Before the Minister moves that the first order be considered, I remind noble Lords that, in the case of each order, the Motion before the Committee will be that it considers the order in question. I should perhaps make it clear that the Motion to approve the order will be moved in the Chamber in the usual way.

rose to move, That the Grand Committee do report to the House that it has considered the Post Office Network Subsidy Scheme Order 2007.

The noble Lord said: The Government announced their proposals for the future of the post office network to the House on 14 December and are currently considering responses to the national public consultation which ended on 8 March. Final decisions are expected to be announced later this month.

At the end of December there were 14,295 post offices in the UK. Only around 470 are Crown post offices owned and operated by the Post Office. The remaining branches—close to 14,000—are operated by sub-postmasters and sub-postmistresses as private businesses. Historically, branches have been located where the sub-postmaster has chosen to set up business rather than as a result of a strategic decision by the Post Office. The result is that in some places many branches are competing for the same customers and it is becoming increasingly difficult and expensive for Post Office Ltd to provide the service. The big problem is that people simply do not use post offices as they once did. Some 4 million fewer people are using post offices each week compared to just two years ago.

The Government recognise that the post office has a vital social and economic role in communities across the country. That is why we will continue to support a national network of post offices, as outlined in our proposals for the network, and why we are looking to continue to subsidise Post Office Ltd to continue to maintain uncommercial offices that it would otherwise close.

The Government have invested more than £2 billion since 1999 to support the network. This includes the annual social network payment of up to £150 million that was introduced in 2003 and which we are now looking to extend until at least 2011. We accept that many branches will never make a commercial return for Post Office Ltd but we are committed to maintaining a national network and understand the need to continue to help Post Office Ltd maintain branches in places that it would not consider commercial.

When the social network payment was first introduced, government were able to utilise the reserves that had accumulated in Royal Mail for the benefit of the network. We directed Royal Mail, through provisions in the Postal Services Act 2000, to put money into a special reserve specifically to meet the costs of maintaining the rural post office network. We announced an extension of the social network payment in September 2004 which now runs until the end of March 2008. The first year of this extension is almost upon us and payments to date have been made by continuing to utilise the Royal Mail reserves. However, noble Lords will be aware that in an another place my right honourable friend the Secretary of State announced a funding package for Royal Mail in May 2006 that included the release of the remaining reserves to fund an escrow account securing Royal Mail’s pension fund obligations. Funding of the social network payment must now, therefore, come direct from government and the order we are discussing today provides the legislative means by which these payments can continue to be made.

Let me provide some detail around the terms of the scheme. The scheme enables the Secretary of State to make payments to Post Office Ltd of up to £160 million per annum. This subsidy will assist the company to continue to provide services through a national post office network. In the absence of the subsidy, it is likely that Post Office Ltd will take commercial decisions to close a significant number of post offices in order to achieve profitability. In determining the need for subsidy payments, the Secretary of State shall have regard to continued provision of services through a national network of post offices. The new access criteria proposals outlined in the post office network consultation document have been designed to ensure that nationwide access to post office services is maintained.

The proposed access criteria include provisions to protect customers in deprived urban areas and remoter rural areas. The Post Office will also provide services in different and more imaginative ways to better serve its customers’ needs. The way that postal services are provided will also change. Government support will enable the Post Office to open at least 500 new outreach locations to provide access to services for smaller and more remote communities using mobile post offices and post offices within other locations such as in shops, village halls, community centres or in travelling mobile vans. In some cases it will be able to deliver services directly to people’s homes.

The current subsidy relates solely to the provision of a rural network. The Government believe that the needs of users of post offices in other parts of the network merit similar protection. That is reflected in the broadened scope of the proposed access criteria. Payments of subsidy from April 2008 will take into account the access criteria resulting from the consultation. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Post Office Network Subsidy Scheme Order 2007.—(Lord Evans of Temple Guiting.)

I thank the Minister for explaining the order. The future of the Post Office, as he said, has been debated at some length in both Houses of Parliament in recent months. We should all be very sad that this great institution finds itself in its present great need of funds. We all understand that we have a network of post offices around the country that provides a valuable service—even, as the Minister said, a vital service—to people living in towns and the countryside, but that we also have an entity, at least in its current guise, that simply cannot survive without substantial subsidy. No one pretends that there is an easy solution.

The order sounds comparatively simple; as the Minister said, it allocates up to £160 million to Post Office Ltd by subsidy. The underlying matters are more complex and we would like some information. First, is the payment of up to £160 million a one-off payment, with future payments to be debated each year; or, importantly by assenting to the order, are we agreeing that up to £160 million be paid to Post Office Ltd each year for five years?

Secondly, as my honourable friend the Member for Wealden said in the equivalent debate in the other place on 27 February, the Government have talked of a package of £1.7 billion over the next five years. Assuming that the answer to my first question is that we are being asked to agree to up to £160 million per year for five years, I believe that that would account for up to £800 million in total. Can the Minister give us a breakdown of the remaining £900 million or more of the package and tell us how each bit will be used? Thirdly, my honourable friend asked specifically whether the redundancy packages proposed for sub-postmasters would come from the sum of up to £160 million per year or from elsewhere in the fund. As the Minister in the other place failed to address my honourable friend’s questions, I should be grateful if the noble Lord would try to do so here.

Fourthly, given the brevity of the order, which simply provides up to £160 million to Post Office Ltd, perhaps I may ask specifically where that money is going. Fifthly, Article 2(2), under the heading “Scope of the Scheme”, states:

“The Secretary of State may make payments to [Post Office Limited] under this Scheme in respect of the costs to the company of establishing public post offices”.

The use of the word “establishing” seems an odd choice because it sounds like there are to be new post offices. I might have expected to see the word “maintaining” used in place of “establishing”. Perhaps the Minister could explain this. If the Government delegate entirely these decisions to Post Office Limited so that it simply gives out the money with no specific knowledge of how it is to be spent, would they not be failing in their duty to taxpayers?

Sixthly, how does this subsidy form part of an overall long-term strategy for the Post Office? What is that overall long-term strategy? Seventhly, has anyone who is appropriately qualified and independent of Post Office Ltd performed a thorough review to ensure that no stones have been left unturned to find alternative services which could be sold through the post office network? What, for instance, remains the blockage to the Post Office being freed up to offer the services of businesses that compete with Royal Mail, and free at least to hold packages for later collection by intended recipients who were out when delivery was attempted? That would avoid the nonsense of postal companies taking those packages all the way back to their depots.

Lastly, given that a post office closed in rural villages is not, for the elderly and the poor, easily substituted for by one a few miles away, what plans do the Government have to deal with the problem of access for those people, who are often unable to drive or use the internet? The Minister in the other place referred to ensuring that nobody has to travel an unreasonable distance to a post office. What distance does the Minister consider unreasonable for someone who does not drive and who lives in an area where there is inadequate public transport?

As I said when I began, we do not pretend that there is an easy solution to the problem. I look forward to the Minister’s answers to these questions and to those put by other noble Lords.

I agree with almost all the questions asked by the noble Lord, Lord De Mauley, and I look forward to the Minister’s response. The approach taken by both the Minister and the noble Lord indicates the importance of this overall issue because we are considering an extremely important order—but one which is entirely straightforward. Were it not for the overall interest in the issue as a whole, clearly it would go through on the nod; and no doubt it would have done the same in the other place. However, we should not lose the opportunity this afternoon to highlight the serious problems that the order has been designed to deal with. Unfortunately the days are long since gone when steelworkers made redundant in the Midlands used part of their redundancy money to invest in the sub-post office network and then very effectively operated those offices for many years along many of the motorway corridors. Would that those days could return, but I think we all know that the current network with its 14,000 post offices and sub-post offices is no longer viable without government subsidy of the kind to which this order relates.

I want to add two or three general points to the remarks made by the noble Lord, Lord De Mauley. First, government statistics have clearly demonstrated that, over large areas of the country, operating a post office or sub-post office business alone will not be commercially viable. In many areas of the country, no one appears to be able to run a viable commercial operation doing that. Therefore, for the post office network to survive, other activities must take place in those post offices and sub-post offices. The most successful sub-post offices are those with the most successful commercial operations going alongside the post office. Of course, that ignores the social function of a post office in many areas of the country. In many villages in this country, the post office is now the only surviving commercial operation in the village and for a number of people, especially the elderly, that building is a source of social cohesion in the village. Without their visit to the post office, many of the elderly will never see anyone else in the community in the course of a week. It behoves the Minister to indicate whether, in the distribution of that subsidy, the social function of the post office will be reflected.

The second and final issue that I want to raise, which I touched on in a debate in the Chamber, is whether the Government are satisfied that sufficient creativity is going into how sub-post offices, in particular, can continue. I was very much encouraged by the section of the Minister’s briefing that referred to some imaginative ideas and hope that he can reassure us that in allocating subsidy, there will be some joined-up thinking across government departments. The Minister should be aware of various suggestions made by Age Concern for community use of post offices jointly with the post office network. There is concern that responsibility for making that happen will fall between the relevant Ministries: the DTI will clearly have to be involved but so should Defra, which can make small grants to assist such community involvement. Following the question posed by the noble Lord, Lord De Mauley, will the Minister confirm that the Government will take into account possible cross-departmental initiatives to try to maintain the post office network?

I have an interest, which I declare, as a member of the Post Office Superannuation Scheme. My only point follows that made by the noble Lord, Lord Razzall. In taking their decisions, the Government must engage in joined-up thinking, seeking the optimum answer for the public purse, rather than sub-optimising in terms of the budget of one department. I have asked previously what estimate the Government made before making their decision on social security payments of the consequential subsidies that would be needed for post offices. I have asked that more than once. Perhaps one day there will be an answer, but not today.

That was an interesting brief debate. I shall start by picking up a couple of points made by the noble Lord, Lord Razzall. He said, and we all agree, that the post office network is of the utmost importance and that imaginative solutions must be found not only to extend the network but to ensure that no one in our country is deprived of access to it. Years ago, I was chairman of the Library and Information Commission, which suggested that post offices ought to be introduced into the public library network. That idea was not taken up, but I am delighted to hear that there is a pilot project in Northern Ireland, where the post office is in the library. It will be very interesting to see what happens there. I have had long discussions with people about the post office and its place in society. One of the first Questions that I answered when I arrived here was on the Post Office. I can assure noble Lords that there is cross-departmental discussion on this problem, which affects everyone. It is of vital importance, and imaginative solutions will come through for the problems that are in the forefront of our minds. They will be dealt with.

I was asked a number of questions, and I will try to go through all of them. If I fail to answer any, we will of course write. The noble Lord, Lord De Mauley, wondered if this one-off payment would be debated each year. The answer is that we are agreeing up to £160 million each year to 2011, but the order allows payments to be made beyond that time. It is a fairly long-term commitment.

What is the detail of the £1.7 billion funding package? As I said, we are proposing to invest up to £1.7 billion, subject to European state aid approval, until 2011, but it is impossible at this stage to determine in detail how this proposed money will be utilised. The intention is to use the money to continue the Government’s annual subsidy, restructure and modernise the Crown network, compensate sub-postmasters who exit the network as a result of restructuring and cover losses in the network. The exact breakdown will depend on how Post Office Ltd implements the necessary restructuring of the network to meet the framework set by the Government. The noble Lord, Lord De Mauley, asked whether redundancy payments are part of the £160 million. They are not; they are part of an additional package.

The noble Lord also asked why the word “establishing” is used in paragraph (2) on page 2, rather than “maintaining”. The answer is that the restructuring of the Post Office network may involve some post offices being relocated. The setting up of some new offices is intended to be covered by subsidy funding as appropriate, so the wider word “establishing” was used in this context. Paragraph (1) on page 2 covers maintenance.

What, asked the noble Lord, Lord De Mauley, is the long-term strategy? We have proposed a strategy that ensures access to a nationwide network. Part of that is a reduction in some size of the network that will help the sustainability of the remaining network.

