If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
63C: Before Clause 80, insert the following new Clause—
(1) Within 12 months of this Act receiving Royal Assent the Secretary of State must make regulations—
(a) requiring that all domestic buildings built after 2012 can function on a zero-carbon basis, and(b) making it mandatory to fit all buildings built after 2010 with appropriate renewable heating systems.(2) Within 6 months of this Act receiving Royal Assent the Secretary of State must present to Parliament a report including a programme to upgrade existing domestic, commercial, public, and industrial buildings to a minimum Energy Efficiency Rating of B within a ten year period.
(3) The programme, established under subsection (2) above, may specify criteria for excluding certain buildings, or categories of buildings from the programme.
(4) Buildings may be excluded on grounds including, but not limited to—
(a) their historic status,(b) excessive costs of insulation,(c) their short remaining life.”
The noble Lord said: This amendment tries to balance the Bill by bringing in a dimension that it is completely missing. The Government’s White Paper on energy, published last year, flagged energy efficiency and energy savings as key parts of the way forward, yet they hardly feature in the Bill. In fact, it was very difficult to table amendments on this because the Long Title almost specifically excludes the area.
Before I describe the amendment, perhaps it would be useful to quote from the White Paper a few of many short sentences on energy saving. The executive summary on page 9 states:
“The starting point for our energy policy is to save energy”.
On page 35, it states:
“Promoting policies to improve energy efficiency. This is the most cost effective means of tackling emissions while improving energy security”.
On page 43, that is put in a European context:
“Our priorities are to achieve the EU target of saving 20% of the EU’s energy consumption by 2020 by improving energy efficiency across member states”.
Finally, a more long-term view is:
“For the long-term we set out our commitment to raise the energy efficiency standards of our future building stock and of the products we buy”.
There is rightly a strong pledge at the forefront about how energy policy should be approached.
I remind the Minister and the Government that at the beginning of this parliamentary Session we were promised three Bills that would work together: the Climate Change Bill, which your Lordships’ House has already sent to the other place; the Planning Bill, which we still have to go through; and this Bill. They were to be the three legs of a stool that would make sure that we met the carbon and climate change commitments that we have made. Yet, important as parts of this Bill are, energy saving is left out. I entirely understand the view that some of this does not need to be in the Bill because the legislation already exists. That may be the case for some of these areas, although that does not usually stop Governments legislating.
I was interested to see some things that came out from previous programmes and legislation. On 2 April, Defra issued a press release entitled, “Benn takes the fight against climate change into homes and communities”. That is excellent, as that is exactly where it should go, but I was struck that having gone through the existing policy on building stock the press release stated:
“It is estimated that once all the measures are installed under the scheme”—
which will be over several years—
“which is being highlighted in adverts in national papers today—it will save 4.2MtCO2/year—the equivalent of removing 1.45 million cars from the road”.
That is very impressive, but 4.2 million tonnes of CO2 is 0.7 per cent of our total carbon emissions, whereas domestic homes account for some 27 per cent of our carbon emissions and buildings as a whole account for some 50 per cent of our economy’s emissions. The response that we have had in past legislation and the programmes that have come out of it are completely inadequate to fulfil the Government’s objectives, which they rightly—perhaps even courageously—set in the Climate Change Bill.
In the amendments, I want to take a leaf out of the Government’s book again from the Climate Change Bill, where the big message is that we are not just making targets for carbon emissions but putting them on a statutory basis. What is an equivalent of that for energy? I would say the Government’s pledge to have zero-carbon homes by 2016. There are two points on that. First, let us be equally courageous and put it into this Bill, so that we all have to do it; at the moment, industry is unclear and there is a fair bit of uncertainty about how that will be met. Secondly, let us bring the date forward, because 2016 is a long way away—eight years. I seem to remember that the Government’s target on house-building per annum is something around 200,000—the Minister may put me right—but let us say that that is rather optimistic and that we are actually looking at around 100,000. That means that we have getting on for a million new homes to be built between now and 2016 that are not zero-carbon, though we have that technology at the moment. Given the importance of energy and climate change, that is not good enough, so I have brought the date forward to 2012, which is much more realistic and something that both industry and planning authorities can cope with.
The amendment asks some rather more probing questions, as I want to hear the Minister’s response to them. The Government have been successful in a number of areas to do with heating over the past five to seven years, particularly in community housing developments. They have found a financial way to help local authorities and housing associations to install the likes of heat pump technology in, particularly, affordable homes and homes for the elderly. It makes absolute sense that such technology be installed when houses are built and, when they are built in estates, that the whole estate is furnished with it. The extra capital cost at that stage is not that great but the benefits in reduced heating costs for the future are huge, and it has made a major contribution to fuel poverty. I congratulate the Government on those schemes. But why should it be the case with just those few instances? Should it not also be the responsibility in the private sector and all buildings, particularly for major domestic developments, that such technology be fitted now? Retrofitting is hugely expensive. The amendment does not say that there should not be other heating systems—maybe there could be PV solar as well as heat pump—but it is a major way in which we could move forward.
I read the statistic somewhere that by 2050—one of the iconic dates in terms of climate change targets— 95 per cent of existing buildings will still exist, so there is a great challenge to raise the efficiency of the existing housing stock. The Government are again rolling out a programme but it is minor in comparison with the need, hence why I say in the amendment that within 10 years we need to move all appropriate buildings up to category B on the energy performance certificates that the Government have recently introduced. Using that sort of currency—the alphabet soup—is a suitable way of doing that.
There are questions about how that is financed. I was trying to table an amendment to do with financing, but I could not do so as it was not seen as appropriate to the Bill. I tabled the amendment to tackle something that is fundamental to meeting the issues around climate change, energy reduction, our targets in Europe and fuel poverty. It is about investing now to make great gains in the future. One of the other areas that the White Paper clearly illustrates, like many other academic and business papers, is that investment in energy saving is by far the most productive means of saving energy and carbon in terms of a positive feedback of costs. It covers the cost automatically, even at commercial discounting rates, and it is the best way forward. I beg to move.
The noble Lord has made a number of important points. Energy efficiency is probably the most positive thing of all that one can do; he is absolutely right on that. I have several reservations. First, if the amendment as it stands were accepted, what would it cost? Goodness knows. It is a very ambitious amendment. I do not know how realistic it is, but it aims in the right direction.
I have one specific point that applies to the United Kingdom, particularly those areas that have the greatest temperature variations—the parts that are coldest and dampest in the winter. I do not know whether that is just north of the border; it probably applies to Wales as well. If you insulate old houses very well, you can get the most appalling condensation and damage. You cannot talk about insulation in a general way. That applies not only to large houses but particularly to small cottages. I have experience of that, and you have to be very careful about it.
The noble Lord has put exceptions to his great idea under proposed new subsection (4):
“Buildings may be excluded on grounds including … their historic status … excessive costs of insulation … their short remaining life”.
Those are sensible exceptions. It is not practical for many old buildings, where you need to have a draught and a bit of circulation of the air. You do not need windows that are completely sealed. It is striking that for the cold countries of Europe, where the temperature drops and stays low all winter, such as Austria and Germany, total insulation is the correct thing to do, however old the house. You do not have the humidity or changes in temperature. It is an important point for us in this country to consider when talking about insulation. Local authorities probably know that very well in local areas, particularly where the temperatures very much vary. Just as with roads, we have to allow for changing temperatures in this country, and we treat them in winter quite differently to the approach in central Europe, and that applies to housing.
The noble Lord, Lord Teverson, made many extremely good points. One or two things about the amendment slightly worry me. Having just put in an eco carbon-based system in my house in the Borders of Scotland, I am still slightly fussed about the muddled thinking that there is on what carbon saving is and what the right thing to do is. Perhaps we need a little more explanation on the right thing for the right house. Obviously, on a new build, one would have to go through the pros and cons of a geothermal basis or an air source pump. I am slightly worried that we all should be much better educated on the right thing to do in the right zero-carbon situation.
On the whole, this amendment makes enormous sense. I agree with the noble Baroness, Lady Carnegy. Certainly, living in the type of house that I live in, one needs the odd draught to keep the air circulating throughout. By and large, I support this amendment.
This amendment strikes me as pretty ambitious, if I may put it in that way. One should bear in mind the parallel with the Government’s proposals for eco-towns, which all sounded very splendid when they first came out. However, one now reads reports from planning officers, experts and others, and one headline, for example, states that “An eco-town on a greenfield site is inherently unsustainable”. One has to be extremely careful and think these things through before putting them on the statute book. I suspect that eco-towns will be dealt with in the Planning Bill rather than here. But that is just an example of unintended consequences. While I admire the ambitions of the noble Lord, Lord Teverson, in this regard, perhaps they are a bit unrealistic.
I congratulate the noble Lord, Lord Teverson, on drafting this very interesting amendment. In many ways, it is extremely tempting, but on behalf of the Government I have to resist that temptation for reasons he may well understand. I thank the noble Baroness, Lady Carnegy, for her comments, particularly those about old houses and condensation. It only goes to show that nothing is simple in this field.
Amendment No. 63C seeks to add a new clause to the Bill, introducing very imposing and, as has been rightly described by others, ambitious targets to reduce carbon emissions from any new dwellings to net zero by 2012 and to require the installation of renewable heating systems in all new dwellings built after 2010. On a longer timescale the amendment also seeks to improve the energy efficiency of all existing domestic, commercial, public and industrial buildings.
The noble Lord, Lord Teverson, is right. This is a crucial and vital agenda. One can understand absolutely the sense of urgency in his amendment and in the way in which he moved it. The phrase was used that he was aiming in the right direction, and we agree. He mentioned the figure of 27 per cent. It is true that emissions from the domestic housing sector account for around that sum in the UK and emissions from the non-domestic sector are around 18 per cent. The decarbonisation of the built environment is an essential part of the transition to a low-carbon economy, and to meeting the Government’s long-term emissions reductions targets in 2020 and 2050.
The noble Lord made the point that energy efficiency is not in this Bill. We, of course, agree that saving energy is critical to the success of climate change policy and energy security policy, but we do not believe that we need new primary legislation to achieve this, which I think he rather anticipated that I would say. If it is not necessary in a Bill, it is right that the Government should not put it in just for the sake of it. We cannot support the amendment for a number of reasons. Before I explain our position, perhaps I may briefly outline what we are already doing to reduce emissions from our homes and buildings.
As the Committee will know, in 2006, we set out a 10-year timetable towards a target that all new homes will be built to zero-carbon standards. This will be achieved through a step-by-step tightening of the building regulations in 2010, 2013 and 2016. It is our ambition, too, that all new non-domestic buildings be zero-carbon. Both these issues will be the subject of government consultations soon, and I will come back to that.
We recognise that targets are not enough. We have made it mandatory from 1 May, exactly two months ago, for all new homes to be rated against the Code for Sustainable Homes. The Government have also introduced a stamp duty land tax relief scheme available to zero-carbon homes built today. These measures will increase awareness, at least, of the importance of energy efficiency in new homes, and give both developers and buyers the incentives to make the upfront investments in low-carbon homes. We realise that just to focus on new homes is not possible; indeed, the big prize in terms of carbon savings will come from the existing stock. Our estimation or expectation is that by 2050 70 per cent of the housing stock will already be in existence today. That is why we have introduced an ambitious package of measures across all sectors to reduce energy use. We will hear more on this later, of course, but the carbon emissions reduction target between 2008 and 2011 will lead to some £2.8 billion investment by energy suppliers in the energy efficiency of households. But there is still scope to do more across all sectors, hence we will consult later this year on the potential for further energy efficiency measures, especially in the existing housing stock, with our intention to introduce policies so that every sector of the economy benefits from energy efficiency.
The noble Lord said that the Government needed to do more to drive household energy efficiency, and we agree with him; we know that we need to do more, both to enhance delivery of existing schemes and to introduce new policies, if we are to meet the challenging energy and climate targets that we have set ourselves. That is why the Prime Minister announced last week, via the renewable energy strategy, a review of energy efficiency, with a public consultation this autumn and a revised energy efficiency strategy to be published in 2009.
Why can we not support the amendment? First, accepting the amendment would be premature. We will consult on how to achieve the target for all new homes to be zero-carbon from 2016. This consultation will include a definition of what developers will have to do to build zero-carbon homes, for example, including the extent to which on-site renewable generation will be required. This is a very important issue; the definition must be ambitious but also achievable. For example, some dwellings, such as city infill, have only a limited capacity for on-site generation, so too strict a definition could effectively preclude such developments, which would be undesirable from a social and indeed environmental perspective. To put our target in legislation before we have fully considered the practical implications could lead to unintended consequences and, in fact, a constraint on our actual ability to deliver affordable and sustainable housing. I think that the noble Lord, Lord Jenkin, hinted at that point, although I cannot for a moment accept his comments on the proposed eco-towns. I am extremely disappointed to see that the Opposition—not the noble Lord, but his Front Bench—have just changed completely in their attitude towards such towns. I am interested to know where the Liberal Democrats stand on that issue, too.
We believe that the amendment is unnecessary. When I first got to my feet, I said that we saw the zero-carbon homes target being achieved through a progressive tightening of the building regulations. These are made under powers provided by the Building Act 1984. Therefore, the statutory underpinning for this initiative is already in place.
Our third reason is that our 2016 target is pretty ambitious and, indeed, world-leading in terms of the pace and scale of the challenge. It is not to be underestimated. Such a revolution in building design requires new mindsets, new technologies, new markets and new supply chains—changes that we are already seeing due to the ambition of that target, but these changes cannot happen overnight. The amendment reduces by nearly half the time that we believe is realistic to allow for such developments to take place. Again, we fear the practical consequences that this may simply increase the costs—a point made by the noble Baroness—and reduce the actual delivery of zero-carbon homes.
We must be particularly careful to avoid short-term measures that impose unnecessary costs, particularly in the current economic climate, where the building and housing sectors are already facing significant problems. The construction industry, to its credit, has so far broadly supported the 2016 target and has engaged, pretty actively, in the forthcoming consultation. But we know that they are of course concerned about the additional costs. As the noble Lord, Lord Teverson, might agree, it is indisputable that the upfront costs of zero-carbon buildings are high. It is estimated that a home rated level 6 on the Code for Sustainable Homes could cost as much as 10 to 20 per cent more to build than homes built to the current building regulations standards. When rapidly increasing our policy ambitions, we must not lose sight of this.
I move briefly on to the other elements of the amendment. We also have concerns about the mandating of renewable heating systems in all new homes from 2010. This is a pretty restrictive requirement to impose in such a short timeframe. As I have said, the Government set out in the renewables consultation last week measures to promote more renewable heat, but everyone knows that this is a complex issue. Unlike electricity, there is no single market where heat is bought and sold. Indeed, the heat market primarily consists of suppliers of fuels, equipment and services.
Different heat technologies, both renewable and low-carbon, carry different practical and cost issues. For example, some renewable heat technologies, such as biomass, come with significant other sustainability considerations in terms of supply and air quality, as the Committee has heard, and are not appropriate in all homes or locations. Consequently, we think that it would be inappropriate to impose such a blanket requirement as this amendment.
Finally, I cannot support the requirement to introduce a programme to upgrade existing domestic, commercial, public and industrial buildings to a minimum energy efficiency rating of B within a 10-year period. We know that we need to make substantial reductions in the carbon footprint of existing buildings. We have a series of existing policies to achieve this—I have mentioned CERT and let me mention the carbon reduction commitment too—and we will consult later this year on the potential for further measures.
Following that consultation, action in the household sector will be taken forward in a low-carbon homes strategy to be published next year with additional action in other sectors taken forward separately. We think that to set a requirement in the Bill that all buildings should achieve a B rating sets a challenge for which we do not yet have an evidence base, and may be overreaching in terms of ambition, cost and the intrusive policy measures that would be required to reach such a target. The reality is that the options available and the costs are totally dependent on the nature of the buildings in question, so to apply a one-size-fits-all standard in all situations is not appropriate.
