Northern Ireland (Regional Rates and Energy) (No. 2) Bill

Tony Lloyd Excerpts

2nd reading: House of Commons
Wednesday 6th March 2019 Commons Chamber

[Tony Lloyd (Rochdale) (Lab)]

The Bill is in many ways an abuse of the processes of the House. I hope that the Minister will take this seriously. There is no connection between the regional rates and the structure surrounding the renewable heat incentive scheme, and they should have been presented in two separate pieces of legislation. It is already obvious from the debate so far that there is massive concern about the RHI proposals on both sides of the House, and the level of scrutiny that we will be able to achieve this afternoon simply is not up to the importance of the Bill.

This is not a trivial matter. It is not trivial because in the end the concern expressed by the hon. Member for North Down (Lady Hermon) and others that there will be casualties of this process is real. My hon. Friend the Member for St Helens North (Conor McGinn) makes the point that many farms in Northern Ireland—small firms, quite often—are in a parlous state. It matters enormously if we get this legislation wrong.

I hope the Secretary of State will consider that, and I hope that we will not see again an attempt to bludgeon legislation like this through the House in such a short space of time. This should have been taken in Committee; there should have been the opportunity in Committee for a much more leisurely but much more intense form of exchange between the Secretary of State, the Minister and interested Members. That is the right and proper way of doing something of this import.

On regional rates, I want to pick up the point raised about business rates. It is difficult to argue against business rates being uprated by inflation—I think even the greatest quibblers would resist that—but it is important to register that across the different towns of Northern Ireland in particular, there are businesses that are struggling. I do not pick as in a vendetta on the town of Ballymena. I know there is some good news that the hon. Member for North Antrim (Ian Paisley) has been involved in—there are some new jobs coming into the town—but I think he will accept that I make no criticism of one of his towns if I say that the Ballymena of today is not the Ballymena of my youth. It is a town that does need uplift; it needs its businesses supported and an injection of resource.

[Ian Paisley]

I appreciate the shadow Secretary of State making those kind and glowing references to Ballymena. It has a significant part of the industrial base of Northern Ireland, but that has of course been damaged by the loss of jobs and EU regulations, and to some extent just because of world economic factors. But the fact of the matter is that there is a spirit of change and a spirit of trying to get new jobs back, and I am delighted that today about 60 new jobs will ultimately be financed at USEL—Ulster Supported Employment Ltd—in Ballymena, which is a wonderful scheme that brings disadvantaged young people on and into the workplace and encourages the development of a circular economy.

[Tony Lloyd]

Like the hon. Gentleman, I very much welcome this piece of good news, but it has to be set against the fact that we do need to see renewal in many towns, and I want to return to a question I raised with Ministers yesterday about the stronger towns moneys. I did not get a response to the question I raised; there was no certainty on that. The Communities Secretary made it clear that the stronger towns moneys were available of course for England but also for Wales, Scotland and Northern Ireland. In Wales and Scotland, I assume those moneys will be diverted through the devolved Administrations there, but with Northern Ireland, we do need some certainty that there is political process and there will be political decision making that can ensure that, whether in Ballymena or any other town, there will be access to the stronger towns moneys. That is important in the context of the debate we are having; yes, we welcome the relative capping of the business rates but we want a recognition that there is still need for legitimate support for businesses across Northern Ireland.

I want to pick up the points made by my hon. Friend the Member for Ogmore (Chris Elmore). He made some interesting comments about the impact of the domestic rate increase. An increase of 3% plus inflation is perhaps supportable for many people, but it is interesting to compare with the Government’s proposed uprating for benefits: for universal credit, for example, that will be 2.4% in total. So 3% plus inflation is a bigger cost being imposed on the many families in Northern Ireland who struggle—for instance, low-income families or families on minimum wage. That kind of impact must be considered.

