Delegated Legislation Committee
Draft International Fund for Agricultural Development (Eleventh Replenishment) Order 2018
The Committee consisted of the following Members:
Chair: Mr Laurence Robertson
† Baldwin, Harriett (Minister of State, Department for International Development)
† Bryant, Chris (Rhondda) (Lab)
† Day, Martyn (Linlithgow and East Falkirk) (SNP)
† Drax, Richard (South Dorset) (Con)
† Francois, Mr Mark (Rayleigh and Wickford) (Con)
† Freer, Mike (Finchley and Golders Green) (Con)
† Keegan, Gillian (Chichester) (Con)
Leslie, Mr Chris (Nottingham East) (Lab/Co-op)
† McDonagh, Siobhain (Mitcham and Morden) (Lab)
† Moon, Mrs Madeleine (Bridgend) (Lab)
† Osamor, Kate (Edmonton) (Lab/Co-op)
† Peacock, Stephanie (Barnsley East) (Lab)
† Percy, Andrew (Brigg and Goole) (Con)
† Phillips, Jess (Birmingham, Yardley) (Lab)
† Thomas, Derek (St Ives) (Con)
† Thomson, Ross (Aberdeen South) (Con)
† Tracey, Craig (North Warwickshire) (Con)
Jack Dent, Committee Clerk
† attended the Committee
Tenth Delegated Legislation Committee
Tuesday 17 July 2018
[Mr Laurence Robertson in the Chair]
Draft International Fund for Agricultural Development (Eleventh Replenishment) Order 2018
I beg to move,
That the Committee has considered the draft International Fund for Agricultural Development (Eleventh Replenishment) Order 2018.
It is a pleasure to serve under your chairmanship this morning, Mr Robertson. After last night’s late votes, is it not wonderful to be here bright and early to consider the order?
I am here to ask the Committee to support a contribution of up to £66 million over the three-year period from 2019 to 2021 to the International Fund for Agricultural Development, which, despite my dislike of acronyms, I will now refer to as IFAD, so I can go faster through my script. IFAD focuses exclusively on the rural areas of developing countries, where an estimated 3 billion people live, most of whom depend on agriculture for their food and income. They are also the world’s poorest and most vulnerable people, with 80% of women, children and men in extreme poverty living in rural areas. IFAD makes loans and grants to Governments for projects in those areas, supporting countries also to invest their own resources in rural development.
The UK’s contribution to IFAD’s eleventh replenishment will help the fund to reach 110 million to 130 million people, delivering results to transform lives and poor rural communities. With our support, IFAD will work with Governments to improve the agricultural production of 47 million people, improve the market access of 46 million, help 44 million to achieve economic mobility, provide more than 16.5 million in rural areas with financial services, and support up to 120,000 rural enterprises to access business development services.
Our investment in multilateral organisations such as IFAD not only helps us to meet our responsibilities to the world’s poorest, but it is firmly in Britain’s national interest. Investing in IFAD and rural development helps the UK to tackle many of the global development problems the world faces today. Hunger, extreme poverty and youth unemployment all have their roots in rural areas and can all be improved through investing in agriculture and inclusive rural development. World Bank and other international reports highlight the fact that investment in agriculture is one of the most effective strategies for economic growth and for reducing extreme poverty and hunger, because successful small farms provide jobs, generate income and stimulate rural economies. Many are led by women, and IFAD has a particular focus on promoting gender equality and women’s empowerment, helping to transform rural communities economically and socially.
IFAD has committed to stepping up its work for youth in this 11th replenishment. Today, the world’s population includes the largest ever generation of young people—1.8 billion—and that population growth is set to continue, particularly in Africa. Most of those young people live in the rural areas of low and middle-income countries. They are more likely to be unemployed and to leave their home in search of work, first to cities and then, if they cannot find decent jobs there, to travel across borders to neighbouring countries and, indeed, beyond. Investing in IFAD helps to build rural economies and create economic opportunities, also for young people. With a growing population, the world needs to produce more food—enough for more than 9 billion people by 2050. IFAD supports rural communities to build their resilience to the effects of climate change and to increase production.
