Great British Energy Bill

Lord Vaux of Harrowden Excerpts

Committee stage
Wednesday 15th January 2025 Grand Committee

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am grateful to noble Lords who spoke in this debate, both today and in our deliberations on Monday. It seems quite a long time ago since then, and I am looking forward to a very constructive engagement today and welcome the contributions that all noble Lords are going to make.

Let me say at once that I very much understand the importance of information being provided in order to judge the performance of GBE and of it being held to effective account. There is no disagreement at all between me and other noble Lords on this. Noble Lords will know, as the noble Baroness, Lady Noakes, explained very clearly in her remarks on Monday, that her Amendment 88 requires GBE to file its annual reports and accounts within six months from the end of its accounting reference period. As she said then, and as noble Lords have repeated, this aligns with the Companies Act 2006 for public companies whose shares are publicly traded. Of course I agree that a six-month filing period is appropriate for public companies. Financial markets need up-to-date and timely information on the performance of a company, as do its range of stakeholders and shareholders, to help them make informed decisions when companies are seeking to raise capital.

I also understand why noble Lords wish this discipline to be applied to GBE, but it is a private limited company owned wholly by the Crown. It is not unreasonable for the Government to say that, on that basis, we should be in line with the Companies Acts requirements, which set a nine-month filing period for private limited companies. I should also say that this is an arrangement applied to most government-owned companies: for example, the National Wealth Fund, the National Energy System Operator and the Low Carbon Contracts Company. I know that the noble Baroness, Lady Noakes, was concerned about the filing deadline, but it is also the case that the vast majority of these organisations, government-owned companies, file their accounts well in advance of the statutory requirement.

I understand the point that the noble Viscount, Lord Trenchard, made about public interest in Great British Energy, and I welcome that. Indeed, I want GBE to be well-known and seen as spearheading the drive we wish to see in relation to Clause 3 and the statement of priorities in Clause 5. We wish GBE to be as successful as possible.

My point is that, in a sense, what is in statute in relation to the Companies Act is a minimum requirement because, as GBE is owned by the Secretary of State, it will be subject to the usual mechanisms that apply in the public sector. They are put in place to ensure that the public interest is discharged and proper public accountabilities are in place.

On Monday, the noble Lord, Lord Teverson, made an interesting point: one of the concerns some people have is that, because of GBE’s structure and because it is publicly accountable, it will be subject to a considerable number of the controls put in place for bodies that fall within public accountability. The key question is: can we ensure that GBE has sufficient operational independence to perform effectively in its work? There are a number of issues here around the way it will work in future.

I should also say that the annual report and accounts are not the only means of scrutinising the funding allocated to GBE. All funding to GBE must be voted on by Parliament; because of that, it will be scrutinised through the supply and appropriations debates in the other place.

Amendment 89 in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Noakes, proposes specific topics to be included in the annual reports and accounts of Great British Energy, as well as the granting of an additional power to His Majesty’s Treasury to require further information. I can confirm that much of the proposed content will already be included and publicly available in the annual report and accounts, as required by Clause 7, and will be laid before Parliament. As an example, the financial assistance details under new paragraph (a), proposed by this amendment, will be included in the accounts of GBE. Details are likely to include issued share capital and items on the balance sheet of the company, such as borrowing from government if that method has been utilised.

The noble Lord, Lord Vaux, and my noble friend Lady Young of Old Scone were concerned that Great British Energy would need only to follow the provisions of the Companies Act in preparing its annual report and accounts. However, I can assure them that that is not the case. GBE will adhere to the additional reporting requirements for government-owned companies over and above the reporting requirements under the Companies Act. These include the obligation to follow the Treasury’s directions on accounts through the powers extended in the Government Resources and Accounts Act 2000, laid out in the government financial reporting manual and related “Dear Accounting Officer” letters. The most recent of these account direction letters requires bodies to give a true and fair view of the state of affairs, including net resource outturn, the application of resources, changes in taxpayers’ equity and cash flows for the financial year.

Furthermore, GBE will be required to report on its governance around exposure to and risk of climate-related scenarios in its operations, as set out by the Task Force on Climate-Related Financial Disclosures. Finally, any future funding of GBE will be subject to agreement through a government spending review, or another mechanism, as the Government see fit.