The Secretary of State says that the people of Northern Ireland should make a contribution as well as the Treasury, but let me make the obvious point that the people of Northern Ireland do make a contribution to Treasury moneys: they pay income tax, they pay VAT and they pay all the other taxes that are paid by people throughout the United Kingdom.

In those terms, this is effectively a redistribution from UK-wide taxation—which is perhaps not as progressive as I would like, but at least it has some sense of progression—to a more regressive form of taxation around regional rates. Nevertheless, the many sectors such as local authorities and, most importantly, education spend and health spend that depend on regional rates certainly need to see these resources coming in, so it would be hard to resist the case for this legislation being needed. It also has time import, in that the new financial year will not be long delayed.

However, that is not the case with the legislation relating to the renewable heat incentive. The consultation on the present scheme began last May and finished last September, and this legislation should have been brought before the House long before now if the intention was to implement it on the third parties on 1 April. It is unacceptable that we are now having to legislate at breakneck speed, just as we did yesterday. The legislation is being forced through the House without the opportunity for proper scrutiny. I have to say to the Secretary of State, although not unkindly, that I did not find her answers convincing when she responded to questions raised by previous speakers. I did not honestly feel that the House knew whether the legislation was necessary. I shall go into further detail on that in a moment.

Will the Secretary of State tell me when the Department for the Economy in Northern Ireland began to talk to the Northern Ireland Office about the need for an uprating? We know that there was an uprating last year, roughly 12 months ago, and it should have been obvious to everybody, particularly as this had gone out to consultation, that there would be a need for legislation, so why are we doing this so late on? Alternatively, why has it been necessary to do all this today? Could we not have had a Second Reading today, after which the Bill could have gone into Committee in the normal way and completed its progress later on, having had proper scrutiny throughout the process? This matters, for all the reasons that have already been given in exchanges with the Secretary of State. We have to be certain that the scrutiny is sufficient to reveal exactly what is happening.

On the specific details, I want to ask the Secretary of State some questions that are parallel to those already raised by hon. Members. An argument that is used to underline her case is that only by moving in this direction can we ensure state aid compliance and that this is the only legal basis, other than the complete abolition of the scheme, for reform of the RHI system. I do not know whether that is true. Nothing that has been presented to the House gives us any reason to believe that this is exactly what the European Union has said.

The hon. Member for North Antrim asked why the situation in Great Britain should be different from the situation in Northern Ireland. Why does one involve state aid compliance but not the other? Conversely, one of the proposals in the Ricardo review was to look at the introduction of the GB tariffs in Northern Ireland, and if those tariffs are legitimate for my constituents in Rochdale, why are they not legitimate for people in Northern Ireland?

[Maria Caulfield]

The shadow Secretary of State is making some good points. The financial difference is stark, because the amount in the rest of the UK will be £20,000 per year per boiler, whereas the amount that we will be moving to in Northern Ireland will be just £2,000 per year per boiler. That is not a small difference.

[Tony Lloyd]

The hon. Lady makes a valid point. Obviously, it is not a small difference; in fact, it is a huge difference to those on what could be described as the receiving end, those at the £20,000 level, or the non-receiving end for those at the £2,000 level. The details for a particular farm that I will come on to bear out exactly the point that she makes.

We need to know about state aid compliance, not only what lies behind it but how it has the system so circumscribed that we can do no other. I want to challenge Ministers on some of the things that they have told us. For example, the Secretary of State said that the cost of fuel might be different in Great Britain from Northern Ireland. I am told, however, that a lot of our non-home-grown fuel is imported from the Baltic states, where there is an awful lot of wood—I can assure the House of that, because I have seen it. Those pellets are shipped from the Baltic states to the UK generally, and I can recognise no enormous difference in the cost thresholds such as to produce a very different cost profile in Northern Ireland—a much cheaper one—from that in Great Britain. That we would have such different cost pressures does not seem logical. We need proper answers to such questions, although I fear that we will not get them today.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I agree with much of what the hon. Gentleman is saying. The purported purpose of this legislation is to give certainty. I have rarely seen the Government produce legislation that is so obviously ripe for legal challenge on the basis of legitimate expectation. In such circumstances, at the end of the day, surely we will not even give the people concerned, the recipients of the subsidies, the certainty that the Government claim they want.

