Road Vehicles and Non-Road Mobile Machinery (Type-Approval) (Amendment) (EU Exit) Regulations 2019
Viscount Eccles Excerpts(5 years, 10 months ago)
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Lord Dykes (CB)
My Lords, I, too, appreciate the explanations given by the noble Baroness, Lady Randerson, about her anxiety about a number of key features of this statutory instrument. I am commenting on the second of the two documents rather than the first one, although the first has a number of significant question marks. I thank the noble Baroness for her thoughts on those matters. As the noble Lord, Lord Adonis, said in agreeing with the noble Baroness, a number of questions need to be answered comprehensively today by the Minister.
However, it is not just that but, once again, the anxiety we all feel about the huge accumulation of SIs going through inadequately, badly considered, all in a rush, in not enough time to be considered properly. It comes back to the much more fundamental issue that one always needs to remember in this whole business, of the flaws in the original referendum and the failure to prepare properly immediately after the result for all the things that are now flowing through in the last minute—literally the last few weeks—in the painful process of the disintegration of this country’s membership of the EU. This is now causing more anxiety and concern among many members of the public as they wake up to these realities, not having been given any guidance by the Government immediately after the result. It is not a matter of disrespecting the result of that vote. We know that it was flawed for various reasons. The construction of the referendum was wrong. British citizens who had lived in other European countries for more than 15 years were excluded automatically, so were the youngest voters, who should be entitled to be on the register for future occasions. There were many other mistakes as well. It was really the fault of the Government immediately afterwards—
Viscount Eccles (Con)
With the greatest respect to the noble Lord, this does not seem to be much to do with this statutory instrument.
Viscount Eccles
Does the noble Lord not think it is slightly insulting to assume that we do not know the background?
Lord Dykes
That is the reality that is now hitting members of public—and not just the press in article after article, comment after comment—as people interviewed say that they were not given sufficient warning.
On the detailed policies, this might seem to be a minor matter, and in one way it is, but it is of great importance to the environment and to the health of the motor vehicle industry in this country, which faces such a gloomy prospect now in view of the most recent developments. The point I was making, which I think is entirely valid, is that after the referendum result, and at least before the 8 June 2017 election when the Prime Minister completely lost the mandate to continue “Brexit means Brexit”—which needs to be remembered as well, but she carried on regardless—the Government should have started going through all the legislative responsibilities they needed to enact. This would have reassured the public that if there was continuity of any kind in policy formation, if we thought that the EU policy system, of which we were devoted members for 45 years, was sufficient, it would be protected.
I come now to the quick points I want to make to cement my agreement with what the noble Lord, Lord Adonis, was saying as well. I, too, cannot understand why there is no proper explanation of paragraph 2.4 of the Explanatory Memorandum. Further, paragraph 2.5 says:
“The proposed changes are designed to ensure that the CO2 emissions of new cars and vans registered in the UK after the UK’s withdrawal from the European Union continue to be regulated in a manner that is at least as ambitious as current arrangements. If these changes are not made, then the retained EU legislation would have no legal impact on newly registered cars and vans in the UK”.
That, too, would cause a certain amount of alarm unless it was properly explained by the Government. I also agree with the question marks raised about paragraph 7.
Consultation was conducted on the second document, at least. According to the Explanatory Memorandum:
“There were seven responses to the consultation all of which were broadly supportive of the proposals”.
However, no detail is given, unless one gets the full government documentation. It sounds very strange that there were only seven responses to the major matter of the future of the motor vehicle industry. Once again, it probably indicates inadequate time for people to be able to consider these things.
Finally, paragraph 11.1 says:
“Detailed guidance on how the regulations will function and how the various flexibility mechanisms should be applied for will be provided to manufacturers, and made available on line, as soon as it practicable to do so”.
Is this future legislation or just extensions of regulations? When is it going to be? We urgently need guidance now from the Government on all these matters.
Groceries Code Adjudicator Bill [HL]
Viscount Eccles Excerpts(12 years, 5 months ago)
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Viscount Eccles
“The Groceries (Supply Chain Practices) Market Investigation Order 2009
The Office of Fair Trading is to continue to monitor compliance with The Groceries (Supply Chain Practices) Market Investigation Order 2009.”
Viscount Eccles
My Lords, I start by thanking my noble friend for letters that have been deposited in the Library and for the dialogue that we have had. I start with two regrets. The House of Commons Business, Innovation and Skills Committee, which put a lot of work into the Bill, considered whether there should be a review of how the present regime was working. On balance—and it was only on balance—it decided not to ask for that review. That was a pity because a good deal of time has gone by since the Competition Commission started its inquiry in 2006, and the order that is to a large extent the subject of the Bill became effective on 4 February 2010.
My second regret is that we have not had a briefing from the Office of Fair Trading, although I asked for one. To be precise, I asked if it thought that the monitoring of the order was going okay and whether it had any concerns. It said that it had done—I think—nine out of 10 compliance reports but that it would take some time to analyse them. Those reports are on the second full year of operation of the order. There has now been more than 24 months of experience of how the GSCOP is working. Perhaps I might suggest to my noble friend that we should have a report from the OFT before Report. The OFT has had this responsibility for more than 24 months and we should know how it thinks the scheme is going.
That led me to believe that the case had not fully been made for the changes proposed in this unusual Bill. As I will explain, I am not against a lot of its intentions, but they are not being sensibly carried through. There is a case for leaving the present regime in place because, as far as I can tell, it is working. All that I will do from now on is probe to find out whether there is a case for what is proposed in the Bill. In so doing, I will explain that in this enormous group of amendments the only thing that really matters is the new clause. If that were to be accepted, Schedule 1 would fall away almost automatically. The rest of the amendments, on which the Public Bill Office kindly advised me, are technical in the sense that one has to replace “adjudicator” with “Office of Fair Trading” if the regime is to stay as it is. Of course, I shall have to be pretty prompt in saying, “Not moved” all the way through the proceedings. I hope that that will at least make sure that I am awake.
After the consequential point, I have to enter a caveat. I have not studied the OFT’s existing powers. Someone, probably my noble friend on advice from the Bill team, needs to say that, if we go down that road, we will not need this or that clause because the OFT already has those powers. An example is the collection of information. I am aware that if my scheme is accepted, there would be other consequential amendments.
At Second Reading I referred to the minority opinion in the commission’s report put forward by Professor Bruce Lyons. This is set out in detail in paragraph 11.347. He supported the finding of the adverse effect on competition and went on to support very strongly a strengthened code of practice. I am sure that the contents of the present code of practice will be entirely acceptable to Professor Lyons, who went on to say that the OFT was “well placed” to monitor adherence to it because competition was at the heart of its role and its history. I agree with that. If the passing on of excessive risk and unexpected costs is not stopped, it is perfectly sensible to come to the conclusion that there may be an adverse effect on competition. The strengthened code of practice in front of us is a sensible document and the OFT is well placed to monitor adherence to it.
Good progress has been made. Now that we are coming to the completion of the second round of compliance reports, it is clear that disputes are regularly being settled. I would like to be guided by someone if I am wrong, but I am not aware that any dispute has yet been referred to arbitration under the code. As we all know, there is a full description in paragraph 11 of Part 5 of the code of practice of how the dispute resolution procedure should lead to arbitration.
Lord Knight of Weymouth
I am most grateful to the noble Viscount for giving way. Has he seen the briefing that has been provided by the National Farmers’ Union, particularly the second point in the section on myths and misconceptions? It states:
“Suppliers do already have the right to independent arbitration under the code. However, this requires suppliers to make the details of their grievance known to the retailer they believe has breached the code. The Competition Commission explicitly referred to the climate of fear in this sector preventing small suppliers from complaining about unfair treatment. The current system of arbitration clearly makes no provision for this serious problem”.
Viscount Eccles
My Lords, I am grateful for that intervention, and no doubt we shall come on to discuss the climate of fear. The concern of the National Farmers’ Union is a pretty difficult issue because very few farmers are direct suppliers to supermarkets and so they are not covered by the code. Indeed, the detriments identified by Professor Lyons, to which I shall come in a moment, include the extended chain of supply to the supermarkets. Perhaps I should say at this point that I owned some cows for a while, but maybe it is not an interest I need to declare on this occasion. It is a difficult issue and we shall come on to it. I do not accept that the problem of indirect suppliers and the question of arbitration so torpedoes the present regime that it is necessary to change it. It may be necessary to do so and I am here to be persuaded, but at the moment I would not change it.
