Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Lord Young of Norwood Green and Lord Henley

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

[Lord Henley]

Midata is a method of electronically transferring customers’ data from a company system to a third party, such as a price comparison website. I was saying that that could lead to innovative third-party switching devices. I think I might have said at Second Reading of the Smart Meters Bill that some apps were already available that could do that for an individual. Therefore, the noble Lord, Lord Lennie, could sign up to something that said, “Always shift me to whatever is the cheapest tariff”. I cannot remember the name of the one already in existence. The noble Lord might then find that two or three times a year he was changing supplier without knowing it, always going to a cheaper one. It might be that the noble Lord, being very virtuous, wanted a greener one or something else, and other such things could be arranged. I hope that is what midata will help the noble Lord and others to do.

[Lord Young of Norwood Green (Lab)]

I hesitate to enter the debate because I do not want to prolong it. My understanding of the current generation of smart meters is that that is their problem: you cannot simply switch to any other provider because they do not yet have the technology to enable you to do that. The next generation will. That is my information and I have not yet heard anything to refute that. I have been talking to energy companies and to people who are heavily involved who say, “I am not signing up to this generation of smart meters”, because they cannot switch you to the complete range of suppliers. They do not yet have that flexibility.

[Lord Henley]

The noble Lord is absolutely right about the SMETS 2 meters. I will write to him about SMETS 1 meters and it might be that he is correct about that. I was only mentioning that as an advantage that will be available in the future to customers.

--- Later in debate ---

[Lord Young of Norwood Green]

That is a given! I will not go through the arguments again. I concur with them. The case has been made and I hope the Minister is listening. I, too, look forward to his alternative response—or perhaps there has been an epiphany and he will accept the validity of the arguments that have been so ably put.

I want to make a few points that have not been made. It is important to understand the context within which price caps are going to be set. A number of times in the debate reference has been made to the introduction of smart meters. That is not going to happen by chance, it is going to happen because the major suppliers have been told that they have to be introduced. The cost is not insignificant: 50 million smart meters will need to be installed at a cost of something like £7 billion. There is a long way to go: only about 12% of the smart meter installation has been completed.

An independent analysis by an energy sector expert points out:

“An energy price cap that pushes the industry as a whole to break-even or losses has significant implications on the smart meter roll-out programme”,


and that it is,

“absolutely essential to secure the cost-effective deployment of electric vehicles in addition to enabling the reduction of switching times to 24 hours”.

That will be one of the benefits of the smart meter rollout. If we want to encourage electric vehicles—which we do, as we know—smart meters need to be a key part of that.

I was also interested to see that the report talked about the incentives to switch. It said:

“The cap is intended to be set at a level that provides customers incentives to switch. When the CMA surveyed customers to understand the level of savings from switching that would encourage them to switch, it found that the median amount of savings”,


for customers was £120. It went on:

“At savings of £50, only 7% of customers were interested in switching … The survey did not find any meaningful variation in the level of savings required by different demographic groups”.


That is a really interesting bit of analysis, ironically by the Competition and Markets Authority.

I will go on to what we expect from our major energy suppliers, which are vital to the UK economy and the day-to-day lives of British citizens. They account for something like 2.3% of gross domestic product and £100 billion of investment has been earmarked to 2020-21 to ensure that the lights stay on and customers have reliable, affordable and low-carbon energy. There are 600,000 people employed in the sector—even more, if you include indirect jobs—and it is at the forefront of essential new technology, as I have said, such as the smart meter rollout. That will facilitate the rollout of electric vehicles, which will be a £200 billion global market in 2019.

Energy companies are at the forefront of training apprentices. For example, Centrica has six training academies, employs 27,000 people in the UK and has trained 1,000 apprentices a year in recent years, including 2,500 smart apprentices. These are no mean considerations and they do not just happen. I hope there is recognition of this. Energy companies supply households with their gas and electricity, and the market is more open and competitive than it has ever been. Some of this statistical evidence is interesting. We have had an argument about suppliers but the fact is that there are more suppliers than before. I do not disagree with my noble friend about concentration but there has been significant switching. Nearly 400,000 customers switched during January 2018, a 14% increase on the same period last year, while 5.5 million customers—one in six—switched supplier in 2017. Awareness of the ability to switch is high; I have already given the Committee that information. It is interesting that in the BEIS tracker polling, public concern about energy bills does not rank higher than it does about other household bills.

