Great British Energy Bill

Debate between Viscount Trenchard and Lord Vaux of Harrowden

Committee stage
Wednesday 15th January 2025 Grand Committee

[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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[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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[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.