Energy Costs

Lord McNally Excerpts

Thursday 6th January 2022 Lords Chamber

[Lord McNally (LD)]

My Lords, when I was in my sixth-form debating society, we would occasionally have a debate entitled “Something must be done.” That mood was well captured in yesterday’s Daily Telegraph “Chopper Politics” column, written by its chief political correspondent, Christopher Hope. He said: “Everyone can see the cost-of-living crisis about to hit millions of British households in the spring. Oddly though, the Prime Minister appears to be all at sea about how to deal with it.” The validity of that statement is beyond doubt and the Question of the noble Baroness, Lady McIntosh, for which I am grateful, goes to the heart of the impending crisis, with its impact on pensioners and those on low incomes.

We have just had a contribution from the noble Lord, Lord Lilley, that goes to the heart of this dilemma. We have on the one hand his “stop the world, I want to get off” approach against the commitments that the Government made only recently in Glasgow. It will be interesting to see how the Minister responds to both challenges.

There is no shortage of suggestions for measures to deal with the matter. We heard some in great detail from the noble Baroness, Lady McIntosh, and the Labour Party and a significant number of Conservative Back-Benchers favour a significant cut in VAT. The Prime Minister immediately stamped on that idea because it would help

“a lot of people who perhaps don’t need support”

with rising living costs. That might well be true, but it will not feel that way to voters in Uxbridge, Surrey or where the noble Lord, Lord Lilley, used to represent in Hertfordshire when they open their energy bills in the spring.

So whatever the response and whenever it comes, the Government must give the country clear direction, not only on short-term measures but on a clear and sustainable national energy policy. That would be difficult for a Prime Minister who seems to work only to a 24-hour rolling news cycle.

The initiative announced by my right honourable friend Ed Davey for a Robin Hood tax on the gas and oil companies would enable the Government to help the vulnerable in immediate need and provide encouragement and resources to help with home insulation and other energy-saving measures in the long term. It is that combination of long-term planning for the future and immediate help to the most vulnerable that is most likely to result in parliamentary and public support for the difficult choices that the Government are going to have to make.

I presume that we have all received the excellent brief for this debate from Energy UK setting out the facts about the gas price crisis and the fragility of the UK energy market. That brief asks two pertinent questions. When will the Government launch their fairness and affordability call for evidence, which was expected in April 2021, on the options for energy levies and obligations to help to rebalance electricity and gas prices, and support green choices? What estimates have BEIS and HM Treasury made of the implications of the high wholesale gas costs for the whole economy and inflationary pressures on business and households? Perhaps the Minister could address those questions in his reply.

After two years of Covid, we are moving into even more uncertain times in the economy. Such times need a Government who are strong in leadership and clear in policies. I fear that at the moment we have neither.

Future UK-EU Relationship on Professional and Business Services (EU Committee Report)

Lord McNally Excerpts

Thursday 22nd July 2021 Lords Chamber

[Lord McNally (LD)]

My Lords, like all the members of our committee, I was in awe of the ability of the noble Baroness, Lady Donaghy, to keep our unruly group in order and enable us to deliver a unanimous report. The way she conciliated and arbitrated between us you would almost believe she had spent a lifetime doing that kind of thing. As has been said, we were most ably aided by Dee Goddard and the staff.

I disagree with what the noble Lord, Lord Davies, said about us letting the Government off the hook. The hard truth that runs through the report, as the noble Lord, Lord Liddle, indicated, is that professional and business services were the forgotten army of the Brexit negotiations. Time and again, on topics ranging from intellectual property to data adequacy, from recognition of professional qualifications to business mobility, and the business and professional services mentioned by the noble Baroness, Lady Bottomley, we were met with responses to our concerns from Ministers that could roughly be described as “It’ll be all right on the night”.

