Nuclear Management Partners (Sellafield)
Debate between Mike Weir and Ed Davey(9 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
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Mr Davey
The NDA has approached some of its key decisions incredibly professionally, including the renewal of the contract and the review of the model that led to the recommendation to me for the change under discussion. I pay tribute to the NDA for the work it has done. It will, of course, be taking on a bigger role in the new model, so it will need to skill up, hire more expertise and fill the vacancies referred to by my hon. Friend. That was part of the questioning that I and others undertook to ensure that the transition process and the resulting process are successful.
Mr Mike Weir (Angus) (SNP)
Obviously, we need to deal with the cost of legacy waste, but as well as announcing the change in the contract the NDA has announced an increase in the estimated cost of cleaning up the site, which now comes to a staggering £110 billion over 120 years. Given those figures and that time scale, how can the Secretary of State possibly give the assurance he gave to the hon. Member for Newport West (Paul Flynn) that the costs of new nuclear will be met by the companies, which may well not be around in anything like 120 years?
Mr Davey
Let us be clear that those costs relate to decommissioning the legacy waste. In answer to the hon. Member for Newport West, I was referring to the negotiations with EDF and its partners on the strike price for the new build at Hinkley Point C. That will include the cost of decommissioning, so that is in the price. Legislation went through this House under the previous Government to set up the nuclear liabilities fund and to ensure that it is independent and ring-fenced so that the moneys that go into it are properly managed. We have done a huge amount of work to ensure that that ring-fenced resource will grow and meet the future decommissioning costs.
Oral Answers to Questions
Debate between Mike Weir and Ed Davey(9 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Mike Weir (Angus) (SNP)
Many offshore wind developers have expressed concern that owing to the structure of the current contracts for difference allocation round, only one development will be given a CfD, imperilling many of the others. Can the Secretary of State give them any reassurance that there will be greater consideration of offshore wind in future CfD allocations?
Mr Davey
First, it is worth putting it on the record, as it is Christmas, that Britain leads the world in offshore wind, with more offshore wind farms installed than in the rest of the world combined. In the current round of CfD allocations—of course, it has not been completed yet, so I cannot talk about the details—we have ensured that we have sufficient allocation for offshore wind, but we have also ensured that the levy control framework includes further allocations for it, so that the consumer can benefit from dropping prices.
Annual Energy Statement
Debate between Mike Weir and Ed Davey
Mr Davey
I am grateful to the hon. Gentleman for his information, but he will know that I cannot comment ahead of the negotiations or discussions that Candu is having with various stakeholders in the industry. At the moment, we are working at Heysham to ensure that EDF gets the reactors back on line.
Mr Mike Weir (Angus) (SNP)
The Secretary of State talked about the amount of offshore wind that has already been installed. Despite the vast amount that has been put into nuclear energy, it seems to me that relatively little is going to offshore wind in the first CfD allocation round. In fact, I understand that it may be sufficient only for one major project, despite the fact that three are proposed off the coast of my constituency alone. Does he think that that is a sufficient incentive to the offshore wind industry to meet his offshore wind industry strategy?
Mr Davey
It is quite difficult to argue that this Government have not put huge amounts behind the offshore wind industry. We have more offshore wind installed and under construction than in the rest of the world put together. We are on track to meet 10 GW by the end of this decade, which is a huge amount. If, when thinking about the allocation of CfDs from the levy control framework—that is what lies behind the hon. Gentleman’s question—we had allocated all of it in the first round, there would have been less to allocate in future. One of the things the industry has said is that it wants a much smoother deployment of offshore wind. By the way, that will also enable us to get the benefit of cost reductions, which is vital for consumers.
Energy Prices
Debate between Mike Weir and Ed Davey(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Mike Weir (Angus) (SNP)
It does seem to me sometimes in these debates that it is the same old gang assembling to go over their greatest hits. However, the recent decision to make a referral to the Competition and Markets Authority has changed the scene significantly. I support the referral and hope that a decision will come fairly swiftly, although the history of such referrals does not give me a great deal of confidence.
Mr Weir
I will wait and see how quick “quicker” is.
It is interesting to look at some of the reasons that Ofgem give for the referral. It notes that average dual fuel prices increased by 24% between 2009 and 2013, which is just over 10% higher than general inflation over the same period. At the same time, energy consumption has decreased. In effect, even though consumers are perhaps reacting to the message of saving energy, they are still seeing substantial costs, leading many to question the cost-effectiveness of energy-saving measures. I have made the point before that one of the defects of the green deal scheme is that many consumers simply no longer trust the energy companies and will be reluctant to take part in any scheme—even a good one—that they are promoting. This is borne out by the state of the market assessment, which says:
“We found evidence of low levels of consumer satisfaction. Only 51-52 per cent of customers said they were satisfied with their supplier, and customer complaints have increased by more than 50 per cent since the beginning of 2011. Our survey evidence showed that in 2013, 43 per cent of customers did not trust energy suppliers to be open and transparent in their dealings with consumers, an increase of 4 percentage points from the previous year.”
Not surprisingly, it concluded:
“Levels of customer confidence and trust are not what we would expect to see in an industry that is successful in meeting its customers’ needs and expectations.”
That is a fairly damning indictment of the way consumers view the major energy companies, and should not come as a huge shock to anyone who has dealt with the issue. This is especially true since the assessment also notes that between 2009 and 2012, the earnings before interest and tax, as it puts it, of the energy companies have shown a very substantial rise of around £700 million, standing as of 2012 at £3.7 billion.
