Revised Energy National Policy Statements

Lord Lennie Excerpts

Tuesday 22nd February 2022 Grand Committee

[Lord Lennie (Lab)]

My Lords, I thank the Minister for his comprehensive introductory statement and all other noble Lords for their contributions to this debate. My noble friend Lord Whitty made it plain that there is not enough imperative in these statements. They need, I guess, to be more inclined towards planning consents rather than against, or a balanced view. The noble Baroness, Lady Neville-Rolfe, reminded us that it is about keeping the lights on at the right price. The noble Lord, Lord Teverson, reminded us about avoiding silo thinking. The noble Lord, Lord Moynihan, was on about prices and costs, as a gas advocate.

The noble Baroness, Lady Sheehan, asked how often this policy and these NPSs would be reviewed. The noble Baroness, Lady McIntosh, talked about the rural effect and rural-proofing future policy, while the noble Baroness, Lady Jones, talked about replacing the whole policy, in her usual fashion. The noble Baroness, Lady Foster, advocated fracking, rather than importing fracking from the United States. The noble Lord, Lord Naseby, supported nuclear fuel, as we do as well, and advocated solar as a future-proofing of warehouses. Then we came to the noble Lord, Lord Oates, who introduced the whole concept of “differenter” to all of us, a new language for us all to grasp.

This national policy statement updates the Liberal Democrat Minister’s statement in 2011 in the coalition Government. I may be wrong, but I think that it was a Liberal Democrat Minister at the time. It will form the framework within which the Secretary of State will take decisions on the nationally significant energy infrastructure developments under the Planning Act. As we have heard, it is accompanied by a series of specific statements which in combination establish the criteria that will be taken into account when considering energy planning applications. The need for the update, as we have heard, is explained by the Government announcing the move to net zero, to be brought forward and achieved by 2050, and the marker, that we will have moved three-quarters of the way towards this by 2035. They are both confirmed in the NPS.

The dash for gas has screeched to a halt and is replaced by a reaching out for renewables. What we have is the establishing of a prime market in energy of wind, solar and nuclear fuels, with only a back-up residual use of carbon fuels as a supplement. This policy shift is welcome—but is it entirely believable? Currently, almost 80% of UK energy is fossil-fuel generated, and there are reports that the Government are about to announce, or have already announced, the licensing of six new oil and gas fields in the North Sea. The Times on Monday carried an interview with Greg Hands in which he confirmed, or appeared to confirm, that the North Sea fields would be developed as a new prime market develops. Is that true and, if so, do the Government believe that it is consistent with the prioritising of renewables in the NPS? What message do they think that it would send out to the energy market and the energy sector overall?

On timing, the need to speed up the planning process and decision making is essential, given the rightful hastening of the net-zero target. Evidence given to the BEIS Select Committee reveals that, while it takes only a year to build an offshore wind farm, it takes about eight years to get planning consents through the process. The NPS establishes a new legal framework for planning decisions, balancing the need for infrastructure against its impact on communities. If it takes eight years to gain approval for new infrastructure to support renewable energy production, it is unlikely that any approvals will be achieved before the next likely review of this NPS. Is the Minister concerned about the timescale, can it be shortened—and, if so, what evidence can the Government point to in support of that? The energy sector needs answers to these questions before risking capital on major infrastructure projects.

That leads to the whole question of costs and prices of energy. The NPS makes passing reference to the costs of energy, but does not focus on it, despite the fact that it is clearly the number one issue facing household budgets. The Chancellor has announced that households will be forced to take a loan from the energy companies in the short term, to be to be paid back in the medium term, but has not offered any longer-term solution to the problem of these high energy costs, other than the prospect of repeated compulsory loans across the board. The NPS skirts around this. It talks about energy at affordable cost, but does not put forward any proposals about how that will be achieved. Does the Minister see the issue of costs as a short-term one or as a strategic problem and, if the latter, how does he feel it should be addressed, and does he think it should be addressed in this NPS?

A decarbonised future should make the UK less reliant on the importing of energy; 79% of energy is currently fossil-fuel generated. Currently, the UK imports about half of its gas-fired energy; it is therefore significantly subject to world price movements, over which the Government remind us they have little influence or control. But the Government of the nearest neighbour, France, have announced a 5% increase, while here in the UK we face a 50% price hike in the Ofgem price cap review.

The Labour Party has no doubt that nuclear energy should play an increasingly significant part in the energy mix of the UK’s decarbonised future. Parliament debated yesterday the financing of nuclear energy, and strategically the two are interconnected—so the absence of any strategic proposal in the NPS is all the more surprising. About half of UK gas is imported, and about one-third of UK energy is gas-fired, so it is a big number when considering the fuel costs that the industry has little control over. Does the Minister see a future when UK energy cost and prices are in the main controlled by decarbonised UK energy markets? If so, when is that likely to happen, and by when will the UK no longer be reliant on importing a significant proportion of its energy?

Onshore wind development has been removed from the NPS—maybe it was in 2016, I am not sure. That appears to show a lack of confidence in that form of energy. I do not know whether it does not meet the de minimis level for inclusion in the NPS, but why was that decision taken and what impact has it had on onshore wind development? Is it because of its not meeting the de minimis levels, or other factors?

The NPS sets out a series of factors that will be taken into account by the Secretary of State in reaching his decisions about approvals of infrastructure projects. How many consents have been made since the last NPS was published? Does the Minister believe that it will increase significantly in the period before the next review? While we are on that subject, when does the Minister feel that the next review should be? Should it be in five years, as discussed in the evidence sessions before the statement was released, or in 10 years, as is the case with this NPS update from the last one? The pace of change and development in energy supply and infrastructure will be exponential in the next period, if we are to meet net zero, and the NPS needs to future-proof to reflect this. Government policy appears to be “wait and see” before judging planning applications, which will almost certainly mean that we do not meet our net-zero ambitions.

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[Lord Lennie (Lab)]

The planning process for renewables and low-carbon development such as hydrogen and CCS should ensure support for infrastructure projects such as aviation over and above competing interests. The inclusion of emerging technologies alongside renewables that will contribute to net zero—hydrogen, CCS, biomass—as well as the infrastructure and storage necessary, should be advanced and advocated by the NPS. A presumption in favour of them in the planning process should be the watchword of the NPS, not neutrality as it currently appears; I think the noble Lord, Lord Whitty, made that point.

