House of Lords
Monday, 17 November 2008.
The House met at half-past two: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Peterborough.
Privacy: Mobile Telephone and Internet Records
My Lords, we have announced that we will consult in the new year on how to maintain the ability of police and intelligence agencies to protect the public using communications data in the face of the challenge of changing technology. This consultation will deal with striking the right balance between privacy and security. Any proposals that the Government bring forward will be fully compatible with the European Convention on Human Rights.
My Lords, given his Answer, does the Minister think that the public have any perception at the moment of what a huge step this is between being a person with a right to privacy and effectively being treated as a suspect? With 3 billion e-mails—that is, 35,000 every second—18 million internet connections and 57 billion text messages a year, does he think that this is really likely to prove the most effective way of fighting terrorism, given that the estimated cost will be up to £12 billion? Does he think that such a step of invading our privacy is a step too far?
My Lords, the noble Baroness misses exactly what is being done here. Communications data are the data of when someone uses their phone, whom they phone, the number that they phone and, probably, where they are. This is all stuff that all the companies keep. It is there today. It is actually sitting there on all their files on every one of us. Whenever we use a mobile phone, the data are there, and this has helped us on a number of occasions. In fact, it has helped on more than a number of occasions; 95 per cent of serious crime cases use these sorts of data to help to pin people down. In the murder of Holly Wells, for example, exactly such data enabled us to get hold of the person involved. They helped to get the murderer of Amelie Delagrange, and the Suffolk strangler. All these things come about because these data are held and we have access to them. We are not proposing that data that have never been collected are held; the question is how in the future, with all the changes that are coming, we can still have access to something that we regularly use today for serious crime and for counterterrorism.
My Lords, can my noble friend give us any indication of how quickly the evidence in the murder trials that he has described, and in other serious crimes, would disappear because of the move towards voice over internet protocol and the fact that these data will no longer be routinely kept unless the Government act on this matter? How quickly will we lose the capacity to have people convicted of these sorts of serious crime?
My Lords, my noble friend raises an important point. The changes are being made because we are ahead of probably everywhere in the world in terms of moving to these new protocols. Organisations such as BT are doing this because it will save them a huge amount of money. They will be charging and transferring data on a totally different system. Exactly how quickly that will come in is difficult to predict, but it will be complete by about 2011-12. That is the sort of timescale we are looking at. There will be a progressive degradation if no one keeps these data. The whole point of our consultation is to look at the options. We have made no decisions as yet on which way to go and we are aware of all the complexities. But it would be a terrible mistake to lose all these data that we have had the use of for years and not be able to prosecute some very nasty and unpleasant people.
My Lords, the Minister says that this strikes a proper balance between privacy and the protection of the public. Does he not see a major difference between looking at individual accesses with a view to the detection of particular crimes, as he has described, and the collection of a record of every telephone conversation, every internet access and every text message made by you and me across the board, to be kept in a government-held database for ever? Will the Minister please provide a copy of the PowerPoint presentation given two weeks ago to ISPs describing this proposal in greater detail, since he appears not to want to tell your Lordships about it?
My Lords, I do not think that it is fair to say that I do not want to tell your Lordships about it. I am very happy to do more in terms of presenting what the problems are. Part of our consultation is exactly that; namely, pointing out the emerging problem, the difficulty, the data that we are beginning to lose, the capability gaps we want to address, how we should move forward and the possible solutions. I am sure all noble Lords would agree that it would be a terrible mistake for us to lose these data which are used with regard to 95 per cent of crimes and help to pin down some very unpleasant people. They are already there. Clearly, we have to look after data. We have to look after exactly what is collected and how it is held. Should it be held in a central database? How will it be done? That is all part of the consultation.
My Lords, the noble Lord raises a very good point. I did not make that clear enough, although I tried. Communications data are not about the content. They are purely to do with the billing information, which is crucial when someone is lying about when or where they have used their phone. They enable the police to pin people down when they say, “I was never in this region. I never did this” and we know jolly well that they did. More information is needed, but this does not apply to the content. The content is covered by intercept, which is and always will be dealt with in a very different way.
My Lords, the noble and learned Lord knows very well that we are pursuing the Chilcot recommendations. We are trying very hard. We would like to go ahead with that and ensure that we can use intercept as evidence, but we have to be absolutely sure that we protect our ability to gain certain types of data. Those are the tests as recognised by Chilcot. We are moving through a sequence of checking these out. If we cannot protect that, having used the abilities we have had for 43 years in war and peace, to give those abilities away to people who would cause damage to us would be a terrible mistake. I hope that we will be able to do it, but we have to be absolutely certain. We cannot lose that ability which gives us an edge on people who would do harm to us.
My Lords, the noble Lord raises a very good point. We need to think carefully about how some of this information is used, and, indeed, how legislation is sometimes used. There is an issue of local councils using legislation incorrectly, and we have now given them guidance to stop that happening. It is true that we need to look carefully at how it is used. To lose something that we are used to using for serious crime and terrorism, which has been crucial, would be a very silly mistake, and we should not do it.
Energy: Wind Farms
My Lords, the UK is fully committed to meeting its share of the EU 20 per cent renewable energy target by 2020. The Government have committed to a comprehensive package of reforms to provide a stable regulatory environment for investors. Despite the current economic climate, the UK remains a good place to invest in renewables, and we have seen four significant acquisitions in the UK offshore wind market in the last month alone.
My Lords, I apologise for not having declared my interest as a member of the renewable energy committee under the chairmanship of the noble Lord, Lord Freeman.
I thank the Minister for his Answer but he has not answered the Question about Shell. Perhaps I can help him by saying that the original announcement on behalf of Shell that it had withdrawn was countermanded later the same day by a statement that was very ambiguous. It said not that it was withdrawing, but that it had not yet completed negotiations for the sale of arrays in this country that would have meant it had withdrawn. It also said that it was dissatisfied by its array in Blackpool lying in the flight path of the airport. Have the Government done anything to address that problem on its behalf? A similar set of complaints arises from BP, which even more unfortunately withdrew a few days later—a far bigger calamity—because it does not have the same fiscal advantages here as in the USA. Will the Minister tell us more about that whole concept?
My Lords, I think not. These are commercial decisions of the companies concerned. I understand that, in the statements, Shell acknowledged the support that the Government had given in taking the project so far. The Government are concerned about ensuring that such projects go ahead, so far as possible, which is why we have welcomed other companies that have come in to take up those possibilities.
My Lords, is my noble friend aware of the shortage of turbine manufacturing facilities in the United Kingdom? Will he join the British Wind Energy Association in trying to convince Vestas and Siemens that they should build plants in the United Kingdom?
My Lords, my noble friend will know that a particularly critical decision has to be made by Siemens shortly. I very much echo his remarks. There is a shortage of manufacturing capacity in the world. We think that the UK can provide an effective and excellent manufacturing base, and—
My Lords, is not one of the main reasons that renewables will be successful is that it is economic to have them? There is a commercial case, as the Minister says. When we have Brent crude at just above $50 a barrel, whereas in the summer it was three times that, is there not a real risk that investors will look outside the renewables area? Have the Government a target price for oil? How do they expect to achieve it?
No, my Lords. The noble Lord would not expect me to respond in any other way. Of course, he is right that prices go up and down; they have an impact on investment. The Government are strongly committed to the target. Renewables have a huge role to play in this country in terms of both generating capacity and jobs. We are confident that the incentives that we put in place will enable us to meet those targets.
My Lords, I apologise for getting up too early, before the Minister had sat down; that was rude of me. Now that we know that BP, like Shell, is pulling out of investing in wind farms in the United Kingdom and investing in the United States of America instead—which, as the Minister says, it is quite free to do—does he agree that if the UK is to keep the lights on and tackle carbon emissions, the Government must ensure a stable investment climate?