Our commitment to UK aid and our strong partnership with IFAD, together with other member states, addresses those global challenges and is an important part of Britain’s leadership and global offer. The United Kingdom continues to drive reform, to strengthen the international system to deliver better results. Together with other member states, the UK has succeeded in agreeing reforms with IFAD, including to increase the proportion of core funding that is allocated to those poorest countries that are least able to self-finance to 90%; to report against an ambitious results management framework that disaggregates by gender and age, ensuring a focus on women, girls and young people; to develop a transition framework that sets out how IFAD’s lending terms will increase as its borrowers’ incomes increase; to address the needs of people with disabilities, in line with the sustainable development goal agenda of leaving no one behind; and to strengthen work on nutrition and climate change in all IFAD-supported projects. It will also mobilise additional financial resources, including through domestic co-financing, sovereign borrowing, and concessional partner loans, increasing the level of development assistance for every pound of UK investment.
We will continue to press IFAD to implement reforms, and its president has committed to using 30% of our funding to provide further incentives. The reforms will increase the focus of our resources on the poorest countries, strengthen work on women’s empowerment, increase transparency and improve value for money, to deliver even better results on the ground.
I recommend that we continue our support for IFAD and our contribution to its results. It is an effective way for the UK to reach some of the world’s poorest people in some of the remotest areas. It improves food security and creates opportunities to increase incomes—both essential to reducing poverty and supporting economic growth. I commend the order to the Committee.
It is a pleasure to serve under your chairmanship, Mr Robertson. I thank the Minister for introducing the statutory instrument. The Labour party welcomes the replenishment of the International Fund for Agricultural Development. We recognise that supporting small-scale farmers is a crucial part of achieving the sustainable development goal agenda, in particular SDG 2 to end hunger, achieve food security, improve nutrition and promote sustainable agriculture.
Smallholder farmers provide up to 80% of the food supply across Asia and sub-Saharan Africa. They are essential to ensuring global food security and play a vital role in local economies. I therefore ask the Minister for reassurances that money spent through the International Fund for Agricultural Development will remain focused on local producers and domestic markets that support food security and local economies around the world, and that that is not undermined by steering small-scale farmers towards disproportionately focusing on links to international commodity markets where they face immense power imbalances. I am happy to confirm that the Labour party does not intend to divide the Committee on the order.
A few questions. Of course, I completely support the measure. Successive British Governments have supported the fund, because we recognise that in dealing with the greatest areas of poverty in the world, one has to tackle the issue of agricultural poverty and agricultural communities. However, I have a few questions for the Minister.
First, can the Minister tell us how the Government arrived at the figure of £66 million? It seems remarkably round and convenient. Is it more or less than Germany, France or Italy? Is the United States of America reneging on its payments, or is it abiding by its commitments? How do we know that that £66 million is an appropriate rise since the last replenishment? I notice that the figures have not necessarily increased in a straight line; sometimes they have gone down and then gone back up again. Why is £66 million the right amount for Britain to contribute?
Secondly, the Minister referred to the fact that there has been quite a push, not only in IFAD but in other organisations of the United Nations, to ensure that more of the money goes to the poorest countries. She said that we are trying to get up to 90% of the money going to the poorest countries. I wholeheartedly agree with that, but can she lay out for us which countries will now not receive money? For instance, I think China has received money in the past. That would seem rather odd now, as it is one of the fastest growing economies in the world. Likewise, although we recognise that there are areas of considerable poverty in India, perhaps India ought to look to its own resources.
Finally, several countries that are very close allies, with whom we ally in many different spheres, have not signed up to IFAD. Why is that? For example, why has Australia, with whom we share views on nearly everything under the sun, not signed up to IFAD, or for that matter several member countries of the European Union? The European Union itself is an observer of IFAD, but not a contributor to it, so why are Latvia and the Czech Republic not members? I wonder whether we would do anything to persuade those countries to sign up. Obviously, if we could get not just 174 but all countries in the world to sign up, we would have more contributions and could do more good work.
I shall respond briefly to points made by hon. Members. I confirm that we emphasise continuing to work directly with rural communities. We shall also continue to put an emphasis on ensuring that smallholders are at the heart of our work.
In reply to the hon. Member for Rhondda and to elaborate on how we came up with the figure of £66 million, which would make us the largest contributor to IFAD, the increase is about 15% in sterling terms; our contribution over the previous cycle was £57 million. At the moment, we have not yet heard what Germany will pledge, but we anticipate a similar amount. The Netherlands, for example, is a strong contributor and just behind the UK. China is now a net contributor to the system, increasing its contribution from US $60 million to $80 million. Italy has pledged $63 million, Sweden $57 million and Canada $55 million. The US commitment is on an annual basis, so about $30 million per year takes it up to about $90 million—again, a similar amount to us.
