rose to move, That the draft Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order 2008 laid before the House on 8 May be approved.

The noble Lord said: My Lords, the draft order before us today is made under Section 63 of the Scotland Act. Section 63 allows for the transfer to Scottish Ministers— that is, members of the Scottish Executive—of functions that are exercisable,

“in or as regards Scotland”.

This is commonly known as executive devolution. Since 1999, 15 orders have been made under this section. These orders demonstrate the Government’s pragmatic approach to devolution, and the flexibility contained within the Scotland Act. In certain circumstances there will be a case for functions to be exercised by the Scottish Ministers, where the subject matter remains the responsibility of this Parliament. Each case is examined on its merits to ensure that functions are exercised at the appropriate level.

The primary purpose of the order is to ensure compliance with a European Community directive, specifically the directive on integrated pollution prevention and control. This introduced a requirement for an integrated means of controlling emissions from industrial installations to air, water and land across Europe. The directive requires member states to ensure that energy is being used efficiently in the operation of certain industrial installations. Some aspects of that requirement fall within the subject matter of the Energy Act 1976, and so are reserved matters under the Scotland Act.

The functions being transferred under the order will enable Scottish Ministers to make regulations that allow the Scottish Environment Protection Agency to enforce this energy efficiency requirement. The bulk of the directive relates to devolved matters which are currently being enforced by the Scottish Environment Protection Agency on behalf of the Scottish Ministers. As such, it is only sensible that SEPA is able to enforce the energy efficiency requirements, alongside all the other elements of the directive, in Scotland. It would also be administratively cumbersome for businesses to deal with energy efficiency under separate regulations. This order will allow regulations to be made to cover all aspects of the directive by the Scottish Ministers.

In order to operate an industrial installation falling within the scope of the directive, operators must obtain a pollution prevention control permit covering the devolved aspects from the Scottish Environment Protection Agency. Under the order, Scottish Ministers will be able to give SEPA the legal authority needed to add energy efficiency as a prescriptive condition in the pollution prevention and control permit. Allowing Scottish Ministers to exercise this narrow function in no way alters the legislative competence of the Scottish Parliament.

I trust that the House will agree that the order is a sensible use of the powers in the Scotland Act and demonstrates the Government’s commitment to using these powers in the best interests of the people of Scotland. Improving energy efficiency can help businesses to make significant savings in the long term and is an opportunity for them to help tackle the challenges presented by climate change. I beg to move.

Moved, That the draft order laid before the House on 8 May be approved. 20th report from the Joint Committee on Statutory Instruments.—(Lord Davies of Oldham.)

My Lords, I thank the Minister for his explanation of the application of the order but I found it a little hard to follow. Certainly what he has said has helped me, but it was slightly complicated. The measure seems to focus largely on energy efficiency but to come under the integrated pollution prevention and control directive.

I notice, too, that the order’s application is directed at a Community obligation—presumably it is the EU Community—and that it states that the powers may be exercised concurrently by a Minister of the Crown. Again, if these activities involve Community obligations which apply at UK level and the Scottish Administration are found not to be fulfilling all the requirements, does the wording mean that if a Minister of the Crown wished to exercise powers he would have to go back to the Scottish Executive for something similar to a Sewel motion—the noble Lord, Lord Sewel is in his place—before proceeding? It is a question of how much power is devolved under this order and what the attitude of the Scottish Executive will be.

Can the Minister give a further indication of where the measures are likely to apply? He said this was to do with emissions from factory chimneys and so on. Is that the only area in which the measures would apply? Are emissions from factory chimneys concerned with energy efficiency? I would have thought that pollution measures were less concerned with worries about energy and more to do with the pollutants escaping through chimneys.

If the measure is to do with achieving energy efficiency, what will the effect be on the obligations put on energy supply companies and local authorities to finance energy efficiency measures in the domestic market? Will this mean that different criteria will be set up? Will this create more complications and separate obligations for companies operating north and south of the border?