My Lords, I agree that a stable investment climate is essential. We believe that we can provide it in this country, together with the skills and technology that go with it. It is worth pointing out that at the same time as those decisions by Shell and BP, other companies have come into the UK because they see it as providing the kind of conditions she has called for.
My Lords, Shell and BP are engineering companies. The fact that they have pulled out may mean that they know something, maybe that offshore wind is the most expensive and impractical of all the large-scale renewable energy possibilities. The new commitment we have made of 25 gigawatts by 2020 means, in effect, installing 10 huge generators every day. There are only 60 days in the North Sea when the weather makes that possible, and we have only one barge that can put up these wind generators. Would it not be better if the Government looked to some other renewable sources of energy and ceased to place so much emphasis on offshore wind?
My Lords, of course the Government do not see offshore wind as the sole provider of renewable energy. We provide support and encouragement in many different sectors of renewables. However, we should not ignore the potential capacity that offshore wind can provide. The third competitive round of bids for development rights to build offshore is under way. I understand the question of barges, and the Government are working with industry on that, but we have just overtaken Denmark as the world leader in offshore; surely it is good to invest in that area.
The United Kingdom unequivocally condemns the recent violent attacks against Christians that have led to deaths, injuries and widespread displacements in Orissa. We have expressed our concerns to the appropriate Indian authorities in Delhi and London. The UK will continue to urge the Government of India to uphold the right to freedom of religion. Our High Commission in Delhi, along with European and other partners, continues to monitor the situation in Orissa.
My Lords, I thank the Minister for that supportive and encouraging reply. Is he aware that, since the violence, 50,000 people have had to flee to camps? I visited those camps recently and witnessed appalling conditions of overcrowding with a lack of medical care, food and adequate sanitation. The people there told us that they dare not go back to their homes because those who perpetrated the violence have still not been apprehended. Will Her Majesty’s Government urge the Government of India, a country which is widely respected as a democratic nation and a signatory to the Universal Declaration of Human Rights, to put pressure on the Government of the state of Orissa to ensure that the security of all their citizens is adequate to enable them to return to their homes as soon as possible?
My Lords, I pay tribute to the noble Baroness. She and others who recently visited Orissa have prepared the report of the Humanitarian Aid Relief Trust, and anyone who has read it will know how moving and depressing the story is. As I said, we have expressed our concerns about this. Our High Commission in Delhi continues to make representations to the central Indian Government on this matter and will continue to press them to resolve the situation. The noble Baroness will know that an EU delegation is visiting that state in early December to see for itself the extent of the problems, and a UK representative will be part of that delegation. We hope that the next EU-India human rights dialogue will be held before the end of the year, and of course Orissa will be on the agenda.
My Lords, a militant Hindu nationalist movement, the Vishva Hindu Parishad, is said to have incited much of the violence and intimidation in Orissa. The VHP is a registered charity with branches in several parts of this country, and the UK branch has made a number of inflammatory statements. Will my noble friend consider referring the VHP UK to the Charities Commission to examine its status?
My Lords, the UK Government do not consider the VHP to be a terrorist organisation under our law. The organisation is proscribed neither here nor in India, nor do the Indian Government classify it as a terrorist organisation. Obviously, decisions on proscription must be proportionate and based on evidence that a group is involved in terrorism as defined in the Terrorism Act 2000. I am sorry that I must disappoint my noble friend on this occasion.
My Lords, although India has experienced enormous economic growth over the past few years, this has clearly not reached every community. Does the Minister think that this is a factor in the violence in Orissa? Following on from the question of the noble Lord, Lord Anderson, will there at least be election monitors in Orissa in the run-up to the elections next year?
My Lords, I agree with the noble Baroness. She will know that Orissa is one of the poorest states in what is of course already a poor country. Of Orissa’s 40 million population, 45 per cent are below the Indian poverty line. It would be hard to think that poverty had nothing to do with the shocking events of both last December and more recently. I hope that there will be monitors for the Orissa state elections when they take place.
My Lords, is not a major contribution to the violence in Orissa the introduction of anti-conversion laws which require that anyone considering conversion gives 30 days’ notice to the appropriate authorities and seeks police clearance before doing so? Does the Minister agree that such legislation should have no place on the statute books of the largest democracy in the world?
My Lords, anti-conversion laws are ultimately an internal matter for the Indian authorities. The noble Lord will know that they came in under the Freedom of Religion Act, 1967, and Orissa was the first state in India to enact it, although it was not implemented for 22 years. It bars conversion by means of inducement, allurement or the use of force. It is considered by many to be at the root of some of what has recently happened in Orissa, but this is a matter for the Indian Government. As the noble Baroness, Lady Cox, said, India is at heart a great democratic country. We should be very proud of it.
My Lords, as it is now some weeks since the federal Government of India invoked Article 335 of the constitution, which allows them to intervene in the affairs of a constituent state where there is a serious breakdown of law and order, can the Minister say whether there have been any discernable beneficial effects of that decision?
My Lords, I must be careful what I say. The noble Lord will know better than me of India’s federal structure, allowing states a large amount of power over law and order. The central Government were concerned enough to invoke that constitutional article.
I do not want to place much emphasis on this, but there is some suggestion that some of those who have been displaced may be moving back to where they lived. Frankly, however, there is currently not much evidence that I can put before the House.
My Lords, in their representations to the Indian Government, will our Government ensure that the compensation offered by the Indian Government for those who have lost their homes and businesses is adequate? I understand that what is currently offered is not even enough to cover the cost of homes, let alone compensate those who have lost their businesses.
My Lords, we are going into the 24th minute.
Taxation: Inheritance Tax
My Lords, the Government already have in place arrangements to meet this eventuality. While a house remains unsold, the inheritance tax due on it can be paid in instalments for up to 10 years. Where a house is sold within four years of the death for less than the value on which inheritance tax was paid, the personal representatives can in most cases make a claim for inheritance tax “loss on sale” relief.
My Lords, I thank the Minister for that reply, but that is a long-standing arrangement. I am asking for more help given the present circumstances. Does he agree that it is a vicious cycle that you cannot sell your asset until you have the grant of probate, but you cannot get the probate until the inheritance tax is paid, so you may well need to borrow in order to pay the inheritance tax and to get the probate? Then, when you are heavily in debt, you may be unable to sell but are paying heavy interest on a valuation which, according to all the top accountants, is being assessed at a price which reflects those at the top of the market and does not allow for the current drop in values. In some cases, people who lived in homes with their parents are being forced to sell those homes, or be badly in debt. What happens if it reaches the point where you have paid out so much in interest and borrowing that even if you get that money back after the four-year period, it does not cover all the interest you have had to pay to whoever lends you the money, if you can borrow it?
My Lords, the present arrangements are reasonable. The individuals concerned can delay the payment of inheritance tax. I appreciate the point that the noble Baroness makes about falling house values, but the Inland Revenue is not in the business of dispossessing people of the houses they have inherited in which they are still living. The Inland Revenue, of course, adjusts its values to the level at which houses are sold. It is for the personal representative to make the case that the price the house has achieved is below the valuation price on which inheritance tax was charged, and to claim a refund.
My Lords, one of the difficulties is getting valuations agreed with the Valuation Office in a falling market. This year the Valuation Office Agency has a key performance indicator of increasing its inheritance tax yield of 5 per cent—5 per cent per unit of cost, 5 per cent per person. Does the Minister agree that that KPI is making it more difficult for executors to agree realistic values with the Valuation Office and that the KPI should be suspended for the rest of this year?
My Lords, the Valuation Office, like any other government department, is expected to give value for money—they all fall under the same rubric. However, it works within very clear rules as regards charging inheritance tax: first, as I indicated, the Inland Revenue is not in the business of dispossessing householders of the houses that they have inherited; secondly, inheritance tax can be deferred; and, thirdly, the current rate at which inheritance tax is paid, if deferred, is 3 per cent. I do not think that any of those propositions is unreasonable.