Amendment 92 in the name of the noble Baroness, Lady Noakes, proposes to require the Comptroller and Auditor-General to be the external auditor of Great British Energy; I think she said on Monday that it is a probing amendment. I am very happy to reassure noble Lords in this case. It is already the case that the Comptroller and Auditor-General will be the external auditor of Great British Energy. The company will also need to comply with the provisions set out in the Treasury’s Managing Public Money document, which requires the Comptroller and Auditor-General to be the external auditor for non-departmental public bodies such as Great British Energy. The requirement will also be set out in the framework document for Great British Energy, which we will debate shortly.

Amendment 90A, in the name of my noble friend Lady Young, seeks to require additional reporting from Great British Energy. Again, I assure her that much of the information that she seeks will be provided in GBE’s annual report and accounts, as a matter of course. The annual report and accounts will include key achievements and milestones, general business information relating to its strategic direction, a review of the company’s performance, challenges and future outlook, as well as financial statements and resourcing levels. It will also include reporting in line with the recommendations of the Task Force on Climate-Related Financial Disclosures.

GBE may also make more information available through reporting, such as when projects or investments are announced. We want to set this company up to be transparent and accountable, with a reporting regime appropriate to its company basis and status. The accountability of Ministers to Parliament for its performance will also be in place.

We very much take the point about the need for this organisation to be transparent and accountable. In the light of this debate, I will set out how this all comes together in detail and send a note to noble Lords. I hope that provides some greater reassurance.

[Lord Vaux of Harrowden (CB)]

I realise that Monday is quite a long time ago now and that the noble Lord has probably forgotten this, but I asked a specific question then. The impact assessment for the Bill says that, because the Bill does nothing but create the company, “no quantification of benefits” and costs

“has been provided at this stage”,

and that those benefits and costs

“will be subject to future spending reviews and business cases”.

I asked whether those future spending reviews and business cases would be made public.

[Lord Hunt of Kings Heath (Lab)]

I am not sure that I can answer that point in detail. The impact assessment is built around the legislation, rather than the future activities of GBE. May I take that specific question away? Clearly, the funding that the Government provide Great British Energy will have to be in the public domain and part of the normal process of dealing with a spending review and the financial consequences and flows of money that follow it. I am happy to look into that in more detail, if the noble Lord would like.

[Lord Vaux of Harrowden (CB)]

That would be very kind. The issue is that, if the Bill had been done in the normal way and included the detail of what GBE was going to do, the impact assessment would have covered those activities. However, those things are not included in the Bill so are not covered by the impact assessment. When the statement of strategic priorities and the detail of what the company will do are published, there will be no impact assessment on them, other than the spending reviews and business cases. It is important that they are made public, as if they had been part of the impact assessment that would have happened if this had been done in the usual way.

[Lord Hunt of Kings Heath (Lab)]

My Lords, as I said, I think we have acted properly with the impact assessment, which is based on the Bill. GBE has yet to commence its work. I have said that I will write to noble Lords detailing how we see GBE being held to account, in terms of its reporting and accountability, and I will add some more information about how that relates to the statement of strategic priorities in Clause 5.

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[Lord Vaux of Harrowden (CB)]

My Lords, the noble Baroness, Lady Noakes, regrets that she is not able to be here today, because this was scheduled after she already had other commitments, so, with the leave of the Committee, I will channel the noble Baroness to wrap up. I thank all noble Lords who have taken part in this constructive debate and the Minister for his constructive response.

Common themes are emerging throughout our discussions on the Bill, and the subject of transparency and accountability is probably the major one. I know that the noble Baroness will be disappointed by the response to shortening the reporting deadline to six months, which does not seem overly onerous. I was encouraged, I think, by what the Minister said about the reporting requirements and I look forward to receiving the letter he has spoken about. However, he did not refer in his answer to a couple of things that were in the amendment and are really important.

First, it is important that GBE reports on the investments it has made, and I do not think he mentioned that. Secondly, as a number of noble Lords mentioned, the key issue is that of additionality—in other words, what impact GBE is having on crowding-in private investment alongside the public investment. As I said on Monday, anyone can spend money. If this is to be in any way positive, it needs to attract private investment that would not otherwise have happened. It is really important that that is measured in the same way as it has to be by the National Wealth Fund. I think it is true to say that the National Wealth Fund, because it has the obligation to report on additionality, is actually performing rather well on additionality.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I think I said by implication that I consider those matters that I would expect the company to report on.

