Parental Bereavement (Leave and Pay) Bill

Lord Stevenson of Balmacara Excerpts

2nd reading (Hansard): House of Lords
Friday 29th June 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, we live in an age where we tend to assume, wrongly, that medicine has all the answers and that we will no longer be in situations where we will confront difficulties of bereavement and worse, yet, of course, every time that we think that, we are caught up by the sort of testimonies that we have heard today in this short debate and which bring it very much back into focus.

My own experience here is from my parents’ generation. I am one of a family who lost the eldest child at a relatively young age, before adolescence, and what would have been my youngest sibling—a long-wished-for and wanted daughter—was stillborn. So I am aware both of the issue and of the impact it had on our family life as my brothers and I grew up. I think that I can say with some confidence that my mother never got over the two tragedies that affected her children. As the noble Baroness, Lady Brinton, made clear, the death of a child is beyond everyday life; it goes on and on and is never forgotten, and we can never underestimate its impact on those affected by it. Therefore, I support the Bill as a step forward.

This is a difficult area; it is not easy for the law to legislate in a way that will pick up all the various elements—I shall come back to some of the points made by the noble Baroness, Lady Brinton. However, we can recognise that the campaign that my noble friend Lord Knight of Weymouth and others over the last 10 or 15 years have tried to bring to Parliament is now gaining traction and has now got a way forward. Thanks to the work of Kevin Hollinrake MP, we have a real chance of getting a Bill that will give a basis and a framework by which bereavement can be dealt with in the very public space of employment in a way that will be sensitive and appropriate to the circumstances. Therefore, we support the Bill and hope very much that we can give it a fair wind and a speedy passage through your Lordships’ House.

The Bill has attracted very few people here today, but like my noble friend Lord Knight I think that there is a measure of support for it. The issues have been raised, in part, over a number of years, including in the Children and Families Act, and in a number of other Bills that came from BEIS, and BIS before it, in recent years. On each occasion we have seen the issue move forward a little bit. We should also recognise campaigners such as Lucy Herd, who I was privileged to accompany when she came to see the Minister at the time of the passage of the Children and Families Act. She so very bravely, as my noble friend Lord Knight said, went through the things that happened to her in a way that was incredibly impressive. One wonders how people can dig so deep and do what they have to do in order to keep going and survive, and yet turn that tragedy—the death of a deeply loved son—into a campaign that has been really effective, keeping it in the front of people’s minds and bringing it forward.

The Bill remedies a lacuna in our employment regulations. It is not a complete answer to all the problems involved, but it at least gives us a framework by which we can move forward. There is a lot of support for it; that has been demonstrated by the previous history but also by the way people have been addressing it in the other place. The important task here is to get it on to the statute book as quickly as possible and then perhaps, as the noble Baroness, Lady Brinton, has said, we can begin to think about the way forward on some of the other issues. Like her, I think there are issues about who constitutes a bereaved parent. We live in a time when there are non-standard family models that are not covered by all the legislation that we are talking about and I think there is a case for looking at that, particularly the point about guardians.

Some who submitted evidence to us in the run-up to the Bill suggested that it would be useful to have a more flexible approach over timing, both in taking the leave and in how the pay is taken. Again, this may be something we can return to. I think there is a case for having a minimum of 26 weeks available for leave to be taken, because as my noble friend Lord Knight has said, that fits into the broad approach that has been taken under the Bill. However perhaps a longer period of time would better reflect the unexpected issues that may arise, including attendance at inquests or anything else that might be required.

On the definition of a child, another point raised earlier, there are very good reasons for sticking to 18 and I do not think we should depart from that at any stage. However, as the noble Baroness, Lady Brinton, and others mentioned, there are other ways in which the statute book defines those who are still in the care of some form of parental engagement. For those, the argument here is not about the absolute age but the extent to which the parents are engaged in supporting and providing for their children. If they are, then the loss by sudden death, or even a known-about death, will be just as devastating whether it is at 18, at 21 or even at 25.

My final issue is a wider one but I think it is one the Minister will be aware of. We have had discussion very recently about the difference between an employee and a worker. The Bill has to be framed around “an employee”: all employees are workers but not all workers are employees. Are we going to think through the implications of the Bill, and others, in relation to the gig economy? It is not just the gig economy, but we will have to face up to this at some point. This is a good way into a number of issues raised by that and it will also have benefits for those who are not directly caught by that. As I have said, the key issue today is to get Bill as quickly as possible on to the statute book, but if the Minister is prepared to meet me, the noble Baroness, Lady Brinton, and my noble friend Lord Knight to pick up on these and other issues that might come up in some future programme of work, that would be helpful to us all.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Stevenson of Balmacara Excerpts

Report stage (Hansard): House of Lords
Wednesday 27th June 2018 Lords Chamber

Amendment 4 (to Amendment 3) not moved.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I will briefly address the substantive motion and explain why we are not moving Amendment 4. It is not from any wish to exculpate us from the needs that should apply to bodies which represent consumers in relation to appeals; it is simply that, given the news that the noble and learned Lord wishes to withdraw his amendment, there seems little point in moving an amendment that will have to be withdrawn in turn.

I congratulate the noble and learned Lord again on introducing his amendment with considerable skill and clarity. He made his case comprehensively. Like him, I am completely bemused by the Government’s response to this, which seems to be more to do with protecting Ofgem than with the merits of the case he made. We are in a situation where the only appeal that will be available in this area is JR. We understand the defects in that and we think that it is probably wrong, not just because of the case that was well made by the noble and learned Lord but because it is an open invitation to seeing a greater amount of judge-made law rather than statutory law, which is a wrong thing. Nevertheless, we respect the decisions being taken by the movers of the amendment, and look forward to hearing a response from the Government.

[Lord Mackay of Clashfern]

My Lords—

Airbus

Lord Stevenson of Balmacara Excerpts

Tuesday 26th June 2018 Lords Chamber

[Lord Henley]

My Lords, I do not think that it is for me to rebuke my colleagues somewhat higher up in the pecking order than I am. I am glad, however, that the noble Lord noted the tone used by my right honourable friend in response to a Question in another place yesterday on this subject. He made it absolutely clear that he and other Ministers in the department for business are prepared to listen to the concerns of business; we will continue to make sure that those concerns are taken into account in our negotiations.

[Lord Stevenson of Balmacara (Lab)]

My Lords, can the Minister go a little further and confirm to the House and more generally that there is not a two-stage policy here? Can he confirm that there is no sense in which the Government are supporting those companies that do not rock the boat over Brexit, as it were, and that they are not disparaging those British companies— responsible for many British jobs and for support of the British economy—that point out the inconsistencies and confusion at the heart of the Government’s negotiating position?

[Lord Henley]

My Lords, I reject the last part of the noble Lord’s statement. I make it absolutely clear that we support all business, and we want a prosperous Britain, as my right honourable friend made clear when launching the industrial strategy and on other occasions. We will go on listening to the concerns of business that it brings to us, and make sure that they are taken into account in negotiations.

Energy Policy

Lord Stevenson of Balmacara Excerpts

Monday 25th June 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Hendry report comes out with headline figures that it is important to bear in mind as we think about and discuss what was said in the Statement. The report states:

“Across the National Audit Office’s three Value for Money tests, Tidal Lagoon Swansea Bay can match or outperform the Contract for Difference awarded to new nuclear power station Hinkley Point C with relevant support from Welsh Government …Tidal lagoon capacity can reduce UK system carbon emissions by 36% in 2035 … Lifetime CfD subsidy cost of £302-£390m achieves net positive social NPV benefits of £787-875m”.


That is a factor of more than 2:1, which is a lot better than the return HS2 and some other projects that I can think of will get.

Of course, that is not the whole story. Although the Statement was very strong on direct costs and the problems that the Government would have in justifying them, there are other benefits that would come from a project such as this. This is a first in its class—a first attempt to do something new in alternative energy production—so there is a difference there that cannot be measured in terms of the direct costs of well-tested wind or solar arrangements. There is an amenity, because clearing up Swansea Bay and costing a very small amount to provide something that is visually attractive and also rather beautiful cannot be costed. In order to give confidence to the overall task that we as a country have to make sure we have a diversity of supply, starting things that are new and different would add something that is not easily costable.

In the past two years, the Government have repeatedly kicked a decision about Swansea into the long grass, and the handling of this must surely be agreed by everyone to have been absolutely atrocious. Not only have the Government taken an inordinate amount of time to come to the House today, they have kept Tidal Lagoon Power, the Welsh Government, the trade unions and other stakeholders completely in the dark about what was happening. Indeed, they had to learn about it through leaks in the press. Indeed, it emerged in a Select Committee hearing last month that the Minister had not spoken to Tidal Lagoon Power in more than 16 months. In the last few days there have been conflicting reports indicating that a Statement was coming last week, then that it was coming this week, and then that there would not be a Statement—and now here we are. This is no way for the Government to conduct themselves on an issue that is so important for Swansea, the UK economy, the climate and therefore the world.

The key point here is that tidal lagoon power is a new, world-first technology, and yet it has been judged as if it were just one of a number of things that could be done in order to get us on the path to a carbon-reduced energy supply. The Government’s decision on Swansea tidal lagoon is of public policy importance not only because of its impact but because of the potential it offers the UK economy to meet our global climate change targets.

The project is estimated to generate and support more than 2,000 high-skilled construction and manufacturing jobs. It could engage more than 1,000 businesses in its supply chain—from figures in the Hendry report we know that the supply chain reaches right across the UK—and it could power directly more than 150,000 homes once it is constructed.

I go back to the point about being a pathfinder. The technology that is tried out successfully in Swansea could be rolled around the UK. It is not surprising that we might have problems exporting it since it is a very geography-specific solution. However, given our tides, our climate and our particular style of landscape, it seems to be something that would work in the UK.

Finally, tidal technology could make a valuable contribution to the UK’s transition to renewable energy, which is becoming ever more urgent. The UK is currently on track to miss its globally agreed climate change targets, so the Government’s plans in relation to Swansea Bay and renewable energy generation as a whole are of greater significance than they would otherwise be.