As yesterday’s Statement on the Northern Ireland protocol clearly demonstrated, Boris Johnson’s much-vaunted “oven-ready” deal was in reality half-baked. We are now going to learn the hard way the consequences of signing in haste and regretting at leisure. I hope that Parliament will learn the lessons of this debacle. The noble and learned Lord, Lord Goldsmith, and his Committee on International Agreements will need to be particularly robust in examining the details and consequences of some of the trade deals that the International Trade Secretary, Liz Truss, is rushing to complete. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership is already being hawked round by the Brexiteers as the alternative safe harbour to the EU, yet concerns are already being expressed about the safety of patents and intellectual property under any CPTPP agreement. Of course, we have the promises of a US-UK trade agreement. We all know how we can rely on the special relationship with our American cousins when they come to talking about trade. The Northern Ireland experience shows that negotiating under political pressure to demonstrate that Brexit is done can lead to catastrophic mistakes. “Caveat emptor” should be the watchword for the committee of the noble and learned Lord, Lord Goldsmith.

In recent weeks, the noble Lord, Lord Frost, has made increasingly clear that the harsh new Brexit world in which whole sectors of the British economy will have to compete is the one that the Brexiteers intended. There will be no soft Brexit. For example, as the noble Baroness, Lady Neville-Rolfe, the noble Viscount, Lord Trenchard, and the noble Lord, Lord Liddle, pointed out, a settlement that would have allowed the important music and concert touring industry to have easy access to the EU markets could not be countenanced because it involved diluting the purity of quitting the single market in labour mobility. This is not an immigration or free movement issue. What is needed is to have negotiated simple, frictionless, cost-free arrangements for temporary paid workers in EU countries so that this important creative sector can continue to flourish. I pay tribute to the efforts of Sir Elton John to make the Government see sense—I did not think that I would ever say that in the House of Lords.

We also put on record our concerns about data adequacy. The recent announcement of a data adequacy decision by the EU Commission is, of course, welcome, as the noble Baroness, Lady Donaghy, said. But, to quote the Commission’s own press release, the decision included

“strong safeguards in case of future divergence such as a ‘sunset clause’, which limits the duration of adequacy to four years”.

This short rein imposed by the EU is in sharp contrast to the sense of urgency in bringing our domestic legislation into line with the GDPR in 2019. Is it because the Government are already planning to bring us into conflict with EU data adequacy? Do Ministers anticipate any conflict between remaining true to our EU data adequacy commitments and our ambitions to join the CPTPP?

What about our ambitions for a free trade agreement with the USA? I ask because in the last couple of days I have received two invitations to round tables looking at greater co-operation between the USA and the UK on data transfer. It would be helpful if the Minister was to give us some idea from the Dispatch Box of how the Government intend to use the four years of data adequacy now granted. Will they be working with the EU, as it refines its own data framework, and have influence in shaping the outcomes, as we did with the GDPR? Or will we be like the Bisto kids, sniffing the gravy but on the outside looking in? The report’s declaration that the

“free flow of data between the UK and EU is vital to professional and business service providers”

remains valid today. The Government owe it to the sector to spell out their intentions in this area and their priorities during the four years that we have been granted.

In the pages of this report are unanswered questions after unanswered questions about the prospects for financial services, the problems facing lawyers, the uncertainties about patents and intellectual property, the fate of our creative industries and other things that have been raised by noble Lords during this debate. The report shows that the Prime Minister and the noble Lord, Lord Frost, have delivered a Brexit with much unfinished business and with a mindset ill-suited to resolving the many problems that they themselves have created by their tunnel vision and ideological inflexibility.

The noble and learned Lords, Lord Hope and Lord Thomas, both wisely advised us not to try to turn back the clock but to look to the future. I realise that there is no chance of our returning to the EU in the near future or on the favourable terms negotiated by successive British Governments in our 40 years of membership. But there is an alternative to consistently seeing Europe as the enemy. At some time, there will come a British Government willing and able to work constructively with our nearest neighbours and most important trading partners. This report provides a useful checklist for how the most successful sector in our economy can have its interests protected and enhanced in that process.