It is interesting to note that within non-domestic supply, profits have fallen slightly, while domestic supply profits have increased from £233 million to £1,190 million —a staggering rise over a four-year period. It seems to me that there must be something wrong with that. Clearly, the hard-pressed consumer was bearing the brunt of the massive price rises at a time when wages were, at best, static and other essential costs such as food were also rising sharply. It is no wonder that many of our constituents were feeling under very considerable financial pressure, and many still feel that they are seeing no benefit from a recovering economy, when their family circumstances remain very tight indeed.
It was interesting to hear what the Secretary of State said about the rocket and feather approach. I am not an expert on hedging, but it seems to me that its object is to prevent sudden price spikes or price falls. Whether it comes down like a feather is one side of the equation, but if it is going up by a rocket, the hedging strategy is clearly not working. We must question whether the energy companies are truly taking part in a hedging strategy, or whether this might be just another excuse. The Competition and Markets Authority needs to look at that.
The figures on the costs are only part of the picture. It is all very well talking about the average cost of a dual fuel bill, but that disguises a multitude of other consumers who are on much more expensive deals. I have often cited the costs that those on prepayment meters face. Although it is true that many companies set those tariffs to the rate of their standard domestic tariff, those are still much higher than the tariffs for those who can pay by direct debit or have dual fuel or fixed-term deals, many of which are not available to those on prepayment meters. The situation can be much worse for those who have debts because the meter can be set at a very high recovery rate. Research by Citizens Advice Scotland disclosed cases where some people had £7 out of every £10 they paid taken towards arrears.
Governments have consistently argued—we have heard it again today—that switching is the way for people to save money. The truth is that those who would benefit most from switching are those who find it very difficult, if not impossible, to switch. Those who are most active in switching are those who are already on better deals. As Ofgem put it in its report:
“Customers that are prepared to manage their accounts online, pay by direct debit, and fix the cost of energy for 12-18 months are able to get the best deals.”
It is also true, it seems to me, that the amount that can be saved is relatively small; the differences between the best online deals of the major companies tend not to be great and the benefits of repeated switching are subject to a law of diminishing returns.
It is also the case, however, that the very nature of these deals—managing accounts online, paying by direct debit and so forth—tend to exclude those who are the most fuel poor since they are also the least likely to have bank accounts, or at least bank accounts prepared to accept direct debit payments, and the least likely to have ready access to a computer to enable them to manage their accounts online.
Oral Answers to Questions
Debate between Mike Weir and Ed Davey(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
My hon. Friend is absolutely right. As a result of our changes, we believe that more ECO measures will help more households. The fact that we have managed to ensure that the affordable warmth and carbon-saving community obligation aspects of the ECO will be extended at the existing rate for two more years is extremely good news for our efforts on fuel poverty.
Mr Mike Weir (Angus) (SNP)
Last month, in answer to a question from me, the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), said that he would speak to the energy companies about the fact that under the affordable warmth aspect of ECO, as run by them, off-grid gas boilers are not available. Has any progress been made on that, and will the Secretary of State take action to end that discrimination?
Mr Davey
We have listened to several representations on that and other areas. We will shortly publish the consultation document on the ECO, to which the hon. Gentleman might want to respond formally, as well as our fuel poverty strategy, which will cover some of the issues that he raises.
Mr Davey
No, I will not do that for the simple reason that we have asked the independent competition authorities to look at the evidence. Unlike the right hon. Lady, I am not prejudging the outcome of independent competition regulators. We provide the evidence and we allow independent authorities to make judgments on that. It is quite odd that the Labour party is now turning its back on independent competition authorities.
Mr Mike Weir (Angus) (SNP)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
Since Energy questions in January we have published Britain’s first ever community energy strategy, which is widely welcomed by the sector. This week we published a review by Sir Ian Wood into our oil industry. I have accepted Sir Ian’s recommendations, and we intend to fast-track his proposals. I am grateful to Sir Ian and his team for their work, which we believe is a game-changer in the management of our offshore oil and gas assets. Finally, we announced a second carbon capture and storage project this week—the world’s first ever commercial-scale gas CCS project—and CCS will play a key part in our decarbonisation strategy.
Mr Weir
The CCS project is indeed most welcome; it is a pity it did not get here some years ago. The Secretary of State mentioned the fuel poverty strategy currently under preparation. I appreciate that the winter fuel allowance is for the Department for Work and Pensions, but given the impact it could have on pensioners in rural areas will he press for action to be taken to allow the early payment of the winter fuel allowance?
Mr Davey
I say to the hon. Gentleman what I said to the previous questioner who raised this. We are looking at all these matters and we are working across Government—with the Department for Work and Pensions, the Department for Communities and Local Government, the Treasury and the Department of Health—on our fuel strategy, because it touches on all areas of government: benefits, health services, flu jabs and a whole range of issues that need to be looked at. I am not going to prejudge the publication of that strategy.
Annual Energy Statement
Debate between Mike Weir and Ed Davey
Mr Davey
My hon. Friend makes a good point. If the right hon. Lady knows of secret information, I hope she will confirm that she has told the competition regulator so that it can be investigated. She is not very good at answering questions. I have asked her and her right hon. Friend the Leader of the Opposition questions about their policy, but we have not had a single answer.