--- Later in debate ---

[Tony Lloyd]

The right hon. Gentleman is absolutely right, and to the extent that some of those affected were in court this morning. Specifically, I understand that the judge said that he will not rule on the request for judicial review today because the scheme has not yet been implemented and is therefore not yet in breach. However, he will ensure that any judicial review is expedited once the scheme is in operation. I was going to make this point later, but I will simply do so now, and the Secretary of State and the Minister of State need to address it. What will the Government’s position be if they face judicial review and a challenge that the measure is outwith the competence of our legal framework? There is real risk of that, given that people have signed up to things in expectation of a certain income flow over the years and decades to come, as hon. Members have said. Such issues are not trivial.

[Ian Paisley]

The shadow Secretary of State is absolutely right. Apparently, this morning, at the High Court in Belfast, a judicial review was not launched and the date for the hearing will be the first week of April. We therefore have to wait until a few days after the change to the new financial year to have an answer. Surely it would be far better to postpone a decision until we have an answer, keeping the current rate until then.

[Tony Lloyd]

That seems logical, but—I am not a lawyer, so the hon. Gentleman will forgive me if I am not right—the problem is that the judge has ruled that, because the scheme is not in operation, he cannot yet judicially review it. So we have to wait for the implementation of the scheme before the judicial review can be taken forward. One way or the other, that is not a satisfactory way of organising our affairs.

I now come on to the question of installation, which is important. The Secretary of State suggested that the buy-out scheme will protect people. I will use a specific example, which I have no reason to doubt. A Northern Ireland farmer installed a boiler and system in 2015, at the end of the scheme. He tells me that the boiler and the feed system cost just under £36,000 to install. On top of that he had to pay £8,600 for plumbing and electrical costs, so a total of £44,600. He also had to do necessary works to house the boiler properly. He talks about various different things. The total further cost was some £28,000. I will not go into the different costs, but his case to me is that, in total, he had to invest some £76,000 to make this system work for him and his farm.

When the Secretary of State tells us that the buy-out scheme will look at the cost of the boiler and so on, plus 12% for the expected return, what is the basis for the boiler costs that will be allowable? Is it simply the cost of the boiler, or is it the cost of the boiler, the necessary installation and those things necessary to allow the boiler to work? That is material because, in the real world, boilers do not sit in the middle of a field—they do not sit in isolation.

There are real issues in such cases. This farmer tells me that he is likely to have to find an extra £3,000 a year as a result of all these changes. That £3,000 is material to a marginal business, so we have to take into account the impact of real damage to individual farms. This farmer tells me that he took out a loan over 10 years at an interest rate of 3.5 percentage points over the base rate. The annual repayment costs are some £9,000. Those are material costs that he will continue to have to pay unless the buy-out scheme covers him on the impact of the change to the scheme.

[Ian Paisley]

I thank the hon. Gentleman for his generosity in giving way. Is it not a fact that the weight of what he says is that the scheme now operating here on the British mainland must therefore be flawed? It has to be in breach of the state aid rules, or else the Northern Ireland Office’s proposals are wrong. They cannot both be right, and that matter must be challenged and identified.

[Tony Lloyd]

I am not being generous with my time because we have to tease out these important issues, and we have to get answers to give us some certainty that the scheme is both necessary and sufficient to protect the interests of those who have acted in good faith.

[Lady Hermon]

It is crucial that we tease out the details before we give our approval—if we give our approval—to this Bill. In the wind-up, I would particularly like the Minister to give further detail on what the Secretary of State said about how the Department for the Economy will seek support for affected participants: those who invested in the renewable heat incentive scheme in good faith. She failed to give any details at all about the efforts of the Department for the Economy to get some support for those who will be adversely affected if we approve this Bill. They had a legitimate expectation of the tariffs that would be paid to them for 20 years, so I would like details from the Minister.