The long timescale between this and previous NPSs has resulted in policy falling significantly behind current thinking and technological advance. Keeping NPSs under ongoing review and updating them as required would be more likely to reflect advances in technological development and would therefore more likely play an important part in our move to net zero.

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[Lord Callanan (Con)]

The whole purpose of these national policy statements is to try to speed up the planning process in the first place by setting a national framework within which the local decisions can be taken. As with all these things, it is a question of getting the balance right. Of course we want to try to speed up the process, but the problem with energy policy is that it takes many years, if not decades, to put the infrastructure in place.

We are announcing, we hope, some progress on new nuclear and passing new legislation in the next few months to enable it but we will not see the fruits of that until the early 2030s. The process for the infrastructure which we see in place now was put in place 10 or 12 years ago. The reason that we have a problem with nuclear now—I am sorry to bring it back to party politics—was because when Labour came into office in 1997, that Government ruled out new nuclear. Tony Blair said in the manifesto “We see no case for new nuclear”. Now, that is a party-political point and I think many Labour Members now think that was a mistake—maybe it was right in the context of the time but it was probably a mistake. Correcting these mistakes takes many decades in order to get the infrastructure in place.

[Lord Lennie (Lab)]

If I may reinforce the point I made, if it takes eight years to get consent for something, that is eight years before the first brick is laid, as it were. If that period can be foreshortened, the fruits of the labour can be brought forward accordingly.

[Lord Callanan (Con)]

We are always open to finding new ways of speeding these things up, but you also have to take into account the concerns of local communities which have to put up with this infrastructure and try to mitigate the effects on them.

I return to the point that my noble friend Lady Neville-Rolfe asked me about heritage coal. I am very well aware of this issue; I am told that my noble friend Lady Bloomfield is a hero in the heritage railway community because she was able to write to them to say that heritage coal would still be available to them to operate their railways. There are many sources of coal apart from Russia. Significant quantities of coal are still produced in Germany and Poland, so I am confident that they will still be able to get the coal to power their excellent machines. I do not think anybody, even the most committed climate zealot, would object to the relatively small quantities that they would use for their heritage equipment.

National Living Wage

Lord Lennie Excerpts

Monday 17th January 2022 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes an important point. I am disappointed by some of the responses from the Opposition Benches. As always with these matters, it is a question of getting the balance right. Of course, we all want to see the lowest paid in society paid more—nobody would want to see that more than I would and I am sure my noble friend feels the same way—but we have to bear in mind the importance of considering whether it is affordable for business. That is why we have the independent Low Pay Commission that makes recommendations on the maximum level of increase that can be afforded without undue inflationary impacts and is affordable for business.

[Lord Lennie (Lab)]

I remind noble Lords—before the Minister takes too much credit for it—that it was the Labour Government who introduced the national minimum wage and that it was introduced against universal hostility from the Tory Opposition. Given the doubling of energy prices expected in April, does the Minister believe that the rise in the minimum wage to £9.50 an hour will be sufficient for ordinary household budgets to cope?

[Lord Callanan (Con)]

Indeed, I am happy to pay credit to the Labour Government of the time for introducing the national minimum wage and I am happy to take credit for the biggest increases in the national minimum wage that we, as a Conservative Government and a Conservative-led Government, have implemented since we came to power. As I said, these are difficult issues. We all want to see it increasing; that is why we have the independent Low Pay Commission to provide independent advice to the Government on what is affordable for business. We are working towards the manifesto commitment to increase the level to two-thirds of national median pay.

Construction Sector: Roadmap to Zero Retentions

Lord Lennie Excerpts

Wednesday 15th December 2021 Lords Chamber

[Lord Callanan (Con)]

The noble Lord makes a very good point. The vast majority of government departments no longer use retention clauses. The main exception to that is the Department for Education, and I continue to urge it to follow the lead of other departments in this regard.

[Lord Lennie (Lab)]

My Lords, in April, eight months ago, the Government stated:

“The Government, in conjunction with the Construction Leadership Council, is working to identify a sustainable strategy on retentions for the whole construction sector.”


Will the Minister update the House on where the strategy is? There may not be legislation, but is the strategy coming out?

[Lord Callanan (Con)]

There are a lot of different factors to take into consideration. This is a complicated area with widely differing views across the sector. In considering the abolition of this contractual practice, there would need to be the development of alternative surety products for the whole industry. That could mean the adaption of existing products, such as performance bonds, or the introduction of new products. It may also involve a range of different products. It is a complicated area, but we continue to take forward work with the Construction Leadership Council.

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[Lord Callanan (Con)]

I am delighted to see that the noble Lord has turned up well dressed to ask such a noble question—he puts the rest of us to shame. My understanding is that the Ministry of Defence is one of the central government departments that has done much to abolish the use of retentions in its contracts.

[Lord Lennie (Lab)]

I will try again: could the Minister say whether he agrees or disagrees that retentions in the construction industry are an appropriate or proportionate mechanism for ensuring quality and fair payment?

[Lord Callanan (Con)]

I can answer that question by saying what we have done in central government in my department: we have substantially abolished them. Most government departments have now got rid of them and only the Department for Education is a laggard. We would be better to do without them, but that is not the same as moving towards a statutory ban.

Newport Wafer Fab

Lord Lennie Excerpts

Monday 6th December 2021 Lords Chamber

[Lord Callanan (Con)]

The noble Lord tempts me but I cannot go any further than I have already stated. This takeover is being reviewed by the National Security Adviser, and we hope to reach a decision shortly.

[Lord Lennie (Lab)]

My Lords, while there can be no doubting the strategic importance to our national security of the part played by Newport Wafer Fab, can the Minister explain why the Government did not intervene in a takeover earlier this year? Could he tell the House what tools the National Security Adviser will have at his disposal that could be applied when the ongoing review is completed?

[Lord Callanan (Con)]

I am not sure to which takeover the noble Lord refers that we did not intervene in—perhaps we should have a separate conversation about that. But it is clear that the Government as a whole have substantial power. As I said, the new NSI Act comes in on 4 January, when it will be commenced, but we have retrospective powers that can go back to November 2020 under that Act.