If we are going to have a diverse energy mix, tidal lagoon technology has an important part to play in our transition. The Government say that the costs are too high, but that seems to be a very narrow description of the costs involved. I understand that, even though that is the main reason why they are not going forward, they have not even met Tidal Lagoon Power to work out what additional funding could be supplied by the market. Perhaps when he responds the Minister could tell us what the acceptable cost is that would allow the project to go ahead.

[Lord Teverson (LD)]

My Lords, we on these Benches believe very much that this is the wrong decision. I will very quickly give the reasons why. First, in order to meet our climate targets, we need all technologies to contribute. We believe very strongly—as was shown in a number of studies—that there would be a reducing price in terms of scale as the technology rolled out. We have seen this very strongly with other renewable technologies.

There are other elements to the project. It is also partly an energy-storage project—an area that is particularly needed in terms of the variability of other renewables. And of course, perhaps not in Swansea but in other lagoons where something similar could have happened if this had gone ahead, there is the whole area of flood management that would also save considerable costs in terms of a holistic management approach to the coast.

Of course, the irony is that 2018, the year we are in at the moment, is 10 years after the Climate Change Act, yet between 2016 and 2017 we saw a 56% reduction in renewables investment. So the curve the Minister talked about in terms of our improved performance will go down because of lack of investment. In fact, renewables investment last year was at its lowest since 2008, when the Climate Change Act came in. We are not heading to meet our fourth or fifth carbon budget and we need to reduce our carbon emissions by 3% per annum to get to our target in 2050. So we have an investment crisis at the moment.

The noble Lord, Lord Stevenson, mentioned the time taken over this. The Hendry report came out 18 months ago. I remember that the original discussions were during the coalition Government period. What message is this to investors in renewable technologies? The way that it has been dealt with, the timescales and the opaqueness of the decision taking are difficult to understand, particularly when it was obvious that the Government were going to say no several months ago and have only just got round to giving that reaction and decision.

I come back for a moment to costs and refer to the Hendry review. Charles Hendry was a Conservative politician and Minister of State. He was highly respected across the whole of Parliament when he was an MP. He said about the project:

“I believe that the evidence is clear that tidal lagoons can play a cost effective role in the UK’s energy mix and there is considerable value in a small … pathfinder project … Most importantly, it is clear that tidal lagoons at scale could deliver low carbon power in a way that is very competitive with other low carbon sources”.


That is something that cannot be written off in the way the Minister did.

I have the following questions. Why has it taken so long to take the decision, which was clearly going to be taken some time ago? How are we going to meet the fourth and fifth carbon budgets? Given the regular quote in that Statement about the costs of technologies, when are the Government going to bring back onshore wind, which is the cheapest of those technologies and the one that would help to bring down energy bills tomorrow and in the years to come?

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Stevenson of Balmacara Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 11th June 2018 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, three issues are being raised now. The last two speeches and the introduction were about communication and the points were well made, but we are probably all asking, “What is this all for?” We are missing a dog that has not barked, which, in its most recent form is, saving the presence of my noble friend Lord Whitty, Consumer Focus. Previous regimes have had national consumer councils and other bodies. There was an active and statutorily supported consumer interest that was also part of the process, from which the problems which we are now talking about seem to have emerged. We do not have that; we have a different structure in place and it is, perhaps, too soon to make judgments on it. However, an issue has been raised that should not be allowed to go away simply because the system does not currently encourage it. Like the noble Lord, Lord Carlile, I have also tried to change my rather complicated fuel arrangements. The house I am in has been brought together from three separate properties and I have three gas and three electricity suppliers. I recognise that this issue exists on the other side of the divide here. It is not simply a doubling: this is an exponential difficulty for those providers who are not able to cope with the issue. That is my problem, but it exemplifies the difficulty of trying to get information.

I have three points of concern. First, it is a problem that there is no statutory body to which you can go that will take this issue on and act on your behalf. Citizens Advice, for all its merits, is not that body and we miss Consumer Focus. Secondly, there is a case—even though there may be costs—for looking very critically at the information flow from the companies at the moment. They may well be trying their best; they may be saddled with statutory responsibilities, but the end product is more pages of more and more complicated, structured things that do not give you the information you require in a way that you can use. For most individuals looking to exercise the market power that consumers should have in this area, this would be a clear statement of the unit cost per kilowatt hour of energy consumed. We do not want a mixture of consumption and fixed costs and to then discover that there are all sorts of fixed costs that are never brought forward, such as network costs, smart meter costs and other things that exist below the line but are never provided in a sensible way. There is a direct issue of communication between the provider and the consumer.

My third point is raised in Amendment 38. The way in which the market has to operate in these rather asymmetric arrangements is for there to be comparison sites and other information providers, which we all tend to go to when we can. There is another problem here, which has not been touched on yet but which we must think about. To what extent are these truly independent? It has been said, by those who have given evidence to us, that many of the comparison sites are only there because they take a commission on the provision of information about the companies by which they are retained. I find it difficult to see how consumers are supposed to work out what is the best deal. This may not be limited to the energy area, but if it exists there then some action needs to be taken, whether by statute or regulation, to make sure that this is a proper aid to consumer choice, not an additional complication.

We were also looking for a way of getting an amendment in this area. I am impressed that the noble Baroness and the noble Lord, Lord Teverson—who cannot be with us—were able to find a form of words. It does not take the trick but it is certainly in the right field. I hope that when the Minister responds he will give the Committee some information about where we might take this issue. It is not dealt with properly in the Bill; it is effectively out of scope in terms of what the Bill currently does. Perhaps, with a little offline discussion, we can bring a bit more focus to it. That would be worth while.

[Lord Henley]

My Lords, before I respond to the amendments, I will assist my noble friend Lady Neville-Rolfe by answering one of her questions. We are now up to 70 suppliers. She talked about it possibly having got to the high 40s or 50s, but one should be grateful that the number is higher and rising.

[Lord Stevenson of Balmacara]

I am grateful to the noble Lord for that information. It would not be right to accept that figure at face value. It may well be 70, but there is a huge discrepancy in size and capacity in that number. We are talking about the big six and then a very large number of small companies with perhaps 1% or 2% of the market. It is not quite as has been said.

[Lord Henley]

I fully accept that, but the big six is six out of 70 companies. There are another 64, and that number is growing. It might be a small tail but it is good to know that those alternatives are available as suppliers.

I am grateful to the noble Lord, Lord Berkeley, for moving his amendment and to other noble Lords for speaking to theirs. The general message is that everyone is seeking more information and information of the right sort, which should be—I forget where the noble Lord was quoting from—on a durable medium. He took that to be paper, but it might be extended to vellum, if we remember our debates on other occasions about what Acts of Parliament ought to be printed on.

I am grateful to the noble Baroness, Lady Featherstone, for her amendment and her frank admission that, for a Liberal, she was being somewhat dictatorial. It is not unusual for Liberals to be somewhat dictatorial; in fact, I find them very prone to banning things and ordering us around, but that is the nature of the beast.

I am also grateful to the noble Lord, Lord Carlile, for mentioning his difficulties in trying to get information and change his supplier online. I also know how difficult that can be. One gets online and has problems, then that dreaded expression comes up: “Frequently asked questions”. One can always guarantee that the one question you want to ask will not be one of the frequently asked questions. I was grateful for the analogy he gave of the very good advertisement he saw for a credit card setting out interest rates of some 56%. I take it that he did not bother to take up such an offer. I will ignore what he said about train fares, only to say that I am grateful not to have to respond for the Department for Transport on this occasion. However, as someone who, like him, travels a great deal, I agree that fares can be difficult to follow.

It is very important that we make sure that energy companies not only are as transparent as possible with consumers but provide as much information as is necessary. I am happy to report that Ofgem’s standard licence conditions require—they are dictatorial, you see—suppliers to communicate information about cheaper tariffs to a customer with a “Could you pay less?” label on the first page of bills and statements of account. It is a requirement that the information on cheaper tariffs is included, along with a message saying, “Remember, it might be worth thinking about switching your tariff or supplier”. That required information includes details of the estimated savings that could be achieved by switching to a cheaper tariff.

As I made clear, customers can also continue to specify whether they wish to receive this information electronically or in a hard copy. I noted the percentages given by the noble Lord, Lord Berkeley, on how much people know what is happening in their bank accounts, whether they receive information on paper or online. The simple fact is that a great many people wish to receive this information online. We do not want to prevent that, but Ofgem is imposing a condition that customers must be offered the right choice. Ofgem is also leading a programme of work across industry, including detailed trials of different problems to engage people. Early information from these trials suggests that they can be effective at improving switching rates, however difficult some noble Lords might find that to achieve.

The Government are also working to improve consumer engagement. We provided a little over £1 million in funding for the Big Energy Saving Network and the Big Energy Saving Week last winter. We are also progressing midata in the domestic retail energy market. Midata is the method of electronically transferring customers’ data from a company system to a third party, such as a price comparison website, and should open the door to innovative third-party switching services.

The Government take transparency and ensuring that customers have the information available to switch very seriously, so although I agree with the spirit of these amendments, the processes and policies are in place for consumers to have the appropriate information that they need. It is also worth remembering the warnings that my noble friend Lady Neville-Rolfe gave about trying to insist on too much. Perhaps we should bear in mind the acronym KISS: keep it simple, stupid. There is a limit to the amount of information that should be provided and what is provided should be kept simple. I hope that with that explanation—

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

4: Clause 1, page 2, line 15, at end insert—
“( ) the need to ensure that adequate protection exists for vulnerable domestic customers, including ensuring those customers who currently benefit under a cap imposed by the Authority on rates or amounts charged for, or in relation to, the supply of gas or electricity because they appear to the Authority to be vulnerable, retain those benefits.”

[Lord Stevenson of Balmacara]

There is no plot, my Lords. We are not trying to keep my noble friend Lord Grantchester away from the Dispatch Box but we find it more equitable to share the responsibility, so we are popping up as need demands. I am sure he will return to his commanding position as leader on the Bill very shortly.

It seems odd to have got to the third group of our amendments to find an amendment that, while ostensibly about the various types of cap that are envisaged in play, actually asks a rather deeper question. What is the Government’s intention behind the Bill and what is behind their intention to have Ofgem, as authority, introduce this within a reasonable time after the passing of the Bill? Is it to help vulnerable customers? Is it to help with fuel poverty? Both issues have been raised already in this debate. Or is it more focused on the market and its efficiency and is therefore unrelated to some of the issues we have already touched on, in terms of how people react to the provision of caps?

