Great British Energy Bill

Lord Vaux of Harrowden Excerpts

2nd reading
Monday 18th November 2024 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I declare my interest as a small-scale generator of hydroelectricity. I welcome the intentions behind the Bill: an affordable, secure and decarbonised power system must be a good thing. I suspect that the stated timeframe of the next five years is rather overoptimistic but, again, I commend the intention. I caution against rushing the transition too much. We must ensure that we do not undermine our energy stability, and rushing could create that risk, make it more expensive than it might otherwise be and undermine the intention of reducing energy costs over the period. Again, the intention is good.

However, the Bill does not do anything beyond allowing for the creation of the company. It sets out only some very broad parameters as to what it may do. In that, as we have heard, it is quite similar to the UK Infrastructure Bank Act 2023. Indeed, whole clauses of the Bill seem to have been copied verbatim from that Act, and I suspect that we will have many of the same debates that we had then. I seriously considered taking my Second Reading speech on that Act and changing the name, but I decided against that.

However, there are important differences between this Bill and that Act. First, like the UK Infrastructure Bank Act, there is a requirement in Clause 5 for the Secretary of State to

“prepare a statement of strategic priorities for Great British Energy”.

In the case of the UK Infrastructure Bank, the then Government provided a detailed draft of that statement, along with the detailed framework document referred to by the noble Baroness, Lady Noakes. We were able to see what the bank was intending to do and the assumptions around, for example, whether it would be required to make a positive return. That was extremely helpful. In this case, I understand that the Government have no intention to provide such a draft before the Bill is passed. I hope that that is wrong, but it sounds as if we will be having these debates rather in the dark, which is deeply unsatisfactory but, rather depressingly, becoming something of a theme.

The Government have made many claims about the benefits from GBE, which the Minister has repeated today. Being something of a finance nerd, it was therefore with great excitement and enthusiasm that I turned to the impact assessment. Let me give your Lordships some highlights from that. The total net present social value from GBE is given as not applicable; the business net present value is not applicable; the net cost to business per year is not applicable; the CO₂ equivalent change in greenhouse gases, which is its core purpose is—guess what?—not applicable. In fact, in every single section of the impact assessment, it says not applicable. But I read on, and it goes on to say that:

“This legislation is not expected to have any direct benefits associated with it”.


Which is, I suppose, straightforward. We are being asked to scrutinise a Bill where we are not going to be allowed to see the statement of strategic priorities and for which there is no meaningful impact assessment for what the Government are planning to do.

That makes my next point even more important. Apart from a requirement to publish a report and accounts that simply comply with the Companies Act 2006, there is absolutely no reporting and accountability required for Great British Energy in the Bill. Given that we know nothing about the strategic priorities, that has to be unacceptable. It is in stark contrast with the UK Infrastructure Bank Act, where there is a whole section requiring an independent report to be laid before Parliament on,

“the effectiveness of the Bank in delivering its objectives, and … its impact in relation to climate change and regional and local economic growth”,

and, importantly,

“(including the extent to which its investments … have encouraged additional investment … by the private sector)”.

That references the additionality concept that the noble Baroness, Lady Noakes, and others have referred to. With the UK Investment Bank, that report is to be laid before Parliament, and is carried out initially after seven years and then at five-yearly intervals.

It is surprising that the Government do not feel that something similar should apply here and that they actively excluded that clause from their copy-and-paste exercise. They have made all sorts of claims about what GBE will achieve but seem unwilling to have the actual performance measured and reported on. I confess to finding that rather shocking. Can the Minister please explain why the Government felt they should copy the UKIB Act but exclude all meaningful accountability aspects, especially given their own support in opposition for the independent review clauses in the UKIB Act? This is something of a change of tune, I think. Infrastructure is, by definition, long-term, so the UKIB timeframes were long—seven years. GBE is talking about completing the decarbonisation within five years, so it must be the case that shorter duration performance-reporting periods should apply.

The impact assessment says that:

“All investment into and expenditure of GBE will be subject to future spending reviews and business cases, which will set out in detail the monetised and non-monetised impacts of GBE’s activities”.


That sounds promising. Can the Minister explain how and when those spending reviews and business cases will be published, and whether they will be made available for scrutiny by Parliament? Perhaps more importantly, how will the actual performance of GBE against those business cases be reported on and scrutinised? I am absolutely certain that we will have many more debates on this element, especially if we do not see the statement of strategic priorities.

During the debates on the UKIB Bill, we had many discussions about how important it was that the activities of the bank should be aimed at crowding in private investment and avoid crowding out private investment. I said during those debates that,

“if the bank simply ends up becoming a cheaper form of subsidised finance in situations where private finance is already available, we will have failed”.—[Official Report, 14/6/22; col. 1555.]

The same sentence applies with bells on in this case. The Government keep repeating the mantra that every £1 of public investment will generate £3 of private investment. I wish it was that simple. If done badly, it can have the opposite effect, so it is critically important that the reporting that I have said we need covers that aspect of additionality. It must be about not just how much we have spent—anyone can spend money—but how effectively we have spent it and what the real impact on private investment has been. Does the Minister agree?

Speaking of the UK Infrastructure Bank—now rather misleadingly called, as we have heard, the national wealth fund—there is clearly quite considerable overlap between the activities of the two entities. Indeed, the UK Infrastructure Bank was set up originally to do quite a lot of what this entity will do. Can the Minister please shed some light on how that overlap will be managed and how duplication between the two entities will be avoided?

The UKIB Act includes details on the composition of the board; this Bill does not. Can the Minister please explain what the Government have in mind about the composition of the board of GBE?

The Bill includes some very broad financial assistance provisions. We have heard that it is intended to provide equity finance of £8.3 billion over this Parliament. However, other forms of finance appear to be completely unlimited and subject to no obvious scrutiny. Can the Minister please explain what is intended in that respect, and what accountability and controls will exist around it? How will any borrowing by GBE be treated within the UK debt figures?

Somewhat related to that, GBE can be designated only if

“it is wholly owned by the Crown”,

and the designation will terminate automatically if it ceases to be wholly owned. That would preclude the possibility of raising any external equity finance into GBE, although I suppose it might be possible into a subsidiary entity. Has the Minister considered whether some flexibility—perhaps allowing minority external equity into GBE—might be advantageous?

Finally, on a different subject, I have a proposal to add an element to GBE’s objects. Since the end of the feed-in tariffs, the only way that domestic generators of electricity can receive any income from any excess electricity that they generate above their own usage requirements is through the smart or export guarantee. Although there are now some better export rates, most are still very low compared with the retail price of electricity. There is little incentive for people to install excess capacity over and above their own usage requirements—for example, putting another two or three panels on their roof. It would surely be a good thing to incentivise people to install more than they need.

I believe there is a way that that can be done at zero cost for the Government, through a peer-to-peer trading facility that would allow generators to sell any excess, perhaps to their neighbours. The only way of doing that at the moment—which I know to my cost—is to wire them in, which is extremely expensive. This facility would allow the generator to earn more than the smart export guarantee rates, so providing a greater incentive to install more capacity, and would allow the neighbours to obtain the excess power at a discount to their own retail cost—a win-win situation. All that is required is a trading company to stand in the middle, and perhaps to take a cut of the trade to cover the costs of the activity. That is a role that GBE could easily undertake, thereby incentivising people to increase domestic renewable generation at, as I said, no cost to the taxpayer. In order to do that, I think that “trading” should be added to the objects in Clause 3(2)(a).

I support, in concept, what the Government are trying to do, but there is an awful lot to do to improve the Bill, especially around the areas of accountability, where it is woefully lacking.