Economic Partnership Agreement: Kenya

Lord McNally Excerpts

Tuesday 2nd March 2021 Lords Chamber

[Lord McNally (LD) [V]]

My Lords, there are times when debates in this House make one feel very old. Between 1974 and 1979 I was a special adviser to Jim Callaghan, working closely with the much-missed Lord Wright of Richmond, the father-in-law of our new Peer. It is also worth remembering that at the time the bright, young Private Secretary to the Permanent Under-Secretary, Sir Tommy Brimelow, was the noble Lord, Lord Kerr. There is one last thought on which the noble Lord, Lord McDonald, might ponder: when Tommy Brimelow came into the House, he joined the Labour Benches. The noble Lord does have a choice.

Kenya is important, not only as a trading partner, as has already been pointed out, but as a country in its own right. It is a member of the UN Security Council and a senior member of the African Union. We have already heard about its membership of the East African Community and, of course, it is a key member of the Commonwealth. It is important that the relationship is endorsed and supported by this House.

Some real worries have already been expressed in this debate. In seeking the new bilateral treaties, the UK must not become a disruptor of existing partnerships, as the noble Lord, Lord Boateng, warned us, which are so important to development in Africa. Although, like my noble friend Lord Oates, I accept that the concessions about parliamentary scrutiny are the basic, minimum requirement, if the Government are sincere in their pledge about bringing sovereignty back not to the Executive but to Parliament, they should look at radical reform of the Constitutional Reform and Governance Act 2010. That would show their real intention to give Parliament the kind of scrutiny that trade and other international relations treaties deserve. We must make sure that they are seen in the wider context of regional stability, our ambitions for climate change targets, development goals and support for human rights, as well as squeezing bribery and corruption out of trade altogether. That is what we want to hear from the Government.

I look forward to the Minister’s reply. Again, I welcome the noble Lord, Lord McDonald, to the House and look forward to his future contributions.

National Security and Investment Bill

Lord McNally Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 4th February 2021 Lords Chamber

[Lord McNally (LD) [V]]

My Lords, as ever, some very wise words from the noble Lord, Lord Reid, with his vast experience. Of course—[Inaudible.]

[Baroness Scott of Bybrook (Con)]

I am afraid we cannot hear the noble Lord. Can he get closer to his microphone? We may have to come back to him.

[Lord McNally (LD) [V]]

Is that close enough? Can you hear me now?

[Baroness Scott of Bybrook (Con)]

Yes that is much better. Can the noble Lord start again, as we could not hear?

[Lord McNally (LD) [V]]

Yes, so long as I get the time. My Lords—[Inaudible.]

[Baroness Scott of Bybrook (Con)]

The noble Lord needs to point his head upwards. As soon as he speaks we cannot hear him again.

[Lord McNally (LD) [V]]

I will try again. Any Bill with the phrase “national security”—[Inaudible.]

[Baroness Scott of Bybrook (Con)]

I am really sorry but we cannot hear the noble Lord. We will ask the broadcasters to check the connection and we will come back to him.

--- Later in debate ---

[Lord McNally (LD) [V]]

My Lords, I hope I am coming through loud and clear now, otherwise we will have to give up. I welcome the maiden speech of the noble Lord, Lord Woodley. I am very pleased that I am now able to follow him.

The right reverend Prelate the Bishop of St Albans posed the moral dilemma of how we trade with the world while standing up for human rights and democracy. I have no direct interests to declare, but I have been a long-time supporter of expanding our relations with China. I say this because the Bill is being interpreted in the media and among policy analysts as mainly aimed at China. I remember, not so long ago, Conservative Prime Ministers extolling a new “golden age” of trade, investment and collaboration with China. We need a very clear statement of where we now stand in these matters. Are we at the start of a new cold war with China? What range of inward and outward investments will this legislation bite on? Will there be guidance on what goods and services will be covered? Will there be national security implications that bite on third countries and trading blocs with which both we and China have relations? We need clarity on this.

