Carbon Budgets

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 8th July 2019 Lords Chamber

[Lord Henley]

My Lords, I assure the noble Lord that nuclear will continue to play a major part in what we are doing. He is right that it provides useful power with little carbon produced. We will continue to keep nuclear as an option, as I have made clear on a number of occasions.

[Lord Stevenson of Balmacara (Lab)]

My Lords, we welcome the Government’s commitment to reduce carbon to zero by 2050, but we lack the detail of how it will be achieved. The answers today fall into the same trap. Is it not correct that the department has already published a report that says that carbon targets will be missed in the period 2023-27, and will be even worse in 2028-32? What proposals will the Government actually bring forward?

[Lord Henley]

My Lords, we met our first two carbon budgets. We are on track to deliver over 90% of our required performance for the fourth and fifth carbon budgets. We will look at what the Committee on Climate Change recommends for the sixth in due course. I hope it sets meaningful targets that we can meet.

National Minimum Wage Naming Scheme

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 5th June 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am very grateful to the Minister for repeating the Statement. I am still a bit confused, however. He went on at length about the value the Government place on the scheme, but has it actually been suspended during this review, or not? Will he confirm, for the record, that the review the Government are carrying out is actually on the effectiveness of the naming and shaming scheme, not on the scheme itself, that the scheme has not been suspended or dropped, and that naming and shaming will continue until such time as a firm decision has been reached by the Government on the current review? Will he also confirm that, although it is true that the director of labour market enforcement called for an evaluation of the naming scheme, this was only one of 37 recommendations made in the excellent 2018 report? What is happening to the other very important recommendations, including the one to which he referred which called for greater use of, and more publicity for, prosecutions, undertakings and orders, so as to alter employers’ behaviour by raising their risk of being caught and increasing the penalties for breaching the law?

[Lord Henley]

My Lords, naming and shaming is just one of a number of different actions that can be taken, alongside self-correction by employers, the civil penalties that are available, and the criminal proceedings and resulting fines. As the noble Lord said, and as I made clear in the Statement, we will review the naming and shaming scheme and he will have to await further announcements on that. As my honourable friend Kelly Tolhurst made clear yesterday, she considers that it has been effective, but it is obviously quite a draconian measure to use against employers and we should be wary about the effect it might have on them. I think it is quite right that the Government should consider how to operate this in the future: that is what we are doing and I ask the noble Lord to be patient about this and about the other recommendations made by Sir David. In due course, announcements will be made.

--- Later in debate ---

[Lord Henley]

My Lords, I am afraid that I cannot answer the noble Countess’s question, but if I have any further information, I will certainly write to her. However, as I made clear in the Statement, we have increased the resources available to HMRC, more or less doubling them. I am told that last year it completed some 3,000 investigations and issued £17 million in financial penalties to more than 1,000 non-compliant employers. Obviously, more can be done, and we will do as much as we can to make sure that where there is legislation—which has had all-party support—it is effective with regard to the employers concerned.

[Lord Stevenson of Balmacara]

My Lords, I am a patient person, and I was glad that my patience has resulted in getting a statement out of the Minister which he was perhaps reluctant to make. His noble friend asked whether this scheme had been suspended. He ducked that question and said that it had not been suspended, but I took from him—I would be grateful if he could confirm it—that the scheme in its present form is not being used until the results of the review have been published. We do not know when that will be but we hope it will be imminent. Given that most of the 37 recommendations in the very good report we have referred to assume that the scheme will continue, are the Government really considering suspending it completely?

[Lord Henley]

I will not prejudge that review. We have made it quite clear that we believe the scheme is effective, but, as I have made clear, on occasion it can be quite a draconian power. We want to look at how the scheme works, whether it is good, and whether it is, as I put it, a useful tool to have in the box to deal with this issue.

British Steel

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 21st May 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for repeating the Answer given in the other place, although it was curious because it did not seem to address any of the points that could bear on the Question which the Secretary of State was asked.

British Steel is our second biggest steel maker and one of only two integrated steel-making sites in the UK. As the only UK steel plant which produces rails used in our tracks, it provides almost all those procured by Network Rail, as well as supplying ScotRail, TfL and Translink in Northern Ireland. It also exports a large volume of products across Europe. Given these facts, your Lordships might well have expected the department to have a very detailed knowledge of the workings of British Steel, which I assume is at the heart of our industrial strategy. For instance, as we heard only last week, and in the Statement, it put £120 million into the company as part of the ETS bailout. Is that money now at risk? Are we to believe that if the company goes into administration tomorrow—as it may do—the money will not actually come back to taxpayers, as was stated? Did the Minister agree with the company’s acquisition of a company based in France, for £42 million, only last week? These things do not suggest a company in trouble, yet we hear today that it needs between £30 million and £75 million to survive.

In order to get some answers, I will ask some specific questions. How much is the company actually asking for? Press reports today range between £30 million and £75 million. What is the figure? What is the current status of the negotiations? There are rumours circulating in the press that the discussions have stalled. Have they? If the company does go into administration tomorrow, what plans do the Government have to support the 4,000 or so people employed directly and the 20,000 or so in the supply chain?

[Lord Henley]

My Lords, I do not think I can take the noble Lord very far on this. His first question was whether the ETS £120 million was at risk. I assure him that that is not the case. That was made clear by the various guarantees that my right honourable friend announced when he made the Statement on 1 May this year. I did offer to repeat that Statement in the House but that was declined. That money is secure. The noble Lord asked a number of other questions about how much British Steel was asking for and what our further plans were. As my honourable friend made clear in the Statement, it would be wrong at this stage to say much more, because detailed discussions with the company have been going on and will continue. As my honourable friend made clear, we will update the House as soon as possible and bring further information to another place and this House when it is appropriate.

Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 8th May 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for introducing this statutory instrument. I can be relatively brief, because most of my points have already been raised by the noble Baroness, Lady Kramer, and I need only add a couple more things to them. Like her, I was caught immediately by the point at paragraph 2 of the Explanatory Memorandum which explained that this statutory instrument comes from a directive passed on 17 May 2017, and I wondered about the timescale of that.

In addition to the points she made, I point out that the department has a long and distinguished record in looking at directives and regulations that come from the European Union and has always prided itself on the quality of the material brought forward in support of the changes that it wishes to make through an SI, whether it is negative or affirmative. This SI stands out as one that has not been supported by a considerable amount of consultation and debate, and nor is there an impact statement, which I find rather surprising. Perhaps I would not go quite as far as the noble Baroness, Lady Kramer, in suggesting that there is a devilish plan here behind the work done by the department to try to avoid having to do anything in the hope that it would not be necessary because exit day would be before 10 June. Even so, the department has not covered itself in glory in the sense that, although it is true that the difference between where the UK Government have already got to with legislation and this directive is relatively small, these are not unimportant issues. If the department’s heart was in the wish to ensure that shareholders and indeed wider stakeholders had good information that allowed them to assess the performance of directors and to form a view on the effectiveness or otherwise of the company’s approach to directors’ remuneration and performance, these regulations, on the back of the directive, are in fact important. In a sense, that suggests that more work on and understanding of how boards will operate it would have been useful and helpful.

In introducing this SI, the Minister tried to paint a benign picture of how this was all happening anyway and was in line with where the Government were going. But that conceals a concern which has stemmed not just from anything heard on this side of the House but which has come from the Prime Minister, no less, who said that more has to be done to improve the way in which our limited companies system operates. There has been concern from the Bank of England about the whole question of whether tomorrow’s companies will need to be significantly different in terms of powers and responsibilities: it pointed out the much wider group of people who have an interest in the success or otherwise of a company, not just the shareholders. So there is a context here which has not been addressed by the Minister and I hope that he will comment on it.

To be more specific, we could not have reasonably expected the Government on their own to have brought forward regulations to make sure that in future we require that the remuneration of persons in the role of chief executive officer and any deputy chief executive officer must be reported, even if they are not directors. That is a major change, and it will help considerably to better inform those who judge companies.

On the question of how share-based remuneration is described, detail on vesting periods, deferral and holding periods is often lacking. In future, remuneration policy will have to indicate the duration of directors’ service contracts. Again, that will be useful. The remuneration policy must also set out the decision-making process for determination of review and implementation and all significant changes. These are important matters. They may be trivial in themselves, but, taken together, they will give much more information.

The Minister mentioned the split between fixed and variable remunerations and the question of share options. Share options have been a source of long-term concern to those interested in how companies pay their staff, particularly directors. To have that nailed down now is a really important change.

So those changes in themselves are important. The context within which this happens is of political interest. There is a question about why the regulations have been delayed so that we are doing this in a rush, and there is a worry about not having the wider context around consultation and cost, which suggests that something is not quite working here. I look forward to hearing the Minister’s response on that.

Like the noble Baroness, Lady Kramer, I am concerned about the SIs that will presumably be required from DWP on disclosure by asset managers about pension funds. This is also an area of interest, but it would be wrong if the regulations were not in place by 10 June. Can the Minister give us some information on that? Like the noble Baroness, I question how the Department for Business, Energy and Industrial Strategy will take forward the provisions requiring further facilitation of shareholders’ rights. It is a longer deadline—3 September 2020—but, again, further information would be helpful.

These matters are important. The statutory instrument is of great interest and I am happy to support it.

[Lord Henley]

My Lords, as always, I thank both noble Lords for the positive side of their contributions to this debate—but thereafter it went a bit negative. The noble Baroness, Lady Kramer, supported by the noble Lord, Lord Stevenson, seemed to imply that we had been dragged kicking and screaming into bringing the regulations to the House. I assure them that that is not the case.

We were engaged in all the activity related to the EU in developing the regulations, but, as both noble Lords will know—probably far better than me, because they have been involved in BEIS matters for longer—this goes back quite a long way. Various improvements were made in 2013 and in 2018 to company reporting. So we have done quite a lot domestically, and we were involved with the EU in bringing regulations to book which, as the noble Baroness said, were produced in 2017 but do not need to come into effect until June this year. That date we will meet, and that is why we are bringing forward the regulations at this moment.

We have been preparing for a year to implement these measures. Those preparations had to take account of the new Commission guidance on the directive published last year, in 2018, and it would not have been fair to have introduced these new EU rules on UK companies two years before other companies in the EU. It is therefore quite right that we bring them forward at this stage. They form part of the Government’s wider corporate reform package that I mentioned, part of which was implemented last year and part of which was implemented earlier.

Both noble Lords asked about other government departments and the FCA. As I said, the FCA, DWP and the Treasury have to implement other parts. The Treasury will shortly be laying draft regulations. I do not know who in this House will do it; I imagine that it will be my noble friend Lord Young, as my noble friend Lord Bates is off on one of his walks. The measures in the directive are designed to increase transparency in the work of so-called proxy advisers, who advise institutional investors on the companies in which they invest.

DWP will shortly lay draft regulations to implement new measures in the directive covering how pension fund trustees carry out their stewardship roles with investee companies. The FCA will make changes to its handbook to give effect to new obligations under the directive covering asset managers and the disclosure of related party transactions by public companies, but that obviously will not need the same parliamentary scrutiny as these regulations. My department—BEIS—will also bring forward measures. I do not know whether they will be affirmative or negative, but I will advise the House in due course. We will bring forward appropriate measures to implement the final parts so that they can be brought into effect by September 2020.

Finally, the noble Lord, Lord Stevenson, asked about an impact assessment. I think that I made it pretty clear in my opening remarks that we did not think an impact assessment necessary, which is why we consulted widely with all the appropriate bodies, individuals and other parties. As a result of their comments, I am told, we made some changes and felt that an impact assessment was not necessary.

I believe that I have answered all the questions. As I said, we were not dragged kicking and screaming into doing this; we believe that the regulations are an appropriate response from the Government, partly to meet our obligations because we are still in the EU but also as part of the wider package I talked about, which came in last year and on earlier occasions.

Corporate Governance

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 29th April 2019 Lords Chamber

[Lord Henley]

My Lords, I believe that I have answered his question.

[Lord Stevenson of Balmacara (Lab)]

My Lords, surely the issue here is not philosophical but political. There is a huge gap in the Government’s legislative programme at the moment and plenty of time to fill it. Since the Green Paper of 2016 the Government have been promising to do something about corporate governance but we have yet to see the detail. For example, when are we going to get the full result of the words spoken by the Prime Minister on the steps of Downing Street when she enthused about workers on boards? These things are important but they have never been acted on; it is about time that they were.

[Lord Henley]

My Lords, we have made clear our views about workers on boards. The FRC has also made clear in its revised code that it requires boards to have in place at least one director appointed from the workforce, a formal workforce advisory panel or a designated non-executive director. We do not think it is right to go ahead with what the noble Lord is suggesting, and we have made that quite clear from the start. It is a matter for companies to decide what is appropriate.

Employment: Automation

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 1st April 2019 Lords Chamber

[Lord Henley]

My Lords, I do not quite take the almost semi-Stalinist approach that the noble Baroness is putting forward. What I am saying is that society will change as a result of these things but the Government must also recognise that it is going to change. That is what the industrial strategy is all about, and we will go along with that.

[Lord Stevenson of Balmacara (Lab)]

My Lords, it is all very well to be optimistic, and even to be rationally optimistic, but however boring some jobs may be to those who have better and more highly paid ones, those jobs also pay wages which keep people out of poverty and ensure that families are supported. These are serious issues; we are talking about 1.5 million people losing their jobs and likely to be affected. I hope that the Government have more than some forward thinking about where they might find educational support for these people. In a practical sense, however, is it not possible that this sort of challenge—a big challenge for society as a whole—should be referred to those experts who are able to give us advice on where to go? Will the Minister suggest that this be a central issue in the work of the Centre for Data Ethics and Innovation, which has just been established?

State Aid (EU Exit) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Thursday 14th March 2019 Lords Chamber

[Lord Henley]

I am sure the noble Lord will find it easy to raise the subject, and will do so. Whether there will be the opportunity through primary, secondary or whatever legislation, I do not know. On his broader questions about the shared prosperity fund, he will have to wait for the guidance that the right honourable Secretary of State will provide. That might be his moment to consider such matters. With that, I beg to move.

[Lord Stevenson of Balmacara]

I notice the noble Lord did not ask me to withdraw my amendment. I am sure he therefore wants to accept it, but I am going to disappoint him because I will be withdrawing it anyway, so he does not need to panic too much.

Having said that, I am afraid we did not get answers to many of the deeper and far-reaching questions about state aid or the European structural and investment funds’ continuation schemes. That is partly because the particular issue is the need to cope with a no-deal Brexit and, therefore, some of the bigger issues do not come into play. For the record, I do not feel that we have had a sensible answer to my question about why the Government are asserting that state aid rules are necessary to ensure that competition with the EU is not distorted. If we are leaving the EU under a no-deal situation, they will be a series of third countries and there is no logic in trying to make sure that our competitive approaches are maximised. There would be a good argument for saying that, if we have to leave the EU with no deal, and we are therefore just competing with them, we ought to use the maximum freedom available under the WTO to subsidise all our exporting companies as much as possible, for the benefits of UK plc. I am not supporting that; I am just saying that there is an alternative. The argument for why we need the proposed comprehensive set of rules needs to be explained better.

Secondly, we have not had an answer to why Parliament has not been brought into this process. Again, this is an issue of supreme importance to many people; the sums of money are enormous. The impact of the structural funds and European investment over the years has been fantastic; in times of austerity, they have saved many communities, economies and lives, and we should not forget that. Therefore, Parliament should have a role. We are not getting the right answers on how the devolved Administrations will operate in this new process and we are certainly not getting answers about how the CMA and its powers will operate.

However, these issues are for the future. I am sure that, once we read Hansard, a number of issues will be clearer. I will do that, and I also hope that a few letters will come from the mighty pen opposite, which will also help. If the Minister feels that a meeting to discuss some of these issues might help to clear the air, we would be willing to do that. With that, I beg leave to withdraw my amendment.

International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 12th March 2019 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare my interest as a retired fellow of the ACCA. Although I have not practised as an accountant very much during my membership—very little, in fact—I retain an interest in the processes of accounting and the impact it has on business and the economy as a whole, which have been so well described by the noble Lord, Lord Hodgson, and the noble Baroness, Lady Bowles. Both have contributed a great deal to the debate, which leaves a number of very uncomfortable questions for the Minister to try to respond to. I am afraid we will probably not get to the bottom of them today. They have set out an agenda, particularly the noble Baroness, for work that needs to happen over the next few months if we are to get the best out of the current changes.

I will put another review on the table as well, which we have not yet had an opportunity to discuss in our House. I hope there will be an opportunity to do so in the not too distant future. Very significant changes are being made through what appears to be a process of correspondence and speech-making between the new chair of the CMA and the department, under which what looks like a substantial shift of public policy on competition issues will be introduced to put consumer interests at the heart of much competition policy—a change which I would welcome.

This would be a significant change in the powers and abilities of the CMA to investigate and to seek out remedies where malfeasance has been found, and a completely different sense and sensibility relating to the work that has previously been done under the CMA on investigations more generally. I say that because it seems a rather important leg of the various bodies involved in a broader conception around how public trust is to be generated in economic operators. One could also add that a similar responsibility towards consumer interests and consumer focus is needed for the regulatory powers in financial services, for which the Minister will be aware we have been arguing for some time, if we are to get the best out of that system. That has been much discussed in the context of whether there should be a duty of care on financial organisations dealing with consumers, a matter to which we will no doubt return.

By way of introduction, I align myself with the two speeches that have already been made, and will ask three questions on the Explanatory Memorandum. I will preface those with the point made very strongly by the noble Baroness, Lady Bowles, but raised also by the noble Lord, Lord Hodgson, that it is the cruellest of misfortunes for those who have been responsible for designing this new structure that they are trying to find analogues for the existing system in Europe, which has run and operated our overall structure for reporting on public accounts and public bodies, when the whole of that structure is being completely refigured through the FRC review and the consultation now going through. The question that concerns me most is about the structure being proposed. The Secretary of State takes on, broadly speaking, the responsibilities of the Commission, but the political control is reduced to a situation which we find more commonly in Britain than in other countries—about which the noble Baroness, Lady Bowles, has been fairly critical—where the devolved responsibilities are to a body that is being created out of nothing and allocated to a body that is in transition and will not have proper supervisory powers. There is a real problem in this, particularly since, as we read in the recent consultation about the independent review of the FRC, about a third of the recommendations are in category three. As the Minister will know, this relates to reforms that will require primary legislation and have wider ramifications, and therefore require deeper consideration and wider consultation.

I do not understand how the Government think they can get away with a process changing the nature and function of an important construct that relates to a whole economic activity and the accounting process underpinning it in terms of public trust—and do so when they are signalling that they will not be in a position to do it until they get primary legislation ready, let alone through, at a time when it seems impossible to legislate on anything except Brexit. I will leave the Minister to respond to that if he can.

My questions in response to the points raised so far are relatively straightforward. First, in paragraph 7.5 of the Explanatory Memorandum, the policy intention is for the Secretary of State to delegate the function to an independent endorsement board when it is constituted satisfactorily in 2019. Am I right in assuming that this is what is referred to in the Chapter 1 recommendations on the need for a statutory authority, which will require primary legislation? If so, can we have more information about the timing? It does not seem likely that it will be finished this year, let alone in time to enforce the work. I would be grateful for a comment on that.

Secondly, paragraph 7.6 makes the point that the instrument enables the Secretary of State to revoke the delegation to the endorsement board if he or she wishes. Is that right? I do not regard that as good law. It is certainly not parliamentary language. Can we have some examples of the sort of issues that might be raised? The only example we have here is the endorsement board being deemed unsuccessful—but by whom and under what criteria? Do we have any principles under which that judgment can be made? If so, what are the processes under which it will happen?

Thirdly—I have already touched on this point—the principles of financial reporting are taken without question as providing a “true and fair” view of undertakings and a position “conducive” to the long-term public good. These are familiar words. They are contained in the IFRS and apply in the UK GAAP but they are not without some difficulty in terms of their overall understanding. They require judgment at the local level in terms of the individual accounts and in the round about whether the processes were correct. The instrument places an obligation on the Secretary of State to consult those with an interest in the quality and availability of accounts. In pursuit of my concern that the consumer and the broader public interest require a much broader cut through this, can the Minister confirm that the consultation process will include not just the Big Four and the accounting professions, and look genuinely at the wider stakeholder interests?

[Lord Henley]

My Lords, I thank all three noble Lords for their interventions, which were based on considerably more expertise than I have. I hope they will be tolerant of my response. If I fail to answer any questions I might have to write to them.

It might be helpful if I remind them of the purpose of these regulations. As usual they have the words “EU exit” in them. They are designed for a no-deal exit and ensure that the IFRS can continue to be endorsed and adopted for use by UK-registered companies after exit from the EU. They are laid using powers under the EU withdrawal Act 2018. It is again worth reminding noble Lords of the constraints within that Act and that the powers within it would not allow the Secretary of State to go wider into some of the other matters that are of concern to all three noble Lords. That is why, as I made clear earlier, that there will be a further SI later on.

We have been talking about Kingman who, as we know, published his report on 18 December. We also know that my right honourable friend the Secretary of State issued his initial consultation on the recommendations on that only yesterday and that the closing date for responses is 11 June. No doubt all three noble Lords have copies of that. I think I saw a tweet from the noble Baroness, Lady Bowles, on it today, so I presume she has seen a copy. I regret that we are not in a position to debate it today, but there will be many other opportunities to debate it and to feed in responses in due course.

To some extent, that deals with the initial concern from the noble Baroness about whether the FRC is a suitable body to host the new endorsement board, in light of Sir John Kingman’s report and the response that will have to be made to that. As I said, there are the constraints of the EU withdrawal Act. My right honourable friend is trying to deal with the deficiencies so that we can get on with the eventualities, should there be a no-deal Brexit.

I shall say something about the consultation on the Kingman review. It is important and we are grateful for the very comprehensive review he gave. We think the recommendations are well-considered, far-reaching and transformational. As noble Lords know, the Government published our initial consultation on those recommendations, highlighting our approach in taking forward the review’s recommendations. The Government welcome and share the review’s vision for a new regulator with a new mandate, new leadership and stronger statutory powers and intend to move as fast as possible on this. I would say move swiftly, but the noble Lord will have to be tolerant because the process to implement reforms and overhaul the sector must be gone through. In the interim, until the new regulation is in place, the Government will work with the FRC to take forward 48 of the review’s recommendations, including addressing issues such as lack of transparency and shortcomings in the enforcement activities. Further detailed consultation on those measures will follow.

Brexit: Protection for Workers

Debate between Lord Stevenson of Balmacara and Lord Henley

Thursday 7th March 2019 Lords Chamber

[Lord Henley]

Would the noble Lord like unemployment levels at the same rate we see in France, or would he prefer to see employment and unemployment levels at the rates we have in this country, where we also have the right sort of protections for workers but do not have inappropriate protections that prevent people getting jobs?

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Statement refers to the intention to establish,

“a new body to bring together the relevant enforcement functions”,

of the gangmaster agency and others. The Minister did not give the exact position in his response to my noble friend. There is an opportunity for a new body to have trade union representation. Can he confirm that that will be under consideration?