[Lord Vaux of Harrowden (CB)]

I am reassured to hear that and I look forward to receiving the letter. We may need to come back to this, and I hope the noble Lord will be willing to sit down, discuss the overall questions around accountability and transparency and, I hope, put something forward himself that will strengthen what is, if I am honest, a somewhat thin Bill. With that, I beg leave to withdraw the amendment.

Amendment 88 withdrawn.

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Moved by

[Lord Vaux of Harrowden]

93: After Clause 7, insert the following new Clause—
“Framework document(1) The Secretary of State must prepare a framework document which sets out the principles underpinning the relationship between the Secretary of State, Great British Energy and any other relevant public sector bodies.(2) The framework document must cover the operating and financial principles through which Great British Energy will pursue its strategic objectives and may include such other matters as the Secretary of State determines.(3) Relevant public sector bodies are public sector bodies and government departments which the Secretary of State considers will or may have a relationship with Great British Energy.(4) The Secretary of State may amend the framework document at any time.(5) The Secretary of State must consult Great British Energy before preparing or amending the framework document.(6) The Secretary of State must lay a copy of the framework document or any amended framework document before Parliament as soon as practical after it is finalised.”Member’s explanatory statement
This amendment requires the Secretary of State to prepare and publish a document setting out the operating and financial principles which Great British Energy will use.

[Lord Vaux of Harrowden (CB)]

My Lords, with the leave of the Committee I shall move Amendment 93 at the request of the noble Baroness, Lady Noakes, who, as I say, is unable to attend today. I will speak also to Amendment 121A, also in her name.

Amendment 93 says:

“The Secretary of State must prepare a framework document”


to cover

“the relationship between the Secretary of State, Great British Energy and any other relevant public sector bodies … The framework document must cover the operating and financial principles”,

at least, to be adopted by Great British Energy. Once finalised, the framework document must be laid before Parliament.

Amendment 121A goes a little further and would defer commencement of the Act until the framework document has been laid before Parliament. The noble Baroness, Lady Noakes, and I have several times contrasted the parliamentary passage of the UK Infrastructure Bank Bill with that of this Bill. In particular, she has raised the absence of a draft framework document for Great British Energy. All we know in relation to GBE is that the founding statement published for it last July said that a framework document would be established in due course. The Minister has not yet given any indication of the timing for that framework document.

I would not normally expect a Bill establishing a public sector body to contain a requirement for a framework document. That is because it is a document routinely put in place between the Government and public bodies, and there should be no question of a body commencing operation until all the details are in place. Hence, when we scrutinised the UK Infrastructure Bank Bill, an advanced draft was made available to those of us taking part in the Bill, which was extremely helpful in our debates. We knew the detail of what the Government were planning, and how they were intending to deliver it, which is missing from this Bill.

Although framework documents have no legal force, they set out in some detail what the Government expect of the new body. Sometimes they cover detail that could have been included in primary legislation, but usually the detail is of a nature likely to change over time and, hence, is inappropriate for statute. The important point, however, is that considerable thought and work are put into the contents of that document.

As we have discussed, it is clear that with GBE, the Government have not yet put in all the hard work on how it is to operate in practice, and what rules and restrictions will be necessary. The Minister has confirmed that this is under way and explained the thinness of the Bill on the basis that the Government had to get on with legislating, and that details would follow. That is not a sound basis for legislating, and failure to provide fuller details on things such as the framework document or strategic priorities treats the process of legislative scrutiny in a somewhat disrespectful manner. We have already discussed the concerns raised in that respect by the Constitution Committee.

I will quickly run through the key contents of the framework document for what is now the National Wealth Fund—what was the UK Infrastructure Bank—which will illustrate the things that we should have expected to see advanced drafts of by now. It sets out the strategic objectives for the National Wealth Fund. These might, or might not, be the same as required by Clause 5 of this Bill. We have seen no draft or even an outline of the strategic priorities that the Secretary of State will set under Clause 5, so we do not know whether to expect strategic objectives in the framework document. Objectives and priorities ought to be different things, but we are completely in the dark at the moment.

There are a number of operating principles, which are extremely important. They include the requirement to make a positive financial return over time, and a double bottom line—a phrase used frequently during passage of the UK Infrastructure Bank Bill, another complicated Bill—of achieving both the strategic objectives and financial return. We ought to know the financial objectives of GBE by now, especially in view of the open-ended financial assistance power in Clause 4, which might mean that GBE will not be required to make a financial return.