This issue was raised in the other place in Committee and on Report. What the Government were going to do about this was left open. At the heart of this amendment is a suggestion that the Government need to step up to the plate and tell us where they want to go on this. The discussion that took place in Committee in the other place on 30 April raised the points I shall make, at a superficial level. At the end, the Minister offered some assurances in summing up, but he did not bring forward amendments at later stages. Your Lordships’ House has not yet seen any from the Government.

At heart, there is common ground that it would be a perverse outcome of this price-cap Bill if low-income and vulnerable consumers currently protected by the safeguard tariff had their energy bills increased as a direct result of the introduction of measures in it. We are clearly looking for some certainty about this. Perhaps, when they are designing the wider cap, the Government could highlight that existing provisions require Ofgem to have due regard to low-income and vulnerable customers who are already protected by the safeguard tariff. I echo the points made by the noble Baroness, Lady Featherstone, about this new cap needing a name; otherwise, we shall get into trouble over what we are talking about. There are, of course, other measures in place. There is a warm homes discount, which may be extended. To what extent does that interpose itself in relation to the cap in the Bill? There are measures to protect those who pay cash through prepaid meters in their homes. Where do they stand in relation to it?

To answer my original question, the Government see this more as a market-mechanism Bill than as anything to do with consumers, whether they are vulnerable, disabled, or fall into another category under existing measures. I think that is a mistake. A case was made in our first discussion this afternoon for making sure that we do not see the return of cold homes and the impact that illnesses have on the wider economy if people are not able to fund and maintain a warm and watertight home. However, the problem that needs to be solved for that to happen is not within the Bill but is raised by it. The current market allows for things to happen that are clearly inimical to consumer interests. We see a widespread use of what is called “tease and squeeze”. This is a technical term, which Hansard will want to look up. It is not found in any legal text but describes perfectly what happens to most customers of the big six and less so to those of the other 64 companies that make up the energy supply market, but it is still present. As was raised at Second Reading, it involves, in essence, the availability of extremely discounted initial tariffs to which people can switch, followed by a quick change to a much higher one, which is never really disclosed in any detail and does not appear on many price comparison sites. When you are signed up, you are squeezed. You are teased first with a chance to cut your energy bills quickly by moving to a wonderful new company that has sprung up. Within a year, however, you find that you are on a much higher tariff. If you pay by direct debit, as many people do, you may not notice that until the letter—probably not an email—arrives saying that you have suddenly built up huge arrears and have to pay them a large sum of money. I am not in any sense implying that any illegality or malpractice is going on in the marketplace, but it is certainly not in the consumer’s interest to have this tease and squeeze arrangement operating at will in a situation where the information flows are asymmetric and difficult to read and where the consumers themselves are not able to use effective mechanisms such as price comparison sites to identify exactly what their costs will be, both when they switch and, much more importantly, later.

Many noble Lords may have been approached by companies and others who have an interest in this area. It seems to attract a large number of people who have views on how this issue should go forward. Noble Lords will have been told that one of the major problems affecting it is that when you try to work out the actual costs of the deals that are available, and what they would mean to a consumer who is paying, the information is so opaque and difficult that people end up frustrated and unable to see it. They certainly do not get the most important information, which is the long-run cost that they are entering into.

Arguing back from where I had got to, if the Bill is primarily about improving the market, surely what we should be focusing on, given what I have been describing, is a better series of powers and regulations held by Ofgem to clean it up. We should ban “tease and squeeze” and make sure that consumers are offered clear and unequivocal information about what they are signing up to—now, a year down the line and further down the line, subject always to cost. We have to get behind the idea that this is in some sense a market, but to say that 70 companies compete openly and fairly for the consumer’s interest does not describe effectively what is happening. A group of small companies has been set up which are primarily concerned with issuing bits of paper called bills and getting money out of people. They do not have the sort of competitive marketing operations that we would expect in a fully fledged and operating market; I think the Government accept that. The Bill is only one very small part of what must happen next, which is a clean-up of the whole operation.

We know that this is one part of that. It was probably a politically inspired decision to try to get some locus in this area, which was very much the opposition parties’ game before the last election. Nevertheless, that will work only if some serious effort is put behind the arguments by bringing forward proposals that people will listen to and act on. If, as we have heard, the main measure behind this provision is the smart meters programme, the Government are putting their money on the wrong horse. From all the information we have—we will probably have the advice of the NAO in three or four months’ time—this programme does not seem to be delivering on the aspirations the Government had for it. If that does not work and the information in the home is not available to consumers at the point of consumption, we will not have an effective, intelligence-led approach to how we may look at our bills and try to make sensible decisions about their cost.

That was a bit of a rant to get the Committee into this debate. The issue behind this amendment is whether we should look more carefully at the issues that have arisen from the ideas already in play to protect vulnerable consumers, while ensuring that they are not affected by the introduction of this price-capping Bill and that as a result consumers benefit, the market is cleaned up and the Government get what they deserve in trying to ensure that people have a fair and open market that works well for all concerned. I beg to move.

[Baroness Featherstone]

My Lords, the purpose of Amendment 12 continues that theme. It would ensure that wherever there is a vulnerable person, whichever supplier they are with and whatever tariff they are on, the Government would empower Ofgem to deliver the lowest tariff—the tariff for vulnerable people. It would also ensure that that lower tariff is not deleteriously affected by the Bill in any way whatever, and that there can and would be no unintended consequences that result in vulnerable people paying more. The Government need to clarify for the record that the introduction of the price cap does not, and must not, allow for Ofgem to remove or fail to extend the current safeguard tariff for low-income or vulnerable households. It would be helpful if the Minister could lay out how this will not and could not be the case, and demonstrate beyond doubt how the two caps—the one already in place for vulnerable people and the new energy price cap being introduced—can operate at the same time, without causing detriment to anyone eligible for a lower tariff for reasons of low income or vulnerability.

Amendments 27 and 31 relate to Clause 7, which we will debate later. It says that Ofgem,

“must carry out a review into whether conditions are in place for effective competition”—

to include, among other things, consideration of the rollout of smart meters—and must recommend whether the cap should be extended or lifted. Then, after considering the review, the Secretary of State must publish a statement on whether the cap should be lifted or extended. Amendment 27 requires Ofgem to take into account,

“the level of protection in place for disabled domestic customers”,

at that time as part of that review process. Amendment 31 requires the Secretary of State to,

“have regard to the level of protection in place for disabled domestic customers”,

as part of the statement setting out whether the cap should be extended or lifted.

--- Later in debate ---

[Lord Stevenson of Balmacara]

I thank all those who have joined me in this debate, in particular the noble Baroness and my noble friend Lord Whitty. I am grateful to the Minister for going through the issues and I will read his words in Hansard to make sure they cover the points I have made. However, it might be helpful to him if I lay down a specific list of the issues that we need to resolve, and perhaps a letter from him would make absolutely clear what is being said on these points. He said that the Government have laid the SI that is necessary for data sharing, which I think is the precursor to extending the safeguarded tariff. I had not spotted that myself, but if it is true and it could be confirmed, that would be great. Does that therefore mean that the extensions to the safeguard tariff will be available to coincide with the introduction of the Bill? If it is likely that the cap will be introduced by the end of the year—it is unlikely to be before that —can we be assured that the extensions to the safeguard tariff will also be brought in at that time?

[Lord Henley]

I am not sure that I can give an absolute assurance on that now but I will certainly make sure it is in the letter that the noble Lord has requested from me.

[Lord Stevenson of Balmacara]

I am not looking for an immediate answer but I am trying to make sure that we are not missing anything out. I think the winter fuel payment and the cold weather payment are in different statutes and I cannot see them being affected by this but, again, confirmation that they will not be affected by anything in the Bill would be helpful.

I declare an interest that I am on the priority services register, being of that age. I am looking to see if anyone else is nodding. It was a rather scary moment when someone rang and asked, “Do you want to go on the register, you poor, shivering old person living alone in your house?”—which was certainly not how I felt at the time. But it actually turned out to be quite nice because when there was—inevitably—a power cut within the next couple of weeks, someone rang up and said, “There is a power cut”. I said, “I know that”. They said, “But you are on our register, we have to tell you”. There were various other things I could bore your Lordships with but it was quite amusing.

I have the same question about the warm home discount: will that fit into the way the Bill is being brought in and can we be assured that it will continue and will not be affected?

In summary, I think all the speakers were interested in getting an unambiguous overarching statement from the Minister that the safeguard tariff will not be withdrawn prematurely and will be extended to fit in with the recommendations. If we could get that, I would be very grateful. I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

6: Clause 1, at end insert—
“(13) The cost of an appeal initiated by a statutory consumer advocate for energy consumers must be met by the Exchequer.”

[Lord Stevenson of Balmacara]

My Lords, I can be very brief, because this amendment tabled in the name of my noble friend Lord Grantchester has already been argued for very persuasively by the proposer of the original amendment and I have nothing to add to that.

The noble and learned Lord makes the point that there are two or three bodies on which there is an expectation that they will look after the consumer interest in matters affecting energy, and one key issue will be the pricing of any cap. An appeal has to be available to them because that decision involves judgment being exercised throughout as many imponderable questions need to be looked at for the authority to arrive at the decision. When we asked about this, Citizens Advice said that it is nervous about the fact that very often these appeals were done with a lack of equality of arms, in that senior counsel are often briefed and brought in by the companies and, therefore, to be able to argue the case persuasively it feels it also has to take counsel. That is expensive, costing perhaps more than it is able to afford. Therefore, the question of cost has arisen. I think the noble and learned Lord, Lord Mackay, made the point so I do not need to emphasise that there is an issue here. If the Government could find a way for these costs to be met, it would obviously be better—we would not need to amend anything—but the amendment needs to stay there to make a point. I beg to move.

