Infrastructure Bill [HL]

Lord Jenkin of Roding Excerpts

Monday 10th November 2014 Lords Chamber

[Lord Jenkin of Roding (Con)]

My Lords, I have some sympathy with the noble Baroness’s amendment. It has always seemed to me that if you are to have an effective carbon capture and storage policy, and if it is to be developed from the two projects which the Government are currently financing, it would make sense eventually to have what one might call a grid for the CO₂ that would be separated as a result of the technology. Each individual power station developing its own method of disposing of its CO₂ would not seem to me to be sensible.

However, we are at a very early stage in developing this technology. Yes, there have been other examples of a technology being worked in other countries. A number of noble Lords were in a party that I joined a year or two back when we went down to see the BP research establishment at Sunbury. We were given what I found a completely fascinating account of how carbon capture and storage has been operated in a large BP gas field in Algeria, with gas deposits spread over about 20 miles or more coming up to the collection point and the carbon capture and storage technology being applied and the CO₂ going straight back down to the deposits from which the gas had been extracted. The gas, now free of CO₂, was piped to the coast where it was delivered to markets.

I completely understand that that is a unique situation, but there are other examples in other parts of the world where the technology is working, and one hopes that this will be possible. If we are going to have to rely on fossil fuels—as I believe we will—for at least the next three decades or perhaps more, it seems desirable, if we can, to develop an economic method of carbon capture and storage so that it can be done without necessarily increasing the carbon that has to be discharged into the atmosphere.

I say this with some hesitation as the noble Lord, Lord Oxburgh, is sitting opposite and knows, I suspect, 10 times more about this than most of the rest of us. Nevertheless, the Government’s policy of having pilot projects and supporting them with the support of the industry is the right way ahead. It may well be that if this can be developed it will be necessary at the same time to develop a coherent system for disposing of the CO₂ that is discharged from the plant. I shall be interested to hear from my noble friend on the Front Bench about whether this needs a change in the law. It seems to me that something along these lines may eventually be necessary, and I hope that perhaps the Government will recognise that in due course.

[The Lord Bishop of Chester]

My Lords, can I ask the Minister when she responds to comment on two points? First, if we are now to be committed in this legally strengthened way to the maximum economic exploration of our oil and gas reserves, how do the Government see that to be compatible with the commitment under the Climate Change Act to reduce our emissions to only 20% of the 1990 level by 2050 without also having a strategy for carbon capture and storage, which I think lies behind the amendment?

Secondly, the amendment refers to the economic extraction of our hydrocarbons—I have never yet heard any reliable estimate of what the additional cost will be of having carbon capture and storage on a typical power station, be it a coal station or a gas station. What level of increase per kilowatt hour—in a unit that can be easily understood—is anticipated if carbon capture and storage is required on such stations? That impacts on what is economically recoverable.

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[Lord Davies of Oldham (Lab)]

My Lords, the House will know that we have been supportive of this new regulator and have very much welcomed its creation. Of course, the Wood review suggested that the measures within it would increase, as the Minister has indicated, the production of oil and gas from the North Sea by a third—and in doing so produce an additional 3 billion to 4 billion barrels, with a wholesale value of around £200 billion over the next 20 years. Those are significant numbers and anything that helps to produce figures of that kind to the advantage of our people and our economy is, of course, greatly to be welcomed.

This measure was welcomed by the industry although there were concerns about the power of the regulator to interfere with commercial arrangements. These amendments would remove the ability of the regulator to alter commercial arrangements. Therefore, I must say, they appear to water down its powers. We understand the anxiety about the commercial arrangements but if this change is necessary to ensure that investment is not deterred, we need to hear from the Minister the extent to which it can be said to have substantially altered the regulator’s power. If it has not made any significant change, what is the rationale behind these amendments?

Did the Government consult Sir Ian Wood before developing these amendments and, if so, what was his response? Obviously, it is important that we have his views if these amendments represent a significant change to the regulator, which we as the Opposition have fears that they do. The fundamental question prompted by this change is whether the regulator still has the required authority to encourage greater co-operation and asset-sharing, and, following on from that, whether the Government see the regulator as a facilitator or as someone who can insist on co-operation. I hope the Minister will recognise that our anxieties that the amendments might represent a weakening of the power of the regulator need to be allayed.