Another operating principle is that of additionality, by prioritising investments where there is an undersupply of private sector finance. The noble Baroness, Lady Noakes, asked whether additionality applied to GBE at Second Reading but did not receive a suitable answer, and I have raised this principle a number of times, including in the previous group. It would be helpful if the Minister spoke a little about the expectations for additionality for GBE. It is another fundamental question that Parliament ought to be informed about before allowing this Bill to become law.

Another section of the framework document sets out investment principles. It describes the kinds of investment that are to be undertaken and those which are not allowed. Not only must individual investments support its core objectives, they must also be intended to deliver a positive financial return, and to crowd in significant private capital. We have no idea what the guiding principles for investments made by GBE are. There is also a lot in the framework document on governance and other matters.

The key questions are whether we will see a framework document and when. I would not go as far as the noble Baroness, Lady Noakes, in Amendment 121A, which would delay commencement, but it is essential that we see a framework document as early as possible. Given the lack of detail in the Bill, it is important that the company should have to do that. I beg to move.

[Viscount Trenchard (Con)]

My Lords, I rise to follow the noble Lord, Lord Vaux, in speaking to Amendment 93, which he moved on behalf on my noble friend Lady Noakes. I have also added my name to this amendment.

As has been said several times in our debates, this is in essence a framework or enabling Bill but one that gives a large number of Henry VIII powers to the Secretary of State. A requirement to produce a framework document setting out the operating and financial principles that GBE will use would be a significant improvement to the Bill, as the noble Lord, Lord Vaux, explained so eloquently. It is essential that the principles underpinning the relationship between the Secretary of State and GBE should be publicly understood and supported. The arguments that I have previously used in relation to my Amendment 86A also apply here; other relevant public bodies, as mentioned in that amendment, clearly include GBN, NWF, NESO, Ofgem and Mission Control.

I also support my noble friend Lady Noakes in her Amendment 121A, which I think is justified in the circumstances, but I would certainly like to hear the Minister’s view on it. Amendment 121A would ensure that the framework document is laid before Parliament before the Act comes into force.

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The framework document is therefore focused on the corporate governance of the public body to ensure it aligns with the best practice set out in Managing Public Money and is clear on its expectations to be fully accountable to the department. This is a commitment from the Dispatch Box by the Minister who is taking the Bill through that there will be a framework document and it will cover the areas that I have mentioned. I cannot give an exact timing; it is simply not possible. We do not yet know. We do not know how long it is going to take. Clearly, we want it to be done as quickly as possible, but it needs to be done thoroughly and it will take a matter of months. I am afraid that that is as far as I can go on that.

[Lord Vaux of Harrowden (CB)]

In effect, under the Bill GB Energy will take a chunk of the activity of the National Wealth Fund—approximately a third of the total value, in fact—and put it into another entity. As I said, the National Wealth Fund’s framework document includes quite a lot of information around requirements to make financial returns and, in particular, the additionality principle. Therefore, because we are, in effect, moving a chunk of the National Wealth Fund’s activities into a different entity, it would presumably be appropriate that that remains subject to fairly similar levels of governance and control. Could the Minister perhaps say a little about the expectation on financial returns and additionality, which he has not mentioned in his response so far?

[Lord Hunt of Kings Heath (Lab)]

My Lords, by implication, we would expect the organisation to be as transparent as possible and to cover the sort of areas that the noble Lord mentioned. It is also fair to say that, given the comparisons being drawn between Great British Energy and the UK Infrastructure Bank, in the case of the UKIB, the framework document was published before Royal Assent. The point is that the organisation was operational before Royal Assent, but this Bill is being brought to Parliament before we have operationalised the company, so there is a distinction. As I said, noble Lords can be reassured that there will be a stringent framework document to ensure proper accountability. I am searching to find something else to say to give comfort, but I have to say that this is as far as we can go. Having said this from the Dispatch Box, it has to happen.

Returning to the part of the amendment that would require the relationship between GB Energy and other relevant public bodies to be included in the framework agreement, noble Lords will know that that is not typically part of a framework document, but GB Energy’s relationship with relevant public sector bodies will of course be part of delivering its objectives. Again, the partnerships will be undertaken in accordance with GB Energy’s operating principles and, where appropriate, we will provide definition to those relationships in the upcoming statement of strategic priorities. As part of its annual reports and accounts, we will of course expect GB Energy to report on activities undertaken as part of its public sector partnerships. We expect it to enter into a number of partnerships or relationships with other public bodies, but that is not appropriate for the framework document.