My main point relates to two things. First, the gig economy has been raised. Is it in the Government’s mind to eliminate once and for all the gap between “employees” and “workers”, which has bedevilled many of the issues we have been talking about? There is a need to make sure that all workers are employees so that they can have the rights and protections the Government are now bringing forward.

Secondly, on the new body, is this not the time to bring in some of the other issues that have affected workers’ rights, such as giving the Small Business Commissioner statutory powers under this new body? Also, would it not be sensible, as is perhaps alluded to in the Statement, to bring in the enforcement body that the Treasury operates for flagrant breaches of the low pay regulations, including the national minimum wage and the national living wage? They should also be part of the same body.

[Lord Henley]

I think the noble Lord will find that my right honourable friend referred to HMRC as one of the bodies that might be brought into some new enforcement body. As he made clear, it is a matter for consultation. We will want to consider what possible arrangements we can come to, but I cannot go any further than that at the moment.

The noble Lord also asked about dealing with the problems of the definitions of “worker” and “employee”. It is quite difficult. I can go as far back as when I was sitting the Bar exams a very long time ago. I found it quite difficult then; it is still difficult, but it certainly needs to be considered. No doubt that is something we can consider in due course when we come to legislation following Taylor and our Good Work Plan.

Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 4th March 2019 Grand Committee

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

My Lords, these regulations were laid before the House on 7 February 2019.

The protection of consumers from unsafe products is at the heart of the legislation before us today. It has a single yet crucial objective—to ensure that, in the event of no deal, the UK continues to have a robust and highly effective product safety and legal metrology regime. It ensures continued protection for consumers across the UK and provides certainty and clarity for businesses.

The UK product safety and legal metrology regime is among the strongest in the world. It is vital that we continue to retain such a robust system, even if the UK leaves the EU without a deal in place. The legislation will not change the existing system or approach taken, which I know is supported by stakeholders. The changes are limited to those necessary to ensure that the 38 product safety and metrology laws it covers will still work effectively on exit.

Before I say more, I would like to explain the approach we have taken, because I appreciate that some noble Lords may have concerns that such a large instrument may be difficult to navigate.

[Lord Stevenson of Balmacara (Lab)]

My Lords, it is not the navigation but the strain on our hands.

[Lord Henley]

I make no comment.

I assure the Committee that this approach has been designed to increase understanding and reduce the number of similar instruments that would otherwise be needed. Many cross-cutting issues are the same for different products. These have similar definitions, obligations and requirements. As a result they require similar amendments, which it makes sense to group together into one instrument rather than to separate out into many different instruments. Another reason for the size of this instrument is the lengthy technical schedules. These are used widely by industry, and incorporating them here from retained EU law makes it easier for businesses to see and understand the legislation as a whole.

During development of this instrument, we have been mindful of the impact on business of changes to processes as a result of the UK’s exit from the EU. Where possible, we have given businesses time to adjust, including an 18-month transition period for importers for any labelling changes and a 90-day transition period for companies notifying key safety information for cosmetic products already on the market. We have also engaged with businesses on the drafting. Drafts of the schedules were shared with stakeholders and feedback obtained. Stakeholders, including trade associations, industry experts and enforcement agencies, took part and welcomed this approach. As a result we have a better understanding of the main requirements and concerns of stakeholders, including businesses, and have been able to reflect these in the legislation that is before us today. In addition, and given the importance of this area of law, we have completed and published a full impact assessment to ensure complete transparency—despite the impact being below the threshold at which an impact assessment is required.

On the detail of the instrument, it is important to repeat that it will not change the UK’s approach to product safety. It keeps important elements; for example, it retains the requirement for conformity assessment to ensure that products meet the essential requirements set out in the legislation, including the need for assessment by third-party organisations where that is currently required. It retains the use of standards that give rise to presumptions of conformity with the legislative requirements, making it easier for businesses to ensure that their products are safe by following a designated standard.

Taking action to protect consumers from unsafe products remains vital, and this legislation ensures that the UK’s market surveillance system will continue to work to limit the number of unsafe and non-compliant goods available to UK consumers and businesses. It also gives ongoing recognition of existing authorised representatives in the European Economic Area for any appointed before exit, while those after exit will need to be in the UK.

For cosmetic products, due to the risk they pose to human health, responsible persons—who play a key role in ensuring the safety of cosmetic products—will be required to be based in the UK from the point of exit. By addressing these issues we are able to give business certainty and—crucially—we will retain our ability to remove unsafe or non-compliant products from the market.

To conclude, I hope that the Committee will agree that maintaining a functioning product safety framework in the event of no deal is essential both for consumer safety and business confidence. Without this legislation in place, there would be major risks to the safety of consumers—the safety of the toys our children play with, the cosmetics we all use every day, and the electrical items which are found in abundance in our homes. Maintaining these protections is vital to people across the country. I beg to move.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, I join other noble Lords in thanking the Minister for organising the meeting held last week on this SI—as has been said, it was very useful in covering a lot of the ground that otherwise would have needed to be raised today. It is interesting to have had the experience of going through such an extraordinarily large tome with so many details; it took me into areas of public policy where I did not think I would ever have to go. I particularly enjoyed, and of course immediately read first, the intoxicating liquor order 1988, which was closely followed by the strawberry regulations. Both were of immense interest and, for those who have not yet managed to get that far through the document, worth the journey.

I will not raise many of the points which have been made, but I will come back to a point raised during the meeting which has not yet been properly answered. There is substantial additional work implicit in the change in regulations, which has already been mentioned by the noble Earl, Lord Lindsay, and my noble friend Lady Donaghy, for the United Kingdom Accreditation Service and the Health and Safety Executive. It is not yet clear that the additional resources that may be required will be funded and that support will be offered. Could the Minister confirm that that will be the case? Additional work will clearly be required; it may be of a short-term and temporary nature, but I suspect that it will be continuing. Assurances need to be given that the additional work will be properly covered, or we will lose.

On that same theme, the Minister said as he introduced this that it was really all about consumer confidence and product safety. Of course, that will be only as good as the body and individuals which have to police it. That will largely fall to trading standards—we have already discussed some of the issues that are raised in this. I asked at the meeting, and ask again: what will the financial arrangement be for this? Clearly we want good product safety and consumer confidence, but will get them only if we pay for them. In the past it has been assumed that the additional work can be picked up by those responsible for trading standards, which are largely local authorities. When primary legislation has gone through this House in the past, we have also asked these questions and had assurances that substantive new additional work applying from primary legislation—such as the recent Bills going through this House—would be funded. Indeed, mechanisms for that have already been described and put in place. Can we again have some confirmation that the additionality implied in these regulations will also be funded?

[Lord Henley]

My Lords, I forget who it was who said, “Never apologise, never explain”, but I will start with an apology for the sheer size of this SI, which has received some comment—not just at this meeting, but at the meeting I held last week. I am grateful for the comments made by all those who came to that meeting and more widely by others, particularly the concerns of the Secondary Legislation Scrutiny Committee, on which the noble Baroness, Lady Donaghy, and the noble Lord, Lord Rooker, sit. I also discussed that with the chairman of that committee, the noble Lord, Lord Cunningham. I know he has also had correspondence with my honourable friend Kelly Tolhurst, who has ministerial responsibility for these matters within the department, and with my right honourable friend the Secretary of State.

Designs and International Trademarks (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 4th March 2019 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am very grateful for the comments of the noble Baroness, Lady McIntosh, and the noble Lord, Lord Clement-Jones, which have covered much of the ground that I was going to raise, so I shall not go back over it. As both of them have said, this is a complicated area. My feeling from the comments made is that it is likely to become more complicated after a no-deal exit, not least because of an additional design right.

On that point, as the noble Lord, Lord Clement-Jones, pointed out, it has taken this rather odd set of circumstances to persuade the Government that there is a problem with our whole range of design rights. We have raised in the House before the question of why there is such a focus in the UK on registered design rights, as against the very much larger number of unregistered design rights used in fast-moving industries such as fashion and why those industries do not use the registration system at all. Bringing in another model just to try to fill a gap seems to overcomplicate the whole structure, although it provides additional cover, as the noble Lord said, and I welcome that.

Does the Minister recognise that an issue is looming here? Do we need another in-depth look at this whole area to try to unbottle some of the problems that we have caused in the past few years by bringing in additional layers of legislation and regulation and consider whether we need a new approach, because the industry has moved away from the current regulatory structures?

Having said that, a number of points raised need answers, and I look forward to hearing what the Minister will say. I have only a couple to mention. The noble Baroness mentioned paragraph 12 of the Explanatory Memorandum. I have two points on that. At paragraph 12.11, there is a rather odd piece of typography. It states:

“An Impact Assessment has not been prepared for this instrument because [].”


There are just two square brackets, so we do not know why it was not prepared, although we can guess. Can the Minister confirm why we have not had an impact assessment and not leave us hanging? It is a bit like a missing third act.

I have a point about cost recovery, which was well argued by the noble Baroness. The resourcing issues of this are not small: they may be £500,000, they may be £375,000, but they are still substantial. On a cost-recovery model, who pays? Are we saying that designers currently registering designs—which is about 10% of the total design component of industry—are carrying the costs not only of the existing arrangements but the additional burden of having to produce another registered design system introduced because of the possibility of defects in the relationship of those registered on the European basis? It is all very well saying that this is a benefit to the designers, but it is at a cost. I should be grateful if the Minister would confirm my reading of the situation.

I asked this question on the previous statutory instrument, but I did not get a full answer. We seem again to be engaging in asymmetry. There would be an argument for saying that if we have to have a no-deal exit, when that happens, the arrangements for design protection must be limited to the UK because no reciprocity is promised from the EU, yet here we are saying that we in the UK will continue to recognise the registration process which takes place in EU countries after we leave but are unable to offer that right to those who register designs with the UK, even with the additional right. Why are we doing that? Is that an asymmetric approach, or is there something we do not know about the arrangements that have been made for that? I am not against what has been going on. However, if I am right, I think the consequences are that, while overseas or European designers may benefit from having their designs copyrighted—the catwalk example is a good one, in that you can have a fashion show in Paris and be confident that your designs will be covered in Britain—in Britain, we will not be able to do that because there is no necessary reciprocity. That seems unreasonable and I would be grateful to know who benefits from it when we hear from the Minister.

[Lord Henley]

My Lords, I will start with consultation and explain what we did. I will not repeat what I said on the previous SI, but the important thing is that, although we were not able to consult fully in the way one might have wished, the IPO has engaged with businesses on the implications of exit ever since the referendum result. We have sought to maximise continuity in the no-deal scenario and in the early stages of negotiation on the future partnership. As I said earlier, revealing the details of our continuity approach through public consultation might have risked that. The individuals who took part in the technical review did so in a personal capacity; we invited all sorts and I hope we had a representative group. They were chosen because of their past experience as representatives of various stakeholder bodies which usually engage in consultation with the IPO.

[Lord Stevenson of Balmacara]

I thank the Minister for giving way. We have been over this ground before and I do not want to prolong the debate. However, the essential difference that is now emerging across all the SIs that we have been considering is the question of whether consultation has been carried out under Cabinet Office rules or not. If it is done under Cabinet Office rules, there are procedures, processes and resulting consequences, including publication and the reporting of all evidence received. I think we all agree that this would probably have helped materially in the process of going through all these statutory instruments.

The second point is that the consultation has then got to be on an open and representative basis, rather than selecting people from organisations with which the department, quite rightly, has ongoing and continuing discussions. The problem with this approach is that it tends to give the impression that those who have been consulted are speaking in their official capacity, when the Minister is making the point quite clearly that that is not the case and that this is very much an informal, personal discussion, because the consultation is not happening under Cabinet Office rules. That is the point we are all making; I do not think we need to dwell on it, but we should accept that that is the situation so that we do not get mixed up between the two systems.

[Lord Henley]

I am glad that the noble Lord is prepared to accept that point. Obviously, we could not follow the Cabinet Office rules—I was trying to make that clear. They are not strict in that respect and there was no absolute necessity to follow them on this occasion. However, we wanted to make sure that we consulted enough and consulted appropriate people to make sure that we were not going into this blind—not that we would have been doing so even if we had not consulted.

I move on to the other hardy perennial—the impact assessment. We assessed the impact using the better regulation framework in line with the Treasury’s Green Book guidance. The impact was deemed to be less than £5 million so a full impact assessment was not required. Analysis is focused on the direct impact of the relevant SI compared with the current legislation, and analysis of the wider impacts of the UK’s exit from the EU has previously been published in the form of the long-term economic analysis, which was published in November 2018. My noble friend asked how we could be so sure of that. I want to make clear that our renewal fee estimates are based on the proportion of registered community designs currently held by UK businesses. That figure is 7% and the calculation was based on that.

My noble friend then gave the figure of 375,000 or roughly half a million and asked whether the fees would increase because of this. UK-registered design fees were subject to significant reductions in 2017. We have no plans to increase these fees to accommodate the cost of converting registered community designs. My noble friend also asked whether a design would be allowed to lapse if it were not reregistered. Creation of a reregistered design will be automatic—the holder will be granted the reregistered design if he or she holds a registered community design on exit day.

Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 11th February 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, the points made by the noble Lord, Lord Fox, and my noble friend Lord Adonis are very important and I hope that the Minister will be able to respond to them. I have a couple more questions to add that the Minister might wish to respond to when he sums up. To add to the comments made by my noble friend Lord Adonis about the consultation, will the Minister also confirm that, if the Law Society was the only body consulted, why were the CBI and the FSB and others not consulted and can he give adequate reasons for that?

Paragraph 7.22 of the Explanatory Memorandum refers to,

“permitted disclosures to credit reference agencies, credit institutions, financial institutions”,

and the current legislation giving “preferential treatment” to EEA agencies. I take the point made in the Explanatory Memorandum that there seems to be no particular reason for that, but will the Minister comment on whether that raises an issue about data protection adequacy? The Government are on record as saying that they want to ensure that movement of personal data between the UK and the EEA is uninterrupted. If a distinction is to be made in terms of access, does that not bear on adequacy? If so, will the Minister comment?

Secondly, paragraph 7.24 refers to political parties and expenditure. My understanding—I may be wrong and I look forward to the Minister’s comments—is that shareholder authorisation is required for donations to political parties, organisations and candidates by any companies established in the UK to ensure that their intentions in relation to those activities are transparent. I take the point that, if we are crashing out of the EU and becoming an independent body, there is a question about the relevance of payments made to political bodies operating in the EU, but that does not take the trick in relation to transparency. Surely, shareholders of UK companies should know whether their companies are making payments to political parties whether or not they are in the UK, particularly if they are operating in the EU. I would have thought that was of interest to shareholders.

I am not in any sense saying that there is anything wrong with what the Government are doing, but it would be helpful if the Minister could explain their rationale. If it is a transparency measure, it is not relevant to exclude payments made to political parties and organisations for referendums and other things, wherever they take place, simply because we are no longer in the EU. That information would be of value to shareholders. I look forward to the Minister’s response.

[Lord Henley]

My Lords, I thank all three noble Lords for their contributions. I was not surprised that there was comment about the consultation. I repeat that, as we made clear in the Explanatory Memorandum, we were unable formally to consult on the provisions in the statutory instrument. But as my honourable friend Kelly Tolhurst said in the other place:

“On consultation, as I outlined, we have consulted, worked with and used the expertise of Companies House to ensure that we are making the best provisions to enable UK companies to implement the regulations that we require for them to be legal if we leave the European Union without a deal”.—[Official Report, Commons, Delegated Legislation Committee, 4/2/19; col. 8.]


We extensively engaged with Companies House—I think it is the right place, initially—on the changes that will impact EEA and UK businesses. In addition, impacted businesses—I will get on to numbers in due course—were notified of many of the changes in this instrument through the publication of the Structuring Your Business If There’s No Brexit Deal technical notice published in October, including filing changes, the route of access to BRIS and the revocation of the cross-border merger regime.

The noble Lord, Lord Adonis, seems to think that we did not consult the CBI, the FSB and other similar bodies. I shall give him an assurance that applies not just to this order but to a range of other orders and orders that will cover other departments. The CBI, the FSB and others—I could go through a whole list of them—are in the department on a weekly basis seeing the Secretary of State. The noble Lord will find that they are also in the department on a regular basis seeing officials and making officials aware of their concerns. I can give a cast-iron guarantee that any concerns they have will have been noted and we will have been made aware of them. As I said, this applies not just to this order but to a range of orders. We are the Business Department. My right honourable friend the Secretary of State has made it clear that his door is always open to representative organisations, just as I made clear last week when dealing with the intellectual property regulations how recently I saw, for example, the ABPI and the BIA. Irrespective of Brexit or whatever, it is important to us to have regulations. The noble Lord, Lord Adonis, is an old hand and has been a Minister. He will have done that in the various departments in which he served, and he knows that those engagements go on with great regularity.

I shall now start working through the various points and questions that the noble Lord, Lord Fox, put. I shall start with his concerns about BRIS. It will continue to be open to scrutiny by all non-UK interests after exit. In addition, most EEA registries are open and can be accessed through the relevant websites in the EEA states, but that will have to be a matter for where the company is based. GOV.UK lists those websites for the EEA and the rest of the world. There are no changes in the information available.

The noble Lord then asked how many would be affected and whether Companies House has the capacity to deal with these matters. I can assure him that we are in constant touch with Companies House and it assures us that all is well. The impact will be small. For example, there are only five companies in scope of the change around intermediaries being a member of their holding companies and we found no companies in scope of the change to investment in companies’ distribution of profits. Going a bit further, in relation to the filing changes, we reckon there are about 1,900 companies in scope of the changes which will have three months to update their information. Again, I am assured that there are no problems in that area.

The third point made by the noble Lord was about technical changes in relation to cross holding. He asked what analysis we have done. We have made only two changes, which relate to intermediaries dealing in securities being a member of their parent holding company and how investment companies can distribute profits. The regulations will ensure that, after exit, only intermediaries that are members of or have access to a UK-regulated market will benefit from this exemption, and certain investment companies will no longer benefit from some relaxations on controls of their distribution of profits unless they are listed on the UK market.

The noble Lord’s final point was on cross-border mergers. I have a note on that which has been temporarily misplaced. I apologise to the noble Lord; I might have to write to him on that.

I turn to the concerns relating to political parties raised by the noble Lord, Lord Stevenson. The regulations amend Part 14 of the Companies Act, which sets out the shareholder authorisation required for a company’s donations to political parties, organisations or candidates for electoral office. Under the current legislation, that reflects that the UK is part of an integrated European political system. In practice, that means that the same authorisations are required whether the political expenditure relates to the UK or other member states. After exit, these authorisations will apply only to donations and expenditure relating to UK-based political parties, organisations and candidates for electoral office. We are making these changes because, after exit, it will no longer be appropriate for the UK to set shareholder authorisations on donations outside the UK, as the UK will no longer form part of the wider EU political system.

[Lord Stevenson of Balmacara]

It was very helpful of the Minister to read out what is already in the Explanatory Memorandum. However, that was not my point; I was asking why the Government are making the change. If the regulations are there in the first place for reasons of transparency of political contributions, it does not really matter where they are.

[Lord Henley]

As I said, we have to get the statute book in the right place in the event of no deal, and therefore that small change had to be made. I do not think that I need go any further than that, unless I have misunderstood the noble Lord. I will look carefully at what he has said and will possibly write to him.

The final point that I wanted to deal with related to cross-border mergers. The noble Lord, Lord Fox, asked what happens to mergers that are in progress now. Mergers between UK and EEA companies may not be recognised by the destination member state after exit. We informed stakeholders of the change via the Structuring Your Business If There’s No Brexit Deal technical notice, which was published in October and to which I referred earlier. In that, we told them what they ought to do and what advice the impacted companies ought to take.

I believe that I have answered all the points. I will write to the noble Lord, Lord Stevenson, if I have misunderstood him.

Recognition of Professional Qualifications (Amendment etc.) (EU Exit) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 11th February 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, we have covered a lot of ground in the last half hour or so. One important point which has not been made follows on from those made by the noble Lord, Lord Adonis, and other noble Lords. It is puzzling that the Government have chosen to ignore the question of how our important services trade will survive, both in the event of a no-deal Brexit and, more generally, if and when we leave the EU. This SI in some senses plays to that concern.

In the Trade Bill, which is currently paused in your Lordships’ House and may reach Report shortly, there is virtually no mention of trade relating to services at all, yet that is 80% of our GDP and consumes a huge amount of our resource and activity. At the heart of services activity is the General Agreement on Trade in Services, which we are members of through our WTO membership and which will apply to us once we leave the EU. However, without any statement at all in the Trade Bill and no confirmation that the Government understand and support the very important services work that relies so heavily on professionals and their ability to move and support their work, knowing exactly where the Government are coming from is a bit puzzling.

My noble friend Lord Adonis is right to raise the connection here between the right to free movement of persons and the freedom of establishment, which are key pillars of the GATS deal. He is also right to ask why the opportunity was not taken in this SI—as, indeed, it has not been taken in the Trade Bill—to support those who must deliver services in this country, in the EU and wherever they trade to generate the return and income we will need if we are to continue to enjoy our current standard of living. In that sense, the idea that somehow, through this statutory instrument, we will encourage non-tariff discrimination and barriers seems perverse. I hope that the Minister will have some answers to that question when he responds.

Paragraph 7.16 of the Explanatory Memorandum sets out the issue but then ducks out of it, for all the reasons given by others in this debate. It is not just about farriers, although it is a curious feature of life that they are not regulated in one part of our United Kingdom but they are in the other three. Discriminating against the rights of free movement, persons and services and the freedom of establishment to provide those services is one thing. However, we currently enjoy a system—whether through the EPC or through the EU’s general regulatory arrangements—whereby established regulated professionals in professions with established training standards automatically qualify to trade wherever they are able to do so. We are trading that for the system we are introducing, which will be devolved to professional bodies. Admittedly, some of these are of great stature and longevity and will, I am sure, act in the first instance. However, because it is not a national system and will not be subject to national standards, it is bound to be variable and to raise the concerns mentioned by my noble friend and raised in the other place of a possible tit-for-tat arrangement under which regulations made in this country—regarding accountants or lawyers, for example—are seen as unsatisfactory by others in the EU, who may introduce tit-for-tat regulatory change to prevent our nationals qualifying. That seems an extraordinary situation to open up and I would be grateful if the Minister would respond to that point.

The underlying issue is the approach we will take if we leave the EU—with no deal or with a deal—to protect the way our citizens are treated. My noble friend Lord Adonis is right: it would be a strange Government who set out deliberately to devalue the possibility of their citizens earning a living and a valuable income for this country in the way this instrument appears to suggest. This is probably not the place to raise all the wider issues mentioned by the noble Lord, Lord Dykes, but he certainly has a point when he asks why we are going through the pain to achieve something that does not seem in any sense optimal for those involved in it. Clearly, minimal consultations were carried out and were mainly focused on whether these regulations will apply in Scotland, Wales and Northern Ireland without difficulty.