The noble Lord also asked what the options are for introducing new business to post offices. There are a number of initiatives in hand. The government proposals support Post Office Ltd’s efforts to develop new financial services products, building on its success already in this area; for example, as leading suppliers of foreign currencies. Government support so far includes some £500 million investment in Horizon, enabling the Post Office to develop its financial service business by opening up its counters to up to 20 million bank customers and becoming the UK’s leading provider of foreign exchange services. Post Office Ltd will expand its financial services offered to customers, including a rollout of 4,000 free-to-use ATMs across the country, and is looking to develop new market and business opportunities among internet companies and other mail operators. Finally, an opportunity is being trialled to provide customers with the ability to pick up parcels they have ordered through mail order companies, or via internet services, from Post Office Counters. To go back to the point made by the noble Lord, Lord Razzall, a lot is happening. We are not just looking at a static entity; we are trying to make it as relevant as possible and give it business depth.

The noble Lord’s final question was: what is a reasonable distance for people who do not drive to travel to their post office? Our proposed criteria ensure that that nationwide network will remain. We sought views in consultation on what people thought of our access criteria. We cannot comment at the moment on that as we are waiting for the government response on the consultation that has just closed, but that question will be an important part of it when it is published.

The noble Lord, Lord Razzall, asked whether the subsidy would reflect the social role of individual sub-post offices. Our package reflects the social role of the network. The continued subsidy being considered today recognises that the social role is of utmost importance.

The noble Lords, Lord Razzall and Lord Dearing, asked for creativity, inter-departmental initiatives and evidence of fresh and imaginative thinking on the Post Office network. I have given a few examples of that and Her Majesty’s Government continue to look at the scope for government initiatives at central and local level to utilise post offices as a service delivery channel, but we also need to be able to offer choice to citizens on how they can access services—for example, electronically.

The noble Lord, Lord Dearing, asked what assessment has been made of the associated costs of moving government business away from post offices. The Government recognise the important social and economic role of post offices, as I have said many times in the past half-hour, and want to maintain a network with national coverage. We need to recognise that it is not a question of offsetting the costs of paying benefits against the costs of the network. We acknowledge that post offices that can never be commercially viable but which play an important social and economic role will continue to need to be publicly funded.

The final question of the noble Lord, Lord De Mauley, was whether other mail operators could use post offices. Any mail operator or online business that is serious about using the post office network should approach Post Office Ltd, which will give it a sympathetic reception. If a commercial agreement cannot be reached the operator can take that up with Postcomm for it to consider. I hope that I have answered all the questions. If not, I will come back later.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Renewables Obligation Order 2006 (Amendment) Order 2007.

The noble Lord said: The Government are bringing forward this amendment order to make some changes to the renewables obligation. There is strong and indisputable evidence that climate change is happening and that manmade emissions are its main cause. We have set ourselves some tough targets with a goal of putting ourselves on a path to cutting the UK’s carbon dioxide emissions by 60 per cent by around 2050, with real progress by 2020. Our domestic targets are, of course, now further reinforced by the EU agreement last week to source 20 per cent of EU energy from renewables by 2020. The Government regard the development of a range of renewable energy sources as playing a vital element in contributing to this target and so addressing climate change; the renewables obligation is our key mechanism for achieving that.

The renewables obligation places a requirement on electricity suppliers to source an increasing proportion of their sales from renewable sources. Since the introduction of the renewables obligation in 2002 we have more than doubled renewable generation and, year on year, we are seeing increasing amounts of new capacity coming through. In 2004, there were 240 megawatts of new wind build. That increased to 446 megawatts in 2005 and to over 630 megawatts in 2006.

Neither is it all about wind. Last year work started on the 100 megawatt Glendoe large hydro scheme, the first large-scale conventional hydro plant to be built in 50 years. We are also seeing a newer type of technology being utilised, such as the building of new dedicated biomass power stations in Lockerbie and Teesside. These will provide around 70 megawatts and more than 300 jobs between them. It is schemes such as these which when built will contribute to our renewable targets and tackling climate change.

I thank the Minister for explaining the order at considerable length—I am sure that we have all benefited. Renewable sources of energy clearly have an essential role to play in reducing the carbon emissions that cause global climate change. We on these Benches are committed to supporting the development of a viable renewable energy sector in the United Kingdom and, indeed, to encouraging the development of renewable generation sources worldwide.

The renewables obligation—the Government’s present approach to supporting renewable sources of energy—has increased the amount of United Kingdom electricity coming from renewable sources, which is to be welcomed. However, the policy has not been without its problems. Perhaps the Minister could explain why the renewables obligation presently costs up to seven times more than other government policies per unit of carbon abated and why the Government have hitherto ignored micro-renewable energy sources.

Furthermore, it is widely acknowledged that the Government have created perverse incentives whereby generators deliberately limit the amount of renewable electricity they produce. What action are the Government proposing to take to amend the incentive arrangements so that those practices cease?

Clearly, there remains an urgent need for improvement. We are looking at ways of reforming the renewables obligation so as not only to put these problems right but also to develop renewable energy sources faster.

I have only a couple of further questions for the Minister at this stage and would be most grateful for answers. It appears from note 4.1 to the Explanatory Memorandum that a licensed electricity supplier, producing electricity from a renewable source, will be able to discharge its obligation by producing renewable obligation certificates relating to renewable electricity, which is not supplied to customers. From what the Minister said, I think I understand that this is so that a producer who produces renewable energy for its own use is not adversely prejudiced by the system. That seems right and fair. After all, it would mean that the producer is not using electricity which otherwise might have come from a non-renewable source. Will the Minister confirm that I have got that right and help me with this question as well? How will the order prevent a situation in which a licensed electricity supplier, whose main business is the production of power from a fossil fuel source, might install, say, a wind-powered turbine, in a place where there is adequate wind to produce energy only at times of day when there is no market for it? Although it is a completely spurious project, the company is nevertheless able to claim its full allowance of ROCs.

Paragraph 7.2(f) of the Explanatory Memorandum, which I think expands upon Article 3(3) of the order—the Minister spent some time on this—provides that a fuel which is not biomass is to be treated as biomass when it is used with at least one other fuel and 90 per cent or more of the energy content of those fuels is derived from biomass. Am I right in deducing that the purpose of this is to allow the use, alongside biomass, of other energy sources such as straw, which, although they are not defined as biomass—for example, because they are not grown specifically for electricity generation purposes—are nevertheless renewable? Whether or not that is the case, how does the order prevent such materials as—to take an extreme case—diesel, which might have become slightly polluted so that it cannot be used for its intended purpose, being used legally under this loophole?

I reiterate that we are committed to and supportive of the development of a viable renewable energy sector. I look forward to the Minister’s answers to these and other questions.

We on these Benches also welcome the order. All these points have been raised at earlier stages, especially when we debated this last time. It is good to see that the Government have taken on board most of those points and answered many of them, especially on co-firing. It was not seen as a priority as I believe the Government thought that coal would not be a primary source of energy in the future. But as we have seen, especially with the rise in the spot price of gas, co-firing has become a real issue. Therefore, the introduction of co-firing using biomass is a very important way of reducing carbon emissions.

I have one question on this. The issue with co-firing is that if biomass and energy crops are used, they would flood the market. What progress has been made on the banding discussed with the industry—namely with the big power stations such as Drax, the country’s major polluter, although it is trying to utilise the largest co-firing element—and will that banding affect the type of biomass? I ask that because waste biomass is around three times more expensive than coal. Indeed, energy crops can be five times as expensive.

The other points on microgeneration are particularly helpful, especially those concerning buyback. When I looked into building a small turbine on a grid connector system, I found it incredible that although I would be able to sell energy to the grid at 2p per kilowatt hour, I would have to buy energy back at 5p per kilowatt hour. I understand that the distributors have some costs to meet, but it is rather unfortunate that we have such a major impediment in the system. We support the order.

I am grateful to the noble Lords, Lord De Mauley and Lord Redesdale, for their questions. This is, as I said, a rather technical order and I may not be able to answer all the points raised, but a letter will deal with any points that I fail to respond to.

The noble Lord, Lord De Mauley, asked why the RO costs seven times more. The changes to the RO announced in the energy review are intended to clarify the Government’s long-term ambition for renewables and so create greater certainty for ROC prices by extending the level of the RO to 20 per cent. Additional targeted support is also being provided for emerging technologies and we will promote achievements towards our long-term targets by providing different levels of support for different technologies, as well as by managing costs to the consumer. That response probably does not answer the question of why the RO costs seven times more, but the detailed explanation will be set out in a letter.

The noble Lord went on to ask about the removal of the requirement for sale in buyback agreements. This removal is for administrative simplification. Obtaining sale and buyback agreements can be difficult, particularly for small generators. ROCs will now be issued for own consumption without the need for a sale and buyback agreement. We are aware of the concern that this may impact on ROC prices, but we believe that it will be very limited. Less than 1 per cent of total electricity sales are accounted for in sales and buyback agreements.

The noble Lord also mentioned microgeneration, as did the noble Lord, Lord Redesdale. The Government are fully committed to promoting microgeneration. In our view, which I know is shared by many noble Lords, microgeneration has a significant role to play in meeting our energy policy objective of sustainable and secure energy supplies for all. In the energy review published last July the Government announced a comprehensive review of the incentives and barriers that impact on distributed electricity generation. In March 2006, we published our first ever government strategy on the promotion of microgeneration. We launched the new carbon buildings programmes in April 2006, offering £30 million in capital grants over three years to successful applicants, with a further £50 million made available in the 2006 Budget. That demonstrates the Government’s commitment to the importance of microgeneration.

The noble Lord, Lord De Mauley, also made the point about the development of non-viable wind farms. The RO provides support for megawatts of electricity produced. It is up to the market to decide whether a wind farm is economically viable.

The noble Lord, Lord Redesdale, asked about consulting on co-firing. The Government are consulting widely with industry on banding, RO, including different types of support for different forms of biomass used in co-firing, and particularly on more support for energy crops. As I said, this is a technical order. A number of questions have not been answered but, at the beginning of next week, we will get a letter to all noble Lords who have taken part in the debate.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Foyle and Carlingford Fisheries (Northern Ireland) Order 2007.

The noble Lord said: The purpose of the draft order is to give effect to the implementation bodies order by providing the Foyle, Carlingford and Irish Lights Commission with powers to exercise the aquaculture licensing and inland fisheries development functions conferred upon it under the agreement.

It may be helpful if I comment briefly on the order and then say a few words about the detailed provisions. The Foyle, Carlingford and Irish Lights Commission is a north/south implementation body with responsibility for aquaculture and marine matters. It exercises its functions in the Foyle and Carlingford areas through the Loughs Agency.

The draft order proposes to introduce a new aquaculture regulatory system within the Foyle and Carlingford areas under the control of the Loughs Agency, and will bring the existing unregulated aquaculture activity in Lough Foyle within the regulatory system. The draft order also proposes to update certain existing provisions of the Northern Ireland (Foyle Fisheries) Act 1952 in relation to the conservation and protection of inland fisheries to bring them into line with other Northern Ireland and GB fisheries legislation.

I will now explain briefly the main provisions of the draft order. Article 3 establishes a new aquaculture licensing system in the Foyle and Carlingford areas under the control of the Loughs Agency. It also sets out the procedures for applications for aquaculture licences and the determination of applications and provides for aquaculture licences to be granted subject to conditions. It also creates new aquaculture offences including engaging in aquaculture without a licence or otherwise than in accordance with the conditions of a licence. Article 3 also sets out provisions for the variation, revocation, transfer and surrender of aquaculture licences.

The draft order also provides for the establishment of a Foyle and Carlingford aquaculture licensing appeals board to which aggrieved persons can appeal against decisions by the Loughs Agency and sets out the procedures for the making of appeals.

Article 4 extends the definition of fish used in the Northern Ireland (Foyle Fisheries) Act 1952 to cover the regulation of wild oysters, mussels, sea bass and tope within the Foyle and Carlingford areas.