[Lord Jenkin of Roding]

My Lords, it needs to be remembered—indeed, the noble Lord, Lord Davies, has acknowledged—that the industry very much welcomed the report of Sir Ian Wood.

Noble Lords will remember that perhaps the most important recommendation that Sir Ian Wood made was that in future if we are to maximise the economic recovery of oil and gas, there needs to be a tripartite partnership of the Government, the industry and the regulator. The industry signed up to that. That has been the basis of the substantial amendments which were moved in Committee with the intention of implementing the Wood review, and I am on record as having welcomed them very warmly.

I am aware of the concerns which have been voiced by the industry—to which the noble Lord, Lord Davies, has referred—but I take much comfort in the recent appointment of Andy Samuel as the chief executive officer of the Oil and Gas Authority. As my right honourable friend Mr Davey announced in the Statement last week:

“This is a significant milestone in the establishment of the OGA and demonstrates our commitment to the UK’s oil and gas industry and implementing Sir Ian’s recommendations”.—[Official Report, Commons, 6/11/14; col. 53WS.]

It has to be remembered that Andy Samuel has a very long background in the industry. He will understand as well as anybody the problems of getting industry members— hitherto seen as competing with each other all the time—to work together in this tripartite arrangement. Therefore, while I understand the concerns, I do not share the problem of the noble Lord, Lord Davies, because I think the industry is well placed to take this forward and achieve the very substantial advantages of additional production and national revenue that were outlined. I think these amendments are probably necessary to reassure the industry but I believe the industry is firmly committed to the tripartite partition for which Sir Ian called.

[Baroness Verma]

My Lords, I am extremely grateful to my noble friend for his intervention and contribution, because he lays out very clearly our position. In responding again to the concerns of the noble Lord, Lord Davies, we are committed to ensuring that the regulator is as strong, competent and influential as a regulator should be. However, it is important to ensure that the powers are practical and effective and do not create unintended consequences, as I stated earlier.

It is also important that we do not undermine investment in the UKCS at such an important time. As part of the call for evidence we will engage with interested parties to discuss how the strategy for maximising economic recovery should apply to commercial arrangements. The noble Lord, Lord Davies, asked if Sir Ian Wood was content with our amendments; the understanding is that he is content, but he also understands very clearly that we must not be undermining investment at this time. It is not our intent that the OGA has the ability to directly interfere with new or existing commercial arrangements. We will ensure that the strategy deals with commercial arrangements in a sensible and proportionate way.

We have listened very carefully to all concerns from industry and other stakeholders but, as my noble friend Lord Jenkin has rightly said, this is a tripartite understanding of investment within the UKCS, and therefore I hope that the noble Lord, Lord Davies, is content with my descriptions of why the amendments are important.

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I apologise to noble Lords if I am even more rambling than normal. I am not feeling 100% today, but I am here because this is an incredibly important aspect of this Bill. It is in our interest, and also that of industry and the economy, that we get fracking right. I do not believe that the Government have paid sufficient attention or listened carefully enough to the concerns from those in the environmental sector, pondering on what we think about the potential impact of this technology. I look forward to hearing the response of the noble Baroness. I beg to move.

[Lord Jenkin of Roding]

My Lords I understand the case that has been made by the noble Baroness, Lady Worthington. I started my consideration of the details of this with the hugely important joint report of the Royal Society and the Royal Academy of Engineering back in June 2012. Indeed, I had substantial discussions with the chairman of the committee that produced the report, Sir Robert Mair, whom I had known previously. Perhaps the most important statement in that report—and it had a great deal of detail backing it up—was that they had reviewed the scientific and engineering evidence on risks associated with UK shale gas development and concluded that those risks,

“can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation”.

That has been at the heart of my continuing support for the development of the shale gas industry in this country.