I would be grateful if the Minister would respond to this statement towards the end of the Explanatory Memorandum:

“Devolved Administrations have confirmed their agreement for UK Parliament to lay this legislation UK wide”.


That is what this statutory instrument does. It goes on to say:

“This has been sought under the terms of the Intergovernmental Agreement”.


I am not sure which intergovernmental agreement that refers to, but if the Minister could write to me with the details, I would be grateful.

[Lord Henley]

My Lords, as the noble Lord, Lord Stevenson, put it, this is not about farriers—I will not deal with that question, unfortunately; my noble friend Lord Gardiner will possibly have to deal with it on some other occasion—or about why they are not regulated in Northern Ireland but are regulated in England, Wales and Scotland. I do not think anyone knows the answer to that question, and I will not try to answer it, just as I do not know why, for example, hairdressers are regulated in Italy but not here. In France, they are doubly regulated; you find that if you want to be a hairdresser who makes home visits you must have one form of qualification, and if you want to operate from a shop, you must have another. Again, we do not consider that necessary, but obviously we have to make provisions for UK citizens who want to work abroad to do so when that is possible.

However, before anyone thinks it is all sunshine out there under the current system—the noble Lords, Lord Fox and Lord Adonis, in their little exchange seemed to imply that as a result of these regulations we would get further restrictive practices—I remind noble Lords of the restrictive practices that happen already. One has only to look at the position of UK ski instructors—to take one example from the 600 or so professions that can be affected—and the problems they have had trying to operate in France, where, for some reason, throughout these wonderful years restrictive practices have always come into effect to try to exclude UK ski instructors from operating.

Employment Rights (Amendment) (EU Exit) (No. 2) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 6th February 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, it has been a very helpful and useful debate and we look forward to hearing the Minister’s response. I have a number of questions that pick up on points already made by other noble Lords.

I will not delay the House too long, but I cannot let pass my normal question to the Minister, when dealing with SIs, about commencement dates. His department has a very bad record on bringing out regulations that commence on the common commencement dates. He promises to do better, but I have yet to see it. Unfortunately, these are not ones that I can tease him with because they are supposed to come out only if required and on exit day.

However, that is not quite the case here, is it? If we look at the Employment Rights (Amendment) (EU Exit) Regulations 2019 and the parallel regulations for Northern Ireland—which I think are numbers three and four as grouped on the Order Paper—both of them say that the regulations,

“come into force on exit day, subject to paragraph (2)”.

Paragraph (2) provides that certain elements of the regulations,

“come into force the day after the day on which these Regulations are made”.

When the Minister introduced the regulations, he said that we did not have to worry about them, that there was nothing in them that would need to take place, and that he was optimistic that there would not be a need for them to come into force. However, that is not true, as some parts of these regulations will come into force. In that context, could he reinforce what he said, which is that there is no diminution in existing rights as a result of the parts of these regulations that will come into force before exit day—and are, therefore, not strictly EU exit regulations in that sense, although we will pass over that, if the issue is indeed trivial, as I suspect it is, given that they seem to be corrections to earlier regulations and primary legislation that may not have kept pace with nomenclature in the EU. If that is not the case, the Minister owes it to the House to make a statement about exactly what is happening under these regulations.

More generally, several speakers—my noble friends Lord Monks and Lady Crawley and the noble Lord, Lord Balfe—have raised points about what is meant by the fact that, on the one hand, the Government are withdrawing powers which, as my noble friend Lady Crawley said, are currently in force and could be implemented to maintain workers’ rights and the rights of employee representatives but, on the other, the Government intend, although there is no evidence for this apart from the assertions of both the Prime Minister and the Minister, that there should be no diminution. Where is the legislation that is going to bring forward that levelling up to the existing situation? If the Minister cannot give us an answer, will he please write to us about what the Government’s intentions are? Clearly, the regulations amend Section 13 of the Work and Families Act. That amendment reduces, in crude terms, the rights of workers currently. What is the timescale for that being rectified?

On the question of what TUPE means and the definition of “TUPE-like”, again the regulations remove powers that exist. Where is the regulation that is going to bring forward the parallel arrangements to make sure that that continues in UK law? The rights of employee representatives, which were mentioned in particular by the noble Lord, Lord Monks, are similarly affected.

These may not seem to be very serious comments, but I think that people across the country will be concerned that their rights are being eroded. At the same time, politicians are saying that they should not worry about it, because the Government have in mind to make sure that there is no diminution. So it is not just a question of the diminution but of making sure that, when changes are made that would have happened had we stayed in the EU, those are also replicated in UK law. I would be grateful to hear the Minister’s comments on those points.

[Lord Henley]

My Lords, I thank all noble Lords for their comments. The noble Lord, Lord Monks, complained that these regulations had possibly been drafted before the talks were concluded. I have to say that it would be rather difficult to draft them after the talks were concluded because I suspect that they might be somewhat late. I think that to start drafting these amendment regulations at 10 minutes to midnight would not be the right way to go about it and I would be quite rightly criticised.

What I can say, and I think that the noble Lord will be pleased about this, is that the Employment Rights (Amendment) (EU Exit) Regulations were published in draft form in December 2017. That allowed for extensive consultation and allowed us to comply with the statutory obligation to consult the relevant bodies on a change made to the conduct of employment agencies and employment business regulations. We received, I think, two responses, one from the National Association of Schoolmasters Union of Women Teachers and the other from the Recruitment & Employment Confederation. I need not go into detail, but neither raised concerns about the drafting of the amendment: rather, they commented more on EU exit in general. We also, as I said, shared these regulations in draft with the TUC and with the CBI—so there was considerable consultation on them.

I shall repeat the commitment that has been made by my right honourable friend the Prime Minister, by my own Secretary of State and by Ministers throughout the Government. Now as a Parliamentary Under-Secretary of State I shall repeat it, although it has been made by people who are far important than me. We are committed not to rolling back on workers’ rights, and by laying these SIs we are upholding that commitment. We already go beyond the EU minimum in many areas of employment law; that is well known. I can say to the noble Baroness, Lady Burt, that we have no intention of making any changes to statutory maternity pay. People will not be affected whether we are in the EEA or not. That is true for all the concerns that have been put forward.

Looking to the future, as my noble friend Lord Balfe invited us to do, I would remind the House of what we discussed in a Statement debate—and there will be other chances to discuss it. Our Good Work Plan sets out our vision for the future of the labour market and our ambitious plans for implementing the recommendations that arose from the Taylor review. That important package will ensure that workers have access to the rights and protections that they deserve in a changing labour market, with the changing technology that we face. In addition, it will create a level playing field for employers, thereby ensuring that good employers are not undercut by the small minority who seek to circumvent the law. That is worth stating at the Dispatch Box as I move these instruments.

Perhaps I may deal with one or two specific concerns, in particular the drafting points made by the noble Lord, Lord Monks, and echoed by others. He asked whether the new phrase “TUPE-like powers” provide the same scope for power. The phrase “TUPE-like provisions” is needed to maintain the current scope of the powers, and the new wording ensures that the Government will continue to have the power to enhance workers’ rights as we do now. We will continue to do that and I repeat that commitment once again. The noble Lord also asked whether these statutory instruments would need to be amended following the talks that he referred to. I can make it quite clear again that these SIs are for no deal. We hope that once we have a deal they will be unnecessary.

The noble Lord also put a question about European works councils. He asked how the Government could claim to be preparing for Brexit when they did not have plans for workers to have proper representation in the absence of European works councils. We are preparing for a no-deal exit, as any responsible Government would do. UK employees will still be able to be represented on works councils—but, again, that will be a matter for the employer and employee representatives. Employees and their representatives on European works councils will retain their existing protections in all circumstances.

The noble Baroness, Lady Burt, asked about the differences as regards Northern Ireland. This is a devolved matter in Northern Ireland in a way that I do not think it is in Scotland. The TUPE-equivalent amendment in Northern Ireland is to the Employment Relations (Northern Ireland) Order 1999. However, in the continued absence of a Northern Ireland Executive, it is for the UK Government to take any necessary EU exit legislation for Northern Ireland through Westminster. However, I can give an assurance that the Northern Ireland departments have been consulted in the preparation of these statutory instruments.

The noble Lord, Lord Monks, also asked whether they would apply during any implementation period. Again I can say that they will be needed only in the case of no deal. I have dealt with the question of statutory maternity pay, which will remain the same. My noble friend Lord Balfe asked about the ability to repeal the legislation. If the SIs are no longer required on exit day we expect, as I think he quoted, to defer, revoke or amend them through further legislation in time for the end of the implementation period. Which route we take will be a matter for us to decide at the time—but, regardless of what we decide, we will uphold our commitment not to roll back on workers’ rights.

With that, I think that all I need to do is to repeat the assurance to the noble Baroness, Lady Crawley, and others that these amendments do not narrow TUPE powers: rather, they ensure that the Government will continue to have the power to enhance workers’ rights, as we do now. One last question was put to me about European works councils by my noble friend Lord Balfe. He asked whether we could apply the EU directive on EWCs like Switzerland. I repeat that these SIs are only for if there is no deal. Switzerland is covered by the directive under the deal that it has with the EU, so that would be a matter for future negotiations.

--- Later in debate ---

[Lord Stevenson of Balmacara]

I wonder whether the noble Lord could answer my question about the commencement date and the discontinuity between the fact that these are supposed to be brought in only on exit day although two of them refer to regulations that will come into force on the day they are passed—which presumably will be today. If the noble Lord does not have any inspiration at this moment, perhaps he could write to me.

[Lord Henley]

I had completely and utterly forgotten the noble Lord’s obsession with commencement dates in the excitement of dealing with orders of this sort. It might be that inspiration comes to me, but it may not be the sort of inspiration that would satisfy the noble Lord. I am told that the standard practice for statutory instruments is that they have a coming into force date. If that does not answer the noble Lord’s question, I will write to him.

I think that I have dealt with all the points that were put to me.

Takeovers (Amendment) (EU Exit) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 15th January 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I will pick up on a couple of points raised by the noble Lord, Lord Fox, and respond in part to some of the points made by the Minister in his introduction of this memorandum, about which we have very little of substance to complain because it does what it says it is going to do on the tin, as they say.

I first reinforce the wider context, which—although I think it sent shivers through a number of those sitting opposite me—we will have to return to before too long in one context or another. The arrangements under which company takeovers and mergers are taken are complex. This is bedevilled by the fact that some are statutory and some not. The role of the statutory bodies does not always fit perfectly with those of the listing arrangements under the Stock Exchange rules. The problems bedevilling British industry, which are too well known to need rehearsing here—short-termism and often acting without regard to national interest—have been raised by the Government over a number of years, but we still do not have their final conclusion or decisions, and we await them with some interest.

Having said that, this SI has similarities with a number we discussed in previous weeks. Only yesterday we talked about intellectual property. I am struck by the difference in approach taken by the department in this SI on takeovers and those we discussed yesterday on intellectual property, patents and trademarks. Does the Minister agree that one of the underlying themes of the debate yesterday on intellectual property was what appeared to be a fairly clear steer by the department that it wished to bring into play regulations that would future-proof discussions that may emerge should there be some form of deal or, even if there is not a deal, some sort of discussions and debates about how the country would wish to engage with partners in the EU on intellectual property, trademarks and patents? Is he struck, as I am, by the fact that the asymmetric approach taken yesterday in those SIs is not being picked up today?

The issue here is whether there should be some form of joint supervision and some mutual recognition of arrangements and structures. Companies increasingly operate across borders. It may not always be easy to identify precisely where the headquarters are. Indeed, some companies have made a virtue of having more than one headquartered operation in a number of countries. Simply doing it on a numerical basis of where securities are listed is not going to get to the same conclusion, as the SI admits. So we have a potential problem, in a sense not dissimilar to that addressed in the SIs we dealt with yesterday, which could perhaps provide an opportunity for further discussion. Does he therefore agree that this SI, as we have it before us, does not meet the asymmetry test in the terms we discussed?

On a slightly different line, consultation was raised extensively and has been raised in all these EU exit regulations. I can understand why the Minister will respond by saying that the consultation was appropriate for the circumstances. But in this case the only consultation I can see mentioned is with the Takeover Panel itself. There has been no attempt to try to look out to a wider interest—for example, to consumer interests, trade union interests or employee interests more directly—in the way these operations take place. There is no reference to the CBI or the FSB. I am a bit surprised about that, and I wonder if he would like to comment on whether he felt the department had the best advice possible in circumstances where so few people were consulted.

My final point is the question raised earlier this evening, which is relevant again now. There is nothing in the SI itself or the Explanatory Memorandum to confirm whether this statutory instrument will continue in the event that there is no no deal. As mentioned in the last debate, I wonder where the poison pill lies in this. What are the circumstances under which elements of this SI will fall away, and how will that be achieved? Does it require a further debate and discussion? Does it require a new statutory instrument? I would be grateful if we could be put in the picture. It would be interesting, if somewhat frustrating, to feel that all the effort we are putting into these statutory instruments today is simply a rehearsal for going back and redoing them should no no deal take place. We should presumably know in about 20 minutes whether that is likely to be the case.

In conclusion, it may be that elements of this SI would continue to any deal scenario. The Secondary Legislation Scrutiny Committee pointed this out on another SI that we will discuss shortly. I wonder if that is the case here and, if so, if the Minister could identify which elements of this would continue in any future discussions and negotiations.

[Lord Henley]

My Lords, I thank both noble Lords for their contributions, particularly the noble Lord, Lord Fox, for saying how helpful the notes attached to this order were. This does not often happen and I must thank the noble Lord on the occasions that he is as polite as that. I also welcome the experience he brings to this debate, particularly with his knowledge of takeovers, although I am not sure I fully share his view of the general helpfulness or unhelpfulness of shareholders. Perhaps I could deal with some of the questions that he, my noble friend Lord Leigh and the noble Lord, Lord Stevenson, put.

First, as always, let me remind the noble Lord, Lord Stevenson, that these are no-deal regulations only brought before the House for the eventuality that we leave the EU without a deal. In the event of a deal, as has been made clear by other colleagues from the Front Bench, there will need to be legislation in the Act that will come before us in due course to deal with that. We will have time enough to debate that.

I also do not think I accept his point—I am not sure I fully understood it—whereby he suggested we were taking an asymmetric approach to these matters when we dealt with those three orders yesterday. I imagine we will deal with them again in the Chamber in due course, but not on this occasion. I never quite understand what the noble Lord means by that asymmetric approach.

[Lord Stevenson of Balmacara]

I do not want to delay the House unduly, but I would not wish the evening to conclude with the Minister going off in confusion and worrying all night. Just to be certain, there was no need in the drafting we saw yesterday—let us take the trademark arrangements, for example—for us as a UK emerging from the EU as an independent state to offer to recognise trademarks registered in the EU. That does not seem to be taking back control, because one is opening up to UK manufacturers which have their own trademarks a chance to lose out to trademarks they will have to compete against which are registered elsewhere in the EU, and we are not part of the EU. I can understand the logic of it, but it certainly does not seem to fit the criteria set out for a no-deal Brexit.

The interesting arguments that emerged during the debate yesterday were that the primary reason that was there was that it might be negotiable in the future for similar arrangements for UK trademarks to be deemed to be registered also in the EU. In that sense, that symmetry of each section—the EU 27 and the UK having their own arrangements for registering trademarks which are then mutually recognised—is symmetrical, but what the SI proposed was very much asymmetrical.

[Lord Henley]

I take the noble Lord’s point, but I do not think it is relevant to the regulations we are dealing with today, so I will get back to the various questions that noble Lords put. I will first deal, as always, with consultation, which is so important to noble Lords. I can again give an assurance that in developing these we worked very closely with the United Kingdom supervisory authority, the Takeover Panel. The noble Lord, Lord Fox, talked about its role as a referee. I do not think it is necessary at this stage for me to get on to the composition of it. The Takeover Panel includes representatives from a range of business sectors. I can give an assurance that it consulted publicly on the changes it will need to make to the Takeover Panel to reflect these regulations. No doubt, if it is available, I will seek advice from the Takeover Panel and give a little more information to the noble Lord.

The noble Lord also asked about the impact on the companies affected. I can say that the only cost to business arising from these regulations will be that associated with compliance with a different supervisory regime. That will affect only the few companies that previously fell under the Takeover Panel’s jurisdiction and will no longer do so after exit, following the loss of that shared jurisdiction regime. The cost of compliance between the different regimes is unlikely to vary significantly as the takeover directive establishes standard requirements, and these costs will arise only in the event of a takeover. I give way to the noble Lord.

Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 14th January 2019 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, it has been a lonely journey to the heart of the intellectual property policies in this country. The noble Lord, Lord Clement-Jones, and I have been stepping together on this route for a number of years. It is really nice to see so much additional expertise brought to the table and shared with us. We have got off to a slightly ropey start, but I do not think anybody could argue that we have failed to reach the heart of the arguments now. I pay due regard particularly to the noble Baroness, Lady Bowles, who is a living legend on these matters and brings expertise from her work in previous lives, and to my noble friends Lady Kingsmill and Lord Adonis. Together with the noble Lord, Lord Clement-Jones, they have displayed the sort of expertise and knowledge we need when we address these issues.

I have only four points. I think they largely cover what my noble friend Lord Adonis, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Bowles, have said, so I will not repeat them at length. They raise issues of some substance which make me worry that the SIs in this area—this is the first of three but, as we have heard, there are more to come—are the equivalent of poking a wasps’ nest with a stick. An awful lot of rather difficult and worrying issues need to be addressed, and we have very little time to look at them. Whether there is a deal or no deal, these will not go away. They will need to be addressed, and we should think very hard about how we do so. I agree with the noble Lord, Lord Clement-Jones, that we ignore it at our peril.

A number of speakers have asked whether these draft regulations change current policy or impose new liabilities or obligations and, if so, to what extent. I listened carefully to the Minister as he got into his stride, and I do not think he really answered the question he raises for us in his letter, circulated on 7 January—I understand a copy is in the Library—which asserts that the regulations,

“do not change current policy”.

As mentioned on a number of occasions, there has been no formal consultation, some unreported discussion, no impact statement and no calculations. Yet out of this, a one-way ticket has been offered to exporters who bring intellectual property into the UK. No opportunity has been given to our fellow citizens working in the UK and producing goods they wish to export to the EU, who have no certainty that there will be any ability to benefit from parallel arrangements. This question seems not to have been answered so far by the Government and needs to be addressed properly if we are to go forward.

The noble Baroness, Lady Bowles, mentioned the asymmetry of the arrangement that the Government have come up with—absent discussion, a costing or an impact statement—and suggested that there may be more downside to this than has been said. Her suggestion of a sunset clause is a very good idea and may be something the Government should think harder about before they come back with an SI on the Floor of the House.

My third point is that made by my noble friend Lord Adonis in his careful consideration of the European Commission’s statement of September 2017. The pinning of all our hopes on a deal that may be negotiable in the future is not a satisfactory business proposition; it will send shivers down the community we are talking about here, a community of creators and intellectual property persons working in one of our most productive areas of activity, on which we pin great hope in the industrial strategy. Yet that is what it is: without any certainty on a regional basis, let alone on the international points made by the noble Lord, Lord Clement-Jones, the climate for those creative industry specialists working in intellectual property and seeking to export it seems extremely damaging. I hope that the Minister has something more to say about that.

Finally, on the legal issues, the Silhouette case comes up for all three SIs before us—it makes a good case for us considering them together, but we are not doing that. The legal issues are worrying. The legal note that I wish to refer to suggests that the basis on which this has been considered is somewhat whimsical. The argument is that it is possible that courts will not follow the Silhouette case in this area. That seems an unreasonable basis on which the Government should make regulation. If that is the case, the narrow question, raised by the noble Lord, Lord Clement-Jones, is whether the Silhouette case will necessarily become part of retained EU case law under the EU withdrawal Act 2017. We need certainty on this; if the Minister is not able to give us a clear view at this stage, I would be grateful if he could write to us on this point, because it is the key issue for those concerned.

The note says that even if the case law does fall within the definition of retained EU case law—so there is a doubt about this—it is relevant only to retained EU law which is unmodified on or after exit day. I would be grateful if that complicated idea could be unpacked, because I do not understand it. The note, which is supposed to be an explanatory memorandum for us, then says:

“Arguably”—


in other words, it is making an argument to us that it hopes we will accept,

“the retained EU law on exhaustion of rights will be materially modified on exit day, as a result of the amendments in the Exhaustion SI, because the Government is changing an EEA-wide exhaustion regime of which the UK is currently part, to a one-way”.

That makes the point that this is a one-way ticket, which is a very difficult argument to make to those affected by it. To cap it all, the unforeseen consequences listed at the end of the statement are quite horrendous:

“The UK Courts will have to follow the case law which established the principle of ‘international exhaustion’”—


a point made by the noble Lord, Lord Clement-Jones; this is a very big step away from where we are—under what is called,

“the implied licence theory in the UK”.

I suspect that lawyers listening to and reading this will be gratified to hear that a dripping roast is being created by this new SI. The document goes on to say that,

“rights-holders will not be able to prevent goods first placed on the market in a non-EEA country”,

to be brought into and resold in the UK. This was the question raised by my noble friend Lady Kingsmill, about what damage would be done to existing operators of intellectual property. The UK market could be,

“affected by cheap goods from countries where genuine goods are sold more cheaply … Consumer confusion may also arise in the UK, where genuine goods are sold under the same mark but are in fact different (e.g. toothpaste and chocolate)”—

I am sure there are many other examples. It continues:

“An international exhaustion regime is a much greater threat to UK retailers and manufacturers … In a worst case scenario intellectual property rights-holders will no longer be incentivized to produce goods for the UK because prices have been driven down”.


These are very worrying concerns for anybody who might be affected by this. I think the Government are skating on very thin ice with this issue. They have not made the case that this does not change current policy; it certainly does and it is a one-way ticket which is not satisfactory for those involved.

[Lord Henley]

My Lords, as always, I thank all noble Lords for their contributions, and hope I can deal with all the relevant points. As always, I will offer to write on those which I find harder to address, and hope noble Lords will be content with those letters.

I remind the Committee of exactly what we are doing. This order, since we are now dealing with them as three orders, is a result of the withdrawal Act, an Act which has been through both Houses and sets out powers precisely so that the Government could make contingency measures in the event of there being no deal. That is why we have brought forward the Intellectual Property (Exhaustion of Rights) Regulations that we are debating: to deal with that no-deal situation. As I and others have made clear on other occasions when dealing with EU exit regulations, of which there are quite a number, they are contingency measures designed to deal with the possibility that there is no deal. We expect that there will be a deal, but at this stage, in advance of debates in another place and other matters, it would be an irresponsible Government who did not make appropriate plans to deal with no deal so as to provide business with a degree of certainty.

The Government are therefore considering various options for the future. We are undertaking research and consultation on what would be the most appropriate exhaustion regime for the future, but that is for another day. We will deal with that in due course, but it is not what we are debating this afternoon. That will take time, and I do not believe there is a compelling reason to rush to an alternative system until we have seen the evidence and listened to what businesses and consumers have to say.

