Gross Domestic Product: Wales and the UK

Lord Wigley Excerpts

Thursday 6th July 2023 Lords Chamber

Asked by

[Lord Wigley]

To ask His Majesty’s Government what are their latest figures for the gross domestic product per head of population for (1) Wales, and (2) the United Kingdom.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, the latest Office for National Statistics data show that in 2021 gross domestic product—GDP—per head, at current prices, was £25,665 for Wales and £33,745 for the UK. The UK Government have made significant interventions aimed at boosting GDP in Wales and across the UK, including the £4.8 billion levelling-up fund, the £2.6 billion UK shared prosperity fund and delivering on investment zones and freeports.

[Lord Wigley (PC)]

My Lords, do these figures not speak volumes? They underline the failure of successive Governments to close the gap between Wales and England. With the relevant economic levers being shared between Whitehall and Senedd Cymru, is it not essential that the two co-operate on these economic matters? Does the Minister appreciate how much this is undermined by the refusal of the Chief Secretary of the Treasury to attend the Senedd’s finance committee? Is she aware that her colleague, the noble Lord, Lord Bourne, told that committee in Cardiff last week that a duty should be placed on the Chief Secretary to attend such committees when required? He said that

“if it needs putting on a statutory basis … that needs to happen”.

Does she agree?

[Baroness Penn (Con)]

My Lords, perhaps I can provide a little reassurance to the noble Lord. Yes, the gap between GDP per head in Wales and the rest of the UK is too large, but Wales has had the highest growth in GDP per head since 2010 of all regions and nations across the UK, increasing by 15.7% compared with 6.9% across the UK. He talked about the Welsh Government and the UK Government working together. That is something that we have done successfully on city and growth deals across Wales that were developed jointly by the UK Government and the Welsh Government. This included £500 million for the Cardiff capital region and over £100 million in north Wales and Swansea. On his point about the Chief Secretary to the Treasury, he works hard and closely with the devolved Administrations—I know that is something he is very committed to—but I will take the noble Lord’s specific point away.

European Structural and Investment Funds and the European Agricultural Guarantee Fund

Lord Wigley Excerpts

Tuesday 21st March 2023 Lords Chamber

[Baroness Penn (Con)]

My noble friend is right that, in both schemes, as the EU funding falls away, the UK funding comes in to replace it. We are seeking to do that in as smooth a way as possible. When it comes to support for farmers, we will continue to set out next steps on our environmental land management schemes, including the sustainable farming initiative, Countryside Stewardship and landscape recovery. On the shared prosperity fund, I reassure my noble friend that that fund is ramping up as EU funding falls away; its profile is faster than the way in which previous EU funding had been distributed.

[Lord Wigley (PC)]

My Lords, is the Minister aware that, when Wales first received structural funds from the European Union in 2000, that money was accepted by the Treasury in the UK and was not initially passed over to the beneficiaries, on the basis that they were already getting adequate money from the Treasury? It needed the intervention of Michel Barnier, the regional commissioner at that time, to get the Treasury to pass that money over. Will she give a guarantee that all money that is supposed to be equivalent to structural funds will be additional to the base spending for the areas that need it?

[Baroness Penn (Con)]

My Lords, the commitment that the Government have made is that the replacement of EU funding in each nation will meet the levels that they previously received. That is the commitment that we are delivering through the shared prosperity fund.

Devolved Budget for Wales: Inflation

Lord Wigley Excerpts

Wednesday 15th March 2023 Lords Chamber

[Baroness Penn (Con)]

I believe the noble Lord was referring to the Lords Committee on the Barnett Formula in 2009, which called for a review of that, including implementing a needs-based factor. That is exactly what we have done through implementing the recommendations of the Holtham commission, which found that the Welsh Government should have at least 15% more per person than equivalent UK government spending to reflect the Welsh Government’s additional needs. In fact, that figure is 20% more per person in the 2021 spending review, which is about £1 million more each year than the Holtham commission indicated and which the Welsh Government agreed was fair for Wales relative to England.

[Lord Wigley (PC)]

My Lords, did not the Holtham commission have as one of its three points the need to do away with the Barnett formula as it exists and to replace it with a needs-based formula? That has not been accepted by the Government. Will they please think again?