My second point—and no doubt my noble friend will be able to elaborate on this—is that the regulation system that we have in this country, in general under the authority of the Environment Agency, is quite different from that in the United States. I am in no doubt that some of the regulation there has been quite seriously defective. That has given rise to accidents that have been reported, and to the lack of support that one is aware of here and that the noble Baroness has referred to. Of course, you only have to read the media to realise that every accident that happens there is greatly magnified through the media—with a trumpet, as it were. If noble Lords studied the various blogs that come out on this every day, I am sure they would realise what an unbalanced argument it has become because of the way in which all these things are presented here in this country.

I have been critical in the past of both the industry and the Government for failing to realise the extent to which they need to fight the case for the development of a shale gas industry. To be fair to the industry, it has now started a considerable programme called “Let’s talk about shale”. Briefly, the leaflet I have been sent speaks of the very considerable activities that the industry is now taking—primarily in the areas of the Bowland shale deposits, because that is where the main arguments come from at the moment, but of course that can eventually be spread nationwide. That is a welcome development, if perhaps a bit belated, but at least it is now happening.

The one point where I agree with the noble Baroness is that the Government have to match that as well, and take these scare stories seriously and counteract them. Indeed, when I talked to the head of the trade association UK Onshore Oil and Gas, I said, “Learn the lesson of instant rebuttal”. We learnt that from a previous Government. If they wanted to scotch a rumour, it had to be the subject of an instant rebuttal. I see very little sign in the media that either the industry or the Government are yet engaging effectively in the instant rebuttal of scare stories.

Having said that, I will perhaps anticipate what my noble friend will say. We now have the most effective system of regulation in the world for our oil and gas resources. It is of a very high standard and admired across the world. There is absolutely no suggestion that the existing powers of the Environment Agency and other bodies involved in this need reinforcing by additional statutory provisions, as in these amendments.

I read the amendments and thought, “For goodness sake, all this is happening already”. The noble Baroness mentioned baseline monitoring. The Environment Agency has the powers—as have the Scottish Environment Protection Agency and Natural Resources Wales—to require baseline monitoring of those environmental indicators it considers appropriate and for the lengths of time it deems suitable for each given site. We discussed this in Grand Committee. I was certainly there arguing that baseline monitoring is hugely important. If there is to be any question of contamination, you have to know what you are starting with. That is what it means and we do that in this country already. I have never heard it suggested that it is anything other than fully effective.

I am not sure that we need the additional provisions in the noble Baroness’s amendments. I have great faith in the ability of our existing monitors. They have these powers and the duties imposed on them. They do not need to be told in detail by Parliament what to do and how to do their jobs, so this is probably unnecessary. I understand the motives behind the amendments, but the issue should be dealt with effectively by proper information programmes to counter the mischievous rumours that one reads in the press every day. I shall be interested to hear my noble friend’s response from the Front Bench, but I do not think that these amendments actually add anything to what we have already.

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

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

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

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[Lord Judd (Lab)]

My Lords, I thank the noble Baroness for introducing the amendment. I do not need to tell the House that I am a passionate defender of the areas of outstanding natural beauty and the national parks. We have to be vigilant all the time on that. There is no room for complacency because the pressures against what we believe in are always there and we have to beware of erosion. The point she has made about a wider application of those principles is very important.

As I listened to the previous debate, I felt my blood pressure rising because it is a travesty to suggest that environmentalists are against economic progress. Of course we are in favour of economic progress. We want to see it effective and driving as hard as it can. But we are equally determined, as custodians and trustees of all that we have inherited in terms of the environment, scenic beauty, biodiversity and the rest, to keep those issues as equally important. Therefore, it is a matter of rational, strategic decision-making about how you have clear areas for driving ahead, so that people are not worried about constraints of one kind or another but know that they have got green lights going all the way, and areas where we are saying, “Yes, but there are other considerations to be taken into account and if we want a Britain worth living in and if we want our children and grandchildren to inherit a country worth living in, these other issues are crucial”.