Of course, with regard to farmers, I think that we are going to talk primarily about milk and cheese production. Some 53% of milk finds its way into fresh milk, 27% into cheese and the remaining 20% into manufactured products. While I think we will be talking about that, I do not believe it quite lies within the remit of where Professor Lyons was finding detriments, except on the point of indirect supply.
The first detriment that Professor Lyons worried about was that he thought that the third-party intervention—however that was structured, but at the time the description was “ombudsman”—would be counterproductive. I suppose that was based on “two’s company and three’s a crowd”, or some such version of it. He thought that independent arbitration with the addition of monitoring by the Office of Fair Trading was a better option than the intervention of a third party for the interests of the industry.
Secondly, Professor Lyons worried very much about anonymity. He did not believe that it could be maintained and he cited the German experience. I have no doubt that we will discuss anonymity in more depth as we go along. Thirdly, he thought that justifiable investigations had a very limited potential because he did not see the third party intervening in disputes or discussions between supermarkets and suppliers about a particular contract. Her Majesty’s Government do not think that that is the way that the adjudicator should work. Professor Lyons thought that finding justifiable investigations would be quite difficult because of the length of the supply chain and the lack of ability to look into actual disputes. I am sure that we will want to discuss that more.
Next, Professor Lyons thought that any third party—an ombudsman or now an adjudicator—could be seen to be in support of suppliers, and of them throughout the supply chain. He thought that that itself could become anti-competitive. He saw difficultly in dealing with complaints from suppliers about buyers and at the same time achieving benefits for the public, particularly long-term ones. The successful outcome of intervening in a contract between suppliers and supermarkets would presumably be that the suppliers got better terms. It was difficult to link that to a benefit to the public—that link was pretty weak.
Professor Lyons also saw any third party intervening in this market as being subject to external pressures and to the almost inevitable regulatory creep. Regulatory creep has been a feature of our lives in recent years, as noble Lords have seen in the amendments to secondary legislation which have tended to make legislation more complicated and severe, not lighter or less severe. Finally, Professor Lyons said that this would be a much more expensive system than leaving things as they are.
Quite a lot of these points have been discussed but I submit that they have not really been properly dealt with and therefore, as I am probing and as we go through, I am sure that these subjects will recur. It will be interesting to see where the argument leads us. I very much agree with Professor Lyons. Sometimes, minorities can turn out to be right. His minority report was very good and absolutely on the ball. I am still left with the question: why have we got this Bill? I beg to move.
Lord Borrie
My Lords, perhaps I may intervene at this point. Most Members of the Committee know that I had a connection with the OFT—the Office of Fair Trading—but retired from it 20 years ago, after many years as its director. I no longer have any position of that kind and therefore do not have anything formally to declare.
However, references to the Office of Fair Trading by the noble Viscount led me to consider whether there was a great deal of point in establishing—for a fairly narrow field of anti-competitive complaints from farmers and others who complain about the power of supermarkets—a specially appointed new body created as a corporate sole, with all the debates, complications and so on that are involved in doing so. The subject of the Bill covers a fairly narrow sphere. It does not deal with all complaints against supermarkets, but only those connected with groceries. It does not even apply to all supermarkets, but only the 10 that are especially designated.
There are surely many reasons for thinking that there may not be an adequacy of work for the groceries adjudicator to justify the appointment of an adjudicator and, as one of the schedules states, a deputy adjudicator and all the paraphernalia of an office—although I admit that it is stated that back-office facilities may be provided by the Office of Fair Trading. If back-office facilities can be provided by the Office of Fair Trading, why are these powers not simply given to the OFT to monitor, to check, to listen to complaints and if necessary push those complaints further to the Competition Commission, and so on?
The points made by the noble Viscount are quite convincing but, as the phrase goes, we are where we are. We have given the Bill a Second Reading. We are now at the Committee stage. We can go backwards, of course, but there would then be an emptiness and nothing immediately to take its place because the Office of Fair Trading does not have all the different powers intended for the adjudicator under the Bill. I therefore return to the point that the Bill in front of us will set up a particular body—the groceries code adjudicator—and we have details in front of us to elaborate, consider and change, as a normal Committee does. In summary, it is not worth while continuing with the fundamental points made by the noble Viscount, although there is a lot of value and a lot of point in what he said. However, that would represent a backward step and we would, in effect, be replacing entirely the contents of the Bill with something else.
Lord Knight of Weymouth
My Lords, I am sure that we are all extremely grateful to the noble Viscount, Lord Eccles, for giving us the opportunity to test at this early stage some of the principles behind establishing an adjudicator. He used the phrase, “As far as I can tell, it is working.”. The core of this debate is whether having just the rules of the game in place is enough or whether we need a referee alongside the rules at this stage.
My strong view is that we need a referee now in order to enforce the rules and to make sure that everyone who is a part of this market and supply chain understands that if they break the rules, there will be consequences. In preparing for Committee stage I have spoken to a number of suppliers to supermarkets and to people in the supermarket supply chain. The anecdotal evidence I have received is that there are still some considerable problems. If there is a belief that it is working, that may be correct technically in terms of the OFT’s analysis, as we have just heard from the noble Lord, Lord Curry, but the reality for people who are trying to operate within this market is that it is not.
As regards notice periods, in some aspects of this business there are no contracts. Thus, the supermarkets often give very short notice—for example, one week for the complete stopping of ordering goods. A minimum of three months’ notice should be given for changes. There are short-term changes to forecasts. The current system is that suppliers get the forecast from the retailer, which is not binding, and then receive the order generally on the day of dispatch. The supermarkets then charge a penalty for not supplying the volumes on the order—shorting—even if they are massively different from the forecast. For example, the sale of salads on a hot weekend can go up fourfold or the supermarket can choose to do a promotion and not tell the supplier. If the supplier fails to supply the larger volume, it could get a penalty charge.
On the flip side, if a supermarket decides to cut back its orders massively, the supplier can be left with big stocks to write off because, often, these goods are on the supermarket’s own label and cannot be sold elsewhere. Consequently, the supplier loses out. I see the noble Viscount, Lord Eccles, wants to intervene, which will be a pleasure.
Viscount Eccles
Perhaps I may ask the noble Lord a short question. What part does he think that the public plays in the salad sales on a hot weekend?
Lord Knight of Weymouth
I am grateful to the noble Viscount for his intervention. Clearly, the public are the consumers. I am certainly aware that not every supermarket is guilty of abusing its power. The competition between supermarkets generally has been very good for consumers but that does not mean that they should continue to be able to use that power to exploit their relationship with suppliers.
To give another example, I heard about a company which was developing an innovative low-sugar jam. It took the product to a very large supermarket because, having invested in developing this new product, it needed to get the volume of sales that could be achieved only by using one of the large supermarkets. The supermarket was very interested and said, “Leave it with us. We will give you a call.”. It gave the company a call and said, “Do come in. We want to talk to you about the low-sugar jam that you showed us.”. The supermarket called the company in just to put on the table its own product which it had developed in response to that company’s innovation. Therefore, that investment was a loss for that innovator. Similar stories of abuses of market power by some supermarkets—not all of them—are legion. I referred to the helpful briefing from the National Farmers’ Union. We have had similarly helpful briefings from the Country Land and Business Association and the Federation of Small Businesses. All were extremely supportive of the establishment of this adjudicator because they agree that we need a referee.
I know that we will go on to talk about some of these things throughout the proceedings of the Committee. In response to my intervention, the noble Viscount, Lord Eccles, said that not many farmers supply retailers directly. The NFU tells us that some do and, what is more, the Competition Commission has identified an adverse affect on competition whereby grocery retailers pass unexpected costs and excessive risks down the supply chain. Ultimately, those risks, in the form of extra costs, are passed on to producers, even when they do not deal directly with retailers.
Viscount Eccles
My Lords, I am grateful to my noble friend and to all noble Lords who have taken part in this short debate. My father wrote a book called Half-Way to Faith. The noble Lord, Lord Borrie, is halfway there, so we have plenty of time to persuade him to come the rest of the distance.