Article 6 will enable the Loughs Agency to regulate or prohibit the sale of rod-caught fish as a conservation measure. This provision will therefore assist the Loughs Agency in its efforts to protect salmon stocks under threat from poaching. Similar provision is also made in respect of the rest of Northern Ireland. Article 8 provides the Loughs Agency with the powers to deliver its England fisheries development function by enabling it to acquire fisheries with the agreement of the owner for the purposes of improving and developing facilities for angling. The provision should therefore enable the agency to improve the quality of the angling product in the Foyle and Carlingford areas for both local anglers and tourists.

The remaining articles deal mainly with the updating of the Foyle Fisheries (Northern Ireland) Act 1952. The existing provisions that are updated relate to the conservation and protection of inland fisheries in the Foyle and Carlingford areas. That brings them into line with other fisheries legislation in Northern Ireland and Great Britain. The draft order is an important piece of legislation that will enable the Loughs Agency to fulfil its range of functions under the Implementation Bodies agreement. By doing so, it will help to ensure that both agriculture and the wild fisheries in the Foyle and Carlingford areas are managed and developed in a sustainable manner. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Foyle and Carlingford Fisheries (Northern Ireland) Order 2007.—(Lord Rooker.)

I thank the Minister for making his Bill team available to me this morning. I had a useful discussion with them. In principle, I support the order. It is a necessary step forward. Foyle and Carlingford are important inland waterways—well, they are not really inland waterways, but sheltered waterways. Fishing, fish farms and so on should be protected. The legislation for that urgently needed updating, and by and large this order does the job pretty well. My concern would be the definition; where the lines are drawn on the map, or on the charts, for British waters as opposed to Irish waters. I understand that this is the responsibility of a cross-border body, but we need assurance that the Republic is legislating in line with us and will be as active in policing the new legislation because, unless both sides of the border are going to work together, it is a waste of time one going it alone. I would like some real assurance that the Republic is as enthusiastic about this as we are, is passing similar legislation and will police it strongly and diligently. Otherwise, I support the order.

I too thank the Minister for introducing the order. Lough Foyle and Carlingford Lough have been designated as special protection areas under the EU birds directive. Both sites support inter-tidal areas but are of particular importance for wintering water birds, while Carlingford Lough is also important for breeding terns. Although the open-water areas of the loughs have yet to be designated, many of the qualifying species are reliant on open-water areas. We believe that the development of mariculture in the sea loughs should be especially sensitive to these birds and their habitats.

There is a need for assessment of applications for licences under the Conservation (Nature Habitats, etc.) Regulations (Northern Ireland) 1995. We support the licensing and regulating of mariculture as that ensures more environmentally sustainable management of marine resources. We are supportive of the proposal to introduce a licensing scheme for Lough Foyle and improvements to licensing at Carlingford Lough. We would like to see the introduction of comprehensive marine legislation in Northern Ireland to secure the protection of our marine environment. In particular, we wish to see the development of a UK marine Bill enabling a Northern Ireland Government to introduce subordinate legislation that ensures the delivery of marine environmental objectives in Northern Ireland.

The development of mariculture in sea loughs, as well as that of other uses of the marine resource, needs to be co-ordinated and planned to minimise impacts on the marine environment. We believe that new legislation should include the introduction of marine spatial planning—MSP—the legislation underpinning the process and focusing delivery at the regional seas scale. Within sea loughs sub-regional MSPs should be developed that nest in the regional MSP. It is vital that plans for mariculture development must be developed with due consideration of future plans to develop MSP within Northern Ireland, and any powers offered to the FCILC must be integrated fully into future MSP.

Can the Minister reassure us that mariculture activity in Lough Foyle and Carlingford Lough will be co-ordinated and planned to minimise the impacts on the rich marine environment in these sea loughs? Secondly, in its response to the consultation we noticed that the board of the Foyle, Carlingford and Irish Lights Commission raised the issue of appeals. Can the Minister clarify why an appeals mechanism is not necessary in this order? Having said that and asked those two questions, we support the order.

I will be very brief. I am basically in favour of the legislation, as we were in favour of creating the agency in the first place. My question is very simple. The Explanatory Memorandum states that the primary consultation on this order took place in 2000. To have an interval of seven, or six and a half years, between the consultation and bringing forth the order is unusual, even for the Northern Ireland Office. Can the Minister explain why the delay took place? I rather suspect that in this case it may have been due to the difficulty in getting our partners south of the border into line. Perhaps the Minister could elucidate.

I feel rather guilty, in so far as I had intended to pay considerably more attention to the order when it came forward. Unfortunately, other matters prevented me. However, I am particularly concerned that to facilitate the southern Government, almost as though it was a dictation, the final consultation period was curtailed from the normal 12 weeks to eight weeks. It may be that everything was settled and in order, but I do not have the same confidence as those who drafted the order appear to have in the Administration of the Irish Republic.

The Minister will be aware that for some considerable time, amounting to years, I campaigned to encourage the authorities in the south to come into line with other North Atlantic nations in respect of banning drift netting for salmon. The Minister at that time, Pat the Cope Gallagher, resisted all persuasion, because, bluntly, he adopted a parochial approach, a Donegal approach, to the problem. I would like to be reassured that in respect of the preservation of fishing stocks in the sheltered waterways of Carlingford and Foyle, we will not be impeded by any reluctance on the part of the southern Government to play their full part. We all know the extent to which North Atlantic salmon stocks have diminished and also that Irish drift netting was increasing its catch when other northern European countries were endeavouring to reduce the damage being done. In that respect I hope that we shall have a categoric assurance from the Minister on the co-operation that we are likely to receive from the Irish Republic’s Government.

In closing, I hope that the cross-border body that is being given responsibility will not be packed with what I shall crudely call “yes” men and women, but that its membership will comprise people who have a genuine knowledge of, and interest in, the conservation of fishing stocks.

I shall speak on a similar note to the noble Lord, Lord Maginnis. First, I declare an interest as a member of a fishing club on a tributary that runs into the Foyle. Can the Minister assure the Committee that the new order will be sufficiently robust to deal with these issues, some of which the noble Lord, Lord Maginnis, touched on, in particular the illegal netting of salmon? That has caused a lot of consternation down the years. Indeed, we had hoped that effective action would have been taken long ago to ensure that this illegal practice was stamped out. Can the Minister assure the Committee that this new legislation will be sufficiently robust to deal with that difficult issue, which has concerned many anglers down the years?

I am most grateful for the contributions. I say in passing to the noble Lord, Lord Maginnis, that I have not found that people in Northern Ireland or those I have met in the Republic are “yes” people, so I do not expect the body to be packed with such people. I can guarantee that it will not be packed with whingers. I have every confidence that we shall get full co-operation from the Government in the south. I realise the sensitivity—

The—

I have not started yet.

Indeed, but, if I might suggest, the Minister has made a rather desperate start. I would much prefer that he stick to the issue we are debating. He seems to feel that he will rouse me—and he has now succeeded—if I raise a question about the way in which the Administration works, and he defines it as whingeing. I am tired of the Minister. It seems to be the only word he has in his dictionary to insult. Let me tell the Minister—the previous time he did this I went to his office and I cautioned him. I know a lot more insulting words than “whingeing”, Minister. I am not prepared to have a lack of knowledge or a lack of understanding of what has to be presented here covered by this ridiculous nonsense. He knows that I cautioned him that I would do this. I hope that he will catch himself on and answer us in terms in which we would like to be answered. Tell us what is happening.

I do not want to have to send for a doctor. All I am asking is for the noble Lord to listen to what I say. I did not call anybody a whinger. I just answered the questions. It is not my job to answer questions in a way that people will like. My job is to answer the questions in as factual a way as I can. The answers may not be liked—that is tough. I gave an assurance that we were fully confident of the co-operation of the Government of the south.

I was about to say that I am well aware of the sensitivity of both fisheries and both loughs, simply because of the border issues, which are historic and still unsolved, as it were. Nevertheless, we are here trying to deal with protection of the environment and of fishing. It is my job to answer the questions; whether anyone likes the answers is another matter.

On conservation of the salmon stocks, the responsibility lies with the Loughs Agency. I realise that there have been difficulties concerning salmon, but the agency is subject to the direction to protect salmon stocks. That is important. There are some technical issues relating to the consultation period. As the noble Lord, Lord Trimble, said, this issue has been around for a considerable period. I make no excuses or apologies for that. As I said initially, the draft order gives effect to the implementation bodies order and it is required to be brought forward in parallel with legislation in the Republic. It is a question of matching drafts of the legislation in this place and in the Parliament of the Republic. That is why the consultation period was limited to just over eight weeks. Notwithstanding that, there was extensive consultation in 2000, including public meetings.

I am also pleased to announce that it is hoped that this will be one of the last six items of legislation—forgive me if I answer a question that was not asked. I was asked: why are we doing this now; why do we not leave it to the Assembly? There are good reasons for that: it is about time. We certainly do not want delay. I understand that this is one of the last six items to be dealt with by Orders in Council that we expect to go through this place. We are down-counting, as it were and are well into single figures.

This is a complex policy issue; there is no question about that. It has taken a good deal of discussion with the Republic to get this right and ensure that the legislation is the same. It is not just a question of getting an agreement, we have to get the same legislation. We expect the area to be policed and looked after equally on both sides. The implementation body and the powers need to be the same under the legislation in both jurisdictions. We had to develop a plan for introducing a new regulatory system that would work well in both jurisdictions.

An appeal mechanism is provided for in respect of applications for aquacultural licences. That is implicit in the order. If someone is turned down, there is a right of appeal.

As the noble Baroness suggested, the matter touches on much wider issues. The order is quite narrow but it touches on much wider issues. The Marine Bill White Paper was published today. It includes Northern Ireland; it is not as if Northern Ireland is being left out. That followed the response to the consultation. We were faced with a choice about 18 months ago. If we kept waiting for a Bill to come along for Northern Ireland, with or without devolution, we might have to wait for years. For the Marine Bill, we decided to include it in the GB legislation, so that Northern Ireland does not fall behind. It is important to protect the situation there.

On the obligation to consult, the agency is required to comply with European Union environmental legislation, including the habitats directive. There is no get-out from that: I think that the noble Baroness asked about that. The draft order confers powers on the Loughs Agency to regulate within the Foyle and Carlingford areas, which covers jurisdictions on both sides of the border. I fully accept that given the way that the border is, especially in Lough Foyle, there are some difficulties. The parallel legislation takes account of that so that we have a workable solution. That is what has taken the time: getting a workable solution in the interests of conserving the fish and improving the situation for angling and tourists—something I imagine that people on both sides of the border want.

Regarding whether the board members of the Loughs Agency have an interest in the preservation of fish stocks, we believe the agency has shown so far a real interest in conserving fish stocks. The agency also has an advisory forum, which includes representatives of all stakeholders. Having gone through the background notes, I am not aware of anyone thinking this is not practical and will not work; it is just that it has been a long time coming. Finally, there is an appeals mechanism in the order, which was the issue I had not dealt with.

I have answered some questions I was not asked, for which I apologise—whether people like the answers I do not know, but they are factual and can be subject to examination.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Electricity (Single Wholesale Market) (Northern Ireland) Order 2007.

The noble Lord said: The draft order was laid before the House on 19 February. It will enable the establishment and operation of a single wholesale electricity market. I emphasise that; the order does not relate to the retail market, but to the wholesale electricity market covering Northern Ireland and the Republic of Ireland. The single electricity market is a key building block in the development of a sustainable all-island energy market covering electricity and gas. The aim is to enhance the mutual economic and social benefits, including security of supply, from cross-border co-operation on energy matters.

Development of an all-island energy market has been a strategic policy objective since the time of the first Northern Ireland Assembly. I understand the initial work started in 1999, and that led to the signing of an all-island energy market development framework in 2004 and action to put in place the flagship element of this work, namely the creation of the single electricity market. The draft order itself is made under the Northern Ireland (Miscellaneous Provisions) Act 2006, and the Northern Ireland Act 2000. We welcome the constructive comments and common-sense approach to co-operation with the Republic of Ireland on the single electricity market that were made during the debate on the 2006 Act in June last year.