Before I sit down I refer noble Lords to the report Home Truths: A Low-carbon Strategy to Reduce UK Housing Emissions by 80% by 2050. That report, published by the University of Oxford’s Environmental Change Institute, called for radical action to achieve an 80 per cent reduction in UK housing emissions, but even it only suggested an aim that no house should have an energy rating less than D by 2050.
Although I cannot accept the amendment, I am very grateful to the noble Lord for allowing a discussion to take place around this vital subject. I hope that I have been able to explain the importance that the Government attribute to these issues, but equally why we feel that the amendment cannot be supported. Instead, we believe that our targets and consultations are the preferable place and opportunity to take forward this very important debate.
Before the noble Lord, Lord Teverson, responds, perhaps I can ask the Minister a question. He referred to the consultation papers that are coming and also to the fact, which is often omitted, that these things involve costs. Many of these green initiatives make things more expensive. Can he assure us that the consultation papers will do their best—I recognise his argument about the one-size-fits-all concept not being appropriate—to indicate the costs of the measures? How much more expensive will a house be, and how much more expensive will it be for the occupiers of a house who will have to incur the necessary capital expenditure? Without that coming into the equation, it is very difficult to judge the validity of the policy.
I thank the Minister for his reply and other noble Lords who have contributed to this debate. This is a key issue. Perhaps I could respond to a few of the comments. In response to the noble Lord, Lord Jenkin, I say that this amendment tries to do exactly the opposite to what eco-towns are trying to do; it is trying not to apply perfection to a limited number of instances dotted around the country, but to mainstream and roll out these standards within existing and living communities. I see it as the antidote to the eco-town syndrome. That is one of the main reasons for putting it this way.
As regards costs, I do not in any way minimise the issue. In Committee, it is probably in order to have an “ambitious” amendment. Through the debate that we have had, one can reconsider how the amendment might be written for a further stage. I point out that, following on from other work, on page 286 of the government White Paper is what is known as the marginal abatement cost curve. It gives all the different technologies and how they are able to help as regards energy, particularly in carbon reduction. A number of them are negative costs: they have positive benefits rather than being costs themselves. Three of those—the largest in terms of savings—happen to be standard insulation, domestic heating measures and solid wall insulation. All those are known as negative costs. It cannot be beyond the wit of the financial community to find ways in which we can financially engineer those to make sense as regards today's capital costs, whether that be through green mortgages, council tax, property tax, benefits or what I want to see in the longer term, which are revenues from carbon auctions. I agree that the costing is an issue, but there are ways around that and the benefits and the paybacks are good. That graph was probably created when oil prices or energy prices were half what they are today.
I understand the Minister’s issues around existing and future legislation, but there is no better way of putting your actions where your mouth is than to put them in the Bill. I understand the issue about condensation. In my area of the far south-west we have issues such as radon gas. We have to ensure that properties are well ventilated for all sorts of reasons. Again, the technology allows ventilation as well as thermal efficiency. Through building regulations and technology, I think that can be done.
I thank the Minister for his long and quality reply. This is a major area that has to be tackled far more seriously and in a far more focused way by the Government to meet their own targets. I will consider whether a less ambitious amendment might be more suitable for Report but, in the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 80 [Energy reports]:
[Amendments Nos. 64 to 66 not moved.]
67: Clause 80, page 73, line 17, leave out subsection (3)
The noble Lord said: It is worth rehearsing the history of the amendment, because there is a somewhat misguided exclusion in the Bill. Some Members of the Committee will remember the Energy Bill of March 2004, when this House voted in support of an amendment to impose a legal duty on the Secretary of State to,
“ensure the integrity and security of gas and electricity supplies”.
I remember that clearly; it was my amendment. It went to a Division and was carried with a majority of two, but then went to the other House, where it stood as Clause 1 within a new Part 1 of the Energy Bill. The Government resisted the amendment during the later Commons proceedings, arguing that a legal duty would make ad hoc government intervention more likely and undermine the independence of Ofgem. Therefore they introduced an alternative, which another place supported—a clause to establish an annual reporting framework, saying that it would secure greater public and political transparency for the longer term prospects of security of supply. In the proceedings on this Bill, we have dealt at some length with security. That alternative was then accepted by this House and became Section 172 of the Energy Act 2004. It is that section that Clause 80(3) seeks to remove.
It is worth looking at Section 172. It requires the Secretary of State to publish and lay before Parliament a report every year on the availability of gas and electricity for meeting all reasonable consumer demands. In other words, the section imposes an annual statutory reporting requirement on the Government in relation to the security of the country’s energy supplies. In a little more detail, the section stipulates that the annual report must be prepared jointly by what is now BERR and Ofgem. It must deal with both the short-term and the long-term view and cover, in particular, electricity generating capacity, the availability of capacity in electricity transmission and distribution, the availability of capacity in licensed gas pipeline systems, and the availability of capacity in gas infrastructure.
That annual report, which the Government are required by law to lay before Parliament, is an important mechanism for reflecting both a strong public and political interest in the provision of secure energy supplies and the reality that, if markets are to continue to deliver security, they must be able to receive and share as much information as possible—a point made in the letter that the noble Lord, Lord Bach, recently circulated.
The reason given by BERR for wanting to delete Section 172—it is set out in the Explanatory Notes—is that it overlaps with reporting requirements imposed by the EU electricity and gas liberalisation directives of June 2003. A problem with that immediately strikes one—2003 was before 2004, so the directives already existed. The Government introduced Section 172 in the other place and it became law here so, if the directives were more important and made it unnecessary, why did they do so? There would have been no need to enact Section 172 in the first place. However, a more important point is that the requirements of the articles in the European directives are neither as specific nor as strong as those in Section 172. Looking at a direct comparison of the drafting—I shall not weary noble Lords with that—makes that clear.
In addition, the directives would allow BERR to pass the monitoring responsibility for security of energy supply to Ofgem, thus negating one of the purposes of Section 172 that I am sure that we all agree with: that the Government must ultimately take responsibility for such monitoring. Finally, deleting Section 172 in favour of the European directives would remove the Government’s obligation to lay security of supply reports before Parliament and would allow the frequency of reports to be reduced from one to two years.
I suggest to the Committee that these are all unwelcome outcomes. Considerable fuss has been made about Clause 80(3) and the Government must think about it again. Given the history and the comparison of the European directives with Section 172, the section is valuable. It should remain on the statute book, and I hope that the Government might agree. I beg to move.
We on this side of the Committee support the sentiment of the amendment. Why are the Government keen to remove Section 172 of the Energy Act 2004? Are they trying to cut costs by doing so at this stage? The report is extremely valuable. Security of supply has changed year on year, and can change month on month, particularly with gas. I am reminded of a situation two years ago where LNG tankers from Qatar were redirected to America due to contractual obligations; that had a definite effect. Looking at the long term means dealing with short-term fluctuations in the market, which is where the report has been extremely useful. Is the provision just on the basis of cost, or will the information be made as readily available in other formats?
I can be reasonably brief. First, the response to the last question is exactly as the noble Lord suggested—other formats for reporting. We recognise the obligation for a report. I reassure the Committee that there is no intention to renege on that commitment, or to avoid reporting on security of supply. We want to do it another way and, in some respects, are now doing so. As the noble Lord, Lord Jenkin, indicated—and I also recall the heady days of 2004—the European directives which were implemented after Section 172 had been agreed by both Houses. We knew that we would be under the obligations, because the directives had been drafted in 2003 but were not for implementation until later.
Yes. The noble Lord will recall that we spent many long hours on the passage of the Energy Bill 2004. As he identified, there was considerable debate about the now Section 172. The Government accepted the need for it, despite knowing that the European directive would need implementation shortly afterwards. Of course, the intention of removing Section 172 is not in any way, shape or form to dilute the Government’s obligation to report on the security of energy supply. We merely seek to simplify and streamline the statutory reporting requirements.
There have been a number of developments since Section 172 was created. First, we are now required by Article 5 of the EU gas internal market directive and Article 4 of the EU electricity internal market directive to monitor gas and electricity security of supply issues and publish reports. These reports are required annually for gas, and every two years for electricity. The Section 172 requirement largely duplicates this EU requirement, and we consider it to be overtaken; we are not in any way, shape or form diluting the obligation.
We are pleased to see this amendment, because it demonstrates that the information now provided in the Energy Markets Outlook and to other sources is of great interest, relevance and importance to the industry. We are well aware of the industry’s anxieties in these areas, which the noble Lord has reflected. I reassure the Committee that we intend to continue to fulfil the requirement of reporting. Our intention with this clause is simply to streamline statutory reporting requirements, removing unnecessary duplication and creating a framework for reporting that is less prescriptive and more responsive to need. Although I do not think that we need Section 172 of the Energy Act, I have listened to what the noble Lord has said this afternoon with the greatest care. In view of the strength of feeling with which he backed his amendment—and we are aware of concerns in the industry that a statutory requirement should remain—I am prepared to take this amendment away and consider it further. He will recognise, therefore, that we are at one with him on the obligation. It is how we succeed in achieving that obligation that is important.
I am sure that my noble friend—but not only him—will be cheered. This is a great relief. The Government seem to have a sort of reflex whereby they never seem to want to report anything to Parliament that we suggest. There is probably no issue about which people are going to be more anxious in the years ahead than whether we have a secure supply at any given moment. Once a year is not too frequent for this. It is a great relief that the Minister is doing this, as I thought for a moment that I was going to have to get up and be very cross indeed, instead of which I am delighted.
The Minister was extremely kind. He said that he would take this away again and look at it. I could not ask for more. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 80 agreed to.
Clause 81 [Power to amend licence conditions etc: smart meters]:
68: Clause 81, page 74, line 23, after “date” insert “that is no later than 1st January 2018”
The noble Lord said: I support the thoughts behind Amendment No. 69, which is grouped with and goes slightly further than Amendment No. 68.
The amendment’s purpose is incredibly simple. The Government’s having added the section on smart metering in Clause 81 has set out an interesting way forward to deal with smart metering but not given any indication of when that obligation should be met and fully exercised. Smart metering has exercised a great deal of the time of those who have been lobbied on the issue for a number of years; many of us believe that it is a valuable tool, not just for the industry but for the consumer—a point that should not be forgotten. This issue could have a realistic effect on fuel poverty and help many consumers deal with the use of electricity in the home. It would also be a fantastic boon for those who have the major difficulty of having meters read on a regular basis. I speak as someone whose meter is in the cellar and I should install a light because I have fallen over a couple of times looking for it, which is a nightmare. It is a major problem for old people who find it difficult to access their meters, especially if they are not read on a regular basis and there could be problems with the bills. Of course, smart metering would deal with that.
However, the Government, having brought forward this most welcome part of the Bill, have failed in their duty to say when this purpose should be completed. We are talking about a massive investment running into billions of pounds. Once the consultation period has been undertaken and the type of smart metering is worked out, we are talking about a system that will cause an enormous amount of effort throughout the country. All premises will be affected and the papers will be full of stories about whether the meters have been installed correctly. There will be a great deal of problems. Of course, there will also be the fiscal problems of taking this forward. That is why a 10-year period should be considered. This is such a large project that it could go on indefinitely. Therefore, while the system may start in the next two or three years, the overrun may mean that many properties do not deal with such meters for 15 or 20 years. This issue feeds into the debates we have already had on feed-in tariffs before we get smart meters; they will be much more difficult to implement.
On waste, we are talking about the environmental implications of not moving forward to zero-carbon-rated homes. I am always very worried about figures that cannot be justified, but there was talk of 10,000 meters being installed each week, each day or each month—I am not sure which, but an enormous number of meters are installed around the country on a daily basis. Obviously, that is part of the ongoing maintenance programme, but it will be very annoying and costly to the environment if meters are installed over the next two or three years only to be ripped out and replaced by smart meters a short time later. There are also cost implications for the people having them installed and the companies which have to install them.
All we are asking is for the Government to go one step further. They have done the hard work in talking about bringing forward a consultation period to come up with the type of smart meters to be installed. We want to make sure that the end date is in sight, so that the companies can gear the considerable finances and the risk factor to fit within an acceptable timescale. We believe that 10 years is not too short a time in which this process can be undertaken. However, the big problem is that the directions set out give no start date by which the majority of the work should be started. An end date would focus not just the Government’s mind, but also the minds of industry, on when the majority of the work must be completed and on making sure that they have an objective in mind for its completion. I beg to move.
I wish to speak to Amendment No. 69. The virtues of smart meters were well explained by the Minister in the other place. They were manifold: giving consumers better information to help manage their energy use; providing more accurate bills; and wider access to different tariffs. The Minister even noted that:
“Smart meters … have the potential to contribute to the future development of the energy services market”.—[Official Report, Commons, 30/4/08; col. 333.]
The concession in the other place on smart meters was welcome.
However, I want to be very clear on the following point: the government concession on smart meters is welcome only in so far as it goes. It needs a timeframe; without one, there is no imperative for the policy to get off the ground. I am grateful for the comments of the noble Lord, Lord Redesdale. It is typical of Government to seize a good idea, pursue it only up to a point, and then omit the factor that will deliver the goods. Not having a timeframe is a poison pill to these proposals. The fact that the Government have put into law that they will do this eventually is simply not enough. The technology for smart meters has been around for some years. What is needed is a firm directive on a transparent timescale.
If the Government expect industry to get on board with rolling out smart meters, it is essential that the industry participants know when they will be expected to act. Clear direction is vital. The Minister will surely appreciate that businesses’ plans will have to be formulated to incorporate the new clauses which the Government have introduced. Yet without knowing when those powers are to be used, businesses will not be able to budget for the future. Without that direction, a smart metering policy is, as I have said, at risk of falling apart. If the Government want to take action, they should be clear about when they will do so.
Now that the House is in agreement on the virtues of smart meters, why should there be any delay? We expect that there will need to be further consultation on the exact way in which smart meters will be rolled out. One year should be more than ample to discover such methods. Our Amendment No. 69 would mandate the Secretary of State to use those powers within one year, giving the necessary direction to industry to get the ball rolling towards universal smart meters.
I would like to pose the first of two questions to the Minister. Will he give a clear undertaking that these powers will be used within one year, or indeed give a firm commitment to industry and accept our amendment? As I mentioned before, it is satisfying to see the Government beginning to take steps towards a smart-meter policy yet, without clarification and some courage, we fear that those devices might never reach the people who stand to benefit from them.
I am a little surprised by the promotion of both of these amendments. From what the two opposition parties have said, as yet we do not know how many meters are required. I would have thought that would be the first thing that we should be told. My understanding is that there are something like 24 million domestic households in the United Kingdom—perhaps not; let us say that there are 18 million gas meters and 24 million electric ones. That is what we are talking about. I was working on the basis of 25 million. Let us say it was 25 million: over 10 years that is 2.5 million a year, which is 50,000 a week and 7,000 a day. I am not sure that, at the moment, British industry is geared up to do that kind of work.
I would like to finish the point. If the noble Lord wanted to make an adequate speech, he had the chance.
My point is that, at the moment, the Energy Retail Association members have been arm-wrestling among themselves for the best part of about nine months and have failed to come up with a scheme to which all their members will sign up. The utilities do not really know what they are doing and at the same time are continuing to install the old meters because they need to be put in for safety purposes and other reasons. We have a problem but it is rather complex. Do we start at the end we have just arrived at where there are new meters, do we go to the oldest ones, or do we go to the ones in between which are just about to be done? Each company has a different set of priorities; each has a different set of ambitions about where they want to start and how they want to do it. Therefore, at the moment, it is very dangerous—
All sides of the House have been lobbied on this by the major retailers and suppliers. They cannot decide what to put in until the government consultation, which will decide what type of meters are to be put in, has taken place. Nobody would risk putting in meters that might not meet whatever is set out in the government consultation. The noble Lord made a point about 7,000 units being put in a day. The industry does not think there is a problem with installing all the meters; it is a question of when it is going to be given the go-ahead to start that installation.