--- Later in debate ---

[Lord Stevenson of Balmacara]

I am sorry to interrupt but the procedure is for me to respond first. I thank the Minister for his response, although I think the arguments were won fairly and squarely by those who proposed the original amendment. I hope that there was support around the table for the additionality of the consumer statutory representatives. The point is made that they are funded to be consumer statutory representatives—that is true. It is not true that they are funded adequately to carry out all the functions that could apply if this additional responsibility were placed on them. It would be a perverse outcome for the Government to rely on existing funding and not supplement it if a large number of people suffered badly as a result of a benefit that was supposed to come to them but which was not done properly and needed to be appealed, and the appellant was not able to fund their appeal.

I think we will have further discussions on this issue. I make it clear that we are minded to support the noble and learned Lord’s amendment. As such, we would like to be part of that discussion and debate when it comes. In the interim, I beg leave to withdraw our amendment.

Amendment 6 (to Amendment 5) withdrawn.

--- Later in debate ---

[Baroness Featherstone]

My Lords, one of the concerns that I raised at Second Reading is that there is no requirement for the authority to exempt from the cap those who wish to pursue a more environmental tariff. Under Clause 3(2) the authority may exempt such customers but there is no obligation to do so. There was such an obligation in the draft Bill, and with Amendment 13 we would reinsert the wording that was used then into this version of the Bill. The BEIS Select Committee was worried that the wording was too ambiguous and would allow companies with tariffs that were not environmental to use it as a loophole to escape the cap. We have tabled this probing amendment to ask the Government why more has not been done to get this into the Bill. Clause 3 enables Ofgem to exempt green tariffs from a cap if a customer makes the choice to move to a tariff that provides energy from renewable sources only—but with no clear timetable for introducing those exemptions.

Earlier this year, the Government stated that they would seek an exemption for green energy tariffs from the price cap. They said that if the power was from a renewable source only, it would be exempt from the cap, but Ofgem is not required to consult on this before the cap is implemented. If this is not amended, there will be a chilling effect on what is still a nascent but vital industry. Taking the Government at their word, encouraging consumers to stay green or to go green should be built into the introduction of the cap from day one.

In March this year, Ofgem published an update on its plans for the price cap. At that point, it said that it was planning to issue a series of working papers on a whole range of aspects of the cap ahead of a policy consultation. One such paper was to be called “Our views on an exemption for tariffs which may support the production of renewable gas and electricity”. It issued a series of working papers, none of which related to that exemption. If we cannot get this in the Bill, the cap when instituted will not include that green exemption. I look forward to hearing what the Minister says about how the Government might amend the Bill to ensure that consumers who choose to buy clean energy are not disadvantaged. I beg to move.

[Lord Stevenson of Balmacara]

My Lords, I support the amendment of the noble Baroness, Lady Featherstone. The amendments in this group are variations on the same theme, which is the question of how one can find in the Bill the right balance between the wish to encourage the drive towards reduced carbon and no-carbon generation of power as far as possible and, at the same time, trying to get out of what appears to be a cul-de-sac in which the more we propose exemptions from the tariff for those who exercise clear preferences for green supply and carbon-free generation, the more they will not feel the benefit from measures that are meant to reduce the cost of the electricity and power that they consume. I do not know what the right balance for that is, so this is a probing amendment.

Our solution—we are not wedded to it but I would be interested to hear the Government’s observations on it—is that a situation where a consumer has clearly and unambiguously signified their intention to always select energy provided from wind or other renewable sources might provide a break point in which one could exercise discretion on whether they obtained the benefit of the cap. That seems to play to my earlier concern that this would prioritise people who used carbon-based energy sources as the only ones to benefit from the cap and would therefore reduce their costs.

I am not entirely clear which way we should go on this. It seems unreasonable to take an extreme position one way or the other, but that seems the only way to find an equitable solution. I look forward to hearing the Minister’s response.

[Baroness Vere of Norbiton (Con)]

My Lords, I will address the proposed amendments to Clause 3 from the noble Baroness, Lady Featherstone, regarding arrangements for exemptions from the price cap.

On Amendments 13 and 14, the Government are clear that it is right for Ofgem, as the expert regulator, to look at an exemption from the cap for green standard variable tariffs, remembering that fixed-term green tariffs are not covered by the cap. The Bill requires Ofgem to consult on an exemption and, if it decides to put an exemption in place, it must be for tariffs that are chosen by consumers and which support the production of gas and the generation of electricity from renewable sources.

The Government do not wish to prejudge the outcome of Ofgem’s consultation. We are very much aware of the arguments around having an exemption but are also aware that, as with any exemption, there may be a risk of gaming—or greenwashing, as it is sometimes known. This is a complex area and we should not make any judgments or decisions until Ofgem has undertaken its consultation and examined the approaches to an exemption.

The Government note that many fixed-term green tariffs that support renewable energy generation are already available on the market. These offer consumers considerable savings compared with non-green SVT tariffs. Some new entrants to the market also expect to deliver green standard variable tariffs at levels below where they expect Ofgem to set the price cap. Fixed-term green tariffs would still be available in the event that the regulator chooses not to exempt green SVTs from the price cap. In view of this explanation, I feel that Amendments 13 and 14 are unnecessary.

Amendment 15 concerns vulnerable consumers. As has been noted in relation to earlier amendments, Ofgem will keep the safeguard tariff in place for warm home discount recipients if it offers a higher level of protection than the market-wide price cap under the Bill.

Amendments 16 and 17 are in the name of the noble Lord, Lord Grantchester. Amendment 16 creates a situation whereby, if Ofgem decides that actively chosen green tariffs that support the production of renewable energy should be exempt, all consumers on such tariffs would need to opt in to this exemption; otherwise, the cap would still apply. There may be unintended consequences from this approach. If Ofgem does decide to exempt green tariffs and yet only a small proportion of consumers opt in to the exemption—for whatever reason—these suppliers could find that their tariffs become financially unsustainable. Such a situation could counteract the aim of encouraging and maintaining investment in renewable energy, while also limiting the choice of green tariffs available to consumers. The Government are therefore not convinced that an opt-in clause would be helpful.

On Amendment 17, I remind noble Lords that Ofgem published its policy consultation on 25 May and it remains open for submissions. The consultation contains a section on the green tariff exemption. Ofgem is engaging widely on the consultation, including through workshops with suppliers and consumer groups. As such, the amendment comes somewhat after the fact, and so I believe it is not necessary.

Finally, Amendments 18 and 19 are also in the name of the noble Lord, Lord Grantchester. I agree with the thrust of Amendment 18. As I have said, Ofgem’s policy consultation is already under way. In Appendix 13 of the consultation, Ofgem sets out the proposed criteria by which it may consider green tariffs to be exempt. One is that the green tariffs,

“provide support for renewables, materially beyond support provided through subsidies, obligations or other mandatory mechanisms”.

On Amendment 19, the Bill requires Ofgem to complete the consultation so that the licence modifications giving effect to the price cap include the exemption. Of course, this is subject to Ofgem deciding to put the exemption in place following the consultation. As setting a price cap and determining a robust exemption—subject to the outcome of the consultation—clearly involve a lot of work, the Bill provides a little flexibility in the event that this is not possible. Nevertheless, it still requires Ofgem to put in place any exemption as soon as practicable following the modifications putting in place the cap taking effect. Consequently, the Government do not see the need to include Amendments 18 and 19 in the Bill, and I hope the noble Lord will feel able to not move them.

[Lord Stevenson of Balmacara]

I am sorry to interrupt: perhaps I might check two things with the Minister. I think we agree that there is an issue here that is very difficult to bottom out and therefore the consultation process is obviously helpful in that. What I was trying to get across, although perhaps I failed—I think the noble Baroness, Lady Featherstone, made the same point—is that given that we are in a consultation process, where does this all lie in relation to the Bill? Are the Government really saying that actually this is too difficult to deal with in the Bill and it is being passed to Ofcom to make whatever decision it can make in the light of the consultation?

I am not saying that that is wrong. I just ask the Minister to accept my earlier argument that this was actually rather a difficult principle and perhaps should be in primary legislation; otherwise, there is a question of gaming and other things. The point of principle was whether we should give priority to the encouragement that would flow to smaller, greener energy producers, which would not have their income reduced because they were carved out of the new tariff, at the expense of green-minded ordinary citizens who want to get their supply from green sources but are poor, vulnerable, disabled or fall into the category of needing support but find themselves removed from that support system because they are prioritising green energy. That does not seem fair. I wonder whether we should think very carefully about whether it is right to simply pass this to Ofgem to do on the basis of the consultation or whether we should take a decision within the Bill itself.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, in moving Amendment 29 I will speak to linked Amendments 30 and 34. I should perhaps express my regret that I arrived too late to speak at Second Reading as a consequence of other commitments.

The purpose of these amendments is to make it more difficult to extend the duration of a price cap and to ensure that it is temporary, if I may pick up the useful word used by the noble Baroness, Lady Featherstone, in her amendment to Clause 2. As the helpful notes on the Bill say in paragraph 15:

“The cap applies until the end of 2020 but it may be extended, for a year on up to three occasions, if the conditions for effective competition in the market for supply contracts are not in place”.


The basic point is that I am unconvinced of the merits of price caps. Setting prices at a low level may seem superficially attractive but experience in many jurisdictions shows the problems that they create. For example, in California in 2001 retail prices were capped at levels that ended up being below the wholesale cost of energy. As a result, retailers found themselves $20 billion in debt and one of them went bankrupt. The state then had to step in. Price caps are against most economic theory and have unintended consequences, as we have discussed, so there is no need for me to labour the point.

If I may, though, I will share one personal experience of price regulation somewhat akin to what we are now discussing. As a junior civil servant, I was responsible for the milk costing system, administered with the help of a leading accountancy firm. In effect, we were responsible for setting the permitted retail price of milk. Unfortunately, a member of the departmental team unwisely agreed that a visit to an international dairy conference in Miami was a legitimate expense. As a result, everyone paid more for their milk. This was an early lesson in why it is better to avoid government interference in pricing.

Still, we are where we are and we need to improve the Bill. I believe it would be much better if the cap ended in 2020 and that, as drafted, it is far too easy for the Government to extend it. Indeed, there seems to be almost no prospect of ending it before 2023. Yet the Minister, Claire Perry, said in Committee in the Commons that there was,

“strong consensus in the Committee”,

that the cap should be temporary and that a proposal under discussion to extend it further,

“creates disincentives and uncertainty in a market where we have to have certainty to generate investment”.—[Official Report, Commons, Domestic Gas and Electricity (Tariff Cap) Bill Committee, 15/3/18; cols. 86-88.]