The proposal to legislate for reform of the existing wholesale markets in Northern Ireland and the Republic is set out in a Memorandum of Understanding between the UK Government and the Government of the Republic. Similar legislation has been introduced into the Irish Parliament. The principal objective of both pieces of legislation is to protect the interests of consumers. The single electricity market will bring together two small isolated markets to form a larger, more competitive marketplace. Along with improvements to both north-south and east-west electricity interconnection, the market is a sensible and practical first step towards longer-term British Isles co-operation within the wider UK/Ireland/France electricity market. The new market is set firmly in the context of the European Union’s internal market for electricity and natural gas and the growing regionalisation of national markets.

The project itself has been led and managed by the two regulatory authorities, the Northern Ireland Authority for Energy Regulation and the Commission for Energy Regulation in the Republic. They have worked closely together and with the industry to deliver the new market on time. It is an incredibly complex project, and they deserve support and commendation for their work.

The two regulators, in addition to their existing domestic duties, will be responsible for development and governance of the single electricity market. This will include common trading arrangements and licensing of market participants. Day-to-day trading will be managed by a market operator. This is being established by the two transmission system operators as a contractual joint venture.

The need to secure mutual benefits from the market was raised during consultation on the draft order. It is vital that consumers are the beneficiaries of the new market. Their interests have been paramount in the work done by the two governments and the two regulators.

The Memorandum of Understanding and the draft order make it clear that the new single electricity market should be a competitive market where there is effective rivalry between generating companies. We believe that this is in the best interests of consumers.

Maria Eagle MP, as Northern Ireland Energy Minister, has worked closely with the Irish Energy Minister, Noel Dempsey, to ensure that the necessary action is taken to deliver competition to the new market. They agreed that measures must be taken to tackle dominance and transparency in both the Northern Ireland and the southern markets.

The measures to address ESB’s dominance proposed by the Irish Government in their White Paper on energy published earlier this week are supported by the Northern Ireland Authority for Energy Regulation. The Northern Ireland direct rule Minister and I welcome the Irish Government’s commitment to opening up competition to their generation sector. It presents business opportunities for UK and Northern Ireland-based companies. But we must be realistic about how much competition can be delivered. The all-island market is still very small compared with European Union markets. While the market will cover a large geographical area, it will only be the size of Greater Manchester in terms of output and customers. It is vital to consumers who want the lights on when they turn a switch, but it is a very small and highly complex market which needs looking after as well as the introduction of competition.

This short technical order of 12 articles and 4 related schedules covers the provisions needed to get the market up and running. It was amended following the consultation exercise, but it was not possible to take on board all the proposals that were made. For example, the order was amended to cover best regulatory practice but it was not possible to include provision for a separate appeals mechanism to deal with licence modifications at this stage. This issue will, however, be considered further in light of discussions with interested parties on the existing arrangements for the single electricity market.

Articles 3, 4 and 5 of the draft order make provisions for the department or the regulatory authority to modify the conditions of licences for the generation, transmission or supply of electricity in connection with the single electricity market; the introduction of a licensing regime in respect of the function of the market operator of the market; and property arrangements schemes to facilitate the transfer of property, rights and obligations between the owner and operator of a transmission system to implement the single electricity market.

Articles 6 to 8 provide for the establishment of a special committee of the authority, to be known as the Single Electricity Market Committee—the SEM committee. It will take any decision regarding the exercise of certain functions of the authority where it considers that such functions materially affect or are likely materially to affect the single electricity market. Articles 9 and 10 provide for single electricity market-related duties for the department, the authority and the SEM committee when carrying out their functions in relation to the single electricity market. Articles 11 and 12 clarify the effect of the draft order on certain arrangements between licence holders and provide for certain minor and consequential amendments. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Electricity (Single Wholesale Market) (Northern Ireland) Order 2007.—(Lord Rooker.)

I thank the Minister for his clear brief on a complex subject. I also thank him for making available to me his official Bill Team; I had an interesting conversation with them for some time this morning, which I found very helpful. But it is a very complex subject with a number of loose ends and is a brave challenge to those who are taking it on.

In principle, I support the concept of a single market within the United Kingdom and the 32 counties. I hope that the total single market within the United Kingdom and Europe will come sooner rather than later, because it will make the position considerably more realistic. The noble Lord pointed out that the size of the market in relation to this order is extremely small, scattered and sparse.

I have a number of questions. The first thing that one asks as an inhabitant of Northern Ireland is: what will happen to electricity prices? As a business person, you are thinking of the cost base, which between the north and the south must be very different, and if both sides are to have profitable businesses working in competition, that must lead to some complex differentials. The cost base of distribution, of power, the tax implications, the revenue from customs and excise are all different. We have quite a number of seriously different cost bases that must make trying to get some sort of parity within the 32 counties either very artificial or very difficult.

My next question is, after asking what price changes are expected in the short term and given that we have seen publications and a press release stating that there will be significant savings to both sides of the border in the medium term—not the long term, I hope—will Northern Ireland in the early stages be subsidising the Republic, because I believe that the cost base in Northern Ireland is considerably lower than is currently the case in the Republic? What is being done with the current contracts between NIE and the generators, which are very favourable to them, but very unfavourable to the consumers?

That was a short list of some of my questions and concerns. Putting on my cynical politician’s hat, I would like reassurance that I am not wrong to ask whether this is being done for real business reasons, or is it just for political posturing by both Governments? Having raised those matters, we support the principle of the single market. I would feel more comfortable in supporting it in realistic terms as a UK-Franco-Irish market than covering only 32-county Ireland.

I, too, thank the Minister for introducing the order and we generally welcome it. I wish to ask about an issue raised in the other place by my honourable friend the Member for Argyle and Bute. The order creates a single wholesale market covering the whole island, but each jurisdiction will still be responsible for its carbon emissions trading schemes and renewable support mechanisms. Those are created in paragraph 6.6 of the RIA, which points out that,

“differentials have the potential to distort all-island trading and could give competitive advantage to players operating in either jurisdiction to a greater or lesser degree”.

Furthermore, a negative instrument, which takes up a rather large amount of paper, has been tabled which impacts on this order—the Renewables Obligation Order (Northern Ireland) 2007, which give powers to the Northern Ireland Authority for Energy Regulation to impose obligations on generators. Clearly, if different obligations are imposed on generators in different jurisdictions, we do not have a fair single market. Perhaps the Minister will comment on that. Otherwise we support and welcome the order.

We also generally welcome the legislation. Before getting into the substance of the matter, I want to draw attention to some terminology. Terminology on matters connected with this subject can be very dangerous. It is very easy for people to make slips, particularly when describing geographic areas. I draw attention to the interpretation article of the order which defines the single electricity market in this way:

“that is to say the new arrangements in Northern Ireland and Ireland”.

I ask the Committee to note the terminology used: “Northern Ireland and Ireland”, and Ireland does not comprehend Northern Ireland. That is entirely correct. It was a consequence of the Belfast agreement of 1998 that the changes made to the constitutional law of both United Kingdom and Ireland brought into existence a new definition in Irish constitutional law of “Ireland”. “Ireland” now means what people in the past called the 26 counties, the Irish Free State and the Republic of Ireland. Those old terms are now obsolete and the correct description of the political entity to the south of us in Northern Ireland is Ireland. Using the term “Ireland” now refers only to that entity and does not include Northern Ireland. This is the modern terminology that people should use.

I realise that people tend to repeat old terminology and easily make mistakes. I noticed that particularly when I was looking at the otherwise interesting 12th report of the Merits of Statutory Instruments Committee, which, in its concluding paragraph on this, talks about establishing unified markets for electricity and gas in Northern Ireland and the Republic of Ireland. The use of the term “Republic of Ireland” shows that the Merits Committee is still very much in a pre-1998 mindset, as indeed are some others who have contributed to this debate.

In introducing this, the Minister referred to how in Northern Ireland and Ireland there had been two small isolated markets. That is absolutely right. One of the consequences is that we in Northern Ireland were—and still are—paying the highest electricity prices of any part of the United Kingdom. Consequently, when we formed the Administration in 1999, our intention was to see what could be done to reduce electricity costs and energy costs generally. That is why our objective right from the outset was not only to have the electricity interconnector but also to have a gas interconnection.

That was extremely difficult to achieve, but we did it and managed to ensure that there would be a gas network for all of Northern Ireland. To achieve that, my colleague Sir Reg Empey had to sell the Irish Government the idea of creating a pipe network around the whole island of Ireland—that is, including Ireland and Northern Ireland—in a single network and persuade them that they would benefit by adding a second gas interconnector, which would give them stability of supply. That enabled what the Northern Ireland Office has, for its own reasons, decided to term the “single electricity market”, as though it existed in Ireland and Northern Ireland alone, whereas, as the Minister pointed out, it will essentially be a British Isles market.

Part of the reason for enhancing the electricity interconnector was to enable Scottish electricity generators to sell electricity to Ireland, where they have a shortage of generating capacity. That demonstrates how this is upgrading essentially as a British Isles market, but we have this little bit of persiflage about a single island market, a single energy market and all the rest of the terminology which the current Secretary of State has been using as though he invented it, something of great significance and to do with bringing about an all-island economy, which is also another bit of useless verbiage. It leads some people to suspect, as the noble Lord, Lord Glentoran, suspected, some political motivation, but that motivation is only in the more deluded recesses of the mind of the present Secretary of State and does not reflect reality. I hope that nobody is put off by the Secretary of State’s effusions on this subject.

The substance of the matter will be for the benefit of people in Northern Ireland and Ireland by introducing competition, more supply and, I hope, by getting prices down to more reasonable levels, which we have long sought to achieve.

I am most grateful for the contributions to this debate and have taken to heart what the noble Lord, Lord Trimble said. When I read the Merits Committee report and I looked at the notes on my speech, I thought that I understood the term “Ireland”. There are some words I have not used in the past 18 months. In fact, today is the first time I have ever uttered the term “British Isles”; it was in my notes, it was in my speech and I referred particularly to France, which is a much wider issue. Some terminology is sensitive and modified; the noble Lord, Lord Trimble, is quite right about the modification and that people have not always caught up with it. However, in describing the geography in layman’s terms, I make no bones about referring to an all-Ireland electricity market. It is an easy way to describe what we are talking about. On the island of Ireland there will be one market, with shortages in some areas. It makes common sense and business sense to know that if you turn on the switch, the lights come on wherever you may live—whether it is a rural or urban area, north or south. It is a complex issue although the principle is easily understood and, I hope, quite straightforward.

The noble Baroness, Lady Harris, asked about distortions in the tax. The difference in tax and revenue regimes may impact on the type and magnitude of the generation between Northern Ireland and Ireland. We believe that there will be minimal distortion in wholesale prices and therefore to consumers. As I emphasised when I started, it is difficult to explain the concept, but this is about the wholesale market for electricity on the island of Ireland. There is a slight difference in the retail market.

Both economies have grown in the past decade—if I refer to the north and south, then we know what we are talking about. Energy consumption is rising. I understand that 10 years ago, no electricity flowed across the border. The network interconnection allows a more efficient use of power generation, and I understand that today, some 10 per cent of Ireland’s energy consumption is imported through Northern Ireland from Scotland, as the noble Lord observed. The second north-south main electricity interconnector is due to be completed no later than 2012, and that will double the transmission capacity, increase trading opportunities and improve stability of supply.

The trading with Great Britain will continue across the Moyle interconnector. The Republic of Ireland’s planned east-west interconnector will further enhance the security of supply and competition as well as a future integration of the Republic of Ireland into a wider British Isles market. It makes sense for everybody.

Electricity price is a contentious issue, as more than one colleague mentioned. I understand that. The legacy costs associated with the long-term generation contracts put in place at privatisation are the main reason why Northern Ireland electricity prices have generally been higher than those in Great Britain. In fact, even following the recent round of tariff increases, domestic tariffs in Northern Ireland are lower than in the Republic. I will come to some figures and percentages in a moment.