I want to make my position clear. I am not in hock to the energy companies—I will finish in a minute—and I am in favour of a price cap, but it has to be administered in a way that takes cognisance of the role that energy companies play. It also has to be done in an appropriate way. Unfortunately, my quote from the Green Paper was anticipated by the noble Lord, Lord Hunt, so I will not go through that again but I believe that the evidence to support this amendment is overwhelming and, on those grounds, I support him.

[Lord Henley]

My Lords, the noble Lord, Lord Carlile, spoke of his trepidation in following my noble and learned friend Lord Mackay of Clashfern. That is as nothing compared to the trepidation that I feel in following my noble and learned friend, the noble and learned Lord, Lord Brown of Eaton-under-Haywood, with all his expertise in judicial review, my noble friend Lord Hunt of Wirral, at whose feet I sat many years ago at the Department for Employment, with his great legal knowledge, the noble Lord, Lord Carlile, himself and all the others who have spoken.

I am also grateful to my noble and learned friend Lord Mackay for mentioning that my right honourable friend Claire Perry had written to him at some length on this matter to set out the details. I will probably have to set out similar arguments, which I hope he will listen to. However, having listened carefully to the debate and to the concerns raised by all, I think we may have to have further discussions on this in due course.

Just before I come to the substance of the matter, I ought to make a brief point to my noble and learned friend. I believe that his amendment does not quite work. I advise that we would probably need to import all the CMA appeal provisions if we took up his amendments from the gas and electricity Acts and adjusted them so that they applied to Ofgem’s decisions under the Bill. It could add something of the order of 12 new clauses and a schedule to the Bill. Any amendment could also place a new duty on the CMA; I think the noble Lord’s amendment would also require the CMA to consider conducting a review under a compressed timetable. In the light of that, I would certainly want to seek the CMA’s view on those points; obviously, we will let your Lordships know the outcome of that.

I will come to the amendment because it is important that we deal with the arguments, as my right honourable friend did in her letter to my noble and learned friend. This amendment gives us an opportunity to consider the idea a little further than we did at Second Reading. As I mentioned—I will mention it again during the course of the Committee—the Bill is a temporary and targeted measure to protect consumers from excessive energy prices until the conditions for effective competition are in place. It is important not to lose sight of this fact, nor of the 1.4 billion consumer detriment figure that was established by the CMA in its 2016 investigation into the energy market when considering the route of challenge for suppliers.

For temporary and targeted interventions such as this price cap, the CMA, as an appellate body, is not a “well-established right”, as has been suggested by some stakeholders. In fact, CMA appeals usually exist only for permanent, if periodically updated, price control regimes. The Bill does not replicate an existing price control regime, setting allowed revenues for entire businesses. It is, as I said, a targeted and temporary intervention to deal with a specific problem in part of the market. In fact, we are unaware of any temporary price-related interventions that have included the right to appeal to the CMA. There are also other examples of price interventions by regulators that do not include a CMA appeal right, such as the payday loan interest rate cap introduced by the Financial Conduct Authority in 2015.

Some stakeholders have sought to emphasise the differences between the FCA’s measure and the one we are considering here today. I suggest that these measures are not so different at all. Both measures are direct, targeted interventions operating in the retail end of their respective sectors; both originate from the sovereign will of Parliament via primary legislation; and both have the same express intent to protect consumers from exploitation. Like Ofgem, the FCA also has discretion in the setting of the cap and, as Ofgem has started to do, it carried out its own consultation weighing a list of concerns it should have regard to in a similar vein to the conditions set out in Clause 1(6).

Obviously, decisions relating to the prepayment meter cap are subject to challenge by way of judicial review. Therefore, there is precedent for a direct, price-related measure stemming from the will of Parliament to protect consumers that does not have a CMA appeal right. What is wrong, dare I ask, with judicial review? It provides a sufficient means of challenge to ensure the provision of a fair and public hearing within a reasonable time by an independent and impartial body established by law.