[Baroness Penn (Con)]

Instead of removing the Barnett formula, we have amended it to include that needs-based factor. The Barnett formula is simple and efficient and provides a clear and certain outcome. With the addition of the needs-based factor, the people of Wales have the guarantee that funding based on their own needs will not fall below the assessment of where those needs are.

Public Spending: Barnett Formula

Lord Wigley Excerpts

Wednesday 15th March 2023 Lords Chamber

[Lord Wigley (PC)]

My Lords, I am delighted to follow the noble Baroness and congratulate the noble Lord, Lord Hendy, on his delightful maiden speech. I warmed very much when he mentioned the Barnett consequences of HS2—I will mention those in a moment. I am sure we all look forward to his future contributions to debates in this Chamber. I also thank the noble Lord, Lord Shipley, for bringing this debate and giving us an opportunity from various angles to address aspects of the Barnett formula.

I am probably the only Member here who spoke in the Commons debate when the Barnett formula was introduced in 1978. I then warned that it would freeze the financial relationships between our four nations and ossify Wales into a dependency relationship in which the consequences of historic industrial and social patterns would place high demands on healthcare and housing budgets.

In opposition, Welsh Labour MPs called for a needs- based formula to replace Barnett, but when in government they failed to deliver. That was partly, I believe, because the Chancellor and then Prime Minister Gordon Brown was a Scottish MP and feared that a needs-based formula might penalise Scotland.

When the Barnett formula was introduced in 1978, Joel Barnett proposed it as a short-term measure. Four decades later, the then Lord Barnett described its continued application as an embarrassment. Its fundamental weakness for Wales is that it takes as its starting point the situation that existed in 1978. The Government have acknowledged that the baseline for Barnett is created by “rolling forward existing spending”. That assumes that the spending in 1978 was appropriate to Wales’s needs and that no fundamental change in the relationships between Wales and England has happened since. But there has been a dramatic differential change arising from the ending of the coal industry and hugely reduced employment in steel. The formula’s other central weakness is that adjustments to the base spending levels were not needs related. Subsequent editions relate to spending levels determined by Westminster as appropriate for England.

It is fair to say that over the period from 2000 until Brexit hit home, Wales benefited from European regional and social funds. We received that aid because the per capita GDP in 15 of Wales’s 22 counties was below 75% of the EU figure. Wales was accorded European funding in 1999 because of the failure of UK economic policy to regenerate the Welsh economy. EU aid was essentially a recognition of need.

The challenge was to raise the economic activity levels, which ran at six percentage points lower than England. There is some irony that the issue of lowered economic activity levels is now being experienced in England as well. I question whether successive Labour-led Governments in Cardiff used those European resources in a strategic manner to put right the underlying weaknesses of our economy. Money was given out to support worthy projects that were welcomed in local communities but often did not address the underlying problem. EU funding was intended to address these needs-based issues. The Barnett formula does not even try to do so.

The Barnett formula was reviewed by a House of Lords Select Committee in 2009 and by the Holtham commission in 2010. Both criticised the formula, principally because it is not needs related. To highlight one aspect of its deficiency, over recent years public expenditure per capita in Wales has been very close to that of London, notwithstanding the greater needs of Wales on a host of indicators. Analysis from 2022 showed that total identifiable public expenditure per capita in 2020-21 was £14,222 in Wales and £15,490 in London. If per capita expenditure had been the same in Wales as in London, Wales would have received an extra £4 billion.

I accept that only half of government expenditure in Wales comes through the Barnett formula and the rest is direct Treasury funding for non-devolved matters. But over the Covid period, London benefited disproportionately from central government spending, despite the costs of Covid being felt all around these islands and the health services being largely devolved.

Another glaring example relates to HS2, as we have heard. Normally, if such a project cost, say, £100 billion in England, the Barnett consequential for Wales would be about £5 billion. Instead, Wales receives nothing because HS2 is defined as an England and Wales project, despite not a single mile of it running through Wales. Will the Minister tell the House who made that decision? Not one mile of HS2 is in Wales; indeed, a KPMG study for HS2 Ltd shows that Wales would lose competitive advantage as a result of it. That report projects Scotland as gaining competitive advantage, yet Scotland gets a Barnett consequential from HS2 and Wales does not. In responding to this debate, the Minister should announce that Wales will get a full Barnett consequential from HS2, as demanded by the Conservative leader in the Senedd. If she fails to indicate government rethinking on this issue, many Tory MPs in Wales will pay the price.