A range of different countries have a strong sense of ownership. Cameroon, for example, has put money in—$1.1 million—and Bangladesh has put in $1.5 million, up from $650,000, Kenya $1 million, Ghana $585,000 and Rwanda $100,000. I confirm that widening the donor base towards the total—it is also important to say that the total replenishment we aimed for was US $1.2 billion—is an important part of the reforms.
I am proud of the fact that Britain is doing more than other countries—that is excellent—but are the Government seeking to use that leadership as a means of persuading others to put their hands in their pocket more effectively? The Minister cited the United States of America giving roughly the same as the UK, but it is a much bigger economy and I would have thought that it gave significantly more. I want to know how much more the Government are trying to leverage in from others.
We certainly make that point. In all our work, we try to do exactly that: we must get the balance right between being one of the leading donors and at the same time ensuring that we leverage in money from other countries. That is a constant part of our work on the replenishment. I think that I have addressed most of the points made by hon. Members, so I ask the Committee to support the motion that we have considered this replenishment.
Question put and agreed to.
draft Oil and Gas Authority (Offshore Petroleum) (disclosure of protected material after specified period) regulations 2018
The Committee consisted of the following Members:
Chair: Mark Pritchard
Brown, Alan (Kilmarnock and Loudoun) (SNP)
† Burghart, Alex (Brentwood and Ongar) (Con)
† Charalambous, Bambos (Enfield, Southgate) (Lab)
† Crabb, Stephen (Preseli Pembrokeshire) (Con)
† Garnier, Mark (Wyre Forest) (Con)
† Harris, Rebecca (Lord Commissioner of Her Majesty's Treasury)
† Harrison, Trudy (Copeland) (Con)
† Hayes, Helen (Dulwich and West Norwood) (Lab)
† Henderson, Gordon (Sittingbourne and Sheppey) (Con)
† Jack, Mr Alister (Dumfries and Galloway) (Con)
Malhotra, Seema (Feltham and Heston) (Lab/Co-op)
† Perry, Claire (Minister for Energy and Clean Growth)
† Smith, Nick (Blaenau Gwent) (Lab)
Stevens, Jo (Cardiff Central) (Lab)
† Swayne, Sir Desmond (New Forest West) (Con)
† Whitehead, Dr Alan (Southampton, Test) (Lab)
† Zeichner, Daniel (Cambridge) (Lab)
Jenny Burch, Committee Clerk
† attended the Committee
Eighth Delegated Legislation Committee
Tuesday 17 July 2018
[Mark Pritchard in the Chair]
Draft Oil and Gas Authority (Offshore Petroleum) (Disclosure of Protected Material after Specified Period) Regulations 2018
Given the temperature today, colleagues who want to take off their jackets should feel free to do so.
I beg to move,
That the Committee has considered the draft Oil and Gas Authority (Offshore Petroleum) (Disclosure of Protected Material after Specified Period) Regulations 2018.
It is a pleasure to serve under your chairmanship, Mr Pritchard. I removed my jacket some time ago. All members of the Committee would agree that the UK’s offshore oil and gas industry is one of the country’s great industrial successes. However, as we know, it has faced numerous challenges over the years, including ageing infrastructure and growing international competition. That is why in 2013 we asked Sir Ian Wood to conduct a review of the offshore sector to see how we could maximise the economic recovery of petroleum. One recommendation of that excellent review was to ensure that the industry had timely and transparent access to petroleum-related information and samples, such as data about reservoir infrastructure or pieces of strata—bits of rock—acquired in the course of drilling a well.
The Government committed to implementing the Wood review and included various powers in the Energy Act 2016 on information and samples. For example, there is a requirement for relevant persons in the industry to retain certain pieces of information and samples for a specified period, as set out in the Oil and Gas Authority (Offshore Petroleum) (Retention of Information and Samples) Regulations 2018. We also introduced safeguarding plans for information and samples for when licence events such as termination occur. At that time, the Oil and Gas Authority was given powers to require relevant persons to provide it with samples they hold that it may need in order to discharge its regulatory role and to contribute towards the highly welcome objective of maximising economic recovery of offshore petroleum. The regulations we are considering are the final piece of the picture. Once information or samples have been acquired by the OGA, the regulations will enable it or a subsequent holder to make the material available after a specified period.
We are all bound by the 2016 Act, which places a general prohibition on the disclosure of protected material, subject to certain exemptions. Indeed, one such exemption permits the OGA or a subsequent holder to make protected material available at such time as may be specified in regulations. Such material might include information about geological surveys, wells drilled, petroleum production and other reports or computerised models of the subsurface or a reservoir—the Committee will know I believe we lead the world in subsurface analysis and geological data collection. It also includes samples of petroleum, fluids or strata acquired or created when drilling or producing from a well and could include information about installations and maps of infrastructure or pipelines associated with offshore petroleum development—it is vital to know where they are.