Again, the noble and learned Lord, Lord Brown, and others have made the point that judicial review is focused on process. A judicial review will consider the lawfulness of a decision, but there is also scope for the court to consider issues around the proportionality of any decision. They rule on many highly complex cases each year, so I am afraid I do not agree with the argument that in this area alone the issues are so complex that the courts simply would not be able to cope. The price cap is for Ofgem to determine in accordance with its duties and the court would not need any particular expertise to review that. As was made clear by my right honourable friend in her letter, if it did need particular expertise, which would be rare, it could still sit with assessors.

--- Later in debate ---

[Lord Young of Norwood Green]

The Minister said that the route of an appeal to the CMA could be abused by the major suppliers. What would prevent them seeking a judicial review at that point? What is the difference?

[Lord Henley]

My Lords, as I made clear, they would be using the CMA to delay this process, and we do not think that that would be right. I do not think that that would be the case with judicial review, but, as I said, I am more than happy to discuss these matters later. We have set out our position here and in the letter that my right honourable friend sent to my noble and learned friend.

Education Bill

Debate between Lord Young of Norwood Green and Lord Henley

Wednesday 14th September 2011 Grand Committee

[Lord Henley]

I am very grateful to my noble friend for putting it in those terms. That makes it even more important that he talks to the department and to my honourable friend and tries to secure some sort of agreement. We now have a reasonable amount of time. I know the noble Lord will be heading off to wherever the Liberal Democrats hold their conference but, in due course, he will be back and then discussions can take place in the appropriate manner.

I want to deal with a couple of other points. First, the noble Lord, Lord Low of Dalston, raised a question concerning people with disabilities and the offer. I can confirm that disabled people aged 19 to 24 are covered by the offer and that that group will be prescribed in regulations. There is also the commitment given by the previous Government during the passage of the ASCLA—as we now seem to call it—to take on an inclusive approach. They are also being advised on this by external disability experts. No doubt we will be able to let the noble Lord know a little more in due course.

Finally, my noble friend Lady Sharp of Guildford asked about the response to the Wolf report on incentives to employers. We accepted that recommendation in the Wolf report. The National Apprenticeship Service has recently run pilots looking at incentive payments and we need to consider these and other research into employer payments to ensure that we avoid dead weight when implementing this recommendation. That is work in progress.

Before my voice finally gives out, I say that we are all travelling in roughly the same direction. We might be going at different speeds and there might be tensions in how we do it, but I believe that much more can be done through further discussions. I believe that we are all committed to the same outcome, which is seeing increasing numbers of apprentices across both public and private sectors and increasing employer participation in the programme. With those assurances, I hope that all noble Lords who have put forward their amendments and spoken to them so eloquently will feel able to withdraw them and, where appropriate, I hope that conversations can continue between now and Report.

[Lord Young of Norwood Green]

Perhaps I may make a few brief comments in relation to what has been said. I support the intentions of my noble friend Lord Layard in his amendment. I would like it to go a bit further but we are all travelling in the same direction. I was not exactly sure what the noble Lord, Lord Wakeham, meant when he said I had gone off key in the latter part of what I said, but I agree with him on his point about literacy and numeracy skills. Interestingly, if you can get young people involved in the apprenticeship process, it refocuses them on the importance of learning. I share the concern of the noble Lord, Lord Addington, and I would want to do everything I can to assist in that process. We discussed a whole range of disabilities, as the noble Lord, Lord Low, will testify—he always makes sure that we do. I thought we reached some useful agreements. I am glad that the incentive to employers was answered and I thank the noble Baroness, Lady Sharp, for her support, and likewise my noble friend Lord Monks.

On the status of apprenticeships, I agree with the noble Lord, Lord Storey. One thing that we got slightly wrong was that, by focusing on getting 50 per cent of young people to go to university, we gave the impression that the vocational route was a second-class route. We need to do a lot more on that. Gradually, the tide is turning. On a lot of apprenticeship schemes, when the apprentices complete their training there is a graduation ceremony. We need to do more on this.

The noble Lord, Lord Henley, referred to targets. Whether or not we delete “target” and insert “planning assumption”, we will still have to make calculations. Before the Government say that the 2015 commitment is not the right approach, it would be interesting to see the planning assumption for what the demand would be. I say that it could be done, and that it is absolutely the right signal that should be sent to young people and to the country.