I still come back to the point that I made earlier: noble Lords may have been lobbied, but they should ask the people doing the lobbying how they want to do things. We no longer live in a state-capitalist society where the Government lay down doctrines. They may lay down doctrines about safety and supply, but not about detailed issues of the kind suggested. At the moment, as far as I understand it, the Energy Retail Association is at sixes and sevens on this, not because the Government have not told it what to do, but because the individual utilities cannot decide on the priorities or the kit, and at this stage they cannot make a unified expression of opinion to the Government about what they recognise as the best kit. I have been extremely inadequately lobbied by some of these people. The Government may well have to grab them by the scruff of the neck, but plucking figures out of the air at this stage is very dangerous.
Equally, we have to have an idea of whether we are doing gas and electricity and whether people want workmen traipsing through their homes to do both at one time, which will have to be the case in a number of houses. If we are enjoying the benefits and discounts of dual billing, I imagine people would like to have both meters smart simultaneously, but I am not sure whether gas is as easy to be smart with as electricity. This subject is a lot more complicated than this rather simplistic amendment suggests, particularly when neither opposition party has taken the trouble to try to give us any quantification of the scale of the exercise. We have been told that 7,000 may be possible a day. That is fine, but it is incumbent on them to deal with the quantum of this problem in a rather better organised way than they did in support of an amendment of this kind. In itself, it may be desirable, but in its present form it is not nearly well enough argued and does not have the specifics that we require.
It may be some time since the noble Lord, Lord O’Neill of Clackmannan, was in opposition, but he deludes himself if he imagines that an opposition party, with whatever advice it may get from experts, could conceivably commit itself to the details of a programme of this sort. What it can commit itself to is to saying that the most speedy advance of smart meters is something that should have a high policy priority. In government, it would rely on the advice that would be available from the department and the officials it would inherit to decide the best way. A great deal of work has been done.
I thought that the consultation paper published in August last year was extremely good. It was immensely thorough and went into a great many of the issues. It is not surprising that as a result, the Government are taking a bit of time to decide what to do. There have been a number of things since then. The Minister, Malcolm Wicks, said:
“I should say that our intention is to report our work on these analyses to the House by the end of the year”.—[Official Report, Commons, 30/4/08; col. 335.]
If that is the Government’s intention, what is wrong with having 12 months from the passing of the Bill? If anything, that is a rather less stringent obligation. The noble Lord, Lord O’Neill, knows that. On talking to the experts, I was intrigued to find that the latest models can do both gas and electricity in the same meter. My immediate reaction was to ask, “What happens if there is a spark in one?”. “They can look after that”, they said. For those of us who have both gas and electricity, such a meter would obviously be an advantage.
I am perfectly happy to leave my water meter where it can be read by the people who come in. Whether eventually it could be read remotely is another question.
There are huge advantages if we can move to this. I am impressed by the case made by the Energy Retail Association that this really is one of its highest priorities. It needs a mandate from the Government. That word is increasingly used and I suspect that the Government will eventually want to give one. It is not a question of detailing what should be done; there are arguments about whether each region should have a monopoly supplier. I would be opposed to that, but let us hear all the arguments. Certainly there should not be single designs and that sort of thing because the market is very capable of producing innovative designs, as indeed it currently is. Before anybody can move ahead, a mandate that this has a priority is needed from the Government.
The letter I had from Ofgem talks about managing trials of smart meters in more than 15,000 households. My electricity supplier asked if I would join such a trial. Do you know what happened? Because my electricity meter is available for the meter reader in a cupboard on my porch I was told that I could not take part. I wrote back and said, “Why on earth not?”. I think they probably thought their meter was going to be too valuable and might be nicked. I am not sure that I would want to try to nick somebody else’s electricity meter; it might be rather dangerous. I was disappointed not to be able to take part in the trial that had been offered.
These things are happening. If the Government give a mandate and there is a swift advance in the introduction of smart meters, that that will have enormous advantages for consumers, and not just through having an instant reading and a dial which can tell them what is happening. It is far more than that; it is being able to have a lot more sophisticated supply arrangements, remote readings and a whole range of things like that—I will not go into all the details. But it does seem to me that, putting it rather crudely, the Government have got to get on with it. That is what my noble friend on the Front Bench is asking for in the amendment, to which I put my name. We must have the Government’s response to this within 12 months of the Bill becoming an Act. Given what Mr Wicks said on Report in another place, I should have thought that this was something the Government would be perfectly prepared to accept. It may not be properly drafted, but it seems to me that it is perfectly proper for Parliament to ask for this. I support the amendment.
I, too, support the amendment, primarily for the reason I gave at Second Reading that I feel that one of the major criticisms of the Bill is the lack of a sense of urgency. I take the point of the noble Lord, Lord O’Neill, about the precise date of what can be done by a particular time. If the amendment is carried and if it is necessary at a later stage to put in a different date, so be it. It is worth bearing in mind that the new smart meters are likely to be significantly less expensive and faster to fit than the conventional meters we know and love.
Finally, it is worth pointing out that the provision of smart meters has an important bearing on another part of the Government’s, and I hope the country’s, agenda—identifying fuel poverty. One can see in real time what is not happening and take action.
I am grateful to all noble Lords who have spoken on this important issue. We recognise that the Government are under pressure to get on with it, but getting on with it is part of this legislation. If the noble Lord, Lord Jenkin, will forgive me, there is a difference between getting on with it and the Government’s ability to progress with this as rapidly as we are able, bearing in mind the difficulty of the task, and writing into the Bill time constraints that may not be entirely realistic.
What my noble friend Lord O’Neill, said is absolutely right. There are real complexities and massive costs involved in this issue. I want to identify that the Government are at one with those who emphasise the potential gains from smart metering. We are able in certain instances to identify those gains and we intend to act on them forthwith. But we are less certain about some aspects of the wider propositions involved in these amendments, and we are asking the Committee to recognise the Government’s inevitable caution around some aspects that the Committee is asking us to consider under the amendments.
The amendments specify in legislation a 10-year period for a smart meter rollout, including domestic customers—and of course this is a crucial issue. From the many contributions on the issue during Second Reading, we were clear that there was agreement about the potential benefits of smart meters for both consumers and energy suppliers. Of course, the government response indicated our awareness of that fact, which is why we set out our expectations in relation to smart meters in the energy White Paper last year. We have worked since towards a decision point. I am responding to those who in their contributions this afternoon have stressed the issue of urgency and that a decision is necessary. Later this year we will look at the issues of full rollout, including the domestic sector. But I hope that the Committee, following the speech of my noble friend and bearing in mind the points that I shall now make, will not underestimate just how complex, challenging and costly a rollout of smart meters to all energy consumers would be.
Before I turn to the specific amendments, which I shall deal with in some detail, I shall respond to the point that the noble Lord, Lord Redesdale, made—that it is about time that the Government set out their position on the question of smart meters. As the noble Lord, Lord Jenkin, said, we have all been involved in some very intensive analysis ever since the consultation paper, to which he kindly referred in generous terms, was presented last year. Our analysis has confirmed that there is a positive business case for proceeding with smart metering for the medium-sized business sector. Of course, we made provision with reference to that in the 2008 Budget—that we would mandate the rollout over the next five years. We will consult on the draft modified licence conditions shortly. Once that process is complete, the Bill will underpin that rollout.
That is action this year, taken on the basis of the budgetary position that we established for the medium-sized business sector. That involves 210,000 meters—a sizeable number. But the commitment is there.
I take on board what the Minister is saying about the commitment. That commitment was given, but it is not a statutory commitment in the Bill. Clause 81(5) states:
“The power conferred by subsection (1) may not be exercised after the end of a period of 5 years beginning with the day on which that subsection comes into force”.
If you read the analysis of the Bill, which is the statutory requirement, it means that the whole process might not start for five years from the enactment of the Bill, and that is a considerable worry. Perhaps the Minister can say that it is not the intention of the Government to use that entire five years but, in the statutory provision, five years is what the Government are giving themselves.
Five years is not a constraint; it is a period within which action will be taken. I am indicating to the noble Lord the steps that we are taking regarding the medium-sized business sector, so that we can be in a position to progress quickly, as the Committee is suggesting.
I emphasise that the issues are infinitely greater than that, particularly when it comes to the domestic sector. There is a case for a rollout of smart meters to small business. This is a complex area, and it is necessary that the Government do the analysis thoroughly because, as the noble Lord was generous enough to recognise when he proposed the amendment, there are substantial costs involved. I will indicate our version of those costs, which I assure the noble Lord is not to minimise the problem.
Our initial analysis of the costs and benefits, which is in the process of being tested, includes further work with stakeholders to ensure that it is robust, before making final policy decisions. Again, the powers in this Bill would underpin this rollout, should we proceed. Regarding small business, we are talking about 2.4 million meters, and 210,000 meters for medium-sized business. In answer to the estimates that my noble friend Lord O’Neill gave when he was identifying the dimensions for the domestic sector, we consider that there would be 47 million meters involved, affecting every home in the United Kingdom. The difference between that and the 170,000 electricity meters and 40,000 gas meters that are needed for medium-sized business are obviously enormous.
On our present analysis, there is not a positive business case for proceeding with a domestic rollout. The current estimated costs for domestic rollout are in the range of £8 billion to £14 billion over 20 years, and there is uncertainty about the expected benefits. By any stretch of the imagination, those are very substantial sums of money indeed. That is why the Government are right to proceed with that necessary caution, which involves us in doing a full cost-benefit analysis of those concepts.
There might be a counterargument that if the cost falls to the consumer, they might well reduce consumption because the meter helps them manage their energy consumption more efficiently. Costs falling on the consumer might be offset by the savings that they make on energy; it could be cost neutral.
Of course. We hope that full analysis proves that that is so, so that substantial sums of investment may be called forth to meet the objective. However, with such substantial sums involved, and my noble friend’s contribution being a hypothesis rather than a taken fact, it is only right that the Government subject it to serious analysis. When we talk of the benefits of any rollout and the meters, we are taking his point into account: there may be greater energy efficiency because individuals becoming more aware of the costs will moderate their use accordingly.
Page 286 of the Minister’s own White Paper has a marginal abatement cost curve, which specifically points out real-time displays in households. I presume that they are smart meters. I cannot show it here, but abatement costs are below the line: the Government declare it to be a positive return in this paper, whereas offshore wind is hugely more expensive per ton of carbon. Again, however, this is all against the energy crisis of a year ago—but from what I can see of it, the Government have already argued our case.
Has it occurred to the Government that there will be a different view from consumers as the high cost of energy continues? Companies may well find that consumers want to buy these meters because they will save money and will find it enormously helpful. The noble Lord, Lord Campbell-Savours, is absolutely right: this will be a big issue and the Government are not up to speed on it at all. We are getting a very laid-back reply. There may be an argument against 10 years; I am not in a position to know that. However, the companies will be alert to this and want to do it as quickly as possible. They are also less likely to have bad debts with smart meters; they will get their money more easily, which would be another imperative.
The noble Baroness must accept that if I have a little difficulty in accepting my noble friend’s hypothesis in its entirely, I am saying that it must be tested. That is the work that the Government have done. By extension, we are bound to have even greater necessity for analysing whether some of the costs might be paid by the householder, who would see the benefits of paying for the meter. That would be an additional step in the analysis of the economic case. I say to the noble Baroness that we have not completed all this work.
The Committee must recognise that this is an exceedingly complex area, which the Government must get right. We are persuaded of the cost-benefit analysis for medium-sized business and intend to proceed on that as quickly as possible. I have indicated that small-sized business is a much bigger problem, and we have further work to do there. The costs involved for the domestic user, however, are enormous. Before the Government can commit to a programme of billions of pounds, we must be as certain as possible of the proposal’s cost-benefit analysis. That is why intensive work has to be done, particularly against the background of high energy prices. It is right that, with the costs involved, the Government should ensure that they have the nation’s confidence in rolling out this programme, rather than back-of-the-envelope calculations.
The Minister makes a reasoned case. However, we are not just talking about the costs to the consumer. One great benefit of smart meters—and of course it is an issue about the type of smart meter that has caused such controversy—is that there is enormous benefit to the supplier in producing them. All those people who knock on your door on a regular basis at inconvenient times because they know you are going to be in at that point—it always happens when I am bathing the kids—will no longer have to go from door to door. That is a massive saving and cost benefit to the companies. But it is not just a cost benefit to the companies. As the Minister says, there is then a value in that, if they are taking that cost base out of the equation, the cost is not then passed on to the consumer who buys the electricity supplies.
The noble Lord is right. He will forgive me if I do not try to reply to the debate by listing the potential benefits that the Government have analysed so far. Without figures that would be meaningless. Any lists that I provide to the Committee would not be exhaustive, such are the fertile minds of a number of noble Lords. I am bound to be open to that challenge. I merely say to the noble Lord that surely he can recognise that with the magnitude of necessary investment regarding the domestic rollout, the Government have to ensure that their cost-benefit analysis on the potential product is as adequate as possible, given all the uncertainties involved. We have initiatives which are helping us. The Energy Demand Research Project will complete its work in November of this year. We would not conceive of being able to reach a decision on these issues until that report has been considered.
I owe both noble Lords the courtesy of addressing their specific amendments. There was bound to be a contextual debate about this very difficult issue. I hope that I have clarified some of those issues, while indicating that the Government are considering these matters as the Committee in broad terms suggests, although the amendments are rather more ambitious and contain dimensions which I am not prepared to accept.
Amendment No. 68 seeks to ensure that licence modifications must take effect within 10 years of the Act being passed. Amendment No. 69 seeks to specify a 12-month period within which regulations must be made and to ensure that a domestic rollout of smart meters takes place over 10 years. As I have indicated in my earlier remarks, I am not unsympathetic—far from it—to the objectives. The Government share the broad proposition that, if we can introduce smart meters, there are potentially considerable gains. We have a large programme of work under way to examine exactly the kinds of issues raised by the amendments. I hope that the Committee will agree that we cannot proceed on just the belief that the benefits are bound to outweigh the costs. We must have more than just a belief; we must make this decision based on real evidence.
The Government have taken steps, are taking steps and will have at their disposal later this year a vast amount of the necessary evidence enabling us to take the decision. I do not see that our approach is unsupportive of smart metering—quite the opposite. The best way of delivering certainty to business, as several Members of the Committee have emphasised, is that business needs to know what government strategy is to plan the necessary investment and to meet the demands of the community. The best way to deliver certainty to business would be to take decisions on our policy and the detail of a smart meter rollout against the backdrop of a thorough analysis of the costs and benefits. We are not in that position yet. The clauses are consistent with the approach that, of course, we are looking seriously at the potential benefits of smart metering, but details such as the timescale of a rollout will be set out in modified licensed conditions or other industry documents rather than on the face of the Bill, which surely would be premature.
Technical issues in the energy sector are not new. Generally, it is the case that we do not put technical factors in the legislation. We recognise their complexity and it is the responsibility of Government to work their way through those issues. The advantage of not having it in primary legislation is that we have a degree of flexibility to decide the details of a rollout and implement the licensing and other arrangements in this regulatory area after we have taken final decisions and had an opportunity to identify the optimum, most cost-effective manner of rollout. Secondly, although we have completed a very considerable amount of work on domestic rollout, it has raised a number of very real issues which require detailed analysis. That is why I hope that the Committee will recognise that it would not be right to specify issues in the Bill.
We need to look comprehensively at the three key parameters of the project, which are meter functionality, the speed at which rollout occurs and the model of rollout. Each has very significant implications for the overall costs and benefits of any rollout. As I have indicated to the Committee, the sums involved are very substantial indeed. It would be highly damaging in the long term if a premature decision were taken now to set one of these parameters in primary legislation before we fully understand the subsequent implications that that may have on the other parameters concerned. For example, the implication on the overall cost of fixing the parameters, such as timeframe, now, could deliver benefits—I recognise the benefits from immediate action—but it is quite possible that those benefits will be far outweighed by the overall costs of the project.
The clauses in the Bill set out to indicate that we will be able to act as quickly as possible to roll out smart meters to the small business and domestic sector once and if our final analysis supports that. If we proceed with domestic rollout, the detail, such as timetable and meter function, will be set out in the draft licence conditions. The powers in the Bill will ensure that there is further parliamentary scrutiny of the draft licence conditions, so the Government will be answerable in that respect.