When I listened to the noble Lord, Lord Deben, in the previous debate, my feeling was that, yes, I do believe that the market has a key part to play in our economic affairs, of course it has. I happen to believe, rather traditionally—and I am not ashamed of that—in a mixed economy. But having said that, I believe in a managed market and I will take the opportunity to say why. The trouble is that the market operates from a short-term time perspective and these other issues of the environment, scenic beauty and the inheritance by our children of a country worth living in do not have the same immediacy in play in the market as other factors of a more essential economic character. Therefore, one must make sure that those points are on the table, being seen to be taken seriously and being given the muscle to be taken seriously. From that standpoint, I am very glad indeed that the noble Baroness has raised the point that what we want to apply to parks and areas of outstanding natural beauty should not be exclusively limited to them.

[Lord Jenkin of Roding]

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

[Lord Wigley]

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

I wholly welcome this amendment—

[Lord Jenkin of Roding]

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

[Baroness Young of Old Scone]

Perhaps I may give just a couple of examples. Water pollution and the impact on aquifers in general could be quite a substantial issue. We already know that the volume of wastewater coming from shale gas extraction sites is substantial. For the most part that will be brought back to base, but where aquifers are involved we are not absolutely clear about that. There are a number of issues which are not just the site-based issues on the surface. They are about what is happening in terms of underground processes as well.

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This would be a reassurance, and in extremis it might become an absolutely necessary reassurance, so that we do not go through the sequence of events that followed earlier generations of energy exploitation in coal and nuclear power, where no such liability was placed on the operator and where, in fact, the taxpayer has paid and is continuing to pay. In the case of nuclear in particular, the taxpayer will continue to pay for many generations to come. Let us anticipate that and at the same time reassure large sections of the community who may not have any fundamental objections of the type that the noble Lord, Lord Wigley, has to fracking but nevertheless are anxious about their own interests and the effect that this may have on their own businesses and their way of life. I beg to move.

[Lord Jenkin of Roding]

My Lords, when I saw the noble Lord’s amendment, my immediate reaction was to say, as he has done, “Look at what’s happened in other industries, notably the nuclear industry, and then look at what has been happening recently in relation to offshore oil and the measures that are now being taken there”. That led me to approach the trade association that covers the fracking industry, which was extremely helpful. My noble friend’s department has produced a very long paper of financial guidance on the whole question of petroleum licensing. At this hour of the night, when there is further business to come, I will not go into that in great detail, but the fact is that, having read that and the paper that has been produced by the trade association, UKOOG, I am satisfied that the difficulties that the noble Lord, Lord Whitty, has raised are in fact being addressed very positively. It is not only the question of whether the company that will get a licence will have the resources to carry out the work and continue to operate any shale gas well that it constructs. The papers address very specifically the questions that the noble Lord has made most of—the decommissioning of plant and financial liability if things go wrong. The existing regime provides for the remediation of environmental damage and contaminated land, and that includes water. If we take all the regulations together, if a company causes damage, harm or pollution to the environment, it can be required under the regimes in force to remediate the effects and prevent further damage, which is the same approach as applies to other industries.

Furthermore, the Government appear to have very clear powers: they can require financial evidence that there are resources available to pay for that. UKOOG has relieved my anxieties in that regard. Unlike the earlier industries to which the noble Lord, Lord Whitty, referred, the approach to this industry, which is still at a very early stage of its development, as he rightly said, has been extremely responsible. I shall be very interested to hear from my noble friend what those measures are. I am satisfied, but I will listen to my noble friend’s reply.

[Lord Judd]

My Lords, I have been glad to put my name to this amendment, which is very wise and prudent. It has been suggested in recent years that the interpretation of welfare capitalism has changed. The original concept was that capitalism had a social responsibility that it should discharge for the well-being of society as a whole. It seems that quite a lot of people have come to believe that perhaps welfare capitalism is about ensuring that while wealth generation and profit is privatised, risk is nationalised and is the responsibility of the taxpayer. The point in the amendment that is particularly important in this context is what happens in the case of insolvency, when all the best predictions can be blown away in the wind in the chaos that follows.