The Delegated Powers Committee made a recommendation, and of course we listened, so the 2016 Act included a list of factors to which the Secretary of State for Business, Energy and Industrial Strategy must have regard when determining the appropriate period after which protected materials may be made available. There are three aspects to that requirement. First, companies must have had sufficient time to satisfy the purpose for which they created or acquired the information or samples. Secondly, there is the potential chilling effect of requiring disclosure in discouraging future activity, which would be counter to the stated aim of maximising economic recovery. Finally, what is the benefit to industry and the economy in making samples and information more widely available? Each of those factors must be taken into account when setting the period after which disclosures can be made.
The periods may vary from immediate disclosure for basic information that is not deemed to be sensitive, such as the fact that a survey had been done, to 15 years for raw information from seismic surveys, which are both expensive to do and could contain highly significant commercially relevant data. While care has been taken to ensure that the specified times are set appropriately, there is no requirement to publish the material. Indeed, the OGA could consider keeping information confidential for a longer period, but it would be asked to weigh up the impact of that against delivering its statutory objective on the maximising economic recovery principle.
These are very technical regulations—I anticipate that the hon. Member for Southampton, Test will have gone through them in great detail—but the proposals on which they are based were subject to consultation with industry and other interested parties by the OGA.
The OGA has published a consultation response, detailing the feedback and what it has done with it, such as excluding more subjective information from immediate release. The OGA will continue to provide guidance on the application of the regulations before they come into force. We did not need to carry out a full impact assessment because the additional impact of disclosure under the regulations is expected to be marginal, but there are, potentially, some minor costs on industry due, for example, to familiarising staff and systems with the regulations.
The OGA considers that improvements to information retention, reporting and disclosure processes, including through the regulations, are critical to achieving the statutory objective of maximising the economic recovery of the UK’s offshore petroleum reserves and, by doing so, to increasing the productivity levels of a vital industry and ensuring that its highly paid jobs are maintained for as long as possible. The changes are expected to make an important contribution to the OGA’s vision for the industry, which suggests that maximising economic recovery could create £140 billion of additional gross value added for the UK and create thousands of jobs right across our nations. In addition, they could facilitate the reuse of reservoirs and infrastructure for other purposes, including for carbon capture utilisation and storage. I am sure that the Committee will be delighted to know that, despite the cancellation of the original CCS competitions, we have spent since that point more than £300 million on continuing to map and understand our reservoirs, and that we are considered to have the best reservoirs for long-term carbon storage in the world, which will potentially open up huge opportunities when we continue to work with industry to come up with economically viable ways of performing CCS.
Although the regulations are highly technical, they are an important and useful addition to the regulatory framework and I commend them to the Committee.
When I received the statutory instrument I had the momentary thought that it was an SI upon which I would have nothing at all to say. But I stayed in that fugue for only a brief period and then decided that, after all, there were things to say.
As the Minister mentioned, the regulations derive from the 2016 Act, the lengthy passage of which I sat through, so it is good to see here the principle that was put into that Act regarding information relating to all aspects of oil and gas exploration, production and decommissioning, which is that the OGA should make publicly available, at the earliest possible date, material it receives and, indeed, material required to be provided to it under the Act. That principle is absolutely right and, as the Minister said, it is potentially important in ensuring that information about future exploration surveys and so on, with proper safeguards, is essentially in the public domain, so that we can learn from each other as far as the future activities in the North sea are concerned. The Opposition thought that was the right thing to do at the time, and the more detailed provisions in the statutory instrument are certainly a good development of the principle.
However, I have two slight concerns about the SI’s structure. The Minister mentioned that the guidance on the period before publication of anything provided to the OGA will be determined by various considerations relating to privileged information about a company’s economic activities. I imagine that the extent to which that information is published could discourage people from investing in the first place, under certain circumstances. There are also various other things that came before the Department after the Act was passed.
The provisions for publication seem a little random. If someone carries out a geological survey on behalf of the holder of a production licence, the material is not publishable for a period of five years. If it is carried out other than by or on behalf of the holder of a production licence, the period is 10 years. For summary well information, the material is publishable on the date on which the information is obtained by the OGA. There does not seem to be a consistent thread running through those provisions.