The noble Lord said that he preferred a voluntary approach when it came to contracts, and that apprenticeships would place an additional burden. I wish that he would not use that term. Apprenticeships are not a burden on companies. They think that they are, but when they take on apprentices they frequently realise what a good investment they are. I do not see them as a burden. When we worked with the Olympic committee and Crossrail, we found that they understood the value of apprenticeships. The Government should take a long, hard look at making them a key part of government procurement contracts. I do not believe that it would disadvantage SMEs, but I will not go over the debate again. With IiPs, what disturbed me was that again there was no reference to apprenticeships. If we are to say that these companies invest in people, surely apprenticeships ought to be part of the investment. I do not know how we should go about it, but something should be done.

I will of course withdraw the amendment, because that is how we operate in Grand Committee. However, we will return to these issues on Report. I welcome the offer of further discussions because I, too, want to make progress. I thank the Minister, John Hayes, for our previous discussion. It was a worthwhile exchange of views. With those comments and caveats, I beg leave to withdraw the amendment.

Higher Education White Paper

Debate between Lord Young of Norwood Green and Lord Henley

Tuesday 28th June 2011 Lords Chamber

[Lord Henley]

Again, I want to leave this as a matter for the higher education institutions themselves. It is up to them; they do not have to charge the same amount for each student if those students are doing different courses. If students are doing a humanities subject, there is no reason why the institutions should not charge less than for other, more expensive subjects. It must be a matter for them.

[Lord Young of Norwood Green]

I, too, thank the Minister for repeating the Statement. I will respond to a couple of points that he made in reply to my noble friend Lord Stevenson. We do not deny the deficit; our counteraccusation to Her Majesty’s Government is that they are dealing with the deficit too far, too fast. Of course, we have not retreated to the position that all funding should come from taxpayers; we recognise the challenge of expanding higher education—indeed, we introduced student fees. This is about the level of them. I share the welcome given by the noble Baroness, Lady Sharp, to support for part-time students, and I hope that we will see an expansion of sandwich courses—and that response from business.

In the beginning, when the Government responded to the Browne report and put the figure of £9,000, there was a lot of confidence that not all universities would rise to that figure. Yet currently more than 80 per cent of universities have indicated their intention to charge £9,000. I was interested in the response to the previous speaker that there might be a variation, but the current public position is charging £9,000. Will that be a deterrent to potential graduates when they see the potential size of their loan increasing so much—figures of £40,000 are not exaggerated? I know the response will be that there is no upfront payment. Nevertheless, people will see a loan that eventually has to be repaid.

[Lord Henley]

I am very grateful for the noble Lord’s admission on behalf of his party that it does not deny the deficit. I am also grateful that he has recognised that funding must come from the beneficiaries of education as well as from the taxpayer—from both sides.

The noble Lord turned to the Browne report which, as noble Lords will remember, did not recommend a maximum. However, we felt that it was probably right to fix it at £9,000, particularly as the noble Lord, Lord Browne, suggested that he did not see why universities could not provide a good education for a figure of, I think he said, round about £8,000. The noble Lord, Lord Young, says that the reports are that virtually all institutions are going for the maximum of £9,000. We will not know the final figure until it has all been confirmed next month, but I can assure him that although a lot of them are going for £9,000, that does not mean that everything in that university, that institution, will be £9,000. There might be different rates for different courses and, as the noble Lord knows, there are a number of waivers, and they will be offering bursaries and other things that will help to bring the cost down, particularly for some of the less well off.

The noble Lord also asked the very valid question: are we worried that the perceived level of debt might put off a number of individuals because they see themselves ending up with a debt of £27,000-plus? That is a genuine fear and we must address it. That is why only last week my right honourable friends Vince Cable and David Willetts sent a letter setting out what we are doing to get information across. They have set up a new independent task force on student finance information, headed by Martin Lewis and Wes Streeting, a former president of the National Union of Students, to try to get the information over that it should not be looked at as a debt but, in effect, as a sort of graduate tax, except that it is not a graduate tax; you start paying only when you start earning above a certain amount and you pay at quite a low rate over a long period of time. It is not the burden that people have when taking on other forms of debt.