Mr Mike Weir (Angus) (SNP)
The Secretary of State made the point that much of the increase in bills has been due to increases in the wholesale price, particularly of gas, but many commentators, including Ofgem, have questioned whether that has been the case over the past year. What powers does the Secretary of State or Ofgem have to tackle the big six energy companies about their most recent rises, which do not appear to be driven by wholesale price increases?
Mr Davey
First, over a period it is absolutely clear that the wholesale price of gas has been pushing up bills, but there is a debate about whether in the past 12 months wholesale gas prices have gone up. If the hon. Gentleman looks at Ofgem’s clarification and the press release on its website, he will find that, depending on how it is measured, it admits that the wholesale price of gas has gone up by more than 8%.
Oral Answers to Questions
Debate between Mike Weir and Ed Davey
Mr Mike Weir (Angus) (SNP)
The Secretary of State will know that one of the problems associated with infrastructure is the transmission charge in getting the energy to market. Project TransmiT came up with a reform package, but its implementation appears to have been delayed. I understand that it was supposed to be in place by next April. Is the Secretary of State able to tell us when it is likely to come into being and what he can do to push that forward?
Mr Davey
The hon. Gentleman will know that Project TransmiT is run by Ofgem, as the independent regulator. Clearly, it would be improper for us to put pressure on the independent regulator. He will also know that we have worked very closely with the Scottish Government on issues such as those relating to the Scottish islands, where there is particular concern about transmission charges. I am sure the hon. Gentleman supports the Government’s announcement last week that we will publish a consultation on strike prices for renewables on the Scottish islands.
Energy Bill
Debate between Mike Weir and Ed Davey
Mr Davey
The hon. Lady might not have noticed that the Government have responded to a lot of the debates and tabled a lot of amendments on everything from electricity demand reduction to decarbonisation. I will come to those amendments shortly.
Electricity market reform, which is at the centre of the Energy Bill, is the result of four imperatives: the need to power the country; the need to protect the planet; the need to insulate consumers from rising energy bills; and the need to get the economy moving. With demand for electricity set to increase, and around a fifth of our power plants set to close, we will need to attract £110 billion of new investment in electricity and grid infrastructure in this decade alone to ensure that we have enough reliable capacity to meet demand. The Energy Bill will do that.
The Climate Change Act 2008 commits the United Kingdom to an 80% reduction in greenhouse gas emissions by 2050, so we need specifically to encourage investment in low-carbon energy generation: renewables, carbon capture and storage, and nuclear. The Energy Bill will do that. With global demand driving wholesale prices higher, and with that in turn driving domestic energy bills higher, we need to create a more diverse and competitive energy market to help to cushion consumers from volatile fossil fuel prices. We also need to ensure that they are getting the best deal from suppliers. The Energy Bill will do that.
By facing up to the need to invest in low-carbon energy infrastructure, we will support economic recovery too. The trebling of support under the levy control framework will mean £7.6 billion a year by 2020 to support low-carbon technologies, including infrastructure projects that are ready to go now, supporting jobs, supporting communities and providing prosperity. Projects worth over £8 billion are already in the planning pipeline. Electricity market reform could support as many as 250,000 jobs in the energy sector. The Energy Bill will support green growth. That is why I am pleased that the Bill, as strengthened in Committee and on Report, benefits from a general level of cross-party support in the House.
I want to reflect on some of the ways in which the Bill has been further strengthened in this House. Let me start by dealing with the decarbonisation target head on. No party in this House—not the Liberal Democrats, not the Conservatives, not Labour, not the nationalists, not even the Greens—had a commitment in its 2010 manifesto to set a 2030 decarbonisation target during this Parliament. Nor has any other country yet set a power sector decarbonisation target for 2030.
I can understand the argument that an early decarbonisation target could provide extra certainty for large, long-term projects in the UK power sector, particularly in the supply chain. However, there is also logic in the consistency of setting the decarbonisation target for 2030 at the same time as the fifth carbon budget, which is scheduled for 2016—still 14 years ahead of the target date. By comparison, the 2020 renewables target was set in 2008, just 12 years from its target date.
If anyone still doubts my commitment, or that of this Government, to decarbonisation, they should consider the decision that we have just made on the UK’s position for the EU’s 2030 greenhouse gas target. In the context of winning an ambitious global climate change treaty, we will be arguing for a 50% reduction target in the EU. That is the most ambitious position of any member state, and I am proud that this Government are leading the way on climate change action.
Let me turn to other areas of the Bill—first, to contracts for difference. Long-term electricity price stability will be provided through CFDs and will be a key part of the new low-carbon electricity market. As such, the Commons Committee quite rightly looked at the nature of the CFD counterparty body and made a number of recommendations. In response, the Government have clarified the Bill’s drafting to make the policy intention more explicit.
Mr Weir
I am listening closely to the Secretary of State, but does he not share my slight concern about the CFDs that, as the Bill presumably leaves this House tonight to go to the other place, we still do not know basic details such as the strike price? Although that information has been promised on several occasions, we are now told that the delivery document may be published next month. We do not seem to be getting any nearer to getting this information.
Mr Davey
We always said we would publish the document in July 2013, and we are on track to publish it in July 2013.
Accompanying the CFDs, the capacity market will ensure that sufficient reliable generating capacity is available to meet electricity demand as it increases over the next decade, but we are also looking at reining in demand. We have added measures on electricity demand reduction that for the first time can allow energy-saving projects to be able to compete with power stations for new investment—negawatts. Delivering through the capacity market can incentivise permanent reductions in demand at times when electricity is most expensive, allowing for a more direct trade-off between generation capacity and demand reduction. This is a radical approach that has been shown to work in international examples such as in forward capacity markets in the United States, and it is a major advance for the UK.