My other interest is in the space industry. I act as spear carrier to my noble friends Lord Fox and Lady Randerson, who lead from the Front Bench on these matters for the Liberal Democrats. I am also a member of the all-party space group, and my son is a space engineer working for a Franco-German satellite company in Munich. Last week, I attended a round table with companies involved in the space industry. Concern was expressed about the implications of the Bill for both companies and universities, and about where this legislation draws the line on collaboration and joint working. I am old enough to remember when Britain last tried to go it alone in space with Black Arrow and Blue Streak, and I worry about the extent to which this legislation is a dangerous step away from international co-operation in space. It has even been suggested that this legislation will mean that security and military considerations will dominate future space policy.

It is a reflection of where we are going that in the last century, at the height of the Cold War, the US and the Soviet Union were able to co-operate on the international space station and multinational space flights, yet today US law prevents collaboration in these fields with China. The outcome could well be that the next boots on the moon have “Made in China” on them. During the 20th century we were able to de-escalate the Cold War with a series of treaties. Should we not be pressing ahead with international treaties to prevent the militarisation and weaponization of space?

On a broader front, I have been concerned with the number of bodies—from international infrastructure investors to the City of London, the Russell group of universities and the Law Society—which have raised concerns that will need to be explored in Committee, including the expansion of bureaucracy implied by the Bill.

I have no doubt that the Bill will pass. But during its passage through the House I hope we will stress-test its proportionality and explore where it will take us, both in space and other sectors, and assess the chilling effect it will have on relations with those with whom we wish to trade and co-operate.

I thank noble Lords, and I thank the technicians for getting me in touch.

Gas Boilers and Heaters: Replacement Programme

Lord McNally Excerpts

Tuesday 12th January 2021 Lords Chamber

[Lord Callanan (Con)]

We are supporting the development of prototype hydrogen-ready boilers that are not available at the moment through the Hy4Heat programme, which is due to conclude this year. Subject to its findings we plan to consult later this year to seek views from stakeholders on the role that hydrogen-ready appliances will play in the transition to net zero.

[Lord McNally (LD) [V]]

My Lords, the Minister referred to ground source heat pumps. How realistic are they as a green energy solution in terms of construction and cost?

[Lord Callanan (Con)]

They are one option. Air source heat pumps are another option and hydrogen a third. Domestic retrofit of community energy systems will also play a role. We will need to use a number of different technologies, but ground source heat pumps are certainly one possible technology.

Trade Bill

Lord McNally Excerpts

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 6th January 2021 Lords Chamber

I urge the Government to support the amendment and display their commitment to leading the world on this important issue of online harms to our children.

[Lord McNally (LD) [V]]

My Lords, as ever, it is a pleasure to follow the noble Baroness, Lady Kennedy. I also want to speak in support of the amendment. My intervention is based on a long-term commitment to seeing age-appropriate design embedded—as it was in the Data Protection Act 2018—activated and written into future legislation. That commitment owes much to the efforts and persistence of the noble Baroness, Lady Kidron, as has been noted by my noble friend Lord Clement-Jones and others.

My fears for the future of that commitment have not been helped by awaiting the implementation of the long promised internet harms Bill. The harms identified by the 2018 Act are real and present now, and delay leaves ongoing harms unchecked. For over a year I have been working with the Carnegie UK Trust on a paving Bill intended to ease the passage of the online harms Bill. In its briefing for this Bill, the Carnegie team had this to say:

“At Carnegie we remain concerned about the opaque nature of the discussions on the UK/US Trade Agreements and the risks that the wholesale imports of provisions relating to section 230 of relevant US legislation”—


that is, the legislation referred to earlier in the debate—

“may significantly restrict the ability of the UK to enact the systemic online harms regulation it intends”.

My concerns were further increased by the briefing from the 5Rights Foundation, which warns that the US tech lobby is working to ensure that US domestic legislation protects big tech companies from liability, and that that is written into all US trade agreements—a warning that Lord Sheikh emphasised.