[Tony Lloyd]

That is a fair point. There is nothing in this Bill that talks about post-legislative scrutiny. We need some capacity to measure the impact of the legislation after it leaves this House, because it will have an impact. The scheme was a disaster from its inception. That is most certainly true. It is also most certainly true that controlling the overall level of cost is and ought to be a matter of public policy, which is in the interests of people in Great Britain as well as in Northern Ireland. Coming up with legitimate control is not something that divides the House, but we need to make sure that we measure the impact on those affected, and that is simply not there.

[Maria Caulfield]

The clause 4 powers to instigate the buy-out arrangements are to be exercised only in the period while there is no Executive. So this place would have a duty to scrutinise that, because under this legislation once the Executive are back up and running, the job of scrutiny would return to the Northern Ireland Assembly.

[Tony Lloyd]

That has to be right. We have a duty to ensure not only that we dispatch the legislation where it is appropriate to do so, but that we monitor its impact to make sure that no injustice is caused by the clumsiness of the legislation.

I will draw my remarks to a conclusion, but the point I have sought to establish all the way through is that the Secretary of State has not given answers with the level of detail that this House ought to demand if we are to say that this scheme is legitimate in terms of protecting the wider public interest, as it rightly and properly should do, and does no injustice to people who, in reasonably good faith—some may have seen a large amount of pound coins rolling in their direction—invested in a scheme that we as a society wanted to promote: a more environmentally sound system of heating. We need to insist that we get that balance right, but I am not convinced that I can see that in the Bill, the explanatory notes or the Secretary of State’s opening remarks

I repeat what I said at the beginning: the way the House is being asked to dispatch this legislation today is incompetent and unreasonable. I hope the Secretary of State will reflect on that, because even at this stage it would be possible for the Government to take part of the legislation back and say that the capacity to scrutinise could be done very differently.

Finally, I wish to make a slightly wider point. Once again, the House is being asked to do something that the Secretary of State talked about as being limited but necessary. There are many limited but necessary schemes that she is refusing to do. In response to the hon. Member for Belfast East (Gavin Robinson), she made the point that she would be looking to legislate on providing the necessary support for housing associations in Northern Ireland. We would not want to oppose that, as it is necessary to have those housing associations working. Again, however, we come down to questions such as: who will make the decision on the medical school in the Derry and Strabane city deal; when will we see progress on Hart if we are still stalled on getting a devolved Assembly in Stormont; and what are we going to do about the important question of public sector workers, such as nurses, physiotherapists and others in the health service, who will not see the uprating in their pay that their counterparts will see in the rest of the UK? Such issues are within the Secretary of State’s capacity to address. It is difficult for us to see any longer when she will act. Yes, protecting public money and allowing public moneys to be spent by local authorities at the Northern Ireland level is important, but so are these issues. There is no clarity any more—

[Emma Little Pengelly (Belfast South) (DUP)]

Is the hon. Gentleman aware that, as far as we are aware, senior civil servants do have the power to give pay increases? In fact, many of them have done so, particularly for nurses, the police and those in the Prison Service—this has been recently announced. The senior civil service does have that ability because of legislation passed in this House previously. Does he agree that we also need to encourage those permanent secretaries to make those decisions earlier, because many of them have taken considerable time, and many people are waiting and are out of pocket? The power is there and we just need to get those decisions made by the senior civil service in a timely way.

[Tony Lloyd]

A guarantee that everybody in the health service receives the same uprate as their opposite numbers in the rest of Great Britain would be welcome. I think the hon. Lady knows, probably better than me, that the most senior civil servants are still traumatised by the judicial review that found that their level of competence to make decisions was limited. Although we brought legislation through the House, I think few people believe that that really did much more than to codify what was already there, rather than to expand their capacity to make decisions. I would love to believe there was a transparent and accountable decision-making process, and hence coming back to Stormont in operation, but we do not have that at the moment, so the only system of accountability for pressing matters lies ultimately in the House of Commons and the Department.