The noble Baroness asked about the impact on the renewables obligation legislation. The department in Northern Ireland is committed to ensuring the continued and effective operation of the Northern Ireland renewables obligation within the new single electricity market arrangements. The introduction of the single market does have implications for both jurisdictions, including the possible impact on the renewables obligation. It is a complex area and the subject of ongoing work between the authorities in both jurisdictions.

The differential in certain costs will lead to some retail differences. This goes back to the point I was making: this is a wholesale issue and there are cost differentials between the north and the south which will lead to retail price differences. What I can say is that citizens and taxpayers living in Northern Ireland will not be subsidising the republic. In other words, we believe that both jurisdictions will enjoy mutual benefits from the market, but it will not operate as a subsidy.

On the long-term contracts between the generators, the existing contracts will need to be amended to facilitate the introduction of the single electricity market. It is anticipated that the existing commitments under the contracts will be unaffected. The single electricity market will create competitive conditions which would allow the regulator to cancel these contracts after 2010 if that was in the best interests of the consumer.

Regarding prices, here I enter a caveat: this is the wholesale electricity market, not the retail one. We believe there should be downward pressure on wholesale costs that ultimately will be passed through to retail prices. On current wholesale price projections, electricity prices on average could rise in 2008 by 0.9 per cent in Northern Ireland and by up to 3 per cent in the Republic of Ireland. There is an advantage to the north in this, but there is a historical reason for it. As I have said, I understand that the condition of the transmission system is quite different in the jurisdictions and much more investment needs to be made in the Republic of Ireland, given what has happened in Northern Ireland over recent years. However, the point to make here is that Northern Ireland consumers will not end up paying for the modernisation of the Irish electricity system. While there are mutual benefits, there has to be fairness as well.

The last point responds to the final question put to me by the noble Lord, Lord Glentoran. It shocked me somewhat when he referred to this as being “political posturing”. Given the fact that I have the background to this in my own notes, this process was started off by the Northern Ireland Assembly. Indeed, I think that the noble Lord, Lord Trimble, can confirm that. So it is hardly political posturing on the part of the Government or anyone else when, as is the case for so many of the changes and reforms taking place in Northern Ireland today, the genesis for them can be traced to the early days of the Assembly. Local politicians who had a grip on the situation were asking, “How are we going to run the show? What do we need to change in the future? We need reviews, discussions and consultations on many issues”. This is just one of those and it has come to fruition. However, it is by nature incredibly complicated.

I hope that I have responded to all of the questions put to me, but if I have not I shall certainly come back in writing. However, we should try to get as much done in Grand Committee as possible. Given that there have been no interruptions, I commend the order.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Northern Ireland Policing Board (Northern Ireland) Order 2007.

The noble Lord said: This order was laid before the House on 6 February and debated in the other place only yesterday. I will explain the background to the order and its contents before I go through some of the details, because it is important that the dates and the chronology are fully taken on board. The Northern Ireland Policing Board is one of the vital elements in the policing accountability architecture recommended in the Patten report.

The Government, and indeed everybody else involved, are very grateful to the Policing Board members, both past and present, for the key role they have played in policing in Northern Ireland. Indeed, some noble Lords have firsthand experience of the work of the Policing Board, having been members themselves. I am sure they share the Government’s view of the board’s importance to policing in Northern Ireland.

The Police (Northern Ireland) Act 2000 sets out arrangements for selecting the members of the Policing Board. The Act provides different arrangements for constituting the Policing Board under devolution and under suspension.

As noble Lords will be aware, the membership of the Policing Board consists of 19 members and is made up of two elements—political members and independent members. In accordance with the Police (Northern Ireland) Act 2000, restoration of the Assembly automatically means that the membership of the Policing Board has to be reconstituted. With the restoration of the Assembly now imminent, the Secretary of State is required to appoint nine independent members following a recruitment competition. The appointment of the 10 political members follows a specific formula set out in the Police (Northern Ireland) Act 2000—essentially the same d’Hondt formula as is used for allocating Assembly ministerial posts.

The Secretary of State launched the recruitment competition for the nine independent members on Tuesday 13 February. These public appointments, which, for obvious reasons, are some of the most important in Northern Ireland, are fully regulated by the Office of the Commissioner for Public Appointments. Noble Lords will be well aware of the political discussions in recent months. It would not have been appropriate to commence the competition until it was certain that it was required.

Given both the importance of the competition and the requirement to comply with the Office of the Commissioner for Public Appointments guidance, a competition of this nature takes some four months to complete. Therefore, there would not be time to complete the competition before the restoration of the Assembly planned for 26 March. The legislation before the Committee today ensures that the vital work of the Policing Board continues during this competition. Its provisions are needed only for these particular circumstances.

Given the uncertainty about timing, it was not possible to have an extensive consultation on the contents of the draft order. However, since the draft order was laid, officials have undertaken a series of briefings with interested parties. I should now like to take the opportunity to consider the contents of the draft order. As the competition to select independent members will not be completed—because it takes four months—when restoration of the Assembly takes place, this order creates a new transitional Policing Board to carry out all the functions of the existing board until the competition is completed.

The Government are planning for success on 26 March. It is the A-plan; we do not have a B-plan. Everybody knows that it is a case of devolution or dissolution. However, to ensure that the vital work of the Policing Board continues without disruption, the draft order modifies Schedule 1 to the Police (Northern Ireland) Act 2000 to provide that if restoration of the Northern Ireland Assembly takes effect on 26 March but is subsequently revoked on 28 March, the current members of the Northern Ireland Policing Board will continue in office, their terms unaffected by restoration or revocation.

Following the restoration of the Assembly and the completion of their nomination process as set out in the Police (Northern Ireland) Act 2000, political members will be able to take their seats on the transitional board while the Secretary of State appoints nine independent members from the current independent board members. The draft order therefore amends the Police (Northern Ireland) Act 2000 to provide for a temporary transitional arrangement to enable nine of the current independent members of the Northern Ireland Policing Board to be reappointed for a period of up to four months. The political members’ positions will remain unchanged when the Secretary of State appoints the independent board members following the conclusion of the transitional board. The Secretary of State will consult the First Minister and Deputy First Minister on the appointment of independent members of the transitional board.

Being mindful that current independent members’ circumstances may change—I am talking about their individual circumstances; they may change job, for example—the draft order provides that no vacancies are filled during the transitional arrangement, and that there may be fewer than nine independent members during that transitional period.

The final provisions in the draft order relate to the appointment of the chairman and vice-chairman. This will be a matter for the transitional board. A new chairman and vice-chairman will be appointed once the restoration of the Assembly board is complete.

In conclusion, I am sure noble Lords will agree that the Northern Ireland Policing Board is one of the undoubted successes of the Belfast agreement. Its work has very recently and rightly been applauded at an international policing conference held in Belfast a few weeks ago. The draft order ensures that the Northern Ireland Policing Board’s vital work continues, irrespective of what happens on 26 March and the time lines that follow that, by ensuring that temporary transitional arrangements are in place while the independent membership is being recruited under the due process agreed with the office of the appointments commissioner. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the draft Northern Ireland Policing Board (Northern Ireland) Order 2007.—(Lord Rooker.)

I thank the Minister again for his clarity in presenting this very detailed order. He is quite right—it does have a mix of dates, times and happenings. I would like also to be associated with his words on the Policing Board, which has done a superb job, sometimes under appalling circumstances. Its members have been very brave and courageous and they have done a good job from day one. I support the order.

I, too, thank the Minister for bringing forward the order and commend the Policing Board for its work over a long period, in some very difficult circumstances. It is to be warmly congratulated and I wish all of its members well for the future, whatever that future may be. We hope for devolved government as soon as possible.

We support the order. It puts in place the practical steps necessary to ensure that the board is properly constituted, once devolved government is restored. I remember many happy hours spent choosing independent members for my police authority—in fact, hours and hours—so I know how difficult it can be to ensure that the right people are appointed to that very important position.

Can the Minister remind me how the chairman and vice-chairman of the board are appointed? I think it is the Secretary of State—no, it is not; so I will be told off. Also, during the appointment of the transitional board, will the Secretary of State take into account the nine independent members’ present constitution or how they were originally constituted or appointed? I think the Minister said that the Secretary of State would look at how they were constituted at the moment and that he would pick nine from those already there. How many will he exclude and how many will he appoint other than those in the original numbers?

I will happily answer that question, because it is important. The nine will be chosen from the existing independents—I understand that currently there are 11. I cannot say how the mechanism for that will work; I shall take some advice on that and perhaps other noble Lords may wish to speak. In other words, the nine will be from the existing members. No new members will be introduced. How those 11 members arrived in their positions is, in a way, history. It may weigh heavily on us, anyway, but the fact of the matter is that the nine members of the transitional board will be chosen from the existing members.

I am very grateful for that explanation. Clearly, two will have not to be considered or considered and rejected. That may still be a difficult job to do. However, we support the order and I am grateful for the explanation that the Minister has given.

I thank the Minister for his careful and precise explanation of the order. I note that the order is predicated on, or at least makes arrangements for, devolution on 26 March and not on any other date. If devolution does not occur on 26 March, alternative arrangements go ahead and presumably will remain undisturbed if, due to some presently unforeseen events, devolution occurs later than that. That is purely and solely operating on the assumption that devolution takes place on 26 March. That was implicit in what the Minister said, but I see several heads nodding as clear confirmation of that.

I will put it on the record if the noble Lord likes. I have a good one here: what happens if the Secretary of State fails to get the Assembly up and running? The answer is that in that case the current members of the board continue in office without their term of office being interrupted. It could not be clearer than that.

I thank the Minister for putting that beyond peradventure.

The Minister referred to the Policing Board as being one success story. That is right. But before the Policing Board was formed, there was a long and very delicate negotiation between the then Secretary of State and a wide variety of political parties in Northern Ireland. In the course of that, there were very clear understandings worked out between the Secretary of State and those political parties, one of which I shall mention. It was absolutely clear at the time, in the understanding that we—by which I mean, not just me but another political leader as well—had with the Secretary of State, that in the construction of the board, in fulfilment of the statutory obligation of ensuring that, taken as a whole, it would be representative of the community in Northern Ireland, it would have to have a unionist majority; not just among the political members, but a unionist majority overall.

I mention that as just one of the understandings that were arrived at, at that time. I hope that when the Secretary of State comes to make appointments, as he will have to do in whatever eventuality, he will take care to stick clearly to the understandings that were arrived at by his predecessor and does not just proceed with the cavalier attitude that is associated with so much that the present Secretary of State does. Obviously, those remarks are not addressed to the Minister. They are not matters within his purview. I am making them in order that they be reflected and heard elsewhere. Just in case the present Secretary of State thinks that he has a free hand, I must point out to him that there are very clear understandings underlying this operation that were part of the reason why the Policing Board has been a success.

That is like the reason why, although I did not mention it with regard to the earlier orders, cross-border matters, which were once so sensitive, have not been so since 1998 because we took care then to get the architecture right. That has turned things which were once controversial into things that are no longer controversial. The same is true with regard to policing which, in many ways, was even more sensitive. Part of the reason for the success of the Policing Board was that its formation was preceded by careful negotiation and a series of understandings which have enabled it to work successfully. I very much hope that that continues in future.

The Northern Ireland Policing Board is probably more successful than could have been anticipated. However, I have listened to what the Minister has said about the present structure and make-up and I wonder if he has taken into account the fact that one of the existing Policing Board members, one of the appointed members, is now a member of the Northern Ireland Assembly and the leader of a political party. Furthermore, in relation to the independent members, I was interested to hear the noble Baroness say that she had spent many hours making appointments to her particular district policing body, and some of us here today have also spent long hours making appointments not so much to the Policing Board, but rather to the district policing partnerships, which are the sons or daughters of the Policing Board.