Regulatory Enforcement and Sanctions Act 2008 (Amendment to Schedule 3) (England) Order 2021

Lord Lennie Excerpts

Tuesday 30th November 2021 Grand Committee

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

My Lords, I beg to move that the draft Regulatory Enforcement and Sanctions Act 2008 (Amendment to Schedule 3) (England) Order 2021, which was laid before the House on 1 November 2021, be approved.

This instrument will add Part 2A of the of the Public Health (Control of Disease) Act 1984, as it applies to England, to Schedule 3 to the Regulatory Enforcement and Sanctions Act 2008. The reason for adding Part 2A to Schedule 3 to RESA is that it brings Part 2A and regulations made under it within the scope of the primary authority scheme as it applies in England. From now on, I will refer to Part 2A of the Public Health (Control of Disease) Act 1984 simply as “Part 2A”. I will also refer to the Regulatory Enforcement and Sanctions Act 2008 as “RESA”, and to the primary authority scheme as “the scheme”.

As I am sure noble Lords will recognise, businesses operating in the UK need to comply with a wide range of legislation, much of which is enforced by local authorities. The scheme has been developed to assist businesses and allow them to receive tailored support in relation to one or more specific areas of law. With a dedicated team, a primary authority partnership makes it easier for businesses to comply with the law, reducing the costs of compliance without reducing regulatory protections. Businesses can invest in products, practices and procedures, knowing that the resources they devote to compliance are recognisable throughout the country across local authority boundaries, resulting in a consistent approach.

Advice provided by the primary authority carries legal weight and provides assurance for the business when dealing with other local authorities that regulate it. The area of law that we are concerned with today is public health regulation. Bringing Part 2A within the scheme will ensure that businesses in England can received assured advice, referred to as “primary authority advice”, on complying with public health regulations made under Part 2A, including in the context of a future pandemic.

Let me now address each of these areas in more detail. I will start with an explanation of Part 2A and its addition to Schedule 3 of RESA, before providing more detail about the scheme. I will also briefly outline the support that the order has already received.

First, Part 2A enables action to be taken to deal with cases of infection or contamination presenting significant harm to human health, if and when they arise. Under Part 2A, a local authority can, where necessary, apply to a magistrate for a range of orders to reduce or remove risks arising from persons, things or premises that are or may be infectious or contaminated and which could present significant harm to health and a risk that others might be infected or contaminated. This is known as a Part 2A order. It is intended to be used as a last resort when other interventions by the local authority have either failed or are not suitable. A magistrate may grant a Part 2A order to a local authority if they are satisfied that the criteria set out in the Health Protection Regulations 2010 are met. Part 2A also provides powers for regulations to be made in an emergency to address a serious and imminent threat to public health.

Secondly, I will explain why Part 2A, as it applies in England, needs to be added to Schedule 3 to RESA. As noble Lords have heard, the order effects the inclusion of Part 2A in the primary authority scheme. To be within scope of the scheme, legislation must be listed in Schedule 3 to RESA, or be made under legislation listed in Schedule 3, or under Section 2(2) of the European Communities Act 1972. It must relate to certain specified matters and be enforced by local authorities. RESA requires any amendments to Schedule 3 to be made using the draft affirmative procedure for statutory instruments.

If Part 2A is not added to Schedule 3 of RESA, it would be necessary to amend Schedule 3 on an individual basis to bring each regulation made under Part 2A within scope of the scheme. This would delay the provision of primary authority advice at the time of a public health emergency. In contrast, by bringing Part 2A and regulations made under it within the scope of the scheme, businesses in England will be able to obtain primary authority advice on compliance with public health regulations from the outset of a public health emergency.

Thirdly, I will briefly describe the primary authority scheme. This was established under RESA and has been in operation since 2009. It was created in response to the Hampton report of 2005, which noted widespread inconsistencies of regulatory interpretation between different local authorities. RESA establishes a statutory framework for a business to form a partnership with a local authority—which becomes the primary authority—for it to receive support from that primary authority in respect of complying with regulations introduced under a relevant enactment. Once a partnership has been nominated by the Secretary of State, the primary authority can issue tailored advice to the business on compliance with legislation in scope of the scheme. The receipt of primary authority advice enables businesses to avoid the cost and regulatory burden associated with inconsistent interpretation and application of the law by different local authorities in respect of the same regulatory requirements.

Where a local authority is proposing to take enforcement action against a business, the primary authority will review the proposed action and consider whether it is consistent with previous primary authority advice. In the event of any disagreement between the primary authority and a local authority over whether the proposed enforcement action is consistent with the original primary authority advice, the Secretary of State is empowered to make a determination.

There are many benefits to the scheme. Primary authority partnerships facilitate a more productive and proactive regulatory relationship between businesses and local authorities. The public also benefit when businesses properly comply with regulations. There are benefits for local authorities as well. If one local authority—the primary authority—provides a business with robust, reliable and consistent advice, it will allow other local authorities to target their resources more effectively, thereby avoiding duplication. Transparency is maintained via a central register through which local authorities can search for primary authority advice. Finally, the scheme gives regulators greater clarity as to where responsibility lies. It improves the consistency of local regulation and supports local economic growth through stronger business relationships.

Finally, let me highlight that there has been strong support among business stakeholders, local authorities and trade associations for the addition of Part 2A to Schedule 3 to RESA. The challenges that local authorities recently experienced in interpreting, at pace, regulations made under Part 2A to reduce the impact of the Covid-19 pandemic, and the associated burdens experienced by businesses in trying to comply with these differing interpretations, led to calls for Part 2A to be brought within scope of the scheme. For example, in November 2020 the British Retail Consortium, which represents over 170 major retailers, wrote to the then Business Secretary, Alok Sharma, requesting that Part 2A be brought within scope. This was in the context that in 2020 approximately 46,000 businesses with an existing primary authority partnership received informal advice on coronavirus regulations made under Part 2A.

In conclusion, we are introducing this order to bring Part 2A, as it applies in England, within scope of the scheme. As I have said, the aim is to ensure that businesses in England will be able to obtain primary authority advice on compliance with regulations made under Part 2A from the outset of any future public health emergency. Due to the Covid-19 pandemic, which is unfortunately unlikely to be the last public health emergency this country will face, there is strong recognition among business stakeholders, local authorities and trade associations of the benefit of bringing Part 2A within scope of the scheme. I therefore commend this order to the Committee.