I want to put on the record the fact that the clauses enable the modification of licence conditions. Amendment No. 69 refers to regulations which, in its current form, neither the existing power nor that amendment would allow. That is why I cannot accept the amendment. I hope I have made it clear that the important issues raised within it are the types of issues we are examining now in the context of reaching—I reinforce this point to the Committee—final decisions later this year.
Noble Lords are anxious that the Government should be committed to a timeframe. That is what we are doing. There will be a decision with regard to medium-sized businesses. We are looking at the issue of small businesses. The domestic position requires further work, and the Committee will recognise what an immense task that is and why the Government have to get it right.
From all the discussions I have had with officials, I think that that is somewhat unlikely. Some of the studies will not be completed until the autumn, so when I say the end of this year, the noble Lord had better think a little bit beyond the end of the passage of the Bill.
I thank the Minister for his response—but maybe I should qualify that, because I thought that smart metering was a foregone conclusion and we were moving forward. I believe that it will be, because the opposition parties have signed up to it and it will be in the manifestos for the next election—although it would take a crystal ball to see the result of that.
The Minister pointed out the difficulties associated with the consultation process, which we do not underestimate. The noble Lord, Lord O’Neill, gave the impression that we somehow thought that this is a very easy matter of just taking the meter out of the box and installing it. I have been to a vast number of meetings, as the noble Lord probably has, looking at all the different options for what might be available within the cost ratio being looked at for smart meters. We believe that a timescale is important because it will have a massive effect on the cost implications and the cost benefits, which should not be underestimated, not just in cost to the consumer but in carbon saving, which was a major part of the Climate Change Bill and is another strand of government policy. I plan to come back to this issue at a later stage of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
68A: Clause 81, page 74, line 24, at end insert—
“( ) provision requiring a levy to be raised on gas transportation or electricity distribution charges and paid out to licensees in order to cover, in whole or in part, the cost of stranded meter assets;( ) provision requiring the holder of a licence, solely or jointly with other licence holders, to tender for the purchase of services related to meters on an exclusive basis in relation to a specified area”
The noble Lord said: This amendment deals with two important areas in establishing the terms of a future smart meter rollout: stranding and the delivery model. Neither can be established until the impact assessment work, which the Minister discussed, has been completed by DBERR towards the end of the year; in an earlier question, we established that that is an elastic period. It is important that the Bill is amended in this way to ensure that no options are precluded before the decision-making process is completed.
The first subsection deals with stranding and the need to be able to compensate for the potential stranding costs that the industry—in particular, network operators—would face if the decision is taken to mandate an accelerated rollout of domestic smart meters. Although it was originally thought that existing provisions of gas and electricity legislation would deal adequately with this, a project of this scale is unprecedented. Closer examination has revealed an anomaly in Section 7B(5)(a)(iii) of the gas legislation, meaning that only gas suppliers or shippers, rather than transporters who are most likely to be affected, can be compensated.
The second subsection is designed to strengthen the clauses to ensure that no delivery options are ruled out by the terms of the Bill before the completion of the impact assessment. Clause 81 is probably not legally good enough to support the regional franchise model—at least, not without exposing the industry to a significant risk of challenge for infringement of competition law principles. The industry feels that there is sufficient doubt to justify a positive clarifying amendment to ensure that no rollout option should be precluded by the legal drafting. The industry is aware that more work must be done to complete the case for regional franchise model, but competition law precludes continuing this work.
If Clause 81 is not amended, the decision on the rollout suggests that there is a real possibility that the regional franchise model will be ruled out before proper consideration can be given to whether it is the right model. The industry feels that it is vital that the enabling clause does not presuppose the outcomes or restrict the scope of delivery of the smart meter rollout. I hope that the Minister sees the amendment as a clarifying one, so that the consultation can be undertaken without any one issue or other being ruled out. I beg to move.
I certainly see the case for the first paragraph of the amendment. There is clearly an anomaly. As the noble Lord, Lord Redesdale, has said, if gas suppliers and shippers can be compensated for stranded assets—that is, those that must be replaced before their life has expired—that would be something. However, the people who will do this are described as the “transporters”: those who transport the gas from the suppliers to the consumers. If the clause is to have the effect that the Government intend, that is an important amendment.
While I understand the case made for the second paragraph, I have already indicated that I dislike the regional franchise model on the whole. There may be some initial cost savings, but anything that smacks of a regional monopoly—which it would—would be a recipe for increasing slackness and a lack of proper competitive pressures. I accept that it may still be a model, in which case a paragraph is probably necessary in order not to rule it out. In suggesting, therefore, that the Government might be wise to accept the second paragraph, I would not like it to be thought that I am automatically supporting a regional franchise model. There may be some difficulties with that.
I am grateful to the noble Lord for his amendment, which touches on what I agree are two important areas for any future rollout of smart meters: stranding and the choice of market model for a rollout. The first part of the amendment deals with stranding, which will occur in any smart meters rollout that is taken forward faster than on a new-and-replacement basis. As has been said, it would mean that existing meters would need to be removed before the end of their usual life cycle. There would be costs to both suppliers and meter providers.
The wording of the first part of the amendment makes explicit provision for the Secretary of State to amend licence conditions to raise a levy from gas transporters or electricity distributors which can then be paid to other licensees to compensate them for the cost of stranded assets in the event of an accelerated smart-meter rollout. It goes almost without saying that this is a complex issue, which we are closely examining with industry. As we discussed during the previous debate and as the Committee knows, we have not taken final decisions on whether to roll out smart meters to the domestic sector, and if so at what speed that rollout should happen. It is therefore not clear at this stage what the potential value of those stranded assets may be, as they will vary according to the specific details of any rollout and, in particular, the speed of the rollout.
Different market actors will be affected differentially. The potential cost impact of stranding is not spread equally across the industry. We need to continue to consider how to address this problem. It is also important to note that how we deal with stranded assets will affect the costs of a smart-metering rollout and it is likely in all scenarios that these additional costs will eventually be borne by the consumer. Until we have decided our overall approach on stranding, it is too early to say whether such a mechanism as the one proposed in the amendment will be necessary or even appropriate.
Given the complexity of this issue we have asked Ofgem to conduct a detailed analysis of stranding, which obviously will feed into our broader analysis of a rollout of smart meters. We cannot take a detailed view on the most appropriate way forward until that assessment is complete—it is due in September 2008. We are also examining whether powers under existing legislation—for instance, there may be some overlap with existing powers available to Ofgem under the gas and electricity Acts to raise levies—could provide for the type of mechanism proposed in this amendment if we should decide such a mechanism is necessary.
I concede, of course, that the second part of the amendment touches on another key issue; that is, the market framework for any such rollout. We have already discussed that a universal rollout of smart meters to domestic customers would be a major undertaking. It goes without saying that it would require a visit to every household and the replacement of some 47 million electricity and gas meters, a figure which has already been given. Various approaches have been proposed for the practical and logistical delivery of such a project.
Proposals have been made by some stakeholders for changes to the existing competitive metering market, which also is an important element of our ongoing work to assess the costs and benefits of a rollout. This work involves looking at the most appropriate market structures and the required mechanisms to ensure that any rollout of smart meters is efficient and cost effective. Industry and the Government are in agreement that decisions on the most appropriate way forward in terms of market structure should not be taken until our analysis of all the issues related to a smart-meter rollout is complete.
It is for this reason that the smart metering clauses we have introduced enable us to pursue a range of possible market models. I draw the attention of the Committee to Clause 81(3)(k), which can be described as the modifications subsection. Under that provision, the Secretary of State can make licence modifications to suppliers’ licences requiring them to enter into agreements with meter companies and thereby, we argue, enabling certain kinds of centralised provision of smart meters and related services. Controls would be exerted over the meter companies via these modifications to suppliers’ licences.
The purpose behind the wording of the second part of this amendment is broadly similar to that already set out under paragraph (k). This amendment would enable suppliers to work together to purchase meter assets and services from a single source within a specified region. It is not immediately clear therefore that the amendment adds to the existing wording of Clause 81(3)(k).
Given the scale and complexity of such a rollout, we are considering and evaluating market options, ranging from competitive delivery by meter operators to options for a more centralised rollout, where the industry might jointly contract for certain services. While we are grateful to the noble Lord for raising two undoubtedly important issues, we must resist the amendment, but I assure noble Lords that work on both market model and stranding is central to our ongoing analysis and will play an important role in forming our future decisions on smart metering.
Perhaps not today, but before we return to the topic, will my noble friend try to find out what the European experience is with this? Northern Ireland has been mentioned, but I am not necessarily saying that that is the best area to choose, because it has historically had high domestic energy prices. My understanding is that the Italian electricity system has gone through this process comparatively recently. There seems to be a sense being conveyed that the UK is trying to start from first principles and go through this in a painfully slow fashion, whereas we may be able to stand on the shoulders of others, see what they have done and perhaps save a bit of time. Maybe by the time we get to Third Reading, when I am sure that there will be debates of this nature, we could, either through the Library or by a letter in advance, have some indication of what other European countries of a similar size and economic development to our own have gone through to secure a system of smarter metering than we currently have.
I am grateful to my noble friend. As always, his suggestion is very helpful. I will write to him and to other Members of the Committee with some analysis of what has happened elsewhere in Europe, so that our opinions can be changed, if necessary, by what we read. I hope that might be ready by Report, let alone Third Reading.
Before the noble Lord withdraws the amendment, I have a question for the Minister. The people I have spoken to about this seem fairly clear that there is a legal problem. The noble Lord said in his reply that the Government are satisfied that there is not a problem and that it is covered by Clause 81(3)(k). Will he give an undertaking that he and his officials will once again go over the ground and make sure that there is not a gap here? I am thinking particularly of stranding and of the question of gas transporters. People seem to think that there is a gap.
I hope that my response did not indicate that we were absolutely satisfied about the legal position. We are still examining it, so the noble Lord need not fear. We are not there yet. We will share with the Committee and the House what conclusion we come to. There are still further examinations to be done across the whole field.
The purpose of the amendment was to bring up the issues, and the Minister has said that he will look at them again. Due to the rather extended gap between Committee and Report, it might become clear at that point whether this is an issue. If it is, I might return to it. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 69 not moved.]
70: Clause 81, page 74, line 24, at end insert—
“( ) Where the Secretary of State makes modifications under this section, such modifications must require that such meters have the facility to provide data on gas or electricity consumption in such form that it may be used for the purpose of assisting the householder to select the gas or electricity tariff which is most to the householder’s advantage.”
The noble Lord said: This area has already been touched on in the rather full debate that we had on the first amendment on smart meters. The amendment is to facilitate information on gas or electricity consumption that would help householders. One of the problems that has been highlighted is a difference of opinion between those promoting smart meters for the benefits that will accrue to those supplying gas and electricity, and those doing so for the benefits that will be supplied to the householder.
The amendment deals with one of the central problems with smart meters, which is also one of the central benefits to the consumer: that is, that you could use the information to switch quickly between suppliers to make the best use of better tariffs. If it is being done on the internet, you could do it on a daily basis or on a much more frequent basis. Depending on the model that is to be rolled out, that will leave the supplier of the gas meter with a problem. If the supplier is paying for the meter and, as soon as the meter is installed, the customer switches to another supplier, that might incur some difficulties with the business model.
However, we should not underestimate the value to the customer in financial terms of the ability to manage the smart meter. That is not an issue that should be taken lightly. Fuel poverty has been mentioned and there is greater mobility within the market for people to switch between different tariffs. One of the major benefits to the customer of using a smart meter is that the customer could use automatic systems to wash their clothes in the middle of the night or do anything that uses vast amounts of electricity on a much cheaper tariff. That could be done easily and cheaply by many householders, and it would have an interesting effect on levelling the grid if a greater proportion of those power-hungry activities, such as washing, were done at a time when more electricity is on the grid than is being used. It would have value in carbon-saving terms. The purpose of the amendment is to find out where the Government see the ultimate benefits of smart metering accruing. I beg to move.
There is something to be said for the case made by the noble Lord, Lord Redesdale. Perhaps I can compare it with what happens now. I get electricity bills which cover a period in which there has been a change in the price of the electricity and I have yet to discover how on earth the company apportions my supply which covers a three-month period when there is a change of price half way. I have tried sitting down with a towel round my head to work it out. Not being a mathematician, I gave up. My wife positively refused to allow me to take it up with the company. I believe a smart meter would be able to answer that sort of thing at once. You would see exactly when the rate changed and what your reading was at that time.
I quiver at “must”. I find that slightly difficult. As the Minister said, there is still a great deal of work to be done to be able to have an effective rollout of smart meters. Although I understand the case made by the noble Lord, Lord Redesdale, “must” brings a slight doubt into my mind.
I almost have some sympathy with this amendment. We have to guard against overselling smart meters, particularly in relation to fuel poverty. Many people who find it hard to pay their bills find it hard to do many things, and putting them in charge of a mini-power station in their house might be a little more than some of them are capable of. The majority of people in fuel poverty are there because they do not have enough money, but there are some who just have difficulty managing their affairs. When we start to be too specific and use “must”, we are getting into dangerous waters. We need to be able to help people who have difficulty. It is like us trying to work things like video recorders without children or grandchildren about—I hasten to add that I do not have any grandchildren. Such things can be rather difficult. I can imagine the smart meter in the kitchen cupboard assuming the proportions of the remote control of the video recorder, or whatever. We have to be a wee bit careful about imposing too many “musts”. There has to be a bit of conditionality in this. That is not to say that we should not move quickly or that we should not make this as comprehensive as possible, but we have to take account of the difficulties that some of our fellow citizens might incur.
The relevance of smart meters to fuel poverty is the alerting of the supply company to the fact that there is something anomalous there. The supply company now has the responsibility to look after this problem. One of their main concerns—and this is something that the noble Lord, Lord Jenkin, has drawn attention to on a number of occasions—is with identifying those in difficulty. I do not think that there is significant intent that the fuel-poverty family themselves have to do anything.
I am grateful to noble Lords. I usually express gratitude at this point for the contribution of my noble friend Lord O’Neill, who is often extremely helpful. Let me just say that I was rather shocked by his suggestion that we would need our grandchildren to show us how to use our video recorders. I find that quite challenging; I am still teaching my grandchildren how to do it, so there is a reverse of that situation. But, as the noble Lord, Lord Jenkin, indicated, calculating the bills is a different matter altogether. We should address ourselves to that point. There is no question of the consumer’s rights being fulfilled if they cannot follow the position of caveat emptor because what is in front of them is incomprehensible.
I am grateful to the noble Lord for eschewing the opportunity to discuss the wider issues of smart meterage again. I shall therefore concentrate on his amendment. Of course, we are in favour of supporting consumers to use the energy market to their advantage and switch to the best energy tariffs but, as the noble Lord, Lord Jenkin, said, that requires that they can identify those opportunities without excessive amounts of hard calculation. Of course, as we know, many consumers are already doing this; you have only to switch between energy companies at present to see that that occurs. There is no doubt that a smart meter can play a role in adding to the information and the readiness of the information for the consumer, which is a good thing.
I am in favour of the principle, but I am against the technical function of the meter itself being placed in primary legislation. That seems a circumscription too far. As I indicated earlier, I seek to preserve some flexibility with regard to that, which is why I shall ask the noble Lord to withdraw his amendment. However, I reassure the Committee that in the event of a rollout of smart meters to domestic customers the intention would certainly be for each household to receive a visual display device. The display will provide the customer with the information about their energy use, enabling them to manage their energy consumption better. Customers will be able to use the information on the display to help to identify the appropriate tariff; it will indicate, too, what the noble Lord often emphasises—the amount of energy consumption.
We are committed to the principle. What I am really not prepared to accept is this degree of technical detail in the Bill. I hope that the noble Lord will accept that response.
The purpose of the amendment was to get the response the Minister made, because one of the problems is that we could end up with smart meters being rolled out in the locations where meters are at present, so people could not access them. That would completely negate any value that could accrue to people who wanted to use smart meters. I hope that in the consultation the cost-benefit analysis will take on board as a priority the positive benefits to the consumer as opposed to cost considerations about the unit, because without the information being available the meters lose many of their advantages.