[Emma Little Pengelly]

Whenever that legislation was discussed by the House, it was very much part of the context that it should give clarity. I accept the hon. Gentleman’s point that because of the judicial review there was clearly apprehension among the permanent secretaries in some of the Departments about making decisions. The legislation was designed to give that certainty and that legal basis, but we are still seeing a reluctance in some Departments. Does the hon. Gentleman agree that guidance for all the Departments in Northern Ireland would perhaps be helpful, to tell all the civil servants exactly what types of decisions they could and should be making in accordance with the legislation passed by this House?

[Tony Lloyd]

It may be helpful to deliver that kind of guidance. The problem we all have to face is that, in the end, decisions made by senior civil servants without reference to a policy framework determined here, or in some logical sense determined when the Stormont Executive were operating, will be challengeable. Judicial review can and will take place, and if civil servants face such a review, that will make them cautious about making the wrong decision. Every Member of this House would face the same kind of reluctance. I am sure that some will by instinct be a little braver than others, but something still circumscribes such decisions. I do not actually think that the legislation we passed materially changed the boundaries. Perhaps that debate is for another occasion, but it is important.

I have come to the end of my remarks, but I wish to emphasise that we would not want to oppose the passage of the regional rates legislation, because it is timely and it is important that there is certainty at the beginning of the new financial year. However, I repeat that the Secretary of State should not have allowed these two separate items of business to be conjoined. It forces the hand of those in the House of Commons and in the other place in an unacceptable fashion. It forces us not to scrutinise properly the legislation she has put before us. She has to think seriously about whether this is the right way to take this legislation through the House. I suggest to her that, even at this stage, she should think about whether she can technically decouple these two pieces of legislation and allow a slower process and more time for the consideration of the RHI.

--- Later in debate ---

[John Penrose]

Some people will have done very well out of this scheme, but I think the House will have a great deal more sympathy with those who have received below the average. I think that is the point the hon. Gentleman is making. The average may be extremely high and some people have done extremely well, even including those who have not run their boilers all the time, lived with the windows open and so on, and he gave examples of people who have not done that. Those who have received well below the average and are worried that they are going to lose out because they are well below the 50% average rate of return that has been achieved so far will still be able to opt out and will be made good. None of the historical payments they have received will be counted if they decide to opt out, and they will basically be told, “You will have a 12% return based on the money you’ve invested so far.” There is a route out for people who are worried; they will still be made whole and should not lose out. They may not make out extraordinarily or become rich, but 12% is a return that many of us would be very happy to earn on most other investments.

[Tony Lloyd]

I am grateful that the Minister is being so generous with his time. None of us has any brief for those who have done extraordinarily well out of all this; they should not have been allowed to be so lucky, but we should not let that delay us. The reality is that it is accepted as part of the scheme that there may be losers, as is recognised in the buy-out clause that the Secretary of State and the Minister pray in aid. A 12% return seems quite a good rate, but the fundamental problem is that the cost that the Minister tells us will be allowable as the basis for that return is not the same as the cost of the boiler plus installation. We need a guarantee that the problems faced by the potential losers will not be compounded by an incompetently designed buy-out scheme that cannot work for them financially.

[John Penrose]

I am delighted to be able to set the record straight. I think that I have already mentioned this, but perhaps I can expand on it: the point about the buy-out scheme is that it will be a 20% return—sorry, it is minus payments already made; I misspoke. It is a 12% return on the capital costs of the boiler and the other eligible installation and running costs that I mentioned in my reply to the hon. Member for North Down. It will be tailored to individual circumstances, and obviously people will need to produce receipts and so on, but if they have ended up paying slightly more for their boiler, they will not lose out. The hon. Member for Rochdale raises a perfectly valid question, but people who might otherwise lose out should be made whole, as the hon. Member for Strangford pointed out.