The climate of fear was mentioned just once by the Competition Commission in its report. If people can find it referred to more often, I would be grateful to know about it. It was not mentioned in the summary or in the findings. I am quite sceptical about it, but that is not really the point. The point is that if it is true, the adjudicator will make it worse. If the supermarkets have the power to create all this fear and they find out that a supplier has approached the adjudicator or that a trade association is doing so on behalf of a group of suppliers, I am afraid that the messages will be a lot sterner than they are supposed to be under a climate of fear. I am sceptical about it because I do not see any justification for a climate of fear for Waitrose, for goodness’ sake. Indeed, I do not see any justification for any of the leading quoted British supermarkets. Their shares are at the bottom of their 12-month spread and they are all in trouble with their shareholders. There is absolutely no reason why they would want to make their lives even more difficult. They will want to do the best they possibly can with their suppliers.
Lord Curry of Kirkharle
Perhaps I may intervene to say something I should have said earlier. I chair the Leckford Estate for Waitrose, so I have an interest in Waitrose which, uniquely, supports the code and is very much in favour of it. I have certainly never used the phrase, “a climate of fear”, and I would not do so. However, I am deeply concerned about trust and confidence within the food supply chain, and I believe that this is an important factor in creating more confidence.
Viscount Eccles
I am grateful to the noble Lord for his intervention, but I doubt whether a state-appointed sole corporation will generate more confidence.
There are all sorts of problems. I used to supply power steering pump casings to Delphi in Strasbourg on a schedule. One week it would be three container loads and the next week it would be one, then suddenly in the middle of the week it would be four, but the following week it would be none. That is the way that just-in-time supply works. There is no escape from it, and it does not matter whether it is the supply of lettuces or steering pump housings, where we were the only people who made them for Delphi.
Lord Knight of Weymouth
For how long did the noble Viscount’s steering pump parts last if he had to store them? What was their shelf life?
Viscount Eccles
We did not know how soon Delphi would change its designs because there was a range of power steering pumps. Let me assure the noble Lord that there was no question of storing them. Delphi wanted them to come in and be fitted straight on to the machines. For many years I was a supplier to Marks and Spencer. The schedules changed every two or three days. That is the way of the interaction between suppliers and the retail market, particularly for anything that has a short shelf life. The noble Lord is quite right, if it has a longer shelf life, one can be a little more relaxed.
I do not therefore see that the problems raised by the noble Lord will come at all easily within the purview of the adjudicator. We shall shortly consider the investigations clause, and I am not at all confident, even if they do come within the adjudicator’s purview, that any substantial progress will be made from the point of view of those who want the supplier’s life made easier and the returns made greater. I do not see it working.
My noble friend is quite right to say that the Competition Commission stated that if there was no satisfactory agreement with the supermarkets it would be necessary to introduce an ombudsman. We should note that we are actually proposing to introduce something quite different to an ombudsman, and we should not therefore pray in aid the Competition Commission without any qualification.
I should add that the decision was, I suppose, made in 2007—it takes quite a long time for these decisions to get into a final published report—which is almost five years ago and the circumstances are different. The high street is under tremendous pressure that is much greater than it was when the report was written. The shares on the London Stock Exchange of the four British-based supermarkets on the list are all languishing near the bottom of their 12-month range.
I therefore feel that anything we do to erode the highly successful competitive model of the supermarkets and their suppliers—including, I may say, Nestlé, Kellogg’s, and Unilever and its subsidiaries—is not going to serve the public well. However, at this stage, and I may come back to this matter—
Lord Razzall
Before the noble Viscount sits down, is he prepared to address my point that the proposal was in all three political parties’ manifestos? He obviously knows better than all three political parties.
Viscount Eccles
Luckily, I am just a vulnerable ancient Conservative Back-Bencher who does not feel in any way committed to the three parties’ manifestos. I should also point out that they were published in 2010 and we are now in 2012, and there is always time for amendment in life. I am just hoping that that still applies. In the mean time, I have much pleasure in withdrawing my amendment.
Viscount Eccles
Very briefly, I am sure that the noble Lord recognises that in doing this he goes far beyond the recommendations of the Competition Commission. The one thing that the commission did not do was go up the supply chain, as I would call it, but never mind. It declined to do that. The code is between direct suppliers—although I recognise that the Bill includes something about indirect suppliers—and supermarkets. It is based on the supply agreements between the supermarkets and those suppliers. If we go down the road that the noble Lord indicated, we are in for regulatory creep, exactly as the professor predicted.
Lord Grantchester
I support my Front Bench colleague at this stage. As at Second Reading, I declare my interests as a dairy farmer in Cheshire and in having been involved in dairy supply-chains both with farmer co-ops and on behalf of the Royal Association of British Dairy Farmers over many years. In support of the comments made in response to the previous amendment of the noble Viscount, Lord Eccles, there is an extremely delicate relationship between a supplier and the supermarket, and it takes quite some managing. It is not necessarily a question of fear. I am often reminded of the words in the Bible that the lion will lie down with the lamb. When I was in with the supermarkets, I always wanted to make sure that I was a lion but I never quite achieved that status. It is an extremely delicate relationship.
The noble Viscount said that the groceries code has been in existence for two years. It is eminently sensible that we complete this legislation to get the adjudicator in place and then, two years after that, have the review that the noble Viscount looked for. That would be an excellent time to review whether the code should be extended further up the supply chain to the suppliers of suppliers: the consolidators and the processors that have that direct relationship. I am sure that we will then find that there are lots of parts that the code does not cover, to which my noble friend from the Front Bench has alluded already. For example, I point to the practice of offsetting invoices from the supermarkets to suppliers and the charges that they think are quite acceptable to deduct from the suppliers. Those lead to long, detailed arguments and a very awkward time between a supplier and the supermarket. I am sure that putting that review on a statutory basis would, in two years’ time, allow Parliament—it would be wider than just the Competition Commission—to be consulted on the reach of the GSCOP code.
Lord Borrie
The only thing that I can say is that it has been the deliberate intention of the Government through their drafting of the Bill to deprive the adjudicator and to deprive anybody else except civil courts—in a completely different process—of the ability to determine a civil claim or something like it. As the noble Lord, Lord Browne, has considered this matter very deeply and carefully, there cannot be a lot between us. We are talking about a matter of title or name. Whatever that is, it does not seem suitable for the Judicial Appointments Commission to be involved in the appointment of this individual in a narrow field of the grocery trade, with the fairly narrow role provided by the Bill.
Viscount Eccles
Perhaps I could ask the noble Lord, Lord Browne, whether we have any other adjudicators.
Lord Browne of Ladyton
The honest answer to the noble Viscount is that we have many adjudicators. We call them judges. However, I am not aware—although the Minister may be—of the use of this term in another set of circumstances that could be instructive to the Committee in analysing the process. I have no doubt that the noble Baroness will quickly leap on the alibi granted to her by the noble Lord, Lord Borrie, that the drafters of the Bill unfortunately came up with this unhelpful title. My argument is that, if it walks like a duck and quacks like a duck, it is a duck. When they created the position and wondered what to call it, they must have said, “It is an adjudicator, so let us call it that”, and they were right.
Viscount Eccles
My Lords, I do not know if this will help or at least shorten what I need to say in the debate on whether Clause 2 should stand part of the Bill. I want to consider what the situation is and has been since 4 February 2010. The dispute resolution scheme is set out in the code in Part 5. Paragraph 11(5), of course, does not conform to the Bill. It states:
“The arbitration will be administered by the Ombudsman, if established. In the event that the Ombudsman is not established, or has a conflict of interest in relation to a particular Dispute, the arbitration will be administered by a single arbitrator appointed in accordance with the Rules of the Chartered Institute of Arbitrators in force for the time being.”
My understanding would be that it is a contractual obligation of the retailers that that is included in their contracts with their suppliers, exactly as I have read it out. It goes on in 11(6) to say:
“To the extent that they do not conflict with this Article 11, the arbitration will be conducted in accordance with the Rules of the Chartered Institute of Arbitrators in force for the time being”;
and in 11(9):
“Nothing in this Article will prevent a Designated Retailer including in a Supply Agreement a right for the Designated Retailer also to refer a Dispute to arbitration if the Dispute is not resolved … within 21 days”.
We need to know what the present situation is with the operation of the code. If the arrangements which have been set out with care by the Competition Commission, and included in the order are working perfectly well then I am bemused as to why the adjudicator would ever want to play any part in arbitration at all. I cannot see why it would be sensible for the adjudicator to play any part, because it is all there. Surely the adjudicator is to monitor whether these arrangements are working satisfactorily?
It may be, of course, that the further sophistication suggested by the noble Lord, Lord Browne, would also be a sensible thing to do. I have no view on that; I am not sufficiently expert. However, I cannot understand—and I need to be given some sort of comfort—why the adjudicator is involved in arbitration, as opposed to simply taking note of the fact that arbitration is taking place, and probably coming to a view as to whether, when it took place, it was a satisfactory procedure or not?