--- Later in debate ---

[Lord Henley]

My Lords, I reject any suggestion that officials have been constrained in what they can do. The point I was trying to make is that we are talking about two things. We are talking about what happens in the event of us leaving without a deal. If we do, we need to set certain things in place, which is what these regulations do. Meanwhile, we will continue to negotiate as part of the whole withdrawal process to get the right deal. We will then get the right things in place. At that point, further instruments will no doubt come before the House—I look forward to debating them—and those will follow full, frank and proper consultation with all concerned. There has been a degree of consultation on these regulations, but they deal purely with a no-deal situation.

[Lord Stevenson of Balmacara]

I am grateful to the noble Lord for giving way. I was going to try to be helpful, although he may not welcome the intervention. When we have had similar discussions on SIs and similar confusion and annoyance have been expressed on all sides about the fact that consultation has not been done in the usual manner and statements have not been provided, the Government have used the argument—the noble Lord did not use it on this occasion—that the de minimis provision is that the department has made an estimate, which is presumably accepted by Ministers, that the burden of the costs that will fall on the industries affected by the SI is less than £5 million. Is that the case with this arrangement—yes or no?

[Lord Henley]

I cannot remember whether that is the case with this set of regulations, but the noble Lord is right that, obviously, we do not consult on SIs with an impact of that order. My understanding is that he is correct, in that there is little or no impact in the case of these regulations. That is why most businesses to which I have spoken are broadly in favour of the regional exhaustion regime.

Trade Marks (Amendment etc.) (EU Exit) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 14th January 2019 Grand Committee

[Lord Henley]

I ought to make it clear that the IPO discusses these matters with DExEU to agree an approach. We want to make sure that there is a similar approach across Government. I can expand on that in any letter I write to the noble Lord. It is not just a matter for this department or that one, as the noble Lord would put it. I am now going wide of my brief, but there is a degree of consistency when dealing with the no-deal regulations to make sure that we get this right. I see that the noble Lord, Lord Stevenson, is itching to get to his feet, so I will give way, but I agree to write to the noble Lord on this point.

[Lord Stevenson of Balmacara]

I have read similar passages in the SIs from the Treasury which were due to—but will not—be discussed this evening. They reflect a different approach, which the Minister mentioned he would feed back to officials in due course. He talked about an all-of-Government approach to this, but that has not been borne out by what we have in front of us. I will be interested to see the letter which explains what is happening, particularly in relation to the department for which he is responsible. In fairness, that is all he can answer for, but if it is possible to add to that a wider brief about what is happening more generally, Ministers in other departments would find it interesting.

The second point is that I am sure these issues are not being raised on the particularity of these SIs alone. Surely they are being raised because what we are concerned about here is that the Government cannot do their job properly in regulating for the future if they do not have the trust and enjoy the confidence of the sectors that they are engaging with. Here we are in a situation where some advice is being taken from some people, and some are being labelled as “trusted” while others are therefore labelled as not trusted. I do not think this is a very good basis for going forward, and I wonder if the Government might like to reflect on that.

[Lord Henley]

My Lords, I will certainly look at what the Treasury is recommending. As I say, we have consulted DExEU. I can certainly give an assurance that all those whom we consult will be trusted. I am sure my noble friend Lord Deben would be the first to admit that he was possibly being mischievous when he tried to imply, merely because the word “trusted” appeared in one Explanatory Memorandum but not in another, that there was some element of a lack of trust by this Government. If any noble Lords think that is the case, I would thoroughly refute it.

Accounts and Reports (Amendment) (EU Exit) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 18th December 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords I am very grateful, as was the noble Lord, Lord Fox, to the Minister for giving a very concise and important overview of these two SIs. We are trying out a slightly different method here—trying to cut down on the amount of speaking that the noble Lord has to do at the Dispatch Box. I think that it has worked, so I hope it will be a model for others to come.

The three points I wanted to make have been covered by the noble Lord, Lord Fox, so I will not repeat them, but I want to say one thing in relation to scrutiny. The Secondary Legislation Scrutiny Committee has asked us to look at both these SIs with regard to a couple of points. I am happy that the Minister covered the points, so I do not need to delay the House on those matters. For the completeness of the record I also wanted to ask about extractive industries and whether there would be any impact in the way that those accounts will be treated consequent on the introduction of these SIs, if they are required. Again, a letter will be sufficient on that.

The noble Lord, Lord Fox, is right. It is a bit intriguing to find that the principal body which would have been responsible for this is going to be abolished before it has the chance to implement the changes made in the statutory instrument. I would be grateful if the Minister could confirm that, as I understand it, the independent review of the FRC, which I read with interest—it is a very good read indeed, full of spicy and rather spiky comments—is suggesting that the FRC needs to be replaced by a new, independent statutory regulator with stronger powers. Is that right and, if so, will it be completed in the timescale that is envisaged for this statutory instrument?

There is a letter—which is not the same as the report—which was sent to the right honourable Greg Clark MP by Sir John in parallel with his report, which looks at whether there is a case for a fundamental change in relation to who appoints company auditors. There are a number of extremely interesting ideas, particularly for PIEs—again, accompanied by well-phrased and rather pointed comments about the current state of play. They suggest quite strongly—although it is not clear whether the Secretary of State is going to accept this—that there would be a case for moving away from companies having responsibility themselves for appointing their auditors to a situation in which an independent, strong regulator, presumably the new body replacing the FRC, will have a probably quite significant role.. I assume that this decision will be undertaken by the new review, building on the work on the FRC, and of course the CMA review, which is rather surprising because that was only an interim report. I am a bit surprised that that is being taken forward already. If it is, fair enough—but will that review being undertaken by Donald Brydon, the chairman of the London Stock Exchange and Sage, take on the letter element of the Kingman report we have received today?

I have also looked at the CMA report. There is a considerable interest in how that might work. Obviously, it will considerably affect the viability, profitability and operating activity of the large companies that have been very successful in building up accountancy and audit-related functions in this country. It may not be a fatal change—it may be a necessary change—but, again, I would be grateful to get a steer from the Minister as to what exactly is going on here and what the pace of that would be, if it was decided to move forward.

[Lord Henley]

My Lords, I am grateful to both noble Lords for their comments. I suspect that I will keep mine pretty brief and will write to them in further detail, which I think they will be grateful for, bearing in mind the hour. Again, I emphasise that the SIs are there for continuity through exit should there be no deal. We need to provide a degree of certainty for businesses at a time of significant change.

I will deal with some of the points that were made. On logging and mining, which both noble Lords raised, I will write to the noble Lord, Lord Fox, and copy that to the noble Lord, Lord Stevenson.

On the question of working closely with business, the noble Lord, Lord Fox, asked why we did not consult more widely. Officials did consult with stakeholder groups, including preparers, users and auditors, but they were not able to consult more widely due to negotiation sensitivities at the time.

I am afraid that both noble Lords are ahead of me in that I have not yet read the independent review of the FRC, but that will be something to look forward to on my Christmas list. The noble Lord, Lord Stevenson, commented on the barbed nature of some of the comments. It certainly adds to the joys of reading these things when they are written in such terms. We will carefully consider and consult on the recommendations and, if there are any, ensure that a smooth transition affects these functions. But obviously the FRC exists at the moment and therefore we have to make these changes.

Lastly, the noble Lord asked whether the SI would be impacted in future by the range of ongoing reviews in the audit market. I recognise that there is quite a range of work going on to ensure that the audit market is as effective as possible, which may lead to later changes, but as I have said on many occasions—and will continue to say—we will consult on those issues in due course.

I think I have answered the questions that both noble Lords have put to me and, there being no further interventions likely, I commend these two Motions en bloc to the House.

Carbon Emission Reduction Targets

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 5th December 2018 Lords Chamber

[Lord Henley]

My Lords, I am going to leave the pay of oil and gas executives to their own shareholders, and what my noble friend has said is something that they can take into account. We will continue to try to meet our own carbon reduction targets and also note the comments of my noble friends. We are making enormous progress and are on track to meet our second carbon reduction target. We are the fastest decarbonating country in the G20. Moreover, as I said earlier, we will look at our energy security and other matters.

[Lord Stevenson of Balmacara (Lab)]

My Lords, given that the long-term gain must be to try to get to net zero emissions—by approximately 2050—there is a lot to play for in this area. I think that we should all congratulate the Church Commissioners and the Church of England on making sure, through their pressure, that at least one company recognises that it has a responsibility, even if it is a rather novel way of doing it. Indeed, if the Minister has any worries about what other schemes we might have for capping executive pay, I have many of them up my sleeve which I could share with him. However, surely the main point here is that this has to be an all-round effort. What are the Government going to do about affecting investors whose short-term decisions often ruin the plans that they might have?

[Lord Henley]

My Lords, I believe that the Government have done the right thing in giving the power to the shareholders, who are the investors. They now have the power to look at their executive pay.

Competition (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 4th December 2018 Lords Chamber

[Lord Stevenson of Balmacara]

Feast, for those who have interests in these matters. This is a bit of a dripping roast, if you do not mind me mixing my metaphors.

The point is that, in attempting to find a way of arguing that there should be no leakage of EU jurisprudence into decisions post-crash-out Brexit, the wording used—the solution mentioned in new Section 60A(7)—provides that the relevant court or decision-maker may disapply the interpretative obligation if they consider that to be appropriate in the light of various criteria, one of which is a post-Brexit development in EU law. However, it goes on to say that other criteria may include—these are terms used in the regulations but there is no apparent way of checking back to see what they mean in fact—differences between EU and UK markets, development in economic activity, generally accepted principles of competition analysis and the particular circumstances under consideration. Like the noble Baroness, Lady Burt, I am no lawyer, and I am not trying to pretend to be one, but that wording is very open and, presumably, will be subject to a lot of discussion and debate.

Those criteria are wide-ranging and broadly expressed and their interpretation is likely to be the subject of considerable debate in many quarters up and down the land. My point is narrow in the sense that the Explanatory Memorandum is perhaps, as I hope the Minister will agree, somewhat optimistic in stating that the provision,

“will provide UK courts and competition regulators with clarity as to how Chapters I and II are to be interpreted after exit”.

I do not think that it is clear at all. I think it is raising a huge amount of interpretative, probably good and proper, debate but it is not providing the sorts of certainty that businesses want as the transition goes ahead. I will leave that point there.

The other relevant point is that there will be transition from a system which is largely co-operative and run across national boundaries under an EU regulatory regime to one that is UK-only, based on UK legislation and UK activities, in this case by the CMA and by other regulatory bodies that have authority.

I do not want to overegg the case but the worry is whether the CMA will be properly resourced to undertake its anti-trust responsibilities as well as the responsibilities relating to the new state aid rules. The CMA itself has said that it will need to carry out a lot more work on more complex cases. It is apparently working on secondary legislation that will facilitate that, and is also increasing staff numbers. That is probably the right response to the problem—both previous speakers raised these issues—but, if that is the case, we are not seeing the last of the legislation that will relate to this. Presumably, we are being promised further secondary legislation to tie up some of the issues that the CMA may wish to raise on its own. Therefore, we are not doing the cut-and-paste job that I criticised the Government for doing. Will the Minister confirm that that is the case? If so, what is the likely timetable and change that we can expect? In particular, will there be more statutory instruments on this set of laws before we reach exit day? It would be nice to know if that is to happen.

My other points are relatively minor. They also relate to the Explanatory Memorandum, in particular, the question raised in paragraph 7.7. There is a slightly convoluted expression of how timetables work on transitions. It states:

“For the purposes of calculating the limitation period to bring these claims in respect of a case which the European Commission has not concluded before exit day, the period before exit during which the European Commission was investigating will not be counted when calculating whether the time period to bring a standalone claim has expired”.


That may make sense in the real world, but I could not understand it. Can the Minister explain it to me from the Dispatch Box or, if necessary, write to me, so we can be clear?

The point here is that there are implied restricted timetables for people who want to make claims in any case over which the UK authorities have control. How do they fit in to where we will have got to on exit day in relation to claims being held under the European Commission? Is there an issue there which we should be aware of? There may not be, but I should like that confirmed.

The Minister spent a lot of time on the block exemption regulations. I do not have much to say on that. It is a difficult area of law because of its subjective nature, but there is another issue about timescale in paragraph 7.18. I do not want to go into detail about it now, but again, if the Minister could write to me about it, I should be very satisfied.

Finally—this is a particularly narrow point—paragraph 7.21 states that the regulations amend secondary legislation related to the Enterprise Act, as the Minister said. It states:

“These changes include amending the definition of insurance undertaking and financial institution so that the statute book is functional after exit”.


I have no complaint about that. But it continues:

“These amended definitions correct deficiencies but do not contain any substantive changes to the definitions”.


I have read them. I do not see many changes. Perhaps the Minister could respond to that now or write to me about it. I want to be sure that the exact nature of the changes is clear and that they have been exposed in this House.

[Lord Henley]

My Lords, I thank all three speakers for their comments and questions and shall endeavour to answer as many as possible. First, I emphasise that, as with other statutory instruments that will be coming before the House, these are no-deal regulations. If there is a deal—if everything goes through—they will not be necessary. I do not know where they will sit, but they will gradually perish, die or whatever.

There will be more regulations—I am not absolutely sure whether there will be more regulations on this specific subject—and the noble Lord, Lord Stevenson, and others will be debating them with me in due course, and I am sure we will have a busy time over the coming months. I hope that we will at least get a break for Christmas.

I can assure the noble Baroness, Lady Burt, that the regulations will not affect our ability to tender for contracts. They are merely about mergers and anti-competitive behaviour. Ability to tender for contracts is a matter for debate on another day. She also asked about the impact of the regulations. I can assure her that they will have minimal impact on the taxpayer and businesses, as the changes in the instrument only remove deficiencies and enable the statute book to continue to function after exit. This statutory instrument aims to create clarity in law, which would minimise litigation risks. Most of the costs associated with the changes to the competition regime flow directly from EU exit, not from this statutory instrument. There may be some cost to business associated with familiarisation with the regulations, but that is the case with any legislation.

The noble Lord, Lord Berkeley, asked what happens to live cases at exit. In a no-deal scenario—I re-emphasise that that is what we are talking about—there would be no agreement between the UK and the EU on jurisdiction over UK aspects of live cases. This instrument does all it can unilaterally to clarify jurisdiction and provide clarity and certainty in the event of that no-deal exit. After exit, the CMA may conduct investigations into breaches of UK competition law that occurred before or after exit day, including live European Commission cases. In practice, I believe that the CMA would undertake a review to ascertain, among other things, the litigation risk and impact on UK consumers of opening an investigation. But if the European Commission has reached a decision before exit, the CMA will not have the power to open a new case.

The noble Lord also asked what would happen to live merger cases. It does all it can to clarify the jurisdiction in the event of a no-deal exit. At the point of exit, the EU merger regulation no longer applies. Consequently, if the European Commission has not issued a decision before exit, that regulation will not prevent the CMA taking jurisdiction over the UK aspects of the merger. The Government recognise the importance of continued co-operation between the CMA, the European Commission and national enforcement agencies. In a no-deal scenario, the Government would seek to establish bilateral or multilateral co-operation agreements with key member states and the European Commission as soon as possible.

The noble Lord, Lord Stevenson, also asked about changes to Section 60. There is a deficiency in the wording of the current section, because it requires UK courts and regulators to act consistently with EU law. The Government have therefore removed the section and introduced the new Section 60A. This provides that UK courts will continue to be obliged to ensure consistency with pre-exit EU competition case law when interpreting UK competition law, but allows them to depart from such pre-exit law where it is considered appropriate. That would be a matter for the CMA in the light of specified circumstances. This approach will provide continuity and consistency in the law for businesses and consumers, as pre-exit EU competition law will form the bank of case law from which courts and regulators will draw, while also allowing them to diverge from old case law where appropriate.

The noble Lord, Lord Stevenson, also asked what regard the courts would have for decisions of the European courts after our exit. The withdrawal Act is clear that the UK courts will not be bound by any judgment of the European courts after the UK exits the EU. However, it will be possible for UK courts to have regard to such judgments, so far as they are relevant to the matter before the court. The noble Lord also asked about the clarity of the wording of the new section. We believe that the changes to Sections 60 and 60A are targeted, reasonable and proportionate. They will reduce litigation risk for the CMA and provide courts and businesses with legal clarity.

The noble Lord, Lord Stevenson, also asked about resourcing for the CMA. We are confident that it will be ready for exit day and it continues to plan for such an outcome. My department continues to work with the CMA to ensure that this is the case. It will obviously represent a significant challenge but it will also be an opportunity for it. The National Audit Office reviewed the CMA’s exit planning and readiness and concluded that it has robust plans in place to take on a larger competition case load. As part of the Spring Statement, the Chief Secretary to the Treasury announced that the CMA had been allocated an additional £20.3 million in 2018-19 for competition, in preparation for the EU exit. The Treasury has received the CMA’s bid for additional funding for EU exit preparations in 2019-20. We will be announcing further details in due course.

The noble Lord also asked about the time limits in paragraph 7.7 of the Explanatory Memorandum. If the noble Lord is content, I would prefer to write to him on that matter, and obviously I will write on any other matters that I have failed to address. But I think that I have picked up most of the points.

Postal and Parcel Services (Amendment etc.) (EU Exit) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 4th December 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, again, I am very grateful to the Minister for the very full letter about this SI that I received last week. He covered all the points that he has made in his speech—and, in fact, a few more—and it was very useful in getting us ready for this debate.

However, there was one thing that I wanted to pick out relating to the Postal Services Regulations 1999, which were set to become redundant and will be revoked in full. I presume that the rationale for wishing to revoke them is that they are derived from an EU directive, I think, rather than a regulation, and they require member states to designate a national regulatory authority in the UK. In this case, Ofcom is the designated authority. The letter goes on to say that the functions of the Secretary of State and Ofcom in regulating the sector are set out in the Postal Services Acts 2000 and 2011, but I question whether the removal of the 1999 regulations, which designate Ofcom as a specific post of national regulatory authority in the UK, does not in some way discriminate against Ofcom as being the likely regulator for postal services in the UK. It is really a question of whether there will be any diminution in Ofcom’s authority as a result of this. I would be grateful for reassurance that there will be no change in substance, even though there will be a change in the legal basis on which it is appointed.

The noble Lord has spent a lot of time discussing the role of the ERGP and the future of that body with Ofcom as an attendee. It is an obvious point but attending is not the same as being a participant, and even though it is an informal body largely operating by consensus, there will still be a difference, so we will be a rule-taker and not a rule-maker in a very real sense. Again, I would like reassurance that there is no question that we will lose out in terms of how our postal services flow and our parcels are delivered in the future.

I have two further points. Like many noble Lords, I am sure, we have received a number of representations from those involved in cross-channel activities, particularly about getting access to goods and bringing them through the Channel Tunnel to make sure that markets in the UK are satisfied. Therefore, this is about inward goods but it is also about external goods. A lot of material flows out through the tunnel to other places, and a particular issue is time-sensitive goods. Is there anything that the noble Lord feels it appropriate to share with us, particularly in relation to recent comments by his colleagues in the Department for Transport about the difficulties in ensuring that goods move backwards and forwards? Would that impact on anything that these regulations should do? Time-sensitive goods are obviously the most important, such as fresh goods and other materials that need to arrive at a particular time. These will be affected by blockages and changes in the overall system. Where they are postal, additional regulatory authority and other issues may be engaged, and there may be costs involved that we are not yet aware of. I would be grateful for some comments on that.

Finally, paragraph 7.6 of the Explanatory Memorandum deals with Article 7 of the EU parcel delivery regulation. I recently saw documentation from the Institute for Government, which has been looking at the Government’s readiness for Brexit in the case of a no-deal crash out. One issue flagged as red, and therefore not ready, is parcels. Does the Minister have any information on that, given that it falls within his brief? Is there a problem here and, if so, is it something that he wishes to share with us? The Explanatory Memorandum makes the point that the EU parcel delivery regulation is largely covered by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. It goes on to say:

“Therefore, the EU Parcel Delivery Regulation will become substantially redundant following the UK’s exit from the EU”.


But “substantially redundant” is not the same as “completely redundant”. Will the Minister spell out the differences that are envisaged?

[Lord Henley]

My Lords, I thank noble Lords for their contributions to the debate. I hope I can answer the questions that have been put to me. Again, let me assure noble Lords that these amendments to primary legislation governing the postal services will have no impact whatever on the UK’s universal postal service and will preserve, as far as possible, the rights, responsibilities and protections offered by the existing system. They make only those changes necessary to ensure that the regime continues to be fully functional on exit day. As I said on previous regulations, this will increase legal clarity and be of benefit to national regulatory authorities, businesses and consumers.

The noble Baroness asked about the cost to the taxpayer. This will have minimal impact. The regulations qualified for the de minimis threshold, which means that direct impact on business or civil society organisations is less than £5 million annually, and as such a full regulatory impact assessment was not considered necessary. As I have made clear, we will continue to offer the same postal and parcel services throughout the United Kingdom as we do now, and as we do to remote communities. There will be no change in liabilities or obligations. Royal Mail will continue to deliver that universal service in line with requirements set out in domestic law.

The noble Baroness also asked what will happen as a result of revoking the cross-border parcel services regulation. Revoking that regulation will mean that the UK will not be required to share pricing information for cross-border parcel deliveries with the European Commission. Ofcom can request pricing information under the UK’s domestic provisions, which will mitigate any data gap between the UK and member states. There are also price comparison websites that provide information about prices for parcel deliveries from the UK’s service providers. Therefore, comparing prices for cross-border parcel services between the UK and EU member states will continue to be available to consumers.

The noble Lord, Lord Stevenson, asked why the Postal Services Regulations 1999 are being revoked by these regulations. The 1999 regulations designated Ofcom and the Secretary of State as our national regulatory authorities for postal services, as was a requirement of the postal services directive, and that simply no longer applies after EU exit. In any event, the functions and duties of Ofcom and the Secretary of State relating to postal services are set out in the two Acts I referred to: the Postal Services Act 2000 and the Postal Services Act 2011. There is therefore no longer a requirement to designate them as the national regulatory authority under separate regulations.

[Lord Stevenson of Balmacara]

I may not have made myself entirely clear. This may be a point that is not worth exploring further, but just to be precise, the existence of the 1999 regulations requires the Government to appoint a single national regulatory authority for post, which is Ofcom. Removing that, as is proposed in these regulations, means that in theory it is possible for the Government to appoint other regulators to take over Ofcom’s rules and functions. I wondered if that was the implication and therefore whether there was any danger to Ofcom’s position.

[Lord Henley]

There will be no change in the position. There is no hidden agenda that a shadow Ofcom will be set up or some such other body. I can give that assurance to the noble Lord.

The noble Lord was also concerned about Ofcom’s new role on the European Regulators Group on Postal Services, and whether it was now, as he put it, a rule-taker rather than a full participant. I stress that the ERGP is just an advisory body. It does not make any binding rules or take any decisions. Leaving that and merely having an observer status will not have a detrimental impact on Ofcom’s ability to participate in it or its ability to regulate the postal sector and engage with other EU regulators. As I said, Ofcom wishes to have that observer status just to ensure that it can continue to participate to the full extent necessary.