In their response to the Select Committee report, Cm 7772, the Government promised to keep the operation of the Barnett formula under review. In responding to this debate, will the Minister tell the House exactly when it was last reviewed, what material evidence arose from any such review and when it was published?

The noble Lord, Lord Forsyth, at Question Time on 18 January, acknowledged that the Barnett formula was not serving Wales well and called for it to be scrapped and replaced by a needs-based formula. The Minister has repeatedly said, in this Chamber on 18 January and again this afternoon, that the Government have responded to the demands of the Holtham commission that Welsh funding should be decided on a needs basis. I say here, as emphatically as I can, that they have not.

The Holtham report contained three core demands. The first was to establish a Barnett floor to stop the ongoing systematic convergence of the Welsh allocation per capita with that of England. It would, in Holtham’s words, prevent even further underfunding of public services in Wales.

[Lord Harlech (Con)]

My Lords, I am sorry to interrupt the noble Lord—

[Lord Wigley (PC)]

I am winding up now. As I was saying, it does not do anything to put right the level of underfunding that Wales has systematically suffered and that is built into the present settlement. That is why Holtham recommended, crucially, that Barnett be replaced by a “needs-based” methodology to get financial provision in line with Wales’s needs. Please will the Minister confirm that case?

Wales: Additional Financial Resources

Lord Wigley Excerpts

Wednesday 18th January 2023 Lords Chamber

Asked by

[Lord Wigley]

To ask His Majesty’s Government what additional financial resources they have made available to the government of Wales, over and above the Barnett formula consequential provisions, to meet unforeseen financial needs for which no provision was made in Wales 2022-23 expenditure plans.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

The Welsh Government are well funded to meet their devolved responsibilities. The 2021 spending review set out the largest annual settlement in real terms since the devolution Act. This is still growing in real terms this year. The Welsh Government also have their own tax and borrowing powers. On top of this, the UK Government are supporting households UK-wide with the cost of living, and supporting businesses, charities and the public sector with their energy bills.

[Lord Wigley (PC)]

My Lords, is the Minister aware that Wales Fiscal Analysis, at Cardiff University, has shown that, even after taking into account the additional allocations made to the Welsh Government, the higher levels of inflation since the coming year’s budget was set could amount to an impact of £800 million in 2023-24, and that, consequently, real-terms spending on public services in Wales will fall by that amount? Will the Government now allocate an additional £800 million to the Welsh Government for the coming year, to avoid real cuts in essential services in Wales?

[Baroness Penn (Con)]

My Lords, we have a difference of opinion on the figures. That might be because government budgets are routinely translated into real terms using the GDP deflator, by both the Treasury and independent bodies such as the OBR and the IFS. Using those figures, we see that the Welsh spending settlement is still growing in real terms this year and over the spending review period, even after the higher costs, and we believe that the Welsh Government are well funded to meet their obligations.

Wales: Economic Investment Projects

Lord Wigley Excerpts

Tuesday 12th July 2016 Lords Chamber

Asked by

[Lord Wigley]

To ask Her Majesty’s Government what discussions they have had with the Government of Wales in relation to the financing of economic investment projects in Wales from 2020 onwards.

[The Commercial Secretary to the Treasury (Lord O'Neill of Gatley) (Con)]

My Lords, Ministers regularly meet to discuss issues relating to the economy of Wales. The role and ambition of the Welsh Government in economic investment in Wales is clearly important. They are responsible for a significant proportion of capital spending in Wales, with £8.7 billion of capital block grant funding up to 2020-21. Through the Wales Act 2014, they are gaining new tax and borrowing powers that can be used to further increase investment.

[Lord Wigley (PC)]

My Lords, with your indulgence, may I thank people in every party and of no party and in all parts of these islands for the warm support given to Wales in the recent Euro 2016 tournament? This is already bringing an economic spin-off for Wales by way of a surge in tourist inquiries.