If a scheme is put forward and is being properly costed, the cost of dealing with potential damage, closure or the consequences of that is an essential element in the calculations. We are concentrating today on this new and exciting aspect of shale development but we are beginning to see infrastructure across the country in connection with power generation and its distribution that is no longer required. We need to be very careful that we are ensuring that any adverse results of that are not left just for the taxpayer to settle, but that they are the responsibility of the people who, while they are operating, are receiving the profits that come from that.

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[Lord Hodgson of Astley Abbotts]

I think I answered it by saying that the reason given for opposing a fund at this stage is that nobody knows quite how much money is going to flow. No one can know. I pointed out that if you do not get something in principle in place now, once the revenue starts to flow, the chances of having a sovereign wealth fund are very low. If we do not get a peg in the board now, when revenue starts to flow there will be a million reasons as to why it should not be put in place at that stage.

I was most encouraged by the remarks of the Chancellor of the Exchequer over the weekend about the advantages that a sovereign wealth fund would bring. I hope that my noble friend will put some flesh on these bones when he winds up. The very last word must rest with Jens Stoltenberg, the then Prime Minister of Norway. In September 2013, at the John F Kennedy School of Government, he said:

“The problem in Europe with the deficits and the debt crisis is that many European countries have spent money they don’t have. The problem in Norway is that we don’t spend money we do have”.

He went on to say that to achieve this happy state of affairs needs actions to be taken that require “political courage”. It is that political courage that I am looking for from the Minister tonight. I beg to move.

[Lord Jenkin of Roding]

My Lords, I added my name to my noble friend’s amendment and I congratulate him on the way in which he moved it. I want to make two points. First, I was the Minister for Energy in the very early stages of our North Sea oil and gas. I was the Minister for only seven weeks when we lost the election at the end of February 1974. At that stage, no one had the remotest idea of setting up a sovereign fund. I do not remember the thought crossing my mind or my desk. As my noble friend Lord Forsyth has indicated, we did not have the slightest idea of how much it was going to be.

In a sense, I take issue with my noble friend Lord Hodgson for saying that it was a massive mistake. I find it difficult to accept that. There may have come a time when one should have seen that the prospects were going to be as bright as they have been and one might have done something to meet my noble friend’s wish. But to have expected that to happen in the very early stages when the oil and gas had scarcely begun to flow is a little unfair. At the time, when BP was investing in the Brent oilfield, which became the most important oilfield, its financial director said that he had established a law; namely, that, however much is spent in developing a North Sea oilfield, the amount still to be spent would be constant. It stands constant. It does not go down. That was the climate in which the oil industry was operating then. The Government, I think, gave it every opportunity to develop and we have enjoyed the success.

Secondly, I hesitated to put my name to my noble friend’s new clause because of the figures. My noble friend Lord Forsyth has already raised this. Nevertheless, I think the principle is sound, particularly what was said about intergenerational equity. Where you have the prospect of major wealth, is it right that it should all be spent on the present generation? It seems to me that there is a principle here that it is desirable to support. My noble friend referred at the end of his speech to what my right honourable friend the Chancellor said over the weekend about,

“making sure money is not squandered on day-to-day spending”.

When you have the indebtedness we have it is unrealistic to say that when you are spending money to keep the economy going to meet the needs of social services and so on that somehow if we spend the revenues from something such as shale gas we are squandering it. However, there may come a time, as happened in Norway, when it would be right to set up a fund. My noble friend’s new clause says that the Government “may”—it does not say “must”. I have already indicated that I have some doubts about the figures he has put in at the end but the principle seems to be very sound and I hope that the opportunity may come when we shall do something about it. Like him I look forward to the reply from my noble friend on the Front Bench.