I would add that price caps where the case for a cap is strongest—for those 4 million households with prepayment meters, and for a million vulnerable consumers—have already been introduced by Ofgem. I ask the Minister to update us on the impact of those before the Bill leaves Committee. The noble Lord, Lord Whitty, made some powerful points about those very consumers and the complications of dealing with them. I hope his commission will come up with some simple innovative ideas that we can all support.

I heartily dislike needless regulation. I would like the Government to come back to Parliament and seek primary legislation if they want to extend these temporary controls beyond 2020. Clause 8 makes it far too easy to extend them, and my amendments would return this power to Parliament. I know from my wide experience of government as a civil servant, from working in business and as a Business Minister that getting rid of regulation is always a low priority in the modern world. This hurts competitiveness and is bad for our economy. I very much welcome the use of a sunset clause but it should be just that. As for the detail of what is proposed, my Amendments 29, 30 and 34 would remove the possibility of extending the cap by deleting most of Clause 8 and making related amendments to the review procedure in Clause 7.

I have to accept that there is a political dimension to the proposed price cap, and I know the Minister will have to support the Bill in the round. However, I would ask him to go away and think about whether we should really extend the cap beyond 2020 without primary legislation—that is, another Bill—and the process of review that always precedes such legislation. I beg to move.

[Lord Stevenson of Balmacara]

My Lords, this is a somewhat complicated group of amendments because within it are points of view that are mutually contradictory and indeed on which we hold contradictory positions. So we are not going to agree on this, and I look forward to hearing the Minister trying to weave a way through that does not upset one side or the other too much. He does not normally care too much about whether he does that, but that is for another time.

Our amendments are probably based on the assumption that the rather high aspirations that you can read into the Bill in terms of how it might reform and change the basic market for electricity and gas supply will be achieved, and takes the sanguine view that they are not going to be achieved in time for the cap to be reduced at the appropriate time. If that is the case, it also has the benefit of making sure that vulnerable consumers are not caught by the other schemes referred to by the noble Baroness, Lady Neville-Rolfe, which we discussed earlier. They would continue to operate and we would take that to be a good thing, but as we have discovered, that is of course not the primary purpose of this Bill.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

36: After Clause 8, insert the following new Clause—
“Ongoing relative tariff differential
(1) The Secretary of State must, during the term of the tariff cap conditions being in place, develop, ready for implementation, a relative tariff differential. (2) A relative tariff differential is a requirement on supply licence holders that the difference between the cheapest advertised rate and the most expensive standard variable or default rate shall be no more than a specified proportion of the cheapest advertised rate.(3) The Authority will be responsible for setting the proportion referred to in subsection (2).(4) The relative tariff differential shall take effect on the termination of the tariff cap conditions.”

[Lord Stevenson of Balmacara]

My Lords, we have reached the last group, which is composed of two amendments on roughly the same area. I will not speak to Amendment 36A, tabled by my noble friend Lady Kennedy of Cradley, but I am looking forward to what she has to say. I might come back at the end of that.

The Minister said in concluding on what I thought to be my rather wonderful Amendment 32, which found no favour, that smart meters are only one of the many ways one could judge whether the market for an electricity supplier was working well. What he was really saying was that switching was the real test and that meters were a means to that. But Christmas comes more than once a year when you are talking about Bills of this nature. We want to offer him another Christmas present, Amendment 36, which will give him all that he wants about the effective market and more. We urge him, even at this later hour and towards the end of a gruelling day that he has had to endure, to look very carefully at this.

The answer to most of the problems in the electricity market, certainly from a consumer point of view, comes down to this tease and squeeze. Amendment 36 takes the trick of eliminating that, because if you impose a relative cap—we would argue that that should be done after the absolute cap has finished, but my noble friend will argue a different approach—then the present arrangements under which companies can entice you to switch with an attractive offer made for the first year, or possibly less, of the time that you move to their mode of operating, billing and consumer care would mean that they could not then squeeze you once you have passed that initial period. If there is a chance that Ofgem can limit the differential between the highest and lowest prices charged by each supplier after the absolute cap ends, we will have emerged to a point where there will not be the incredible unfairness and problems that there are in the current market. We could therefore move away from the temporary cap with confidence.

I urge the Minister to think very carefully about this because it does supply for taking out this egregious behaviour and it would find a lot of support around the industry. I beg to move.

--- Later in debate ---

[Lord Henley]

I welcome the noble Baroness, Lady Kennedy of Cradley, to our discussions. Amendments 36 and 36A are broadly similar in asking the Secretary of State to develop an ongoing relative tariff differential. However, Amendment 36 says:

“The relative tariff differential shall take effect on the termination of the tariff cap conditions”,


while Amendment 36A, in the name of the noble Baroness, Lady Kennedy, to which a Liberal, the noble Lord, Lord Teverson, has joined his name—it must have good free-market credentials—says:

“The relative tariff differential is to take effect on the commencement of the tariff cap conditions and to be ongoing after the tariff cap conditions cease”.


They are broadly similar but would come into effect at different times. They would cap the most expensive advertised variable and default rate tariffs as a proportion of the cheapest, and Ofgem would set the differential.

There may be a need for further protections once the cap has ended, particularly for vulnerable consumers. Ofgem has indicated as much and has enduring powers to operate protections but I do not think it would be sensible to seek to determine the precise form that any protection takes, if it is needed at all. The energy market is likely to change significantly between now and then. Smart meters are just one part of that. The new clause inserted by these amendments would seem to introduce an indefinite relative price cap. It is not the intention of the Bill or the Government to put in place such a permanent cap.

We have come back again to tease and squeeze, which the noble Lord mentioned earlier. I briefly responded to that. I appreciate that the aim is to get rid of the practice of tease and squeeze. However, there is the risk that under the amendments suppliers would raise their least expensive standard variable and default tariffs, rather than decrease their most expensive. That is the Government’s fundamental concern about any kind of relative price cap. The Government and others, including the BEIS Select Committee, believe that a relative price cap would not work. I do not see how the outcome of a relative price cap would be any different, whether it was in place alongside an absolute cap or after the absolute price cap had been removed. A relative cap as a permanent feature of the market risks undoing the work of the temporary absolute cap.

The best way of ending the practice of tease and squeeze will be the detailed work, as I said, that Ofgem is undertaking to test better ways to secure customer engagement; the work to make switching quicker and more reliable; and the many other programmes to make the market work better. Recent changes mean suppliers can now make their default tariff a fixed-rate rather than a variable-rate deal, and many have done so. The Government believe that better engagement and better switching that leads to more effective competition is a proportionate and sustainable solution, rather than concurrent and permanent relative price caps. I hope that my explanations will satisfy noble Lords and my noble friend. I hope, therefore, that the noble Lord will feel able to withdraw his amendment.

[Lord Stevenson of Balmacara]

I am grateful to the Minister for his response. I also pay tribute to my noble friend Lady Kennedy for a powerful speech, trying to root the approach we are taking in a much deeper analysis—a richer and more enduring issue about what is going on in the marketplace as far as consumers are concerned, which is a theme we have developed throughout the Committee.

We would all be much happier with the Government’s approach if we could see real evidence that things were changing in the market. The thing that gives the lie to a lot of what the Government’s position is based on is that, for many years now, we have all seen the appalling behaviour on the part of semi-monopolies, operating virtually as they will against a regulator which does not have the powers. The Minister said that Ofgem had enduring powers. If it has them, why has it not acted before now to get rid of some of these appalling behaviours such as tease and squeeze, which has been so disruptive, and making super-profits out of a natural monopoly? I thought the whole point about regulatory structures was to prevent that. Therefore, I do not think the action has lived up to the rhetoric.

My noble friend said that she thought it was time to say good riddance to the bad rubbish we are being served up by these committees. The judgment we have to make is whether we are prepared to wait and see whether the latest round of the approach taken by the Government will have any effect at all. If, indeed, it has an effect, will it be in time? I have my doubts about that. We are relying on smart meters and customers, who may be in significant numbers in relative terms, but if it is all the same people switching regularly and 80% of people are not switching—and those 80% are the sort one would expect to get the message and switch—then the market is broken. If it is broken, it will need much more serious measures than we have currently to see how it may be taken forward. We will think carefully about this but may want to come back to it on Report. In the interim, I beg leave to withdraw the amendment.

Amendment 36 withdrawn.

Brexit: Science and Research Funding

Lord Stevenson of Balmacara Excerpts

Tuesday 5th June 2018 Lords Chamber

[Lord Henley]

My Lords, we discussed the Galileo programme only a week or two ago, and I think from all sides of the House noble Lords are sanguine, as the noble Lord said, that we should continue to play a part in that. Government Ministers are doing all that they can to lobby their opposite numbers all around Europe to continue to take part in that. It is again in the United Kingdom’s interest but also in the interest of the rest of the European Union that we continue to play a part in Galileo.

[Lord Stevenson of Balmacara (Lab)]

In the Minister’s first response that the UK would continue to receive substantial funding from Her Majesty’s Treasury for research, he gave a gross figure—I think that it was £7 billion by 2022—and then a figure of 4% of GDP by 2027. I would be grateful if he could clarify what exactly that was. The real question was whether the gap that was going to happen would be matched by the Government. What level of science and research spending is guaranteed to the science community in the UK, and for how long?

[Lord Henley]

My Lords, as we set out in our industrial strategy, we want to see an increase in R&D, getting up to 2.4%, if I can correct the noble Lord—I think that he said 4%—by 2027. I reaffirm the other figure I gave to which the Prime Minister referred, that some £7 billion will be put into research and development by 2022.