My Lords, I cannot comment on individual cases, but the Valuation Office operates on the information that it has before it. Of course, there will be a downward adjustment because, as everyone in the country is all too well aware, property values are dropping. Therefore, if the property is sold at a lower valuation than the tax levied on it, there is, as I say, a proper claim for rebate.
My Lords, the Minister said that HM Revenue and Customs is not in the business of dispossessing people. Does he find an interesting contrast with Northern Rock, which is adopting the most aggressive stance of any bank in the country in dispossessing people who get into difficulties paying their mortgage? Could he suggest that the considerate people in HM Revenue and Customs who are not dispossessing people have a word with the people in Northern Rock and tell them to be more generous-spirited?
My Lords, the noble Lord is adroit in picking up some interesting cross-references but he will recognise that the process we have in place for inheritance tax—which, I emphasise, involves only the 4 per cent of estates in this country that are above the level requiring tax to be paid—consists of arrangements that are fair and proper. Northern Rock, as the noble Lord will be aware, was set up to run its business as a commercial operation. The Government made it absolutely clear that while the bank is in temporary public ownership, we will not be involved in day-to-day commercial decisions about how it operates.
No, my Lords. That issue concerns the time taken for inheritance tax to be agreed and levied. The payment period can be as long as 10 years, as I have indicated. I have also indicated that the interest rate paid on the outstanding amount owed is 3 per cent. I find it difficult to conceive how anyone could suggest that such arrangements are unreasonable.
London Local Authorities Bill [HL]
London Local Authorities and Transport for London (No. 2) Bill [HL]
Transport for London (Supplemental Toll Provisions) Bill [HL]
Broads Authority Bill
My Lords, I beg to move the first four Motions standing in my name on the Order Paper.
Moved, That this House resolves that the promoters of the London Local Authorities Bill [HL] and the London Local Authorities and Transport for London (No. 2) Bill [HL], which were originally introduced in this House on 22 January 2008; the Transport for London (Supplemental Toll Provisions) Bill [HL], which was originally introduced in this House on 22 January 2007; and the Broads Authority Bill, which was originally introduced in the House of Commons on 23 January 2007 should have leave to suspend any further proceedings on the Bills in order to proceed with them, if they think fit, in the next Session of Parliament according to the provisions of Private Business Standing Order 150A (Suspension of bills).—(The Chairman of Committees.)
On Question, Motions agreed to.
Examiner of Petitions for Private Bills
My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That, in accordance with Private Business Standing Order 69 (Appointment of Examiners of Petitions for Private Bills), Mr Liam Cledwyn Laurence Smyth be appointed an Examiner of Petitions for Private Bills in place of Mr Alan Sandall.—(The Chairman of Committees.).
On Question, Motion agreed to.
Pre-release Access to Official Statistics Order 2008
Legislative Reform (Lloyd’s) Order 2008
National Assembly for Wales (Legislative Competence) (Social Welfare and Other Fields) Order 2008
My Lords, I beg to move the Motions standing in my name on the Order Paper.
Moved, That the draft orders laid before the House on 17 and 21 July, and 15 October be approved. 27th and 28th Reports from the Joint Committee on Statutory Instruments, 13th Report from the Regulatory Reform Committee, Considered in Grand Committee on 12 November.—(Lord Davies of Oldham.)
On Question, Motions agreed to.
Social Security (Lone Parents and Miscellaneous Amendments) Regulations 2008
My Lords, I beg to move the Motion standing in the name of my noble friend Lord McKenzie of Luton on the Order Paper.
Moved, That the draft regulations laid before the House on 6 October be approved. 27th Report from the Joint Committee on Statutory Instruments, 30th Report from the Merits Committee, Considered in Grand Committee on 12 November—(Lord Tunnicliffe.)
On Question, Motion agreed to.
Medical Profession (Miscellaneous Amendments) Order 2008
Civil Contingencies Act 2004 (Amendment of List of Responders) Order 2008
My Lords, I beg to move the Motions standing in my name on the Order Paper.
Moved, That the draft orders laid before the House on 16 and 29 October be approved. 28th and 30th Reports from the Joint Committee on Statutory Instruments, Considered in Grand Committee on 12 November.—(Baroness Thornton.)
On Question, Motions agreed to.
Armed Forces (Alignment of Service Discipline Acts) (No. 2) Order 2008
My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the draft order laid before the House on 21 October be approved. 30th Report from the Joint Committee on Statutory Instruments, Considered in Grand Committee on 12 November.—(Lord Tunnicliffe.)
On Question, Motion agreed to.
Read a third time.
1: After Clause 22, insert the following new Clause—
“Independent Commissioner for Terrorist Suspects
(1) The Secretary of State shall appoint a person to be known as the Independent Commissioner for Terrorist Suspects (the “Commissioner”).
(2) The principal function of the Commissioner shall be to monitor the detention and treatment of terrorist suspects held under section 41 and Schedule 8 to the Terrorism Act 2000 (c. 11). He shall also perform such other related functions as the Secretary of State may from time to time determine.
(3) The Secretary of State may appoint not more than two deputy Commissioners to assist the Commissioner in the performance of his duties.
(4) The police shall give the Commissioner such assistance as he may reasonably require to enable him to perform his functions.
(5) The Commissioner shall make an annual report to Parliament as to the carrying out of his functions under this section.”
The noble and learned Lord said: My Lords, this is a shortened version of the amendment that I moved on Report. The noble Lord, Lord West, was good enough to say that he would accept the substance of that amendment. This shortened version spells out the substance of the amendment as I see it, and I had hoped that it might have been agreed in time for Third Reading. That has not proved possible. The noble Lord needs more time, and of course I accept and understand that. I will not divide the House on the amendment. At least this amendment at Third Reading gives the noble Lord the opportunity to say again what the Government intend to do about this proposal. I live in hope that he will be able to find a slot for it, perhaps in some forthcoming criminal justice Bill but, at any rate, during the next Session. I beg to move.
My Lords, briefly, the new amendment that has been tabled by the noble and learned Lord, Lord Lloyd of Berwick, deserves the most constructive consideration, simply on the principle that if—it is no longer part of this Bill but it is part of the Government’s intention—we are liable to take actions that may be necessary and in the public interest to curtail civil liberties, it is even more important, if it can be, than it otherwise would be, that we should be utterly scrupulous in ensuring that the manner in which people are detained and the manner in which legal proceedings are taken against them should match the highest possible standards. The safeguard that the noble and learned Lord proposes in the substance of his proposal must be right. I very much hope that my noble friend will be able to respond in a constructive spirit.
My Lords, the Government absolutely accept the substance of what the noble and learned Lord, Lord Lloyd, is trying to achieve, and we have had considerable negotiations and discussions about this. We accept that there is a need for an independent commissioner for terrorist suspects. It is a lot more difficult actually to achieve these things than when one is an admiral achieving something in the Navy. Trying to get all the people together, and trying to get them to agree to all the various bits and pieces, whether it is the Crown Prosecution Service, what exactly happens in Scotland and Northern Ireland, whether we need something in the regions, aspects of the judiciary; there are a whole raft of things to be debated. Although initially, being a slightly hasty naval type, I thought we should be able to get something down, I accept that it is important that we do not legislate in haste and do not get this wrong.
I absolutely make a commitment that we intend to go down this route. Given that, I ask the noble and learned Lord to withdraw his amendment. I thank the noble and learned Lord for pursuing this initiative, which he first talked about with me some 12 months ago. It is an important measure, and it is an issue that the Government believe is of value. Certainly, even if some people do not think it is, the perception is very important, and it is of value. I give a commitment that we will do something. I cannot promise exactly which bit of legislation we will fit it into. If I did so, I would probably get it wrong. We are absolutely committed to doing something, and on that basis I ask for the amendment to be withdrawn.