[Lord Lennie (Lab)]

My Lords, as we have heard, these regulations extend the scope of the primary authority scheme, as provided under the Regulatory Enforcement and Sanctions Act 2008, to include regulations made under the Public Health (Control of Disease) Act 1984 that deal with public health protection. The Government have said that this will have the effect of enabling businesses to form primary authority partnerships with local authorities in England in relation to public health protection, including in the context of a future pandemic.

The Explanatory Memorandum reveals quite a startling statistic: there is a 5% likelihood, in any given year, of a pandemic. It also states that it is estimated that a severe pandemic, of high mortality, will occur at a 2% rate per year and a less severe pandemic, of low mortality, will occur at a 3% rate per year. Can the Minister explain whether this likelihood has increased due to the Covid pandemic we are experiencing? With the knowledge of the 5% figure, can he also explain why the Government are dragging their feet over launching the public inquiry into Covid-19?

We must surely learn the lessons of this pandemic as soon as possible, given the scenario predicting a 5% likelihood of pandemics in any future year. This change is clearly taking place in response to the role that business and the private sector have played during the Covid pandemic. What the Government have asked from business and the wider private sector during it is unprecedented in peacetime. We must thank businesses for stepping up when we needed them to do so most.

The Explanatory Memorandum reveals that in 2020, approximately 46,000 businesses with an existing partnership under the primary authority scheme were receiving informal advice on regulations made under the Public Health (Control of Disease) Act 1984. The Government have stated that this change will enable these businesses to access consistent and reliable advice on compliance and that business stakeholders, local authorities and trade associations in England have requested this change. Can the Minister repeat how many there were—I am not sure that he told us—and did they include organisations representing small and medium-sized enterprises? Can he also confirm that businesses have struggled to get any reliable advice during the pandemic, and whether there have been any serious consequences from not being able to do so?

The Welsh Government have apparently decided not to apply this statutory instrument to Wales. The First Minister of Wales declined to consent to the amendment in July 2021. Can the Minister explain why, and what type of engagement took place with the Welsh Minister?

The Explanatory Memorandum revealed this:

“The impact on business, charities or voluntary bodies is an expected net benefit to business in England of approximately £20.9 m over 2021 to 2030.”


Can the Minister provide some clarity on how that benefit is expected to be shared between large businesses, SMEs and charities? I look forward to his reply.

Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021

Lord Lennie Excerpts

Tuesday 30th November 2021 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I understand and welcome the principle of the regulations—to ensure that large companies state what they are doing about climate risks and opportunities—but I have one concern. Companies’ financial statements are becoming ever fuller of environmental, social and governance information. There is a danger that, in doing this, we render the accounts more difficult to follow. It becomes hard to see the wood from the trees.

We have only to look at US listed company financial statements to see how that can go. You have to wade through hundreds of pages of risk and other ESG analysis. Most of it consists of standard-form, boilerplate statements that do not change year to year and, in reality, add little or nothing to the understanding of the reader. Indeed, it can make the accounts almost unreadable and very hard to make an informed decision about the position of the company.

I fear there is a danger that we may be starting to follow that trend, so I am very pleased that Part 3 of the regulations requires a review to be carried out, but that is not until 6 April 2027. I suspect that it will become clear much more quickly than that whether they are having the desired effect or are just adding more meaningless boilerplate to the accounts. I urge the Minister to keep that under constant review, rather than waiting until 2027, and to take action much more quickly if it becomes clear that the regulations are really not doing what is intended.

[Lord Lennie (Lab)]

We shall see, my Lords. We debate these regulations on the back of the most important summit the UK has ever held—a summit which future generations will look back on as when we either met the moment or missed the opportunity. It is increasingly clear that progress at COP 26 was modest and, too often, action will come too late. The Climate Action Tracker has stated that Glasgow commitments mean that, rather than limiting warming to the target 1.5 degrees, we are on track for a devastating 2.4-degree rise.

This is the backdrop to which we debate these regulations, which I hope have not come too late, as they will play an essential part in reaching net zero by 2050, as well as ensuring businesses both mitigate the risks of climate change and seize opportunities.

Today’s instrument introduces new reporting obligations for certain UK registered companies, as the Minister explained, including certain listed companies and companies with more than 500 employees and a turnover of more than £500 million, which require them to report climate-related financial information as part of their strategic report. This is in line with the recommendations of the task force on climate-related financial disclosures—a framework which includes 11 recommendations forming, as we have heard, four pillars: governance, strategy, risk management, and metrics and targets.

Support has been coalescing around these recommendations. The TCFD’s latest annual status report states that the number of organisations endorsing the task force’s recommendations has increased to more than 2,600—an annual increase of 70%.

We should remember that, regardless of the serious impact on migration, security and hunger, climate chaos is also costly. The Intergovernmental Panel on Climate Change estimates $69 trillion in global financial losses by 2100 from a 2-degree warming scenario.

Getting to this point has taken a while, and climate delay has been a repeated issue with this Government. The task force on climate-related financial disclosures published its recommendations back in 2017. Then the UK Government’s green finance strategy set out an expectation that all listed companies and large asset owners should disclose in line with the TCFD’s recommendations back in 2019, but did not hold a consultation on the proposals until earlier this year. As we have heard, these new requirements are to come into force next April, 2022—five years after the task force on climate-related financial disclosures published its recommendations.

According to BEIS, regulatory action is necessary because the current voluntary approach

“is unlikely to be effective … current levels of disclosure across the economy are low and reporting quality varies significantly.”

If we look in detail at the impact assessment, this is clear. Looking at the central scenario for additional groups having to comply with reporting requirements, it reveals that only 34% of the 1,350 companies in scope have already aligned with governance, 24% with risk management and only 14% with scenario analysis. The impact assessment estimates that 1,350 companies are in scope of the regulations. Can the Minister tell us what percentage of the UK economy this covers?

The impact assessment states that

“When a UK group is in scope, all the subsidiaries (UK and overseas) belonging to the same UK group, would be expected to hold some degree of reporting burden.”


What does “some degree” mean? These regulations also focus on companies producing mandatory qualitative scenario analysis. The impact assessment states that the Government

“understand that while some companies might decide to go beyond these requirements … there will be some companies that lack the expertise, resources and capabilities to undertake quantitative scenario analysis by the time these regulations come into force.”

How many companies are predicted to produce quantitative analysis as well? What will be done to encourage both qualitative and quantitative analysis to be produced? When does the Minister expect quantification to be phased in?