Is the aim of the order to assist the effectiveness of the Scottish Administration in producing adequate compliance with the Climate Change Bill even though the Scottish Executive have full powers over anything to do with that? Again, the UK is tied under an EU obligation and obviously we should do anything that can be done to assist the Scottish Executive to fulfil their part of it, even though they are solely responsible for how much they wish to fulfil.

Is there any urgency in this measure and, if so, what? If the order is to do with energy efficiency, it seems a little strange to put this through now, when we are in the early stages of the Energy Bill in this House. Even though at present there is not much in the Bill that the order might affect, there is a strong lobby asking for the Energy Bill to include a feed-in tariff for independent generators. On a domestic scale, this could be seen as a form of energy efficiency. Perhaps the measure is solely directed at factory-level emissions, but it would be helpful to have a little more clarification.

My Lords, this is not a controversial measure. Indeed, it follows a number of precedents under the Pollution Prevention and Control Act 1999—so much so that the Minister mentioned 15 other orders which have preceded it. That in itself might raise the question of whether there is a case to be considered by the Calman commission for adjusting the relationship between this Parliament and the Scottish Parliament—this Government and the Scottish Government—in respect of some of the matters governing energy.

While it is perfectly clear that energy efficiency is a reserved matter, it would not be sensible to divide the regulatory role within Scotland between SEPA and a United Kingdom regulatory authority. In light of the new authority of the integrated pollution prevention and control directive, this will remove a potential anomaly. I am conscious that if energy installations are potentially giving rise to pollution which the authorities have to consider in their regulatory role, it would be absurd to put them into the hands of another body south of the border in respect of one possible aspect of the installation.

I welcome what is being done and thank the Minister for the clarity of his exposition.

My Lords, I welcome the order. It is an example of the kind of pragmatic, sensible extension of executive devolution that the Scotland Act both envisaged and facilitated. In saying that, surely this underlines and demonstrates the wisdom of the constitutional settlement that was established by the Scotland Act. Perhaps we would all be better off trying to work within that framework rather than trying to bring in new constitutional arrangements.

My Lords, I am grateful to my noble friend Lord Sewel and the Liberal Democrat Front Bench for the clear way in which they have illustrated that which I had rendered opaque in my opening statement. I am grateful to both noble Lords for answering most of the central points of the noble Duke, the Duke of Montrose. He is right in his obvious point that the order mixes up an energy issue with an environment issue. A great deal of the European order, which is to be carried out by member states, will be carried out by the Scottish Environment Protection Agency, which has powers to act in certain respects. In relation to the Energy Act 1976, some aspects are reserved to this Parliament, but we have always adopted a pragmatic approach to the issue of such reserved powers. Most reserved powers are central to the debate we had on the limits of devolution, but it was always recognised that for administrative reasons there might be areas where some flexibility would be necessary and for additional matters to be devolved by order to enhance the capacity of the Scottish Administration to carry out their proper obligations.

My Lords, just to show the depth of my misunderstanding, as far as I can see, if the order is concerned with factory emissions, trying to clean up factory emissions and prevent emissions of certain substances actually decreases the energy efficiency. Does this measure allow the Scottish Executive to say, “We’ll accept a certain decrease of efficiency so that we can say that we have improved pollution”?

My Lords, in so far as the Scottish Executive might be faced with that problem, so is the rest of the United Kingdom—and, as the directive applies across all European states, so are all those states. As the noble Duke knows only too well from his extensive work on the Climate Change Bill, there are costs to the control of pollution. If he is identifying that the order contains an element of potential detriment to Scottish business in terms of additional cost, I cannot deny that. However, if the United Kingdom Parliament retained the powers, the costs would still be borne. In fact, I fear they would be greater because there would be two administrative authorities dealing with the issue: the Scottish Ministers, who would have the powers that they exercise at present, and the British Government, with their powers under the Energy Act. The administrative costs would be greater as well, as would the complexity for the industries concerned. The noble Duke ought not to worry greatly about that.

