statutory instruments as instruments of interest to Members.

Together, these four instruments make up the British industry supercharger, which aims to support our most energy-intensive industries with the cost of electricity. Energy-intensive industries, known as EIIs, include important foundational manufacturing sectors such as steel and metals in Port Talbot, for example; chemical manufacturers; paper, glass, ceramics and so on. As foundation industries, these businesses are critical in the development of new projects including offshore wind. They therefore play an important role in the transition to net zero.

The British industry supercharger also provides relief for new and emerging industries such as battery manufacturers, which are critical to electric vehicles and manufacturers of semiconductors, which are critical to the high-tech economy. Due to their nature, these industries require significantly more electricity use than other sectors. As a result, they are disproportionately impacted by high electricity prices.

The Government already provide some electricity price support to these industries, but there remains a competitive gap with other nations. In the UK, our electricity prices for medium and large industrial users were the highest in western Europe in 2019, so these regulations importantly seek to close that gap, ensuring that British industry can thrive and grow, attracting new investment rather than losing out to cheaper production overseas, and helping to mitigate the risk of carbon leakage due to cheaper energy costs elsewhere.

This existing support was put in place in 2017 and, since then, over 370 businesses have benefited from an 85% exemption from certain renewable energy levies. Under these new measures, those business that are eligible for the exemption scheme will not only see an increase in the value of their exemption, up to 100%, but benefit from a new exemption from capacity market charges, as well as receiving compensation for a proportion of their network charges.

Taken together, the Government estimate that this support could be worth, on average, around £24 to £31 per megawatt hour, closing the competitive gap between UK industrial energy prices and those faced by international competitors.

These savings are funded by spreading the cost widely among all other electricity consumers, which is estimated to add between 5 to 10 pence per week to the average domestic bill, and increase electricity costs for non-domestic consumers by about £1 a megawatt hour, once all measures have been fully implemented by 2025-26. These are clearly estimates, since the energy market is highly volatile, but these are our projections and it is important to understand the scale of the effect.

The sectors eligible for the British industry supercharger support scheme employ around 400,000 workers and account for more than a quarter of total UK exports. Many are located in areas of economic disadvantage and provide good, high-paid jobs. This carefully crafted support will mean strategically important UK industries remaining competitive on the world stage. We will back these businesses to keep on growing our economy and delivering into the UK both high-quality jobs and investment as well as the products that we rely on for our everyday lives and work.

I shall summarise for noble Lords. These regulations amend the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015, which make provision for indirectly exempting eligible energy-intensive industries from the full costs of funding the contracts for difference scheme as set out in the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014. They amend the Electricity Capacity (Supplier Payment etc.) Regulations 2014 to make provision for indirectly exempting eligible energy-intensive industries from the costs of funding the capacity market. They make provision under the Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024 for electricity support payments to be provided to energy-intensive industries for the purpose of alleviating the impact of electricity costs under the proposed network charging compensation scheme. They amend the Renewables Obligation Order 2015 to allow the Secretary of State for the Department for Energy Security and Net Zero to revise the renewables obligation level for the 2024-25 scheme year; this will allow the implementation of the increased EII exemption rate under this scheme from 1 April 2024 onwards.

In conclusion, this suite of regulations will help bring electricity costs down for the most energy-intensive and trade-intensive industries—such as steel, chemicals, glass and battery manufacturers—to a level similar to those of their European counterparts. In my view, this is crucial in helping UK-based firms remain competitive, incentivising investment and a move towards decarbonisation through electrification. With that, I beg to move.

[Earl Russell (LD)]

I thank the Minister for introducing the regulations. Before I start, let me say that I will not speak for longer than I would do if we were dealing with just one set of regulations; I will treat all the regulations together and not go through them individually. I will conclude by asking just a couple of questions. I apologise in advance if any of my questions are wrong. These are quite complicated regulations so I offer any advance apologies as necessary.

These four draft instruments propose to implement jointly the key aspects of the British industry supercharger, a package of measures that the Government announced back in February 2023. It aims to make strategic energy- intensive industries, or EIIs, in the UK—for example, steel production, cement production and glass manufacturing, as well as other areas including critical national infrastructures such as steel and chemicals—more competitive. This is to be achieved by closing the gap in electricity prices between the UK and our competitor countries, especially in the European Union. I note that these measures apply only in the UK and not in Northern Ireland.