Baroness Wilcox
The noble Lord, Lord Browne of Ladyton, has raised an important question that it is well worth us examining closely. It is correct that the adjudicator will have two separate main roles. One will involve arbitration, as set out in Clauses 2 and 3 of the Bill. The other will involve investigations and is set out primarily in Clauses 4 to 10 of the Bill. Both roles will be carried out fairly and impartially. The two functions will be distinct from each other and it is important, as the noble Lord, Lord Browne said, that they remain so in order to prevent any conflict of interest.
The noble Lord, Lord Browne, asked whether the adjudicator would always be conflicted. Not necessarily. If arbitration is sought on a subject where the adjudicator has not carried out an investigation or given advice, it is likely that there would be no conflict of interest. We do not consider it inherent in the functions of the adjudicator that he or she will be conflicted in carrying out arbitrations.
It is important to remember that the adjudicator will carry out all their functions fairly and impartially. It is not the role of the adjudicator to act as an advocate for suppliers in carrying out investigations, but it is possible that conflicts will arise in particular cases, and the Bill provides the flexibility to deal with each situation as it arises. The Government consider that Clause 2(1)(b) in particular will help ensure that the distinction between the adjudicator’s arbitration and investigation functions is maintained and that any conflicts of interest are prevented. This clause allows the adjudicator to appoint another person to arbitrate a dispute. The Government envisage that this will be used in cases where a conflict of interest may exist, for example where the adjudicator has previously advised on, or investigated, an issue which is relevant to the dispute. To assist the noble Lord, Lord Browne, the powers to arbitrate are applied at the request of the supplier or retailer. No previous investigation is actually needed.
The adjudicator will be required to act responsibly and will refer any cases where a conflict may arise. However, in cases where there is no conflict of interest, the Government believe that it is sensible to allow the adjudicator to arbitrate. This was envisaged by the Competition Commission in its drafting of the groceries supply order. The adjudicator will, after all, probably be the single most experienced person in the workings of the code.
On the proposed procedure for appointing an arbitrator, I do not consider it necessary to set this out in the Bill. As the Explanatory Notes explain, in England and Wales and Northern Ireland, Section 94 of the Arbitration Act 1996 will broadly apply the provisions of Part 1 of that Act to any arbitrations carried out under the groceries supply order and this Bill. In Scotland, Section 16 of the Arbitration (Scotland) Act 2010 will broadly have a similar effect in applying the Scottish arbitration rules.
The arbitration legislation which will apply to arbitrations by the adjudicator or a person appointed by the adjudicator includes protections on fairness and impartiality, including an ability for parties to apply to the court to remove an arbitrator on those grounds. The adjudicator can of course be expected to satisfy himself or herself either that they can carry out an arbitration themselves fairly and impartially, or that the person they appoint will do so, but there is a safeguard in the arbitration legislation if, for some reason, that does not happen properly.
I wanted to respond to my noble friend Lord Eccles, and have now found the speaking note for that. The groceries supply order has already established a dispute resolution scheme for disputes arising between a particular retailer and a particular direct supplier under the groceries code. The order anticipates that the adjudicator, referred to there as the “ombudsman”, will arbitrate these disputes. This will both ensure that the disputes are arbitrated by an individual with a high level of expertise in the sector and will allow the adjudicator to gain a greater understanding of how the code is operating that will be helpful when carrying out his or her functions, such as providing advice or preparing the annual report. I hope that that is helpful.
I hope that these rather long but, we felt, necessary explanations have proved satisfactory to noble Lords. While I would of course be happy to speak further to the noble Lord, Lord Browne of Ladyton, about this matter, I ask him to withdraw his amendment at this stage.
Viscount Eccles
I will try to be brief. I start by coming back to Professor Lyons, whose views were set out in paragraph 11.347 of the Competition Commission’s report:
“However, he believed that the Ombudsman would be counterproductive and strongly preferred rapid, independent arbitration of disputes, combined with OFT compliance”.
On the question of independent arbitration, I hope that we will investigate what is happening. It is very normal in conditions of supply and sale for there to be arbitration clauses. I suspect that if we were dealing with a large supermarket and somebody like Nestlé, Kellogg’s or Unilever, there would be arbitration clauses in the supply and purchase agreements. Are we saying that the adjudicator will override those clauses in some way because of the provisions of the Bill? That is one of my main reasons for suggesting that the adjudicator should play no part. That is why Clause 2 should come out of the Bill—and with it, under my Amendment 16, subsection (1) of the following clause. The adjudicator will not be at all well served by having the duty to administer arbitration or, if not being the arbitrator him or herself, to appoint another. That will override a lot of the existing and quite normal arrangements that are set out independently in contracts.
My noble friend said in different terms that the adjudicator will be neutral and fair between suppliers and retailers. I say with some regret that that is not the expectation. The expectation of the adjudicator, and those lobbying for the appointment of one, is that he or she will be in support of suppliers. I do not think that we should blink at that in this Committee. There has been no argument by the retailers of the kind that there has been by the suppliers. I quite accept that that is something to do with the gearing of perceived market power between the two sides, but if the adjudicator does not serve the interests of the suppliers, there will be a lot of disappointment.
Lord Knight of Weymouth
I am grateful to the noble Lord. As we have already heard, Waitrose, as one of the big retailers, is fully supportive of the establishment of not only the code but the adjudicator as well.
Viscount Eccles
I am grateful to the noble Lord, Lord Knight. I have looked at that with some care and he is quite right that the things said by Waitrose during these procedures have been more positive than some of the things said by other supermarkets. If you read the compliance reports in the supermarkets’ annual reports and accounts—those that are available—you will find that they are all complying, and doing so in cheerful and positive way. That is why I want the OFT, under paragraph 7 of the code—it gets all the reports and it has all the information—to give its assessment and judgment of the extent to which the supermarkets are complying in a cheerful and positive manner with this code. My belief is that they are complying. I have sought to find out the views of the supermarkets and all their responses have been 100% positive; not one has put up any kind of negative response. Their trade association’s response has been, “We are going to make this thing work. We are making this thing work. We do not really think that an adjudicator will help, but we may have to have one”. That is perhaps the attitude I am taking—if we have to have an adjudicator, we will get on with it. I do not think the argument that Waitrose stands out as an exception runs.
Lord Knight of Weymouth
Given that the noble Viscount had said that there were no suppliers, I merely wanted to offer the information to the Committee that clearly there was one.
Viscount Eccles
I am only talking about expectations. It is up to Members of the Committee to make up their minds as to where the expectations that might arise as a result of this Bill being enacted lie. We all make up our own minds. In conclusion, I would much prefer it, and I think that it would be much in the public interest, if Clause 2 did not stand part of the Bill.
Baroness Wilcox
My Lords, my noble friend Lord Eccles has already made clear that he believes that the adjudicator’s function should be given to the Office of Fair Trading. The Government disagree and consider that with arbitration, just as with investigations, there is merit in establishing a dedicated, independent office which can build up a high level of expertise in the groceries market. I have already discussed this issue in some depth in response to previous groupings and have set out why we have made the provisions for the adjudicator to arbitrate.
The groceries supply order has already established a dispute resolution scheme for disputes arising between a particular retailer and a particular direct supplier under the groceries code. The order anticipates that the adjudicator—referred to there as the “ombudsman”—will arbitrate these disputes. This will ensure that disputes are arbitrated by an individual with a high level of expertise in the sector and allow the adjudicator to gain a greater understanding of how the code is operating that will be helpful when carrying out his or her functions, such as providing advice or preparing the annual report.
In response to the question asked by my noble friend Lord Eccles on whether the Bill will override existing arbitration clauses, the order already gives a right to suppliers to arbitration in accordance with Article 2 of the order. The Bill simply allows the adjudicator to carry out that arbitration role where appropriate. Similarly, with regard to Amendment 16, the purpose of Clause 3(1) is to increase the expertise of the adjudicator—something that will benefit both retailers and suppliers. It is entirely reasonable that just because the adjudicator has not acted as an arbitrator he or she should continue to have access to the information from that dispute. This clause provides the adjudicator with the means of obtaining it. Therefore, with that explanation, although I know it will not please him, I hope that it will persuade him to allow Clause 2 to stand part of the Bill.