We acknowledge that many consumers are “feeling the pinch”, and we remain committed to doing everything we can to help. Let me be clear, however, that the main reason for rising energy bills is rising wholesale gas prices, which make up around half a typical household dual fuel bill. These prices are set on global markets and changes are driven by global events. This Bill paves the way for increased UK production of energy, which will help to reduce price rises from global markets.
As well as providing a more stable pricing environment and helping consumers to reduce their electricity demand, we introduced in Committee new provisions on domestic tariffs to ensure that all households will be able to get the best deal for their gas and electricity. These provisions will ensure that energy companies provide consumers with clear information about their tariffs and put them on the cheapest tariff that meets their preferences. These provisions will also ensure that there are fewer and simpler tariffs so that it is easier for consumers to shop around for the best deals across the market. Last year, Ofgem estimated that there were approximately 900 open tariffs. Under these proposals, each supplier will be allowed to offer a customer a maximum of four core tariffs for each fuel and meter type. We want to see a competitive retail market, where suppliers have to work hard to retain their existing customers and attract new customers.
These measures complement the new consumer redress measures already in the Bill, which ensure fairer outcomes for consumers by giving a new enforcement power to Ofgem. This power will enable Ofgem to require energy companies that have breached regulatory requirements directly to compensate consumers where they might otherwise not have done so. This is another step forward for energy consumers.
We have listened to the concerns raised throughout the passage of the Bill. Opposition Members have raised questions about transparency and accountability, and we have responded by amending the Bill further to ensure that it aligns with the Government’s principles in this area.
We remain committed to encouraging a more diverse and competitive energy market, and there are a number of related areas within the Bill that we will hope to consider further in the other place. As indicated in Committee, we will continue actively to consider raising the threshold for the small-scale feed-in tariff scheme from 5 MW to 10 MW, and the Government hope to respond to this issue in the other place. We are taking backstop powers in the Bill to enable the Government to intervene in the generating market, if needed, to improve liquidity and competition.
I am grateful to the House for taking the time to scrutinise and contribute to this Bill. The wide cross-party consensus we have achieved sends a strong signal to investors in the UK and investors globally. The UK is the place in the world to invest in low-carbon energy. We now have the opportunity to deliver a lasting framework for investment in the country’s energy infrastructure: delivering green jobs and green growth, securing a low-carbon energy future, and ensuring that consumers get a fair deal. I commend the Bill to the House.
Hinkley Point
Debate between Mike Weir and Ed Davey
Mr Davey
I am grateful for the hon. Lady’s question. When she reads the decision letter, she will notice that the panel and I have spent some time on those issues. Section 4 of the decision letter discusses the habitats regulations assessment, and section 5 considers the environmental impact assessment. She is right that a regulation approval from the Marine Management Organisation is outstanding, but she will also understand that it is an independent regulatory body. I believe and am told that its examination of the issue is well under way, but I cannot hold the MMO to a timetable.
Mr Mike Weir (Angus) (SNP)
The strike price at Hinkley Point will send an important message to other potential nuclear developers. When the chief executive of EDF appeared before the Energy Bill Committee, he said that he was anxious for transparency on the strike price. The Minister has said that he will publish the contract, but will he also publish enough information for everybody to see how that strike price was arrived at and that there was no public subsidy behind it?
Mr Davey
The hon. Gentleman is right that we will be transparent about the process, but of course some cost information will be commercial in confidence. We have never undertaken to publish every single document relating to the negotiation, but the key terms and conditions will be published.
Energy Bill
Debate between Mike Weir and Ed Davey(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
The hon. Gentleman notes that the energy debate is an important part of the debate on independence for Scotland, but I would not want to cloud that debate by suggesting that there should be new nuclear power plants there. He will know that our new nuclear build proposals include three consortiums, none of which is proposing new nuclear build in Scotland. We have a long way to go before that question arises.
Mr Weir
I was not looking for a right of reply, but I thank the Secretary of State for giving way anyway. Many are concerned that the contract for difference will not be introduced until later on and there is a real danger of a hiatus in investment because of uncertainty if the renewables obligation is closed in 2017. Will he consider extending that deadline if there are real challenges in obtaining that investment?
Mr Davey
I am grateful to the hon. Gentleman for his question. We have certainly spoken to people in the industry who make that argument, but our response has been to note that we have the final investment decision enabling contracts for difference, which will prevent a hiatus in investment in the immediate future. We are running contracts for difference side by side with the renewable obligations certificate to help people get more familiar with them before 2017. Some of the problems people had raised are now being answered and I hope that I will be able to persuade the hon. Gentleman that he need not have those concerns.
Energy Policy
Debate between Mike Weir and Ed Davey(11 years, 12 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
I start by paying tribute to my hon. Friend: I believe Members of all parties know what a critical role he played in shaping the Energy Bill that is published today. Along with my right hon. Friend the Member for Eastleigh (Chris Huhne), he worked across the parties to bring these proposals forward, and he deserves a huge amount of credit today. I am determined, having made this agreement in the coalition, that we send out a signal—not just to the UK or Europe, but to the whole world—that the UK is open for energy investment. We have built a consensus in the UK Government, and in view of the remarks of the right hon. Member for Don Valley (Caroline Flint), I believe we may well secure cross-party consensus, which would be valuable to this country and its people. My hon. Friend asked how we will continue the consensus. Let us see how we make progress during proceedings on the Bill, in Committee and so forth. I know that my hon. Friend will play his role in making that happen.