The noble Lord also asked about customs arrangements and whether they might affect the post. We will obviously be engaging with businesses about new customs arrangements if the UK leaves the European Union without an agreement. The Government have published the customs White Paper and sent out technical notices. Royal Mail is working with HMRC to ensure that it is prepared for changes so that we can continue to operate in the same way after exit.

I hope that that deals with all the questions. As I said on the earlier regulations, the regulations do not represent a policy change to the operation of postal services and they preserve, as far as possible, the rights, responsibilities and protections offered by the existing system. I commend these regulations to the House.

Textile Products (Amendment) (EU Exit) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 21st November 2018 Grand Committee

[Lord Henley]

I will write in greater detail to the noble Lord, just to make sure that he is absolutely clear. In passing, on the question of correspondence, I give an assurance that from now on I will send all letters from my department on matters relating to SIs to the noble Lords, Lord Stevenson and Lord Fox: I will copy letters to one and the other. I am sorry if he has been confused: on some occasions I have written to the noble Lord and on others to the noble Lord, Lord Grantchester. I shall inform my office that in future it will be entirely himself. If the noble Lord, Lord Lennie, would like to receive those letters, I will send them to him too.

[Lord Stevenson of Balmacara]

In no sense was any blame to attach to the Minister personally: in fact, several of the ones that went to my noble friend Lord Grantchester were from his colleague Kelly Tolhurst. I got a couple from the Minister himself and my poor noble friend Lord McNicol got none.

[Lord Henley]

The poor noble Lord, Lord McNicol, got none, but I think I wrote to the noble Lord, Lord Lennie, on something. Anyway, between myself and my honourable friend Kelly Tolhurst we will look at our entire system and make sure that there is one recipient of all letters on the Official Opposition Front Bench and that similarly, the noble Lord, Lord Fox, will be a recipient of all other letters.

I move on to the question of the impact—the cost, as the noble Lord, Lord Stevenson, put it. After exit, the responsibilities for UK manufacturers or a business sourcing textile products from UK manufacturers, or importing them from outside, will remain the same; it will be the same for manufacturers. Anyone importing products from manufacturers in the UK would be putting a textile product on the market and so would become responsible for ensuring that it contains the appropriate label or marking and that it is accurate according to the retained EU regulation. The practical impact of this will be limited. I think any impact on business will fall far below £5 million annually and, as a result, we do not believe that a full impact assessment is necessary.

On exit day, UK and EU labelling laws will remain highly aligned. Textile products imported from the EU will therefore be compliant with the shared requirements and the saved EU regulation does not mandate any costly technical testing or the production of documentation as proof of compliance. Similarly, there would be no administrative costs at the border to demonstrate compliance. Many businesses already undertake compliance activities as part of their due diligence programmes. That includes asking for proof of fibre composition or procuring their own fibre composition test. As a result, it is unlikely that businesses would need to put in place additional checks to demonstrate compliance with the saved EU regulation. The Government will, in due course, provide further guidance to businesses to ensure that they have understood the requirements of the saved EU regulation.

The noble Lord, Lord Fox, asked about applications for new fibres. Businesses wishing to introduce a new textile fibre name or manufacturing tolerance will be able to make this application to the Secretary of State. The Government will, in due course, publish further guidance, including the process by which the Secretary of State will assess the various applications. Lastly, I was asked: will businesses have to apply to both the United Kingdom and the European Commission to have a new fibre name approved for both UK and EU markets? Yes, in a no-deal scenario, it will no longer be appropriate for the European Commission to approve new textile fibres which can be made available on the EU market and therefore they will have to apply to both. I hope that will not be an onerous burden.

As I said, I remain optimistic, as always, that we will reach an agreement with the European Union, but it is important and prudent to have a regulatory and legislative framework in place should we leave without a deal. That is entirely what this instrument ensures.

Productivity: Work-related Stress

Debate between Lord Stevenson of Balmacara and Lord Henley

Thursday 15th November 2018 Lords Chamber

[Lord Henley]

My Lords, that is a very interesting suggestion. I cannot remember the precise details of all the recommendations in the Stevenson/Farmer report as to whether that was one of them, but it certainly recommended that large employers—organisations with more than 500 people—should take certain actions. The Government recommended applying that to employers with more than 250 people, an improvement on that figure. I will certainly take the noble Baroness’s suggestion on board and ensure that it is looked at.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I do not wish to trivialise the issue but I want to bask in the reflected glory of the name Stevenson. Unfortunately, it was nothing to do with me. I guess there must be quite a lot of stress in the party opposite in the current circumstances so I send them my best wishes at this difficult time.

Does the Minister accept that work-related stress is one of the components of job quality? On page 118 of the 254-page Industrial Strategy, the Government set out a programme of work stemming from Matthew Taylor’s review, which assessed job quality and success—including the well-being of workers and employees, which is said to be fundamental. Can he say what progress has been made on that work stream?

[Lord Henley]

My Lords, if the noble Lord can be patient, he will get a further response to the Taylor review in due course. I assure him that there is no stress in the Conservative Party or the Government at the moment.

Industrial Strategy

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 31st October 2018 Lords Chamber

[Lord Henley]

My Lords, I am afraid that I cannot give the noble Lord a precise date. I accept that it is not spring and that British Summer Time has ended. I had better say that, as the noble Lord knows, one member, the chairman, has been announced. The remaining members will be announced—dare I say it—shortly. I look forward to being able to share the names of those members with the noble Lord—in due course.

[Lord Stevenson of Balmacara (Lab)]

We have obviously stumbled into an audition for “Yes Minister”; I congratulate the noble Lord on his response. Would he agree with me that the industrial strategy has to be for the whole country? If so, why does the Cabinet sub-committee, chaired by the Prime Minister, charged with supervising the industrial strategy have no representatives from Scotland, Wales or Northern Ireland in its membership? Can he confirm that the new strategy board—or strategy council; I thought it was the strategy board—will have representation from businesses, economists and academics from every nation and region of the United Kingdom?

[Lord Henley]

My Lords, on the Cabinet committee that will be looking at this issue, the noble Lord will be well aware that many members of the Cabinet —including my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy—have responsibilities that cover the entire United Kingdom, so the whole United Kingdom is covered in that respect. On the membership of the council itself, there will be 20 members. One member has been announced; the remaining 19 will cover the entire United Kingdom, covering as many different areas as it is possible for 20 members to cover. Again, I look forward to sharing that list of members with the noble Lord and with the noble Lord, Lord Fox—in due course.

Companies (Miscellaneous Reporting) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 9th July 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am conscious that the House wants to move on but it would be wrong to pass over these regulations, because there are rather important points within them. My noble friend Lord Haskel raised a number of points about the overall shape of the Government’s response to company powers. He talked about the need to think again about the way that shareholders are always given priority and the missed opportunity to stress the importance of productivity. My noble friend Lady Drake raised a number of points about how the figures can be used in a positive way, and I want to come back to that, although I will not go through all the points in detail. In fact, a lot of them were covered by the noble Baroness, Lady Bowles, although I am afraid that she lost the House during her speech. It may be worth reading again what she said, because a lot of it was very relevant to what our future agenda needs to be.

First, I congratulate the team behind these regulations. The Explanatory Memorandum that accompanies them runs to 55 pages and is one of the best that I have seen, but I bet that very few people here have read it. They should do so because, even if they are not up to speed with the latest arithmetical terms, it will tell them about averages and means in a way that will bring home any questions that they might have had about why people use one term or another. If I may say so, it has chosen the wrong term, but has done so in a way that has allowed it to at least shine a spotlight on the difficulty of comparing, for instance, the pay of the top person in a company with the median or average or whatever other term you want to use. It points out more difficulties than it solves so it is worth reading.

Secondly, on the date of application of the regulations, some Members of the House will be aware that I have concerns about the fact that we are observing in its absence the common commencement dates for when new regulations are placed on companies and businesses. These regulations come in 21 days after they are passed and not on the common commencement dates, which are 6 April and 1 October. I am keeping a score of the Minister’s efforts in this matter. He will be delighted to know that, of the 13 regulations he has brought forward recently, his score is now 11:2, and even those two were almost cheating because one of them was done by exception and another was done a year late. Nevertheless, I appeal to him to try to up his game.

The key point is: why are the Government not doing more on Section 172(1) of the Companies Act 2006? This section requires directors to act in a way that they consider in good faith promotes the success of their company as a whole and to have regard to, among other things, the long-term consequences of their decisions and the interests of their employees. This needs to be looked at very seriously and rewritten for the 21st century. As part of that, the review should look at the issues that should be in place for all directors, whether in private or public companies, and should include matters such as late payment of suppliers, productivity and the use of powers to try to ensure that stakeholders of the company benefit from it.

Thirdly, the point has already been made that the threshold of 250 UK employees mirrors existing thresholds, but it does not make any sense for it to be limited to UK citizens only. The Government should make it clear that the intention of the legislation is for companies to report on their whole workforce. My noble friend Lady Drake asked why we are not including “workers” as well as “employees”. All employees are workers but not all workers are employees, and it is time that this was updated to reflect that. I think the Minister has already accepted that, in time, they will do that.

My final point is that, without some central registry of reports, this requirement will not be satisfactory. I hope that the Minister will take account of what I have said and perhaps write to us on the key points, in order that we might make progress today.

[Lord Henley]

My Lords, like the noble Lord, Lord Stevenson, I would like to make progress, and I suspect that the House would also—I am sure the Chamber is not as full as it is purely to listen to me wind up on this order.

I start by dealing with the noble Lord’s comments about common commencement dates; I know this is a matter of great concern to him, and I always try to comply. Wherever practical we like to follow them but, because we are proposing to introduce these significant new regulations designed to coincide with the start of the company reporting year, we felt that 1 January might be more suitable. I will allow him to continue to keep his scorecard and on those rare occasions that we diverge from the common commencement dates—although they are perhaps less rare than they might be—I will make it clear why we are doing so.

My noble friend Lady Neville-Rolfe asked whether we could have a review of some of the arrangements in five years, particularly in the light of her comments on pages 41 to 51 of the impact assessment. I give an assurance that we will do that. The success criteria include company executives focusing more on long- term performance, and the new Section 172 reporting requirement must include reporting on the impact of directors’ decision-making in the long term.

I appreciate that although the noble Lord, Lord Haskel, welcomed the regulations, he felt that they possibly should go further. He expressed concern about the reluctance, particularly of some institutional shareholders, to intervene. It is important to remember that increasing knowledge is always a benefit to any shareholders. I think that he recognised this and that shareholders were increasingly becoming more assertive in holding companies to account. They have, for example, strongly backed pay ratios and other rules introduced today. The Investment Association’s new public register of shareholder dissent, to which I referred in my opening remarks, is putting significant and welcome new pressure on companies to listen to their concerns.

The noble Baroness, Lady Drake, asked about the definitions of “employee” and whether they should also cover other workers. The regulations we are using are made under the Companies Act and, therefore, we will follow the definitions of “employee” in that Act—that is, someone employed under a contract of service with the company. Having said that, I recognise her more general concerns about the definitions of “employee”—we have discussed these matters on other occasions—given the changing nature of the workforce. The Taylor review has addressed this issue and the Government will need to respond further in the light of that and recent court decisions. However, for the moment, for these regulations it is necessary that we stick to the Companies Act definition.

As the noble Lord, Lord Stevenson, suggested, it would be right for me to write in greater detail on some of the questions put to me in the course of the debate. However, I have heard a general welcome for these regulations.

Airbus

Debate between Lord Stevenson of Balmacara and Lord Henley

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.

Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Lord Stevenson of Balmacara and Lord Henley

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 ---

[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.

--- 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.

Brexit: Science and Research Funding

Debate between Lord Stevenson of Balmacara and Lord Henley

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.

Package Travel and Linked Travel Arrangements Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 16th May 2018 Grand Committee

[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.

Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 9th May 2018 Grand Committee

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

My Lords, the draft Renewable Heat Incentive Scheme Regulations 2018 were laid before the House on 23 March 2018, and the draft Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018 were laid before the House on 7 February 2018. Just to save the noble Lord, Lord Stevenson, some trouble, I can let him know that the common commencement date rules do not apply to this type of regulation as they have no impact on business, so he need not raise that.

[Lord Stevenson of Balmacara (Lab)]

I am grateful to the Minister for raising the point before I had time to do so, but I just point out to him that that puts the score at 8-1 against.

[Lord Henley]

I am grateful to the noble Lord. As I said earlier on, I will endeavour to improve; I know that the noble Lord will keep a record on these matters.

The purpose of the draft orders is to implement reforms to the renewable heat incentive, or RHI. The reforms will deliver changes that will strengthen the focus on long-term decarbonisation, offer better value for money for taxpayers, increase protection for consumers and further support supply chain growth in the renewable heat sector. Heat accounts for around half of the UK’s energy use and one-third of total carbon emissions. Increasing the share of heat derived from renewable sources is a critical challenge, both to meet our renewable energy targets and to deliver the Government’s long-term carbon goals. Building a vibrant renewable heat sector is a key objective of my department’s clean growth strategy and the industrial strategy. The RHI is the main programme to deliver those goals over this spending period. Before the RHI started, only 1% of our heat came from renewable energy sources; that figure is now around 7% of total heat.

This type of tariff-based support for renewable heat is the first scheme of its kind in the world. Inevitably, there are lessons to be learned, and these reforms are a response to some of the lessons from the early years. The National Audit Office published a review of the RHI in February this year, which we were pleased to receive. Many of its comments related to issues covered by the draft regulations, which I hope will go some way towards addressing some of the issues raised by the NAO, which were also noted by the Secondary Legislation Scrutiny Committee. The draft orders will deliver a series of important reforms that will help us to deliver a more strategic mix of technologies and improve value for money over the next three years until the scheme closes in March 2021. I will highlight the main ones.

We will increase the tariffs available for biogas and biomethane technologies while introducing new restrictions on the feedstock that those plants use. That will encourage the increased use of food and agricultural waste and will reduce the use of energy crops, making better use of farmland for food production. Alongside changes already made last year, this will rebalance deployment away from biomass in favour of heat pumps, biogas and biomethane, which will all play a much stronger role in the scheme over the long term.

Another important change is that we will bring in tariff guarantees that will allow RHI applicants to secure their place on the scheme in advance of construction. This will support investments in larger plants that deliver better value for money. We will cap the amount of heat covered to 250 gigawatt hours per year to protect the scheme budget.

In the domestic scheme, take-up to date has been dominated by owners of larger homes. To promote wider uptake, we will introduce the assignment of rights. This will allow third parties to finance renewable technology and to be repaid directly from the RHI. Crucially, that will open up access to the scheme for those without up-front capital to pay for a new heating system.

Following consultation last year, we will limit the eligibility of certain heat uses. These provisions will remove most instances of wood-fuel drying and waste processing or drying. In addition, we will remove the use of heat for drying digestate in anaerobic digestion facilities as an eligible heat use. We consider that these processes are poor value for money and that many would not exist without RHI support. We will also remove support for heating swimming pools on the non-domestic scheme, unless the pool is for commercial or municipal use.

We are also introducing changes to allow more than one heat pump to use a common or shared ground loop. This should facilitate greater deployment of that important technology. The introduction of electricity metering for heat pumps across both schemes will allow participants to better monitor the efficiency of their plant and build confidence in the technology.

Following consultation, another change will be to increase the power efficiency threshold of combined heat and power technology from 10% to 20% to reduce the risk of overcompensation and to encourage plants to run more efficiently. There is also a whole series of mainly administrative changes to tighten cost control, reduce the risk of gaming and improve Ofgem’s delivery of both schemes, including by tightening its enforcement powers.

The Renewable Heat Incentive Scheme Regulations 2018 also consolidate all previous revisions to the original regulations, as recommended by the Joint Committee on Statutory Instruments. The RHI plays a central role in the Government’s programme to decarbonise heating. These regulations are an important step in refining the scheme and I commend them to the Committee. I beg to move.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for his excellent introduction to these regulations and other speakers who have contributed. It is a truism to say that these regulations are an important part of decarbonising the economy and reducing greenhouse gas emissions in line with our international commitments and targets. The key question has to be whether these regulations before us will help us in our drive to achieve the Government’s stated aims, which include a,

“focus on long-term decarbonisation, promotion of technologies with a credible role to play in that transition, and offering better value for money for taxpayers”.

I couple that observation with a question to the Minister: does he agree that the evidence before us—which, as has just been said, is not complete by any means—seems to show that we have been less successful in reducing carbon from heat in this country than we have been in decarbonising electricity generation? It may be that that is a lesson that we need to learn and expand upon during this process.

The noble Baroness, Lady Featherstone, has just said that we are approaching a cliff-edge. Not only is this scheme time limited, but we have had very little information on how the Government are going to drive this policy through to 2030 and beyond and, indeed, on whether they are focusing sufficiently on decarbonisation or are falling into the trap of choosing some current technologies over others, which experience tells us is not the way to go. We need to go single-mindedly for the higher carbon-generating technologies and stick with that before we start playing around with too many other options that may well not be as efficient in getting us to the target.

Turning to the regulations, we do not disagree with the proposed changes. There have already been delays that have been far too long, revisions and seemingly endless consultations. The most important thing is to get on with delivering progress in renewable heat generation. However, we have to bear in mind, as the NAO report, which has already been mentioned, has brought into clear focus, that this reset of where we currently are translates into a very severe overall reduction in ambition. Can the Minister give us some indication of the longer-term plan that the Government have for renewable heat, and of what exactly the plan will consist? The ambition, which I thought all parties shared, of a substantial decarbonisation of heat cannot be achieved on the RHI alone. Indeed, as has been mentioned, these regulations are going to end, and will be closed to new entrants in March 2021. This is very short-term target and few, if any, new projects can be expected to be devised, tested and financed, or even introduced, in that timeframe. So, while we welcome what is being done, the Government need to answer some key questions: what is going to happen next and when will it happen? Where is the research on different heat-demand scenarios? What is the future for hydrogen, which recent reports have talked up? What changes will be needed in the grid, for example, if there is a large- scale uptake of heat pumps, and who will pay for that? What is the proper role of bioenergy, given its sometimes adverse impact on the natural environment? All we know is that the Government intend to publish a full report on the evidence by summer 2018, which is not, frankly, enough, and is, of course, already too late.

We have, as the Minister said, the benefit of a NAO report, which was picked up by the Secondary Legislation Scrutiny Committee. The key point that emerges from that is that the amount of renewable heating funded by the RHI will have reduced to 65% by 2020, and the lifetime carbon emission reductions achieved by the RHI, in terms of the current ambition compared with the original starting ambition, is a reduction of 44%. This is a substantial downgrading, which is very disappointing. As a country, we surely deserve better.

I have some specific questions for the Minister, some of which have been raised already. On the assignment of rights, which we agree is important, surely it is important for both domestic and non-domestic RHI, but the regulations restrict it to domestic. Can we have an explanation of why that is the case? On tariff guarantees, the regulations are sending the wrong signals; people need certainty, and making these TGs subject to closure if the guarantee amount is exceeded in any particular period is obviously helpful in capping the costs, but will be disastrous because they leave investors and operators uncertain about the likely financial return they will obtain from their investment. We welcome the geothermal element in the non-domestic scheme, but the funding identified seems very ineffective and insufficient. Can this be looked at again? Finally, I am surprised at the outturn position of 20% adopted on the CHP efficiency threshold, as 71% of the consultation responses disagreed that the level should be returned to 20%. The argument goes that CHP, because of its variable outputs, does not work on the basis of a known level of electricity certainty. By setting the level at 20% as if it were achievable across the board without exception, the scheme potentially undermines the viability of good CHP schemes that cannot operate entirely on that basis. I would be grateful for a comment from the Minister on that.

I look forward to the response from the Minister, but I echo what has just been said by the noble Baroness, Lady Featherstone: if he wants to add to his letter-writing, I am sure that we can wait for that.

[Lord Henley]

My Lords, as always, I make the offer of a letter to all noble Lords who took part in the debate, because obviously I will not be able to pick up all the points. I am grateful for noble Lords’ general welcome for the regulations and our response to the NAO report.

The noble Lord, Lord Teverson, talked about this being a drop in the ocean given the large sums of money that are involved—we all know that a billion here and a billion there soon adds up to quite a large sum. Take, for example, AD, which was mentioned by the noble Lord, Lord Teverson, and the noble Baroness, Lady Featherstone. We know that AD will never solve all our problems, but it can deal with a certain amount of waste. As was pointed out by the noble Lord, Lord Teverson, the important thing with any AD plant is to make sure that you have adequate waste as feedstock for the future. We do not want people producing waste for the sake of waste just to go into a plant. We want to use only genuine waste or, on occasion, to top it up with a certain amount of crops that are grown for that purpose. Principally, however, plants would be designed to deal with waste.

In my former life as a Defra Minister, I saw quite a number of AD plants taking in waste from very different sources. Where they were attached to a supermarket, one would see bucket loads of old yogurts or whatever else had gone past its sell-by date being tipped in. That was a good way of using it, and we want to devise schemes that will, as the noble Baroness rightly said, prevent that waste going to landfill. I saw excellent small schemes also. I remember one used by a salad producer, which took the waste from its own products—the stalks from tomatoes are actually rather difficult to break down—and used it to produce both heat and power to grow more tomatoes in due course, and used the digestate that comes out in the end to fertilise those tomatoes. It was, wonderfully, almost a closed loop. There are terrific advantages to AD, but, as we all know, it will not solve all the problems.

RHI will be an important step in helping to reduce carbon emissions and—I say this to the noble Lord, Lord Teverson—make progress towards the legally binding renewable energy targets that we have. As I made clear, we will certainly look very carefully at ensuring that there is suitable waste feedstock and that the scheme ensures current and future supplies to anaerobic digestion. If the noble Lord has a local problem in the south-west, it is important that he, and those in that world, brings it to the attention of the department when it is reviewing this matter. I assure the noble Baroness, Lady Featherstone, that my right honourable friend Claire Perry and the department will look constantly at these matters to make sure that there can be further tinkering to get it right.

The noble Lord, Lord Teverson, asked about solar thermal. My understanding is that it is eligible for both schemes, so it is already supported by RHI. If he wants to look at that for his own domestic arrangements, he is welcome to do so.

As I said, I very much welcome what the noble Baroness, Lady Featherstone, had to say. I made it clear that we will keep these matters under review. I cannot give a precise date for when and how my right honourable friend will respond. I will certainly respond to some of the noble Baroness’s more detailed questions, particularly those relating to electrolysis and other matters, most of which I shall make a complete hash of if I try to respond to them now. I think all those taking part in this debate would be far more grateful for a written response.

The noble Baroness is right to raise the whole question of detecting abuses and gaming—something touched on by other noble Lords and which the NAO was wary of. As she pointed out, with any changes that we make, there are always potential unintended consequences, and we keep that under review. It is a large and varied scheme, and the non-domestic scheme in particular has huge variation in size, heat and use and the technology used between projects.