I love the asides in debates in this place. The Minister said that he is quite adept at using the video recorder. Perhaps I should mention that I recently gave a children’s party. We have a video recorder, but one of the young children had no idea what it was because the technology has moved on and it is not possible to buy them. We are dealing with the antiquated, which reminds me of the joke about the gramophone. I raised that because I thought it might strike people further down the line as quite amusing. The Minister made a serious point about the benefits of VDU displays being available and showing information so that people can switch between suppliers. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
71: Clause 81, page 74, line 26, leave out first “different”
The noble Lord said: We have discussed many aspects of smart metering and I think that this is a rather clever way of trying to make sure that all smart metering is done in one way. I know that the Government will not accept this amendment, but it is just a quick attempt to say what a benefit it would be if we did not just look at the class of customer but brought all customers together. There is a serious point to this. The Government have talked about large, medium and small-sized customers, but does the size of the customer matter when you are talking about these types of meters? The meters could deal with metering for different types of customer. A large customer will not have just one access point into its premises.
I am particularly interested in this because of an issue that was brought to my attention about smart meters. I have spoken to a large supermarket, which brought in smart meters as an environmental benefit, about how it could manage its electricity supply. Using the better meters meant that it could contest the electricity charges because the old meters were not as accurate and there was a considerable differential. I was disappointed because this was seen as very valuable and it meant that those dealing with the metering issue immediately tried to save the supermarket as much money as possible and the environmental benefits were not looked at. The concept is that it is valuable for very large customers. I can see why the Government are splitting the customer base into different groups. They could introduce the meters to one group and then move down the line. There is, I would say, a disproportionately high benefit to the much smaller customers, especially the SMEs, but there will be no real difference to domestic properties. It is a real issue for those companies. There can be a major variation in the billing technique on the meters currently being moved. If a meter reading is not taken over a period of time, a large bill will suddenly turn up and can cause a major cash-flow problem. That has happened to a number of companies and individuals I have talked to.
That is the basis of the amendment. I know that that Minister will say that the Government will not take this route. However, if this massive investment takes place for domestic customers, I ask the Government to consider why all customers should not be dealt with in the same way. I beg to move.
The noble Lord has anticipated almost everything that I have to say; I am going to ask him to withdraw his amendment. Simply, we must preserve flexibility. We do not know whether a medium-sized business might want a different specification from a small-sized business or from the domestic consumer. It may be, as the noble Lord says, that one size fits all, but we see no point in pre-empting that position. We want to maintain the necessary degree of flexibility, so I ask him to withdraw his amendment.
74A: After Clause 83, insert the following new Clause—
“Smart meters: installation
(1) The Secretary of State shall make regulations requiring the installation of smart meters for the supply of gas and electricity in all domestic hereditaments subject to the following provisions—
(a) that within 12 months of the coming into force of this Act, the Secretary of State shall lay before Parliament a timetable for the introduction of smart meters;(b) that within 12 months of the coming into force of this Act, the Secretary of State shall lay before Parliament, a draft of the proposal for regulations for the introduction of smart meters.(2) In this section, a “smart meter” means a gas or electricity meter with two way communication capabilities including a communication capability to display—
(a) household usage on a daily basis;(b) total cost within a billing period of units concerned; and(c) the cost per unit.”
The noble Lord said: This is a transparency amendment, providing the citizen with the necessary information to enable them make more informed choices and decisions. I have read the Committee and Report stages on these matters in the Commons in their entirety. I am conscious of the detail and compromise introduced by the Minister, Mr Malcolm Wicks, set out in the House of Commons Hansard for 30 April, starting at col. 333. I mention that because it is important that people who study this debate read that speech and the debate that followed it on Report in the Commons, so that they understand fully what undertakings the Government have given, and what they have not.
The Government set out the benefits as they saw them, as alluded to by the noble Lord, Lord De Mauley. I accept the divisions that they have drawn between medium-sized and small-sized businesses and domestic, but will quote the Energy Minister and take the debate on a little further:
“A roll-out of smart meters to the domestic sector is, of course, a far larger and much more complex project”,
as my noble friend alluded to today.
“It would involve replacing some 47 million electricity and gas meters”—
that could now be as few as 23.5 million if meters measuring both electricity and gas are deployed—
“in every home in Great Britain. Current estimated costs to the economy are potentially between £8 billion and £14 billion over 20 years”.—[Official Report, Commons, 30/4/08; col. 334.]
I emphasise the point, which I think was made by the noble Lord, Lord Redesdale, about the need for us to graft the policy of introducing the meters on the back of the replacement programme, which is an eminently sensible way to proceed.
However, Ministers have stated that their intention is to report on the potential for domestic rollout by the end of the year and my noble friend has said that it might be a little later than that. The question then is, “What happens then?”. My amendment is a very mild shift in the Government’s position, reflecting the views of the Members of the Committee in the House of Commons and expressed both in Committee and on Report. They were concerned at that time about the absence of a timetable.
My noble friend set out in great detail why he believes that a timetable should not be introduced, but my amendment is quite mild, in the sense that it asks the Government to introduce,
“within 12 months of the coming into force of this Act … a timetable for the introduction of smart meters”,
“within 12 months of coming into force of this Act, the Secretary of State shall lay before Parliament, a draft of the proposal for regulations for the introduction of smart meters”.
It is only a slight shift in the position taken by the Minister in Committee. In so far as I would hope to be able to table a very similar amendment on Report, it might be that we can negotiate on the question of the number of months.
When I talked to Members of the Committee in the other place about what they thought, a view was expressed to me that it should be 18 months. The 12 months is just a try-on. There was a general view among Members of the Committee that some attempt should be made to set a timetable. This is not a hugely significant amendment, but it tries to take the debate forward by laying down some framework which, in my view, would be very helpful to those outside who are looking to Parliament.
The debate has moved on since the debate in Committee. First, we have had a huge increase in energy prices, which must influence the judgment of the Government. Secondly, we have had developments in the climate change debate, which is now on the tongue of almost every politician worldwide. There have been major developments in the past three months in the climate change debate. We have had the Prime Minister’s statement last week on renewables, which indicates the personal priority that he gives to this matter.
Thirdly, I understand that a statement was made by the Prime Minister in November 2007. I do not know the source, and it might well be that someone can identify it. He said:
“For every household over the next decade there will be the offer of a smart meter that will allow two-way communication between the supplier and customer, giving more accurate bills of course and making it easier for people to generate their own energy through microgeneration and sell it on to the grid”.
If that statement is well sourced, one would have thought that must now influence the Government’s judgment when they are considering the whole question of a timetable.
The Energy Retail Association’s advice is:
“If the ambition to have all homes in Britain fitted with smart meters is to be achieved, the process of planning needs to begin sooner rather than later. In order to achieve the Government’s stated expectation that smart meters will be rolled out to every British home within 10 years, the industry needs a mandate. It must commit now to a clear timetable and ensure that a decision is made quickly to grant the mandate”.
I listened very carefully to the comments of my noble friend Lord O’Neill, who seemed to be suggesting that there was some dispute or argument going on in the Energy Retail Association’s advice. I presume that the association is represented here today. It would be very interesting to know what its advice is now. Has it amended that advice? Is what my noble friend said accurate? The association should communicate to us and let us know precisely where it stands on these matters.
My amendment is minor but it deals precisely with the concern being expressed by those Members of the Committee in the Commons across the political divide who, almost to a person, wanted some kind of timetable. I am offering my noble friend a way forward. As I said, we could easily compromise on the number of months before Report. I beg to move.
On the face of it, I like this amendment very much. It does a minimal amount in assisting the process by giving a timetable which is entirely reasonable, I should have thought, and almost necessary in view of the discussion that we have had. It is also saying what the minimum capabilities are that smart meters should have. It is not saying all the things that they should do, but saying what people will really want from the meters. If they can get the daily usage of energy, the total cost in the billing period and the cost per unit, that will help them very much indeed. There will doubtless be leaflets accompanying the companies to help them, but anybody can use a meter that does those things to tell them what they need to know clearly. I should have thought that even I could use such a meter, and I am not terribly bright with that kind of electronic device. I hope that the Government are interested in the amendment.
I, too, support the amendment. The noble Lord, Lord Campbell-Savours, made a particularly good point. In this frightening period we are living in, energy prices are utterly out of control. Last night I looked it up and our own electricity charges went up from 5.9p per unit last September to very nearly 10p. That is a huge difference. I cannot help but think that these smart meters will benefit those particularly who are less well off than others, so I give the amendment my wholehearted support.
I am grateful to all noble Lords who spoke to the amendment and to my noble friend for introducing it. I reassure the noble Baroness, Lady Carnegy, that the Government are interested in the amendment. We take all amendments seriously. Certainly my noble friend, as he has said, does not think that he is stretching the envelope too far for Government and thinks that there may be a basis for compromise. There may be, but let me reiterate the fact that we are concerned about fixing the details in primary legislation now. We regard that as somewhat premature; in the final analysis, it might bind us in such a way as to have negative implications for the very objectives that we share.
We are looking at ways to get the rollout for domestic consumers. The Bill provides the necessary flexibility while also ensuring that Parliament scrutinises the licence conditions that are eventually established. I reassure my noble friend in that respect that there is full parliamentary scrutiny of what the Government will do in this area, and I assure him that we will of course set out a timetable. If we decide by the end of this year—and that is the decision framework to which we are committing ourselves—that we wish to proceed with the smart meter rollout to domestic consumers, we understand entirely that we will not be able to do that without a timetable. That is necessary for the wider public and for the industry, which has to gear itself up for the necessary structures and investment decisions to make it possible. I am giving him the commitment that that is our intention. He will recognise that his amendment falls into the same category. It is much closer to the Government’s thinking than one or two earlier amendments which sought to put in the Bill, and therefore in primary legislation, a commitment on a matter on which the Government need to preserve some flexibility. We do not doubt that the benefits of smart metering are potentially significant.
My noble friend will know that his words will be pored over by elected Members in the other place. He used the words “there may be room” in reference to compromise—I usually write down what Ministers say. Is there any possibility that we might be able to consider, let us say, 18 months or 21 months, and that that might be the nature of any compromise, or are we ruling that out right now?
My noble friend presses me with too much precision and detail for me to commit myself on my feet in those terms. I was merely indicating that I understand that what he is driving at has a fair amount of parliamentary support behind it. We are aware that my noble friend has a reputation for some degree of persistence, so it is highly unlikely that even when I get him to withdraw his amendment today—if I am successful in that limited objective—I will have seen the end of the matter, even if there are not further discussions. I was merely indicating to him that I am open-minded about those further discussions. I am not prepared be to pinned down the details at the moment.
Let me once again make the obvious point: noble Lords have articulated these issues well enough in the Committee and we, of course, see the potential benefits of smart meters for domestic households. How could one gainsay those benefits and a number of other significant benefits? The noble Lord, Lord Redesdale, raised the issue first in terms of the battle against climate change and the impact on the carbon count. The benefits are readily identified, but the Committee has not been quite so assiduous—and why should noble Lords concern themselves with such matters?—about the potential costs. The Government have to look at costs because they are borne not by the Government but by the people whom the Government represent. He will recognise that we have to do this analysis thoroughly, otherwise we would not be serving the community that we seek to serve.
We shall be leaving the issue of smart metering soon. I was interested to hear the Minister say that we have not analysed the costs, but I have been trying to work out the figures he gave me for smart meters, and I get the impression that he is talking about them costing about £200 each, whereas we have always been given the impression that they would be between £95 and £140 each. That would make the figures he gave to the Committee somewhat on the high side.
The noble Lord has a narrower concept than the Government of where costs lie. To place them on the meter only will not do. There are other costs involved in restructuring and an obligation on society. I congratulate him on his ready calculation, but it is not just the meter. I again say to my noble friend that we do not see that there is a gain from placing in legislation this degree of restriction, but I recognise that he has support for his position. We will be prepared to discuss this matter further, but I want him to withdraw his amendment today.
I shall rest on my noble friend’s words—that in relation to compromise there may be room. Like Camembert cheese, ideas mature. We have the Summer Recess. Over that period no doubt departmental officials will be very busy developing ideas with a view to taking the whole project forward. With that in mind, I refer to the intervention of my noble friend Lord O’Neill about doing this work during the summer months and the issue raised by the noble Lord, Lord Redesdale.
When that work is done on what people do abroad, can we also have some idea on costs? What are the Italians actually paying for their meters? Where are the meters manufactured? We need information about not just what is available but what the costs are and where meters are manufactured. Is there the potential for manufacture within the United Kingdom?
I spoke to a company this morning called bglobal, of Darwen in Lancashire, which provides meters. It tells me that its meters come from Singapore and are fitted in Australia. The Australians have a fairly major programme. When this research is done, following the amendment of my noble friend Lord O’Neill, we might well be able to collect a lot of data prior to the Report debate. I am sure that we would all find that very helpful. On the basis of the Minister’s assurance that these things are being considered, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 84 to 89 agreed to.
75: After Clause 89, insert the following new Clause—
“Power to amend licence conditions etc: carbon dioxide emission targets and fuel poverty
(1) The Secretary of State may modify—
(a) a condition of a particular electricity supply licence under section 6(1)(d) of the Electricity Act 1989 (c. 29);(b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act;(c) a condition of a particular gas supply licence under section 7A of the Gas Act 1986 (c. 44);(d) the standard conditions incorporated in licences under those provisions by virtue of section 8 of that Act;(e) a document maintained in accordance with the conditions of licences under section 6(1) of the Electricity Act 1989 or section 7 or 7A of the Gas Act 1986, or an agreement that gives effect to a document so maintained.(2) The Secretary of State may exercise the power in subsection (1) for the purpose of requiring the holder of a licence to promote measures, in respect of the group of customers defined in subsection (4), pursuant to any order made under Part 1 of the Gas Act or Part 1 of the Electricity Act 1989 that imposes an obligation on suppliers to achieve carbon dioxide emission reduction targets.
(3) Modifications made by virtue of subsection (1) may include—
(a) provision about the protection of consumers;(b) provision requiring the holder of the licence to enter (or refrain from entering) into an agreement of a specified kind, or with a specified person;(c) provision specifying, or enabling the determination of, a date from which a modification is to take effect.(4) In subsection (2) “the group of customers” means customers who are—
(a) in receipt of income or disability benefits,(b) in receipt of tax or pension credits, or(c) aged 70 or over.(5) The Secretary of State shall, within 6 months of this Act receiving Royal Assent, lay before Parliament regulations making provision for the provision of information to licence holders enabling them to identify those of their customers who fall within the group defined in subsection (4), and provision about the use, sharing and protection of that information.
(6) Regulations under subsection (5) shall make provision in relation to matters including, but not limited to—
(a) disclosure to licence holders of specified information,(b) conditions relating to the security of information disclosed,(c) conditions relating to the use and sharing of such information.(7) Regulations under subsection (5) shall be made by statutory instrument and shall be subject to affirmative resolution of each House of Parliament.”
The noble Lord said: Those who were in the Chamber on 22 January will recollect that, when the House was asked to pass an order entitled the Electricity and Gas (Carbon Emissions Reduction) Order 2008—the CERT order as it is usually called—I moved a regret Motion. That followed a very unsatisfactory debate in Grand Committee when I complained that, while the order imposed strict duties on the suppliers to secure 40 per cent of their carbon emission reductions from the so-called “priority group” of customers, who broadly might be described as the fuel poor—and these were duties subject to substantial penalties in case of failure to comply—the department flatly refused to tell the companies which households fell into the priority group. So the companies were driven into, what I called on that occasion, a very costly “hunt the thimble”.
The noble Lord, Lord Rooker, the Defra Minister responsible for the order, had, I suspect, a somewhat uncomfortable time trying to defend the indefensible. Angrily, noble Lords may remember, he challenged me to divide the House against the order. I refused for two reasons. First, the order is aimed at improving the energy efficiency of the existing domestic sector. I regard that as a very important aim. Secondly, I said that I would return to the matter when we had the Energy Bill before us.