2: Clause 44, page 32, line 26, leave out subsection (1) and insert—
“( ) This Part applies to—
(a) an offence as to which a court has determined under section 32 (sentences for offences with a terrorist connection: England and Wales) that the offence has a terrorist connection, and(b) an offence in relation to which section 33 applies (sentences for offences with terrorist connection: Scotland).”
The noble Lord said: My Lords, I shall speak to Amendments Nos. 2 to 4. Amendments Nos. 2 and 3 improve the drafting in relation to the provision that the notification requirements attach to offences with a terrorist connection, taking account of the differences in the system attaching to such offences for Scotland. Amendment No. 4 is consequential to the amendments that we made on Report to the notification requirements that varied the time periods for which notification requirements would apply. The amendment would ensure that if a person subject to a notification requirement has their sentence varied, the notification period would be altered accordingly. I beg to move.
On Question, amendment agreed to.
3: Clause 44, page 32, line 33, after “determination” insert “as is mentioned in subsection (1)(a)”
On Question, amendment agreed to.
Clause 63 [References to a person being “dealt with” for an offence]:
4: Clause 63, page 45, line 42, leave out paragraph (d) and insert—
“(d) if the sentence is varied so as to become one by virtue of which the notification requirements would apply for a different period, the period for which those requirements apply shall be determined as if the sentence as varied had been imposed at the time of the original decision;”
On Question, amendment agreed to.
Clause 65 [Application to set aside financial restrictions decision]:
moved Amendment No. 5:
5: Clause 65, page 47, line 30, at end insert—
“( ) This section does not apply to any decision of the Treasury to make an order under paragraph 8 or 28(6) of Schedule 7 to this Act.
The noble Lord said: My Lords, I beg to move Amendment No. 5. I will speak also to government Amendments Nos. 8 to 10, and 15 to 19. Last week, we had a good discussion on the provisions to which these amendments relate. I thank your Lordships for the constructive and helpful manner of that debate which was particularly useful given the importance of these measures and the unfortunately brief time your Lordships have had to consider these provisions. As these amendments mainly concern issues outlined in our previous discussion, many of which were first raised by noble Lords on the Conservative and Liberal Democrat Benches, I will attempt to be brief.
Amendment No. 5 seeks to remove from the application of Clause 65 the order-making power in paragraph 8 of the schedule which enables the Treasury to alter the definition of persons operating in the financial sector, and to whom it could therefore give directions, and the order-making power in paragraph 28(6) of the schedule which provides for appeals to be made to the VAT, Financial Services and Markets, or Consumer Credit Appeals Tribunals rather than to the first-tier or upper tribunals to manage the transitional process here. The effect of this amendment is that challenges to orders made under paragraph 8 and paragraph 28(6) will be subject to the normal judicial review procedure rather than to the procedure in Part 6. I hope your Lordships will agree that this is a more appropriate procedure given the nature of such orders.
Amendment No. 8 seeks to address a point that was raised in the 15th report of this Session of the Delegated Powers and Regulatory Reform Committee in relation to these provisions. Specifically, the committee recommended that the order-making power provided for in paragraph 8 of the schedule should be more explicit in its intention to allow for purely technical adjustments of the definition or be made subject to the affirmative rather than the negative resolution procedure. I said on Report that I would give careful consideration to the committee’s recommendations. I appreciate the efforts of the committee to scrutinise our provisions at short notice as well as the useful part its members and ex-members played in our previous debate. This amendment seeks to address the committee’s recommendations by now providing for an affirmative order in this case. I thank my noble friend Lord Harris of Haringey for raising this matter.
Amendment No. 9 provides for an explicit requirement on the Treasury to apply these powers proportionately, according to the risks that they are seeking to address. This requirement was discussed on Report and the noble Baroness, Lady Neville-Jones, was keen to see it addressed in the Bill. As I have previously assured noble Lords, proportionality is an important requirement for the operation of any administrative order of this type and I am happy to recognise this explicitly in the legislation.
I will briefly take Amendment No. 18 out of order as it similarly addresses another matter that I consider essential to the proper and effective use of these powers— the production of guidance for industry on their implementation. Such guidance by industry bodies and supervisors plays a valuable role in our current anti-money-laundering regime. As with the previous amendment, the noble Baroness, Lady Neville-Jones, was rightly concerned that the Treasury should assist relevant bodies to produce this guidance. I have assured the noble Baroness that this would be the case—it is, after all, in our interests to ensure that it is as simple as possible for business to implement our directions—but I am happy to accommodate such a requirement directly in the Bill.
Amendment No. 10 substitutes “undertake” for “take” in line 18, thereby ensuring consistent terminology throughout the provisions. This reflects the point raised by the noble and learned Lord, Lord Mayhew, on Report. I thank him for his observation.
Amendment No. 15 simply leaves out lines 27 and 28 on page 101 of the Bill, thereby removing a typographical error which had made its way into the provisions.
Amendments Nos. 16 and 17 are moved in response to the issues which the noble Lord, Lord Thomas of Gresford, helpfully raised on Report on behalf of the Liberal Democrats and in relation to provisions in paragraph 34(1) of the schedule which replicated those of Clause 29 concerning jurisdiction over offences. As I undertook on Report, these amendments alter those provisions so that they now apply only to offences committed outside the United Kingdom.
The final amendment I am concerned with today, Amendment No. 19, is merely intended to clarify the situation regarding the use of any penalties received by the FSA in its supervisory role. As is standard, and as is the case for the FSA’s other supervisory actions under the money-laundering regime, this amendment provides for any penalties received to be applied against expenses incurred in connection with its functions. This provision also reflects the position in respect of penalties imposed by the FSA under its powers under the Financial Services and Markets Act 2000, which must be applied for the benefit of authorised persons.
I hope I have sufficiently explained all the amendments. I believe that, save the odd minor adjustment, they all reflect issues and concerns that were recognised on Report. I hope noble Lords agree that they will all usefully improve the provisions and that they can support them. I beg to move.
On Question, amendment agreed to.
Clause 81 [Control orders: powers of entry and search]:
6: Clause 81, page 56, leave out lines 18 to 20 and insert—
“(b) other premises to which the controlled person is required to grant access in accordance with an obligation imposed by or under the control order;(c) any premises—(i) to which the controlled person has previously been required to grant access in accordance with an obligation imposed by or under a control order, and(ii) with which there is reason to believe that the controlled person is or was recently connected.”
The noble Lord said: My Lords, on Report I mentioned that I proposed to table an amendment to what is now Clause 81 to deal with an issue raised in Committee by the noble Baroness, Lady Miller of Chilthorne Domer. Clause 81 strengthens police powers to enter and search the premises of individuals subject to a control order. It is intended to fill gaps in the powers of the police to investigate more effectively breaches of control order obligations and to ensure the police can more effectively monitor compliance with, and enforcement of, control order obligations.
The noble Baroness expressed concern about whether the definition of premises in the clause was sufficiently tightly worded and in particular whether the wording, at least in theory, gave the police powers to search premises that were no longer connected with the controlled individual in any way. Although the noble Baroness acknowledged that it did not seem likely that the police would undertake an inappropriate search, we agreed to see whether the drafting of the relevant powers could be improved to ensure the desirable clarity in the Bill.
We believe that Amendments Nos. 6 and 7 will deliver that clarity by amending the definition of premises in new Sections 7A and 7C of the 2005 Act. The new definitions will allow entry to three categories of property: the controlled person’s place of residence; other premises that the controlled person is required to grant access to as part of the control order obligations; and any premises to which the controlled individual was required to grant access to in the past and with which there is reason to believe that the controlled person is or was recently connected.
