Great British Energy Bill

Baroness Noakes Excerpts

Report stage
Tuesday 11th February 2025 Lords Chamber

Moved by

[Baroness Noakes]

1: After Clause 1, insert the following new Clause—
“ObjectivesGreat British Energy’s objectives are—(a) to reduce energy costs in the United Kingdom in a sustainable way,(b) to enhance the United Kingdom’s energy security,(c) to increase the levels of clean energy generation in the United Kingdom, and(d) to increase the availability of long-term energy storage infrastructure in the United Kingdom.”

[Baroness Noakes (Con)]

My Lords, I thank the noble Lord, Lord Vaux of Harrowden, for adding his name to Amendment 1. The amendment would add to the Bill a statement of objectives for Great British Energy.

In Committee we had a couple of debates about the difference between objects and objectives. While the words are closely linked etymologically, they mean rather different things in the context of the Bill. Objects are specified in Clause 3 in the context of Great British Energy’s articles of association, which is a document required by company law. Prior to the Companies Act 2006, every company had to have an objects clause, which defined the extent of the powers of the company. Since that Act, objects of a company are unlimited unless the articles specifically restrict its objects. That is what Clause 3 does—indeed, it uses the word “restricted” in subsection (2). Clause 3 does not require Great British Energy actually to do any of the listed activities—rather, it prevents Great British Energy carrying out things that cannot be fitted within the scope of the subsection (2) list.

My proposed new clause focuses on what Great British Energy should be achieving, rather than what it can and cannot do. It can then be held accountable if it fails to achieve what it was set up to do. Accountability is one of those concepts that is deeply unsexy but absolutely essential in the world of quangos.

Quangos such as Great British Energy are typically given a significant degree of independence, and Ministers, when it suits them, typically hide behind that independence. If strong accountability foundations are not created when a body is formed, Parliament will find it difficult to hold that body to account at a later stage.

The objectives that I have drafted in this amendment are fourfold. I have attempted to draft them in a politically neutral way that I think represents what the Government want to achieve with Great British Energy. I would not have drafted these objectives for Great British Energy, given a free hand—but then, given a free hand, I would probably not have set Great British Energy up.

The first objective is

“to reduce energy costs … in a sustainable way”.

I think there is common agreement that UK energy costs are too high, particularly for business consumers and by comparison with international standards. The other three cover energy security, levels of clean energy, and long-term storage infrastructure, which align with the Government’s aims for Great British Energy. If the Government prefer different words, I am not wedded to these ones and would be happy to discuss alternative formulations.

The Minister may well say that all of this will be covered by the strategic priorities to be set under Clause 5. Since the Government have refused to share even an outline of the strategic priorities which they intend to set for Great British Energy, or the framework document which will be agreed with it, it is difficult for the House to tell whether that is the case. In terms of ordinary usage of language, strategic priorities are not the same thing as objectives. Priorities might simply be things that the Secretary of State wants Great British Energy to focus on—perhaps based on technologies, types of energy, geographic locations and those sorts of things—but they might well fall well short of describing what Great British Energy is intended to achieve.

This amendment is not about the Government’s energy policies or the role of Great British Energy in those policies. It is straightforwardly about accountability and laying the foundations for Great British Energy to be held accountable in an effective way in due course. Great British Energy should, I submit, be judged on the outcomes that it achieves. There is a danger that if objectives are not set up front, we will be able to judge it only on what it has done and not what it has achieved. That is tantamount to giving Great British Energy a free pass on accountability.

I have also added my name to Amendment 37, in the name of the noble Lord, Lord Vaux. There are two important issues here, one general and one specific. The general point is that it is quite normal for the Government to take powers to specify what a public body reports on. Private sector reporting rules that exist for companies do not automatically ensure that the interests of public sector accountability are supported and, in many cases, public sector bodies do things that simply do not happen in the commercial sector. That will be the case for Great British Energy.

My specific issue is a subset of that general point. We need to make sure that Great British Energy reports on the extent to which it has achieved additionality, as in paragraph (d) of the proposed new subsection in Amendment 37. Additionality is a public sector concept and there is nothing in Companies Act reporting requirements that would ensure Great British Energy included relevant data and analysis. I believe we should ensure that this information is available routinely.

Lastly, this is a bit of a dustbin of a group, with a lot of individual things in it, but I will comment briefly on Amendment 17, in the name of the noble Earl, Lord Russell, which would require the Government to give Great British Energy £8.3 billion of financial assistance during this Parliament. I have remarked before that the £8.3 billion is nowhere to be found in the Chancellor’s Budget. The noble Lord, Lord Cryer, wrote to me after one of our Committee days, for which I thank him, to confirm that the Budget made no provision for Great British Energy beyond the £125 million to be spent in the next financial year. It is all to be settled as part of the current spending review.