[Lord Whitty]

My Lords, I have also added my name to this amendment. This is for two reasons—partly, I was swept away by the rhetoric from the noble Lord, Lord Hodgson, in Committee; it is such an obvious strategic decision that I thought I must support it. The second reason is purely historic. Somewhere in the archives of the TUC, from about 1973, there is a paper with the initials “LW” on it. In that paper I argued that we should set up a fund to invest in upgrading into the new technologies of the manufacturing industry and acquire assets at home and abroad to meet the interests of the state and of the British economy out of the tax revenues which we anticipated would come from the North Sea. We had no idea how much revenue would be coming in from North Sea oil at that time but it would clearly be substantial. I do not think anybody thought at that point it would be as substantial as it turned out, altering the terms of trade of the UK, with the level of sterling rising to the detriment of the competitiveness of the British manufacturing sector which was, of course, already a bit deadbeat and uncompetitive.

If only they had listened to me then. I am afraid that I never got my paper to the noble Lord, Lord Jenkin, while he was still in office but the next Government took no notice of it nor, indeed, the one after that. It stayed through all that period of North Sea oil revenue the Government received—I would not use “squandered”. I disagree with a lot of the priorities of the Government of the 1980s as noble Lords know, but that revenue was not used for the long-term benefit of the British economy when at least a fraction of it should have been. I thought the noble Lord, Lord Hodgson, had an important point here. If this industry develops to the extent that many of its proponents are saying, although none of us knows that yet, there will be a serious tax revenue that is in a strict sense a windfall for future Governments and a windfall for the British economy. We should not make the same mistake and we should take a lesson from our Norwegian cousins by investing in a fund that can provide some degree of security and improvement of the British economic situation for future generations. I am very happy to support in principle the noble Lord’s amendment.

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Moved by

[Lord Jenkin of Roding]

119: After Clause 38, insert the following new Clause—
“Part 4AImpact of infrastructure spending on costs for consumersImpact of infrastructure spending on costs for consumers
(1) The Treasury may by regulations make provision for the regulators to provide data, in a manner prescribed by the regulations, about the anticipated impact of infrastructure spending on the cost of products for consumers.
(2) Regulations made under subsection (1) may prescribe—
(a) the type of infrastructure spending about which data must be provided;(b) the nature of the data to be provided;(c) the methodology for collating and manipulating the data, including assumptions that should be made; (d) the form in which the data should be presented;(e) the persons that should receive a copy of the data.(3) The regulations may make different provision for different regulators where necessary.
(4) The Treasury must scrutinise the data provided under subsection (1) and assess—
(a) the impact of infrastructure spending on the cost of products for consumers;(b) the affordability of any anticipated increases in the cost of products for consumers, taking into account factors other than infrastructure spending that are also likely to significantly impact the cost of products; and(c) differences in affordability between different groups of consumers, if any.(5) The Treasury must publish the data provided under subsection (1) and the assessment made under subsection (4) in such manner as it reasonably deems appropriate.
(6) The Treasury must take into account the assessment in subsection (4) in making decisions about the extent, prioritisation or timing of infrastructure spending.
(7) In this Part—
“consumer” means any individual or household of individuals that purchases a product or products;
“product” means a good or service the provision of which is regulated by a regulator;
a “regulator” means any of—
(a) the Northern Ireland Authority for Utility Regulation;(b) the Office of Communications;(c) the Office of Gas and Electricity Markets;(d) the Office of Rail Regulation;(e) the Water Industry Commission for Scotland; and(f) the Water Services Regulation Authority,and “the regulators” means all of them.”

[Lord Jenkin of Roding]

My Lords, I thank the two noble Lords who added their names to the amendment. We turn from the question of spending the proceeds of shale gas to the question of who is paying for the infrastructure investment on which the country has embarked and for which there is a great deal of support.

When my noble friend Lady Kramer wound up the debate on the new clause in Committee, she was kind enough to suggest that I might approach my noble friend Lord Deighton to discuss this matter as it was entirely a matter for the Treasury. It was therefore no surprise that a day or two later I received an invitation from my noble friend’s office to go to a meeting. It was a very helpful meeting and I will refer to it later. However, I was most grateful for his readiness to meet me on that occasion, and for his presence here this evening to respond to the debate. I recalled his splendid speech when he opened the second day’s debate on the Loyal Address last June. He demonstrated his deep commitment to the Government’s major programme of renewal and expansion of Britain’s infrastructure.