The key difference between this formulation and the one currently in the Bill is the addition of the explicit requirement that, for past premises, there must be reason to believe that there is or was a recent connection between the controlled person and the premises. That formulation will cover any premises which, for example, are still occupied or owned by a relative, friend or other associate of the individual or property that the controlled individual left only recently. However, it will not cover premises that were occupied by the controlled individual but which are now occupied by a member of the public with no connection whatever with the controlled individual. We think that this is a good amendment and we thank the noble Baroness for her intervention on that point. I beg to move.
7: Clause 81, page 57, leave out lines 6 to 8 and insert—
“(b) other premises to which the controlled person is required to grant access in accordance with an obligation imposed by or under the control order;(c) any premises—(i) to which the controlled person has previously been required to grant access in accordance with an obligation imposed by or under a control order, and(ii) with which there is reason to believe that the controlled person is or was recently connected.”
On Question, amendment agreed to.
Schedule 7 [Terrorist financing and money laundering]:
8: Schedule 7, page 89, line 29, leave out “negative” and insert “affirmative”
9: Schedule 7, page 90, line 10, at end insert—
“( ) The requirements imposed by a direction must be proportionate having regard to the advice mentioned in paragraph 1(2) or, as the case may be, the risk mentioned in paragraph 1(3) or (4) to the national interests of the United Kingdom.”
10: Schedule 7, page 90, line 18, leave out “take” and insert “undertake”
On Question, amendments agreed to.
11: Schedule 7, page 94, line 28, leave out paragraph 20
The noble Lord said: My Lords, I am disappointed that the Government should treat Parliament in the way that they did last week when they added a massive amendment on Report. New Schedule 7, which my amendment relates to, consists of 23 pages of fresh legislation that is only tangentially related to the Bill. It is extremely technical and needs detailed discussion in Committee. That would have given the House a proper opportunity to hear representations from interested parties on the amendment. There was a mere one and a half hours of debate with six speakers, including the Minister and the two noble Lords from the opposition Front Benches. This is no way to legislate. It is an insult to the democratic process. I personally regret that those on the opposition Front Benches seem to have yielded to government pressure on the method that was used. I totally acquit the noble Lord, Lord West, on this action. The schedule was grafted on to his Bill and we all support his Bill, especially after the improvements which have already been made in your Lordships’ House.
This sort of thing will not happen in the United States under President-elect Obama. Among his other great qualities, he is a brilliant constitutional lawyer and has a huge respect for constitutional proprieties. Indeed, I was told last night by one of his Democrat colleagues that he places the maintenance of the American constitution second only to his wife and children in his priorities.
Playing fast and loose with the constitution has been one of the major failings of the Bush Administration; it is also one of the major failings of this Government. What could and should the Government have done? To delay this Bill would not have been sensible. The obvious alternative would have been to introduce a separate Bill. Twenty-three pages of complicated legislation is quite enough for a separate Bill. It could then have been given whatever priority the Government’s business managers thought appropriate.
What was the great rush? The Minister did not give a convincing explanation last week. He referred to a meeting of the financial action task force, a body which most people have never heard of. Those of us who serve on Sub-Committee F of the EU Select Committee, however, will learn a lot because we are about to embark on a detailed study of the problems of money-laundering in relation to EU directives.
The noble Lord, Lord Myners, wanted the 34 members of FATF to take further preventive action on money- laundering, terrorist-financing and what the Minister described as proliferation financing. He never actually explained what that meant and the great majority of those I have asked in your Lordships’ House have no idea what it means. It actually means finance which could be used to develop chemical, biological or nuclear weapons. It shows the attitude of the Treasury to your Lordships’ House that it did not think it necessary to put a clear explanation of it in the Minister’s speech last week.
I have now read the FATF statement on the 16 October meeting, which was put forward as the need for this hurry. It refers only to potential problems with Iran, Uzbekistan, Turkmenistan, Pakistan and Northern Cyprus. It is perfectly clear that there is no such urgency as to justify this treatment of Parliament. The real clue was when the noble Lord, Lord Myners, said:
“The UK has been and will continue to be at the forefront of the international call for action and efforts to protect the international system from these threats”.—[Official Report, 11/11/08; col. 579.]
For a cosmetic advantage, the Government are prepared to steamroller this schedule through Parliament. I wish they would adopt that old Latin tag, esse quam vidire—to be rather than to seem to be. There are probably many imperfections in this hastily drafted schedule, and indeed the Minister has been seeking to correct some of them this afternoon. The one I am putting forward is on the powers of entry.
Earlier this year my noble friend Lord Selsdon took through his excellent Bill to limit the greatly extended use of powers of entry without warrant. It received its Third Reading in your Lordships’ House on 17 July. The Government gave the impression that they were sympathetic to my noble friend’s Bill. Indeed, we were told that the Prime Minister himself was keen to correct the overuse of entry without warrant and that they would consider their own Bill for this purpose. Perhaps the Prime Minister is even considering including it in the gracious Speech. Well, in this schedule they have produced a prime example—perhaps I should say a sub-prime example—of the need for such a Bill. The power in paragraph 20 to enter without a warrant, which I seek to remove, demonstrates how this whole schedule has been hastily cobbled together from other bits of legislation. I shall give one example. Paragraph 18 lists those who have powers of entry into any business premises without a warrant—we should bear in mind what the object of the schedule is—including at sub-paragraph (2)(e), “a local enforcement officer”. For the avoidance of doubt, sub-paragraph (3)(a) states:
“A ‘local enforcement officer’ means … an officer of a local weights and measures authority”.
I can imagine Mr Entry, a Suffolk County Council local enforcement officer, calling on my local butcher in Wickham Market and saying to him, “Mr Revett, I have not come to check the weight or shape of your excellent sausages this morning, but you have never revealed the secret formula which makes them so delicious and sought-after throughout East Anglia and beyond. Well, Mr Revett, some powerful people in Whitehall—I am not at liberty to mention their names, of course—have suggested that they might contain proliferation finance. I don’t rightly know what that means, but I am afraid I am going to have to open up some of your sausages to determine whether there could be any truth in the allegation”.
Let us improve the schedule in a small way by sweeping away paragraph 20 and leaving the Government with paragraph 21 which contains all the powers of entry they could possibly need, and probably many more. But at least they would have to use a magistrate to determine whether their desire for entry makes any sense under this law. I beg to move.
My Lords, as the noble Lord who introduced the Powers of Entry Bill after some 15 years’ work, it behoves me to intervene. I did not wish to do so in this Bill, but by some strange act of cunning, new powers of entry have suddenly appeared to go with the 1,137 powers of entry that have so far been identified. I thought that I had reached an agreement with the noble Lord, Lord West, that this Bill, which is passing through the House with great support, would not push this matter to the limit, but that jointly with the Home Office we would sit down and identify all the Bills that give powers of entry for an official to go into a person’s premises and search, seize and effectively spy without a warrant.
I have a problem in that I do not want to oppose the Bill, but the moral feeling within me says that I cannot possibly support yet another power of entry without warrant without going through the process that I thought we had agreed with the noble Lord, Lord West. I ought to declare an interest because with the help of the Home Office, we have set up a mixed public and private Bill team that is gradually identifying more and more powers of entry from different Ministries. Responses to the questions I have asked over time reveal that the problem is that government departments do not know what their powers of entry are. The Home Office team, a good one, is trying to find them out. I spoke to a member of the team the day before yesterday to say that I was going to be almost forced to intervene in this matter, and he said that the team was getting on but was still failing to get responses from various government departments about what those powers of entry are. I shall not repeat the concept of the Bill or its details, but I refer noble Lords to the enormous schedule that was produced jointly with the Government. All we said was that there should be a code of conduct when people seek to go into people’s premises, and that they should not go in without a warrant or a court order, except by agreement and during certain periods of the day.