If I were the Secretary of State for Energy Security and Net Zero, I would be looking at the deteriorating economic environment, made much worse by the Budget, with some concern. The fiscal rules are already under threat and I would not put my money on the Chancellor finding headroom for the full £8.3 billion promised in the manifesto. I shall be especially interested to hear what the Minister says in response to Amendment 17. I beg to move Amendment 1.

[Lord Vaux of Harrowden (CB)]

My Lords, I shall speak to Amendment 37 in this group and to Amendment 1, which has been introduced by the noble Baroness, Lady Noakes, and to which I have added my name. Before I start, I thank the Minister and his team for the very constructive and helpful discussions that we have had since Committee. We have made good progress and I am very grateful. I also thank the noble Baroness, Lady Noakes, and the noble Viscount, Lord Trenchard, for their support for my Amendment 37.

The noble Baroness, Lady Noakes, has already introduced Amendment 1 with her usual clarity, so I will try not to repeat her too much. As we discussed at some length in Committee, this Bill creates GBE as an entity, but nowhere does it set out what GBE is actually expected to achieve—what its aims or objectives are. As the noble Baroness just pointed out, Clause 3 sets out its “objects”, but we should be completely clear that the objects set out only what the company is allowed to do, not what it is intended to achieve. The only place where the company’s aims will be set out will be in the statement of strategic priorities in Clause 5. However, we have not seen these, even in draft. They will be published sometime in the future and are not subject to meaningful parliamentary scrutiny. They will be laid before Parliament, but there is not even the level of scrutiny that may be applied to a negative statutory instrument. Your Lordships’ Constitution Committee described this as being “disguised legislation”.

It is important that the Bill should include, at least at a high level, some statement as to what GBE is actually intended to achieve. The noble Baroness, Lady Noakes, should be commended for not trying to score political points with her Amendment 1, which is why I have supported it. I think that she has tried to align the objectives in her amendment with what the Government have said are the goals for GBE, so I hope the Minister will look kindly on it. If not, and if the noble Baroness were to divide the House, I would be minded to support her.

My Amendment 37 covers similar ground to my amendments in a later group. I apologise: I was told at a late stage to degroup them on the advice of the Public Bills Office, for some esoteric reason that I am not sure I fully understand. These amendments all try to inject some much-needed transparency and accountability into the Bill—something that is currently somewhat lacking. The only reporting that GBE must do, as it stands, is the annual report and accounts that it must file in accordance with Section 441 of the Companies Act. We had a lot of discussions on this in Committee and the Minister undertook to write to set out the additional requirements that will apply to GBE as a publicly owned entity. I thank him for his letter, which I think satisfies the first three proposed new paragraphs of my Amendment 37. The element that would still not be covered, as the noble Baroness just pointed out, is the assessment of the extent to which the investments or partnerships entered into by GBE have encouraged additional investment by the private sector.

This is extremely important. If all that GBE does is make investments that would happen anyway in the private sector then that would not be a good use of public money. Indeed, it could actually damage the creation of a thriving market for financing green energy—the well-documented concept of crowding out. There is an important role for GBE, just as there is for the UK Infrastructure Bank, now called the National Wealth Fund, to act as a catalyst to kick-start or accelerate investment in new technologies where the private sector is not yet ready to invest. There is a good precedent for this: it can be very strongly argued that the offshore wind industry, now so successful, would have been much slower to develop without the initial backing of the European Investment Bank, which the UK Infrastructure Bank was designed to replace in this country.

If the Minister will confirm clearly that he would expect GBE to report in its annual report and accounts on the extent to which it achieves additionality then I will be happy not to press Amendment 37.

--- Later in debate ---

[Lord Hunt of Kings Heath (Lab)]

My Lords, we need to await the outcome of the spending review and the timetabling of the money to be allocated to Great British Energy. We are trying to establish a balance between wanting to give Great British Energy operational independence and ensuring that the proper controls over public expenditure are kept appropriately. I think the noble Lord, with all his experience of how government works, will have confidence that the Treasury will be keeping a very close eye on this and the processes, and ensuring that public money is spent wisely. My role as a Minister, too, is to ensure that, none the less, GBE has sufficient operational independence to be able to make the kind of decisions that need to be made to get the investment decisions right. We are trying to get, and clearly want to get, a balance between proper control and giving GBE the right ability to make the decisions it needs to make without being excessively micromanaged.

We do not expect that GBE will need to borrow. However, if it turned out at some point in the long term that a Government decided that, and GBE asked for more borrowing facility, the normal processes of His Majesty’s Treasury would come into play. As a public body, GBE would require explicit agreement from His Majesty’s Treasury before being able to borrow from external providers, if HM Treasury agreed that this would be beneficial. We should also bear in mind that the chief executive officer of Great British Energy will be the accounting officer. That too should give a great deal of comfort on the proper expenditure of public money.