The introduction of energy efficiency measures might have short-term costs—they are bound to because of the cost of the installation of the necessary processes—but they bring long-term benefits. We all recognise, as we did with the Climate Change Bill, that improvements in energy efficiency benefit those who introduce them, and that those who do so early stand to benefit over those who are a little tardy. We ought not to entertain too many anxieties on that score, although I understand entirely the noble Duke’s anxiety.

I am a little less certain about the rather broader issues that the noble Lord, Lord Maclennan, brought in about the question of the Calman commission and its consideration of devolution. It is due to produce an interim report by the end of the year. Whether we are in a position to prejudge what it might say about the 15 orders—16 if this one, which introduces that element of flexibility, is passed by both Houses—and whether it will be critical of that process or laudatory and encouraging of it, is not for me to say from the limited position I occupy at the Dispatch Box on this order. However, I assure the noble Lord, Lord Maclennan, who as ever is well informed on these matters, that it is an issue that the Calman commission will certainly be considering.

I hope I have assuaged the anxieties of the noble Duke, the Duke of Montrose, who as ever is zealous in his concern about the interests of—I give way to the noble Baroness.

My Lords, I did not mean to interrupt the Minister but I have a question for him, which I think is my right. The CBI welcomes the fact that energy is a reserved matter, because its members have businesses north and south of the border. In view of the costs that are implied in the order for firms in Scotland, have the Government consulted CBI Scotland on this order as well as the CBI south of the border, and what was its response?

My Lords, I cannot answer that directly, but I assure the noble Baroness that the moment the directive became enforceable upon all member states, the Governments of all member states addressed themselves to how to enforce the order. As a consequence this order does have costs, but it will have long-term benefits for industry and for wider society when it is implemented. The noble Baroness will recognise that the costs and benefits were going to be enjoyed by Scottish industry irrespective of which agency was the enforcer. All the order does is locate a greater amount of that enforcement in Scotland by the Scottish Environment Protection Agency, which has direct obligations under the directive for powers that it enjoys at present. All we are doing is enhancing SEPA’s capacities at the expense of the central UK Government’s responsibilities, because we are devolving that element of responsibility.

Within that framework, therefore, it cannot be contended that Scotland looks on this order with disfavour—far from it. Scotland is gaining to its advantage administrative simplicity and straightforwardness in implementing an order which it would in any case have to follow even if it were imposed under parts of the Energy Act 1976 and the reserved powers of the UK Government.

My Lords, I appreciate what the Minister says, but where a firm operates north and south of the border it is being asked to consult two different bodies now. It is obvious that that will involve extra cost, and it may get different answers from the two bodies. I understand and note that the Minister said that no consultation with the CBI has taken place.

My Lords, I reassure the noble Baroness that we must not rush our fences. We are seeking by way of the order to devolve matters to Scotland, after which the Scottish Ministers will have to propose the regulations. How they propose and carry out those regulations is their business, but they would be naive in the extreme if they did not consult the Scottish CBI, as I am sure they will, because that consultation has taken place at the English level.

My Lords, if a company which operates both south and north of the border has to make application for planning regulations, it will have to subject itself to different regimens north and south of the border, will it not? That is implicit in operating in Scotland and England. That could be true also for energy, installation and pollution issues. However, if one body is in charge of those installation issues in Scotland, it cannot make sense to fragment the responsibility for part of that installation in Scotland and translate to two bodies the decision-making for a purely Scottish operation. This is an entirely sensible solution to that potential problem.

My Lords, I am grateful to the noble Lord for expressing it with greater clarity than I had done. He is absolutely right: that is the purpose behind the order, which is benign in intent. It seeks to give to Scotland a more orderly structure of implementation in circumstances where otherwise, because the energy part was not devolved, Scotland would be faced with implementation by its own Scottish Environmental Protection Agency and by an agency operating on behalf of the UK Government.

I reassure the noble Baroness, Lady Carnegy, that when it comes to the Scottish dimension of enhancing these powers, the regulations are the responsibility of Scottish Ministers. Neither she nor I have the slightest doubt that they will consult the Scottish CBI and all others who have an interest in the matter, as we would ordinarily expect.

On Question, Motion agreed to.