But I think the position is slightly more complicated than has been suggested here today. We have a position where Sinn Fein has declared publicly at an Ard Fheis that it supports police, yet one of its members, the Member for Fermanagh and South Tyrone, declared at the count recently that they would not be giving information to the police on anything and would not encourage anyone to go to the police with information. This further complicates the whole situation in relation to policing. It has to be said here today that there are many who have been appointed independent members, particularly from the nationalist community, who did put their heads above the parapet and go into extremely difficult situations in which they were intimidated in their homes, their cars burned, and they were put through all sorts of hoops by republicans who were absolutely adamant that policing was not going to work in Northern Ireland. I pay tribute to those people today. They had the courage to stand up and be counted, and they did so at great personal risks, both to their lives and their property. Should the day come when a new board is contemplated, those facts ought also to be taken into consideration. It was their courage and bravery that stood up against militant republicanism, at great cost. I want to put that on the record today.

I am most grateful. My experience is minimal, but what I do know is that English, Welsh and Scottish politicians have had a really cushy time compared with those who represent and have carried out the representative function in Northern Ireland over the past 30 years. There is no comparison between the sacrifices made and the courage shown by those representatives, elected or otherwise, in trying to maintain law and order and the semblance of a civic society. I want to make that absolutely clear. It would be wrong and improper for me to go down the road of discussing individuals, but the independent Member referred to earlier, who I believe has been elected, will not be eligible for appointment to the reconstituted board. I want also to repeat, for the avoidance of any doubt, that the chairman and vice-chairman are appointed by the board.

I am sure that the noble Lord, Lord Trimble, does not expect me to respond to his remarks, but I will make sure that his precise and specific remarks are put before the Secretary of State at the earliest possible time. I understand where they are coming from and it is a very important issue. In my last few seconds I want to thank all noble Lords for their attendance at Grand Committee and for supporting these orders. I think we have one more session in Grand Committee on two orders next week. One of those is the modification order which I have already highlighted to noble Lords. It has to be brought before the House for carrying on direct rule. There are good reasons for that and the dates will be apparent. The other order will probably raise the hackles of more than one Peer, although I do not want to start another debate now, in discussing the renewal of recruitment to the policing arrangements. But those are matters for next Tuesday. Again, I am grateful for the support shown for these orders.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Pension Protection Fund (Pension Compensation Cap) Order 2007.

The noble Lord said: I shall speak also to the Occupational Pension Schemes (Levies)(Amendment) Regulations 2007 and the Occupational Pension Schemes (Levy Ceiling) Order 2007. As noble Lords will know, the Pension Protection Fund provides compensation to members of eligible defined benefit and hybrid occupational pension schemes where an employer has a qualifying insolvency event, there is no possibility of a scheme rescue, and there are insufficient assets in the scheme to pay benefits at PPF compensation levels.

The PPF provides two levels of compensation: for individuals who have reached their scheme’s normal pension age or, irrespective of age, are either already in receipt of a survivor’s pension or a pension on the grounds of ill health. The PPF will pay the 100 per cent level of compensation subject to PPF rules; and for the majority of people below their scheme’s normal pension age, the PPF will pay the 90 per cent level of compensation subject to the compensation cap and PPF rules. PPF compensation is funded in three ways: by means of levies charged to all eligible occupational pension schemes, by assets remaining in schemes which transfer to the PPF at the end of an assessment period, and by the investment returns from each of these.

To date, three schemes totalling 275 people have transferred into the PPF. Some 66 people are currently in receipt of compensation payments at an average of £3,700 a year. The PPF has just made a fourth payment to these people. A further 209 people will receive compensation when they reach their normal pension age. Those 275 people are the first of the thousands who will be protected by the PPF. Indeed the PPF and the Pensions Regulator have recently published the “purple book”, or to give it its official title, the DB pensions universe risk profile, which indicates that 12.5 million members of schemes are eligible for PPF protection. Even if the actual number of people is lower because some will be members of more than one scheme, we are talking about a compensation scheme that protects a significant number of people. At the end of February 2007 there were 147 schemes covering a total of 102,000 scheme members in a PPF assessment period. We expect a further 80 schemes to enter an assessment period in each of the next two financial years, with 65 of those schemes transferring into the PPF by the end of 2007-08.

I turn now to the first order before the Committee, the pension compensation cap order. A cap on the level of compensation is applied to those scheme members who are below their scheme’s normal pension age immediately before the employer’s insolvency event. These members are entitled to the 90 per cent level of compensation when they retire. The current compensation cap is set at £28,944.45 at the age of 65. In calculating a member’s compensation entitlement, the cap is applied before compensation is reduced to the 90 per cent level. This provides that the total value of compensation payments for members below normal pension age does not exceed £26,050 a year at the age of 65. This amount is adjusted depending on age to ensure that the actuarial value of the compensation package remains the same. As required under paragraph 27 of Schedule 7 to the Pensions Act 2004, the 2007 PPF pension compensation cap order uprates the level of the compensation cap from 1 April 2007 in line with the increase in the general level of earnings in the previous tax year.

Average earnings, as measured by the Average Earnings Index and published by the Office for National Statistics, increased by 3.4 per cent in the 2005-06 tax year. Applying that percentage to the current compensation cap will provide an uprated cap of £29,928.56.

When applying the 90 per cent provision to that uprated cap, it will provide, at age 65, a maximum level of compensation of £26,935.70. This uprated cap will apply to members who first become entitled to compensation at the 90 per cent level on or after 1 April 2007. This order ensures that the level of the compensation cap is maintained in line with the increase in earnings.

The Occupational Pension Schemes (Levies) (Amendment) Regulations 2007 remove references to the Pension Protection Fund Ombudsman from the Occupational Pension Schemes (Levies) Regulations 2005 for the purposes of clarity and cost effectiveness. The regulations also amend that statutory instrument so that it includes the rates for the administration levy for the financial year ending 31 March 2008.

The Pension Protection Fund Ombudsman provides a dispute process that will enable interested parties to seek a review of certain key decisions by the PPF, called reviewable matters, which are set out in Schedule 9 to the Pensions Act 2004. In addition, there is a right of complaint in cases of alleged maladministration against the PPF.

There is a two stage internal process with the PPF, and if people are not content, they can refer their case to the independent PPF Ombudsman. The Secretary of State initially funds the PPF Ombudsman’s work from money provided by Parliament. A levy may be raised by the Secretary of State to recover his expenditure in respect of the PPF Ombudsman, but for the second year running no PPF levy has been raised. This is because the amount needed for the PPF Ombudsman for 2007-08 is expected to be small and, in the interests of cost effectiveness, we propose to recoup costs incurred during 2007-08 in future years. This has been welcomed by those who responded to the consultation on this instrument.

On the administration levy, these regulations substitute new amounts to be used in calculating the amount payable in respect of the PPF administration levy for the financial year ending 31 March 2008. For the first two years of the PPF—2005-06 and 2006-07—the administration levy was set at a rate to recoup £15 million a year. That will rise to £20 million a year. I should like to explain the reason for this rise.

The PPF estimates that its running costs will increase from £12.4 million in 2006-07 to £14.2 million for 2007-08, as it moves out of its start-up phase towards full operation, with substantial numbers of schemes completing the assessment process and transferring into the PPF itself. In addition, depreciation has increased from £0.3 million in 2006-07 to £1.1 million in 2007-08. These amounts represent the depreciation incurred in respect of capital assets the PPF acquired since they came into operation in April 2005.

The increase is partly due to an increase in the staffing required to carry out the PPF’s functions for the long term. These staff will support those schemes in an assessment period and the transition of certain schemes into compensation, support the levy calculation process, invoice and collect levies, and develop the research and modelling capabilities of the PPF.

There was also a shortfall in levy collection in 2005-06 and 2006-07, which has partly led to the increase in the levy for 2007-08. The collection figures for 2005-06 and 2006-07 are lower than estimated due to the poor quality of pension schemes’ data held in the past and changes in the number and size of schemes eligible to pay the levy. To date, £13 million has been invoiced and £12 million collected for 2005-06 and we estimate that around the same figure will be collected for 2006-07. Therefore, there is a small deficit to carry forward into future levy calculations. I reassure the Grand Committee that these data are significantly improving and we anticipate more accurate levy collection forecasts in future.

Finally, the increase in the rate for calculating the administration levy also includes the amount of costs to the Department for Work and Pensions in setting up the PPF. These costs amount to £2.2 million a year, together with depreciation of £0.9 million on fixed assets purchased by the department as part of setting up the Pension Protection Fund, to be recovered over a three year period. The depreciation charge represents depreciation of the capital assets acquired by DWP before the PPF came into existence and is in addition to the charge referred to earlier on assets subsequently acquired by the PPF. The 2007-08 financial year is the final year of this three-year period and, therefore, administration levies in future years will no longer include these recoverable amounts. 

I turn finally to the Occupational Pension Schemes (Levy Ceiling) Order 2007. The levy ceiling is one of two statutory controls on the pension protection levy. The pension protection levy estimate for 2007-08 is £675 million, which is only 2 per cent of the amount that companies are investing in pension schemes. We therefore think it is a very reasonable amount to give people the security that they need in retirement.

The ceiling restricts the amount of the levy that can be charged by the PPF. The second control which comes into effect in 2008-09 is a maximum limit of 25 per cent by which the levy can be raised in any one year. The current levy ceiling was set at £775 million for 2006-07.

As required by Section 178(1) of the Pensions Act 2004, the Occupational Pension Schemes (Levy Ceiling) Order 2007 uprates the levy ceiling by 3.8 per cent, in line with the general level of earnings in Great Britain in the 12-month period ending 31 July in the previous financial year.

The order specifies the levy ceiling figure to be imposed on the pension protection levies for the financial year beginning on 1 April 2007 as £804.45 million. However, because the 25 per cent rule restricting the growth of the levy does not come into force until 2008-09, the draft order needs to be read in conjunction with the Pension Protection Fund (Levy Ceiling) Regulations 2006 (SI 2006/2692), which sets a modified levy ceiling of £718.75m, 25 per cent higher than the estimated £575m levy for 2006/07.

I can confirm that I am satisfied that the statutory instruments before us are compatible with the rights in the European Convention on Human Rights. The three statutory instruments before noble Lords provide that the compensation cap is uprated in line with the increase in average earnings, that the board of the PPF is properly funded to carry out the important task that Parliament has given it, and set a levy ceiling that safeguards the PPF’s independence and financial flexibility while providing the reassurance that business has asked for. I commend the orders to noble Lords. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Pension Protection Fund (Pension Compensation Cap) Order 2007.—(Lord McKenzie of Luton.)

I am yet again grateful to the Minister for explaining these orders so clearly. Although putting them all into one speech makes life just a tiny bit more complicated than it would otherwise be, I pretty well understood what he said. The noble Lord ranged widely over the background to the orders and I understand why, although the noble Lord, Lord Oakeshott, and I were both involved in the discussions on the then Pensions Bill, which became the 2004 Act. We are well aware of the background.

When we are ranging widely, I am tempted, as I have been in the past, to pursue the subject of the Chancellor’s disastrous decision to remove advance corporation tax from pension funds. But today I will let the Minister off the hook; indeed, for the first time in many pensions debates. But I put him on warning that I will not resist the opportunity that will come when we debate the Second Reading of the Pensions Bill in a few weeks’ time—or will it be quite so soon? The Government are under enormous pressure both in another place and over here to make compensation available to the thousands of people on whose behalf the Government were accused by the Parliamentary Ombudsman, of mis-selling pensions.

When we last debated the matter, the Government had not decided whether to appeal the High Court’s verdict supporting the ombudsman. Have they decided now, and will it affect the timing of the remaining stages of the Bill, that is, the introduction of the Bill into your Lordships’ House? Also, are they still sitting on the fence as regards compensation? One of the suggestions I and my honourable friends have made is to roll the Pension Protection Fund, the subject of two of these orders, and the Financial Assistance Scheme into one operation—an idea to which, as far as I know, the Government have not yet responded. Are they able to do so today? In passing, an article in the Financial Times last week suggested rolling the Pensions Regulator and the PPF together. What is the Government's reaction to that?