The other point to make here is that GBE will be accountable to Parliament, with a statement of strategic priorities laid before Parliament, and the accounting officer of Great British Energy, and Ministers, will be accountable to Parliament for the work and performance of the company. Members of your Lordships’ House will be able to ask questions and debate, and I have no doubt that Select Committees will wish to examine the chair and chief executive of the organisation from time to time, which seems wholly appropriate and will provide the public accountability that needs to go alongside the normal accountability that a private company would expect to operate, within the legislation that it will be covered by. We need to remember that it is also publicly accountable alongside the accountability that it needs to discharge as a private company.

The issue I come back to is that we have to ensure that it has enough operational independence. A push-back from noble Lords might be to ask: will it be overly constrained? We have to get the balance right between proper accountability and reporting and—dare I say it —what I hope will be an entrepreneurial approach to the formidable task it is being given. That is why the appointment of the incoming chair has been so important —to give us that expertise and experience.

As noble Lords will see, it is very difficult for us to agree to Amendment 121A, which would defer commencement of most of the provisions in the Bill until a framework document had been laid before Parliament. We do not think it possible to produce a framework document without the active involvement of the company itself. That is probably as far as I can go on this interesting area, but I can assure noble Lords that there will be a fully fledged framework document, which I think will cover all the issues that noble Lords are concerned about.

[Lord Vaux of Harrowden (CB)]

My Lords, I thank all noble Lords who have taken part in this short debate, and the Minister for his response, which is helpful and encouraging—I understand his point. However, I think he put his finger on the fundamental problem with the Bill, which is precisely what he said: the company is being established before we really know what it is going to do and before it starts to operate. Therefore, there is no scrutiny of those things at the moment. When he says that there is accountability through, for example, the statement of strategic priorities, it is not strictly true. It gets laid before Parliament, but there is no debate, approval or anything. The framework document will not even be laid before Parliament.

[Lord Hunt of Kings Heath (Lab)]

My Lords, of course, that is a fair point but, equally, I would say, as a Minister accountable to Parliament, that the opportunity for noble Lords to ask questions and take part in debates is considerable. I would expect that GBE and any statement of priorities will be fully part of the rough and tumble of life in Parliament. Anyone who has been involved in a company organisation such as that will know that parliamentary accountability really does bite and is effective.

[Lord Vaux of Harrowden (CB)]

The Minister is right on that—I cannot disagree—except, again, that accountability is only as good as the information on which one bases it. If there is no information, or if it is really thin, it is hard—

[Lord Hunt of Kings Heath (Lab)]

My Lords, I do not want to intervene constantly, but I think noble Lords will be awash with information about GBE, its performance and activities.

[Lord Vaux of Harrowden (CB)]

I am very encouraged to hear that but there is nothing in the Bill that says that. If one is honest, what tends to happen is that if something is really successful, we will be awash with information telling us how successful it has been. If it is less than successful, I wonder how much information we will see. Fair enough, but there is a wider discussion to be had between now and Report on transparency and accountability, and I hope the Minister will be open to that. With that, I beg leave to withdraw Amendment 93.

Amendment 93 withdrawn.

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[Lord Vaux of Harrowden (CB)]

My Lords, I rise to speak to Amendment 103, and thank the noble Baroness, Lady Noakes, the noble Lord, Lord Cameron of Dillington and the noble Viscount, Lord Trenchard, for their support. As we have heard, once again we are returning to transparency and accountability.

Amendment 103 is similar to Amendment 94, which has just been introduced by the noble Lord, Lord Offord, but with some important differences. As we have discussed before, and as the noble Lord, Lord Offord, has just mentioned, most of this Bill has been copied across from the UK Infrastructure Bank Act, but with most of the transparency and accountability provisions removed. In particular, Section 9 of that Act, which provides for independent reviews of the effectiveness and impact of the bank—now the National Wealth Fund—has been omitted.

The Minister has previously explained that the reason for this omission was that no such reviews were included in the Energy Act in respect of Great British Nuclear, and he feels that this is the precedent which should apply here. That argument holds no water at all. Great British Nuclear is a completely different entity, with completely different activities. It has a clearly defined and specific role initially to administer the process to select which small modular reactor technology the UK will choose. It has a relatively small budget—I think it was £157 million initially—and it is not intended to invest directly in those technologies. Great British Nuclear has an important role, but it is very different to what is apparently planned for GBE.