In the guidance for the regulations, I could not find exactly how those dates of publication restraint, or dates of publication, had been determined. There does not appear to be a principles manual that underlines the publication of material. That could be important because somebody who wants to get hold of that information could say, “Actually, the restraint on this information has not been determined by a fully worked-out process,” and that might therefore be actionable in terms of the material’s publication.
Conversely, since several regulations require the publication of information on the date on which the information is obtained by the OGA, that could be a recipe for encouraging people to go slow on providing information to the OGA. In the 2016 Act, there are sanctions for long-term non-co-operation with the OGA in a variety of ways, but there is nothing that says, “You’d better be reasonably smart about providing the information by a certain period, otherwise the sanction regime will come in and it’s the worst for you.” There is a question about whether some elements of the regime, welcome and positive though it is in terms of publication, can avoid suppressing the likelihood of that information coming forward so that the OGA can publish it.
Other than that, this is a well-crafted set of regulations that should greatly enhance the ability of the industry and the general public to understand what is happening in the North sea, and, where appropriate, to be supplied with that material in a reasonably timely fashion. Therefore, we do not wish to oppose or divide the Committee on the motion. It would be good if the Minister gave some guidance on some of the issues that I have raised, as I hope she will be able to—a little note has just appeared in her hand—and we can then finish the proceedings on a note of concordance.
Would it not be nice to have that running through all debates? As always, the hon. Member for Southampton, Test has asked some sensible questions. The information that I have been provided with suggests that the OGA has consulted industry extensively on the periodicity of the provision of information. Further guidance will be forthcoming if people want it.
The hon. Gentleman prompted a question in my mind, which was, what happens if a person who requests information disagrees with the period for which that information is retained? Basically, appeal provisions are set out in the Energy Act, which he sat through in Committee, that say non-compliance with a reporting notice is sanctionable. The OGA has dedicated compliance personnel who already ensure compliance with other aspects of information and samples powers, and it can set a deadline for the provision of information with which companies must comply. I hope that answers his sensible questions.
I would be grateful for clarification on one more point. As is set out in the regulations and the guidance, the Minister mentioned that the OGA is not required necessarily to publish according to the lines that are set out in the regulations and that it may not publish as a result of representations by companies that say there would be particular problems.
Unless there is subsequently some form of code that relates to that, the OGA could put itself in the situation of not recording the circumstances under which it has declined to publish something that it should have done, or, if it has declined to publish something that it should have done, what its justification for doing so was. That might make some of those actions actionable, if someone wanted something to be determined according to what the regulations had set out, but the OGA had declined to publish it for reasons that it had not put forward. There may already be guidance on that, but if the Minister could assure me on that point, it would be helpful.
It is an important question. Essentially, the OGA has to pay attention to the objective of maximising economic recovery. It is therefore a judgment question for it as to whether it makes information available. We have now set out more guidance on the timeframes, depending on different sorts of information, but it may make a judgment that it will not publish because it would inhibit the delivery of that objective. For example, a field or licence report that might be subject to a shorter reporting period could contain confidential seismic data that is subject to a longer protection.
The hon. Gentleman will know from his time on the Energy Act Committee that many of those compliance and appeal requirements were set out in that Act. I will ask the team to draft a note to him so he can be satisfied that that power of judgment is being exercised correctly and that appropriate appeal routes are in place if there is a sense that it is not.
It is always a pleasure doing business with Her Majesty’s official Opposition, because we have a thoughtful discussion. It is rather disappointing that Scottish National party Members never bother to show up to debates about this vital industry these days. Luckily, I have my hon. Friend the Member for Dumfries and Galloway behind me, but, if I may be so partisan, having a political party that does not effectively represent the most economically valuable industry in that geographical area is disappointing. With those remarks, having hopefully reassured the hon. Member for Southampton, Test on his good questions, I commend the regulations to the Committee.
Question put and agreed to.