It is regrettable that, first, we are unable to study the non-binding guidance alongside these regulations and, secondly, that the LLPs regulations have not been laid at the same time as this SI, due to their interlinking nature. The Secondary Legislation Scrutiny Committee flagged this SI as an instrument of interest:

“We note that the Department will produce guidance on the new reporting requirements which, according to the Impact Assessment, will be around 125 pages long. This suggests a considerable degree of complexity. In the absence of the actual guidance, it is difficult to form a view of the nature and extent of the new reporting requirements, and how robust the Department’s assessment of the impact on businesses is.”


Does the Minister agree that there will be a “considerable degree of complexity”? Why is the guidance not ready for today’s debate? In the consultation stage impact assessment, the Government had assumed that guidance would be about 75 pages long. Why has this increased by 50 pages according to the Secondary Legislation Scrutiny Committee’s report?

The Government state that the combined impact on business of these regulations and those which apply to LLPs is £145.3 million. The impact assessment states that costs result from companies needing

“to get familiar with BEIS Guidance, TCFD Guidance and other companies’ disclosures before producing their own report”,

as well as ongoing costs which include collecting and processing information, strategy and risk management. How are the Government communicating to and supporting businesses with this additional cost?

I would like some clarification from the Minister on enforcement. The impact assessment states that:

“We also expect there to be an additional ongoing cost of monitoring, supervision and enforcement to the Financial Reporting Council (FRC) as the appropriate regulating body for disclosures”,


but is the FRC properly resourced to take on this additional burden? Can the Minister explain how the Government will work closely with the Financial Conduct Authority and the Financial Reporting Council to ensure monitoring and enforcement frameworks operate in a coherent and complementary way? What happens if these companies fail to follow these obligations or publish substandard information? Will there be fines? The impact assessment states that “reporting quality varies significantly”, as the Minister said, so can these regulations ensure that this does not continue to be the case? A review before 6 April 2027 is welcome, but the impact assessment states that there will be “a light touch review” in 2023. What will this consist of?

I end by speaking about small and medium-sized enterprises. As the impact assessment states,

“Climate change poses significant risks to businesses,”

and we have to include SMEs within that statement. The cost implication of these risks means that SMEs can be even more exposed to the risks and to being squeezed out of the opportunities of climate change. Does the Minister see these obligations being extended to SMEs soon? The impact assessment states,

“disclosure can have cascade effects through the supply chain”.

Can the Minister confirm they are not just relying on trickle-down climate economics to see a change in reporting behaviour for SMEs? The cost implications for SMEs make it essential that the Government have a strategy to support them.

To conclude, these regulations are welcome, but they represent only a small part of the picture of how the Government need to help businesses respond to the risks and opportunities of climate change.

[Lord Callanan (Con)]

I thank both noble Lords. I know that they had some questions, which I will come on to shortly, but both their contributions emphasised how much support there is for these regulations. Although people have concerns about the detail, I think that we are at one in terms of general principles. That reflects the fairly broad support we have for introducing them.

The Government appreciate that these regulations will entail some additional costs to the UK’s largest companies, but we think that the legal targets we have make it essential for us to act if we are to achieve net-zero greenhouse gas emissions by 2050. The process of preparing the disclosures required by these regulations will help businesses to understand their climate-related risks and opportunities, and will bring a greater focus on how to manage them. The increased transparency will enable investors to make better-informed decisions about where to allocate capital in a consistent and climate-positive manner.

The proposals take account of business capabilities and business readiness. For instance, the introduction of qualitative scenario analysis allows companies to use this important tool to manage climate risks in a way that encourages capabilities to grow over time.

The noble Lord, Lord Vaux, raised the concern that annual reports and accounts are becoming more and more full of ESG information, such that it is sometimes hard to see the wood from the trees. He asked whether my department could commit to keeping the regulations under review in the interim. I can tell him that the Government will indeed review the effectiveness of these provisions. If we see that they are not working, we will certainly look at taking further measures. We will conduct a statutory review of the regulations after five years, as is normal.

In response to the noble Lord, Lord Lennie, I can tell him that we are publishing non-binding Q&A style guidance targeted to help companies making the disclosures. It provides clarification on the disclosures against each of these specific requirements. There is, in fact, already significant background material on how to disclose according to TCFD, which itself has recommendations and guidance available online. There is also, by way of background material, the existing guidance from the Financial Conduct Authority on the climate-disclosure provisions in the UK listing rules, and indeed from the Department for Work and Pensions on the disclosure requirements that exist for pension funds.

The department assumed to model costs that companies might read 125 pages for familiarisation before making the appropriate climate disclosures. We hope and anticipate that BEIS’s Q&A guidance on the regulations, which explains their legal requirements and desirable outcomes, will be well short of that page total. However, companies might want to consult wider background material and information to familiarise themselves with the disclosures. Accordingly, we made that assumption in our cost modelling to ensure that our impact assessment did not underestimate the true cost of these regulations to business. As I said, we appreciate that there will be a cost to implementing them.

On the point the noble Lord raised about monitoring and enforcement, the FRC will take on the monitoring of the climate-related disclosures alongside the other contents of the strategic report. The Government consulted earlier this year on reforms to the FRC. We will publish a response to that White Paper and our plans to create ARGA very shortly.

The responses to the consultation showed that many respondents considered that scenario analysis is important for meaningful climate disclosures. However, they also recognised that it is one of the most challenging and costly aspects of the TCFD to implement. We believe that requiring qualitative disclosures strikes an appropriate balance between, on the one hand, requiring companies to consider this important element in business planning, and, on the other, recognising that this is an emerging area of competence and one that will be new to many businesses and companies. So, although some companies are already doing quantitative scenario analysis to produce excellent disclosures, we did not believe that all companies within scope would be able to produce such analysis at this time; therefore, the regulations take a proportionate approach to enable businesses to grow their capabilities.

Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021

Lord Lennie Excerpts

Tuesday 9th November 2021 Grand Committee

[Lord Sikka (Lab)]

It has been? You may be right; I probably missed it.

Why are the same arbitrations terms not available to individuals? Why are they restricted to commercial landlords and commercial property? The increase in the threshold—from £750 to £10,000—for presenting a winding-up petition may give temporary reprieve to some small businesses, but the Government have missed an opportunity to offer permanent help to small businesses in matters of bankruptcy. This would have required a change in the order in which the creditors of an insolvent business are paid. Currently, secured creditors, which include banks, private equity, hedge funds and wealthy individuals, walk off with most of the proceeds from the sale of the assets of a bankrupt business, leaving little, if anything, for unsecured creditors, comprising employee pension schemes and supply-chain creditors, including many small businesses.