The new clause concerns one important aspect of that. I refer to the absence at present of any systematic system for calculating and publishing what part of the costs will fall on consumers and have to be paid for in their bills. I suggested in Grand Committee that it was time for the Treasury to “lift the veil”. But we are not the first. Last year the National Audit Office produced an interesting report. I will quote two passages from it. First, in paragraph 16, the NAO said:

“Government has made no assessment of the overall impact of infrastructure on future bills or whether those bills will be affordable. Therefore government and regulators are taking decisions on behalf of consumers in the absence of full information about the situation for consumers”.

Later on, on page 11 of the report, it recommended:

“The Treasury should ensure that there are mechanisms in place to assess the cumulative impact of infrastructure investment on consumer bills and the affordability implications, particularly for low-income households”.

I say straight away that I have accepted the arguments that to try to do this cumulatively right across the whole range of infrastructure is at this stage probably unrealistic. In the present new clause, we have removed any reference to the cumulative assessment that we had in the version of it in Committee.

The NAO report was taken up by the Public Accounts Committee, which made a number of recommendations. One of them was to pick up that point made by the National Audit Office. On the same day, the Government published their response to the PAC report. That was really quite an interesting document. They accepted most of the recommendations but rejected the PAC’s recommendation that the,

“Treasury should ensure that an assessment of the long-term affordability of bills across the sectors is produced and published”.

However, at the end of that response, the Government added:

“Nonetheless, the Government agrees that there is scope to improve understanding of affordability in this important area and will continue to work with the regulators on these issues, including through the UK Regulators Network which is considering affordability as a key element of its work-plan”.

I regarded that as a very important pointer to a possible way forward, in particular the reference to the UK Regulators Network. I was unaware of this body, so explored its origins with Ofgem and learnt that it is indeed a more formal and authoritative body than the previous informal association of regulators. Here I come to my meeting with my noble friend Lord Deighton. He told me that the Treasury was in full support of the UKRN. Indeed, its creation was on the initiative of the Treasury itself. I also gathered that that paragraph in the response had actually been approved by my noble friend. I was delighted to hear that. As I said, I have taken on board what I think was the most difficult aspect of the proposal—the question of aggregating consumer impacts across several different programmes. We are now looking at just assessing the impact on consumers of each individual industry.

My noble friend told me at our meeting that the Treasury regarded the regulators network as the right body to take this initiative forward and that the Treasury would take very seriously any recommendation which it might make. There is no doubt that the impact on consumers is an issue of not only great but growing importance. This has been repeatedly acknowledged by the coalition Government, not least in the recent Statement of my right honourable friend the Secretary of State for Energy and Climate Change.

The PAC report of last July has not yet been the subject of a debate in another place. In those circumstances, I would not think it the least bit appropriate to invite the House to vote on the new clause. Rather, I see this debate as providing my noble friend Lord Deighton with an opportunity to give the House his assessment of where we are in greater understanding of the impact of infrastructure investment on consumer bills and what his department may be able to do to advance that understanding. There is no doubt about the importance of the subject. Indeed, the presence of my noble friend to respond to the debate indicates that the Government share that view. I beg to move.

--- Later in debate ---

I thank my noble friend for giving me the opportunity to discuss these issues today. I hope that what I have set out reassures him, and that he will feel comfortable in withdrawing his amendment.

[Lord Jenkin of Roding]

Before I withdraw the amendment, may I say that I am immensely grateful to my noble friend for his reply to the debate? I—and others, I am sure—will want to study carefully what he has said, because this represents, in some respects, a new departure in trying to assess who is actually having to pay for the huge programme of infrastructure investment on which we are currently embarked.

I thank the noble Lord, Lord Berkeley, and I should also mention that the noble Lord, Lord Whitty, apologised to me for the fact that he had to leave. This has been a useful debate, and I am grateful to my noble friend for having been here to reply to it in the way that he did. I beg leave to withdraw the amendment.

Amendment 119 withdrawn.