Draft Single Source Contract (Amendment) Regulations 2018
The Committee consisted of the following Members:
Chair: Mr Adrian Bailey
† David, Wayne (Caerphilly) (Lab)
† Docherty, Leo (Aldershot) (Con)
Ellman, Dame Louise (Liverpool, Riverside) (Lab/Co-op)
† Ellwood, Mr Tobias (Parliamentary Under-Secretary of State for Defence)
† Elmore, Chris (Ogmore) (Lab)
† Hair, Kirstene (Angus) (Con)
† Lamont, John (Berwickshire, Roxburgh and Selkirk) (Con)
† Lopresti, Jack (Filton and Bradley Stoke) (Con)
† McCarthy, Kerry (Bristol East) (Lab)
McDonald, Stewart Malcolm (Glasgow South) (SNP)
Mahmood, Shabana (Birmingham, Ladywood) (Lab)
† Moore, Damien (Southport) (Con)
† Morton, Wendy (Aldridge-Brownhills) (Con)
† O'Brien, Neil (Harborough) (Con)
Robinson, Mr Geoffrey (Coventry North West) (Lab)
† Shelbrooke, Alec (Elmet and Rothwell) (Con)
† West, Catherine (Hornsey and Wood Green) (Lab)
Yohanna Sallberg, Committee Clerk
† attended the Committee
Ninth Delegated Legislation Committee
Tuesday 17 July 2018
[Mr Adrian Bailey in the Chair]
Draft Single Source Contract (Amendment) Regulations 2018
I beg to move,
That the Committee has considered the draft Single Source Contract (Amendment) Regulations 2018.
It is an unexpected pleasure, Mr Bailey, to be in the position of moving the motion, but it is nevertheless an honour.
The Ministry of Defence spends some £8 billion a year through contracts that are not competed. Given the lack of competitive pressure, the Government need to find alternative ways of ensuring that the MOD obtains value for money on those contracts while protecting the long-term future of the defence industry by ensuring that suppliers get a fair return on single source work.
Lord Currie produced an independent report on non-competitive defence procurement in 2011. He concluded that the arrangements then in place were simply unfit for purpose. The result was a weak negotiating position for the Department and poor value for money for the taxpayer. As a consequence, the Government introduced a new framework through the Defence Reform Act 2014. Our intention was clear: the new framework set out firm rules on pricing single source defence contracts and shifted the onus on to suppliers to demonstrate that their costs are “appropriate, attributable and reasonable”. Where there is a dispute, either party can refer the matter to an impartial adjudicator—the Single Source Regulations Office—for a binding decision.
Since coming into force in December 2014, the new framework has made significant progress. Contracts worth more than £19 billion have been brought under the framework and the benefits to the MOD have been considerable, including a reduction of the baseline profit rate from more than 10% in 2014 to 6.8% this year. However, any new regime of this complexity needs to be refined in light of experience. The 2014 Act therefore required the Secretary of State to carry out a thorough review of single source legislation within three years of it coming into force. The review was completed in December 2017, and it identified several potential improvements to the framework. We have incorporated the first of those into the regulations, and we plan to introduce further amendments to Parliament later this year.
The Joint Committee on Statutory Instruments has stated that the MOD has failed to comply with proper legislative practice by not offering the regulations under the free issue procedure. The Department had taken the view that the main purpose of the regulations was to introduce enhancements to the existing regulations by changing the definition of exclusions. It believed that the aspects of the regulations that clarify aspects of the original regulations, and hence would cause them to be issued free of charge, would not have been sufficient to justify producing a new statutory instrument. However, in light of the Joint Committee’s views, we are happy to make the regulations free of charge when they are published.
The main amendments under consideration relate to the types of single source contracts, known as “exclusions”, that cannot become qualifying defence contracts. MOD policy remains to maximise the value of single source contracts covered by the framework to secure the highest level of benefits. For that reason, it is important that exclusions are defined as narrowly and precisely as possible to ensure that as many contracts as possible are eligible under the regulations.
However, experience in implementing the framework has shown that there is confusion about how to apply some of the exclusions and that contracts relating to intelligence and international co-operative programmes are being unnecessarily excluded. We are therefore proposing a clearer and more precise definition of the two categories. We estimate that that could result in up to a further 8% to 10% of single source spend coming under the regulations.
We are also adding a further category of exclusion to deal with situations where contracts are transferred from one legal entity to another, such as where an internal restructuring of an industry has taken place. In such cases, although the legal identity of the supplier may have changed, the contract has not otherwise changed in a material sense. We have engaged extensively with stakeholders in drafting these amendments and believe that the proposals will be welcomed by suppliers as offering greater clarity on definitions of exclusions and therefore reducing the degree of confusion. I hope the regulations will gain the Committee’s approval.
It is a pleasure to serve under your chairmanship, Mr Bailey. May I say that I was surprised to hear the Minister say that it was a pleasure to be here? We all know he is here because the fellow who should have been—the Defence Procurement Minister—resigned last night. I am glad to see a very able stand-in, but I am a bit surprised, because this Minister had threatened to resign and instead it was a Minister who had not threatened to resign who did so. It is all a moveable feast; nevertheless, I welcome the Minister to the Committee.