The insolvency law is forcing employees to forgo some of their pension rights. It also strangles many small businesses, because, in their capacity as unsecured creditors, they will receive next to nothing from the bankruptcy of a large customer. So, unlike financial conglomerates, they are forced to bear a highly disproportionate amount of risk arising from the bankruptcy of their clients. I cannot think of any moral or economic reason that justifies financial conglomerates being able to walk away with most of the assets of a bankrupt business, leaving small businesses and pension schemes with little or nothing.

It would be helpful to hear what moral and economic justification the Minister can offer; it is actually strangling SMEs and damaging employee pension interests. Could the Minister indicate whether, perhaps before the end of this Parliament, the Government have any plan to introduce legislation that will facilitate the equitable sharing of bankruptcy risks among all creditors? As I said, there is no economic or moral reason why secured creditors have to be prioritised. That law goes back to the 18th century, and here we are in the 21st century still not having changed it. Is it not time that we did?

[Lord Lennie (Lab)]

My Lords, as the Minister has said, the statutory instrument introduces new temporary tapering measures that restrict the use of winding-up petitions. From 1 October, this instrument introduced a tapering effect, we are told by government, to protect companies from aggressive creditor enforcement as the economy opens up. The new temporary measures will be in place until 31 March 2022, but, ultimately, it is an extension of some support and a withdrawal of other support in the way it has been tapered.

We believe that it is right to maintain restrictions on serving winding-up petitions under Schedule 10 to the Corporate Insolvency and Governance Act 2020. It is vital that businesses that have sustained so much pressure during the last 18 months be supported right through to the end of the pandemic. This pressure was clearly demonstrated by the recently published annual report from the Insolvency Service, which found that although some measures had mitigated the impact of the pandemic on businesses, the number of people who have accessed the Redundancy Payments Service was up around 20% on normal levels.

National Security and Investment Act 2021 (Monetary Penalties) (Turnover of a Business) Regulations 2021

Lord Lennie Excerpts

Monday 1st November 2021 Grand Committee

These are important SIs, and the Liberal Democrat Benches support them as necessary instruments and in the hope and expectation that greater levels of transparency will become available as the regime settles.

[Lord Lennie (Lab)]

My Lords, I thank the Minister for outlining the regulations. I say at the outset that the Labour Party also supports these necessary instruments. Taken together, they provide for the operation and running of the NSI Act and the provision of a safeguard for the UK. The SIs identify, as we have heard, 17 sectors in which national security could be at risk—the so-called sensitive sectors—and establish how the Secretary of State would establish the worth of each business when calculating the value of monetary returns it would be required to make. The offences cover both completing an acquisition without approval and failing to comply with a final order when required to do so, with resultant penalties, as we have heard, of £10 million or 5% of turnover, whichever is the greater, or a daily rate of 0.1% or £200,000.

However, there appears to be no effective early warning system or method to forewarn businesses considering acquiring a business that they may be in breach of these regulations. Have the Government considered putting such a system in place to alert businesses that they may risk putting themselves in breach by continuing with an acquisition?

The current thinking about the destination of the funds raised by this instrument is that they will go to the consolidation fund. Surely more creative thinking is possible, such as using them for the specific purpose of funding start-ups and innovators to help build up UK resilience. Is this set in stone, or could the Government reconsider the destination of the funds and ally them to the problem that the instruments are designed to prevent?

As the noble Baroness, Lady Bowles, said, there is also some concern about the breadth of what is captured by this legislation; in particular, the biodiversity sector believes that the definition is cast too wide and covers industries not associated with security matters. Could the Minister look at the concerns raised by the biodiversity sector to be sure that the reach of the regulations is only as broad as is necessary and not more widespread than it needs to be?

Some concerns have been raised about how the Government engaged to build these better regulations. For instance, when considering issuing guidance to particular sectors, which the Minister said would happen shortly, he should be aware that SMEs do not have access to large legal firms to advise them on these matters and therefore require straight, clear guidance rather than obscure, legalistic wording. Can he explain this process to the Government when they are issuing such guidance?

Finally, do the Government believe that food security forms part of national security? I ask because they have shown little interest in the recent takeover of Morrisons, which will in turn undoubtedly act as an encouragement to others to consider similar purchases in this country.

While we support the regulations, they require a more muscular approach in some areas while in others a lighter touch is required. Getting this balance right is tricky but important to the UK’s inward investment programme and opportunities.

[Lord Callanan (Con)]

My Lords, I am grateful to both noble Lords for their valuable contributions to this debate. I will endeavour to respond to the points that were made; first, to those made by the noble Baroness, Lady Bowles of Berkhamsted, and then to those made by the noble Lord, Lord Lennie.

In response to the points made by the noble Baroness, Lady Bowles, about the maximum monetary penalties, some businesses may argue for the lowest possible turnover, for obvious reasons, and it is important that the Secretary of State retains the flexibility to set what would be a reasonable and effective fine. Of course, in all decisions the Secretary of State must act reasonably under public law duties, so it does not exactly give him a free pass. However, I am very happy to provide the noble Baroness with reassurance that, if there is any disagreement between the Secretary of State and the business that would be subject to the penalty, it will be for the Secretary of State to determine the relevant turnover in question.

In regard to the noble Baroness’s point about whether penalties are set too low—I do not often get to hear that criticism—the largest penalties are up to £10 million or 5% of turnover, whichever of those is the higher amount. I am sure the noble Baroness will appreciate that, to any business, £10 million is a substantial amount of money. However, as a civil financial penalty, it is only one of the possible forms of punishment. The noble Baroness will be aware that criminal sanctions are also available, and those criminal penalties may well include a prison sentence of up to five years, so we are satisfied that the appropriate disincentives exist to flouting the regulations.

The noble Baroness referred also to some of the sector definitions. I am happy to reassure her that we have engaged extensively on them in a number of different ways. We have changed the descriptions and amended them in communications with regard to qualifying entities carrying on activities in the UK. For critical suppliers to government, two of the five limbs of the definition set out in the government response were amended, and we made some changes in data infrastructure. We clarified some of the infrastructure activities with regard to energy, and, on suppliers to the emergency services, some of the limbs of that definition were amended and narrowed to provide an objective list of activities, as well as in the field of synthetic biology.