Mr Mike Weir (Angus) (SNP)
We, too, welcome the publication of the Energy Bill, much of which we can probably support. If gas is to continue to be an important part of the energy mix, however, it is essential that carbon capture and storage is brought forward quickly. There has been some speculation in the specialist press that the UK Government have missed the European Union’s target for submitting details to ensure funding. Can the Secretary of State assure us that this is not the case, and that CCS will be brought forward quickly?
Mr Davey
I thank the hon. Gentleman for his support, as having cross-party consensus is so important, in Scotland and in the rest of the United Kingdom. As he knows, I think Scotland is stronger in the United Kingdom and that the United Kingdom is stronger with Scotland in it, not least on energy policy. On CCS, we are pursuing our policies as quickly as we can, but we need to make sure that we get value for money for the taxpayer. We were fortunate to have eight applications; we have now whittled that down to four, and we are proceeding apace to choose between those remaining four. It is true that we did not get in the first round of the New Entrants Reserve 300 funding from the EU, but we are wholly able to get into the second round and get the same amount of money. I have spoken to the European Commissioner about that. I see no problem in ensuring that we use the money put aside to get the best value for money for the best CCS projects.
Postal Services Bill
Debate between Mike Weir and Ed Davey
Mr Davey
I am looking forward to doing that, Madam Deputy Speaker. The hon. Member for Llanelli welcomed Lords amendment 1 but felt that it did not go far enough. Despite all the arguments we have had in this place, she still believes that an inter-business agreement should be in the Bill, as do a number of her party’s members.
I do not wish to rehearse the long speeches that were made on Report, when our debate on this particular point lasted for about three hours, but let me repeat that putting provisions in the Bill in the way in which the hon. Lady suggests would create a significant risk of legal challenge owing to incompatibility with competition law. In addition, such an approach would almost certainly face a state aid challenge. I would have thought that she would have realised that, because it has been accepted by many who have examined the situation in detail.
The hon. Lady says that the absence of such provisions means that there is no protection for post offices, but the whole point is that the detail set out in our policy statement will enable them to be more profitable. It is real business that will save the post office network, not legal provisions in the Bill, so I disagree with her point.
The hon. Lady spent some time talking about employee shares. The Lords amendments will require the Secretary of State’s report to Parliament at the time of first sale of shares to include details about the employee share scheme. I would have thought that she would have supported that welcome development.
We would certainly want to report on such things as the terms by which shares would transfer to the employee share scheme and the design of the scheme. Such detail might include questions of whether there would be a trust model or individual shares, or a mixture of the two. There would also be consideration of the percentages to be transferred and the governance arrangements.
The hon. Lady asked how the shares will be allocated, but clearly that is a point for later discussion. Such a point might be addressed in the report. We can imagine allocating shares to employees on many bases, such as length of service, grade and salary. The Government would certainly not object to a proposal that shares and their benefits should be allocated evenly across employees to ensure that there is equal entitlement regardless of grade, salary or length of service. We have been clear that the scheme is for all employees of Royal Mail, not just the management, so I hope that people will not run away with the wrong idea.
Several Opposition Members asked what would stop employees selling shares immediately. Again, we are not making premature decisions about the scheme’s design, but we have always said, as I have repeated several times, that we are designing the scheme with longevity in mind—there are many attractions to a trust model for that very reason. However, it is not true that individual employees’ shares are always sold off by those employees. People arguing that point try to pray in aid the BT example, but the Public Bill Committee heard evidence that 66% of BT employees held on to their shares after the share plan had matured, so there is longevity in share ownership, even with the individual model. A lot of myths are cited by those who oppose employee share ownership, which was no doubt why the Labour party did not include employee shares in its 2009 Bill.
Mr Davey
I listened carefully to that interesting point in the hon. Gentleman’s speech, and the way in which he eloquently described the situation and referred to the Companies Act 2006 showed that we need to ensure that we design the scheme carefully. We will do so, because we want to deliver on employee share ownership, which is an objective of the Liberal Democrats, the coalition Government and the Bill.
The hon. Member for Llanelli was generally supportive of the proposals on mutualisation, but she spent a lot of time—do tell me if I stray out of order, Madam Deputy Speaker—saying that Government front-office services had not been delivered. We are turning around the decline under which the previous Administration took away more than £300 million of Government services from post offices. Our policy statement and the things that we are delivering show that there is a real future for the front office of government.
Mr Davey
There have been Post Office “locals” pilots in all parts of the country. We are up to 80 local schemes, and Post Office Ltd has tried to pilot them in urban, rural, suburban and urban-deprived areas. It is trying to test them out over time, taking account of seasonality and cash flow, so we are learning an awful lot of lessons from them. The recent analysis of the “locals” project by Consumer Focus is publicly available, and although it has some concerns about privacy it was able to show that on issues such as access, longer opening hours and reduced queues, people have found the projects to be a beneficial step forward.
The hon. Member for Strangford (Jim Shannon) said that he was concerned about the universal service obligation and worried that the Bill would undermine it. Far from it: one of the Bill’s main objectives is to secure the universal service, and Opposition Members have failed to realise that clause 30 includes stronger protections for the universal service than was previously the case.