Order. The nature of the debate is straying some way from the regulations. I have indulged Mr David so far, but he must please confine his remarks to the business before us.
Indeed. I was simply taking my lead from what the Minister had said. I hope you will indulge me slightly more, Mr Bailey, as I pay tribute to the Minister who should have been here, because he did his homework meticulously well. He was a very good Defence Procurement Minister who put his constituents first. As he explained to me last night, he resigned because he was concerned about the situation of Airbus, which employs many people in his constituency, and could not bring himself to support the Government on this occasion. I simply say that for information, but it is relevant because Airbus is referred to in the regulations. It would have been slightly embarrassing, to say the least, if the former Minister had been speaking now in this Committee knowing full well that his constituents would be adversely affected by legislation that the Government were pressing hard.
I have some sympathy with the Minister before us, but this is an important subject and I want to ask him some questions. If he cannot respond effectively, we will understand why, and I would be more than happy to have his replies in writing—in copious detail, I might add.
The Ministry of Defence has a 10-year equipment budget of £178 billion. For 2016-17, the budget for equipment and infrastructure is more than £8 billion. Members might be surprised to hear that some 40% of MOD contracts are single source—allocated without any competition—of which only 15% to 20% are subject to the Single Source Regulations Office.
I understand that the regulations make three changes, two of which expand the scope of the SSRO with regard to aspects of international co-operation and some intelligence activities—those that do not impinge upon the national security of this country. The third is about extending the exclusions to the regulations where there is a change of contract, which is perfectly understandable. What percentage of contracts that are currently not subject to the SSRO will now be brought under that office’s responsibility? I ask that because when a Minister in the other place, where the regulations have already been dealt with, was asked the same question he was somewhat confused and thought that his notes were unclear. Might the Minister now, or in writing, clarify that, so that we have firmly on the record exactly what percentage we are talking about?
The second question about the two exclusions that are coming to an end. The regulations state that there should be a voluntary agreement between the MOD and the supplier. I find that strange, because as I understand it, a regulation is either in place or not in place; it either applies to people or does not apply. It seems strange that there is a process whereby there is a voluntary agreement on whether the regulations are to apply. I will quote exactly what the explanatory memorandum says, at paragraph 7.5:
“The proposed change is that contracts made within an international defence framework will be subject to the legislation if the MOD and the supplier agree.”
That is surely very uncommon. Legislation either applies or does not apply.
My hon. Friend is making a very important second point. Is he aware of whether the Department, in its public procurement principles, has a commitment to pay the living wage both outside and within London? I know that the Minister is aware of my questions in that regard. Also, is there any provision in defence contracts, given that this is public procurement, for the suppliers to employ apprentices? Could the Minister outline the situation in that regard in his response?
It will be interesting to hear the Minister’s answer to those two points. I think I know what the reply will be. The fact is that the Government’s so-called defence industrial strategy is strong on rhetoric but very weak on substance. That is a leitmotif through all our criticisms of what the Government are doing on defence procurement.
Let me return to the point that I was making about the apparently voluntary nature of the legislation. Of course, that has implications, because, as the explanatory memorandum goes on to say:
“The need for agreement from both parties may limit increased take-up to an extent.”
How much is “to an extent”? It is so imprecise that it is almost vacuous. If all suppliers say, “Well, that’s very interesting, but we’ve decided not to apply it,” will the Government’s response be, “Well, fair enough. That’s okay. It’s voluntary anyhow”? That is my second question—will the Minister explain the logic, if there is some, behind that?
My third question is about the impact that the modified regulations will have on business. Common sense tells me that there is bound to be an impact on how businesses operate, how much they charge and how they relate to the Ministry of Defence, so I am surprised to see that the explanatory memorandum, under the heading “Impact”, says:
“There is no impact on business”.
Again, is that because this is voluntary and the anticipation is that everyone will ignore it, as it is not worth the paper it is written on? I will be interested to hear the Minister’s explanation of that.
My fourth point is that, as the Minister said, the Government have conducted a review of the legislation, as they are obliged to do under the 2014 Act, but this explanatory memorandum says that they will bring forward a number of changes to be set out in some detail in the Command Paper in the autumn. If that is the case, why are we seeing these modest changes now? Would it not have been better to wait for the Command Paper to be published in the autumn? Then we could have dealt with all the changes that stem from that. It seems very much that this is a partial case of cart before horse. I ask the Minister for his response to that. If there are pressing reasons to bring these modest changes forward, what are those reasons? They are hinted at in the regulations, but the explanatory memorandum does not explain them.