On points raised by the noble Lord, Lord Lennie, with regard to the funds, as was discussed—these points were also raised in the other place on 20 October—any funds received will go to the consolidated fund, as is standard practice. However, the noble Lord will be aware that we have a wide range of support schemes for businesses in other areas, particularly for establishing new technology.

On publishing the details of clear cases, we are of course required under the Act to publish an annual report setting out the numbers and sectors of cases that are notified and cleared. To ensure that mandatory notification works proportionately and that the Act is future-proof, the Secretary of State will of course keep this under constant review and will seek to amend the list of acquisitions that would be in scope in the future through additional secondary legislation to reflect evolving national security risks and technological changes. The noble Lord will be aware that, following the practice of previous Governments, we have never defined what national security is, and he will also be aware that of course I cannot comment on the additional case that he mentioned.

Both these SIs are essential for the effective operation and running of the NSI Act and for the provision of a safeguard for the United Kingdom. The Government have ensured that the proposed descriptions within the notifiable acquisition regulations will enable potential acquirers to self-identify for the purposes of the mandatory notification requirement.

The noble Baroness, Lady Bowles, also raised the point about communication and the possibility of a helpline. We do not think that that is necessary; officials remain available in the investment screening unit within BEIS for consultations, if necessary, on a confidential basis with businesses both large and small, if anybody is unclear about a particular acquisition. Advice is being provided at the moment and will be provided in future to any business that wants to call or email the team responsible for leading this. Sectoral expertise has been a vital part of the development of these regulations, and we have taken great care and time to get it right.

In response to the comments that the noble Lord, Lord Lennie, and the noble Baroness, Lady Bowles, made about available support for SMEs, as I said, we continue to engage directly with businesses around the NSI Act. I have done a number of consultation meetings, and I know that officials have done a lot as well. The first tranche of detailed guidance has already been published to assist businesses, investors and advisers in understanding the Act to comply with its requirements. We have established an expert panel, which I have met with on a couple of occasions, as well as officials, which includes business representative organisations, higher education bodies, investment associations and law societies, all of which will have an interest in having these provisions correctly interpreted. They are giving us constant and detailed feedback on the draft guidance and ensuring that the guidance is fit for purpose.

Our second tranche of guidance will be published ahead of regime commencement—as I mentioned, the regime will commence on 4 January—to continue to aid the interaction of parties with the new investment security unit and to ensure compliance, including on how to submit a notification form and guidance around notifiable acquisitions. We are also holding a communications campaign, which will focus on delivering teach-ins and guidance to a wide cross-section of businesses and organisations to build understanding of the Act in the United Kingdom and internationally. The Government have conducted targeted and extensive engagement with organisations which are most likely to be affected by the Act, including companies that invest or acquire entities in the 17 mandatory sectors.

Tailored explanatory materials have been sent to around 100 industry bodies and mandated areas of the economy, 70 major law and financial services firms, 36 international investors and 550,000 businesses via Companies House. We have taken great care to reach small and medium enterprises through associations such as the Federation of Small Businesses, British Chambers of Commerce and the CBI, which, taken together, have networks of something like 580,000 businesses.

I hope that I have been able to provide sufficient clarification and assurance to both noble Lords who spoke on this, and I commend the draft regulations to the Committee.

Conformity Assessment (Mutual Recognition Agreements) and Weights and Measures (Intoxicating Liquor) (Amendment) Regulations 2021

Lord Lennie Excerpts

Tuesday 15th June 2021 Grand Committee

[Lord Lennie (Lab) [V]]

My Lords, I am grateful to the Minister and the noble Lord, Lord Lansley, for their contributions thus far to this debate.

As we have heard, these regulations give effect to mutual recognition agreements between the UK and the USA, Australia, New Zealand, Canada, South Korea and Japan. The regulations also allow specific products assessed by those bodies in countries recognised under MRAs to be placed on the market in Great Britain and enable the Secretary of State to designate and monitor UK conformity assessment bodies to assess products against the other party’s requirements.

The Secondary Legislation Scrutiny Committee noted that these regulations are the first use of the power to implement free trade agreements under Sections 2 and 4 of the Trade Act 2021. As the noble Lord, Lord Lansley, commented, the instrument also implements Annexe 2-D of the UK-Japan Comprehensive Economic Partnership Agreement by allowing single-distilled Shōchū to be placed on the market in the UK in the new quantity of 900 millilitres. I recognise that this an important statutory instrument for both businesses and consumers, with continuity and certainty even more important now as we look ahead to 19 July and our hopes for the beginning of the end of the current restrictions. I would therefore be grateful if the Minister could provide some clarity on a few areas.

In relation to UK policy on conformity assessment and accreditation of the situation under EU law as it applies in NI, the regulations set out the requirements for the accreditation of market surveillance as it applies in EU law to the Northern Ireland protocol. That continues to be the basis for accreditation policy. If there are any changes to the UK policy in future, will they require an assessment of the implications of any trade barriers between Great Britain and Northern Ireland, and how is that being considered?

In respect of registers of MRA bodies, the statutory instrument states:

“The Secretary of State may … compile and maintain a register of … MRA bodies … their MRA body identification numbers … the activities for which they have been designated; and … any restriction on those activities”.


Can the Minister confirm where he has outlined, or whether he will outline, the activities for which MRA bodies have been designated and what restrictions there are on those activities? The Secretary of State will also be able to designate a conformity assessment body—CAB—to assess products against other countries’ requirements. What criteria will the Minister use to consider whether the body is capable of fulfilling those functions and to ensure that it meets the requirements of a designated body? What parliamentary oversight will that body have?

The statutory instrument states:

“To the extent that these Regulations contain provision in the areas of the protection of human or animal life or health or environmental protection, the provision is consistent with maintaining UK levels of statutory protection in that area.”


However, in Section 2(7) of the Trade Act, UK statutory protection also extends to

“plant life or health … animal welfare … employment and labour”.

Do these regulations not cover those areas?

The Explanatory Memorandum states:

“The main direct cost to business will be the familiarisation cost associated with these Regulations; these are a one-off cost, estimated at £205,000.”


Does this fall equally on large companies and SMEs?