GBE will, in effect, take over a substantial and important area of the National Wealth Fund’s activity, investing directly in projects and businesses. It has an initial budget of £8.3 billion, which is nearly a third of the National Wealth Fund’s budget. It is worth reminding noble Lords that there is no limit in the Bill on how much public money GBE can spend. Indeed, the activities of GBE and the National Wealth Fund are so close that, initially, the National Wealth Fund will carry out the activities of GBE on its behalf, so let us drop this pretence that GBE is like Great British Nuclear; it is not. GBE is taking over a part of the National Wealth Fund’s activities and has a substantial budget. A body with the ability to spend billions of pounds of public money should be subject to rigorous transparency and accountability, and not just to the Treasury and the Secretary of State. It must, therefore, be appropriate for GBE to have to follow at least equivalent accountability disciplines to the National Wealth Fund. It is doing very similar things.

Amendment 103 is an almost direct copy of the independent review process that the National Wealth Fund is subject to. That arose from lengthy debate during the passage of the UK Infrastructure Bank Act and was supported by the Minister’s party at the time. It is not clear why, in government, they have decided to omit it from the Bill. Accountability seems to be a good thing, so long as it does not apply to them.

For GBE, I have changed the provision slightly from how it is in the UK Infrastructure Bank Act, in two ways. I have limited the scope to reporting only on how GBE has met its objectives and how well it has encouraged private sector investment alongside its activities. This latter point—additionality—is critical, as I have mentioned before. I do not have time to get into the details of crowding-in and crowding-out theory, but if all that GBE does is invest in projects which could easily have been financed by the private sector, that would be a complete waste of taxpayers’ money. Indeed, it would be actively damaging, as it would undermine the emergence and growth of a thriving industry providing the finance for our move to net zero.

We had lengthy discussions around the additionality principle during the passage of the UK Infrastructure Bank Act. I asked the Minister to comment on it in a previous group. He has still not commented in any detail, but it is critical. I would like to hear from the Minister what the expectations of GBE are in that respect. The Government have stressed the importance of it, and I have referred previously to the £1 of public money capitalising £3 of private investment that has been claimed. Crowding in is fundamental to its success, so it should be part of the measurement and review of GBE’s performance.

The second tweak I have made to the section from the UK Infrastructure Bank Act is on timing. The 2023 Act requires that the first independent report should be after seven years and then every five years. Infrastructure is by nature long-term, so those timeframes made sense in that context. However, GBE is intending to have decarbonised the power sector by 2030, in just five years’ time, so we should logically be reviewing progress before then. I have suggested reporting every three years; that is probably the major difference between my Amendment 103 and Amendment 94 of the noble Lord Offord, which proposes an independent report every year. I think an annual independent review is probably unduly onerous, but we need an independent progress review before the end of the target period of 2030, so I hope that three years is an acceptable compromise. However we do it, as currently drafted, the Bill falls woefully short on transparency and accountability.

I hope that the Government look seriously at having an independent review of effectiveness. It was hard-wired into the UK Infrastructure Bank Act for good reason: routine annual reports and accounts are simply not a good vehicle for a deep dive into the effectiveness of what are often quite complex investments and other financial activities. A separate, independent review was a good idea for what is now the National Wealth Fund, and I cannot see how a valid distinction can be made between the two organisations. The Government should want to ensure that they both operate equally effectively. Again, I would be very happy to discuss this further with the Minister and I hope that he is receptive to strengthening these aspects of the Bill, just as he and his party, when sitting on the other side of the Chamber, were on other Bills including the UK Infrastructure Bank Bill.

I say in passing that I support Amendment 102 of the noble Earl, Lord Russell, which requires a biennial report on GBE’s relationship with other public sector bodies. We have talked about this previously and it is another example of the opacity that currently surrounds GBE. In particular, I have no idea what its relationship with the Crown Estate means in practice, as well as that with Great British Nuclear and the UK Infrastructure Bank. It would be very desirable to have reports on how those relationships would work.

[Viscount Trenchard (Con)]

My Lords, I support my noble friend Lord Offord’s Amendment 94, to which I have added my name. I have also added my name to Amendment 103 in the names of the noble Lords, Lord Vaux and Lord Cameron, and my noble friend Lady Noakes.

The noble Lord, Lord Vaux, made the same point that I tried to make on Monday much more eloquently than I did: GBE and GBN are not comparable institutions. Unfortunately, it seems that the Minister’s department does not recognise that. I refer to the Explanatory Notes at page 6, paragraph 22. The power to give directions in the hands of the Secretary of State

“is consistent with the power that the Government has to direct comparable institutions, for example: the Department for Energy Security and Net Zero has a statutory power to direct Great British Nuclear, although, to date, this has never been used”.