Despite all those challenges raised by the NAO, the department—the former Department for Energy and Climate Change, which noble Lords on the Liberal Democrat Benches will know well because it was one of their great Secretaries of State who sat in that department, which is now within BEIS—is working with Ofgem and, I think, developing a better approach to identifying gaming. We will certainly respond to the NAO in due course.

The noble Lord, Lord Stevenson, also welcomed the changes, and I am again grateful. He particularly welcomed the assignment of rights, but was concerned that it might lead to a lack of access to loans or other finance for a number of businesses and that that could be a barrier for them. I can only say that we have no plans to widen the assignment of rights beyond the household sector at the moment, but we would always want to keep all matters under review.

Product Safety: Freezers and Refrigerators

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 8th May 2018 Lords Chamber

[Lord Henley]

My Lords, I totally and utterly reject that accusation. We are doing a great deal on this front. However, I agree that my noble friend has done a great deal on this—and not just since she left government. She led the charge on this as far back as November 2014, when she announced the original review of the UK product safety system.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I think one should share some of the credit. The Minister’s noble friend did a great deal of work, but the Opposition were also involved in trying to get the new Office for Product Safety and Standards set up. The Government are saying that we lead the world in terms of our standards, but, if these standards are linked to roughly 60 fires a week in the UK, how many deaths is it going to take to get them to change their mind on this? We have a new body, the Office for Product Safety and Standards. It has a wonderful website with a list of things it can do. When is it going to do something, and does it have the power to change the way people manufacture these dangerous machines today?

Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 1st May 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords I am grateful to the Minister for his introduction to this SI. I shall start with a very obvious point that I am surprised he did not reach for as his first line, which is why it has not been brought in on a common commencement date. The noble Lord will have heard me speak about this before and I am sure that the department is tired by my questions about this. Such regulations will have a huge impact on certain sectors of the economy. Common commencement dates were meant to give people good warning about when regulations would come in. They are 6 April and 1 October: it would surely not have been impossible to arrange for them to come in, if the 6 April date could not be met, on 1 October. That would have given people plenty of time and knowledge that it was happening.

The Minister has been very good in responding to this and seems to get the point, but of course no action seems to be flowing from the decision. I have decided to keep a tally of his scores: we have had six statutory instruments so far, only one of which has landed on a common commencement date, and I had to rule that one out because it missed the common commencement date that was available to it and went for one further down the track, so it really does not count. So it is really 6-0. I really think that this is not a good standard and I am going to bring this up every time we have a chance to debate these issues until he is finally goaded into doing something about it.

More seriously—although I think that this is a serious point—I agree with a lot of what the noble Baroness, Lady Burt, said about the general approach taken here, particularly the very hostile response that was given to the consultation, which must have given somebody in the department some concern. Like her, we agree with the broad thrust of what has been happening here. There is a concern for the national interest if there are not sufficient regulations set up around hostile takeovers—or, indeed, takeovers that have been done with consent—if they threaten our national interest.

My worry, which I think is shared by the noble Baroness, is that while it is relatively straightforward to see what is meant by the national security interest in relation to military technologies, where the regulations will bite, as soon as there is an introduction of dual use a grey area opens up. It is true that most of the material will be listed as part of the UK’s export control regime, and there is some consolation in that, but I worry a bit about material that could be judged by BEIS to have dual-use technologies, even if the original intention was never for that to be the case. It would mean that the company involved in making it might well get caught by this.

The problems get worse in relation to computing hardware and, in particular, in relation to quantum technology, for which definitions are so obscure, or so general, that it is a very hard to see that those who are working in this area will know whether they are or are not in scope of this regulation. Computing hardware is, as the regulation says, ubiquitous. It is very difficult now to see any technology that does not involve some form of computing, whether it is at the simple level or whether it is more complex, in terms of writing instructions and making things happen in a way that could be carried out to be hostile or difficult. I think that the noble Baroness, Lady Burt, and I are saying the same thing here; that this is getting to the point where it is either such a broad list that it is going to include every company involved in technology and manufacturing in this country, or so wide that it will be useless, because it will be taking the Government’s control, through the merger process, into every sector of the economy, and I am sure that is not what is intended.

If it is bad in computer hardware, it is even worse in quantum technology, which is a phrase that is not well defined. As far as I can see, it certainly did not appear in any legislative document that we have seen in this House for some time. Of course, quantum could be restricted to mean very fast computing. Obviously, that is the sense in which the national interest is more likely to be at risk. But, again, in a short period of time it could include virtually every sector of our economy, and if it does not, it means that our economy will not be competitive across the world. The question underlying this is: is it not better for the Government to fess up and say that they will investigate every merger? In effect, every merger could be used as a way of breaching our national security. If that is the case, perhaps the Government ought to think again about the road being taken here.

My second point is about the change that is coming forward in the negative instrument, which is helpfully attached to the documents that have been circulated for this debate, which is to reduce the value of the target companies for the share of supply test from £70 million turnover per annum to £1 million. Again, it is a question of scale. Does that not suggest that virtually every company in the country will be subject to the share of supply test? If that is the case, how on earth will it reassure those who are carrying on a business which does not threaten the public interest to feel that any discussion or merger they may wish to do with their business—and many of them will be private companies—will be subject to call-in by the competition authorities? I wonder again if the Government are on the right track here.

It may be that the £70 million turnover provides a difficulty in relation to the companies the Government have concerns about, although it is true that according to the impact assessment that is attached to the regulation, we are talking about a very small number of companies—between nought and five. If it is the case that we are going for virtually every SME in the country—those with a turnover of more than £1 million—that probably excludes microbusinesses, but is that not another problem? Quite a lot of the innovative material that will be of concern to our national security may be being developed by two or three people with a very small turnover. If microbusinesses are excluded, the competition issues will not come to bear. I may be making too much of this, but I worry about the direction in which this is going.

My final point for the Government to respond to is that this was said by the Minister to be part of a longer-term project. This is the first stage: two statutory instruments, one of which we have to approve this evening and one of which is a negative and we will have to consider whether to pray against it. According to the Explanatory Memorandum, the second stage is:

“In the longer term, the Government will bring forward primary legislation to make more substantive changes to how it scrutinises national security implications of foreign investment”.


The noble Baroness, Lady Burt, made a number of points about how there may be other considerations here. Will this be restricted to national security or are we finally going to see some sense of the public interest test—which clearly the Secretary of State wished he had powers to address when he was looking at the GKN merger a few weeks ago—which would deal with questions about how research, employment and sensitive activities across the country will be looked at when there is an aggressive overseas takeover that is not particularly welcomed or wanted or which is subject to concerns for which there is currently no adequate remedy in our companies legislation? The Stock Exchange can make recommendations, but these are not statutory. What we need is a government commitment to go forward on this basis which will look at undertakings that will have to be given by the acquiring company for which there will be statutory redress should it be recalled. Is this what is referred to in paragraph 7.4 of the Explanatory Memorandum, and if it is not, can we know when that is going to happen?

[Lord Henley]

My Lords, I start with an apology to the noble Lord, Lord Stevenson, as I have done before, particularly about the common commencement date. I know that he considers this matter of considerable importance and I promised I would take it on board. I hope the message is getting through to the department. It has now also got through to my Whip, my noble friend Lady Vere, who is sitting next to me. She will kick me hard when it next happens. The noble Lord first gave me one out of six, but by his second count had reduced that to 6-0. We will see if we can do better in the future. I hope that I can deal with some of his concerns. I certainly hope we can get back to that point and, where it is important, stick to that common commencement date because I see the importance of what the noble Lord has said.

I forgot about this until I sat down in the Chamber; I then did a few quick sums and saw that the order had been laid on 15 March and comes into effect not 28 days after it is laid but 28 days after it is made. I imagine that it is made on the date when it goes through either this House or another place—I think it goes through another place tomorrow—and that is well off 5 April. I briefly thought, “Gosh, if it means laid then if I add this to that, I would only be a week out”, but I do not think I am as lucky as that.

Perhaps I may deal quickly with some of the points that the noble Baroness, Lady Burt, and the noble Lord, Lord Stevenson, raised. Some of them go wider than the order itself; no doubt someone will discuss some of them in due course if and when there is the primary legislation that I referred to in my opening remarks. The noble Baroness said that a number of legal firms felt, in the consultation, that these reforms were disproportionate or inappropriate. We considered the legality of the reforms carefully and they have gone through significant legal scrutiny by internal and external legal advisers. The reforms have of course been looked at by the JCSI, which we take very seriously. The JCSI certainly said that it believed that the reforms are within the powers granted under Sections 28 and 123 of the 2002 Act.

The noble Baroness, Lady Burt, also asked why the special public interest intervention regime is not enough. That regime is limited to mergers involving relevant government contractors. This statutory instrument takes us a little further and will enable the Government to scrutinise mergers involving an acquirer with no share of supply of the relevant good or service, in the case before a transition, in those three key areas of the economy that I mentioned. She asked why it was those three sectors and not others. Again, the Green Paper set out just how hostile actors’ takeover of certain businesses could raise risks to our national security. We will obviously keep our powers under review but we are acting only under the powers in the 2002 Act. We will not hesitate to take further steps, if necessary, to protect our national security.

The noble Baroness, Lady Burt, then took us wider. Perhaps I may link my response with that to some of the questions raised by the noble Lord, Lord Stevenson. He was looking at the long-term project and how we manage to address it. I can really only take them both back to what I said: we had a Green Paper earlier this year and we are now in the process of looking at a White Paper. Following that, we will need to bring forward primary legislation, which will certainly give the noble Baroness the chance for any amount of parliamentary scrutiny that she wishes. Failing that, I can give an assurance that either my right honourable friend or a Minister here at the Dispatch Box will report to the House if and when it is necessary. As I said, we will want to bring forward primary legislation at some stage to make more substantive changes to how we scrutinise the national security implications of foreign investment. Whether we would want to go wider and look at further grounds for intervention—I noted what the noble Baroness had to say about research and innovation—is a matter that should be left for that occasion.

Finally, the noble Lord, Lord Stevenson, asked about how respondents reacted to the changes to the share of supply test proposed in the consultation. Some respondents raised concerns that the test is subjective and that the threshold is complex and therefore involves complex assessments and would lead to disproportionately high costs for smaller businesses. Some businesses recognised that the proposed changes are necessary to prevent hostile states taking over smaller companies working in sensitive areas of the economy without due diligence being provided. Therefore we are clear that the amendments that the two orders make to the share of supply test are necessary to safeguard national security, as they ensure that our powers to intervene will cover deals involving a buyer with no footprint in specific markets.

I hope I have answered most of the questions put to me by the noble Baroness and the noble Lord. I again apologise to the noble Lord for failing to meet his requirements on the common commencement date. That point is getting through to me, and I have taken it on board. Other than those questions, I think there was a broad welcome for the limited measures proposed in this order and the associated negative instrument.

Swansea Tidal Lagoon: Hendry Review

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 1st May 2018 Lords Chamber

[Lord Henley]

I do not think that I can take this much further but I note what the noble Baroness has to say.

[Lord Stevenson of Balmacara (Lab)]

Let me try the question the other way round. Is this project still open? Is it possible that we might get a positive response to all these requests? I draw the Minister’s attention to a letter sent to Mr Carwyn Jones by the Secretary of State in January, which described the tidal lagoon as,

“an untried technology with high capital costs and significant uncertainties”.

Is that not just the end?

[Lord Henley]

I think that the noble Lord is trying to put the wrong interpretation on that. As my right honourable friend made clear in responses earlier today in another place, she is still open on this matter, no decisions have been made and she still wants to continue those cordial relations with colleagues in the Welsh Government. I have not got a transcript of what she said but no doubt the noble Lord can look at Hansard tomorrow.

Smart Meters Bill

Debate between Lord Stevenson of Balmacara and Lord Henley

Committee: 1st sitting (Hansard): House of Lords
Tuesday 24th April 2018 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I support my noble friend Lord Grantchester in his Amendment 4 and reiterate his important suggestion. He accepts that his amendment is not necessarily the definitive way forward and is inviting the Government to engage with him and others to try to find a form of words, process and activity that would enable a national plan to come forward that we could all get behind. I hope that when the Minister responds he might signal that this is something he will consider.

Like the noble Baroness, Lady Featherstone, I have come to this relatively late. Those who have not been living the ups and downs of this over the past few years are completely and utterly shocked that it could have got to this stage without some very serious consequences. At a superficial level—I know it is more complicated than this—the initial programme has had to be restarted and reset but is now about to stop, and people are being laid off and made redundant because there is no guarantee that the SMETS 1 meters will be continued after October 2018. A completely new, untested and uncertain scheme involving SMETS 2 will be brought in on top of that and will therefore go back over ground already covered in a way that is as yet unforeseen.

At the same time, the whole costs of this are hidden and difficult to ascertain. The process under which levers can be exercised on people is not clear and the role of Ofgem, the regulator, is very passive in relation to the capacity it has now. It all smacks of being a complete and utter train crash of enormous proportions, and the only solution appears to be to keep ploughing on. British pluck is all very well but it has not always been the most successful way forward, particularly in matters involving technology.

I urge the Minister, when he comes to respond, to think very carefully about the way in which the Opposition are proposing this and about the support we have received from others. If we do not come out of this with a clear and approachable process—whether it is this national plan or not—the real danger is that consumers will literally be switched off in the sense that they will not wish to be involved in this. As a result, the huge upside of this, the benefits of bringing in a new technology, opening up innovation and bringing in new thinking about how we manage our energy supply—which was the point made by the noble Lord, Lord Teverson—will be lost if consumers are not prepared to walk along. This is not about individual customers having a better time; it is about how we as a country can cope with the energy demands that we will face, and minimising them while strengthening our approach as we go through. This is a terrific chance to get this right in a proper and positive way.

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

My Lords, the noble Lord, Lord Teverson, used the examples of the length of a number of wars. I will not follow him down that track because I think one could come up with some longer wars as examples. He mentioned that this had started under a Labour Government, continued under a coalition Government and was now being dealt with by a Conservative Government. I have been a member of two of those—obviously I was not a member of the Labour Government. It has been going some time but we want to get it right.

When things have been going some time I am always faintly surprised when Oppositions put forward amendments to suggest that we should take even longer. I suppose that is why the noble Lord, Lord Grantchester, prefaced his remarks with, “Unusual as it may seem”. I take note of that. I will not rise to his bait to make any comments about the likely outcome of the next election. Quite rightly, he wants whoever is in government at the time, whomsoever that may be, to be helpful, possibly referring to the remarks on the word “helpful” made by the noble and learned Lord, Lord Goldsmith, in yesterday evening’s debates. We will try to avoid “helpful” in the future.

To continue on the helpful theme, I would obviously like to be helpful. The noble Lord asked whether we could have further meetings. I will make myself available when the noble Lord, the noble Lord’s colleagues and the noble Baroness, Lady Featherstone, and others want to have meetings between now and Report if we feel that we can discuss things further and take things forward.

In the meantime, I will respond in a little detail to the specific amendments—Amendments 1, 2 and 4 in the first group. As I said, the first amendment proposes to extend certain powers that the Secretary of State has to develop, amend and oversee regulations relating to smart meters until November 2026, although in this Bill we have sought only the powers that we think are justified, which extend to 2023. Extending the powers to 2023 would allow the Government to continue to oversee the programme, while suppliers meet the obligation on them to take all reasonable steps to install smart meters in homes and businesses by the end of 2020.

The noble Lord referred to my letter where I talked about them offering rather than installing—we are trying to make sure that they have at least offered something to everyone. Obviously no Government can guarantee that one can be installed in every home because it is quite possible that a number of individuals will refuse to have a meter for whatever reason. It also allows the Government to undertake a post-rollout review once the programme has been operating in a steady state and then implement any of the recommendations that emerge. We hope this will help to ensure that the smart metering programme is fit for purpose—whether SMETS 1 or SMETS 2—for decades to come.

[Lord Stevenson of Balmacara]

I am sorry to interrupt, but on the narrow point, what specification are the Government adhering to? Is it the obligation on energy suppliers to take all reasonable steps to install smart meters or not?

[Lord Henley]

We hope that they will offer—and if they do, obviously they must then install. There is no point offering to install one unless they do so. So we hope that all of them will have offered and installed by that date.

[Lord Stevenson of Balmacara]

It is important that we get this right, because there is a world of difference between making an offer to install and having an installation completed. My noble friend Lord Grantchester, in making his proposal, would give an additional three years because the understanding we had from the first paragraph of the Minister’s letter was that it was about the completion of that process. If the noble Lord is saying that the licence obligation placed as a condition of licence on energy suppliers is only to offer, does he not accept that that completely changes the process?

[Lord Henley]

No. I wanted to make clear that there is no obligation to have got to a 100% rate of installation because we know we can never get to that target. What we are looking for is that they must make the offer and then make the installation—that is the undertaking—by the appropriate date. We do not think that extending the time is necessary. Does the noble Lord follow me?

[Lord Stevenson of Balmacara]

I will try one more time and then I will stop. The obligation placed statutorily on companies operating as energy suppliers is, as I understand it, to have made an offer to take all reasonable steps to install smart meters in homes covered by the mandate by the end of 2020. That will be considered to have been completed if they have written to and received information back from all those who would be eligible to receive these things, and, where there has been an acceptance, have completed the installation. Obviously, as the Minister said, you cannot install a meter if somebody says that they do not want one, so those people are taken out of it—but must everyone else, if they say that they want a meter, have had one installed by 2020? That seems extraordinary.

[Lord Henley]

It is not simply a matter of writing a letter to the individuals concerned. One letter would not be enough. The energy suppliers must show that they have made reasonable efforts with all their customers while allowing a degree of flexibility in certain circumstances. The rollout obligation puts that onus on them. Ofgem has made it publicly clear in an open letter that it will need to adapt its approaches to consumer engagement, using other approaches where necessary. It is not merely a letter, but it must make a genuine attempt—merely making a solitary offer is not sufficient—to get hold of those people to make an installation.

--- Later in debate ---

[Lord Stevenson of Balmacara]

I suggest that the test has already been passed and we are doing SMETS 2 come what may.

[Lord Henley]

We are going ahead to SMETS 2. The noble Lord is right there. We will see benefits from that, just as we have seen benefits from SMETS 1. That process will continue. I am suggesting to noble Lords and the rest of the Committee that we will provide appropriate reports back as to how that goes in due course, but I cannot provide any figures on exactly how fast that is likely to go, particularly in the initial stage this year.

[Lord Henley]

My Lords, I do not believe in crossing bridges until we get to them. When we get to that stage, if there is a problem, I will come back to the noble Lord.

[Lord Stevenson of Balmacara]

Let us put the noble Lord, Lord Teverson, to bed happily. There is no further testing. The Government have accepted this, on the basis of what we understand to be the evidence of 300 SMETS meters placed into the homes of employees of the companies commissioning them. The network is said to be working, and may or may not be, at two different levels in the north—I am not quite sure where—and the south because there are two different arrangements, with an imperfect but satisfactory, to all intents and purposes, gas approach based on the idea that the SMETS 2 meters that go on to the gas equipment have to be shut down for most of the time that they are there because otherwise they will use up the batteries, which they are restricted to using because you cannot use electricity near gas since it might blow up. Therefore, they are battery-driven and the batteries cannot last forever. It would be ridiculous to have a situation where you had to have teams of people coming in right across the country replacing the batteries all the time because that is what we are trying to stop them doing when they have to read all the meters. The Government are going ahead with this—this is the point I still do not quite get—on the basis of very imperfect testing on a scale of £8 billion to be spent over the next few years, which is effectively a voluntary tax paid by people who did not know that they were being asked to pay it. It is bonkers.

[Lord Henley]

I am afraid I do not recognise what the noble Lord has offered. I suggest that we continue discussions on this. What the noble Lord is putting to me is not what has been put in front of me in other places. As I said, we will continue to monitor matters and to provide information. That will be sufficient to deal with the amendments. If the noble Lord would like to continue to make these strange allegations about what is happening, we can continue to do that in the discussions that I offered when dealing with the first amendment.

Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No. 2) Order 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 16th April 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I join other noble Lords in congratulating the Government on bringing forward these two SIs for consideration today. This one is affirmative and the other will go through on a negative basis. At a time when the gig economy and zero-hours contracts are growing, it is right to raise the issue of treating workers differently from employees—and what can be more important than pay? I thank the Minister for his contribution to this debate, and for opening up the issues in the round. I also thank his department for its work on the impact statement.

I have noticed that a considerable amount of work has been put into recent SIs. Those who have looked at this will not be surprised that it is of the high standard that we now expect. Not only does it run to over 20 pages but it includes, for the first time, Venn diagrams and flow charts. However, I reiterate a point I have made before: it is quite hard to read them if they are not in colour. Can we at last invest in a machine that would allow noble Lords on these Benches, who see them in mere black and white, to read them in the same glorious technicolour as Ministers? Maybe that is just the status of being in opposition.

Noble Lords who have listened to me talking before about statutory instruments from the department for business, enterprise and training will know that I have a fixation about the dates on which regulations come into effect. It has been agreed by all parties that we should work to common commencement dates, and I have been punctilious in picking up every one of the orders coming forward that does not comply with that—and there are rather a lot of them. Last time we debated this, only a month ago, the Minister was gracious enough to say that he agreed with me that we should think harder about the impact that regulations made in this House have on people and businesses who have to implement them, and that he would do his best to ensure that the department paid more attention to that in future. There are occasions when it is necessary to do things in a different way, but this is not one of them. My point is not that they have selected a common commencement date—they have—but 6 April 2019 is almost a year away, for something which is clearly beneficial to a lot of people. I am surprised that the department did not wish to use the other common commencement date of 1 October, and I would be grateful for the Minister’s comments.

I will make two points in passing. The first is on the way the Explanatory Memorandum is set out. It takes a line which is primarily about the advantages that will flow to the policing of the implementation of the national living wage—or, in this case, the national minimum wage, as it is defined. However, the Minister in his introduction took a much stronger line, which is that there is a principle of equity here: people who receive a payment should understand the basis on which that payment is made. The Minister made that clear. We are talking about transparency, and this simple change here will make a huge difference to a lot of people who have difficulty in following that through. It should be welcomed on that ground alone.

It may be—and I am sure will be—effective as regards policing the national minimum wage and rooting out the very small number of employers now who do not pay the national minimum wage as they should do. Of course it will help, and I am not against that, but the important thing here is the question of transparency and helping all workers to understand the benefits that flow from the employment and what is part of it.

However, it seems that the Government’s decision to move on this issue at this time, welcome though it is—and perhaps necessary as it is because of the changes in the economy, such as gig jobs and zero-hour contracts—raises wider questions about why we continue to differentiate between workers and employees. As the Government themselves say on their website, everybody is a worker—if they take out a certain number of issues that are tested in what they do—but not everybody is an employee. Employment rights, normally delivered under contract, are significantly better than workers’ rights. Can the Minister comment on whether further consideration might be given to that in future work on the good work agenda?