Viscount Eccles
I am grateful to my noble friend. Perhaps I may ask whether that last comment was on Part 2 of the code of practice, which does not seem to mention arbitration.
Baroness Wilcox
The order already gives the right to suppliers to arbitration, in accordance with Article 11. I am sorry, did I say Article 2?
Viscount Eccles
I thank my noble friend. I want to reiterate that I do not read anything in Article 11 that currently prevents a supermarket and a supplier entering into their own contractual arrangements about arbitration. Perhaps we could deal with that matter. I am sticking to my point that I would like an answer to the question: do the arrangements proposed in the Bill override normal contractual arrangements that exist between many suppliers and their customers in many markets?
I would also welcome—because I would like to come back to this at the next stage—some reflection on this matter of arbitration and its independence. I think that I am supporting the noble Lord, Lord Browne, because I remain of the opinion that it is almost inconceivable that the adjudicator will not have some perceived conflict of interest. Therefore, once it is perceived, the adjudicator will say, “I think that I had better back out of this and let it be done another way”. Meanwhile, I withdraw my opposition to the Question that the clause stand part of the Bill.
Viscount Eccles
Viscount Eccles
My Lords, I will read out a sentence that is relevant to my amendment and also to the one we have just discussed. The Minister stated:
“After careful consideration, the Government have decided not to restrict the information that the adjudicator can consider”.—[Official Report, 22/5/2012; col. 726.]
That is entirely right. It is a free country, with free speech and so on. However, at the other end of the story, if we were to get into a situation where it was found that something had been brought forward that turned out to be vexatious, it would represent a failure and would be proof that the Bill was not working as well as it should.
I am mindful of the warning of Professor Lyons that he was not at all sure that the investigation potential was all that large, because of the length of the supply chain and because the adjudicator may investigate whether a large retailer has broken the groceries code. That is quite a narrow ground on which to mount an investigation.
In my amendment I put forward the argument that we should take out “suspect” and put in “believe”. There is a lot of hearsay and suspicion in the world, and in the way in which people think about the way supermarkets behave. When considering several Bills recently the House had no problem accepting that “suspect” was too weak and that we should “believe” before we start engaging in the expenditure of public money. I also think that it would be a protection for the adjudicator. This business of investigation is delicate and the adjudicator will have quite a hard time with it.
It is not an answer to say that Amendment 24 is irrelevant, because I think that the Office of Fair Trading should persist. That is my preference but of course I am capable of accepting that we should debate this on the basis that there will be an adjudicator, even though I want to see the continuation of the OFT. The adjudicator would welcome the protection of having to say that he or she “believed” that they had reasonable grounds rather than just “suspected”. I beg to move.
Baroness Wilcox
My Lords, the amendment would alter the criterion for starting an investigation so that the adjudicator would have to have reasonable grounds to believe that there had been a breach of the code, rather than reasonable grounds to suspect, before beginning an investigation. The decision on what threshold is needed is always difficult. However, we should consider what is being decided here. It is not guilt, liability or a sanction of any kind. All that is being decided is whether the adjudicator should begin an investigation that will allow him or her to decide, based on the results of the investigation, whether there has been a breach of the code. At this early stage of the process, the term “suspect” rather than “believe” has to be correct, particularly as the adjudicator generally will not benefit from the information powers set out in Schedule 2 until an investigation has started, and so may not be able to establish grounds for belief.
With that explanation, I hope that the noble Lord will see fit to withdraw his amendment.
Viscount Eccles
My Lords, I thank my noble friend, although I will come back to the matter because I am not satisfied. I should like to point out that the minute an investigation begins, it threatens a supermarket with an unexpected cost. Starting an investigation is quite a serious matter and is not to be undertaken lightly. The word “believe” should be included in the prelude to an investigation. I also think, given the amount of information that would already be available and will become available to the adjudicator, it should not be too much of a problem to ensure that there is some certainty that the matter is worth investigating. I beg leave to withdraw the amendment.
Viscount Eccles
My Lords, I have an amendment in this group. I am in full support of the noble Lord, Lord Browne. My amendments dovetail entirely with what he has just said. I want to drop subsections (3) and (4) of Clause 5 because, in this media age, the idea that an investigation report will be published and that the identity of the retailer will not come out is not workable. Again, it feeds the whole world of suspicion, innuendo and investigation of another kind. On subsection (4), if a retailer’s name is given, apart from the reasons for the decision having been given, the retailer would have been given an opportunity to make a comment and to know which way the report was going, as is normal in order that it could be agreed by one and all to be a well balanced and fair report.
Baroness Byford
I will speak to my Amendment 34 in this group. It is a simple, probing amendment to ask whether the wording implies that a supplier will never be mentioned and that, if a supplier is mentioned, he or she does not need or deserve a second chance to comment. For example, if a retailer is mentioned in the draft, it can see the copy and comment on it. As a result, the draft may be changed. Should it not be open to all parties involved in the investigation to know both the original wording and the comments made?
Renewable Transport Fuel Obligations (Amendment) Order 2011
Viscount Eccles Excerpts(13 years ago)
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Lord Davies of Oldham
My Lords, the Minister had a difficult time with this order yesterday, not least because, as the noble Lord, Lord Bradshaw, indicated, the Merits Committee took a rather dim view of its inadequacies. Her Majesty’s Opposition think that this order should go through because of the real urgency of the position for the industry. But what I sought to point out yesterday, and what other noble Lords pointed out more forcefully than I did, were the inadequacies of the instrument. I am certainly of the view that we should let it go through today but I hope that the Minister will take on board the fact that the criticisms yesterday were serious ones and that we expected the Government to have taken a more definitive position on the issue so as to reassure the industry in circumstances where underinvestment in this very important sector is occurring because of a complete lack of confidence in government policy. The Minister should therefore not be surprised that he is being pressed further today, as indeed he was yesterday.
Viscount Eccles
My Lords, I do not often find myself in agreement with the noble Lord, Lord Davies of Oldham, but on this occasion he is about 110 per cent right.
Earl Attlee
My Lords, I accept the thrust of what noble Lords are saying. Regrettably this order is on a very tight timescale for a variety of reasons. I would like to make it clear that I very much value what noble Lords are saying. Yesterday, in Grand Committee, the noble Lord, Lord Davies of Oldham, said, at col. GC 160 of the Official Report, that the Opposition support the measure “inadequate” though it is. By using the word “inadequate”, I take it that he meant that the order deals only with sustainability and not the trajectory of biofuel take-up. I did of course deal with that point yesterday, and was very happy to do so.
With regard to the issue of used cooking oil, I recently answered an Oral Question on that and I agreed to write on a number of points. I am not known for speaking at length, but I spent 23 minutes responding to the debate yesterday despite the pleading looks from my noble friend Lady Verma. Relevant letters are nearly ready despite their complexities. My expectation is that I will send out all the letters strictly relevant to the order by the end of the week at the latest and some may well be sent tomorrow. I accept that the timescale is tight, but I think it is better to agree the Motion now rather than go right up to the wire later. I beg to move.
Renewable Transport Fuel Obligations (Amendment) Order 2011
Viscount Eccles Excerpts(13 years ago)
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Baroness Worthington
My Lords, it is a great pleasure to speak on this subject. I also want to make a general comment about how this order was introduced. I worked for Friends of the Earth when the original Bill was being promoted in the House of Lords, and the reason that Friends of the Earth supported this Bill then was because we could see that the overriding priority was climate change and that we needed to seek renewable energy use in all forms of energy, not just electricity but heat and transport. So this was an important part of a suite of measures to address climate change.
In general, the order put forward today is very welcome. It is necessary to have sustainability criteria. I echo the noble Lord’s comments that when we started out on this track no one could anticipate the degree of complexity that would come from this order, but measures are being taken to address problems as they arise. One way to address problems more easily could be by focusing more on indigenous use, growth and production of renewable fuels in the UK, where we can control the sustainability far more clearly. I would like to see more from the Government about how we can promote UK-grown biofuels.
The great weakness in the order at the moment is, as has been mentioned, the cliff face where we have no trajectory beyond 2014. It was interesting to note that the noble Earl seemed to be presenting it as something to be proud of that we have not committed to a trajectory. That is questionable and really damages investor confidence. The obligation is phrased as a percentage of overall fossil fuels sold. This means that not only do we have no growth in the percentage but we could have a declining volume of fuels being provided from this order because vehicles are getting more efficient and we are seeing a reduction in overall fuel use in this sector, especially as we move towards electrification of vehicles.