Brexit: Competition and State Aid (EUC Report)

Lord Stevenson of Balmacara Excerpts

Thursday 24th May 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I start by thanking he whom we must call “the master of the universe”, my noble friend Lord Whitty, for his skill in bringing forward a committee report which I think meets the test of committee reports which I have observed over the years. I do not think that any particular measure for that test has as yet been defined, but if a report is good enough to bring not only those who participated in it but others to the debate, that is obviously a tick; if it gets a quick response from Ministers, that is another tick; and if the combination of the report and the ministerial response produces a good debate then you have a winner. I think that “master of the universe” should be the routine accolade for those who chair these committees and are able to fulfil ticks in all three boxes. In passing, as others have mentioned, it is quite unusual to get a quick response from any department, and I congratulate the noble Lord and his department on producing one. To get one which allows an early debate is a double win.

My noble friend Lady Donaghy said that she thought you could read this report on a number of levels. First, it is an analysis of a series of problems thrown up by the decision to exit the European Union. Secondly, it is a disquisition on where this country has got to in its own measured way in coming up with a set of procedures for the complex area of dealing with companies and how they operate, and in a sense the report also fulfils that. Thirdly, it reveals the way in which we have failed to grapple with some of the deeper issues surrounding the whole policy area of state aid and state companies, and the questions of why and under what conditions mergers should be allowed. Fourthly, it is also about consumer choice. Both this country and the EU have been very bad at making sure that consumers are involved in these matters and that they are the ultimate beneficiaries of the policy choices made. I am grateful to my noble friend for that because, without that point being made, some of this debate might not have had quite the resonance that it should.

I have only three major areas that I want to cover. One is whether we will be able to work with our European colleagues—currently our partners—in the future. There is also the narrow question of whether the references in our current law explicitly linking us to the jurisprudence of the European Commission and the European Court of Justice will continue in some form or other. It is not clear from the current Government’s present position whether that is the case and they are struggling to get out of that. A measure of success in terms of Brexit seems to be whether any policy announced or to be announced will continue to be covered by ECJ jurisprudence. Even if that is not the case, it is quite clear from this report that there will be a continuing need to keep in step with our colleagues, not least because there will be mergers involving companies which trade either to or from the European Union and we will need to have some regard to the jurisprudence.

Emerging leaks about the withdrawal agreement and transitional agreement seem to suggest that the European Court of Justice will continue to have a direct role, at least until the end of the transitional period in December 2020. Can the Minister indicate whether this might be a longer-term issue, with particular reference to competition and the need to work closely with our European partners?

There is then the question of how we will manage the divergence that will inevitably set in once we separate from the European Union. The divergence will partly be statutory and will therefore presumably be under our own control, but it will also partly emerge from judgments of courts and statements in cases that come before various authorities, whether in this country or in others. However, we will also have to adapt to the fact that it might be necessary to have a more flexible approach to many of our industrial sectors—certainly the ones that feature heavily in our industrial strategy—than would perhaps be the case with some of the more traditional ones. We will be diverging in an evolutionary way but there might need to be a bit of revolution about that, particularly as we get a sense of how these new technology companies and the new sectors that emerge from them work in practice.

In a sense, this may be a problem that we cannot solve today or have any views about, but it would be helpful if the Government could confirm for us when they can that this is an issue that they are on to and to which special attention will be paid. In passing, I notice, for instance, that we are now getting some frameworks for the future EU-UK partnership, and I have here the one on data protection. It is quite interesting that we are now making policy by spreadsheet rather than by papers—this is a series of slides that you can riffle through in a matter of seconds, although it is supposed to tell you the entirety of our negotiating position. It is a funny way of going about it, but will there be one on the question of how competition law will be developed? It is not mentioned in either of the two reports that have come out, one of which is on science and research and the other of which is on data protection, but it is alluded to in both of them. It would be helpful if the Minister could share his thoughts on that.

The divergence that may come naturally because of the way in which the two bodies will separate, or will come organically because we need to move far faster and more smartly on those sectors that will cause us more trouble in this area, may or may not have a link to the third thing—the question that I mentioned at the beginning about how our overall policy will change. It should and could change towards a consumer focus—I hope that will be the case—but, as I will come to in a minute, the CMA has no consumer representatives on its board, so how will it access that new consumer interest? There have also been calls for a move towards a more prosecutorial approach to competition enforcement—that increasingly comes out as one reads the papers around this—and perhaps towards a more economics-focused, effects-based approach to competition decisions rather than simply market power. I would be grateful if the Minister could share some thoughts on that.

We had quite a few contributions in this debate about whether the move away from the one-stop shop under the EU merger control will have an effect. Clearly, it will have an effect. We are still in the shadow of the unfortunate circumstances of the Cadbury-Kraft and recent GKN-Melrose mergers, where public interest has not been seen to be either effective or enduring in how it was used to analyse and treat these mergers. My narrow point is not that work is not going on here—I know that it is. As my noble friend Lord Whitty mentioned, we have already passed in your Lordships’ House measures that have relaxed the shares element of merger analysis and changed the conditions under which the targeting company has to fulfil a certain share of the market amount. At the moment, these are narrowly confined to defence and security issues, but there is read-across to media and to the other exemption, which is financial stability.

In both these situations, the Government have hinted that they are still thinking about additional strategic considerations, such as economic, social or environmental policies. Can the Minister give us any more information about that? The last time he was asked, I think he said that something would be coming out soon. “Soon” is an elastic word, and I have not yet heard whether it will be before the Summer Recess or whether we are talking about Christmas. It would be helpful to know that to inform the debate. Has what we have seen recently been a ground-clearing exercise for that, or are we still waiting for more substantial thoughts on it?

Finally, on the question of institutions, it is clear that the Government have recognised that more work will be going to the CMA. It is good that they have increased the budgets so that it will be able to cope, particularly with the Brexit-related work that will come forward in the next year or two. However, as others have said, that was done before the recognition that a state aid authority is required and the CMA would be best placed to take on that role. However, three important points have been made, and the noble Baroness, Lady Noakes, was the first to make them. The whole issue, including state aid, raises the question of the independence of the CMA. We have to be clear that that will change, including changes to the way in which people are appointed, with particular reference to the chairman, which we also talked about. The model here might well be the ICO. Although that is clearly an agency created and supported by the Government, stress is placed in all the funding documents and in the legislation we have just seen—the Data Protection Bill—to ensure that the independence of the ICO herself is not in any sense threatened. I would be grateful for a response from the Minister on that.

The wider question here is whether we can see any problems. The idea is that the CMA is focused on third-party mergers, and in some senses anti-trust cases, and state aid, which will of course involve issues that will affect the Government both nationally and locally. Whether that requires additional independence is an issue on its own merits and is not to do with the organisational structure or, indeed, membership of the board of the CMA.

On state aid and the devolved institutions, the announcement that the CMA will be the state aid authority is interesting given what happened in the recent debates on the EU withdrawal Bill, as mentioned by the noble Lords, Lord Wigley and Lord German, and others. It will pour petrol on a large fire and will be a real problem if we do not sort it out. It is clear that some of the powers returning from Brussels will go straight to the devolved Assemblies and Parliament. The powers will include trade and the possibilities of state aid, and therefore they will prosecute this issue with considerable vigour. If it is already decided that the only agency able to make decisions on such matters is a UK-wide one, under what conditions does that follow the devolution structures? If everything that should be devolved is devolved when it is not specifically reserved, the Government will have to be agile in their arguments to ensure that people understand—even if they do not accept it initially—the case for the CMA being the state aid authority and a UK body.

Even if that is the case, the questions raised by the noble Lord, Lord Wigley, and others about how we set the formal structures around which these negotiations can take place are only the beginning of a huge discussion about what is effectively creating a federal state in the United Kingdom. This is not small beer. It is a matter of significance with which we need to grapple, and it will not help if decisions are taken piecemeal about elements of it—even though they are important elements—without having regard to the wider issues. This may be above the pay grade of the Minister—he is smiling, so he has obviously got prepared remarks—but I put on record that this issue needs a great deal more attention and discussion, and I look forward to hearing his response.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Stevenson of Balmacara Excerpts

2nd reading (Hansard): House of Lords
Tuesday 22nd May 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for introducing the Bill and for giving it a good going-over in terms of its various elements. It is a very short Bill, but sometimes the shorter Bills are the more contentious ones that come before us. We will have to see how we get on with this.

I should also apologise for the non-appearance of my noble friend Lord Grantchester, who would normally introduce Bills of this type—he has a lot of experience and knowledge of them—but unfortunately he is ill and cannot be with us today. I am sure that your Lordships will join me in sending him good wishes for a speedy recovery.

[Noble Lords]

Hear, hear.

[Lord Stevenson of Balmacara]

We are very pleased that the Bill is finally before the House today. The 2017 Conservative manifesto committed to implementing an energy price cap, and it has been Labour Party policy since 2013 to introduce a price cap on consumer energy bills. So, as the Minister says, we should have a harmonious time on this Bill. But as background, let us be clear that National Energy Action found that, on average, some 9,700 people die each year because they live in cold homes. To put that in context, it is close to the number of people who die from breast or prostate cancer every year. So although the principle underlying the Bill is good, we remain concerned that, as drafted, it does not go far enough. Why? Because our energy market is fundamentally broken and needs to be changed. The Bill is silent about the fundamental changes that need to be made.

I start with the question of why the Bill does not provide any direction from the Secretary of State on what might be a preferred level for the cap. The Bill merely states:

“The authority must exercise its functions … with a view to protecting existing and future domestic customers who pay standard variable and default rates”.


In so doing, Ofgem must consider a number of factors, including creating incentives for suppliers to improve efficiency, enabling suppliers to compete effectively, maintaining incentives to switch between suppliers, and the need to ensure that the holders of supply licences which operate efficiently are able to finance activities authorised by that licence. It is a good list, but it is a very interesting list, because it is largely focused on maintaining the present structure of the industry. Where is the need for Ofgem to devise a scheme that benefits consumers? We want to promote fair and transparent competition within the energy market but not at the cost of consumers, neither literally nor metaphorically. Why do the Government insist on a market-facing approach? Is it perhaps because the main aim of the Bill is to promote switching, not to protect vulnerable consumers?

Secondly, why is there no duty on Ofgem to consult on how such measures can accurately be quantified? Will they form part of Ofgem’s cap methodology consultation, and if not, how will Ofgem reach a determination among these somewhat contradictory goals?