We all know that the gas and electricity industry does its best to help the Government to achieve their objectives in the field of energy policy, and particularly for the domestic customer. It does that in a number of ways. One is the excellent voluntary agreement which was recently negotiated to increase the industry’s expenditure on fuel poverty mitigation measures to some £150 million a year by 2010. Another is the CERT order, by promoting energy efficiency and energy conservation measures. But what these require is an effective means of targeting the help on those who most need it. I ask noble Lords to hang on to “targeting”.
However, since January, there have been some significant developments. In April, Ofgem mounted a fuel poverty summit, an objective of which was to concentrate on targeting the fuel poor. By then—whether as a result of the discomfiture in January of the noble Lord, Lord Rooker, or not—Ministers had decided that they had to do something about it. The outcome of the summit was therefore the so-called fuel poverty action programme, a copy of which was sent to me by the noble Lord, Lord Mogg, on 4 June. In his covering letter, the noble Lord set out the programme’s main points. I quote the first two:
“The Government has announced that it will seek to legislate to allow the Department for Work and Pensions and energy suppliers to share data so that help can be targeted at vulnerable customers … Energy suppliers have committed to improving the targeting of their social measures for fuel-poor customers”.
There were a number of other points, but they are not relevant to the amendment.
The amendment is intended to provide an appropriate statutory backing for an information disclosure scheme that would enable the Government and the industry to achieve these objectives. It is drafted in a way that I would have tried to avoid if I had had any choice. It begins, for example, with the grant of a power to the Minister to modify the conditions of the industry’s operating licences. It is clear to me and some others that that would not be the ideal way of dealing with it, but I had to do something like that to bring the clause within the Long Title; I express my gratitude to the Public Bill Office for its help in this regard.
The key provision of the new clause is quite clear. It would require Ministers, within six months of the Bill receiving Royal Assent, to bring forward regulations to establish a scheme for the disclosure to gas and electricity suppliers of information that would enable them to identify those of their domestic customers who are in receipt of the benefits, credits or allowances listed in Schedule 2 to the CERT order; I declare an interest as, being over 70, I am included in that schedule—no doubt with a number of other noble Lords. Disclosure of that information would enable the suppliers to target—I latch on to that word again—not only the priority treatment groups under the CERT order, but also those most likely to be able to benefit under the suppliers of a voluntary fuel poverty mitigation programme. As noble Lords will realise, there is a high degree of overlap between those customer groups.
Of course, there must be safeguards over the use, sharing and protection of information disclosed under the scheme. Part of my amendment is directed to that. The tight timeframe of six months for preparing and laying the regulations demonstrates an intention underlying the urgency of dealing with this. If any of these policies are to take effect, it must be done quickly.
The regulations will need to be fairly far-reaching. They include at least four government departments: the Minister’s own department, BERR; Defra; the Department for Work and Pensions; and Revenue and Customs, if one is talking about tax credits—as we know from another incident, it ought to hold all the details. The regulations may have to modify some elements of current data protection legislation, or of carving out certain exemptions from such legislation. Therefore, because it is important, the clause provides for the regulations to be subject to an affirmative resolution procedure. Of course, that would provide for appropriate parliamentary scrutiny.
A moment ago, I mentioned the Department for Work and Pensions, and I am most grateful to the noble Lord, Lord McKenzie of Luton, who gave me advance notice of the amendment that he tabled at the end of last week, which would provide for relevant information disclosures to gas and electricity suppliers in relation to customers who are in receipt of state pension credit. My immediate reaction was to say that, welcome though that might be, it affects only the smallest group of all those who are intended to qualify as members of the priority group under the CERT order and hence, by extension, only to a very small group of those who are vulnerable to fuel poverty. However, the new clause in the Pensions Bill, of which for better information I have acquired a copy, states very clearly:
“The Secretary of State may by regulations make provision authorising the Secretary of State, or a person providing services to the Secretary of State, to supply relevant persons with social security information about persons in receipt of state pension credit”.
“Relevant persons” are described later in the clause, but that broadly means the electricity and gas industries.
There you have a very clear precedent of what can be done for that group. I want to see it being done for the whole priority group. Otherwise, what is the purpose of listing them all in the CERT order and then not telling the industries who they are? That is the purpose of my amendment. Something along the lines of the Pensions Bill amendment would provide for the effective targeting—I come back to that word—that was required under the action programme following the fuel poverty summit. It seems to me to be absolutely in line with what the Government want to do and as subscribers to the action programme with what they have said they will do. I hope that Ministers may be able to smile on this amendment. I beg to move.
I am very pleased that my noble friend Lord Jenkin has tabled the amendment, which poses an interesting question about what steps need to be taken to ensure that fuel poverty targets are met. As the noble Lord, Lord Jenkin, said, on the Pensions Bill currently making its way through your Lordships’ House, the Government have tabled an amendment to allow the information of those on state pension credits to be used to better target fuel poverty. As he said, this amendment would extend the access to the information of other groups. While the Government’s track record on data protection is not enviable, this might be a necessary way of tackling fuel poverty. Businesses are currently spending enormous amounts of money trying to find out whom they are supposed to be helping, and it will be very interesting to hear from the Minister whether he thinks that this access to information would be the way forward in addressing the problems of the fuel poor.
There is a very good case for the amendment. Clearly, the area that we are all concerned about is information security. There are issues where, rightly, people do not want too many others to know which benefits they get and which category they are in; we all entirely understand that. I would particularly like to understand, in terms of the Pensions Bill, which the noble Lord, Lord Jenkin, mentioned, what the Government see as the safeguards to the data. In what way are the Government moving forward on data issues in that area? Those have to be robust. As fuel poverty is more and more an issue and a challenge to more people, we need to ensure that the agencies and companies concerned are able to maximise and roll out the programmes that are more desperately needed now than has been the case for some time.
I, too, wholeheartedly support this amendment. In my small contribution at Second Reading, I devoted most of my speech to fuel poverty. It is an absolute scandal that, in 2008, anyone should have to live in fuel poverty. The noble Lord, Lord Jenkin, mentioned targeting. He emphasised the fact that this is covered by several different government departments, which is often the same with alternative energy, in which I have also been involved. One used to have to get involved with Defra, the Department for Transport, the old Department of Trade and Industry and with the Treasury.
There is a great complication as regards subsection (4) in this amendment. I feel incredibly strongly about the geographic difference. The noble Lord, Lord Bach, will realise that I have a meeting with him after Questions on Tuesday to discuss this very issue. It is absolute madness that, for example, someone on fuel poverty payments who lives on the south coast of England receives the same amount as someone living on the north coast of Scotland. Last weekend at home in the Scottish Borders, it was 52 degrees and we very nearly lit a fire. It was not that temperature on the south coast of England. We should seriously consider that there should be some geographic difference. This will not be the last that the noble Lord, Lord Bach, will hear from me on this subject. I look forward to talking to him. However, I wholeheartedly support this amendment. I reiterate that it is an absolute scandal for anyone to suffer fuel poverty today. It is interesting that a former Conservative Minister responsible for energy has to bring forward this amendment rather than the Government.
I look forward very much to meeting the noble Lord, Lord Palmer, for further discussions on this subject. However, before we debate this issue, I have to point out that in 1996 there were 6.5 million households in fuel poverty and there are now 2.5 million. Of course, that is 2.5 million too many, but the fact that we have reduced the number should be put on the record and taken into account, although we all know that in the past year the number has increased. That is why I slightly resent—but no more than that—the comment of the noble Lord, Lord Palmer, in relation to a previous Conservative Secretary of State responsible for energy having to tell this Government something. I think our record on this is pretty good—not perfect, but pretty good.
I did not mean to be offensive in the slightest. Because of the horrible escalation of fuel prices, the figures which the Minister has just quoted will not be correct by the end of this current financial year. In the Times last week, it was estimated that 6.5 million people will be in fuel poverty by the end of next year. The noble Lord said that 2.4 million people is indeed too many, but that is almost a trebling of the actual number. It is very worrying. I apologise most sincerely if he thought I was being offensive. I did not mean to be offensive in the slightest.
The noble Lord was not being offensive. I have never known him to be offensive and I am sure he never would be. I just slightly resented the comment. That was all. I make it clear that it is a real problem and an existing problem. It was a problem when the last Government were in power and it is a problem for us now. It is important to say that the figures, which I thought were agreed, are as I have stated them.
I congratulate the noble Lord, Lord Jenkin, because it is an achievement to have got this amendment on to the Marshalled List at all. No doubt, it is absolutely rightly on the Marshalled List and it gives us a chance to discuss what is clearly a very important subject, which becomes more important for exactly the reason mentioned by the noble Lord, Lord Palmer—that this is a time of rising prices and global financial uncertainty. The impact of those factors on the most vulnerable in society is clear.
This is an interesting amendment. I think the second part, rather than the first, concerns the noble Lord, but I shall deal with both parts. The amendment appears to seek to add an additional consumer protection element to the Secretary of State’s existing powers to impose carbon reduction obligations on energy suppliers. It also provides for a duty on the Secretary of State to make regulations enabling the provision of information to help suppliers identify particular consumers. It is that last point about which the noble Lord, Lord Jenkin, is most concerned.
The Committee will be aware that the Secretary of State’s powers to impose carbon emissions reduction obligations on suppliers is the power which underpins the delivery of the carbon emissions reduction target, CERT, which is bolder and wider than its predecessor, the energy efficiency commitment. Starting this year, the CERT scheme effectively doubles the carbon reduction objectives we are imposing on suppliers and we believe will significantly increase the number of customers benefiting from the scheme. As has been said, the scheme already contains an obligation to achieve 40 per cent of its target carbon savings from defined groups of vulnerable consumers, who are very much the groups identified in the noble Lord’s amendment. When combined with Warm Front funding the CERT scheme will result in spending on energy efficiency and other measures in low income, elderly and disabled households of around £2.3 billion in the period 2008-11. By anyone’s standards, that is a large sum. I was grateful for what the noble Lord said and for his support for the voluntary agreement.
The first part of the amendment seeks to add further to the Secretary of State’s powers in relation to carbon reduction obligations. It would enable him to amend licences in order to require licensees to take further steps to protect consumers. It is not immediately clear from the amendment text what form these consumer protections may take. What is clear is that this power is intended to be used in relation to orders made under Part 1 of the Gas Act or Part 2 of the Electricity Act, which impose carbon reduction obligations on energy suppliers. This suggests that any consumer protection measures would therefore also need to be related to carbon reduction, so this could involve activities such as improving the insulation in a consumer’s home.
As I have said already, under the CERT scheme the Government already have powers to ensure that a large percentage of the carbon reduction activities within that scheme are targeted at vulnerable groups of consumers. We would argue that the first part of the amendment is not strictly necessary, as we do not believe that it would add to existing requirements for suppliers to target carbon reduction measures at a priority group of vulnerable consumers. Finally, on the first amendment, in addition, this kind of power may well also cut across existing voluntary action by suppliers outside of their CERT obligations.
The second part of the amendment relates to the sharing of information—the targeting that the noble Lord insists on—to assist suppliers in identifying the particular customers specified. This is obviously an issue of particular and lasting interest to the noble Lord—I pay credit to him for his role in this—particularly in relation to the targeting and delivery of the CERT scheme.
Ensuring consumers receive the support to which they are entitled is, of course, an ambition which the Government fully share. Which person of good will could not share that desire? Members of the Committee will be aware, because, not least, the noble Lord, Lord Jenkin, told them, that improving the identification and targeting of measures aimed at vulnerable consumers was one of the main themes of the Ofgem fuel poverty summit in April. The attendance at that summit of several government Ministers, representatives from the European Commission and the major energy suppliers, plus a wide range of groups from the voluntary sector, is an illustration of just how seriously this issue is being taken.
However, the very fact that this issue required such a high-level discussion by that group also illustrates that while intuitively sharing data to identify the vulnerable feels right, obvious and straightforward, when it comes to finding practical ways to deliver this, things immediately become a good deal more complex. Identifying and reaching vulnerable consumers requires information on the individual circumstances of each customer. This can often involve understanding the state of their housing, their income levels, the benefits they receive and the fuel prices they are paying, and some of those are dynamic factors that change frequently.
No single organisation holds that breadth of information on an individual consumer. That is why finding an effective method of identifying significant numbers of vulnerable consumers requires a joined-up approach within and across government departments, suppliers and other agencies involved. That work is well under way, but it involves complex legal and human rights issues that need to be worked through—to use the noble Lord’s own expression, there have to be safeguards. These are legitimate privacy and data protection concerns. Any action to share data held by government departments or suppliers must be justifiable in terms of the Data Protection Act—the noble Lord, Lord Teverson, referred to that Act—and the European Convention on Human Rights. Any large-scale action to identify vulnerable groups would potentially involve sharing the personal details of hundreds of thousands of individual consumers.
Data sharing on that scale must be justifiable and proportionate. That presents difficulties because, as noble Lords will be aware, in order to identify vulnerable consumers, we need to use proxies, such as being in receipt of certain benefits. However, these proxy tests are an imperfect means of targeting and, as a result, can capture a very wide group of consumers, many of whom may not be eligible for government or supplier support schemes. Therefore, in many cases, this level of data sharing would not be considered proportionate or justifiable, and we do not feel that it would be appropriate at this stage to take broad legislative powers in relation to data sharing before we have worked through some of these complex issues. We must be sure that any sensitive information being shared can deliver the outcomes that we are looking for, is appropriately protected because the safeguards are in place and can be delivered in a way that is consistent with data protection and human rights legislation. The DWP, BERR and Defra are committed to exploring how data held by DWP may best be used to ensure that appropriate help is targeted on vulnerable groups. We will continue to keep the case for large-scale legislative data-sharing provision under close consideration.
However, there are a number of other legislative and non-legislative actions, some of which have been referred to in the debate, which we are already taking forward in the short term to try to improve the identification and targeting of vulnerable consumers. I believe that is a demonstration of our good faith and of the Government’s commitment to this important issue of effective targeting.
The amendment to the Pensions Bill has been referred to. It is currently being considered in this House and provides a power to enable data sharing between the Government and energy suppliers regarding elderly consumers. The noble Lord, Lord Teverson, asked about that. That amendment will allow that department to share data with energy companies to allow them better to target the range of help available, including access to social assistance programmes for pensioners most likely to be fuel poor. However, I have to tell the noble Lord that the precise details of the future arrangements are still being considered and discussed with supplier companies. It will be important to ensure that there is a beneficial outcome for the great majority of customers whose data are shared and that, as far as possible, it is awarded automatically.
Perhaps I can come back to that point before I sit down.
The Pensions Bill amendment is an important step forward on data sharing. Moreover, because of the more limited focus of this amendment on a particular group of vulnerable consumers, some of the issues of proportionality and data protection I have just outlined can be better managed.
Briefly, on non-legislative steps, all eligible households that come forward to the Warm Front scheme—which, as the Committee will know, offers grants to help pay for heating and insulation improvements in the home—are now also offered further assistance to ensure that they are aware of all the benefits to which they are entitled. Last year, Warm Front performed approximately 50,000 benefit-entitlement checks, which helped locate additional benefits for over 18,000 people with an average value of over £28 per week, or £1,500 per year. Working with the energy suppliers, the departments referred to have already undertaken two small winter mail-outs based on DWP data, which the noble Lord referred to. In the past two winters 350,000 customers on pension credit have been sent information to tell them about the Warm Front initiatives, the CERT measures and to offer advice on reducing their energy bills.
Following the fuel poverty summit, suppliers have committed themselves to improving the transparency of the support that they can offer vulnerable customers. This includes ensuring that websites to help you switch energy supplier, agencies such as Citizens Advice and consumers have clear, accessible, information on what support is available. Suppliers will also be reviewing the effectiveness of the Home Heat Helpline, which is run by the Energy Retail Association, to ensure that it functions effectively as a central point of contact for help and advice on paying fuel bills.
I end my list of examples with experience from regional programmes, such as the Warm Zones scheme, which has shown that an area-based approach can be one of the most efficient and cost-effective ways of identifying and helping the fuel poor. As part of the drive to better target the most vulnerable consumers, local and central government and suppliers will work together to build on this approach and explore if an area-by-area approach could have benefits for the delivery of other programmes such as CERT.