It is bad enough that we still have difficulty in trying to work out what a person’s employment status is in relation to taxation, and it is bad that we retain that in these regulations and that no attempt has been made to move that forward. It is very difficult; the onus is on the employer to ensure that the taxation arrangements are applied properly and correctly. However, the guidance given on the GOV.UK site is vague almost to the point of obscurity. It does not clarify—rather, it confuses. You are warned as you read it, as a possible employer, that you have to go through a checklist of nearly 15 bullet points which you test, and the answer to the question of whether an employee should be taxed as a self-employed or an employed person is the probability that most of the statements you are checking are true. That is not right for a modern economy that is looking to try to get people into work and to work productively and well. We should be better at it than that. Perhaps that might be part of the agenda.

To go back to my earlier point—which the noble Lord, Lord Fox, made as well—if we are to see a growth in workers as opposed to employees, we also need to think a bit harder about what we are saying to those in the worker category, which is the lesser of the two categories, as regards statutory sick pay, maternity pay, minimum notice periods, protections against unfair dismissal, the right to request flexible working and time off for emergencies. At the moment something like 290,000 people in the economy are workers and not employees, and it seems odd that in this world we still discriminate against them. I do not have an easy solution, but perhaps the Minister might respond to it and take it forward in the agenda and in the department that is moving it forward. However, we support this statutory instrument.

[Lord Henley]

My Lords, I am grateful to the noble Lord, Lord Monks, and to all other noble Lords for the very constructive approach they have taken to this order. I trust that this constructive approach will be noticed by the House and will be continued throughout the week on all business that comes before us.

I hope to deal with some of the questions that have been raised by noble Lords. However, I start off by correcting some of my earlier words to save myself making a Personal Statement tomorrow. In my opening remarks I said that some 30,000 workers did not receive a payslip. The paragraph I read out stated: “Although a significant number of employers already provide their workers with a payslip, up to 30,000 workers do not receive one”. I should have said that, “up to 300,000 do not receive one”. They will now receive one. I just want the House to be aware: for “30,000”, please read “300,000”.

Perhaps I may deal briefly with some of the questions put by noble Lords. First, the noble Lord, Lord Anderson of Swansea, asked whether it might be appropriate to have uniform payslips. That sounds very attractive, but this order is designed to ensure convergence with best practice, and I think that it would be right to leave employers with a degree of flexibility in how they continue to provide that. However, I note what he said.

I also noted what the noble Lord, Lord Stevenson, had to say about common commencement dates. He has criticised me in the past, so I was grateful that he spotted that on this occasion we have observed the rules on having a common commencement date, although he regretted that it would not be until April 2019. We could have gone for the other common convergence date in 2018, but that would have given employers considerably less time to prepare for this matter, and we therefore decided that 2019 would be better.

The noble Lord, Lord Fox, asked whether hourly rates could be included in payslips. We listened to arguments for including even greater detail on payslips, which is what this would amount to. I accept that he makes a perfectly valid point and we notice that UNISON provided input on this to the Government. However, we tested the idea of requiring employers to include a full disaggregation of hours, including those on employees’ payslips, but the costs of doing so for employers would be high and, we reckoned, disproportionate. However, again, I note the arguments put forward by the noble Lord.

The noble Lords, Lord Fox and Lord Stevenson, made a number of comments about the difficulties faced by independent contractors involving the definitions of “employee” and “worker”. We all know the difficulties of managing the distinction between “employee” and “self-employed”—a matter that has only recently gone to the Supreme Court and one that we have discussed in this House. This goes slightly beyond what we are discussing today. I accept that these are very difficult matters and obviously they will be taken into account in continuing to deal with the Taylor review. I certainly remember from my Bar exams some 40 years ago the difficulties around the definitions of “self-employed” and “employee”. The fact that it is going to the Supreme Court indicates that it is a very difficult matter. We also know that, as the noble Lord, Lord Fox, said when talking about the gig economy, times are changing. Again, these are difficult issues—but we have the Taylor review, which we will continue to consider.

I am grateful for all the remarks that have been made about this order and its relevance, and I think that I have had a degree of support from around the House. As I said, long may that continue. I commend the order to the House.

Works Detrimental to Navigation (Powers and Duties of Inspectors) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Thursday 15th March 2018 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, like the noble Lord, Lord Bradshaw, I am supportive of the intention behind these regulations and have no wish to delay them in any sense. Before I start, I should like to say how nice it is to have had three Lords Chairman officiating over our modest debate. I am sure it must be a very interesting chance for the Lord Speaker to shine a spotlight into the activities of your Lordships’ House in a way that is not often possible.

[Lord Henley]

He can see real life.

[Lord Stevenson of Balmacara]

Real life and marine life as well, as we are going to discover.

I have three main points but they are not at all major. First, as I think the Minister said, these regulations have been in force since 2009 as part of the implementation of the 2008 Act. Yet there seems to have been a sudden rush of activity since 2015, according to the Explanatory Memorandum. Can he give a little more detail about what is going on here? Is there some new interest in the area, arising from some activity which we were not aware of and, if so, why is all this litter being left around and causing difficulty to ships? I would be interested in the background if that is possible.

Secondly, I do not think the Explanatory Memorandum makes the case very well for OPRED’s lack of ability to force operators to return expediently to compliance. The powers now in these regulations would allow them to get more information in the form of paper and other documents. That would somehow seem to inform them better but I do not quite see how it will make anybody do anything they are not currently doing. I would be grateful if my puzzlement on that could be met with a bit more information.

In that respect, there was a four-week targeted consultation. I am not saying it is true of this occasion, but whenever I see the words “targeted consultation”, I wonder whether very many people have been involved. Given that there were only two responses from what seems to be a very large sector of our economy with many companies—indeed the Explanatory Memorandum states later on that there is a large number of small companies involved—maybe there could be a few words about whether, in the department’s view, the consultation was as effective as it could have been. There were only two responses, neither of which was significant in terms of what we are told here, but they did manage to persuade OPRED that there should be a change in relation to the power to seize original documents. Paragraph 8.3 says that OPRED decided to take,

“account of industry concerns by caveating it with sensible limitations on the use of the power”,

but does not say what those limitations are. Again, perhaps the Minister could just explain them.

However, my main concern is timing. Members of the department will be aware that every time BEIS comes in with a regulation, I think I have made a point of pointing out that the Government have accepted, as have previous Governments, that there should be adherence where possible to the common commencement dates of 6 April and 1 October. These common commencement dates are there for the benefit of businesses and to make sure that regulations do not sprinkle upon them like rain from the heavens but are brought up at two points in the year when they can anticipate that there will be regulations, plan for them and expect them to be implemented in an appropriate way. There may be some reason for the commencement date, but these regulations seem to be coming into force in a rather ad hoc way. They come into force the day after they are made. The Explanatory Memorandum comments that,

“the critical need for, and core objective of, the instrument”,

means that the regulations,

“will enter into force on the day after they are made and, if feasible, either prior to, or (if apposite) beyond, the next Common Commencement Date of 6 April 2018”.

It happens that 6 April 2018 is not very far away, so it would not have been very difficult, and certainly given the pressures on all concerned not impossible, for these regulations to come in on 6 April. There may be good reasons for bringing them in a few days before then, and I would be interested to hear what they are, but I worry more generally that the department does not, much as I would wish it to, try to work to the common commencement dates. I am sure the Minister will accept that they are important. They have been advertised and adhered to now for, I think, 15 years. It is something we should respect if we can. I would be grateful for his comments.

[Lord Henley]

My Lords, we will try to stick to common commencement dates where appropriate, but as I think the noble Lord suggested, there has already been some concern that a degree of time has been taken getting these regulations ready. We therefore felt that this is one of those occasions when not sticking to the common commencement dates would be appropriate. Bearing in mind that there is always the risk of an accident, we thought it appropriate to move as quickly as possible. For that reason again, we thought that a relatively short, targeted consultation—going to what we thought would be the appropriate people—was appropriate. As a result, we obviously missed out the noble Lord.

[Lord Stevenson of Balmacara]

I just wanted to be sure that “targeted” did not mean two people on this occasion.

[Lord Henley]

I will take advice, but I am fairly sure it was a number greater than two. I do not know what it was, but on this occasion we did not need a general consultation including the noble Lord and others. We are talking about a fairly specific field that many of us do not know a great deal about. I will come to some of his other points later on, but will deal with points raised by the noble Lord, Lord Bradshaw, first and give him a little more background and detail about the amount of non-compliance there has been.

On average there are at least 49 incidents a year on offshore installations, a proportion of which seem to be in the southern North Sea, which is obviously a fairly busy shipping route. Nine offshore installations had components of their main or subsidiary lighting systems repeatedly fail completely, meaning that parts of the installations were not visible at night or at times of poor visibility due to intense fog. Thirty-two offshore installations had other types of repeated malfunctions relating to other navigational aids, including lights not flashing in unison and dim lighting systems causing reduced visibility from a distance. Five installations had fog signals that were repeatedly inaudible or not functioning, while the radar communications systems on three offshore installations repeatedly failed. Those are the numbers involved and reflect the scale of the issue. I hope that is useful to the noble Lord.

I will have to write to him about the number of inspectors and whether we think that that number needs to be increased. The important point is that the inspectors are already doing their job, but we are giving them extra powers to make sure that there is proper enforcement. He also asked about the appropriate penalties if operators are prosecuted under these regulations. An operator guilty of an offence as set out in Regulation 6 would be liable on summary conviction in England and Wales to an unlimited fine and on summary conviction in Scotland and Northern Ireland to a fine not exceeding the statutory maximum, which is £10,000 in Scotland and £5,000 in Northern Ireland. I hope that the noble Lord does not ask me why the fines are different among the nations, but if he has any concerns I will write to him about it. Conviction on indictment leads to an unlimited fine, which would usually be for an amount greater than the fine on summary conviction. I might be wrong, but that is probably the explanation for the difference between England and Wales and Scotland and Northern Ireland. In Scotland and Northern Ireland there is summary conviction or on indictment whereas in England and Wales there seems to be only summary conviction.

The noble Lord, Lord Stevenson, asked why after 2015 it became more difficult for operators to rectify promptly breaches of consents to locate obligations. Some have asked whether it coincided with the drop in the price of oil at the time. The reason it has become more difficult to get smaller operators to rectify breaches is not entirely clear. Contributing factors may have been the low oil price which has put pressure on operators, but whatever happens the situation is clearly unsatisfactory, given the critical nature of navigation aids, hence the need to put these regulations on to the statute book as quickly as possible. I appreciate that some will argue that we have taken our time to do this, but it is important to get on with them now.

I again thank both noble Lords for their contributions. I think that I have largely dealt with the points, but if I have missed any, I will write. I commend these regulations to the Committee.

Criminal Justice and Police Act 2001 (Powers of Seizure) Order 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Thursday 15th March 2018 Grand Committee

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

My Lords, I congratulate the noble Lord, Lord Stevenson, who is still with us for the third item of business. I am grateful for the feedback from the Secondary Legislation Scrutiny Committee regarding the explanatory material accompanying this draft order. We always strive to provide sufficient information for noble Lords to gain a clear understanding of an instrument’s policy objective and intended implementation. Furthermore, my department will take account of the comments of noble Lords made in this Committee when preparing explanatory memoranda for future instruments.

Insider trading and price manipulation in the wholesale energy markets is a crime and ultimately consumers and businesses pay the price for such behaviour in the form of higher bills. It is therefore important that the energy regulator in Great Britain, Ofgem, has sufficient powers to investigate and punish those behaving in such a way and that that acts as a deterrent. Insider trading and market manipulation in the wholesale energy markets are prohibited by the wholesale energy market integrity and transparency regulation—REMIT —which has been in force since December 2011.

In June 2013, the Government made civil enforcement regulations for REMIT—the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013—which give Ofgem powers to impose unlimited financial penalties, access to information and the power to enter the premises of a regulated person under a warrant. In March 2015 the Government strengthened that regime by making further regulations to create criminal offences of intentionally or recklessly breaching the prohibitions on insider trading and market manipulation.

The 2013 regulations give the regulator the power, under warrant, to enter premises to search for, and seize, information and documents that appear to be relevant. However, there are cases where Ofgem may have difficulty exercising this power of seizure. Investigating officers may be presented with a large volume of documents. Identifying documents relating to suspicious transactions among many documents of a similar nature can be akin to finding a needle in a haystack. Ofgem currently has no power to take away an entire body of documents to sift them for relevance off premises. In some cases, this may mean that vital evidence is missed.

Section 50 of the Criminal Justice and Police Act 2001 addresses this problem. It enables a person exercising a power of seizure to remove material from the premises being searched to determine whether it is something which the person is entitled to seize if it would not be reasonably practicable to determine that on the premises. The power in Section 50 applies where a person is exercising a power of seizure listed in Schedule 1 to the Criminal Justice and Police Act. More than 60 such powers are already listed in the schedule. The effect of this order is to extend this power to Ofgem when it is searching premises to investigate breaches of REMIT. The Government believe this would be a measured and sensible extension of Ofgem’s powers, which will help to ensure it can take effective enforcement action.

The Government sought views in December 2015 through consultation on whether Ofgem’s powers should be strengthened to bring them into line with this provision. Industry stakeholders, perhaps not surprisingly, believed that the additional powers offered to Ofgem were disproportionate. Others, including consumer groups, were neutral or in favour of the provision. The Government believe that effective regulation in this area is essential and that sufficient safeguards will be in place to meet stakeholder concerns. The Government do not believe that costs will be unreasonable.

The power will apply only where a court has granted Ofgem a warrant to search premises. When Ofgem exercises this power it will be under a statutory duty to sift information as soon as reasonably practicable after seizing it and return anything which it was not entitled by the warrant to seize. Additionally, a person who is the owner of a document can apply to the court for the return of such material.

We believe that this additional power will aid Ofgem in its investigation of market abuse and that the safeguards should ensure that it is not used unnecessarily. I commend the order to the Committee. I beg to move.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for his full introduction to this order. Again, we have no significant concerns about the order itself because it is an appropriate way forward. Indeed, it seems to be needed, based on the description we have had.

As the Minister has said, the Secondary Legislation Scrutiny Committee reported on the order in order to draw it to the attention of the House on the grounds of a policy likely to be of interest. The committee’s main concern seems to be about the rather extended time taken to go from the initial idea booted around in the consultation paper in December 2015 to the final decision to move forward on a part of what was consulted on—only a part—as late as earlier this year. The Minister said that the issues raised will be taken back with everything else, but he did not give us an explanation about that issue. The letter from the department that covered it is also rather vague. It is mainly to do with the fact that internal government processes got in the way of the smooth running of the overall proposal and that the decision was taken quite late simply to go ahead with these REMIT proposals. More information about that would be of interest.

My concern is slightly different. The consultation that was carried out was broader than the REMIT, but the Explanatory Memorandum focuses on those issues. I take it that the references in Article 8 of the Explanatory Memorandum are around that. It says in paragraph (8.2):

“Some energy companies expressed support for the initially proposed “seize and sift” powers, but the majority of companies and representative groups”—


so it is not quite as the noble Lord mentioned—

“argued that these were disproportionate, unnecessary or gave Ofgem too much leeway on which information to remove”.

In other words, they were about the powers. It seems to me that the majority of companies did not agree with the proposal. They felt that the existing powers would be sufficient and that seeing papers on sight, sifting through them there and taking information away in that form would be sufficient for their processes. In paragraph (8.3) however, the department’s response states:

“Having taken account of the consultation responses, BEIS considers that the aim of the policy … justifies the additional burdens identified by industry”.


They were complaining not about the burdens, but the powers. The Explanatory Memorandum is completely silent on whether these powers are appropriate. It seems that the Government have decided to ignore the consultation and go ahead. Will the Minister comment on that? He is not wrong in the sense that the ends may justify the means, but the process would have left a number of companies a bit bruised, given the very short time available and the lack of any individual consultation. They would be entitled to feel that they have not been taken account of properly.

Finally, I have to come back to the matter of the implementation date. This is a new group of civil servants and I can expand on my worries. Other noble Lords will realise that I have raised this matter before. This order may be cited from, and comes into force on, the “twenty-first day after the day on which it is made”. It will have a considerable impact on a small number of companies operating in the electricity and gas field. It is therefore not inappropriate to think that the order should start from the common commencement date: 6 April. If you do the maths, 21 days takes you just beyond 6 April. It would be not inappropriate if the Minister decided to suggest, even with the regulation in this form, that 6 April would have been a better date, and I appeal to his better judgment to make the necessary changes if he can.

[Lord Bradshaw]

In considering this order we should consider the enormous public dissatisfaction with some of the regulated industries that we have seen for a long time. I think I am correct that the regulators have often been caught out saying that prices should be allowed to rise by a certain amount, and immediately after the announcement, companies’ share prices have risen. To me, this means that the regulator has misjudged the situation. Bodies such as Ofgem are extremely powerful, and from the point of view of the consumer and the general public it is important that a very close watch is kept on their activities. I am happy to support what is in this paper because the balance of advantage between consumer and supplier is tilted very much one way, and this will tilt it back the other way.

[Lord Henley]

My Lords, I think that I am grateful to the noble Lord, Lord Bradshaw, for his comments. It is always difficult to get the balance right in these matters, which is what we are trying to do in a number of other pieces of legislation—as the noble Lord will be aware—that are before another place at the moment.

It is important that we ensure that Ofgem has the appropriate powers to look after the consumer interest. Obviously, we take very seriously the idea of any extension of powers that we might grant to Ofgem or any other body, and that is why, under the Police-and-whatever-it-is Act 2001, we have to make an order if we want to do that. They are affirmative orders and we have to come to the House to argue the case for them. That is what I am doing.

The noble Lord, Lord Stevenson, was slightly worried about the consultation and whether we listened to the consultees. What I said in my opening remarks was that the industry and stakeholders, perhaps not surprisingly, believed the additional powers were disproportionate, but I added that others, including consumer groups—this is the point that the noble Lord, Lord Bradshaw, picked up—were neutral or in favour of the provision. The Government have to consider these matters very carefully.

[Lord Stevenson of Balmacara]

Just to be clear, paragraph 8.2 of the Explanatory Memorandum does not say what the Minister just said. It may just be that the expression needs to be changed, but it states,

“the majority of companies and representative groups”.

I think “representative groups” includes consumer groups. The Minister said there were others, but we do not have the detail. They,

“argued that these were disproportionate, unnecessary or gave Ofgem too much leeway”.

[Lord Henley]

It does not just include consumer groups. The point I was making was that consumer groups in particular were neutral or in favour. Having listened to the consultation, the Government came to their conclusions and decided what was necessary. We considered that the powers were very important and we considered bringing them in with appropriate safeguards. I think that is what we have done.

The noble Lord was concerned about the timing of the order. I am glad that it was not just me listening to him. As he said, there is a collection of officials listening behind me, and I hope this will suffuse through the department so that all of us—Ministers as well as officials—can be aware of his concern that as far as possible we stick to the appropriate dates. Obviously, there will be other occasions when we cannot. I have no power to make amendments now. The noble Lord probably guessed that, since he made the suggestion. Since I have general agreement that this order should go through, I repeat that the department could possibly do better in future. I will keep my beady eye on these matters and see to it that we do as well as possible. As I said at the beginning, we will continue to take the Committee’s views into account in future.

[Lord Stevenson of Balmacara]

I go back to my original point and ask the Minister, for my comfort and satisfaction, to write with a bit more explanation about the make-up of the responses that were received. May I also welcome the Minister to the small band of people who believe in common commencement dates?

[Lord Henley]

The noble Lord will get a reputation for having a bee in his bonnet about common commencement dates and will, no doubt, be teased by his colleagues as “Lord Common Commencement Dates” for ever. I will certainly write to him in greater detail on the other matter. I am grateful for the support from both noble Lords.

National Minimum Wage (Amendment) Regulations 2018

Debate between Lord Stevenson of Balmacara and Lord Henley

Thursday 15th March 2018 Grand Committee

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

My Lords, I beg to move that the National Minimum Wage (Amendment) Regulations 2018, which were laid before the House on 5 February 2018, be approved. The purpose of the regulations is to increase the national living wage and all of the national minimum wage rates from April 2018. The regulations also include an increase in the accommodation offset rate, which is the only benefit in kind that counts towards minimum wage pay.

The national living wage has had a real, positive impact on the earnings of the lowest paid: between April 2015 and April 2017 those at the fifth percentile of the earnings distribution saw their wages grow by almost 7% above inflation. This is faster than at any other point in the earnings distribution and, according to the Resolution Foundation, wage inequality, as measured by the ratio between the top decile and the bottom decile of the earnings distribution, fell in all regions of the United Kingdom between 2015 and 2017 thanks to the national living wage. Increasing the minimum wage is one more way in which the Government’s industrial strategy is boosting people’s earning power and seeking to raise productivity throughout the United Kingdom.

From next month the national living wage for those aged 25 and over will increase by 33p to £7.83, which is a 4.4% increase. The 33p increase in April will mean that a full-time worker on the national living wage will see their pay increase by over £600 over the year. The national living wage is on course to reach the Government’s target of 60% of median earnings by 2020.

The 21 to 24 year-old rate will increase by 33p, meaning those in that age group will be entitled to a minimum of £7.38—an annual increase of 4.7%. Those aged between 18 and 20 will be entitled to a minimum of £5.90—an annual increase of 5.4%—and those aged 16 and 17 will be entitled to a minimum of £4.20, an annual increase of 3.7%. Finally, apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, will be entitled to £3.70, which is the largest annual increase of all the rates at 5.7%.

All of these above-inflation increases represent real pay rises for the lowest-paid workers in the United Kingdom. For younger workers on the national minimum wage, it is the largest and fastest increase in more than 10 years. The Government’s green-rated impact assessment estimates that more than 2 million people will directly benefit from these regulations.

All of the rates in the regulations have been recommended by the independent and expert Low Pay Commission. The LPC brings together employer and worker representatives to reach a consensus when making its recommendations. The Government asked the Low Pay Commission to recommend the rate of the national living wage so that it reaches 60% of median earnings in 2020, subject to sustained economic growth.

For the national minimum wage, the LPC has recommended rates that increase the earnings of the lowest-paid young workers without damaging their employment prospects by setting it too high. I thank the LPC for the extensive research and consultation that has informed these rate recommendations, all of which was set out in its 2017 report, published in November.

The Government recognise that, as the minimum wage rises, there is a higher risk of non-compliance as a larger share of the workforce is covered by the minimum wage. The Government are committed to cracking down on employers who fail to pay the national minimum wage. We are clear that anyone entitled to be paid the minimum wage should receive it. Consequently, the Department for Business, Energy and Industrial Strategy has increased funding for HMRC national minimum wage enforcement to £25.3 million this year—up from £13 million in 2015. HMRC follows up on every complaint it receives, even those which are anonymous. These include those made to the ACAS helpline, via the online complaint form or from other sources.

In 2016 HMRC recovered pay arrears in excess of £10.9 million for more than 98,000 workers. Those employers who underpay their workers the minimum wage face public naming by the Government. Indeed, last Friday BEIS named 179 employers who had underpaid a total of £1.1 million to 9,200 workers.