The Government’s own modelling should show declining use of fossil fuels, which therefore means that the percentage in this order is also declining. We are not even standing still. This is a really serious issue and I would like the noble Earl to address this when he responds. All the reasons given for not committing to a trajectory are to do with the volume of fuels expected because of concerns about sustainability impacts. However, because it is a percentage, you could have the same volume but just growing in percentage terms. That does not really work and we need to see more clarity on why there is no trajectory and the damaging effect that this has on the investment community and UK business. I really want to see something from the Government to put these fears to rest at a time when we should be seeking to encourage all investment into renewable and sustainable forms of energy.
Viscount Eccles
My Lords, this is a very difficult subject, as the noble Lord, Lord Palmer, said. It is of interest that the department has not produced its statistics up to April 2011—although we are in December. I also have a perception that the department has come to this instrument with a certain amount of reluctance—I do not think it likes it very much. The reason why it does not like it is absolutely understandable. The information upon which the order is based is very sketchy indeed. I used to be on the Merits Committee, and I probably spoke on another order on this subject some time ago. When I was on the Merits Committee I do not remember there being five impact assessments—all done during the summer holidays, I notice. That must be close to a record.
Before getting on to the instrument itself I wanted to make two points. The first one is about a holistic approach. It does not make sense, in the context of climate change, to talk only about fuel, and not about fuel consumption or about emission control coming out of modern cars. There needs to be a much more rounded approach. The European instruments which have been put into place, no doubt agreed by ourselves in a Council of Ministers, are not at all fit for purpose. In fact, I am pretty sure that they are completely unfit for purpose. There needs to be a much more radical look at how we look at the whole picture.
My second point follows up what the noble Lord, Lord Palmer, said about UK production. I think I am right in saying that at the moment, of the biofuels that we use in this country, 90 per cent is imported and only 10 per cent is produced in the United Kingdom. Those are the Department for Transport’s own statistics. The great majority of that is produced from tallow and waste cooking oil. On Teesside—I come from the north-east and reject the description of it being “deprived”, which is not right—there is a quarter of a million tonne plant—
Lord Palmer
I am sorry; I did not mean that in any derogatory way. I know that unemployment in the north-east is a good deal higher than in other parts of the country, which is why I was urging for more investment in the north-east. I hope the noble Viscount does not take my comments in any derogatory way, because they were not intended as such.
Viscount Eccles
I thank the noble Lord for that, but there are some people in the north-east who are very good at making the most of the difficulties that we have in the economy. It does not do us any good to overplay our hand.
There is a very large plant, which I know. It was engineered in large part by somebody with whom I used to work, and it is extremely well engineered. The company that was going to operate it went out of business. It is now owned, and, to a certain extent—I do not know quite how much—operated by Harvest, which is one of the suppliers of biofuels. It was designed to process rapeseed oil. My information is that it is not processing any rapeseed at all. I really question the whole future of the United Kingdom’s own production from the standard feedstock in temperate climates, which is rapeseed. I do not know what the position is.
It is notable that in the instrument and the impact assessments there is hardly a mention of rapeseed, and no references are made to United Kingdom production from rapeseed. Of course, rapeseed is a food; you can buy rapeseed oil in any supermarket, and it is very good for cooking. However, so is soya bean. The three principle feedstocks for biofuels—two for diesel—are soya bean, palm oil, and of course, rapeseed.
The soya bean is responsible for 50 per cent of the world’s supplies of vegetable oil. How will you determine whether a particular lot of soya comes from a sustainable source? I should declare a past interest: an organisation I was involved with used to grow soya beans in Zambia. We grew about 40 per cent of Zambia’s vegetable oil supplies in that area of the country—it was a very big operation. I have also been a palm oil grower. As for bioethanol, I have also been a sugar cane grower. I could volunteer to be a verifier; I would know what I was looking at. I have seen all sorts of land transferred, for example, from growing coconut trees to oil palms—but what was the land before coconuts were grown on it? My goodness, it was forest until somebody thought, “We need some food”. So they cleared the land and grew coconuts. Then the coconut industry became unremunerative and the coconut trees were replaced by oil palms.
Earl Attlee
My Lords, this has been a useful discussion on a subject that generates a wide variety of views. I will try to address some of the key points that have been raised. The number of noble Lords addressing the Committee clearly shows the importance of this order.
The noble Lord, Lord Teverson, asked me if I would agree that not one litre of biofuel should come from the United States. He tempted me but I remind the noble Lord that of course we have the 35 per cent reduction in greenhouse gas emissions test. Although I cannot meet his aspiration, the effect of the order will be very beneficial. The noble Lord, Lord Bradshaw, teased me about whether I would invest my own money in a biofuel plant. The Committee will know that I am a classic impoverished earl and I have no money. However, I am convinced that the order, as amended, will provide a good commercial and environmental incentive.
It is recognised that greater assurance of the sustainability of biofuels will help to address some of the uncertainties in this policy area. This improved auditing will simultaneously address a number of concerns about the potentially negative impact of some biofuels, while providing industry and investors with increased reassurance that the instruments to incentivise sustainable biofuels will be in place for the foreseeable future, providing the certainty needed to plan ahead. In response to the noble Lord, Lord Davies of Oldham, we are building on the work of the previous Administration, as I am sure he would accept.
Double rewards for biofuels from wastes and advanced biofuels will replace the 20p duty differential for used cooking oil, or UCO, which will expire at the end of March next year. This will mean that industry has an incentive to explore ways of delivering any of the fuels with the very best sustainability credentials, rather than incentivising it to focus on a single feedstock. This amendment will allow us to meet our EU obligations in this area and is needed to set in law the sustainability criteria required by the renewable energy directive. As an EU obligation, the same criteria will apply in all other European member states.
We recognise that the issue of ILUC is not currently addressed by the RED and are working both within Government and at a European level to ensure that proportionate and robust action is taken to address this. However, I remind noble Lords that this amendment is a continuation of our current trajectory towards increasingly sustainable biofuels. That trajectory was set out following the Gallagher review of biofuels in 2008, which highlighted the potential impact of ILUC and recommended that the rate of increase of the targeted volume of biofuels in place at the time should be reduced. It said that higher targets should only be implemented beyond 2014 if biofuels are shown to be demonstrably sustainable, including avoiding indirect land use change.
I have a number of points to cover in answer to noble Lords. Some touched on fuels other than biofuels; for example, hydrogen and the use of electricity. The Committee will forgive me if I just cover biofuels. A recurring question from many noble Lords was how industry will prove its fuels meet the new criteria. The answer is that independent verifiers will check the claims made by suppliers that recognised voluntary schemes that certify fuels as RED-compliant are in place. Suppliers will need to have the information that they supply to the scheme's administrator independently verified to the internationally recognised standard known as limited assurance. It is expected that many will provide evidence through certification from one of a number of voluntary schemes set up by private organisations and recognised by the European Commission. Verification has taken place since the RTFO was launched in 2008. The schemes involve companies such as Ernst & Young and PricewaterhouseCoopers.
Viscount Eccles
Does my noble friend have any information about the cost of verification? It must be enormous if it is being done properly.
Earl Attlee
My Lords, I would not imagine that it impacts greatly on pump prices. I will see if inspiration comes to me in due course. However, the cost is in the impact assessment.
The noble Lord, Lord Palmer, asked how we could support UK production. The RTFO seeks to increase biofuel use. We want sustainable biofuels. The RTFO allows sustainable biofuels to count. We cannot exclude biofuels because they come from outside the UK. If we did, we would face competition issues from the WTO and no doubt from the European Commission as well. Also, such anti-competitive behaviour would be against the interests of UK consumers. The key is sustainable feedstock.
Earl Attlee
My Lords, it is up to the supplier to convince the authorities that their fuel is sustainable.
Many noble Lords asked about advanced biofuels. A number of commercial activities are developing advanced biofuels. BP is involved in a joint venture to develop biobutanol. Double counting of waste-derived biofuels and advanced biofuels will increase the financial incentive to invest in advanced biofuels.
My noble friend Lord Eccles asked number of questions. Many of them are key to the debate, so I will go through them and I hope that the answers will cover many other noble Lords’ concerns. He asked about UK production. The UK is currently the largest single supplier to our market. Volumes from the UK have increased over the years. The market share is currently around 23 per cent. The detail is on the department’s website. The noble Viscount asked whether our 10 per cent was not all tallow, et cetera. Tallow and used cooking oil account for a significant proportion of UK feedstocks. Some fuel comes from agricultural feedstocks. Again, the detail is on the website. He asked what happens to our oilseed rape production. We do not have the figures to hand. The statistical data are on our website.