On Amendments 20 and 37, on the reporting requirements that were the subject of much discussion in Committee, I do not want to restate previous arguments, but much of the content proposed in the amendments would already be included in the annual report and accounts of Great British Energy, which, as I said, will be laid before Parliament. Also, the Treasury already has the ability to request specific reporting information from arm’s-length bodies through the Government Resources and Accounts Act 2000. Furthermore, GBE will be required to follow the provisions of the Government Financial Reporting Manual, which sets out details of required reporting by arm’s-length bodies through annual reports and accounts; these are additional to the requirements of the Companies Act 2006.

I thank the noble Lord, Lord Vaux: we have had a series of engagements between Committee and Report on the issue of additionality. I well recognise that this is an important matter, and noble Lords have been right to raise it. Let me be clear here: additionality will be an important principle for Great British Energy, and it will form part of the way in which Great British Energy assesses its opportunities and investment decisions. In the context of the noble Lord’s amendment, I am very happy to confirm our expectation that Great British Energy will include reporting on additionality as part of its annual report and accounts. I also confirm that all investment into and expenditure of Great British Energy will be subject to future business cases, including the cost and benefits of these investments, and the monetised and non-monetised impacts of Great British Energy’s future activities will also be considered.

Additionally, Great British Energy is part of the Government’s major projects portfolio. We therefore expect a summary business case for these activities to be published in due course. Moreover, we expect the outcomes of future spending reviews to be made public through the Chancellor’s Budget announcements, as is customary.

On Amendment 39, on the subject of Great British Energy’s chair, which was tabled by the noble Lord, Lord Frost, and returns to a point he raised in Committee, one accepts that it is important to ensure the quality and performance of the chair, but the existing framework and best practices, which I outlined extensively in Committee, already provide robust mechanisms for oversight and accountability. I will again say—the noble Lord, in a sense, challenges me on this—that the decision on scrutiny of appointments normally falls to discussions between the Secretary of State and the relevant Select Committee chair. It is a procedure that the previous Government followed; we will continue with that. Moreover, the proposal for an annual review of the chair by external auditors seems to be way over the top. I have already said that GBE will be subject to the normal accountability arrangements. I would expect Ministers, in addition, to meet the chair of GBE frequently, as Ministers in my department do in relation to a number of public bodies for which they are accountable. As ever, we are trying to find the balance between holding GBE properly to account and putting our trust in it, in the quality of people around the board led by the chair, and in the senior officials that they then appoint to do the job properly and effectively.

In relation to Amendment 41, proposed by the noble Lord, Lord Offord, on the rate of return, I think this is going into too much detail and is inappropriate for Parliament to insist on. The Bill we have before us is focused solely on making the minimum necessary provisions to enable the establishment of this operationally independent company. Adding the proposed detail risks too narrowly restricting the company in carrying out its activities, not least because GBE’s work will extend beyond investments. We do not want to be restrictive and put a rate-of-return requirement on all its activities. For me, one of the most important activities that GBE will do is to carry out a lot of the groundwork to enable investors to come in. We know that we have a big problem with the manifold delays in energy infrastructure development and investment. We, of course, seek to reform the planning system and find other ways in which we can speed up development, but GBE has a vital role to play in relation to that too.

I will resist Amendments 56 and 57, on the commencement of the powers in the Bill. These amendments would delay the designation of GBE under Clause 1 and the ability of the Secretary of State to provide financial assistance to it under Clause 4. Those clauses are fundamental to GBE’s ability to start its operations as soon as this Bill is passed.

I am very grateful to noble Lords for their interventions and contributions. I understand that they wish to ensure that GBE is properly held to account. I hope I have convinced them that we will indeed hold GBE to account. Equally, I must fly the flag for operational independence and for the ability of the board to do the job we set out for it to do.

[Baroness Noakes (Con)]

I thank all noble Lords who took part in the debate on this group of amendments. I will start with Amendment 37, in the name of the noble Lord, Lord Vaux. He will decide, when we get to Amendment 37 in its place on the Marshalled List, what he does with it. I will just say now that I was grateful for what he said on additionality, because it is important that we get proper public reporting on whether Great British Energy has achieved the additionality to which it is required to adhere.

I thank the various noble Lords who have given their support to my Amendment 1. I got lukewarm or even negative support from the Liberal Democrat Benches, but I think they were trying to engage in the wording of the objectives. My sense was not about the detailed wording; I was trying to capture what I thought the Government were trying to achieve in terms of objectives for Great British Energy, because the key thing for me is that we have things against which we can hold Great British Energy to account.

The Minister said that the strategic objectives would be set by the statement of strategic priorities. As I tried to argue, it is not inevitable that a statement of strategic priorities would include objectives. If the Minister is telling me that it will include objectives, then we should have something against which we can hold Great British Energy to account. He rather confusingly then went on to say that we would be able hold it to account for its activities. My argument is not that we hold it to account for its activities but that we hold it to account for what it achieves against what it is supposed to be achieving, but I assume that that was loose language on the part of the Minister and that the strategic priority statement will indeed set strategic priorities. On that basis, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.