It pleases me much that the President of the Board of Trade is in his place because he will be well aware that the original council of trade became the Board of Trade. In 1918, when there were certain rules for co-operation and regulation, these matters were discussed. In 1702, the Bishop of London became a member of the council of trade; he was later replaced by the Archbishop of Canterbury. I am proposing to introduce a new Bill to reintroduce the Board of Trade because it had within it all His—or Her—Majesty’s Secretaries of State, members of the Privy Council and others. When the Minister replies, will he urge all the Secretaries of State to whom I have addressed questions over the years to produce, as a matter of urgency, the schedules giving their departments’ powers of entry because surely they should know what their powers of entry are. I feel much more relaxed knowing that the President of the Board of Trade is in this House. He is the supreme arbiter and has the right to call upon those people to deliver the information we require. However, until that happens, I am obliged, with great regret, to support the amendment moved by my noble friend.
My Lords, I follow the noble Lord, Lord Marlesford, in questioning what the local weights and measures authority has to do with terrorist-financing and money-laundering. I note that under Clause 20(3):
“An officer may exercise powers … only if the information or document sought to be obtained as a result is reasonably required in connection with the exercise by the enforcement authority for whom the officer acts of its functions under this Schedule”.
For which enforcement authority does the officer of a local weights and measures authority act? Is it, under Clause 18(1), the Financial Services Authority? I would not have thought so. Is it the Commissioners of Her Majesty’s Revenue and Customs? I would not have thought the local weights and measures authority would have anything to do with them. Is it the Office of Fair Trading? Possibly, but in what circumstances is it envisaged that it would be involved in terrorist- financing and money-laundering? Is this not just a wide spread of powers without any thought about the circumstances those powers can be used in? I look forward to hearing an explanation from the Minister about exactly what the Government have in mind.
My Lords, I do not know whether the Minister will be able to provide an example of when an enforcement officer would need to make an entry under Clause 20 when it would not be possible for him to obtain a warrant under Clause 21. Unless he can give a solid example, I shall feel compelled to vote with the noble Lord, Lord Marlesford.
My Lords, on Report, I explained in some detail why this amendment was tabled at a late point and gave context to the work of the financial action task force, the global body representing 34 national bodies and many bodies representing regional groupings. I drew attention to the minutes of the meeting of that task force in October and anticipated likely developments at its next meeting early next year. I pointed out that we felt that the change in the constitution and character of the group meant that, at times, we would not necessarily wish to await a decision by the FATF, but would want certain powers to move unilaterally.
We discussed at some length on Report why these amendments have been included in this Bill. It was an informed discussion. The Government listened carefully to the views of noble Lords and have reflected that in the amendments that we have tabled today.
I appreciate the points made by the noble Lord, Lord Marlesford, in relation to the amendments that he has tabled; let me attempt to respond to them. This provision has been included as it is necessary for a number of reasons. First, it is consistent with our attempt to replicate the compliance and enforcement procedures that currently exist in regard to our anti-money-laundering and counterterrorist financing regime. We have been eager to achieve as much consistency with this regime as possible, which would help firms and supervisors in management of compliance. Secondly—and importantly—the ability of enforcement officers to enter without a warrant could be useful in the successful investigation and enforcement of breaches of directions. We checked that supervisors wish to retain their existing range of enforcement powers for these new provisions, and have acted on this basis. It was considered necessary to have a full range of powers, given the risks involved in terrorist-financing, money- laundering and proliferation.
I have no desire to take unnecessary powers, but entry without a warrant may be necessary—for instance, in circumstances where giving notice might result in the destruction of relevant documents or important evidence. It is also worth highlighting that this enforcement power cannot be used as a supervisor sees fit, but is subject to the important safeguard that it may be employed only if the information sought is reasonably required in connection with the exercise by the enforcement authority of its functions. I believe that that should provide protection for the butchers of East Anglia.
In addition, I note that the power to enter premises without a warrant is not unusual in legislation, as the noble Lord, Lord Selsdon, advises us. Similar examples can be found, to list a few, in Section 162 of the Consumer Credit Act 1974, Section 118C of the Customs and Excise Management Act 1979 and Section 14 of the Food Standards Act 1999.
My Lords, the decision on reasonableness would be made by the enforcement agency. There is provision to appeal against that if the individuals involved judge that it is unreasonable. For these reasons it is clear that Parliament has granted a number of rights to intervene without warrant.
My Lords, I believe the right of appeal would effectively freeze the outcome of the intervention. I would prefer to give noble Lords a complete explanation in writing.
The noble Lord, Lord Selsdon, gave us an historical perspective. He complimented my noble friend the Secretary of State for Business, Enterprise and Regulatory Reform with his former title of President of the Board of Trade. I note that he proposes legislation in that respect. I will leave it to my noble friend to comment in due course on whether he wishes to have either a new or an extra title. The more serious point about examining how the various rights should be reviewed and pulled together into a single document has merit and I will share that with my colleagues in government.
The noble Lord, Lord Thomas of Gresford, asked when a weights and measures inspector might need to use the powers. I anticipate that it will probably be in connection with the enforcement powers of the OFT but, if I am incorrect, I shall write to the noble Lord and to all those who have participated in this debate.
I now ask the noble Lord, Lord Marlesford, to withdraw his amendment.
My Lords, I asked whether the Minister could give us one example of an occasion when the enforcement officer might need to use the powers under Clause 29. I think that the only one that he has so far given is if the person in question was on the point of destroying a document. Is that the only reason that the noble Lord has?
My Lords, I thank the noble and learned Lord for his question. I believe that that right would be necessary in many circumstances which it is difficult to be precise about. It is in the nature of acting in an enforcement relating to terrorism, proliferation or money-laundering that one may have to move very swiftly. As was explained on Report, that is why we propose the powers. We would not wish them to be used lightly, but there are circumstances where we feel that the threat is such that it is appropriate to have them.
My Lords, the Minister told me that he would write to me with an answer. Unfortunately, this is Third Reading, so that would be absolutely useless. Perhaps he could tell the House how one can appeal against a right of entry when the entry is actually being effected, because that will often be the first time that the householder knows about it. There is no time for an appeal.
My Lords, as someone who has become increasingly worried as this short but very welcome debate has continued, I ask how the powers could be needed in connection with the Office of Fair Trading. How could that furnish relevant documents or important information, to use the description that the noble Lord employed a few moments ago?
My Lords, with the leave of the House, I would like to ask the Minister a couple of questions. Has he by any chance read the Powers of Entry etc. Bill and the Schedule to it? Is he aware that I tabled the entire Bill as an amendment to the then regulatory reform Bill but agreed with the Government to withdraw it because they were treating the question of powers of entry very seriously? Therefore, I am at something of a loss to find that, without much knowledge, the Government are proposing a new power of entry that flies in the face of what we thought was a fair and just understanding of co-operation.
My Lords, I thank the noble Lord, Lord Selsdon, for his observation. I am not familiar with the actions that he has taken, but will certainly ensure that I become so.
I remind noble Lords that the powers we seek are to assist us in addressing very real and serious threats, such as making funds available to support terrorism or the proliferation of weapons of mass destruction. That is the seriousness of the matter and why we are seeking these powers.
My Lords, I am afraid that the Minister has had to bat on a pretty sticky wicket and that his explanation has not satisfied me in any instance. The 16 October minute, which I read and he has read, but most people will not have read, absolutely does not suggest that this legislation need be attached to this Bill. It could perfectly well have been attached to another Bill, which the business managers could have made as fast as they wished. It could then have been subject to proper scrutiny by Parliament. That is point 1.