I turn now to the orders. The Secretary of State must by law make an order to increase the amount of the pensions compensation cap if on a review he recognises that the general level of earnings has increased since the last review. As the Minister has just told us, that level has apparently increased by 3.4 per cent—so this order increases it by that amount. He also said that only 90 per cent is paid, so this amounts to an increase of £885.70, which just beats inflation and so is worth having. However, I have a problem. If you compare this with the general level of earnings in the levy ceiling order, it is apparent that a different calculation has been made of the increase in earnings since the last review. That is to rise not by 3.4 per cent but by 3.8 per cent. Why the difference? I am sure that there is a very simple answer, but not being a mathematician, I cannot find it easily.

There was originally some dispute about the amount the PPF levied to fund its insurance scheme for defined benefit schemes. Has the Minister heard any complaints about the proposal in this order to increase it? Indeed, did the managers of the PPF collect all the money up to the ceiling in the last year, or did they not need to do so? After all, a ceiling is the maximum amount that can be collected, it is not the amount that will be collected. It is worth considering whether the law on uprating needs to be changed. It may be a bit early to do this as we have not yet had a great deal of experience of the operation of the fund, but I put the thought into the Minister's head, because it is apparent from the levies amendment order that an extra levy no longer needs to be charged for the PPF ombudsman, as I think the noble Lord has just said. This is very healthy, but to return to the Financial Times article, is he necessary at all? Surely the Pensions Ombudsman could do both jobs? Having said that, I agree with all three orders.

We on these Benches have no complaints in principle with the orders, but we have a number of questions. Following the noble Lord, Lord Skelmersdale, and to save the Minister time, I believe that the Government have announced today that they are pursuing an appeal on the court ruling on the people who have been robbed of their pensions and who are covered most inadequately by the financial assistance scheme. That adds insult to injury and it is high time that the Government accepted the umpire’s decision and got on with compensating these people who have been appallingly treated. Let me make clear that our position is that they should receive at least the same level of compensation as they would have if they were covered by the Pension Protection Fund.

In general, we support how the Pension Protection Fund has been doing its job. We think it is businesslike, thoughtful and respectful of the will of Parliament. We expressed views particularly in the amendments passed in the Chamber to ensure that the risk-based levy was drawn up on a proper commercial basis that did not penalise the funds that make a serious attempt to meet their commitments.

None the less, we are concerned at the increase in cost. The noble Lord discussed the question of costs in a little more detail than in the order. As he is an accountant and probably understands more about it than most in the DWP, perhaps he could explain in a little more detail the cost figures and the separate depreciation figures. I find it difficult to see why the depreciation is put separately. If that is the normal cost of writing off capital equipment over its expected useful life, It is just a normal, straightforward cost. On that basis, the cost of the operation seems to have gone up from £12.7 million to £15.3 million over the past year, if I calculate it correctly, which is about a 20 per cent increase.

I do not understand the point he was making, that the DWP element separately would stop because it was only going on over three years. Again, why is it being depreciated over three years if that is not the normal and proper expected life? Surely it should be done over a longer period? Will he please explain that? In any other business you include the depreciation of your capital equipment with the costs in the normal way and just give a single cost figure. On that basis, this looks like a substantial increase.

The Minister kindly updated us on the number of schemes that are in the assessment period, along with the PPF estimates of the likely number in the next couple of years. Taking the schemes that are in the assessment period now, on the most recent figures he has, what are the total assessments and liabilities and what is the total deficit?

Will he also comment—I am happy if he wants to write to me if he does not have a full assessment with him—on what he and the PPF feel about, and what steps they are taking to deal with, the likely danger of the effect on pension funds of the current torrent of private equity buyouts, which is clearly going to lead to a great deal more risk in pension funds? I noticed today that the trustees of the Sainsbury’s pension fund, who are in considerable danger of being taken over by a highly-geared private equity consortium, have appointed independent advisers to advise the fund, and I welcome that step. There is likely to be a great deal more danger for the 12.5 million members potentially covered by the PPF in defined benefit schemes if this wave of private equity buyouts gathers pace.

Those are my main questions on these orders. I look forward to the Minister’s reply.

I thank both noble Lords who have participated in this debate and for what I think is their support for these orders. I am delighted that the noble Lord, Lord Skelmersdale resisted—

Must the Minister be quite so grudging?

I did not mean to be grudging and I apologise to the noble Lord if it came across that way. I was about to say I am delighted that he resisted the temptation to talk about payable tax credits, and I shall certainly resist the temptation to remind him that the change in the rules relating to payable tax credits was accompanied by a reduction in the main corporation tax from 33 per cent to 31 per cent in 1997 and a further reduction thereafter. I shall refrain from doing other than reminding him of a quote from Anatole Kaletsky in the Times of 19 October 2006:

“Anybody with a thorough understanding of pensions knows that Mr Brown’s “tax raid” was not the root cause of the industry’s demise. Occupational pensions and life assurance were destroyed by foolish court judgments and well-meaning but misconceived regulations under the Thatcher and Major governments. The so-called “tax raid” was actually supported by most business leaders and tax experts, since it paid for a three percentage point reduction in corporation taxes and simplified the corporation tax system in exactly the way the Tory tax panel is expected to recommend”—

as I think it did—

“in its report to David Cameron today”.

I note that we will be returning to this interesting topic when we debate the Pensions Bill in due course.

Both noble Lords asked about appealing the High Court’s decision in relation to the ombudsman’s report. We have appealed the finding of maladministration because the judgment raises important constitutional issues that need to be resolved. This appeal will not prevent us reconsidering the ombudsman's recommendation with regard to compensation in line with the High Court's direction. We have real sympathy for people who lost their pension when their schemes went into wind-up and appreciate that they need to know where they stand.

I forgot to ask this. There is a report in the current edition of Personal Pensions, stating that both the Pension Protection Fund and the Pensions Regulator rule out the possibility of a merger. It quotes the Pension Protection Fund extensively as saying that it is not in favour of one, but I am not sure that that is the view of the Pensions Regulator. During the passage of the Pensions Bill, several of us argued for cost savings by merging the two bodies. Although they are both doing a good job now, there is still a good case for that. Can the Minister confirm whether the view of the Pensions Regulator really is as reported: that it does not want a merger? Obviously, I am not asking for his conclusions yet, but is that correct, because it should be seriously considered?

I do not know whether it is. I shall certainly seek advice on whether there is anything meaningful that I can say other than the assurance that I gave in relation to the review currently under way and write to the noble Lord.

The noble Lord, Lord Skelmersdale, asked about the difference between the 3.4 per cent uprating and the 3.8 per cent. For the compensation cap, the 3.4 per cent uprating is based on the annual review of the general level of earnings under Section 148(2) of the Social Security and Administration Act 1992, which is linked to the tax year and also links to increases in the guaranteed minimum pension and additional amounts. Average earnings, as measured by the average earnings index and published by the Office for National Statistics, increased by 3.4 per cent in that tax year—the 2005-06 tax year, which was the base for the 3.4 per cent increase. The 3.8 per cent uprating of the levy ceiling is used because the Secretary of State must review any increase in the general level of earnings in Great Britain for the period of 12 months ending on 31 July in the previous financial year. So they concern different periods.

To revert to my response to the noble Lord, Lord Oakeshott, I am advised that it is not the TPR’s view that it is against merger.

They are not against it?

That is correct.

The noble Lord, Lord Oakeshott, asked about the number of schemes. In my introduction, I said that there were 147 schemes covering a total of 102,000 scheme members in an assessment period at the end of February 2007. A further 80 schemes are expected to enter an assessment period in each of the next two financial years, with 65 of them transferring into the PPF by the end of 2007-08. I do not have information on the question about deficits and assets relating to those schemes, but, again, it is readily available. I will write to the noble Lord with whatever information is meaningful.

The noble Lord, Lord Oakeshott, asked for some clarification on administration costs. I shall try to provide that. Whether or not depreciation is included in the headline operating figure is just a presentational matter. To recap, the planned operating costs, excluding depreciation, for 2006-07 were £12.4 million, projected to be £14.2 million next year. The planned depreciation in that is £0.3 million for the current year and £1.1 million projected for next year. Obviously there is a smaller amount of depreciation in the current year because there is presumably a build-up—an acquisition—of assets over that period.

So far as the department’s costs are concerned, the department bore some of the setup costs and is entitled to recover those from the PPF. It seeks to do that, and is doing that, over a three-year period. Those costs are actual setup costs, including a depreciation element, so again there are two components, but it is being recovered over three years. The final year of recovery is 2007-08, so that bit of the administration costs will fall out of the equation for the year 2008-09.

The noble Lord, Lord Oakeshott, asked about the impact of private equity buyouts on all this. It is an interesting but quite involved question, as I am sure he knows. The issue is whether it will affect the solvency of employers. One would not think that it should. The thrust of a private equity buyout is to get better use of the overall assets. There is a broader debate about the consequences of private equity. In some respects we know that private equity brings some liquidity into markets and focuses on efficiency, but there are clearly risks associated with that for employers. I am trying to see the correlation and impact of private equity on pension funds, which are separately funded assets held by trustees, and how the existence and involvement of private equity might have an adverse consequence. Perhaps I could reflect on that.

Perhaps I can help the Minister here. Even if, overall, private equity is helpful, I think everyone would agree that introducing a lot of debt into a company means there is more risk if things go wrong. The reason it is relevant to pension funds, given that most defined-benefit pension funds in this country are in deficit and the sponsoring employers are having to pay quite large amounts of money into the fund every year, is that if you end up with a weakened employer, it will inevitably be harder for it to keep paying in and covering the deficit. That is why people are worried.

I understand the noble Lord’s point, but that presupposes that the involvement of private equity would lead to the weakening of employers. Often it might be argued that the involvement of private equity could have the reverse impact. It is difficult to generalise on these things, although I acknowledge that there are risks associated with private equity that are not necessarily not present in other forms of investment into the corporate sector.

Was there a question about the number of schemes or the number of complaints before the Pension Protection Fund Ombudsman? I think that was raised. There is one case before the PPF Ombudsman, but that was information that was not requested. I hope I have dealt with each of the points noble Lords have raised, but if not I will be happy to try to provide further information.

I commented on the fact that the ceiling order was a ceiling. The Minister will remember. The ceiling order constructed a ceiling, and I do not think he has answered my question about how close to the ceiling the actual takings of the PPF were last year.

The noble Lord is quite right, I did not deal with that. I will try to do so now. The ceiling is one of the protections that are available to ensure that the PPF can only call upon a certain level of funding. It is the cap on which a levy can be raised. The levy itself will be computed by what is expected to be the need and the call on the protection of the PPF. The ceiling for the current year, ending in April 2007, was £775 million. The estimate of the levy for that period was £575 million. There was a gap; it was within the ceiling. It was recognising part of the two protections that the ceiling could be uprated by an inflationary component and there cannot be an increase year on year on the amount collected by more than 25 per cent, but we are not currently up against that threshold, nor will we be for next year.

The point of my question and the answer the Minister has just given is that there is something like a £200 million gap between the ceiling at the top and the actual gross levy at the bottom. Therefore one must begin to wonder whether the ceiling is a bit on the generous side. As I said earlier, I accept that it is too early to make that sort of judgment, but one ought to be thinking about it.

We have to look at this over a longer period. Particularly in the early years, there will be a build-up of schemes in the assessment phase and potentially then under the protection of the fund. I would imagine that there will be a convergence of the levy and the ceiling in later years as more schemes move into the fund. In the early years there is scope for a gap, but I think it would be wrong to try to close it by imposing a higher levy, taking more than is necessary in the short term.

I hope that I have dealt with all the queries and accordingly I urge noble Lords to agree to these orders and regulations.

On Question, Motion agreed to.

I beg to move the Motion standing in my name on the Order Paper.

Moved, That the Grand Committee do report to the House that it has considered the Occupational Pension Schemes (Levies)(Amendment) Regulations 2007—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

I beg to move the Motion standing in my name on the Order Paper.

Moved, That the Grand Committee do report to the House that it has considered the Occupational Pension Schemes (Levy Ceiling) Order 2007.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2007.