Despite the technical names of these regulations, there is a back story to all of this, with the war in Ukraine, Covid and our continued reliance on importing energy. We know the impact that this has had on the increase in energy bills in the domestic sphere. These measures are the equivalent of saying, “It’s a question of the Government supporting these energy-intensive industries to make sure that they can continue, survive and flourish in a market where energy prices are rising”. However, I want to be clear: they water down some of the reforms to our carbon markets that have previously been agreed.

I understand that the impact of these measures will be that the cost of emitting 1 tonne of carbon under the UK’s emissions trading scheme will fall from almost £100, as it was a year ago, to about £47. I also understand that the costs will be borne by bill payers, be they domestic consumers, small and medium-sized industries, charities, the health sector or the education sector in this country. I understand that, for these industries, the percentage of their operating costs that is represented by the cost of energy has risen; in some cases, it has risen from 3% of their operating costs to 10% or in some cases 15%. So I recognise that these instruments are important and necessary. I will not go through them individually; I had a sentence on that but, in the interests of time, I will cut that out.

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[Lord Leong (Lab)]

My Lords, I thank the Minister for setting out these instruments so clearly and the noble Earl, Lord Russell, for his contribution. These four instruments implement key aspects of the British industry supercharger, as mentioned by the Minister, a package announced in February 2023 to make energy-intensive industries—EIIs—in Great Britain competitive. These industries face challenges in the coming decade. The primary issue is the relatively high cost of energy in the UK, which makes it difficult for them to remain internationally competitive. Furthermore, there is a need for them to implement transitions toward greener technology, with lower carbon leakage, as we strive to move towards a net-zero economy. We recognise these challenges and broadly support these instruments, in so far as they seek to address them for these industries, which are vital for our national security and the literal fabric of our national growth.

The first instrument exempts eligible EIIs from the costs associated with funding the capacity market and seeks to ensure that there is sufficient supply despite fluctuations in demand, especially at peak times of day or in colder periods, and in supply, for example when wind generation is low. While we support this instrument, have the Government considered whether this will lead to any shortfall in the capacity market? If so, what measures are in place to mitigate this?

The second instrument concerns additional costs due to green levies which the UK imposes and some of our international competitors do not. We do not want this differential cost to drive our energy-intensive industries abroad, so this instrument adjusts an already existing scheme and exempts EIIs from 100% of the costs of funding various environmental schemes. Industrial electricity costs in comparable neighbouring countries are evidently not static, so will the Government keep them under review? If there is movement, do they have plans to make further adjustments if necessary?

For both these instruments, the Government’s calculations accept expected increased electricity bills for non-eligible users, including small businesses, charities and households. For this instrument, that is cited at 20p to 30p per megawatt hour. With the current spot price at just under £60 per megawatt hour and the reduction since the start of this year already being closer to £30, that certainly does not seem a massive amount. However, will the Minister outline how much these regulations, in conjunction, will add to the average household electricity bill per annum? The third instrument follows by necessity to enable the Secretary of State to revise the renewables obligation level from 2024-25.

The fourth and final instrument makes minor amendments to the Energy Act 2023, sets out funding for the payments via a levy on suppliers and appoints an administrator. Such support payments are to be made to the EIIs quarterly. Will there be an automated process for eligible recipients to receive these payments with the minimum administrative fuss? Have the Government made forecasts as to whether the costs of this scheme will outstrip the contributions from the electricity suppliers, which will effectively be funding the EII support levy? Are there any provisions in place for this possibility, so that the scheme does not collapse if it is successful?

This instrument allows corrections to be made to support payment entitlements. It will also make provisions for the administrator to hold a reserve fund so that EIIs will always be able to receive payment. Do the Government expect this will need to be used? If so, how big will it be and is there a maximum time limit over which the administrator will be expected to cover the shortfall?

We will be very happy to support these four instruments if the Minister can provide some assurances on the concerns I have mentioned. I look forward to his response.