I hope that we have understood the question of the noble Lord, Lord Teverson, correctly. Analysis indicates that suppliers would need to target around 2.4 million households to meet their CERT obligations. Ofgem will report a little later in the year on how many have received assistance so far.
I hope that I have provided some reassurance to the noble Lord; I am sure that I have not told him anything that he does not already know better than me. However, we recognise that this is a major issue, and I emphasise the wide range of work that is under way. We will review progress from the Ofgem summit in autumn 2008. The amendment to the Pensions Bill is an important start, and we will learn lessons from it to help inform further work on other legislative data-sharing options. I assure the noble Lord that we will keep the case for further legislation under review in the context of our ongoing commitment, shared by everyone in the Committee, to address fuel poverty. At this stage, it is not a simple matter of adding further legislation. However, I again thank the noble Lord for introducing the topic to the Committee this afternoon.
First, I thank everybody who has taken part in this. Secondly, in the light of the position that the Minister outlined to the Committee this afternoon, I recognise that there has been a sea-change in the Government’s position since as recently as last January, and I welcome that. I claim no credit for having stimulated it, although the noble Lord was kind enough to indicate that perhaps I might have helped. The important thing is that there now seems to be a way forward by building on what has been put forward for the Pensions Bill and the other non-legislative methods.
The noble Lord suggested that there needs to be a lot of information about the people who might be targeted. For the purposes of the CERT order, no information is required. The categories in the schedule are absolutely clear: those in receipt of certain benefits, certain tax credits, certain pensioners and so on. There is no question of having to see what their energy consumption is, what kind of house they are living in or anything like that. That may be necessary for the purposes of social tariffs for the electricity companies, but for the moment I have been concentrating on the CERT order. I hope that that will not be lost sight of by adding the additional difficulties if one is going to try to target the fuel poor as a whole.
The noble Lord gave me rather more comfort than perhaps I had been expecting in the wake of last January’s debate. For that I am very grateful. We want to study very carefully what he has said. I will consider whether it is necessary to return to this matter on Report.
I understand if one is dealing with the Data Protection Act and human rights the smaller the group one is identifying, the easier it is to justify under that legislation; the larger the group, the more difficult it is. There must be some way of approaching this. I have no doubt that the Government have this very much under consideration. I am grateful to the noble Lord, Lord Bach, for what he said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 90 agreed to.
76: After Clause 90, insert the following new Clause—
“Duty to protect public health
(1) The Electricity Act 1989 (c. 29) is amended as follows.
(2) In section 3D(2) (exceptions from sections 3A to 3C) omit the words “or 37”.
(3) In section 29 (regulations relating to supply and safety), after subsection (2)(g) insert—
“(h) specify the distance at which any new high voltage line should be installed from any existing development.”(4) After section 37(3) insert—
“(3A) In granting consent under this section, the Secretary of State must ensure that he does not expose any person to any risk to their health arising from exposure to electric and magnetic fields with a frequency of between 30-300 Hertz.”
(5) In Schedule 8 (consents under sections 36 and 37) at the end of paragraph 2(1) insert “and the Health Protection Agency”.
(6) In Schedule 8 (consents under sections 36 and 37) in paragraph 2(2) after “relevant planning authority” insert “or the Health Protection Agency”.
(7) In Schedule 8 (consents under sections 36 and 37) after paragraph 2(6) insert—
“(7) In this Schedule “Health Protection Agency” has the same meaning as in the Health Protection Agency Act 2004 and includes any successor to its functions in respect of radiation.””
The noble Lord said: I hope to move this amendment more briefly than the last one as I am conscious that we are nearing the end of our deliberations and that we want to reach the end of the list before we have to adjourn.
The amendment is about a possible link between electric and magnetic fields, EMF, and extremely low frequency electricity current, ELF, and the incidence of childhood leukaemia for children either in utero or born and living within 200 metres of a high-voltage transmission line. This issue is clearly important. It has been the subject of several reports and of a recent debate in Grand Committee on the Housing and Regeneration Bill on 10 June, when the noble Baroness, Lady Finlay of Llandaff, supported by the noble Lord, Lord Best, tabled an amendment in pretty well the same terms as the one I am speaking to this afternoon.
The issue is whether it is desirable, necessary or proportionate to take steps to reduce the risk. It is interesting to learn that the evidence of the link is based almost wholly on epidemiological studies. There is very little, if anything, to establish causation. That makes it extremely difficult for those responsible for policy to decide action because one is inevitably thrown back on the precautionary principle. I have discussed this issue with the charity Children with Leukaemia and, more recently, with a scientist from the National Grid, Dr John Swanson. I am extremely grateful to both for the information and guidance they have given.
I mentioned the reports a moment ago. The most significant report is the so-called SAGE report—an acronym for the Stakeholder Advisory Group on ELF EMFs. It is an admirable initiative, trying to break away from the confrontational approach and to establish a collaborative effort to reach some consensus about what advice to give to the authorities. The stage that we have now reached is that the Health Protection Agency has commented on the SAGE report and issued its own advice. We now await the Government’s response to that report. We are promised that “later this year”— I take that from the speech of the noble Baroness, Lady Andrews, in Grand Committee on the Bill that I have just mentioned, on 10 June reported in col. 179. Can Ministers perhaps be a little more specific about that, since “later this year” still leaves us with six months? Could we have slightly more detail?
The noble Baroness referred to “precautionary measures”. Could we have some indication of what those might be? One suggestion widely canvassed was that authorities should insist on a very wide corridor, of perhaps 400 metres, within which housing and schools would be planned. What has been made clear in the grid is that that would entail a huge cost and an enormous sterilisation of land. The HPA’s estimate of what we are dealing with here is that out of 450 cases of childhood leukaemia per annum perhaps two might be attributable to ELF/EMF from transmission lines. I find it very difficult to believe that a corridor could conceivably be regarded as a proportionate response to that. At the other end, there is apparently some evidence that EMF fields emanating from poor house wiring might be contributing to the problem and that the cost might be as little as £20 a house to put that right. I have no means of knowing whether that is right, but that is the figure that I was given.
There is a third matter which perhaps ought to be left to the Planning Bill. The noble Baroness, Lady Andrews, said,
“the HPA recommends that, within the existing government planning framework, the attention of local authority planning departments and electricity companies be drawn to the evidence for a possible small increase in childhood leukaemia”.—[Official Report, 10/6/08; col. GC 179.]
The HPA itself has also said:
“Raising awareness of a hazard without giving advice on how to reduce exposure could cause anxiety and attendant health detriment”.
Just issuing information to planning authorities without some accompanying guidance would seem to me to fall into the HPA’s trap. I was quoting from paragraph 6 of its report.
The industry takes a very positive approach to this issue. There is no suggestion of trying to sweep it under the carpet. The concerned NGOs remain very anxious to continue the collaborative approach inherent in the SAGE process. My proposed new clause, which was suggested by Children with Leukaemia, makes certain more specific suggestions about distance from developments or a duty on the Secretary of State to ensure no risk. I am prepared to agree that there can never be no risk when talking about developments of this kind. The involvement of the HPA has also been referred to.
For these reasons, it would be wrong to press this in advance of the Government’s promised response to SAGE, but the amendment does give Ministers an opportunity to add to what the noble Baroness, Lady Andrews, said on 10 June. On that basis, I shall decide whether to return to this on Report. That will depend on when we can expect the Government’s response. We will not reach that point until after the long Recess, so there is time for this to be considered. I share the concern that there may be something here of which we need to take account and that the precautionary principle requires that that is done. I beg to move.
I am grateful to the noble Lord for this amendment, which gives us a chance to air an important topic. I must declare a direct interest. This year, my grandson suffered from leukaemia and to see an eight year-old go through the agonies of the necessary treatment fixes the issue very firmly indeed in one’s mind. I was very grateful for the way in which the noble Lord, Lord Jenkin, approached the whole issue and for how constructive he has been.
I regret that I do not have a great deal to add to his extremely comprehensive analysis because he was so fair in identifying the nature of the problem and in indicating the difficulties of the potential solutions. He is right about the fundamental position that we do not know enough about leukaemia to identify its causes and, as regards power lines, he also showed statistically how limited any effect is but, however small the number of cases, every child affected is a grievous concern to us all. As he said, we have to have proportionality in developing a strategy for the grid that relates to what still would be just a potential factor with regard to the illness and to children. That shows how problematic the whole issue is.
Certainly, the industry and the Government have taken the Draper report very seriously, as they have any issue of public health. What constructively can we do to advance understanding of the issue and what action needs to be taken? I was extremely grateful to the noble Lord for the way in which he spoke about the work of SAGE, the Stakeholder Advisory Group on ELF EMFs. It certainly brought everyone together on a remit to identify and explore the implications of the issues. It reported last year and made a number of recommendations in relation to power lines and property, and, as the noble Lord also added, to wiring in homes and electrical equipment.
SAGE set out a range of precautionary options to reduce exposures significantly, involving the physical separation of buildings from power lines. It identified the best-available option for obtaining significant exposure reduction; namely, a combination of no new power lines and no new developments too close to residential developments and schools. It also undertook a cost-benefit analysis of this precautionary option and found that, because of the difficulty of cause and effect and the small numbers involved, it was difficult to reach a positive cost-benefit analysis on any action, which is what the noble Lord very fairly reflected in his speech.
We are currently considering the report very seriously. The noble Lord mentioned that my noble friend Lady Andrews has already commented on it. The work is ongoing and we are considering the Health Protection Agency’s advice. It will also take into account the cross-party inquiry into childhood leukaemia and the advice of the World Health Organisation which was published last year.
The noble Lord asked me whether the amendment would at least trigger from the Government a more specific date than he has received so far. I cannot say anything more than that the work is being done intensively and is under careful scrutiny. I somewhat doubt whether we will have the Government’s response to the report before we have completed our deliberations on the Bill. We are committed to doing it this year, but there is a lot of work. I cannot give him the assurance that he sought that we would have it ready for Report in the autumn, as far as this measure is concerned.
The noble Lord will understand our reluctance to pre-empt by any amendment at this stage the consideration of the report. I am grateful to him for having raised an issue of the greatest concern to the industry and to the Government. There is not the slightest doubt of the obligation on the Government to examine the issue thoroughly, which they are doing, and to respond to the report, which raises very profound and difficult issues. I hope that I have at least conveyed that seriousness on the part of the Government, if I cannot help the noble Lord regarding the timetable.
Can the Minister say whether the anxieties are being at all reflected in the many inquiries that are going on about the criss-cross of high voltage lines that are designed to feed energy from wind farms into the grid? I think particularly of Scotland, where there are a great many planning inquiries going on in a number of directions. Is that a consideration?
All issues with regard to the construction of new lines are of consideration. That has all got to be taken into account. Obviously, we are expecting, and are due to have, a substantial extension of power generation to the grid from such a large number of sources, and the noble Baroness is right to say that we need to take into account how and where those lines are constructed. That is all part of the work that is being done, and I give her that assurance at least.
I would not have expected the noble Lord to say more than he did, and I was grateful for what he did say. Clearly, the Government are seized of the problem. Whether we can get their response to the report in time for the last days of Report stage of the Bill, we shall have to wait and see. It would be very helpful if they could manage to achieve that.
I recognise that there is another important group of amendments to come, and the noble Lord, Lord Puttnam, has been waiting very patiently. I will just add one point. The first thing that I ever did for my constituents, very soon after I was elected, was to persuade the London Electricity Board to bury a distribution cable that was going straight through a housing estate in my constituency on pylons. I am told that that makes no difference to the ELF/EMF problem, unless you are a little bit away from it. One has lived with this problem, which was some 46 years ago. I—
76A: After Clause 91, insert the following new Clause—
“Adaptation of role of OFT in initial investigations and report
(1) In section 44(3)(b) of the Enterprise Act 2002 (c. 40) (initial report by OFT in public interest cases must include summary of representation about public interest considerations) for the words “(other than a media public interest consideration)” substitute “(other than a media or an energy public interest consideration)”.
(2) After section 44(5A) of that Act insert—
“(5B) The report may, in particular, contain a summary of any representations about the case which have been received by the OFT and which relate to any energy public interest consideration mentioned in the intervention notice concerned and which is or may be relevant to the Secretary of State’s decision as to whether to make a reference under section 45.”
(3) After section 44(7) of that Act insert—
“(8) In this Part “energy public interest consideration” means any consideration which, at the time of the giving of the intervention notice concerned—
(a) is specified in section 58(2D); or(b) in the opinion of the Secretary of State, is concerned with energy and ought to be specified in section 58.(4) After section 44A of that Act insert—
“44B Additional investigation and report by OFGEM; energy acquisitions, mergers or takeovers
(1) Subsection (2) applies where—
(a) the Secretary of State has given an intervention notice in relation to a relevant acquisition, merger or takeover situation; and(b) the intervention notice mentions any energy public interest consideration.(2) OFGEM shall, within such period as the Secretary of State may require, give a report to the Secretary of State on the effect of the consideration or considerations concerned on the case.
(3) The report shall contain—
(a) advice and recommendations on any energy public interest consideration mentioned in the intervention notice concerned and which is or may be relevant to the Secretary of State’s decision as to whether to make a reference under section 45; and(b) a summary of any representations about the case which have been received by OFGEM and which relate to any such consideration.(4) OFGEM’s advice shall cover the issues of—
(a) financial liability,(b) transparency, and(c) security of supply.(5) OFGEM shall carry out such investigations as they consider appropriate for the purposes of producing a report under this section.””
The noble Lord said: I point to the irony that at this late hour and right at the end of the Committee stage of this Bill we are discussing energy security. I cannot think of a more important issue—I am sure there are more important issues, but I am not aware of one.
I have had the benefit of two very good and constructive discussions with the Bill team and, to an extent, they were quite reassuring. By the middle of last week, I was very reassured, until I read a very good speech by the Prime Minister given last Thursday to the low carbon economy summit. Early on in the speech, which I shall précis, he said,
“let me set out for you our strategy to build Low Carbon Britain. Our first priority is to provide … competitive markets and an entrepreneurial, pro-business culture. … we will never put these at risk”.
I would infinitely have preferred it had he made it clear that his first priority was security of supply and control over our energy destiny. It seems to me that our business credentials could well have been a perfectly adequate second priority. This lies at the heart of the matter.
I am sad to say that in the past 25 years—not exclusively the fault of this Government—Britain has drifted more and more towards being an entrepot nation, particularly London. I am a film producer, so I think I am allowed to conjure up romantic visions of old black and white films, such as “Macao” and the Zanzibar films, where dodgy people were able to do dodgy deals in a dodgy environment and where the wink and the nod increasingly became the culture of the hour. That troubles me. We are moving towards an assumption that if it is a good deal, if it is good business and if you do not look too carefully at who is doing that business, it is okay. I submit, in the case of energy security, that it is anything but okay—hence my proposed amendment.
The amendment is reasonably complicated, but it does the job. The Bill team and I have discussed it and it is a competent amendment. I draw the Committee’s attention to proposed new Section 44B(2):
“OFGEM shall, within such period as the Secretary of State may require, give a report to the Secretary of State on the effect of the consideration or considerations concerned on the case”.
The case would be the takeover, merger or acquisition of one of our significant energy interests. The amendment continues with the words “The report shall contain” and it talks about that. Proposed new Section 44B(4) states:
“OFGEM’s advice shall cover the issues of—
(a) financial liability”,
which is the deal entered into, where the money comes from and on what terms;
which is the governance of the acquiring corporation or company; and,
“(c) security of supply”.
I ask the Government to come up with reasons why one would not want that information. Why on earth would a significant transaction take place in the energy sector without that information being on the public record: the transparency of the organisation concerned; where the money comes from; what the terms are; and what security of supply we in the UK can expect as a result of that transaction?
I want to add to my concerns. Much of the thrust of my argument was contained in my speech at Second Reading on 21 May at cols. 1948 to 1501. In it I quoted our current Prime Minister in 1989 and again in 1991 saying,
“there has been very little attempt to stand up for ordinary people against the vested interests of business and vast corporations”.