The noble Lord said: I beg to move that the draft Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2007 that were laid before the House on 26 February 2007 be approved. I thank noble Lords for the opportunity to introduce the debate on the draft regulations. They use the powers contained in Section 29 of the Jobseekers Act 1995 that permit us to make regulations to pilot changes, but limit the duration of such regulations to 12 months. At the end of this period, if appropriate, the regulations may be replaced by similar provisions for a further 12 months. My noble friend Lord Hunt introduced the pilot scheme on 13 December 2005 through the Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2005. As my noble friend said at the time, given that this was a two-year pilot commencing in April 2006, it would be necessary to introduce further regulations to enable the pilot to be completed. The regulations before noble Lords today will enable the pilot to continue as planned for a further 12-month period.

A full evaluation of the pilot is already under way and the completed evaluation will provide a clear view on the value of early interventions with jobseekers and will be used to inform future policy development. Initial evaluation evidence suggests that jobseekers have most valued the practical support provided to them in the three-day courses. This has included help with CV writing, help preparing for interviews, and help with letter writing. Many jobseekers have indicated that the action planning process has helped to increase their confidence and has improved their motivation to find work. It would be premature to terminate the pilot after just under 12 months in operation. The need for the pilot continues because the evaluation, although under way, is incomplete. It is important that the pilot is allowed to continue for a further 12 months as planned in order that the evaluation—both qualitative and quantitative—can be completed. Only then can we make reasoned judgments about the success or otherwise of the pilot.

The regulations will apply in the same geographical areas where the current pilot scheme operates. They will permit the same programme of assistance that is currently available.

I am satisfied that the regulations are compatible with the European Convention on Human Rights. This pilot is part of the Government’s clear strategy to help jobseekers move from relying on benefits back into work. We know that the majority of people claiming jobseeker’s allowance terminate their claim within the first six months of claiming benefit. Our New Deal programmes for those aged over 25 already provide valuable assistance to jobseekers who remain out of work for more than 18 months. This pilot looks at whether an earlier intervention after jobseekers have been out of work for just six months is beneficial, and whether this early intervention helps jobseekers return to employment at an earlier stage than otherwise might occur.

Research suggests that the longer that unemployment continues the harder it is to enter employment. For many, the six-month point is when motivation and confidence begin to decline. After a jobseeker has been out of work for six months, the pilot provides for a three-day motivational course followed by three fortnightly follow-up personal adviser interviews. The three-day courses are delivered by private sector organisations under contract to the Department for Work and Pensions. Each course focuses on providing practical help for jobseekers and examines job aspirations, motivation, rights and responsibilities and job-search skills. Over the three days, jobseekers are helped to develop a personal action plan designed to focus their ongoing job-search commitment.

Even after a short period away from employment, some jobseekers may be concerned about their ability to adjust to new working environments, new technology and new types of work. The three-day courses are designed to address such concerns and to provide opportunities for confidence building and self-motivation. The follow-up personal adviser interviews are conducted by experienced staff from Jobcentre Plus on Jobcentre Plus premises.

The interviews help to ensure that the commitments detailed within the action plan are not overlooked, and are used to provide a clear focus on seeking employment. We are seeking through the pilot to determine the value of targeted and individual help, giving early direction, support and guidance to customers. It is important that all eligible jobseekers take the opportunity to improve their employability and avail themselves of the practical assistance available through the pilot. Therefore, the regulations make it mandatory for all eligible jobseekers to participate in the programme provided for them. A one-week sanction is applied for each failure to attend either the course or, indeed, any of the three follow-up interviews.

A one-week sanction is considered appropriate to the short duration of the pilot programme rather than the longer sanctions for non-attendance on the New Deal programme. Appropriate safeguards exist to ensure that those who have good cause for failing to participate will not be sanctioned. We have made process changes to help ensure that any sanction decisions relating to the pilot are made quickly. The Social Security Advisory Committee has considered the draft regulations and advised that it does not wish to have the proposed regulations formally referred.

In conclusion, the draft regulations form an important element of the Government’s back-to-work agenda. They enable the pilot to continue to its planned conclusion, and for the evaluation to be completed. I commend the regulations to noble Lords. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2007.—(Lord McKenzie of Luton.)

We are nothing if not versatile this afternoon. We have now turned our attention to the subject of jobseeker’s allowance. I thought that the true versatility of the Minister was going to be proven by answering our questions on his own, but he managed to speak long enough to get some back-up, which is probably no bad thing. Essentially, we are being asked to give the go-ahead to an extension of the pilot programme which we debated on 13 December 2005, and which for very good reasons trialled the effectiveness of an early mandatory intervention by targeting all JSA customers six months into their claim.

This order extends that trial for a further year. That is all well and good, although it strikes me as more than a little odd not to have a break between the ending of one trial and the beginning of the next. Two years ago we were told that qualitative research, about which I remember the noble Lord, Lord Oakeshott, had quite a lot to say, would be conducted by Sheffield Hallam University, and would be available to us for study in March 2008—in other words, this time next year. It was hoped that that pilot, and the research into it, would inform the future conduct of JSA for some time to come. This could, I suppose, still happen, but the Minister should expand on what he has just said in his introduction about the initial findings of that pilot and justify this one. I say “this one”, because the order we are debating today marks, as the Minister said in his helpful letter to me on 12 March, for which I am grateful, a number of changes to the Government’s original thinking.

First, it reinforces the principle of coercion by making any person who fails to participate in the jobseeker mandatory activity programme liable to lose one week’s benefit for each failure. That is the three-day course that the Minister has just mentioned. The horrible word “conditionality” is much in our minds at the moment, and this is something that has clearly been translated from the thinking on the Welfare Reform Bill. Only this morning the Minister and I established that in that Bill there is to be a minimum level beyond which sanctions will not bite. I stand to be corrected, but I cannot recall any mention of sanctions in the 2005 regulations. I hope the Minister can confirm that. The question is, therefore, does the same apply here as with ESA, or is the customer expected to live on his savings—or, at worst, thin air?

Secondly, I am perhaps on rather stronger ground when I note that eligibility is now to commence when a person claims benefit, rather than when he receives it, so reflecting the original policy intention of the pilot. That poses another question: why was the original policy not followed? I hope the Minister can answer that one.

Lastly, I have a more general point. Before the 2005 order came into effect, there was mandatory intervention after 18 months. That order reduced it to six months. Last week the Government published the Freud report, which is pretty firm that there should be intervention at only three months into a claim for JSA. What is the Minister’s take on that proposal? Indeed, when do the Government expect to come up with their response to the Freud report? Given that the report was prepared by civil servants, it must already be highly illustrative of the Government’s thinking. Again, I am not going to object to this order, but we are owed rather more about its background.

I start by thanking the noble Lord, Lord Skelmersdale, for reminding me about my questions about the evaluation process. I am glad to say that he remembers them in slightly more detail than I do, and that was very helpful of him. I was planning to ask generally how that process was going.

There is a problem with continually rolling out pilots without any ability for us in this House or the public outside to evaluate the results. Perhaps the Minister could remind me what the cost of the pilots was last year and what the estimate is for this year. I certainly hope that the timetable for the independent, or relatively independent, evaluation does not slip in any way. We are now sufficiently far into the process that the Minister could give us a little more information now, or perhaps promise to write to us, about the department’s initial assessment. Just to roll it forward for another year, when we are a year away from the assessment, is taking a little too much on trust.

We support the principle of these pilots, but I wonder if the Minister could also give me an estimate, if he has one, of how widespread he thinks the effect of this new sanction of the loss of one week’s benefit for each failure is likely to be. Is there any conclusion that one can draw from how the interview process and the co-operation, or lack of it, has been going so far? We are being asked to take quite a bit on trust on a programme whose aims and broad thrust we all support. We want to be sure that the resources are there to support it, and we want more of a feeling of how it is going now, rather than waiting until 2008.

I thank both noble Lords who contributed to our consideration of these regulations. Both probed why we were running-on the first year’s pilot without more detailed feedback in the interim. As I said, when the trial was started, it was envisaged that it would be a two-year trial. The regulations required us to do it in 12-month bites, but it is the same trial, the same process, the same pilot areas and the same rules. It is a continuation of what is already under way.

On conditionality, I am advised that the sanctions were present in the 2005 regulations; nothing new has been introduced. The noble Lord, Lord Oakeshott, asked about the cost of the pilot last year and the estimate for the current year. The main cost comprises the cost of the courses. The costs to date are of the order of £3.5 million. Interviews are taking place with Jobcentre Plus staff and there will be more intensive interviews, but the cost of the courses is a significant component of the costs.

Both noble Lords asked for an update on how things are going to date. I am afraid that I shall disappoint them. The evaluation is under way, but it is important to base it on the entire two years of the pilot. Therefore, it has not been published yet but I can make some general comments on the courses. I believe I have already said that participants are pleased and encouraged by some components of the courses and appreciate that they help them to move closer to the job market. Work done on the courses suggests that some are more personalised and focused on individual circumstances while others are a bit generic. However, there are different providers in different pilot areas and the courses are not the same in each pilot area, as they have been contracted separately. There is an issue about sharing good practice from all that. That will be in the evaluation so that we can take forward what we learn from that.

I am conscious that I may not have given the detail noble Lords seek. However, it is right to consider the matter at the end of the two-year period because the pilot is continuing.

Can the noble Lord tell us how many people have been through these courses so far? He may have done so, but, if he did, I did not hear him.

Yes, I have the figure for that and if I talk for long enough it will appear. If it has not by the time we finish this exchange, I shall certainly provide it before we conclude our proceedings today. The number of people who have gone through courses is just over 16,000 to date. That is a not inconsiderable number of people and it is an important indication.

I thank the noble Lord for that figure. I should have thought that was a sufficient number to enable you to do at least a preliminary assessment rather than waiting for another year.

An evaluation has been started and is continuing across each of the pilots. It seems fair to wait until the 24 months are concluded so that we can get an overall view of how the measure has worked. I refer not only to the value of the courses but outcomes in getting people back into the labour market. I shall discuss the matter with officials and if they can say something a little more definitive on where we are to date on that I shall be happy to write to the noble Lord. However, I cannot undertake to do that without checking with them first, simply because I believe that the information we have comprises fairly raw interim data.

Perhaps the Minister is unable to undertake to do that, but perhaps he can undertake to consider very seriously whether an order parallel to this is laid next year without any evaluation.

If we wanted to continue this for a third year without evaluation, my understanding is that there is no plan to do that. This was envisaged as a two-year pilot to start with, and it had to be done through two separate processes. My noble friend Lord Hunt made it clear a year ago that 24 months was what was originally envisaged. We do not envisage running it on. It is absolutely right that there should be a proper evaluation and that the feedback from that be made available to noble Lords.

The noble Lord, Lord Skelmersdale, asked about varying time periods. Eighteen months is the current situation generally for the New Deal for those aged 25 or over, and that is the point at which the conditionality in the extra support goes in. Freud had a range of recommendations, and I cannot do more than reiterate what we already said when we discussed that, which is that the Government welcome the broad thrust of what Freud says and have committed to comment in detail on it. We said we would respond within the course of this year. I cannot give a more detailed timetable than that, but this is something with which the Government are actively engaged.

The particular focus on a six-month start for these pilots is to recognise that a lot of people go out of JSA in the first six months; they find their way back into work without the sort of support and engagement that these pilots envisage. This looks at whether an intervention at that point for this group of claimants, rather than the longer 18-month period, can throw up benefits that indicate that we can get people back into the job market quicker and help their aspirations in doing so. That is why there are different timescales. Freud is part of an important wider debate, and there will be feedback on that in due course.

The issue of the one-week sanction was in last year’s regulations. Hardship payments are available to those in need if a sanction is levied and they would otherwise be without resources, so there is a safety net.

I thank the Minister for that. I am sorry if I misunderstood. So the one-week benefit sanction has already been in effect over the past year? How many people have been sanctioned under it?

The sanction has been there since the start. I am advised that 111 people have been sanctioned to date. If there are no further points, I commend the regulations to the Committee.

On Question, Motion agreed to.

That completes the business before the Grand Committee. The Committee stands adjourned.

The Committee adjourned at 5.03 pm.