As the Government are committed to delivering Brexit, will the Minister confirm that they will also honour the commitments on which the Brexit vote was secured, including the vow that the European structural funds from which Wales is currently benefiting will be fully replaced by UK Treasury funding?

[Lord O'Neill of Gatley]

My Lords, as a keen football supporter, let me also add my congratulations on the performance of Wales. I look forward to Manchester United signing some of those players. On the specific question from the noble Lord, that is a matter for the next Prime Minister. What has been committed to in the specific deals between this Government and the various places, particularly Cardiff city, will of course be stood behind.

Income Per Capita

Lord Wigley Excerpts

Tuesday 14th July 2015 Lords Chamber

Asked by

[Lord Wigley]

To ask Her Majesty’s Government what steps they are taking to secure an increase in the level of income per capita.

[The Commercial Secretary to the Treasury (Lord O'Neill of Gatley) (Con)]

My Lords, to achieve meaningful and lasting growth in the level of income per capita and living standards we need a sustained pick up in productivity. Interestingly, the most recent data have shown a notable rise in productivity, admittedly from somewhat disappointing data beforehand. Of course, it should not necessarily be assumed that this is the start of a trend. This is why the Government have just published a productivity plan that sets out how we will achieve a step change in productivity.

[Lord Wigley (PC)]

Does the Minister accept that GDP per capita now is still lower than it was in the first quarter of 2008 and that the disparity between the level of income per head in London and in Wales or, indeed, in the north of England, remains very stubborn indeed? What plans do the Government have in the document he has just drawn to the attention of the House to close the disparity between London and the rest of these islands?

[Lord O'Neill of Gatley]

My Lords, I encourage every Member of this House to read all 82 pages of the document because it includes considerable detail to answer those questions. To be brief—I am aware from my recent appearances in this House that one has to be brief and not put Members to sleep—one of the most important measures related to previous Questions that I have been asked is that we have authorised an independent review into the accuracy of all UK economic statistics, which are highly relevant to this Question.

Barnett Formula

Lord Wigley Excerpts

Tuesday 10th February 2015 Lords Chamber

[Lord Newby]

Well, my Lords, that is exactly what we are doing. The transfer of tax revenue to the Scottish Government means that the block grant, the element to which the Barnett formula applies, is falling by two-thirds from approximately £30 billion to £10 billion.

[Lord Wigley (PC)]

My Lords, does the Minister accept that the comments he has just made about phasing out the Barnett formula will be noted with considerable interest in Wales? Does he understand that on the formula that Scotland is receiving at the moment, adjusted for population, Wales is getting £1.2 billion less than we would if it was calculated on the Scottish basis? When are the Government going to phase in a new arrangement for Wales so that we get a fair deal out of the Treasury?

Autumn Statement

Lord Wigley Excerpts

Wednesday 3rd December 2014 Lords Chamber

[Lord Wigley (PC)]

Can I press the Minister further on the health increase to which he referred? It was mentioned by the Chancellor in the other place that £2 billion will be spent every year. The Green Book states on page 68 that it will be an extra £2 billion for the NHS. Given that that is the case, can the Minister give an assurance that there will be full Barnett consequential of the full sum for the devolved Administrations?

[Lord Deighton]

If Barnett consequentials are appropriate, of course they will follow.

Infrastructure Bill [HL]

Lord Wigley Excerpts

Monday 10th November 2014 Lords Chamber

[Baroness Young of Old Scone (Non-Afl)]

My Lords, I rise to support Amendment 113G. I declare a past interest, having been chief executive of the Environment Agency for eight years. This is a technology that is deeply distrusted by the public. Certainly, my experience of regulation in the environmental field is that if a degree of certainty can be given to both sides—the industry and the public—that is hugely beneficial in removing tension, distrust and suspicion. Industry used to tell me time and again that it would prefer to see clear, unequivocal regulation, which it could then fit its business around and make sure that it was compliant with, so that there was no doubt about the requirements that would be laid upon it. This was the most successful way of developing a degree of trust on hotly contested issues that could have an environmental impact.