The hon. Member for Angus (Mr Weir) made a very informed speech. He was a distinguished member of the Public Bill Committee, who failed to attend only on the few occasions when the weather prevented him from flying down to London, but in looking at the amendments before us I have to say that he has made the mistake of calling for guaranteed business for the post office network and, almost, of wanting to keep things in aspic.
On the train down to the annual meeting of the National Federation of SubPostmasters, I read the federation’s account of its 100-year history, which mentions the concerns that existed when telegrams were being phased out, and when postal orders were used. In other words, the business and services that have gone through our post office network have changed hugely, and we have had to develop them and move on, so setting things in aspic—putting things in the Bill, as some Members want—would not help.
Mr Weir
With respect to the Minister, this is not about setting things in aspic. The problem is that there is a great deal of uncertainty, because Royal Mail is up for privatisation, the link between Royal Mail and Post Office Ltd now relies on the good will of whoever runs Royal Mail, and with no guarantee of business it is difficult for those trying to sell post offices to find people to take them on, as they are uncertain of what business there will be in one or two years’ time.
Mr Davey
We are in danger of going over old ground. The hon. Gentleman will know, because we have had this debate many times, that it is my view that post offices are in a very strong position in this negotiation, because the idea that Royal Mail is going to absent itself from the post office network and allow its competitors to go in there is, frankly, nonsense. As for the particular issue that he has been raising with Post Office Ltd—the closure of Ferryden post office—he will know that that closed not because of any action of the Government or Post Office Ltd but following the resignation of the sub-postmaster. Post Office Ltd is looking at all available options to keep that service in his constituency open.
Mr Weir
If the Minister reads my remarks, he will see that that is what I said. I understand that the closure at Ferryden is not the Government’s responsibility. I have been in touch with the Post Office and it is trying to get an alternative, but it looks as though it will be an outreach service rather than anything else. That is a reduction in service to that community.
Mr Davey
I am sure that the hon. Gentleman will be engaging in that debate with Post Office Ltd.
The hon. Member for Linlithgow and East Falkirk (Michael Connarty) asked, in the context of the report, what objectives we have for Royal Mail and the Post Office. We have made it very clear that securing the universal service obligation is our top objective. Getting a good deal for Royal Mail and for the taxpayer is essential. There is no objective of fragmenting Royal Mail as he described. When he suggested that employee shares were not a good thing for employees, I began to despair. The only correct thing that he said was that employee share ownership—ownership of the company in which one is working—needs to be combined with involvement in worker participation.
We should look at what is happening in Royal Mail at the moment. Someone who goes to sorting offices such as Gatwick, Greenford or Cardiff, as I have done, sees a world-class mail system and the rolling out of a programme of modernisation that involves the workers directly and has as one of its key objectives the health and safety of those workers. Sorting offices are being made not only more productive but safer. There is great employee involvement. If we link that with employee share ownership, this business will have a real future. I hope that the House will welcome this group of amendments from the other place, and give them its approval.
Lords amendment 1 agreed to.
Lords amendments 2 to 11 agreed to.
Clause 21
Restriction on power to transfer assets
Postal Services Bill
Debate between Mike Weir and Ed Davey(13 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
Let me just finish the point, because there is a legal barrier. This also addresses the point made by the hon. Member for Blaydon (Mr Anderson), who asked whether the European Union was involved in creating problems for legislating in the way proposed in the new clause. The legal barrier to legislation requiring an IBA is the EU’s competition framework. Legislation providing an exclusive arrangement between Royal Mail and Post Office Ltd would face a significant risk of legal challenge as being incompatible with competition law. Article 101 of the treaty on the functioning of the European Union contains rules prohibiting anti-competitive agreements between undertakings. Article 4(3) of the treaty on European Union obliges member states not to jeopardise the attainments of the objectives of the treaty. The effect of those provisions, together with article 102 of the treaty on the functioning of the European Union, is that member states cannot introduce measures that would render the competition rules ineffective—that is clear. In addition, legislating for Post Office Ltd to have a guaranteed income stream would risk a successful state aid challenge being mounted. There are real barriers to doing what new clause 2 seeks to do.
However, I can assure the House, as I have done previously, that we, as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled.
Mr Weir
I understand that after the Bill is passed, if that indeed happens, one company—and only one—that has a statutory universal service obligation will be entering into a contract with Post Office Ltd. I fail to see where the competition problem lies, because nobody else is offering a universal service obligation to challenge that.
Mr Weir
New clause 4 and amendments 11 and 14, standing in my name, relate to concerns about the universal service obligation. My concern throughout the Bill’s passage has been that there are insufficient safeguards to ensure that, in the event of the Royal Mail’s privatisation, the universal service obligation, which is so important to my constituents, is maintained.
Throughout Committee, the Minister insisted that the purpose behind the Bill was to secure the universal service obligation, but I made the point on several occasions, as I did earlier today, that far too much has been left to trust and hope—a point, indeed, that was made in our previous debate this afternoon. In many other areas, the Government are very fond of triple locks, yet on something as important as the universal service obligation, they have not put sufficient safeguards in place.