If such clauses were to appear in a future UK-US trade deal, they would have a chilling effect on all the advances the UK has made to protect children online. So I believe that this amendment is necessary to protect safeguards already in law or proposed in future law, but which could be voided by clauses written into trade treaties.

I believe the good intentions expressed by the Minister, but we are only six days into our new liberties, so claiming that there are no problems is a little premature. I am a little worried about the self-styled buccaneers in his party, whose idea of behaving in accordance with commitments to the law may be equal to that of the old buccaneers.

Although the amendment would be a valuable addition to the Bill, we must also address the wider issue of the use of the royal prerogative in making treaties. There is an urgent need to review how Parliament deals with trade and other treaties. The 2010 Constitutional Reform and Governance Act—the CRaG Act—is now not fit for purpose. It was drawn up when we had already spent 30 years in the EU, which then had responsibility for our trade treaties. The CRaG Act is out of date, but so too is the concept of the royal prerogative, which is a useful fig leaf for giving Ministers power and preventing Parliament from having power.

A Government who came to power promising to return power to Parliament, not to the Executive, should really examine the CRaG Act, the royal prerogative, and how we handle trade treaties. As has been said, there are lots of Governments, chiefly the US Congress, who have powers to scrutinise. American Ministers, and other Ministers in the same situation, simply have to live with that kind of scrutiny. Let us pass this amendment, but let us then put down a firm marker that there is other work to be done before Parliament can regain sovereignty over treaties.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow my noble friend Lady Jones of Moulsecoomb in thanking the noble Baroness, Lady Kidron, for tabling Amendment 23. My noble friend and I do not usually speak on the same amendment, but there is a particular range of issues that I want to speak to on this one—issues that no other noble Lords have addressed. I am talking about controlling advertising, a fast-rising area of concern.

When I talk about advertising I also mean some of the broader online issues such as product placement and payments to influencers, which are effectively indirect forms of advertising. This is where I agree with a comment made by the noble Lord, Lord Vaizey, yesterday, which may surprise the House. He expressed concern about differential controls on advertising for broadcasters in the UK, which do not apply online. Yet we know that consumption of media is very much blending now; indeed, the divisions between broadcast and online material, from consumers’ point of view, are pretty artificial these days.

In some areas we already have quite tight controls in the UK for broadcasters and others—on smoking advertising, for example, as well as some controls on gambling advertising, and limited controls on alcohol advertising. We have also seen, particularly in the London underground, controls on the advertising of unhealthy food. As we start to face up to our role as chair of COP26, and face the climate emergency and the nature crisis, a broader concern about advertising is rising, in relation to its place in driving consumption, and driving the destruction of our planet.

The amendment is about children in particular. It is Green Party policy that all advertising directed at primary school age pupils, who psychologists tell us cannot distinguish between advertising and programmes, or editorial content, should be banned. In the online context, it should be possible to create a situation in which we can protect children up to a certain age from online advertising.

I note that just before Christmas, on a question about gambling advertising, the noble Baroness, Lady Barran, speaking for the Government, said:

“We very much welcome moves by the major platforms that give individuals greater control”.—[Official Report, 14/12/20; col. 1518.]


over gambling advertising. Should a future Government decide to enforce even the rights of users to block advertising, I suggest that we do not want to see trade Bills stopping that happening.

I conclude by referring to what the noble Baroness, Lady Kennedy of The Shaws, said. What we are talking about here is giving guidance and democratic control—sovereign control—to our trade negotiators in future trade deals.

United Kingdom Internal Market Bill

Lord McNally Excerpts

2nd reading & 2nd reading (Hansard): House of Lords
Monday 19th October 2020 Lords Chamber

[Lord McNally (LD)]

My Lords, my first duty is to congratulate the noble Lord, Lord Sarfraz, and the noble Baroness, Lady Hayman, on two excellent maiden speeches. It is not always like this, by the way. In his speech today, the most reverend Primate the Archbishop of Canterbury made it clear that we are an unelected second Chamber with a mainly advisory and revisory role, but along with those responsibilities is another power, rarely used but very important.