Therefore, I urge the Minister to think seriously about placing in the Bill an environmental impact assessment and some of the other associated requirements here. Some of these exist elsewhere in legislation, but there is no harm in making the point that whether they are implemented is not the decision of the Environment Agency but a requirement because this technology is so distrusted by the public. I think it should cover exploration as well as extraction. It should also be associated, if I may say so slightly in advance, with the two amendments—or at least one of them—that I have put down, which we will be debating later. Certainly in the initial stages of this hotly contested area, we need belt and braces, not just belt.

[Lord Wigley (PC)]

My Lords, I am content to support Amendment 113G as far as it goes but, to my mind, it does not go anything like far enough. I regret that I will be introducing rather a disconsonant note to the debate. I will outline my opposition to hydraulic fracking, lock, stock and two poisoned barrels, in the debate on a later amendment in my name—here’s to knocking these diabolical fracking provisions out of the Bill. These amendments give a modicum of increased environmental protection, and I welcome the reference to the levels of methane in underground water, to which I shall certainly be returning in a later bank of amendments. I seek some clarification from the mover of the amendment on whether either the Scottish Parliament or the National Assembly for Wales has any role in the consideration of these draft instruments.

[Lord Teverson (LD)]

My Lords, when one reads the amendment, one is clearly very favourable to it because it tries to do certain things and convey a message, which the noble Baroness is quite right about, in terms of public confidence in the fracking industry. However, sometimes in this debate we forget the amount of regulation and control that is already there. For a start, we must have the permission of the surface land owner. We need planning permission from local authorities. We need a licence from DECC from a series of auctions or allocations of those licences and areas for that. We need the Environment Agency to approve and we need health and safety to give the go-ahead as well. That is quite substantial. When I look through the amendment a little more, I certainly agree with independent inspections and disclosure of chemicals. I am far from sure about a 12-month period for a previous record of monitoring. From discussions on this in Committee, this is not particularly seasonal and 12 months is a long time—certainly, in terms of fugitive gases, methane in particular, that is extremely important.

However, I am not sure that the Bill is the right place to ask the Committee on Climate Change to do something. In fact, I am sure the Minister could speak to the chairman of the Committee on Climate Change quite easily—maybe even after the debate—and come to an agreement on whether that was needed. I agree that maybe a report is required. It could, of course, really look only at foreign experience, while perhaps UK experience becomes far more important. We clearly cannot do that until after at least some of the exploration stage, and maybe some of the production stage, has happened. However, I agree that we need the regulation of this technology to be comprehensive, and we have a good track record in general in this area. Perhaps we need that regulation to be in one place comprehensively so that not only the industry but we as parliamentarians can understand it and, more importantly, the public can see how this all works.

So while I do not really support this amendment in its current form, I hope that the Government are working on this anyway and will bring forward, perhaps later in the Bill or in secondary legislation, a comprehensive summary and description of exactly how all these levels of regulation will work within the industry.

--- Later in debate ---

[Lord Young of Norwood Green (Lab)]

My Lords, in taking part in the debate, my only interest is that we should make a judgment based on supported evidence, rather than on allegations. If nothing else, the amendment is important because there is a battle of ideas on fracking that we need to win. Noble Lords have said that we are not currently doing so well on public opinion. Unfortunately, the scare stories are believed. There has been an important event since we debated this in Committee: the publication of The Economic Impact on UK Energy Policy of Shale Gas and Oil. It is a very important report. No one has questioned its integrity or the evidence it contains. I stress that point again and again.

Like many others, I looked at Amendment 113G. I was pleased to hear my noble friend Lady Worthington say that she was not opposed to fracking. I suppose the amendment is a bit like the curate’s egg: it is good in parts. It is probably better than the average curate’s egg because most of the parts are good. I support an environmental impact assessment—I agree with the noble Lord, Lord Teverson, that that is something that needs to be done. I support independent inspections of the integrity of wells used; I am pretty sure the fracking companies would as well. They are also prepared publicly to disclose the chemicals used for the extraction process. Again, read the report: they are in there. For the most part they are used in tiny amounts, and for the most part there is no problem with them whatever.

It is true that some practices that went on in the States were not helpful to the process of fracking. That is not to say that everything that happened in the States was bad, because it was not—there are plenty of good examples from there. We should not forget that fracking substantially reduced emissions in the States. It did and has created jobs and it has brought industry back to the States. We should not forget that important aspect.