The new clause is an attempt—perhaps not a triple lock, but at least a lock—to provide some assurance that a privatised company will maintain the universal obligation and not seek to get around its provisions. In the event of privatisation, the privatised company will be given the obligation to provide the universal service, but it concerns me greatly that our only sanction to ensure that it does so is through the regulator, Ofcom. There is nothing specific in the Bill to prevent, for example, a privatised company from hiving off the profitable parts of the organisation, although if recent press reports are true perhaps the European Commission will have done so before the company reaches privatisation. That could leave only a shell company obliged to provide the universal service.
What would happen if the privatised company went to the Government, saying that it could no longer afford to run the service and seeking either a public subsidy or to abandon the service? We would be thrown back on the regulator alone or have to utilise the compensation fund that we debated at some length in Committee, with the other operators having to contribute and the consumer, as the Minister confirmed, perhaps having to pay substantially higher costs for the service.
I am sure that the Minister, in his usual inimitable fashion, will say that my argument is a flight of fancy, but in recent years we have seen how many large companies operate, moving, for instance, their head offices to avoid UK corporation tax, the latest example being Cadbury, after its takeover by Kraft, which is reportedly moving its head office to Switzerland. UK Uncut has staged demonstrations throughout the UK against other companies, as diverse as Vodafone and Topshop, which seem to have indulged in practices to avoid taxation.
The universal service obligation is far too important to be left to the good will of a privatised mail carrier. Far too much stock has been placed on the name and reputation of Royal Mail, but the situation after privatisation will be far different. The organisation will no longer be a state monopoly but a private company—albeit one that, admittedly under the Bill, has a high social obligation. In my experience, and as our bankers have eloquently shown in recent weeks, however, there is very little sentimentality in big business.
I raised the matter during the Committee’s eighth sitting, when I asked the Minister whether there was anything in the Bill to prevent asset stripping. He said:
“The hon. Gentleman has anticipated where I was going, because a number of protections in the Bill will give reassurance to hon. Members who are worried about that. For example, under clause 35, Ofcom has the power to impose designated USP conditions akin to condition 16 of Royal Mail’s existing licence. Condition 16 does not allow Royal Mail to pursue things, such as an asset disposal or dividend payment, if doing so would create ‘any significant risk that the necessary resources will not be available’ to enable it to continue its business.”––[Official Report, Postal Services Public Bill Committee, 18 November 2010; c. 289.]
The Minister went on to explain that Ofcom can impose that condition, and that Royal Mail could face a very large fine for breaches of its regulatory obligations.
I am not particularly reassured, and I tabled the new clause because it seems that Ofcom has the power to react only once something has happened, when it is far too late to do very much about it. Condition 16 does not give any real protection because a gradual sell-off of assets would not necessarily mean that Royal Mail was unable to continue in business, although it might undermine its ability to continue parts of its business, which is completely different.
Mr Davey
The hon. Gentleman will know from the debate in Committee that there is the potential for Ofcom to impose a fine on the universal service provider of up to 10% of its turnover. At the moment, that would be a fine of £650 million. Does he not think that that is a disincentive?
Mr Weir
The Minister is forgetting my point. If a privatised operator has got rid of many of the profitable parts to simply leave a shell, what is £650 million to a company that effectively does not exist other than as a nameplate? That could happen. This new clause is designed to stop such things happening.
Mr Davey
Because of the shortage of time, I shall begin with a brief overview of our reaction to the new clause and amendments.
The Government have introduced more protections for the universal service than currently exist, and more than the last Government proposed in their 2009 Postal Services Bill. We have strengthened the existing protections. The amendments tabled by the hon. Members for North Ayrshire and Arran (Katy Clark), for Ochil and South Perthshire (Gordon Banks) and, indeed, for Angus (Mr Weir) would weaken those protections, and would serve the consumer very poorly.
I entirely see what the hon. Member for Angus is getting at in new clause 4. As he said, we discussed it in Committee. As I told him then, however, I believe that the Bill provides the protection that is needed. I told him that the Bill gives Ofcom the power to impose a designated universal service provider condition similar to the condition 16 requirement in Royal Mail’s existing licence. That prevents Royal Mail from doing anything—such as transferring assets or paying out dividends—that
“creates any significant risk that the necessary resources will not be available”
to carry on its business.
If the universal service provider put itself in breach of its obligations through, for example, the sale of part or all of the business in a way that no longer enabled it to fulfil the universal service requirement, Ofcom could take enforcement action. As I said in my intervention on the hon. Gentleman’s speech, it could fine the universal service provider up to 10% of the turnover of its postal business in the relevant year. On the basis of Royal Mail’s current turnover, that would be more than £650 million. He seems to think that it is an insignificant return, but I disagree. Moreover, he did not mention—although I had told him in Committee—that there are additional protections in company law relating to what the pensions regulator can do.
In my view, new clause 4 is not needed. We already have the necessary protections, and I hope that the hon. Gentleman will at last be reassured and will withdraw the new clause.
In amendment 11, the hon. Gentleman seeks to ensure that the needs of small businesses in rural and remote areas continue to be met, and are taken into account in all of Ofcom’s actions relating to postal services. I agree that both those protections are vital, but again he need not worry, as there is already ample provision in the Bill. Section 3(4)(l) of the Communications Act 2003 requires Ofcom to take into account the needs of
“the different interests of persons in the different parts of the United Kingdom...and of persons living in rural and in urban areas”.
We are extending those duties to Ofcom’s functions in respect of post: “communications matters” in section 3(1)(a) of the 2003 Act will now include postal matters.
Mr Davey
It has been well established that, in the Act, “persons” also means businesses.