[Lord Johnson of Lainston (Con)]

My Lords, I am grateful to the noble Earl, Lord Russell, and the noble Lord, Lord Leong, for their comments. These measures are extremely important if we are to have a sustainable heavy industry in this country. If I may take my own experience as Investment Minister, I have unquestionably been able to land a significant amount of investment—some of the biggest investments that we have announced to date, particularly in the car and advanced manufacturing industries—because we have these mechanisms in place. It is not even ambiguous. It is a clear point of fact in these discussions and is very important.

The noble Earl rightly raised that we do not want to be subsidising carbon-intensive businesses out of some desire to keep historic organisations going, contrary to our net-zero ambitions and our overall industrial policy. It is right to challenge the principle of carbon leakage, which is exactly what would happen if we did not operate this process. It is designed to help these businesses to decarbonise. For example, for Port Talbot, which will obviously be a receiver of these support packages, the intention is clearly that it will decarbonise. If you look at the car industry, it is going to an EV industry, and rightly so.

The noble Earl asked when the next review will be, how we will review it and how we add companies. This is an issue with novel technologies coming forward and with industries that need this support, which may not already be under a current and easy-to-define classification. Quite rightly, we will review this. The next review point is 2026. This measure will come into force next month so it seems logical that there is an 18-month or two-year period for review. I am absolutely sure that, at that point, there will be some quite significant changes. It gives us an opportunity to take companies and sectors out and put new companies and sectors in. I am positive about that.

I am also positive about the ability to spread the cost. The noble Lord, Lord Leong, rightly asked how much this will add to the electricity bills of an average household. These are the dreaded averages but we are looking at £4 to £5. I am very aware that there is a cost of living crisis and that there are other pressures on people’s households but, when you look at the ability to target this type of support for that type of diffuse outcome, it makes a lot of sense. The noble Earl, Lord Russell, mentioned the power-generating and petrochemical industries, which do not qualify for this. I am sure that there are others that do not qualify; we would be happy to provide a specific list. It is a 1% increase overall.

Noble Lords will know that I have spent many years in investment and looking at financial markets. The energy markets present a high degree of volatility. The gas prices now are lower than they have been for a considerable period. We are very dependent on gas, which is why our own power structure is so complex to manage. Looking at the network costs, the capacity market charges that are made and other exemptions, these mechanisms are really about removing the obligations to invest in the net-zero ambitions of the UK while expecting businesses to do it for themselves. There is a sensible trade-off there. It is well balanced.

The noble Lord, Lord Leong, asked whether there would be a shortfall in the capacity market point because of the effective compensation being paid. As I understand it, that charge has never been utilised. We are confident that there is no effect on the capacity market in terms of the charges that are being made; I would be happy to investigate that further. On technical guidance and the transparency around these processes, let me say that, as Minister for regulatory reform, better regulation or smarter regulation—whatever the current title is—impact assessments are important to me. I hope that all noble Lords have read the impact assessment reports for these statutory instruments; anyone listening to this debate is also welcome to do so. It is a transfer rather than a new cost so it does not show up on the impact assessment process as clearly as it would do if it were a new principal regulation.

It is important that there is as much transparency as possible because these are, in effect, transfer charges. This is a transparent system; to some extent, it requires the complicit consent of industry in general and the public. It is important that this is happening in a private sector capacity with government direction. We feel that this is absolutely the right thing to do. It is highly diffuse in its impact and very targeted. We believe that it will allow the UK to be incredibly competitive when it comes to developing its advanced manufacturing ambitions.

I hope that I have answered all the questions from noble Lords today. If I have not, I will certainly scrutinise Hansard and welcome any follow-up, but this is a relatively uncontentious series of statutory instruments.

In summary, the noble Earl, Lord Russell, mentioned that he was not going to address each statutory instrument individually; he was quite right not to, not just in the interests of time but because this is one package—they are naturally separated for reasons of legislative complexity but this is the British industry supercharger. It presents a powerful package to industry and sends a strong message to the country and internationally that we want to support businesses as they develop and decarbonise. Support for our economy gives us great growth for the future. With that, I commend this instrument to the Committee.

Motion agreed.

Renewables Obligation (Amendment) (Energy Intensive Industries) Order 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Renewables Obligation (Amendment) (Energy Intensive Industries) Order 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

Motion agreed.

Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

Motion agreed.