On divergence, the UK MRAs replicate the previous EU MRAs in substance, with the only substantive divergence from the EU being in the permission to allow the additional bottle size for single-distilled Shōchū. This poses the broader question of whether the UK could take a different approach to conformity assessments in future.

On 1 January 2021, the UK introduced its own product safety mark, which broadly mirrors the EU’s CE mark. According to the law firm Bird & Bird, the UK conformity assessment regime

“follows essentially the same principles as the previous CE marking regime, but with the safety and compliance standards, authorised representative/responsible person and notified body requirements all now being valid for the UK only.”

Despite being a UK ask, the EU-UK deal did not include an agreement on the mutual recognition of conformity assessments. This means that most goods produced in the UK that require certification for sale in the EU will have to go through a secondary conformity assessment in the EU in order to be eligible for export, resulting in extra costs to trade with our main trading partner. A lack of MRAs is unusual for comparable deals such as those between the EU and Japan, Canada and Switzerland, which all have MRAs. Even countries such as Australia and the US, which do not have trade deals with the EU, have MRAs. Does the Minister regret not having an MRA in the TCA? Will the UK continue to share information on CABs with the EU? I look forward to the Minister’s response.

Employment Rights

Lord Lennie Excerpts

Thursday 10th June 2021 Lords Chamber

[Lord Lennie (Lab) [V]]

My Lords, workers face a real crisis of insecurity and a lack of protections, but the proposals announced in this Statement will do little to turn around the record of inaction from the Government. Whether it is dropping the employment Bill, allowing 2 million people to be paid below the minimum wage or indeed leaving the post of Director of Labour Market Enforcement vacant for months, the Government’s rhetoric on workers’ rights simply fails to match reality. We see this again today.

There is no plan for when the legislation for the single enforcement body will come to Parliament, despite three-quarters of respondents in the consultation stating that the current enforcement system is ineffective. As the Government said that the new body will

“significantly improve the Government’s ability to protect vulnerable workers and ensure they receive their employment rights”,

can the Minister confirm that the Bill is a priority and will at least be published this year?

There is no new money to merge three existing bodies into a single organisation with a significantly expanded remit. The consultation response states that the current funding will be “used more effectively”, but more funding for its new responsibilities, such as

“enforcement of holiday pay for vulnerable workers”,

is yet to be considered. So can the Minister explain how effective the body will be across all its responsibilities without additional support?

The most glaring omission in this plan is that many of the most exploitative employment practices will remain perfectly legal. Bogus self-employment denies millions of workers in the gig economy basic protections and rights. On fire and rehire, the Minister said:

“This Government have always been clear that we do not accept fire and rehire as a negotiation tactic.”


But the weak promise of further guidance only kicks the can further down the road.

Almost three million people—one in 10—have been subjected to fire and rehire since last March. This will not stop until this morally wrong and economically illiterate practice is outlawed. So will the Minister commit to giving workers full employment rights to ensure that everybody has dignity and security at work?

The Statement also reconfirms that the Government are determined to hobble trade unions, which are the best mechanism for protecting workers’ rights. The proposal to give the certification officer powers to commission investigations and fine trade unions even when there has been no complaint from a member—funded by a levy on trade unions—is an attack on working people and seeks to solve a problem that simply does not exist. Why are the Government not following President Biden’s proposals—he is here in the country—to empower trade unions to rejuvenate the American economy and raise living standards? If Ministers really want to do whatever they can to protect and enhance workers’ rights, they need to stop overpromising and start delivering for working people.

[Lord Fox (LD)]

My Lords, I thank the Minister for repeating the Statement. This is a relatively small, long-overdue step towards upholding workers’ rights, and to that extent it is welcome. However, it comes with no parliamentary time allocated for legislation and no new funding.

There was a glaring hole in the Queen’s Speech. After a pandemic that has made life extremely hard for many people, it is disappointing that the Government are yet to announce an employment Bill to strengthen workers’ rights and to make the rules fit for modern working practice.

A single enforcement agency is welcome but, unless we look again at people’s working conditions and the rules in place, this agency—when it eventually emerges—will not be able to deliver the change that people need in their lives. To do that, it needs proper funding. For example, the International Labour Organization recommends that Governments have one inspector per 10,000 workers. In the UK the current funding is for 0.4, so can the Minister tell your Lordships’ House if and when the new agency will be funded to deliver ILO levels of inspection?

When an illusionist is practising their art, the key skill is misdirection. In this case, our attention is in danger of being distracted by decent and welcome words condemning the practice of fire and rehire. Meanwhile, the Government have conflated employment abuses with measures to crack down on trade unions. While there may be some issues in a small number of unions, they are not the cause of the problems faced by so many families. It is sharp employment practice that is taking UK families to the edge, not trade unions, so my next question to the Minister is: how do the Parliamentary Under-Secretary’s words in this Statement help people who right now are being fired and taken back on downgraded working contracts? This Statement condemns the practice, but now the Government have asked for a further report on the subject. This is kicking it into the long grass. When will the Government actually do something to help workers?

More broadly, in October 2016 the Government commissioned Matthew Taylor to carry out an independent review of the UK employment framework. The Taylor Review of Modern Working Practices found that the labour market was changing due to the emergence of new business models and different forms of gig economy working; the Minister knows about this very well. It proposed many important measures to help support people’s jobs in those sectors. These measures received a broad welcome, and indeed warm words flowed from the Benches opposite. In their last manifesto, the Conservatives undertook to implement many of the report’s findings—yet it still gathers dust. Mr Taylor became interim Director of Labour Market Enforcement in August 2019, but then in January this year he announced that he was leaving and the role was not refilled. So have the Government abandoned their pledge to implement the Taylor review?

With or without Taylor, things need to change—and quickly. When will we see an end to the toxic practice of delivery workers being required to drive illegally so that they can meet their quotas? When will we see an end to people being forced to skip bathroom breaks? When will nearly two in five workers get more than a week’s notice of their working hours? When will gig economy workers get the wages they deserve—for example, the 20% higher minimum wage for people on zero-hours contracts? Because this is the real world of work that is facing many people right now.

Speaking in the Commons, the Parliamentary Under-Secretary said:

“Nothing is off the table.”—[Official Report, Commons, 8/6/21; col. 849.]


Actually, for the poorest, most exploited workers there is nothing on the table. These are words. When will we see some action?