I repeat the point made by the noble Lord, Lord Vaux, that, despite what this says, I cannot think that they are comparable institutions.

Both Amendments 94 and 103 require an independent person to carry out a review of GBE’s effectiveness. Of the two, I prefer Amendment 103, which requires the independent person to review the extent to which investments by GBE have encouraged private sector investment in those projects. Amendment 94 requires an annual independent review, whereas Amendment 103 requires such a review only once every three years. Perhaps we could compromise at two years.

I have also added my name to Amendment 102, in the name of the noble Earl, Lord Russell. This requires GBE to report on its relationships with other connected bodies and is, to some extent, similar to some of the other amendments we have debated. It is obviously a requirement of working together on strategic objectives and directions that GBE should maintain excellent relationships with its stakeholders. One of the ways to achieve that would be by adopting the noble Earl’s amendment, and I look forward to hearing him speak to it and to hearing the Minister’s response.

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[Lord Vaux of Harrowden (CB)]

I am sorry to interrupt the noble Earl. This was lifted directly, almost word for word, from the relevant legislation, the UK Infrastructure Bank Act.

[Earl Russell (LD)]

I thank the noble Lord. I would be keen to hear what the Minister has to say in response to that amendment.

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[Viscount Trenchard (Con)]

My Lords, I congratulate my noble friend Lord Frost on his two amendments in this group, which deal with the governance of GBE. There is, as has been said in previous debates, almost nothing in the Bill about the corporate structure of GBE or how it will be managed. I welcome my noble friend’s proposals to require that the chair should be full time and be required to attend the office in Aberdeen, from which it follows that he must be based there. That would also ensure that the person will be fully committed and be a real check on the powers of the chief executive, who may need oversight in interpreting the priorities and actions needed in response to directions received from the Secretary of State. My noble friend’s proposal that the board must comprise at least five and no more than eight directors makes perfect sense and provides for the assembly of a group of people with the appropriate skills and experience.

I have also considered and support Amendment 101 in the name of the noble Earl, Lord Russell, which requires scrutiny of any proposed appointments by the Energy Security and Net Zero Committee of another place. That committee should ensure that an appropriate balance of skills and experience among the directors is maintained at all times.

[Lord Vaux of Harrowden (CB)]

My Lords, I was not going to speak on this, but I just point out very quickly that the other Act that has a clause that is not quite the same but similar to Amendment 99 is the UK Infrastructure Bank Act. As I have already pointed out, that is the really analogous organisation to Great British Energy, so it must be appropriate, I think.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am grateful to the noble Lord, Lord Frost, for initiating the debate on his Amendment 98, where he proposes to place a number of requirements on the role of the chair of the board of Great British Energy. I agree that the chair, the board and the chief executive officer have major responsibilities. I must say to him though that I do not recognise GBE as being an executive arm of my department. It is very interesting that he said that, because the noble Lord, Lord Teverson, made the interesting remark on Monday that there is a risk in having too many controls and reporting arrangements in relation to GBE, detracting from what we need it to do. We do want it to have operational independence, albeit working within the context of Clauses 3 and 5 of the Bill, the requirements under the Companies Act and the accountability arrangements I have already referred to. We need very highly skilled people at the top of GBE to find their way through this in order to ensure that it actually delivers on the things we want it to deliver on.

At the risk of inviting the noble Lord, Lord Hamilton, to intervene, I take his point about winners and Governments: this is the whole point of having an organisation that is not part of government—but, of course, it is owned by government—and being able to really get on with the job that needs to be done.

I will address pre-appointment scrutiny of the chair in relation to Amendment 101 soon. Amendment 98 requires the chair to be a full-time position based at the headquarters of Great British Energy in Aberdeen. I must say that it would be highly unusual to specify that a company’s non-executive chair should be full time or based formally at an organisation’s headquarters. Looking at the Grand Committee, almost all noble Lords here have taken roles as chairs or non-executive directors of organisations that can be based very far from where they are resident. Frankly, if we were to adopt this principle, we might inhibit the appointment of high-calibre people, notwithstanding that Aberdeen is a very fine place to live and work, as I know from the experience of having a family member working in the offshore oil and gas industry from there.