Thirdly, we welcome the fact that the Government are bringing in an absolute cap. We are agreed that it will help customers, especially those languishing on standard variable tariffs. However, this absolute cap is time-limited; it will be in place for only a few years before it is lifted. While there are reviews of switching practice going on, the Government have not answered the fundamental question of how they expect the energy market to be fixed by the time we reach the end of this process. Surely we should not be changing things in an arbitrary way until the landscape of the energy market has changed and all customers benefit from low energy prices, especially those who have not switched from SVTs. Perhaps the solution would be to require that a relative price differential mechanism should be established and implemented while the absolute cap is in place. This would at least have the effect of preventing the current and perverse “tease and squeeze” culture of trying to attract customers with cheap or loss-leading tariffs and then rolling these customers on to very expensive SVTs, as commonly happens in the market. A relative price differential, absent the fundamental reform which is required, would at least drag SVTs down towards cheaper tariffs and hinder the “tease and squeeze” approach.

Fourthly, what is the process when the cap comes to an end in 2020? The Bill merely states:

“The Authority must carry out a review into whether conditions are in place for effective competition for domestic supply contracts”.


It does stipulate that the review must include an assessment of progress made in installing smart meters, but unfortunately that is as good as it gets. We think it is highly unlikely that the smart meter rollout will get anywhere near completion by that date. Why not use the completion of that programme as a point at which to review the capping scheme, without a sunset clause?

Fifthly, what exactly is a “clear and realistic definition of effective competition”? The magazine Which? says that,

“the criteria for effective competition are not defined so it is not certain under what circumstances the cap will be lifted or how its success will be judged”.

Sixthly, we are concerned that the consumers who benefit from Ofgem’s safeguard tariff may actually see their energy bills rise as a result of the cap. If the overall price cap consumes the safeguard tariff, vulnerable customers could see their prices go up by more than £30 as a result of the difference between the safeguard situation and the likely absolute tariff. When responding to these concerns on Report in another place, the Minister agreed that it would be perverse for some of the most vulnerable customers to see their energy prices go up as a result of a price cap and agreed to give the issue further consideration. The Minister did not mention it in his introductory speech, but I hope he has reflected on this and will, during the passage of the Bill, require Ofgem to identify affected customers and put in place measures to offset their loss or else not proceed with removing the safeguard tariff.

Seventhly, we are concerned that, because this Bill is at heart intended to promote switching as a means of reforming the energy market, it will not of itself reduce prices. According to the Dieter Helm review, the cost of energy is significantly higher than it needs to be to meet the Government’s objectives and, in particular, to be consistent with the Climate Change Act and security of supply. Further, energy policy, regulation and market design are not fit for the purposes of the emerging low-carbon energy market as it undergoes profound technical change. Since this was a review commissioned by the department, I think it is fair to ask the Minister why the Bill does not seek to remedy the problems identified by Dr Helm. If, as Dr Helm suggests, we are moving towards a decarbonised, digital, smart electric energy world, why are customers not benefiting more from the prospect of ever-lower costs from cleaner energy? To narrow it down to something at the heart of the Bill, why are the Government even considering excluding green energy from the cap?

I see from the list of speakers that we are going to have the benefit of the wisdom of the noble and learned Lord, Lord Mackay of Clashfern, later on. I have a suspicion—I may be wrong—that he is going to talk about appeal mechanisms and will want to ensure that there is a proper merit-based appeal mechanism to the CMA if any company, the prices of which are capped by the Bill, is adversely affected. I do not want to anticipate his speech because I look forward to hearing it, but I put it to him that there may also be a case for civic agencies such as Which? or Citizens Advice to be able to raise appeals on behalf of consumers in a symmetrical, although not identical, manner. Perhaps he will consider this suggestion carefully when he comes to his amendments at a later stage of the Bill.

As I have said, the Bill does not provide an answer to the broken energy market. The rules in place are contradictory and self-cancelling. The place of green energy is equivocal. Between 2007 and 2013, electricity bills soared by 20%, while in the past year alone every household in the UK paid an average of £120 towards the dividends extracted by energy company shareholders. Over the past few months, report after report and news story after news story has detailed the unfairness of the current system. However, it must be noted that the final bills that consumers face are not simply a consequence of manipulation by some supply companies. As the BEIS Select Committee has highlighted, network-fixed costs make up the second highest element of a dual fuel energy bill.

Reform of the market is critical not just to instil fairness and affordability but to ensure that Britain has an energy system fit for the future. We are experiencing a pace of change in the energy sector that has never been seen before. Batteries, storage and smart systems are transforming demand and supply. There is a move to smarter, more decentralised forms of energy generation and supply, emulating many of the models established across Europe, along with the potential of accessing a low-carbon market that is, according to Goldman Sachs, worth over $600 billion.

The main problem is why the system is not treating vulnerable consumers fairly. The Business, Energy and Industrial Strategy Committee found that vulnerable and low-income families were especially affected by poor-value tariffs, with 83% of those living in social rented housing, 75% of those on low incomes, 73% of those with no qualifications and 74% of disabled customers on a standard variable contract. It was clear from the committee’s findings that, even with the advent of smart meters, these groups will still require protection from overcharging. I therefore urge the Government to reconsider their opposition in the other place to amending Clause 7 to ensure that, when it considers “effective competition”, Ofgem has regard to the impact of removing or extending the cap in relation to vulnerable and disabled customers.

Finally, I am concerned that there is no timetable in the Bill and no guarantee that the price cap will be in place for this winter. The Bill currently states that Ofgem must introduce a cap “as soon as practicable” after it is passed, but Ofgem has already said that it would take around five months after the Bill receives Royal Assent to enact a price cap because it has a statutory duty to consult power companies. We need to look at this again. Ofgem currently estimates that it,

“will look to set the level of the cap over the autumn and bring the cap into effect at the end of this year”.

But that is half way through next winter—the cap will not even be in place when the weather turns in autumn this year. The Bill would be greatly improved by the inclusion of a hard deadline by which the cap must be in place, and we will seek to include such a deadline of the last weekend in October 2018, when the clocks go back.

Package Travel and Linked Travel Arrangements Regulations 2018

Lord Stevenson of Balmacara Excerpts

Wednesday 16th May 2018 Grand Committee

[Lord Snape (Lab)]

My Lords, I have no personal interest to declare on this matter though, as a fellow of the Institute of Travel and Tourism, I have some degree of affection for the subject before the committee today. Having been appointed way back in 1992 as a transport spokesman in the other place, I think it was the first directive I actually dealt with from the then Opposition Front Bench. As far as I remember, it amounted to about five pages in those days. It included the Explanatory Memorandum. It is a measure of how far we have come—whether forwards or backwards I leave to the Committee to judge—that the legislation before us is 41 pages with a 47-page impact assessment. As the noble Baroness, Lady Randerson, said, things are a lot different these days compared with 1992. In a way, the Minister was being too modest when he talked about the Government’s involvement in this package. I do not often find myself in a position of praising Ministers and accusing them of undue modesty, but it is true to say that the British Government have led the field, as far as the EU is concerned, on consumer protection in this area. The Government should be commended for that.

There are three main advantages to the instrument: as has been said, it widens the definition of a package holiday; it will enable British companies to sell across the EEA; and it guarantees repayment if any aspect of a holiday package fails. Will the Minister confirm that the implementation date is July this year? He might have said that in his speech. If he did I beg his pardon, I missed it.

Although the industry feels that there could and should have been a little more time for consultation, it appreciates the consultation that has already taken place. Indeed, I spoke to Mr Steven Freudmann, the chairman of the Institute of Travel & Tourism, about this legislation a few days ago. He expressed his view on behalf of a substantial chunk of the travel industry that this legislation goes a long way to increasing consumer protection and is to be widely welcomed.

As far as the linked travel arrangements are concerned, praise ceases there. Indeed, when I read and reread the linked travel arrangements I was, like the noble Baroness, completely baffled as to what it meant. Indeed, I was so baffled that I got the ITT to pass me the name and telephone number of a lawyer who specialises in these things. I rang him with some trepidation. Noble Lords will be aware that ringing lawyers is never a very wise thing to do. It is inevitably followed by a whacking great bill that makes the bank manager blanch, but on this occasion the information I requested came gratis.

I hope I can go some way to addressing the noble Baroness on the situation she outlined. Having booked one aspect of a package holiday, namely the flight, she asked whether other aspects booked separately were covered under the legislation. My point to the Minister and the noble Baroness is that as far as I can see, and as far as the legal advice I have had is concerned, no part of the package is, in fact, covered other than the first part. If she makes a mistake, if that is the right term, in booking the flight and then returning to book a hotel, hire a car or whatever subsequently, that aspect of her package will not be covered under the legislation. I am sure the Minister will be able to tell me whether I have that right or wrong, but it indicates a weakness in the legislation. If we are to have these welcome packages that assist holidaymakers and package bookers, it is of some concern that the difference in treatment is not immediately apparent between those booking their package straight off and those booking parts of the package, albeit at the same time.

I repeat that there appear to be no benefits as far as the second service is concerned. I would be grateful if the noble Lord will tell us whether we have it right. If we have, what is the department prepared to do about it? The travel industry generally welcomes the legislation and the proposed consultation. I ask the Minister to see that the travel industry is properly consulted if any difficulties arise and that its views are heard following the implementation of the directive. It is welcome, with a caveat about the weakness of the linked packages and the baffling nature of the legislation which, quite frankly, I did not understand. I am sure that the Committee, like the travel industry, will give a cautious welcome to this legislation.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the noble Baroness, Lady Randerson, and my noble friend Lord Snape for their comments. They have eased the amount of ground I have to cover because they have raised issues that I would otherwise have dealt with.

Although I welcome the regulations, I join the noble Baroness, Lady Randerson, in saying how confusing they are—certainly the latter part on travel arrangements. However, I am comforted by what my noble friend Lord Snape said, not least because he is on my side for a change. Normally when he speaks in debates, he attacks me from the Benches behind, but this time we are on the same page and singing from the same hymn sheet. We think that these regulations will do a lot for consumers and we are grateful for that.

[Lord Snape]

I apologise for interrupting my noble friend but I have never actually attacked him; I have merely tried to give him some helpful guidance.