In 2006, along with my noble friend Lord Tyler, I sat on a Joint Committee of both Houses set up to examine the conventions that govern the relations between both Houses, and between Parliament and Government. The report and recommendations of that committee chaired by the noble Lord, Lord Cunningham, were adopted by overwhelming votes of both Houses and stand as the basic rules of the conventions between them—not Salisbury/Addison, but the Cunningham conventions. Paragraph 281 of that report said about the powers of the House of Lords:

“Nothing in these recommendations would alter the … right of the House … in exceptional circumstances, to vote against the Second Reading or passing of any Bill”.


It is that right to say no that stops this House being simply a debating society. In the 110 years since the first major reform of this House, its most passionate defenders have argued that the Lords was the safety catch to prevent an abuse of power by a temporary majority in the other place. A constant in all our deliberations has been the special responsibility of this House to uphold the rule of law.

Over the next two days we are considering a Bill on which a Minister of the Crown in the other place admitted a proposed breach of the UK’s international obligations, and where the Government’s senior law officer in this House, the noble and learned Lord, Lord Keen, has resigned rather than be at the Dispatch Box today to try to defend it. When all five living ex-Prime Ministers express concerns about the Bill; when the joint briefing on it from the Law Society and the Bar Council calls for the removal of the offending clauses; when the Bingham Centre for the Rule of Law says that these clauses are in fundamental opposition to the rule of law and damage our standing internationally; and when our own Select Committee on the Constitution calls in aid the late Lord Bingham and states:

“We agree with Lord Bingham that respect for the rule of law requires respect for international law”,


one is bound to ask whether this House could ever have before it legislation which better fits the term “exceptional circumstances” than that before us today.

I will vote for the amendment tabled by the noble and learned Lord, Lord Judge, and it will undoubtedly be carried tomorrow. It does not, however, use the power of this House to remove the offending clauses—Clauses 44, 45 and 47—from the Bill. In that respect, it will allow us to go home feeling good but without having changed the mischief in the Bill.

I am clear that we should refuse this Bill a Second Reading, but am told by my more herbivorous colleagues that the Bill should go to Committee. I hope that during its passage through Committee and Report we will see an amendment to remove the offending clauses, and that, however many times it is brought back, this House will say no. If this is not an “exceptional circumstance” as set out in the 2006 report, I fail to see when this House will ever summon up the courage to use that power. Those who have a contempt for our parliamentary democracy and the rule of law will be emboldened by our failure, and this House will be diminished in the process.

Trade Bill

Lord McNally Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 8th September 2020 Lords Chamber

[Lord McNally (LD)]

My Lords, I welcome the speech by the right reverend Prelate the Bishop of Blackburn, not least because I speak as Lord McNally of Blackpool, and it was encouraging to hear him talk about some of Blackpool’s problems and some of its successes, because both should be remembered.

I also welcome the Minister, not just for this Bill but for his vast knowledge of China. I suspect that his experience will be needed now as much if not more than when he was encouraging the golden age of our relationship with China. I share with the noble Baroness, Lady Jones, an admiration for his wonderful bedside manner—but the wrong policies put forward in a wonderful bedside manner are still wrong, so I hope that he will listen to some of the experience in this House during the task ahead. It cannot be suggested that this is just some kind of nodded-through technical Bill to cover matters already discussed and decided. The evidence against it is far too strong.

I also ask the Minister to read the report of yesterday’s Grand Committee debate about the powers of Parliament. The CRaG Act was produced when we were firmly ensconced in the EU, and it is stretching credulity too far to suggest that its powers and responsibilities do not need to be reviewed, as is true of the royal prerogative.