Point 2—there is no way in which I am seeking to deny the Government powers of entry. They have got it all under paragraph 21 of the schedule. The Minister makes no sense at all saying that having powers of entry without a warrant would make it less likely that someone could destroy the evidence, unless you are suggesting that the magistrate tips off somebody, “I have just signed a warrant for someone to enter your premises”, which would be absurd. The Government say that they already have all these powers in other legislation to do with money-laundering, but the whole point of the Bill of my noble friend Lord Selsdon was that there were far too many powers of entry without warrant. We understood that the Prime Minister himself had said that he wanted to reduce them. Here the Government slip in another one, in a shoddy manner, because it is cobbled together. There is no defence for the weights and measures chap. I wish the Minister would be honest about that—sorry, I did not mean to use that word. The Treasury Box obviously has been unable to produce any conceivable case where Mr Revett would be an appropriate target. I must test the opinion of the House.
[Amendments Nos. 12 to 14 not moved.]
15: Schedule 7, page 101, leave out lines 27 and 28
16: Schedule 7, page 101, line 35, leave out from first “committed” to end of line 36 and insert “outside the United Kingdom—”
17: Schedule 7, page 101, line 41, leave out sub-paragraph (2)
18: Schedule 7, page 104, line 40, at end insert—
“Assistance in preparing guidanceThe Treasury must provide such assistance as may reasonably be required by a supervisory authority or other body drawing up guidance that, when issued and published with the approval of the Treasury, would be relevant guidance for the purposes of paragraph 25(3) (civil penalties) and 30(3) (offences: failure to comply with requirement imposed by direction).”
19: Schedule 7, page 105, line 2, at end insert—
“( ) Any penalty under paragraph 25 (civil penalties) received by the FSA is to be applied towards expenses incurred by it in connection with its functions under this Schedule or for any incidental purpose.”
On Question, amendments agreed to.
World Leaders Summit
My Lords, with the leave of the House, I shall repeat a Statement made by my right honourable friend the Prime Minister entitled, “World Leaders Summit: Financial Markets and the World Economy”.
“First, Mr Speaker, I am sure that the whole House will join me in sending our profound condolences to the family and friends of the three servicemen killed in Afghanistan in the past week. They were Marines Neil Dunstan and Robert McKibben from the UK Landing Force Command Support Group, and Colour Sergeant Dura of 2 Battalion of the Royal Gurkha Rifles. We owe them and all those who have lost their lives in conflict a huge debt of gratitude.
“With permission, I should like to make a Statement on the Washington Summit on Financial Markets and the World Economy—the first ever G20 leaders summit—which I attended this weekend with my right honourable friend the Chancellor.
“In just over six months, the world has seen a 40 per cent collapse in global share values; global financial institutions write off losses approaching $1,000 billion; world oil prices peaking at nearly $150 dollars a barrel and then sinking 60 per cent; and a fall in global expectations for growth in the world’s industrialised countries from 2.5 per cent in 2007 to below zero, with all the impact on families and businesses with worries about mortgages, jobs and family security in Britain and around the world. What has made this a fully worldwide crisis is that in recent weeks a problem that started in America has extended to emerging markets and developing countries, some of which are facing bankruptcy.
“These unprecedented global events call for unprecedented global action. While the economic problems of the 1970s created the G5 and then the G7, it is right that for the first time leaders from developed, emerging and developing economies, which are responsible for 85 per cent of global GDP, met and agreed on the urgency of common and concerted, and, where appropriate, co-ordinated actions to address the financial and economic crisis.
“To put the long-term challenge in context in the next 20 years it is expected the world economy will double in size, which will mean a doubling of opportunities for British business and new opportunities for British workers and families. But to make the transition to, and secure the benefits of, an open and inclusive globalisation, we have to deal with three other consequences that it brings: the need for restructuring of industries and services to reflect the new global division of labour, not least resulting from the rise of Asia; increased competition for resources as long-term demand for oil, food and commodities from the newly emerging economies threatens to outstrip supply; and, now that we have global flows of capital, the need to ensure a global framework for financial services as a precondition of prosperity and security, as epitomised by the sub-prime crisis that started in America. At the root of the banking crisis was a failure by banks to manage risk, understand increasingly complex and opaque financial products and to make transparent a developing shadow banking system.
“In Washington we agreed, first, on fundamental reform of how the financial system is supervised around the principles that Britain has been promoting—of transparency and accountability, responsibility, better banking practice, integrity and international co-operation, including establishing international colleges of regulators; bringing transparency to tax havens by including them within the scope of the financial system; convergence of accounting standards; reviewing executive compensation schemes that encourage excessive and irresponsible risk-taking; disclosure of toxic assets; and reform of credit-rating agencies.
“We set a clear timetable, tasking our Finance Ministers to prepare immediate measures for implementation by 31 March and to report back on progress with the full action plan at the next meeting. The summit also agreed that recapitalising the banks was the right course of action. The action taken in the UK to buy shares in banks has now been followed on every continent, and guarantees have been introduced to allow banks to raise the money needed to continue to support the real economy, as they must, through lending to businesses and families.
“Secondly, we agreed that, against a background of deteriorating economic conditions worldwide, a broader policy response was needed immediately, based on closer macroeconomic co-operation. Importantly, we made clear that within our commitment to fiscal sustainability this broad and international policy response needed to encompass both monetary and fiscal policy action.
“While it is for independent central banks to make their own decisions, we recognised the importance of monetary policy to the restoration of growth. While some have contended that it was impossible to cut interest rates in Britain because of the fiscal position, in fact the Bank has now, in two successive months, made two cuts worth 2 per cent in total, and the governor has stated clearly that there is scope for further action. A measure of the level of international co-operation that has already resulted is the extensive currency swaps put in place between central banks and the co-ordinated cut in interest rates across Europe, Asia and America a few weeks ago.
“On fiscal policy, crucially, and for the first time, our Washington statement agreed a broad and concerted international macroeconomic policy response: first, that fiscal policy has an essential role to play alongside monetary policy in sustaining demand, with quick-acting measures to encourage a rapid impact with help for households and businesses; and, secondly, that the benefits of fiscal policy action will be greater for each country if all countries act in a concerted way.
“This imperative is international. In recent days, China, South Korea, Australia and Germany have joined other European countries, including Spain and France, in considering new fiscal stimulus packages. The European Union has already said that flexibility in the stability and growth pact to recognise exceptional and temporary conditions will be used, and President-elect Obama has already stated that a new fiscal stimulus package in the US is both necessary and urgent. Most previously published forecasts assumed the absence of co-ordinated fiscal action, but the downturn can be shorter and less deep if Britain takes action and if that action is matched elsewhere.
“It is of course for individual countries to make their own announcements, as we will in due course. The more co-ordinated the action, the greater the benefit to each country will be. However, I believe that the emerging consensus across the world, from the IMF itself, from Governments of left and right and in developed and developing countries, is that we should take rapid, co-ordinated and concerted action through the use of budgetary measures.
“Over the past year, the central problem facing the global and the UK economies was inflation, driven by a sharp rise in international commodity prices, allied to a credit crunch, which left fewer options for Governments. This year, the reality is sharp falls in commodity prices while the credit crunch is leading to contractions in bank lending and in consumer demand. The risk in this new environment is not now stagflation but rather the impact of close-to-zero inflation. It makes sense for the Government to support interest rate cuts with fiscal action. I believe that, in addition to the announcements already made, in the next few weeks we will see many countries following with expansionary measures founded on this agreed international position.
“The third central message of the summit is that in taking action we must resist all forms of protectionism. These threaten to slow down and eventually stall world trade and thus deny us the benefits of one of the great engines of new growth. So, uniquely, all nations signed an agreement that over the next 12 months they will resist pressure and refrain from raising new barriers to investment or trade.