[Lord Wigley]

The noble Lord quotes the economic impact report, which I have with me. Paragraph 269 says that the Government,

“must also explicitly address the safety issues”.

The committee that produced that report was clearly not entirely happy on that count.

[Lord Young of Norwood Green]

Of course, we have to address the safety issues. I am not seriously saying that anybody in the Chamber is recommending that we embark on a process of mining or whatever activity without addressing safety issues. I listened carefully both to the noble Lord, Lord Wigley, and to his companion sitting next to him, the noble Baroness, Lady Jones. They both expressed a deep-rooted opposition to fracking, which frankly puzzles me. If we do not have fracking we will still be dependent on LNG, on which I think about 27% of our energy is based. I do not understand the basis of their opposition. I sometimes do not understand the green analysis of a number of issues because it is not always evidence-based. I could say the same about GM foods, but that is another issue.

To return to this important subject, I, too, want to hear what the Minister has to say. I heard it once in Committee, but it is worthy of repetition. I listened to and understand the concerns of my noble friend Lady Farrington, but I direct her to the report. It said that when people talk about earthquakes, it might be better if we talk about tremors. There was one in Wigan in Greater Manchester, which was of a 1.5 magnitude. It was about the same as a heavy lorry passing.

--- Later in debate ---

[Lord Jenkin of Roding]

My Lords, neither the noble Baroness who has moved this amendment nor the noble Lord, Lord Judd, appears to have recognised that what we are talking about in Clause 32 is developing land 300 metres below the surface. Looking at the list of the various sites in the noble Baroness’s amendment, I cannot of think of one of them which could remotely be affected by horizontal drilling 300 metres below the surface. I am surprised that neither the noble Baroness nor the noble Lord seems to have acknowledged this. We are not talking about actually drilling down in a special area of conservation or a site of special scientific interest which implies development on the surface. We are talking here about horizontal drilling 300 metres below the surface and I just cannot understand how either the noble Baroness or the noble Lord can think that this could affect these important sites. Perhaps I have missed something.

[Lord Wigley]

My Lords, first, I thank the noble Baroness, Lady Young of Old Scone, for introducing these important amendments. Perhaps I could immediately pick up the points made by the noble Lord, Lord Jenkin, a moment ago. Yes, there will be drilling across—of course there will be—but somewhere they have got to drill down. If he is saying there shall be no drilling down at all in these areas, just drilling across into them, then at least I would understand what he was saying, but he appears to say that there should not be any rules whatsoever appertaining to these special areas because the drilling can only come from the side. Well, it cannot only come from the side, and I would have thought that that is something that perhaps could be addressed later if this amendment was accepted.

I wholly welcome this amendment—

[Lord Jenkin of Roding]

The noble Baroness had an amendment in Grand Committee which addressed the question of whether there should be downward drilling and whether pads for developing shale gas could be located in any of these places. Although we did not vote in Grand Committee, the argument was perfectly clear that it would depend on the site. You have got planning permission and you have got a whole range of other things. I must confess I have not reread the noble Baroness’s debate on that occasion, but what we were talking about here is 300 metres below.

--- Later in debate ---

[Lord Wigley]

As I was saying before such diverse interventions, I welcome these amendments. They exclude important parts of these islands from the impact of fracking.

I come back to the experience of the United States—I will be talking more about that in the next group of amendments. The experience of the United States has been scorned in our previous debates, but it teaches us to be extremely careful before allowing such developments in our more sensitive rural areas. I accept that perhaps the rules will be different in the United Kingdom compared to the United States. That is one of the reasons why we need to have rules in the United Kingdom to look after these areas. Most certainly in the United States, to my knowledge, there are areas that have suffered not just from the effects underground but also very badly on the surface.

Noble Lords will be aware of the classic book Rape of the Fair Country by Alexander Cordell. We in Wales know what such extractive industry can do to our beautiful countryside and its effect on all sorts of wildlife. My only reservation with this amendment is merely that it does not go far enough and that many sensitive environments are excluded from being governed by it.