We cannot allow this Bill to be nodded through as a mere technical transition of existing and agreed measures. Too many sectors, from intellectual property to the Green Alliance, from farmers to the BMA, have asked for their interests to be better protected during the passage of this Bill. Too many sectors have had their concerns fobbed off with “it’ll be all right on the night” bravado from Ministers. I was interested in the warnings of the noble Earl, Lord Devon. There is a very real danger that a Government desperate to prove that they can get trade deals will indulge in a race to the bottom, putting at risk environmental, work and safety standards, and creative and cultural assets. I urge the Minister to look again at the Djanogly amendments, which were not carried in the other place, because nothing would give greater confidence in the intentions of the Government than if they were to bring the Djanogly amendments back and pass them in this House.

Space Science and Technology

Lord McNally Excerpts

Monday 15th July 2019 Lords Chamber

[Lord McNally (LD)]

My Lords, I first congratulate the noble Lord, Lord Mawson, and send good wishes for the People’s Moon project. I hope that the media give it the coverage it deserves and that it succeeds.

My locus in speaking in this debate is twofold. I hope it is not thought of as one-upmanship to say that I was in Downing Street on 14 October 1969 when Neil Armstrong, Buzz Aldrin and Michael Collins were received by Harold Wilson as part of the world tour that followed their journey to the moon. I have a son, James, who works in Munich as a space vehicle controller—a title that slightly worries me, but he assures me it is perfectly safe.

The past 50 years have seen an amazing movement forward in unmanned exploration. The noble Lord, Lord Rees, was right to draw attention to the fact that we were probably right: the brief we have had and “8 Days: To the Moon and Back” showed, perhaps more than we knew at the time, just how perilous that journey to the moon was.

As the noble Baroness, Lady Walmsley, said, we really are going into a new space age, with lots of encouraging things happening—not least the work by Professor Brian Cox, which has been mentioned, Tim Peake and his adventures and successive Governments in the past 10 years giving legislative and investment support to our space industries.

There are, however, still things that worry me. The noble Lord, Lord Rees, mentioned the future of our participation in the European Space Agency. The Government must really make clear what their intentions and hopes are for our participation in the European Space Agency. I worry that we are moving away from:

“We came in peace for all mankind”.


The Chinese, the Russians, the United States and France all seem to be developing military capacity in space. What is the Government’s view of these dangers? A number of speakers have also talked about the environmental clean-up in space.

I was very interested in the comment from Buzz Aldrin in “8 Days: To the Moon and Back”. On the way back from the moon, he said that space travel would continue because of,

“the insatiable curiosity of all mankind”.

My son James has told me that what has inspired him more than anything else was that “Earthrise” image taken by Apollo 8—our earth suspended in the void. It is a reminder of both our urge to explore new frontiers and our responsibility to our fragile blue planet.

Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018

Lord McNally Excerpts

Wednesday 9th May 2018 Grand Committee

[Baroness Featherstone (LD)]

The delay to the laying of these regulations has been hard for the industry. We will not stand in their way; however, perfect they are not.

I am sure the Minister will understand the need to keep a watch on their effect as they come into being as there may be unintended consequences—some of which I shall run through. I seek the Minister’s assurance that the Government will keep them under review and make further changes and revisions where needed. I shall put forward a raft of suggestions in that vein.

One of the shocking aspects of the RHI is how far short of the expected targets it has fallen, as mentioned by my noble friend Lord Teverson. I was watching the Public Accounts Committee session on the RHI and was astonished at the BEIS response to questioning from the committee on the fact that the original target for number of installations was 513,000 by 2020 but, as was mentioned, only 78,000 had been installed by December 2017, as stated in the NAO report.

The BEIS response was even more shocking because it was that this meant we had saved money and that was a good thing. BEIS prayed in aid unsubsidised companies which were doing brilliantly. The Government would reach their targets for emissions reduction and renewable energy production anyway, so it did not matter. I thought that was a concerning approach to the desperate need to decarbonise heat.