Viscount Eccles
How will my noble friend deal with the fact that the website is madly out of date?
Earl Attlee
My Lords, I will have to write to the noble Viscount on that point. I confess to my shame that I have not personally studied the website.
The noble Viscount suggested that sustainability was immeasurable. Some sustainability is relatively easy to track. That is what we are mandating today. The issue of ILUC is unresolved and we are pushing to have it addressed.
Viscount Eccles
Perhaps I might have one more go. One of the problems is primary forest. That is forest or other wooded land of native species where at any point in time, in or after January 2008, there has been no clearly visible indication of human activity, and where the ecological processes have not been significantly disturbed. Is my noble friend suggesting that there is anywhere, in any forest, where nobody has ever been?
Earl Attlee
My Lords, the noble Viscount is asking me searching questions of great detail, and I will have to write to him.
I am just going through the questions asked by the noble Viscount. He says that we do not know where 16 per cent comes from. These are the latest published statistics for April 2010 to April 2011. He asked how we can trace biofuels and ensure that they are sustainable. Currently the RTFO has voluntary reporting in place. This reporting has enabled many suppliers to demonstrate that they can trace the production of biofuels, and that they are sustainable. This verification work has been taking place since the RTFO was introduced in 2008. It is carried out by independent, reputable companies, as I have previously mentioned.
The noble Viscount, Lord Eccles, and the noble Lord, Lord Reay, asked why the Government are supporting biofuels when doing so can push food prices up. The analysis by Her Majesty’s Government concludes that biofuels were not a particularly significant driver of the 2008 food price spike, with other factors such as the price of oil and adverse weather conditions being greater contributors. However, some biofuels will put upward pressure on prices for those agricultural commodities used in biofuel production.
My noble friend Viscount Eccles also asked what the Government are doing now to ensure that the promotion of biofuels does not result in land grabs in developing countries. The Government agree that biofuel production must be socially and environmentally sustainable and should not adversely impact on food prices and availability or on local people’s access to land and other natural resources in developing countries. The scale and complexity of this issue mean that it is most effectively addressed at the EU level. He also asked about the impact of biofuels on food availability. Under the RED, the European Commission must monitor and report every two years on the impact of biofuel policy and the increased demand for biofuel on social sustainability. This will include reporting on the availability of foodstuffs at affordable prices, particularly for people living in developing countries.
Many noble Lords have asked why there is no target after 2014. We need to await the conclusions of a number of pieces of work before we can set biofuel targets beyond 2014. The research we are waiting for is the report of the Committee on Climate Change on renewable energy, and the Government’s bioenergy review. We expect to consult on targets for 2014 to 2020 next year. There have been shifts in biofuel policy in the past. We need to ensure that policy decisions going forward are robust and stable. This is an important point for industry, as many noble Lords have pointed out during our debate.
Postal Services Bill
Viscount Eccles Excerpts(13 years, 8 months ago)
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Viscount Eccles
My Lords, I thank my noble friend very much for an extremely clear exposition. We started the group with an extremely clear and well expressed amendment from the noble Baroness, Lady Drake. I want to ask a question that perhaps cannot be answered this morning: namely, what information has been conveyed from Royal Mail either to Postcomm, as it is at present, or to the Government about the expected experience under the new pension scheme? Pension schemes are very difficult to keep in surplus or in balance if the number of employees is declining or their average age is rising. Royal Mail recently declared that it was going to reduce its staff and workforce and I think has further plans that might lead to that happening again in the future. In my submission it is likely that the new scheme, which is entirely properly set up under the arrangements as described, nevertheless could be threatened with going into deficit at an early date. In looking at that subject, I hope that the Government are also taking account of the comparative costs of pensions to Royal Mail and to other postal operators. As I say, I am not looking to receive a detailed assurance today as this is a new and rather complex point. Nevertheless, at a later stage I might consider it right to revert to this subject.
Lord De Mauley
My Lords, my noble friend makes an extremely important point. The terminology is confusing but I think that he is talking about the RMPP scheme, the old liabilities and assets having been transferred out into what is rather confusingly called the new scheme. Therefore, he is concerned about the ongoing liabilities in the RMPP scheme. I will write to him, but I can tell him that £1.5 billion of funding will be left in the new scheme specifically to cover what is known as the salary link. However, I had better expand on that in writing, if I may.
Viscount Eccles
In the interests of time, it may be better for the noble Lord to wait until I explain what it is about.
Lord Young of Norwood Green
On reflection, I am happy to do that and shall conclude my comments at this point.
Viscount Eccles
My Lords, we have had two very interesting contributions—I am tempted to call them Second Reading speeches, but perhaps that is unkind or does not fully take into account where the argument has reached. They have been an overall look at where we are. We should remember, first, that the price of stamps went up substantially on 4 April. We should not forget that in all these discussions.
Secondly, we have talked a lot about regulation. Regulation is indeed central, and we have concluded across the House—the Government have certainly concluded—that Postcomm, for one reason or another, has not understood the situation correctly. I think that that is the right way to put it. I cite Mr Tim Brown’s opening to Postcomm's February report:
“There is consensus that deregulating where it is safe to do so is the correct approach and that change is urgently needed”.
That is a pretty comprehensive sentence for a regulator who has been regulating for the past six years. Then there are some qualifications, but he continues:
“That said, all interested parties acknowledge that the current framework is not fit for purpose”.
I do not think that you could go further than that. In his final paragraph, he concludes by saying two things:
“The 2012 price control may look and feel very different to the current price control developed in 2006 … Regardless of the ongoing Parliamentary process, the coming months will be crucial in putting in place the building blocks for a new and sustainable regulatory framework”.
In the ongoing conversations between Postcomm and Ofcom, it is pretty clear that Postcomm has come to the conclusion that it does not know what is going on. I make that comment with all seriousness. I think the reason is competition.
Viscount Eccles
You could run Royal Mail on the basis of the universal service only. That is to say, if you were being properly paid by whoever was using it, you could outsource—I use that word advisedly—every form of sorting except probably the very final sort where you sequence the delivery. You could write a PhD thesis on whether a final-delivery universal service provider should have to sort mail. My answer to that question would be no, it should not have to. It would have to collect it, because that is in the universal service, but it could immediately deliver it to somebody else who did all the sorting. That of course is what is happening with the people who have access agreements. In that way, you would reduce quite dramatically the amount of capital you needed and you might also establish a profitable business which would be attractive to the market.
Lord Christopher
My Lords, I had not intended to speak, but some of the comments made require a response. The noble Lord, Lord Flight, put his finger on one point: we have had much discussion about competition for the universal service when it does not exist and, in my own judgment, never will. However, you need regulation, because science moves on and who knows what might happen?
I was interested in the intervention of the noble Viscount, Lord Eccles, because I was going to use as a not-too-strong illustration the supermarkets. It is very interesting that they have not come together to provide a universal delivery service; they all do it on their own. Whether they ever will, I do not know, but I think that people would be very worried if we had the system which the noble Viscount, Lord Eccles, has just suggested, because the delivery of one’s letter in 24 hours would disappear and it would become increasingly difficult to discover who was responsible for it.
I shall move on to something more practical; the low cost of postage in this country, as has been mentioned. A couple of days ago, the Telegraph ran one of its happy headlines about the increase in the price of postage, and now utterly unrealistic correspondence is going on. I should like to put the differences on record. Despite the increase that is about to take place, we are still the second cheapest in Europe and the only country which has a mandatory access service. No other country in Europe has picked that up—not one. The new price of posting a first-class letter in the UK is to be 46p as compared with the following countries, none of which has an access requirement. In Denmark it costs 64p; in Germany 48p; in Belgium 51p; in the Netherlands 38p; in Sweden 58p; in France 50p; in Austria 48p; and in Spain, at the bottom, 30p, which will come as no surprise to anyone who has had experience of its postal service. Whichever company ultimately buys Royal Mail, it will seek to make a profit, so how can we conceivably expect a price structure to exist unless we have some regulation over it? We should be realistic, not only with ourselves but with the country, about the fact that there will continue to be increases in the price of mail in this country.