[Lord Borwick]

My Lords, I only wish that I could agree with the noble Lord, Lord Judd, that it is a short-term exercise to get planning permission for this sort of development. The planning permission process will take many months, probably years, and cost a large amount of money. It is not a short-term exercise, and that is why I think this amendment is unnecessary because it will be up to the local council or local planning authority to grant the planning permission, with all the pressures put upon them to make the decision to protect the environment. With these sites listed in this amendment, I do not think they are going to get the planning permission which the noble Baroness fears they will. I really do not think it is going to be possible.

Secondly, I am sorry that—despite trying to listen to it—I am not sure I fully understood the meaning of “functionally linked”. How wide a definition will that actually be in practice? I wonder whether the noble Baroness could help in explaining that?

--- Later in debate ---

Moved by

[Lord Wigley]

114: Clause 32, page 38, line 15, at end insert—
“(6) This section shall not extend to Wales unless an order authorising it has been passed by the National Assembly for Wales.
(7) An order under subsection (6) may contain any conditions which the Assembly deems appropriate.”

[Lord Wigley]

My Lords, I shall speak to Amendments 115B, 115C and 123, which also stand in my name and are grouped with Amendment 114. First of all, could I say a word about the whole issue of fracking? Noble Lords will be aware that when this Bill was given its Second Reading there was no reference to the provision it now makes in relation to fracking. When we first started in Committee, there was no sign of the amendments we knew were being prepared. Ostensibly, we had to wait until the conclusion of the consultation process in August, before amendments were formulated. But since little notice seems to have been taken of the overwhelming opposition to fracking expressed by the general public, this seems to have been little short of a charade. It is not good enough to take an arrogant and disparaging attitude to those who harbour genuine fears.

Now that we have the amendments in the Bill and the provision for fracking is likely to be confirmed as part of it as we move forward from Report, unless we challenge it rigorously tonight, then the fears that people have will be underlined and reinforced. That is why I have tabled my amendments. But before I address the detailed wording, I will make it clear why I unreservedly oppose the application of fracking technology to extract underground gas. I have grave reservations about this technology. I do not express these doubts and concerns on the basis of a nimby approach. There are no identified areas of potential fracking activities in my home county of Gwynedd, nor do I harbour doubts about any form of modern applied technology.

--- Later in debate ---

[Baroness Verma]

My Lords, I note the clause stand part amendments and the amendment proposed by the noble Lord, Lord Wigley, regarding the application of the right to use deep-level land for the purposes of exploiting petroleum or deep geothermal energy in Wales. The Government support the development of shale gas and oil. Natural gas from shale could play a crucial role in supporting UK energy security, as well as an important role as a part of the transition to a low-carbon economy, and that was well debated previously. The carbon footprint of UK-produced shale gas would likely be significantly less than coal and lower than imported liquefied natural gas. Domestic shale gas could also benefit the UK in terms of jobs, tax revenues and growth, mitigating some of the falling revenues from the North Sea.

However, it has become clear that difficulties in obtaining underground access pose a barrier to exploring this new industry. The same problem also applies to the deep geothermal industry, which is likewise at an early stage of development in the UK. New lateral drilling methods that can cover much larger areas underground mean that existing processes for obtaining underground access can be disproportionately costly and time consuming in relation to the potential benefits. Currently, companies must negotiate rights of access with every landowner living above underground drilling. If these negotiations fail, an oil and gas operator can make an application to the Secretary of State, who may refer the matter to the courts. This process gives a single landowner the power to delay a development significantly and, in the case of geothermal, it is likely to stop the project entirely.

The right to use deep-level land would help unlock exploration for shale gas and deep geothermal as we move towards a low-carbon economy. However, let me be clear that we are not proposing any changes to the regime for surface access, and the regulatory system that deals with the potential risks associated with drilling and hydraulic fracturing will remain the same. I can reassure noble Lords that a company looking to develop shale or geothermal would still need to obtain all the necessary permissions, such as planning and environmental permits. The onshore oil and gas industry has committed to engage with communities at the early stage of operations, as well as consulting through the planning application process. Our robust regulation will protect residents while allowing this source of homegrown energy to develop in a way that is fair to communities.