The NAO report demonstrated that the ambition of the Government in this regard has been scaled down from their original ambition. The proportion of renewable heat that will not be eligible for RHI has gone up by 270% and the lifetime emission reduction resulting from the RHI has gone down by 44% compared to the original ambition. The Government are not on track at all to reach their fourth and fifth carbon budget targets, and they will be missed. We were all celebrating when we signed the Paris agreement, yet there has been no step change in actions to match the step change needed to meet our commitments, particularly on heat. In terms of our debate today, there is a cliff edge coming in 2021, so will the Minister say what is the Government’s plan? What is going to happen when the scheme ends? The Government have said that they will bring forward lots of studies this year and report on their review in the summer of 2018, which is nearly upon us. Can the Minister be explicit in his response and tell us what we can expect to see and when we can expect to see it?

As the Minister said, there has clearly been a lot of gaming to get subsidies that are not in the spirit of this agenda. Can he tell me how many companies have been caught gaming the system? In the committee, it seemed that most of the checking is done at the point of accreditation and there is relatively little in terms of inspection and audit. If we need regulations changed to clamp down on this, perhaps the Government should also be looking far more strictly at their compliance regime.

I want to address one of the changes in these regulations that have been brought in to address some of the gaming that was mentioned; the drying of wood. It is obviously not the intended purpose of the subsidy, and companies which game the system should be ashamed of themselves, but shame clearly is not working. I totally understand and support the Government’s desire to make changes that will exclude this type of gaming, which unfairly means that those who play by the book find themselves at an economic disadvantage, and margins are extremely tight.

However, there are potential unintended consequences of the new regulations about feedstock rules, and I should like the Minister to address this issue. The regulations in relation to AD rightly want to encourage the use of non-crop feedstock. That means that there will be a greater need for feedstock processes, such as pasteurisation or hydrolysis, to make sure that digestate is safe to lay across the land. It also means that a wider range of feedstock will be used. This is not my specialist subject, but removing potential bugs from the digestate, meeting the requirements of the Environment Agency and reassuring end users that the digestate is okay to spread to land seem pretty important.

As we rightly shift to non-crop feedstock, this will become a bigger issue and the need for these processes will increase, so companies doing the right thing may find themselves penalised economically for doing so under the new rules. Going forward, all RHI projects will use some waste feedstock, and the change to waste eligibility potentially rules out these uses. If the RHI subsidy is not allowed for plants using these processes, projects may be unable to go ahead. The original consultation referred only to withdrawing support from drying “industrial or municipal waste”, and it is a good move in these regulations to remove the ability to game in that way. Is it intended that the policy should also capture pasteurisation and/or hydrolysis in AD plants with the exclusion process for waste? If that is the Government’s intention, how will it work if only a proportion of the input feedstock is waste? Does it mean that even a tiny amount of waste feedstock would render all heat generated ineligible for support? Could the amount of support paid be adjusted based on the proportion of waste feedstock used?

There is a call from some in the industry for flexibility in the system, as there is a difference between AD projects that use heat for pasteurisation or hydrolysis as opposed to blow-drying wood. To indicate some of the financial implications, although each plant is different, this one is an example of potential financial implications on set-up. Funding projects with a current long-term investor requires returns of minimum 8.5%; it would need to be more like 9.5% to 10% on the open market. For an average plant, therefore, the overall cost to build is £12 million. The RHI heat income that would be lost if the changes are interpreted as “no RHI paid on heat for pasteurisation or hydrolysis if any waste is used” means that £880,000 would be lost over a project’s lifetime, taking 0.4% off the project’s returns. Given that these projects are only just achieving the required level, a project that is just about fundable now would not be funded as the return would fall to only just over 8%.

I know that is very detailed. I obviously want to give the Minister time to think about this, but these issues have been raised by the industry. The Minister is getting sympathetic looks from my noble friend on my right. My point is that this is detailed and close, but when margins are close, this is important. We want to encourage these people to set up new plants, not discourage them. This needs looking at and we need to keep an eye on it because it puts people out of business. As small as it seems, it is hugely important.

[Lord McNally (LD)]

I intervene to say that this matter illustrates the importance of these committees, where the industry and Members are able to put on record real concerns that both Ministers and the learned people behind them can take on board for the future.

[Baroness Featherstone]

I thank my noble friend.