On amendments 12 and 13, Members will be aware that the market is undergoing big structural changes. Volumes have declined by 15% in the last five years, and Richard Hooper predicted declines of up to 40% in the next few years. Surely we all agree that action must be taken to protect the universal postal service. Clause 30 sets out the minimum requirements of that service, which are identical to those set out in the Postal Services Act 2000. They are also identical to the minimum requirements proposed by the Opposition in their 2009 Bill. They gold-plate the minimum requirements of the European postal services directive. The amendments would impose additional regulation on top of that gold-plating, and thus risk undermining the provision of the very universal service that we are trying to save. In its evidence to the Public Bill Committee, Royal Mail spoke of the need for deregulation in competitive parts of the market if it is to survive. The most competitive part of the market is packets and parcels. I am afraid that the hon. Gentleman is not looking at what is happening. Royal Mail is competitive, and despite there being no requirement, it is delivering six days a week. The 2000 Act does not require that, nor does the European postal service directive. The last Government did not seek to require it either, and Postcomm does not require it in its licence. Yet Royal Mail provides a six-day-a-week parcel service. Why does it do that? The simple answer is because it makes commercial sense. That is the best incentive for any business.
This Government are committed to reducing regulatory burdens. We do not wish to impose regulation where it is not necessary. It is vital that businesses can operate free from the spectre of excessive bureaucracy that serves no purpose.
Postal Services Bill
Debate between Mike Weir and Ed Davey
Mr Mike Weir (Angus) (SNP)
I congratulate the hon. Member for Woking (Jonathan Lord) on making his maiden speech. I have been to Woking only once, and he missed out its most famous citizen—the great Paul Weller.
Turning to the matter at hand, although our amendment was not selected, it sets out the feeling of the Scottish National party, Plaid Cymru and all the parties from Northern Ireland, including the Democratic Unionist party; although DUP Members did not sign the amendment, they support its aims. We fear for the future of the universal service obligation if the Post Office is privatised.
I contributed submissions to Richard Hooper’s original work. I agreed with much of what he said in the end, but I strongly opposed the part-privatisation proposed by the previous Government and absolutely oppose the full privatisation proposed by this Government. Today, the Business Secretary argued that regulation will protect the universal service guarantee and that there is therefore no need to maintain Royal Mail as a public company, but it is inevitable that the pressures from a fully private company will lead to a reduction in the universal service.
Over the summer, the Business Secretary appeared to recognise that the current six days a week pick up and delivery service may not survive and suggested that a five days a week service might be sufficient. That accords with the current definition of the universal service, which does not include Saturday deliveries, so the Government already envisage the service declining. That position was justified on the grounds that it would not discriminate against any area, since it would be the same service whether someone resides in Kensington or Kyleakin. However, that is not quite the case. If I reside or run a business in Kensington, I am sure that there are a number of different services to which I can turn, but it is somewhat different in rural areas of Scotland where Royal Mail is the only service that will pick up and deliver mail. That vital point must be borne in mind when we consider the Bill’s proposals.
We are dealing not only with residential customers but with business customers, many of whom, in more rural and remote areas, rely absolutely on Royal Mail, which is the only carrier that is obliged and able to deliver a service to them. Does anyone really believe that that will continue in a fully privatised environment? How long will it be before a private owner such as TNT or Deutsche Post argues that it is at a competitive disadvantage because it is the only company required to offer a universal service? How long will it be before it wants the agreement to be watered down or requires public subsidy to enable it to continue?
Such an outcome would be a disaster for rural business. Only this week, the Government talked about the need to increase broadband access in rural areas. All too often Royal Mail is considered old-fashioned—it is seen as Postman Pat and his black and white cat touring Greendale as opposed to the brave new world of broadband. Although broadband is important in rural areas, which would benefit enormously from faster access, one cannot send goods down a telephone line or a fibre optic cable. Unless some entrepreneur in this brave new world comes up with Star Trek transporters, we will still require a physical delivery service to go up and down dale and glen to pick up and deliver physical objects. At the moment, the only company that will guarantee to do that is Royal Mail. We have to take that on board and do nothing that will undermine the service if we are to encourage the regeneration of our rural areas and create jobs in the new green economy.
I appreciate that many Government Members firmly believe in the overriding primacy of private enterprise, but even private enterprise sometimes needs public help. I was intrigued by the Prime Minister’s speech to the CBI earlier this week in which he said that
“business confidence doesn’t just come from financial and human assets. It comes from physical assets too—from our infrastructure.”
I do not often agree with the Prime Minister, but I think that is absolutely correct. He recognises the need for substantial public investment in the infrastructure needed to help businesses develop. Infrastructure is not just roads, railways and broadband—it is also investment in existing systems that provide a backbone for many businesses. Infrastructure assets such as Royal Mail provide new entrepreneurial businesses in many of our rural areas with an essential service that enables them to operate, grow and create jobs. They do that in many areas that are about to be hit very hard by the reduction in public sector employment.
I am interested in the fascinating myth-busters leaflet published by the Department for Business, Innovation and Skills.
Mr Weir
Indeed. Let me quote one of the myths in the leaflet:
“Growth in parcels from online shopping will outweigh falls in letter volumes”.
The response states:
“The parcels market is much smaller than the letters market and has been fully liberalised since 1981, making it highly competitive.”
It might be highly competitive, but many carriers will not deliver to remote and rural areas, particularly to Scottish islands, except at immense cost. There is a real danger in going down the route of privatising postal services.