EY has estimated a thriving industry could mean 64,500 jobs nationally. Locally, that could mean cementing contracts, new facilities and jobs for local companies. Communities that host shale development could see a share of this, which is why we welcome the developers community benefit package, similar to other technologies such as wind. This will pay communities £100,000 per hydraulically fractured well site at exploratory stage and 1% of revenue if it successfully goes into production. As with wind farms, wider communities will benefit too, as local councils will also be able to retain 100% of the business rates that they collect from productive shale gas. Therefore, there are many potentials of this industry to communities in Wales if shale production takes place.

Petroleum extraction is a non-devolved matter. As such, the proposals for oil and gas will apply across England, Wales and Scotland. The proposals on deep geothermal energy also cover England, Wales and Scotland, where in Scotland deep geothermal energy is exploited for the sole, or main purpose of electricity generation. Schedule 7 to the Government of Wales Act 2006 sets out the conferred subjects over which the Welsh Assembly can exercise legislative competence. Oil and gas are clear exemptions from the conferred list of economic development and, furthermore, the exploitation of deep geothermal resources could not be considered to have been conferred under any of the subjects in Schedule 7.

Although deep geothermal and oil and gas activity may impact upon conferred subjects such as environmental protection, that is not what they properly relate to for the purposes of the legislative competence test in the Government of Wales Act 2006. In addition, the right of use clauses are not removing any existing regulatory requirements. We therefore see no ground on which this measure would be within the legislative competence of the Welsh Assembly. On that basis, there is no rationale for requiring approval by the Welsh Assembly before the section can apply in Wales.

It is also worth noting that, while oil and gas are non-devolved matters, all existing planning authority procedures and powers will remain in place. As such, the different UK planning regimes will continue to regulate shale gas or geothermal developments according to their existing planning procedures. I have reflected on the noble Lord’s amendment and in response to his concerns I have offered him a government perspective. Therefore, I hope that the noble Lord, Lord Wigley, will withdraw his amendment.

[Lord Wigley]

I am very grateful to those who have taken part in the debate and to the Minister for her response. Quite clearly, I would be unlikely to carry the House on the amendment that the clause should not stand part of the Bill. Although my heart would want me to go down that road, I suspect that I would come to a blind alley. Therefore, I will not press it on this occasion because there will be opportunities in another place. I have no doubt that many Members of all parties in the other place will wish to come back to this because there is deep concern outside.

Even if one was in favour of fracking in principle, I would have thought that it would be very wise to pay attention and take the maximum possible notice of the reservations that exist outside, because these are the real fears of real people in real communities, and they need to be addressed. Members in all parts of the House have expressed that in the series of debates we have had tonight.

Turning to the lead amendment in the group, which relates to the powers of the National Assembly for Wales, I think that it is ironic that at a little earlier than this time tomorrow—as the noble Lord, Lord Bourne, on the Government Front Bench, will be well aware—we will consider an amendment that would change the model of devolution for Wales to a reserved-powers model of the sort that exists for Northern Ireland and Scotland. This was a recommendation of the Silk commission, of which the noble Lord, Lord Bourne, was a member, and which appeared to have all-party support in Committee in this House. The Report stage of that Bill takes place tomorrow. That being so, unless there was a specific exemption made for these purposes, it would not be enough to rely on the 2006 Act, which the Minister has relied on in the debate tonight.

However, rather than argue technical, legalistic points arising out of legislation, I put this to the Minister in conclusion. When the National Assembly for Wales has responsibility for the environment, particularly for town and country planning, transport, and economic development within Wales, as well as health proposals, then surely it makes all sense to put the responsibility for this area also into its hands—at the very least to make sure that there is a working together. That surely was the intention of the Government when they responded to the Select Committee on Welsh Affairs report. I will not quote it again, but it underlined the fact that planning policy is a devolved matter and that planning is integrally involved in the decisions we are talking about in regard to fracking.

Therefore, I ask the Minister whether she will take this away between now and the debates in another place and give further thought, particularly in the light of the debate we will have on the Wales Bill tomorrow, as to whether there is a mechanism to make sure that the National Assembly for Wales and the Government of Wales are totally on board in a dialogue on these matters so that, in keeping with the principle of subsidiarity, the decisions affecting communities can be taken as close as possible to those communities—in this context, decisions affecting Wales can be taken by the National Assembly where possible. On that basis, I beg leave to withdraw the amendment.

Amendment 114 withdrawn.