In a subsequent speech he said that the current Government,
“would appease the vested interests of their friends in the private sector before advancing the public interest which it is their duty to uphold”.—[Official Report, Commons, 12/2/91; col. 754.]
All I am arguing here is that it is an absolute duty to uphold the public interest. The public interest will be best upheld by the incorporation of the type of amendment that I am suggesting here. I find it very difficult to take on board the argument that the situation is already well covered and that the nation is already absolutely secure when it is clear that all the countries with which we would normally associate ourselves—the democratic nations of western Europe and, most particularly, the United States—would not countenance the possibility of a portion of their energy supplies being owned and operated by companies with which they did not in any way, shape or form fully conform. That is particularly true of the United States, a nation that we continually seem to hold up as the apex of our economic ambitions. America would not dream of allowing a foreign company or corporation to own any of its energy supplies. We know that; the Americans make no bones about it. Why have we decided on a policy that is so entirely different? I beg to move.
I thank the noble Lord, Lord Puttnam, for tabling the amendment, to which I was pleased to be a signatory. The issues are simple. Our nation is international and operates effectively in a global economy. We are proud of that, and lead many parts of the world, including Europe, in that sense. However, that leadership and globalisation—that openness—requires certain standards for businesses and business ownership. They consist of the classic capital model of decisions being made on the commercial and financial basis of a return to shareholders, whoever they may be, and on a degree of transparency in the whole area of company and corporate reporting.
However, there are good reasons to look at that more closely in certain sectors. The defence sector is clearly one and so, increasingly, is the energy sector. Over the past few years, energy security has rightly become a more important and highly regarded area, which we understand better than ever before is important to our national security. I am the last person who would want a clause that could be used for a nationalist, protectionist reason; that is always an issue with this type of clause. It is a question of balance.
I will be particularly interested to hear the Government’s response to the possibility of organisations taking over strategic sectors of our energy industry where there is a political rather than commercial objective. Where there is a politically driven agenda, or a sovereign wealth fund whose shareholding and strategic company aims have no transparency whatsoever, there must be a balance between energy security and the open market capitalism and globalisation that this country would generally be proud of. That balance is important in this area, and I welcome this amendment.
I never thought that I would agree with the noble Lord, Lord Redesdale, as much as I just have. We must set our face firmly against commercial protectionism, but where the objective is a political one it must be resisted. Noble Lords may be aware that when we debated these subjects a little over a year ago, the noble Lord, Lord Truscott, was replying for the Government. There were rumours in the press that Gazprom was threatening to bid for Centrica, which includes British Gas, among other things. I am not sure that I got a clear enough answer, but I made it clear to the Government that that would be totally unacceptable. There could be no reciprocity or transparency of any kind; that must be firmly resisted.
That is quite different from the proposals of the noble Lord, Lord Puttnam. Mischievously, I ask him what his view was when the Government chose to sell Westinghouse to the Japanese.
The noble Lord, Lord Jenkin, is in agreement with me as well as with the noble Lord, Lord Teverson, although I said nothing. Another point that underlines the importance of this amendment is that over recent years, instead of competition proliferating on the European stage, the number of large energy suppliers has shrunk as large corporations have merged for reasons of size or marketplace. Indeed, we are looking at a situation where very few players in the market are dealing with interests within countries. I recently had a meeting with most of the large energy suppliers on a carbon labelling scheme. It was amazing to have the five or six people in the room representing such a large tranche of the market. If some of the deals that have been speculated about go through, that number will shrink. It is therefore important that we look carefully at companies that will be moving into the field, especially with the gas pipelines and the situation about gas supply. As the noble Lord, Lord Puttnam, pointed out, this amendment is at the tail end of the Bill, but I believe it is an issue that, as an amendment, is intrinsically important to the basis of the Bill, and I hope that the Minister comes forward with a positive response to the amendment.
I thank my noble friend for his patience in sitting through this afternoon’s events and for the way in which he moved his important amendment. It deserves a full answer, so I do not apologise for the fact that, even though we are close to the time limit, I shall not shorten my answer but will try to give a full answer, whether satisfactory or not, to the Committee.
Everyone shares the noble Lord’s desire to ensure that our regulatory framework has robust powers to address takeovers of UK energy assets where they may operate against the public interest and, in particular, to address any concerns arising from energy mergers. Maintaining the security of our energy supplies as we, as a country, make the difficult transition from being a net exporter of energy to being a net importer brings new and difficult challenges. As part of the Government’s response to those challenges, much of the Bill, which we have now been debating for five days, is about ensuring that we have the right legislative environment to support the investment in the new kinds of infrastructure and technologies that we will need to cut carbon emissions and ensure security of supply.
Much of this will involve foreign direct investment. Maintaining the UK’s long-standing policy—a policy that we should defend—of being open to inward investment, while also ensuring that, where necessary, action can be taken to protect legitimate public interests requires a careful balance to be struck in the formulation of our regulatory framework; that goes almost without saying. It is also agreed that we need certain standards in ownership takeovers, and I hope that my response may go some way to persuading the Committee that the right safeguards already exist within the Enterprise Act and within European law. Why we allow foreign companies to invest in our economy is sometimes asked. The answer is, in short, that we are open to foreign investment in our economy for the obvious benefits that it brings in capital and expertise. As long as there are appropriate protections, it is the Government’s firm view that we should remain open to foreign investment and resist protectionism, which is a disease that many countries find themselves prey to, particularly when economic circumstances are difficult. We have resisted it over many decades, and we should continue to do so. It has always been in our interest as a country to be free-traders.
The aim of Amendment No. 76A is to insert into the Enterprise Act 2002 a new public interest consideration in relation to energy security. My noble friend’s Amendment No. 76B would see the plurality of persons controlling energy enterprises become specified grounds on which the Secretary of State may intervene in mergers.
We agree that we must ensure that the UK has robust powers to address takeovers in this sector. However, I assure the Committee that we do not believe that these amendments are either necessary or appropriate. Two concerns are key to energy in this concept. One is ensuring a competitive market and choice for the consumer. The other is ensuring a secure and dependable energy supply. Under UK and European merger laws, independent competition authorities are responsible for ensuring the protection of competition, while our Enterprise Act also addresses wider issues of public interest.
Currently, through the powers in the Act, there are two specified public interest considerations. One is national security and the second is plurality in the media. The national security provision references the definition of public security in the European merger regulation. Recent case law of the European Court of Justice—the ECJ—confirms that the public security or public interest consideration includes energy security in cases where there is a genuine and serious threat to what is described as societal needs, such as energy supply.
Let me put it another way. It is fair to say—I have to concede this—that there are not a great many ECJ cases on the issue, but our view is that, having considered what case law there is, it is highly likely that energy security would be within the ambit of public security. In particular, that view is supported by paragraphs 43 and 46 in the Commission of the European Communities v Kingdom of Belgium case regarding Distrigas. In that case, the Court indicated in paragraph 47 of its judgment that exemptions to general principles must be “interpreted strictly” and that “public security” could only be invoked if the threat was genuine and sufficiently serious, affecting a fundamental societal need.
In paragraph 48, the ECJ further indicated that the restriction must be the minimum necessary to meet that need. In the earlier case of Campus Oil, which is also relevant to the meaning of the expression “public security”, the European Court found in favour of the Irish Government. It was accepted that their concern about energy supplies could transcend matters of purely economic interest and intrude on the security of the nation. So we are of the view that recent case law confirms that the public security or public interest consideration includes energy security.
If that is right, it means that, should the acquisition of a UK energy company or assets raise a genuine and serious public interest concern about the lasting security of energy supply in the UK, the Secretary of State will be able to have those concerns examined by the OFT, and, if appropriate, the Competition Commission, and he can ultimately intervene in the merger if he considers it necessary.
I add one final but extremely important point. Since public security is a term which appears in the European merger regulation, which has been held by the ECJ to include the security of energy supply, we think it inappropriate for the UK to introduce its own national provision. To do so would cast doubt on the breadth of the term “public security” as it appears in the European merger regulation.
If I am asked, “Why do you not want an energy security public interest consideration for the UK?”, let me try to answer like this. First, seeking an energy security public interest consideration would indicate that we do not believe that it falls within the ambit of the existing national security consideration. That would have obvious implications for other sectors, such as telecommunications, which are not specified in the legislation, but which, like energy security, we believe fall under the wider concept of national security.
Secondly, there is the open markets issue, which would indicate that we believe that it is legitimate for Governments to consider mergers in the energy sector differently from any other mergers. Thirdly, we could not rely on it to intervene in larger mergers that fell to the European Commission to review unless it—the European Commission—approved the new consideration, which is far from certain.
The second amendment relates to the need to ensure plurality of ownership of energy assets and companies. I again suggest that the existing provisions, which are designed to prevent excessive concentration of ownership, are sufficient. Where a merger raises concerns around the possibility of an insufficient number of enterprises operating in the market, such concerns would be addressed by the competition assessment of the merger. In relation to the energy sector, these provisions would prevent any one company from dominating our energy market and as a result creating risks of disruption to supply.
The arguments which were made to support a separate power for the Secretary of State to intervene in media mergers—I pay great tribute to my noble friend for the part he played in that legislation—on grounds of plurality cannot be transferred directly to this energy sector. Energy is different in this context. The key concern beyond the economic one of maintaining competition is ensuring security of supply. As distinct from the issue of media plurality before 2003 and the Enterprise Act, a serious threat to energy supply is covered by national security considerations as set out in that Act.
In considering the proposals, it may assist if I briefly outline how the present regulatory process works. Mergers in the UK and the EU are regulated by the relevant independent competition authorities, whether it is the Office of Fair Trading and the Competition Commission in the case of a UK merger, or the European Commission in the case of a merger involving large enterprises. Mergers are considered by the competition authorities on the basis of their impact on competition in the relevant market, but, in addition, I emphasise that, on the announcement of a proposed merger or takeover, the Secretary of State has the power to issue an intervention notice for any such merger if he considers that it may raise particular non-competition-related concerns falling within the scope of a public interest consideration that has been specified in the Enterprise Act 2002. Following a Secretary of State’s intervention on public interest grounds, the OFT is under an obligation to investigate and report on the issues that have been raised.
The details of this OFT report may also include representations from other organisations with an interest in the specific sector—in this case, Ofgem. This provides these organisations with the opportunity to provide information and advice regarding the energy market. If on receipt of the OFT report and the other advice that the OFT has received, the Secretary of State decides to refer the merger to the Competition Commission, the commission has 24 weeks to make its recommendations to government on the relevant non-competition, public interest considerations. This would be in addition to any competition issues that it was already looking at. The Secretary of State must then decide whether to make an adverse public interest finding and, if so, whether to allow the merger to proceed, to impose conditions or to block it altogether.
Even if the parallel competition investigation by the authorities does not find against the merger, the Secretary of State may none the less decide to act on public interest grounds. However, of course, any remedies imposed following such an intervention would have to be reasonable and proportionate. For example, depending on the case, this could include a requirement to hold an asset separately or to divest certain interests, such as an interconnector, a storage facility or generation capacity. A decision by the Secretary of State on whether to intervene in any merger would have to be considered on a case-by- case basis.
My noble friend asked at the start of his speech about Ofgem, in relation particularly to proposed new subsection (4) in Amendment No. 76A on Ofgem’s advice. I am advised that financial liability, transparency and security of supply are considerations that Ofgem could under the present law look at in the scenario that I have just described.
I have gone on quite long enough; it is half-past seven. It is such an important issue that it has been worth trying to describe the Government’s position on it. I hope that I have to some extent reassured the Committee that the existing national security public interest consideration provides adequate scope to take action as necessary to intervene on public interest grounds, and not just on competitive grounds, in mergers in the energy sector. The plurality of energy ownership is not a distinct public interest consideration in its own right but is contained within the competition scrutiny that any merger must undergo and the energy security aspect of national security.
I tried to follow that argument as carefully as I could. The noble Lord said that the Secretary of State could intervene on public interest grounds. Suppose that the two companies that decide to merge are, because of previous takeovers, abroad and are not in Europe, but are somewhere else. What can he intervene on? Can he prevent the merger just because they happen to have contracts in this country to supply energy? Or is he saying that they can be told that they cannot continue to supply energy, in which case what happens? Perhaps that is a stupid question, but it struck me that it might happen.
No question from the noble Baroness is stupid, and that one certainly is not. I will be very careful in the answer that I give. Because this is such a delicate and important point, I wonder whether instead of just telling the noble Baroness what I think the answer is, it would be better if I wrote to her with an answer. As I understand it, there would, of course, be a look by the competition authorities to see whether this was competitively a good thing, but the Secretary of State could invite the competition authorities—the OFT—to look at the non-competition issues as well and report. Ultimately, it would be for the Secretary of State to decide whether—even if the competition side of it was okay, if the non-competition side was not, regarding national security—it would be within his power to take action. He would have to do it in a proportionate and reasonable way. That is probably an accurate answer, but the noble Baroness deserves more than that, which is why I intend to write to her if she will allow me to do so.
It is just a point of clarification. The Committee will be familiar with the European law in relation to big mergers in Europe, and we are familiar with legislation in this country. Where it falls between is where it is a world issue. Companies can have ownership anywhere in the world, and it is really about whether there is a loophole.
I thank everyone who has been involved in this brief debate, particularly—I sincerely mean this—the Minister for his full and helpful answer.
I will make two or three things clear. First, the noble Lord, Lord Jenkin, possibly felt that I sounded like a protectionist, a little Englander or maybe both. I am a businessman. I have earned my living as a businessman for 50 years; there is not a protectionist bone in my body, but I am a realist. I am a realist who has worked in the global environment, and I have no doubt whatsoever about what a tough old world it is out there.
The noble Lord, Lord Redesdale, rightly talked about sovereign wealth funds. Any nation, particularly ours, should make itself fully aware of the implications of the new global environment in which sovereign wealth funds, and many other forms of investor that do not conform to our notion of transparency or good governance, are predators; the noble Lord, Lord Jenkin, mentioned one possible predator. To pretend that that is not the case, or that if you allow some of these people a glimmer of an opportunity they will not leap through that gap, is naïve in the extreme. I am very reassured. It is certainly the first time I have heard any government Minister lay out the procedures. They sound pretty robust.
I referred to other western European democracies and the United States. All of them are rapidly moving towards a point where they can look through deals and ownerships to see the real owners and the real purpose behind deals. We have been laggards on this, and have almost begun to make ourselves a lone voice in saying that you can go too far in looking through deals. I am not sure that that is the case. In that sense, perhaps I do sound like a protectionist—for which I do not apologise because mine is a real-world view.
I suspect that I will not come back with the amendment as it is, but I would like to think about taking the Ofgem components and eliding them with the general amendments of the noble Lord, Lord Oxburgh, on Ofgem’s remit to see if we cannot get into the Bill many of the things that the Minister made clear. There is a win here for all of us, which will not be this amendment. Frankly, I am very grateful.
Lastly, I am a disciple of John Kenneth Galbraith; it may be my age. Many of my views on the new global environment are shared by extremely reputable and recognised economists. I am not alone in this. The world is changing rapidly, and it is time for us to look more closely at whether we are semi-consciously drifting into the type of economy that the United States became in the late 19th and early 20th century, from which it eventually had to jolt itself and resile. I hope that that will not be the case in this country, but I am concerned about this drift. I am sure that I will return to this issue in other places at other times. For the time being, however, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 76B not moved.]
Clauses 92 and 93 agreed to.
Clause 94 [Parliamentary control of subordinate legislation]:
77: Clause 94, page 82, line 41, at end insert—
“( ) section 13 (importation and storage of combustible gas: inspectors),( ) section 27 (carbon dioxide storage: inspectors),”
On Question, amendment agreed to.
Clause 94, as amended, agreed to.
Clauses 95 and 96 agreed to.
Schedule 4 agreed to.
Clause 97 agreed to.
Schedule 5 [Repeals]:
78: Schedule 5, page 139, line 6, at end insert—
On Question, amendment agreed to.
Schedule 5, as amended, agreed to.
Clauses 98 to 102 agreed to.
Bill reported with amendments.
The Committee adjourned at 7.40 pm.