My fifth and final question is on a contextual point. It is interesting that the papers that were circulated for this Committee are a little different from the papers that are at the bottom of the room today. One change that I have quickly noticed is to how the document, the explanatory memorandum and the amended legislation will be distributed, and how much the charge will be for the documents. The document circulated to Members—I ask them to listen carefully to this—states that
“the overriding purpose of this instrument is to give effect to the policy on exclusions, not to remedy the deficiencies, which were not identified in the consultation as matters which cause concern or confusion to users, and would not in themselves have warranted a separate instrument. Therefore it has been decided not to make the instrument free of charge to known recipients of the SSCRs.”
I challenge anyone to explain to me what on earth that means. I have heard of double Dutch, but that is convolution in the extreme.
I am sure the ministerial team have read through all the documentation that the civil servants have sent out, but how on earth could something so convoluted have been passed? I respectfully suggest that all those involved in writing legislation and explanatory memorandums be sent on a plain English course not only so that parliamentarians understand what is being said, but, more importantly, so that the people outside who have to adhere to the regulations understand what is being said. I am sure the Minister cannot hope to explain the quote I gave, because I do not think any reasonable person can, but may I ask for a reply in writing on the last point in particular? With that, I will be able to explain to constituents how much will be charged and how the document will be distributed in plain, intelligible English.
I call Mr Ellwood.
Thank you, Mr Bailey—I was waiting for the deluge of other Back Benchers leaping to their feet to participate in this important debate.
I thank the hon. Member for Caerphilly for his comments and his perspective on the resignation of the former Minister, my hon. Friend the Member for Aberconwy (Guto Bebb). We all wish my hon. Friend well and thank him for his service and what he did. The hon. Member for Caerphilly sought perhaps to make fun of the fact that he had resigned, but the Government are yet to match the more than 100 resignations we have seen in the Opposition. There is one Member sitting on the Opposition Back Benches now who resigned. If we want to compare notes on resignations, Labour should perhaps keep quiet.
The hon. Gentleman says he resigned. As far as I can see, he is still on the Front Bench, so I do not know where his resignation took him. Obviously it did not have the impact he wished. Perhaps his services were desired again because so many others had resigned that the Opposition needed a chance to revisit some of them, saying, “Please come back, because we have got nobody else.” Before we go any further down that cul de sac, shall we return to the business at hand, Mr Bailey?
I think that would be a good idea.
I am pleased to gain your approval.
The hon. Member for Caerphilly wished me well in momentarily taking over this portfolio. Like many of us with a desire to see the best for defence, for our armed forces and for Britain, I take a huge interest in the procurement process. I certainly feel able, competent and enthusiastic to step into the shoes of the former Defence Procurement Minister.
The hon. Gentleman spoke about investment in procurement and touched on the fact that there is to be some £180 billion of investment over the next 10 years. That is an indication of the Government’s commitment. We want to see an advance in equipment for our armed forces to ensure that we remain a tier 1 nation when it comes to our defence posture. That is partly why we undertook a capability review and the defence modernisation programme, which is coming to its conclusion.
The hon. Gentleman asked a number of questions, particularly about why we have single source contracts. There are two principal reasons for that. First, some of the major procurement contracts, such as submarine build, simply go to a single contractor. There is only one that steps forward, perhaps for security reasons or otherwise, so there will be a single source in those cases. In other cases, perhaps at smaller levels, the economic supplies limit who steps forward, such as with our maritime patrol aircraft. Nevertheless, I hope he appreciates that there is not always the competition we want. If there is not the competition, we should have robust rules to ensure that taxpayers’ money is properly spent.
The hon. Gentleman talked about the impact on businesses. There are a number of impacts. First, there is value for money, where we have seen in the percentage drop in the baseline profit rate that I mentioned in my opening comments. We have more efficient procedure, and there is less confusion as to what the process is. There is no negative impact on business—that is what the guidelines were hinting at. The measure will not require any further red tape for business to be concerned about.
The hon. Gentleman talked about the Command Paper. We are preparing that now simply because it is part of the thoroughfare of business that we need to get through. We do not wish to wait until the autumn. I certainly hope that the Command Paper will be published as soon as possible. It is part of the wider timetable that we must honour, which is about joined-up Government and ensuring that we meet our responsibilities. That is why the regulations are being put forward today.
The hon. Gentleman put a couple of other detailed questions to me, on which he invited me to write to him. If I may, I will do exactly that. With that, I seek the Committee’s approval for the regulations.
Question put and agreed to.