Sustainable increases in minimum wage rates depend on strong employment growth. Over the past year the UK labour market has reached a record high employment rate, and the lowest unemployment rate since the 1970s. Evidence has long told us that investing in human capital is crucial for the long-term productivity of the workforce. The industrial strategy sets out our long-term vision for increasing productivity, including through raising the minimum wage and so boosting the earning power of the lowest-paid workers. Through these regulations the Government are building an economy that works for everyone. I commend the regulations to the Committee.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister very much for his introduction. I will not go back over the recent history of the introduction of the national minimum wage, because I think it is now a settled agreement between all the parties that it is a good thing. It works for all sections of society, but particularly for the lower paid, and we have evidence before us that shows that.

While we are in congratulatory mode, I thank the LPC, as the Minister did, for its work. It is often unsung and not very visible, but it is well rooted in the interest it has in this area and I know that Ministers value the work that it does. I also congratulate the team responsible for the paper before us. It is a bit of a shock to have to read back through some of the stuff one thought one had forgotten a long time ago about microeconomics and the impact of some of the very narrow points raised in the 51 pages or so of the supplementary work, which I am sure the Minister has in his mind and can quote extensively from memory. It is a very good read and very interesting. It agonises a lot about issues that we do not need to detain the Committee with, but it is important that that work is done. I appreciate the fact that it is there and we should publicly recognise the contribution made by it.

Having said that, while I give an alpha plus for the work that has been done, I give it a beta minus for presentation. I came to this slightly late, otherwise I would have raised it earlier, but it is unfortunate that some of the pagination has been lost in the form that the document comes to us. The pagination matters because, for instance, on page 15 of the copy we have from the Printed Paper Office there is a box that should be on one page but which has gone on to several pages. It makes it very difficult to pick up where we are on that. On page 17 there is a rather complicated and important wage distribution graph that is only really readable in colour, although it is printed in black and white. It therefore does not make sense. You have to spend quite a lot of time working out which of the confidence limits percentages are being referred to in the text. If they had been colour coded one would have been able to do so. I am not complaining about this; I am just pointing out that intelligibility would be improved if we could think more about a reader who is not directly involved.

I will make three points—but before I do, I will say that this is the third time that I have responded to this particular instrument, so I am quite familiar with the process, and in particular the rather neat shuffle that took place this time last year, or maybe six months ago, when we moved from October to April. Last time the instrument came partly under the national minimum wage and partly under the living wage. It did the work of assessment and thinking in terms of the minimum wage but prefigured how we would move to the living wage. This is a simpler and more straightforward document than we had the last time we went through this.

Having said that, we have lost a little bit of the context for the decisions that are quite important in this area, which is that the move from the minimum wage to the national living wage is one of significant increases over a relatively short period of time to jump-start an increase in funds at the lower end of the pay spectrum. We absolutely welcome that, but I have lost the thinking of why we are doing it over three years. Also, the Minister used the phrase “subject to satisfactory economic growth”. Well, economic growth is not very satisfactory. For reassurance’s sake, may I have a confirmation that there are no red lights about the future of this and that, as far as we are able to say at this stage, we are still on track to do this oddly phrased equal bite, or single bite, or whatever it is called—it is called the “straight line bite path”—movement from the current position to hit 60% of the median earnings in October 2020, and that there is nothing I have missed in this that would suggest there is any doubt about whether we will do that, subject obviously to the overriding concern about economic growth? It is important to give reassurance if we are at that stage.

Another minor point is that the percentage increases in individual hourly rates are good. One could perhaps make a little too much of 5.7% arising from a 20p per hour rate increase for apprentices, but nevertheless it is valuable in itself. However, the rates are significantly higher than they would have been otherwise and indeed contrast with the reduction in real wages which we are seeing elsewhere in the economy—so to that extent it is doubly welcome.

Having said that, the LPC has recommended, and as far as I can see the Government have accepted without comment, a much bigger increase in the disregard for accommodation rates. I wonder if the Minister could give me some thoughts on that. This is a sensible way of treating those who have accommodation benefits. I do not dispute the principle, but the particularity of squeezing cash in the pocket or the purse, as it were, by raising the disregard for accommodation at a higher rate than the increase in pay seems a little unfair. Is there any context around that in documentation that we have not seen? I would be grateful if the Minister could tell me that today. If not, I will be happy to receive a letter.

Public Services: Corporate Governance of Businesses

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 13th March 2018 Lords Chamber

[Lord Henley]

My Lords, we think it is very important that the voice of those working for companies should be heard on the board. In the Corporate Governance Reform Green Paper we made it clear that companies should have flexibility to choose how best to engage with their employees, and there are a number of different ways they can do that. They can have an independent director who represents employee views, an employee advisory council or a director directly from the workforce. There are a number of options. It is certainly something that should be looked at.

[Lord Stevenson of Balmacara (Lab)]

Does the Minister agree that one of the reasons we are now experiencing a bit of a run of scandals on outsourced public services is the lack of information available to public authorities which have to control them? Will the corporate governance changes which the Minister responded to give the Financial Reporting Council greater powers to regulate companies and to take action before things go badly wrong? It asked for those powers after the BHS collapse two years ago. When will we see the results of the lessons learned exercise on Carillion and the actions required by government, according to the Secretary of State, to strengthen,

“the oversight … of the public sector in terms of contractors”?—[Official Report, Commons, 30/1/18; col. 657.]

[Lord Henley]

The noble Lord is right to draw attention to the role of the Financial Reporting Council. We believe it has a range of powers that allow it to sanction, for example, individual auditors and accountants and to audit firms. In implementing our reforms, we certainly want to give further consideration to whether the FRC has the appropriate powers, resources and status to operate effectively.

Small Businesses: Retention

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 21st February 2018 Lords Chamber

[Lord Henley]

My Lords, I agree with some of the noble Lord’s analysis about problems related to retention, a practice that is common within the construction industry but which has negative impacts. That is why we had the consultation, as I think he knows. We obviously want to consider the results of that consultation and in doing so we will look, as he has suggested, at Peter Aldous’s Bill and see whether it is appropriate that we can take further steps. But the consultation having been completed, we need to consider it first.

[Lord Stevenson of Balmacara (Lab)]

My Lords, you have to wonder why this Government have it in for SMEs. We have a Small Business Commissioner who seems to have none of the powers necessary to do anything about the late payments scandal that they have to face; and on retention, as we have just heard, very good and well-argued proposals have been played into the long grass and will not see the light of day for some time, as the Minister seemed to suggest. Should this not be put immediately to the task force that the Secretary of State has put together to advise on how to mitigate the Carillion disaster?

[Lord Henley]

My Lords, as I said, we are considering these matters. The noble Lord quite rightly points out the task force that my right honourable friend has set up; I add that the Small Business Commissioner, Paul Uppal, will sit on that task force. We will consider all the options as a result of that but we will not rush into legislation; we are going to consider what is appropriate. Perhaps we can give some support to Peter Aldous’s Bill but these matters need to be considered and we will then deal with the problem.

Unified Patent Court (Immunities and Privileges) Order 2017

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 6th December 2017 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Minister will be grateful to know that the shadow cast upon the previous debate does not extend this far. I will be a ray of sunlight in his life and he will emerge, if not hopping and skipping, possibly with a little spring in his step at the pleasure we express and the way in which this piece of legislation is coming forward.

In passing, it was unfortunate that the Minister caught what appeared to be a full blast from both barrels from my noble friend. He should have seen him in the earlier stages of that Bill, when the hapless victim was the noble Baroness, Lady Neville-Rolfe. The full wrath that my noble friend Lord Mendelsohn could express at the whole approach that the Government were daring to take to this important area was expressed in many amendments that we had to discuss. The Minister got off lightly; he may not feel that. We certainly look forward to his letter when it comes.

I am going to say absolutely nothing about the substance of the statutory instrument because we agree with it and are happy for it to go through. It shines a light on the way some people manage to live their lives—in tax-free environments, free of all exemptions and penalties; some people have all the luck—but nevertheless that is the way it is done. I am glad that it is coming forward.

Like the noble Baroness, Lady Neville-Rolfe, whose work on this I salute—as well as that of the noble Baroness, Lady Wilcox, who preceded her—I am interested to learn a little more about what is actually happening on the ground. There are rumours of premises having been secured and buildings having nameplates attached to them, and so on. It would be nice to know what exactly is going to happen and what the timing is, if it is possible for the Minister to tell us.

The other thing that might be interesting to find out is whether there is yet any feel for whether there will be a sufficient caseload to warrant other centres being opened. During the passage of the original Bill we talked about the possibility that the Court of Session’s responsibility for patent determinations in Scotland might be echoed by having a similar court based there, if there was sufficient casework, because there is expertise and knowledge in Edinburgh in this area, and it would be sad if those were not able to be expressed. But these are matters that the Minister may not yet have the detail on and I am happy to have that at a later stage.

As I said, I am a ray of sunlight. We support this statutory instrument.

[Lord Henley]

I am not sure that I will necessarily be able to help the noble Lord; I might have to write to him. I am grateful for that ray of sunlight on this issue, even though he took a slightly “It’s all right for some” attitude to the idea that some of those lawyers and others involved with the courts would not pay UK taxes. However, it is always open to him to requalify at this stage in his life and seek to become one of the judges working in that court. I understand that they think that there might be up to six part-time judges there; that is all I can say. I say to my noble friend Lady Neville-Rolfe that I do not know where the court will be and when the doors will open. But again, if there is further information, I will let them know in due course.

There is one further process after the order leaves here, which is that this matter has to go to the Privy Council. I think it has missed the next meeting, so it might not be until the new year. At that point, we will have a better idea as to when, as I said, the doors will open and where it will be. If I have any further knowledge about what the caseload is likely to be, I will write both to my noble friend and to the noble Lord.

I am grateful also to have the support of both my distinguished former colleagues in this role, both of whom dealt with intellectual property when they were in that department. I am obviously not considered bright enough to do that, and they have taken that bit away from me. For all I know, it might be a gender issue—one of those things that mere men cannot do. I simply do not know. However, both my noble friends brought great distinction to that office, I am grateful for what they did, and I thank them—in particular for their warm welcome for this order.

Designs (International Registration of Industrial Designs) Order 2017

Debate between Lord Stevenson of Balmacara and Lord Henley

Wednesday 6th December 2017 Grand Committee

[Lord Stevenson of Balmacara]

That is very good news indeed. If it is moving in that direction that picks up the point I am making. There is an unexplored case for more work here, which will bring benefits to UK plc in time.

As I was saying, I was going to grandstand a little on the instrument to ask a couple of questions that I am very confident the Minister will not be able to respond to directly. I am happy to have a letter on them. The first is specifically on the consultation exercise. The Minister touched on this in his opening speech. The comment is made that the UK does not need to keep its own register of registered design rights because after we accede to the Hague agreement, which is what we are doing today, it automatically confers protection on the UK because the UK signed up to the Designview database, operated by OHIM. However, what is the mechanism under which we will continue to have access to it after Brexit? If it is in any way tied to membership it will raise, as the noble Lord, Lord Clement-Jones, said, considerable difficulties in negotiating a fair price and the conditional arrangements. If there are to be cost barriers that will further diminish the pressure on people who wish to register designs. It is important and clearly a useful tool for protecting design rights, but if it is inaccessible it will obviously not be of any value. WIPO and the role it plays are very valuable. The IPO does not have much of a role in this. It again seems a slightly missed opportunity to beat the drum for registration, but if the connection is directly to WIPO and we are to be affected by Brexit, clearly that is a problem.

Secondly, the Minister may be aware of a Supreme Court decision in the Trunki case, PMS v Magmatic. It raised the interesting question of whether one could register or even protect shapes of articles. In this case, the well-known Trunki is a small ride-on suitcase that children use rather irritatingly, at speed, in airport lounges, which my ankles have felt over the years—not my children, I confess; there were third parties involved. The case raised the interesting issue that our systems do not allow anyone who has a visual representation or design representation to register it. As I understand it, the Hague agreement has some flexibility about what can or cannot be registered. It would be interesting to get a sense from the officials in due course about whether they think it would be possible to use the flexibilities in the Hague agreement to allow those talented members of our design profession who design representation to register those designs. I look forward to hearing from the Minister in due course.

[Lord Henley]

My Lords, I am grateful to the noble Lords, Lord Stevenson and Lord Clement-Jones, for their responses. As they said, it will be important that I write with a little more detail on this. I certainly promise to do so. The noble Lord, Lord Clement-Jones, was alarmed about the visibility of the Intellectual Property Office and of these matters more generally.

Productivity

Debate between Lord Stevenson of Balmacara and Lord Henley

Tuesday 7th November 2017 Lords Chamber

[Lord Henley]

My Lords, we, too, welcome the Industrial Strategy Commission’s report. It is an independent inquiry, a joint initiative by the University of Manchester and the Sheffield Political Economy Research Institute, and as my noble friend will be aware, my right honourable friend the Secretary of State spoke at its launch. As I made clear in my original Answer, we will be publishing the industrial strategy later this year—I hope it will be by the end of this month—and if my noble friend will be patient, I think that when we produce that strategy she will see much there. As she will be aware, we have already made some fairly considerable announcements about investment: I mentioned the £23 billion national productivity investment fund which is there to drive improved productivity across the country, an area we certainly want to address.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I welcome the noble Lord back to the Dispatch Box in what I think is his fifth role since 2010, which must be a record of some kind. I was glad to hear him welcome the final report of the Industrial Strategy Commission, which makes very interesting reading and covers very interesting areas. One of its key recommendations to the Government is that health and social care should be at the centre of the industrial strategy. That may sound counterintuitive, but it makes the point that using the Government’s purchasing power to promote innovation in that sector and to increase productivity would be a good thing. Does the noble Lord agree with that, and will it appear in the industrial strategy?

[Lord Henley]

Perhaps I may correct one of the noble Lord’s statistics: it is only my fourth department since 2010. It is important to get these things correct. I am glad that the noble Lord, like the Government, welcomes the report; we will certainly take note of it. As I said, we are waiting for the industrial strategy to come out later this month, and I am grateful that he makes it clear that there are matters other than government spending which are important here, particularly in dealing with questions of productivity. We want to make sure that all levers that are available to the Government can be made use of. He mentioned purchasing. We will certainly make that clear, and I hope that other departments will do their bit. He mentioned purchasing within the health service, but there are other things that the Government can do as well, in relation to deregulation and trade policy, as well as procurement, which he mentioned.

Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 12th December 2016 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for introducing the order, which as he said catches public interest entities; that is, companies whose activities likely to have a significant impact on the economy and society, including companies such as banks and insurers and extending to partnerships and other groups. The issue at hand is how companies assess non-financial risks and opportunities and how they incorporate them into their business strategies and models. The areas of main concern are environmental policies, policies about employees, respect for human rights, anti-bribery and corruption policies and diversity policies.

The Explanatory Memorandum explains, and the Minister also mentioned, that the underlying problem is really one of information asymmetry between the users of non-financial information and the directors of the company—a matter that in some senses transcends any temporary concern one might have about EU legitimacy in this area. It highlights that while UK companies are pretty good at reporting on environmental, employer and diversity policies, they are pretty poor at dealing with human rights and bribery and corruption issues. If there are asymmetries, they can lead to sub-optimal investment and trading decisions as well as misalignment of managers’ incentives away from delivering best performance in the company.

While the primary policy is to increase the transparency of PIEs including increasing relevance, quantity, consistency and comparability of the non-financial information currently disclosed by strengthening and clarifying the existing requirements, there are two quite important secondary objectives. The first is to encourage companies to better assess the risks relating to such matters as bribery and corruption and the other matters listed, and to incorporate these into their business strategies and models. The second is to increase diversity in corporate boards and the staff of companies and to enhance transparency concerning their diversity policies in order to help facilitate more effective oversight of management and governance in the company. We support those aims.

I have a few questions for the Minister, but I hope he will understand that we are not objecting to the regulations as they stand. If it would be more convenient for him to write to me, I am happy for him to do so. However, first I will make one observation, which I tend to have to do when I am dealing with orders from the department from which the Minister has emerged. Regulations are supposed to come into force on the seventh day after the regulations are made. In other words, these do not comply with the long-standing convention, which I had thought informed much of the work done by the department, that regulations which affect business, and these clearly do, should be introduced on one of the common commencement dates, which are 1 October and 5 April. Why is that? Has the department sought special exemption which can exceptionally permit other commencement dates, and if so, will the Minister explain what arguments of necessity and urgency were used?

Secondly, the regulations implement aspects of directive 2014/95/EU on disclosure of non-financial and diversity information and also directive 2013/34/EU relating to an exceptional group account about which we have no comments. The main problem facing the Government is that the UK does not currently recognise the group of organisations known as public interest entities and a large proportion of the Explanatory Memorandum is taken up with trying to show how all public interest entities based and operating in the UK are in fact caught by the regulations. In particular, the directive sets out four limbs within which it characterises the PIEs it wants to be in scope. I enjoyed the tour d’horizon of our legislative framework in paragraphs 4.7 to 4.10 of the Explanatory Memorandum, which almost convinces the reader that all the right companies are due to be in scope of this SI—or are they? In practice, as paragraph 4.10 makes clear, without recourse to the European Communities Act 1972, there are no statutory mechanisms for designating a small but presumably important group of bodies. Can the Minister say whether any companies or organisations have slipped through the net, and if so, why no recourse to the ECA 1972 has been proposed?

Paragraph 8 of the Explanatory Memorandum discusses the outcome of the consultation. I noticed one rather interesting area of controversy, to the effect that some stakeholders were,

“in favour of applying the Directive to all listed companies as well as the small amount of private companies that are in scope”.

The argument is that this would remove the small differences between the EU and domestic regimes, which I think the Minister referred to. The Explanatory Memorandum says that the principal reason for not gold-plating on this occasion was that it,

“would go beyond the minimum requirements of the Directive”.

Given that there was support among the consultees for going further than the minimum and that only a very small number of extra companies would have been captured, can the Minister tell us why this opportunity was not taken? It would have made more sense for external users of the information. It is a matter of regret that the information is not there. I understand that there is a voluntary procedure, but that is not what the consultees were asking for.

Finally, in paragraph 12.2 the Explanatory Memorandum explains that it is not necessary to make arrangements for a formal review of these regulations on what I think are rather specious grounds—that the regulations are amending,

“provision that is contained in primary legislation”.

However, paragraph 12.3 goes on to say that,

“the Department will keep the effect of the non-financial reporting requirements under review”.

The reason we are making PIEs disclose anti-corruption and bribery measures, as well as the others, is partly because of the EU directive but also because the Government accept—and they are right to do so—that it is necessary to encourage transparency and that a requirement to make this information available is in the best interests of the country because it will encourage “responsible corporate behaviour” as well as assist,

“the interests of other stakeholders such as creditors, investors and regulators”.

The Minister made that point. Can he explain this apparent reluctance to build a formal review mechanism into these new regulations and confirm that, as the department will in fact be reviewing them as if the requirement was in place, the review will be published?

[Lord Henley]

My Lords, I am grateful to the noble Lord for his very kind offer to someone such as myself, who is new to these matters, to write to him. I will certainly take him up on that. He might want me to take him up on that even after I try to answer some of his questions.

The noble Lord’s first question was about whether it would be possible to have a common commencement date. He said that it might be easier for companies if we stuck to 1 October or 5 April. The directive means that we can implement as close to the date as possible so as to avoid gold-plating. I understand that that means that the common commencement date does not apply. However, I certainly take his question on board and will come back to him if there is a better answer.

The noble Lord also asked whether there was a mechanism for a formal review. I can assure him that we always keep all these matters under review. The review process will certainly look in due course at whether all EU and domestic non-financial reporting regimes have led to unnecessary complexity for business. Obviously, that is something which will have to be kept in mind by the department.

PIEs were not recognised in the United Kingdom designation, as I understand it from the noble Lord’s question. There is no designation under the European Communities Act. He asked whether any companies have slipped through the net through this implementation. I can say that there is a legal definition of a public interest entity. The accounting directive defines what it is and we have used PIEs in the Companies Act when transposing the audit directive and the audit regulation because there are certain duties which only PIEs have—mandatory rotation and retendering of auditors, for example. The regulations further provide a list of entities to which the requirements apply, which is drawn from the accounting directive’s definition of a PIE. We believe that no companies have slipped through the net because we do not have our own definition; we are requiring what the accounting directive sets out.

I thank the noble Lord for his valuable comments. I can probably give him an assurance that there will be a letter in due course. I hope that, with luck, it might even arrive before Christmas. If it does not, it will be something for him to look forward to in the new year. I believe that his comments have been valuable, and that it is important to remember that the annual report can be used to present a very fair and balanced impression of a company, which goes beyond items on the balance sheet. These regulations strike the right balance between offering flexibility for companies to report on these issues of risk as they relate to their activities and providing a structure that makes the disclosures meaningful. The regulations should help to increase the transparency of how our companies behave and better equip shareholders to be active stewards of the companies they own. I beg to move.

European Union: Trade

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 28th November 2016 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I welcome the noble Lord back to the Front Bench and look forward to debating with him again in future. In October, the noble Baroness, Lady Mobarik, said that the forthcoming Green Paper—I am glad to hear it confirmed that there will be one—will continue to give support to the original proposal by the Prime Minister that employees and stakeholders will get a stronger voice in company boardrooms. Since then, business organisations have unanimously come out against this. Does it remain a commitment of the Government?

[Lord Henley]

My Lords, I am not going to comment on what will be coming before the noble Lord and others sometime later this year. The noble Lord does not have to wait long—he does not even have to wait as long as Christmas before this wonderful Green Paper comes out. He can then peruse it and make his comments in due course.

Universities: Admission

Debate between Lord Stevenson of Balmacara and Lord Henley

Monday 20th June 2011 Lords Chamber

[Lord Henley]

My Lords, we accept that many people have not quite understood what the Government are proposing. We wish that they would and we will try to educate them in that process, so that they understand that eligible students will not be paying upfront or paying more than they did in the past. They will pay for longer but they will not pay more per year. Obviously, we will do research into what we have done to see just how effective that has been.

[Lord Stevenson of Balmacara]

Your Lordships’ House will recall that the recent report by the noble Lord, Lord Browne of Madingley, recommended that graduates would begin to pay their loans back only when their earnings reached £21,000 and that interest would be charged at the cost of borrowing to the Government. Will the Minister confirm that the Government are now proposing that the interest rate to be charged after earnings reach £21,000 will be as high as 3 per cent plus RPI? Will he indicate what studies have been carried out on the impact that this will have on admissions from people from ethnic minority backgrounds?

[Lord Henley]

My Lords, the noble Lord asks a large number of questions, which I propose to answer simply. We have broadly followed the recommendations by the noble Lord, Lord Browne, but not entirely, and we draw our own conclusions. But he is quite right to say that we decided that no one would pay until they were earning at least £21,000 a year and that there should be an appropriate level of interest beyond that rate. That was set out in a Statement some six months ago, which was repeated in this House, and is what we shall be ensuring comes to pass with the passage of the relevant clauses in the Education Bill. The noble Lord can also wait for the introduction of the higher education paper which will be published shortly.