[Lord Stevenson of Balmacara]

That is what I meant. Perhaps I may deal, first, with the date of implementation, which I am sure will be entirely in line with the Minister’s expectations. This measure has been in genesis for a number of years. We knew that it was coming from about 2015, so waiting until 1 July 2018 to implement it seems rather like an overabundance of time, and I wonder whether the Minister will comment on that.

Secondly, why implement this measure in the middle of the holiday season? Changing the regulatory structure and the information for consumers bang in the middle of when they will be taking their holidays is an extraordinary thing to do and does not seem very sensible. It is certainly odd that the expectation was that the regulations would be implemented no later than 1 January 2018, although a six-month extension was allowed. However, we have managed to do it on the very last day possible, which, as I said, is not at a very convenient time, and I would be grateful for the Minister’s comments. I point out to him that, having heard his exhortations to himself to try to do better, we are now in a situation where only one of the last 10 SIs has been implemented on the common commencement date, and even for that one it was the wrong common commencement date. I look forward to a positive response on how performance will improve.

Having said all that, I thought that the Explanatory Memorandum was terrific and I congratulate the civil servants on what they have done. I read it with great interest right the way through. It was convincing and covered all the points that I had in mind. They did a very difficult job very well. It is a very complicated area. I am not complaining about the complications; nevertheless, work was done to try to come up with figures reflective of the changes, and I thought it was very good.

However, what I missed in the regulations was the complementarity of the effect that they will have on consumers. These are the Package Travel and Linked Travel Arrangements Regulations 2018, but they are not to be taken separately from the negative instrument. That instrument will be brought forward by the DfT but I am afraid I could find nothing about it. That may be my fault but I understand that there is to be another regulation which is not under the control of BEIS and therefore BEIS will not be answerable for it. However, as someone who is interested in this area, I, and certainly consumers, would have found it very helpful to have both measures together. I do not know whether the Minister can comment on that but perhaps he can arrange for me either to be informed or to be sent a copy of the negative instrument so that we can see both sides of the story.

The negative instrument, which is coming from the Department for Transport, provides the answer to a number of questions around whether flights booked separately form part of a package. The regulations that the CAA is responsible for come into force because of that instrument and not this one. I think that this is covered in detail in paragraph 4.6 on page 2 of the Explanatory Memorandum. The Air Travel Organisers’ Licensing Act 2017, which was given Royal Assent in November 2017, is the founding legislative form for that.

The other thing that I wanted to pick up was the question of guidance. There are two aspects to that. First, there is the question of how consumers will work out how this is. I would be interested to hear more comments from the Minister on that. Secondly, there will clearly need to be guidance for those in the business who actually operate this stuff. On page 5 of the Explanatory Memorandum, paragraph 9.1 says that BEIS,

“will issue non-statutory guidance for business on their responsibilities under the new Regulations at the same time this instrument is laid”.

As we heard, it was laid on 16 April so presumably that guidance is available. I would be grateful if the Minister could make sure that we get a copy of that as well. I would like to read what is being said by the department to businesses.

--- Later in debate ---

[Lord Henley]

I thank all three noble Lords for their comments on these regulations. In summary, I think all three were saying that they welcomed them but that the regulations were somewhat on the complex side and they needed some explanation and guidance. The noble Lord, Lord Snape, gave from his own history the example of the first SI that he dealt with in opposition, many years ago back in 1992. He and I do not have to remember it but that legislation was only five pages long and these regulations are somewhat longer. The first thing to say is that things have got more complicated. As the noble Lord knows, the way we buy things has got much more complicated than it was some years ago. The old, simple package holiday is no longer there; we all buy things in a completely different way.

The noble Baroness, Lady Randerson, gave an example of the way that, as families, we sit down in front of the computer and say, “Right, let’s get a flight”. We take many more short holidays and may suddenly think, “We’ve got a long weekend—let’s get a flight”, then up jumps the offer of car hire, hotels and other things. In a sense, we create a package. For that reason, things will obviously be more complicated when putting together the regulations. It is therefore quite likely that they will have to contain more than the five pages that the noble Lord, Lord Snape, remembers so well.

[Lord Stevenson of Balmacara]

I am sorry to interrupt the Minister but is not one of the Government’s aims here to make sure that people who buy things digitally have the same rights and experiences as those who might walk into a shop and buy them on the ground? I think the point that the noble Baroness, Lady Randerson, was making is that it is actually not being replicated here. There is not quite the same sense of buying, in a shop at a particular time, the package—even though it comes in slightly different forms. That is the issue which is causing concern.

[Lord Henley]

The noble Lord is quite right to highlight that as an issue. The point to make is that when you are buying something slightly different, as a package, it will be quite difficult to put together exactly the same regulations as those remembered so fondly by the noble Lord, Lord Snape, which covered only five pages. To try to give the same sort of coverage when something so completely different, which did not exist in the past, is being bought necessarily makes for more complicated regulations. It is not that we have become more verbose since 1992. It is just harder to do these things.

I was going to offer some thanks to the noble Lord, Lord Stevenson, for his thanks for the Explanatory Memorandum. It is very rare that we get praise of that sort but we are grateful for it.

Prompt Payment Code

Lord Stevenson of Balmacara Excerpts

Thursday 10th May 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I was never in the boy scouts so I lost that last metaphor, but I understand where it comes from. We owe a great debt of thanks to the noble Baroness, Lady Burt, for raising this issue again—it has been discussed before—and doing so in contemporary terms by bringing us up to date with some of the issues of recent years. We have had some very good speeches. We have lost the noble Lord, Lord Cope: in that respect we have lost the little group of aficionados that was here for the Enterprise Bill in 2016 and covered this and related topics a number of times. It was very good to hear some of those tropes repeated today.

The general theme of those noble Lords who have spoken today is that while there have been welcome improvements in what the Government have been doing to help the problem of late payments, the current approach is not going to work. The central thrust is to change the culture and to believe that that will lead to a significant and speedy change in what has become current business practice. Using a code is not really the way forward—it is not even statutory and is not operated by the Government but through a franchise by a non-statutory body.

We supported the measures in the Enterprise Act 2016 that required large unlisted companies to publish information about payment performance and practices—strengthening the Prompt Payment Code in that respect—but we do not think that the situation today is satisfactory and we want big changes. The model that we had in mind for the Small Business Commissioner was the system used in Australia, where that post can operate in a way that causes things to happen, including fines. We do not understand why the Government do not want to take that forward.

Is funding a major problem? We have heard from many speakers that there are significant problems. I am not sure of the figures but we reckon that between £50 billion and £60 billion is tied up by the way companies have to deal with late payments.

On top of that there are two problems. The code itself is pretty good in terms of what it says, but the behaviour by companies, whether or not they are signed up to the code, has been egregious. We have had examples in recent debates about Diageo, the owner of Guinness and Johnnie Walker, which simply informed its suppliers that it was extending its payment terms from 60 to 90 days. AB InBev, owner of Budweiser, Stella and Boddingtons, has extended its terms of payment to 120 days. Heinz has doubled its payment terms from 45 to 97 days. The list goes on: it includes Monsoon, GlaxoSmithKline and Debenhams, to name just a few. It is a common theme. It is of course a perfectly logical response to difficulties within the marketplace. These companies put a squeeze on their suppliers to accumulate as much cash as they can. They also do it because they can and, in some sense, that is bullying.

All this comes out in the wash when we look at Carillion. The Carillion crisis has exposed how absolutely toothless the Prompt Payment Code really is. Despite being a signatory to the PPC since 2013 Carillion, as we have heard, was notorious for being a late payer. According to the FSB, it regularly required its suppliers to wait 120 days to be paid. I do not think there is any doubt that there is a problem.

The question is: is the code robust enough in itself? First, it is not very extensively used. We may get warm words about the numbers of signatories—I think it is nearly 2,000, which sounds a lot—but we are talking about a totality of companies and organisations vastly in excess of that: 32,000 mid-sized companies and 200,000 smaller companies. If we add micro-businesses, which are also eligible to come under the code, we are probably talking about 5 million or 6 million companies. Out of that number—perhaps 6 million or 7 million companies—we have 1,700 signatures. The code is not a successful or effective way of trying to change the culture. Secondly, the objective of the code is to ensure that there is a gold standard for how people should behave but if it is just a gold standard to aspire to, it obviously means that others will not meet that standard and therefore be excluded, so the culture will not be transformed in the way we are talking about.

We do not have what is required in the marketplace, so what are the proposals? I would like to add a couple to those we have heard of today. First, the Prompt Payment Code should be put on a statutory basis and it should not be franchised out but operated by the department concerned. Secondly, we need to look again at the link between the Prompt Payment Code and the Public Contracts Regulations, which have been mentioned by other speakers, and make sure that it actually works. Since the regulations are quite appropriate in requiring payment within 30 days and enforcing that throughout the value chain of the contracts concerned, there are real penalties which follow from non-conformance with it. It should not be possible for people to be reappointed to government contracts if they are clearly not fulfilling the requirements under the Public Contracts Regulations.

Thirdly, the retention scheme has been mentioned. The noble Baroness, Lady Burt, suggested a model for setting up escrow accounts or public bank accounts to prevent the problem that happened with Carillion; money which should have been passed over ages ago to small contractors and others involved gets lost in a bankruptcy. This is already happening in Scotland, Wales and Northern Ireland—it is England that is behind. Surely the Government must now take action on this matter. We have heard about the consultation and the reporting cycle has now finished. Where is the action that will follow from that?

Fourthly, the sorts of powers we are thinking about for the Prompt Payment Code are already to be found in other areas of government activity. For instance, the groceries code gives powers to the Groceries Code Adjudicator to fine companies which are in breach of that code 1% of their turnover. Why is that power not given to the Small Business Commissioner, who I am sure would jump at the chance to level what he finds on the ground from the information flowing to him with the action that he needs to take? If we are not getting progress there, why are we not outlawing discounts by companies which attempt to take a cut when they make a payment within the normal rules? If there is a continuing problem, why does an automatic interest rate penalty not kick in at the Bank of England rate plus, say, 10%? I am sure that for any financier who is involved in trying to work out how to pay their bills, the prospect of having that bill increased by 10% if it is not paid within a certain time would focus their attention.