I do not think that a full-time chair is appropriate; I think it is perfectly appropriate to have a part-time, non-executive chair in that role, as the noble Lord, Lord Frost, has already remarked. Having an interim chair does not preclude having a very lively presence—and a jolly good thing too. I do not think we should insist that that should be a full-time role.

My main board experience is in the public sector, in the National Health Service, and I have been around in the NHS for long enough to know the problem of chairs who come in on a daily basis and inhibit the proper role of the chief executive. I would be wary of encouraging that development in GBE; I am sure that it will not happen.

Again, in relation to the annual review of the chair’s performance by external auditors, which is to be laid before Parliament, first, we will of course ensure that there are annual performance reviews for Great British Energy’s chair. This aligns with best practice followed by other public bodies, and my department is well used to doing this in relation to a number of the bodies it oversees. The review will typically be performed by a senior official in the sponsoring department, supported by the senior independent director on the board, who will have deep insight into the chair’s performance over the year.

Of course, there will also be regular meetings between the responsible Minister and GBE, as there is in my department between Ministers and other organisations, as would be expected. In a sense, these are also part of the accountability mechanism. However, I acknowledge the expectation of the noble Lord, Lord Frost, that Parliament will have a strong interest in the chair’s performance. I fully anticipate that the relevant Select Committees will call on them on a regular basis to provide evidence and, of course, I fully expect the chair of GBE to accept those committee’s invitations.

Amendment 99, also in the name of the noble Lord, Lord Frost, would place certain requirements on the composition of Great British Energy’s board. As noble Lords have said, it largely replicates provisions in the UK Infrastructure Bank Act. We made clear in our founding statement that GBE will be an operationally independent company, overseen by an independent board. We do not think that it is necessary to legislate these provisions, since established governance documents, such as the UK Corporate Governance Code and the Governance Code on Public Appointments, already apply.

The UK Corporate Governance Code, published by the Financial Reporting Council, sets out best practice in relation to corporate governance. Although it applies formally to listed companies only, it is standard practice for government companies to comply with it or, where they do not, explain why. The Governance Code on Public Appointments provides clear guidance for ministerial appointments, which are regulated by the Commissioner for Public Appointments and should be followed even where roles are not formally within the scope of the commissioner. I can give an assurance from the Dispatch Box that Great British Energy will comply with these codes, ensuring best practice in corporate governance.

GBE will also be required to follow corporate governance best practice to help guide the composition of its board. This will have an impact on the number of directors required at each stage of GBE’s development and operation. We think that, having given those assurances, there needs to be a degree of flexibility at this stage about how GBE goes forward in relation to the composition of its board. The noble Lord’s amendment would also place standard requirements on when an individual should cease to be a director. I can assure him that such provisions already exist, including in the Companies Act 2006, and that they will, as is common practice, be replicated in GBE’s articles of association.

Amendment 101 in the name of the noble Earl, Lord Russell, proposes to require all appointments by GBE to be scrutinised by the Energy Security and Net Zero Committee in the other place before they come into effect. This is similar to new subsection (1), proposed by Amendment 98. Noble Lords will know that Cabinet Office guidance on pre-appointment scrutiny by House of Commons Select Committees provides clear guidance on the criteria and process to be used in these circumstances. It sets out that decisions on the scrutiny of individual posts should be made between the Secretary of State, the chair of the relevant committee and the Cabinet Office. It is not common practice for this to be set in primary legislation.

The guidance gives the criteria of the types of roles which may be in scope. Importantly, it sets out the principle that the posts which require pre-appointment scrutiny are, most typically, the chair or equivalent of the organisations. None of the roles identified in the guidance as requiring pre-appointment scrutiny are in government-owned companies of the kind that GBE will be. No public body currently appears to have its full board subject to pre-appointment scrutiny. Where individual roles are scrutinised, it is done following agreement between the Secretary of State and the committee chair.

From our point of view, the calibre of Great British Energy’s director appointments will be of great importance. We want GBE to succeed, so we want the highest calibre of people to be appointed as chair, to non-executive positions and to the chief executive officer role. We anticipate that recruitment for the substantive board will begin over the course of this year, and we will ensure that recruitment is undertaken in a manner which aligns with best practice. I can assure the noble Earl, Lord Russell, and the noble Lord, Lord Frost, that in line with Cabinet Office guidance, any relevant public appointments to Great British Energy will be discussed with the appropriate Select Committee chair. I hope that I have been reassuring regarding this.