Viscount Eccles
Viscount Eccles
My Lords, I shall be brief. I await with interest the remarks of other Members of the House on this group of amendments. My amendment seeks to leave out the words “as a minimum” as they refer to the universal postal service. I put down the amendment to see whether or not the Government had any intention of adding to the universal service because, if I read “as a minimum” correctly, that is an opportunity left open in future after the system of reviewing, which is the subject of other amendments in this group that will be discussed now. With that initial probe, I beg to move.
Viscount Eccles
My Lords, I am very grateful to all those who have taken part in the debate on this group of amendments. I think particularly of the three amendments spoken to by the noble Viscount, Lord Tenby, and the noble Lord, Lord Laming. Their comments have shown very clearly how important the universal service provisions are to this House and to the general public. That also came through very clearly in the two amendments spoken to by the noble Lord, Lord Laird. I am sure that the Government will take on board that such concerns are at the forefront of everyone’s minds, and indeed that was set out very firmly by my noble friend on the Front Bench.
I am prompted to make only one short reflection. If the provision of that service does not produce a positive cash flow—I use that expression rather than talk about profits—we may well find ourselves returning to the subject again. We all fervently hope that the Bill will turn into an Act and that the subject does not recur—at least, not for very many years to come.
I think we would all agree that we have received the reassurances for which we were looking, and I therefore have much pleasure in begging leave to withdraw the amendment.
Viscount Eccles
Very briefly, I recall that 55 years ago, I used to be responsible for making 5 foot 8 inch diameter tunnel sections for the GPO tunnel system. The firm was called Head Wrightson, and it made many tonnes of the segments that made up the tunnel. There is no question of them deteriorating. As with the Northern line, which is older, they will be there for ever, because in London clay, cast iron has an almost infinite life. You will notice that when the Underground does things on old lines, it does not have to replace the tunnels.
On a more serious point, I urge my noble friend to have serious thought about the non-public records part—what could be loosely described as the stamp collection. It would be a great shame if it were not kept coherent and whole. I do not know if that can be achieved by some partnership agreement with the British Museum, for example, or some other imaginative idea about who would undertake some combined financial responsibility—perhaps partly charitable and partly public money. It would be a great shame if it was not kept together.
Baroness Wilcox
I will of course add the comments of the noble Viscount, Lord Eccles, to those that we have already heard in this debate. They will form part of our discussion before we come back at Report.
Viscount Eccles
My noble friend has referred extensively to Schedule 9 covering the transitional arrangements, to which the amendment moved by my noble friend Lady Wheatcroft also refers. Those arrangements are very necessary because it has been agreed by Postcomm itself that its present regulatory system is dysfunctional, although to be correct, I think the words used were “not fit for purpose”. We are therefore moving from a regulatory system which is not fit for purpose to another one by another regulator. Of course I agree strongly with my noble friend in what she said about regulatory creep. So we are moving from an unsatisfactory situation into the unknown.
I have a second and rather more important point to make. My noble friend on the Front Bench keeps referring to Ofcom, which is absolutely right, but Schedule 9 gives the Secretary of State three order-making powers. Given that, we must ask the Government just to think through what they might say at the Report stage about this transitional period. It is all very well to say that Ofcom will do this and Ofcom will do that, but it is accountable to the Secretary of State who in turn is accountable to Parliament. If Ofcom makes a recommendation, it may have the power to make an order itself. It does in certain circumstances, although on many occasions it does not have it without the approval of the Secretary of State. What I think Members of the Committee on all sides are interested in is not just Ofcom’s attitude towards regulation, but the Government’s attitude to the system of regulation which is laid out in tremendous detail in the Bill and which, earlier in the day, my noble friend Lord De Mauley said would be given further consideration.
I am not sure that I have put it terribly well, but I think we still need to understand the basic attitude of this Administration towards a regulatory system for which, as it also said in Postcomm’s February paper, the building blocks have yet to be constructed.
Earl Attlee
My Lords, it may be helpful to the Committee if I explain the extra flexibility that “substantially the same effect” clearly gives Ofcom compared with the wording of the amendment. Where possible, Ofcom should be trying to make the initial conditions compatible with the new regime. There may be circumstances where an existing licence condition is not technically capable of transferring to the new regime, but it is possible to create a new regime requirement that has substantially the same effect. I think that that would be a desirable outcome.
Lord Stevenson of Balmacara
I thank the Minister very much for his comments. He came up to us at the end of day three of the Committee stage, with a more mournful expression than he sometimes has on his face, saying that we had cheated him of his moment of glory because we had withdrawn our amendment at quite short notice. It was the only amendment that he was down to speak to that day, and we took it away from him. Now here he is, irresistibly back in the Box, popping up all the time. So it does come back; it goes in rounds.
Quite a lot of what we have talked about today are what could be described as mop-up provisions and backstops—things that are very unlikely to occur. The Minister argued that, as a result, we did not really need to put them in the Bill, because they were so unlikely that it would be a waste of our time to spend our precious moments on them. In The Hitchhiker's Guide to the Galaxy, a book that I am sure all noble Lords have read, or listened to the programmes, there is a vehicle driven by a thing called the improbability drive, which has the result of making the space travellers turn up in the least likely situation that can be imagined at the time of their arriving. In a situation where they are being threatened by giants and attacked from all sides, they think of something completely unlikely and are immediately transported there. I simply say this because sometimes the impossible and the improbable does happen; we should not be deluded into thinking that it is so remote that we should not have provisions for it. That was what inspired us to put forward these proposals, some of which the Minister looked at sympathetically and some of which he did not.
It is important to have contingency provisions, and we are not arguing against that, but if we are going to do that we should be consistent. I hope that on reflection the Minister might accept that there were one or two points in what we said that might be worthy of a little bit more consideration. The principle on which we have been working is that if the aim is continuity, the going-concern process would be the least disruptive. That is why our amendments are framed as they are. I do not think that anything the Minister said is against what we are trying to achieve. My sense is that the whole process of going into administration would be such a major issue that making sure that there was greater concern than currently expressed in the statute for going concern would be helpful. But we would not push that at this stage.
As we reach the end of our discussions here, I wanted to say that, particularly today but as mentioned on a number of occasions in Committee, we have been a little unkind about Postcomm. We had a quotation from the noble Viscount that expressed in its own terms what it felt about itself. Even so, I am sure that the people at Postcomm have done what they could with possibly difficult ammunition to achieve what Parliament wanted them to do, and no personal criticism should be implied by what we or anybody else has said. On the other hand, the Minister kindly pointed out what the framework was for the new regulatory structure and expressed various options and hopes for that, but he did not say that Ofcom would not be an unsympathetic regulator in the same way as Postcomm was. We should bear that in mind. Having said that, we register our support for government Amendment 26.
Viscount Eccles
I intended no criticism of the individuals in Postcomm. We need to remember that regulators have only a limited amount of independence. We are inclined to talk as though they had a rather larger amount of independence than they actually have. When I look at the 2000 Act and think about the policy intentions behind it and the interpretation of them, I am not entirely surprised that Postcomm got itself into what it admits is a very difficult position. In any evaluation of how the present situation comes about, we have to remember—and that is exactly why I intervened on Schedule 9—that the Government of the day are in the final analysis the accountable body and Parliament with it, and the regulator is trying to carry out their wishes as it interprets them, with a certain amount of independence, but only a certain amount.
Earl Attlee
My Lords, I must confess to never having read The Hitchhiker’s Guide to the Galaxy, but I do have my own personal copy of the law of unintended consequences, which was passed many aeons go. I am happy to have further discussions with the noble Lord offline and we take on board his comments about Postcomm.
Postal Services Bill
Viscount Eccles Excerpts(13 years, 9 months ago)
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Lord Lea of Crondall
If the noble Lord will allow me, it was the Hooper report that said that the most likely presumption of going forward was an IPO, and that was very recent.
Viscount Eccles
Hooper said in 2010 that the situation had worsened, although he acknowledged that things were happening at Royal Mail which were a great improvement. The big snag with an IPO is that it does not bring Moya Greene’s £2 billion. The noble Lord, Lord Clarke of Hampstead, would certainly buy some shares, and I might if the price was low enough, but you would not get any part of the £2 billion from either of us.
Baroness Kramer
My Lords, does not the dispute that has just taken place make it clear that this House and the other place are not the appropriate organisations for detailed discussions on how to do a disposal of shares? Obviously there are many different views, but this is not the kind of issue that can be put in the Bill. The financial circumstances of the Royal Mail have to be considered, as have the financial markets and the trade buyers that may be available. There will be a wide range of issues. I agree with those who have criticised past sales.