“The key to confidence in open trade is of course the signing of the Doha world trade agreement, on which talks have stalled since the summer. We cannot allow this impasse to continue. I welcome today’s new agreement, following Saturday’s summit, to work towards a ministerial meeting in December. To ensure that the trade round truly is a development round that benefits the poorest countries, it will be accompanied by an agreed $4 billion aid-for-trade programme to invest in the infrastructure of developing countries. In discussing issues facing poorer countries, the summit reaffirmed the importance of meeting the millennium development goals and, even amid the necessity of dealing with the financial crisis, the importance of applying the same common purpose to the challenge of meeting these goals. Some have argued that as long as the trade talks remain deadlocked on specific issues no deal can be agreed, but the G20 was explicit about the action that we have to take. For the first time, we have instructed our Trade Ministers to agree, by the end of the year, the outlines needed for a successful conclusion to the Doha round.
“Finally, the G20 leaders have also agreed that the next summit will allow us to review and to make decisions on the wholesale reform of the international economic architecture, built in 1945 but no longer adequate for the challenges of 2008. In agreeing the need to reform our international financial institutions to meet the challenges of the global age, we also set down agreed changes that we believe are essential to effective reform, including a greater voice and representation for the emerging and developing countries; an urgent expansion, with a broader membership, of the financial stability forum; and better identification of vulnerabilities and anticipation of potential stresses, with swifter action in crisis response—all to be delivered by the expanded financial stability forum in collaboration with the IMF.
“The IMF's ability to assist countries facing problems as a result of the current liquidity shock and the contraction of international capital flows depends on its reserves of £250 billion. We welcomed the announcement from Japan to lend up to $100 billion dollars from its reserves as an interim measure, but that may not be enough. We agreed to review the IMF’s facilities to ensure that it has the flexibility to give countries the help they need. The World Bank agreed that it will make new commitments of up to $100 billion over the next three years to protect the poorest and most vulnerable countries, as well as $30 billion of new facilities with contributions from other donors, specifically to help address problems faced by the private sector as a result of the crisis, including recapitalising banks and providing trade finance.
“At this unique moment in our economic history, we are seeing the world come together to find global solutions for the global problems we face. Over the next few weeks, following consultation, Britain, as the incoming chair of the G20 Finance Ministers, will lead the preparations for the next summit working alongside the past and future chairs. We will set out the schedule of events, meetings and papers that will take us to the next conference, the date and venue of which will be announced next week.
“In the run-up to the conference, we will monitor, following the recapitalisation of the banking system, barriers to the resumption of funding, for this summit and the meetings that will follow are about the real challenges of everyday life: the need for people to have confidence in the banks that hold their savings and their mortgages and that everything possible is being done to help them in their jobs. We pledge, with national and international action, real help in difficult times. We will take people through the downturn fairly, and I commend this Statement to the House.”
My Lords, that concludes the Statement.
My Lords, I thank the noble Baroness the Leader of the House for repeating the Statement. I join her in the Prime Minister’s tribute to the family and friends of those servicemen killed in Afghanistan in the past week.
All too frequently, we now seem to gather to hear Statements about the disastrous consequences of the most imprudent government-stoked boom this country has ever seen. Since the previous Statement made by the noble Baroness on 20 October, sterling has fallen by 11.4 per cent against the euro and, in the past three months, by 30 per cent against the dollar. More families have had their homes repossessed. Savers have seen their incomes slashed and another 36,000 proud people were forced to sign on for the dole. Only this morning, the CBI forecast a deeper recession and warned that another 1 million people may lose their jobs over the next year. Will the noble Baroness therefore begin her response by apologising to those workers who are now being caught up in the bust that has followed the boom that the Prime Minister engineered?
We hear a lot about the Prime Minister as the saviour of the world. We have had the boasts; is it not now time for the apology to the jobless and the homeless who are suffering as a result of these policies? The IMF says that the British economy will shrink faster than any major economy in the world. Even the European Commission puts our economic prospects in the fourth division with Latvia and Estonia. Can the noble Baroness tell the House—I ask for an explicit answer—whether any responsibility for this recession lies with the Government? Is that a significant amount or nothing at all, or was this recession pit dug entirely abroad?
Before the G20 summit, the spinners in the Government were saying that countries with budget surpluses, such as Saudi Arabia, would put more funds into the IMF. Those in this House with a long memory will know that Labour Governments with deficits know a lot about the IMF. Therefore, can the noble Baroness tell the House what commitments were given by other G20 nations in Washington to provide additional funding to the IMF and other international financial institutions? What is the Government’s latest estimate for the deficit in trade in goods in 2008? Can she confirm that in 2007 it was £89 billion in what was once a proud manufacturing nation? Against this background, does she think that the unprecedented devaluation in sterling we have seen is a benefit or a problem?
At the G20 meeting, there was talk of better regulation of financial services. Judging by what has happened in Britain, they could scarcely be worse regulated than in the system put in place by the Prime Minister in 1997. Will there be another apology for that? Will the noble Baroness acknowledge the immense importance of financial services to our country? Surpluses and services have offset half the UK’s deficit in goods. While collegiate co-operation is welcome, will she give a clearer assurance that the UK Government will not accept the imposition of external regulation that may strangle the success of the City of London, which is so vital to our national well-being?
I greatly welcome the renewed commitment to the completion of the Doha round. Nothing would do more damage than renewed protectionism. Can the noble Baroness give the House the Government’s latest assessment of the intentions of President-elect Obama on this? Is it not essential that we impress on him how damaging US-first protectionism would be at this juncture? How is this message being transmitted?
We will no doubt discuss a fiscal stimulus at length in the debate on the Pre-Budget Statement that we have been promised. This Prime Minister has taken more money from the British people in taxation than any Chancellor in history. There is general agreement that tax cuts are necessary: the issue is how they should be paid for. We have put forward some carefully funded proposals. We submit that there is waste and space enough in the public sector to provide room for greater efficiencies. The public sector cannot ignore the need to tighten its belt when families and businesses face these pressures day by day. Is it not clear, therefore, that more borrowing now, without knowing where the money is coming from, will inevitably lead to higher taxes later? That is what the Business Secretary admitted this morning when he talked about a medium-term adjustment some years ahead and a structural adjustment later on. Translated from the original Greek, that means tax cuts now, tax rises later. There is not a single family in the country that does not understand that what you borrow now you have to repay. Borrowing has its place, but it is like a drug; if you take too much for too long, it can kill you. So far this year, we have borrowed £100 each month for every man, woman and child in the country. In the Government’s view, is there any ceiling to the current growth in borrowing, including commitments to the nationalised banks, PFI and public sector pensions?
The Business Secretary spoke of a “medium-term adjustment”. What can this mean—higher taxes, spending cuts, printing money and higher inflation? What, my Lords, and when? The Government led us into this, not with the G20 but on their own. They now have a duty to chart the course that will lead us out. I hope that when the noble Baroness responds, she will give us an assurance that she will ask her right honourable friend the Chancellor to set out a clear strategy for repayment of the debt now being undertaken in the Pre-Budget Report next week.
In his Statement, the Prime Minister calls this a,
“unique moment in our economic history”.
I call it the mother of all economic crises. Let its father now accept some share of blame for the mess that he has made.
My Lords, we on these Benches join in sending condolences to the families of the three people killed in Afghanistan.
We all recognise that we are in a severe and serious economic crisis that has its roots in the global economy, starting in the United States and spreading across many other countries. In these circumstances, it behoves us to be hesitant about being over-partisan. I followed the noble Lord, Lord Strathclyde, with puzzlement. He implied that the Conservatives would have been far less committed to free markets and financial capitalism than the Labour Government have been; that they would have wanted to regulate the City more tightly; but that they are resistant to any idea that foreigners should regulate the City more tightly. On the contrary, we on these Benches recognise that, in an international crisis, we need the stronger international co-operation that goes with an open global economy. It has always been a core Liberal principle. We believe in free trade, open markets, and the international institutions and international co-operation that go with them. However, some of us are hesitant about the ambition of our current Prime Minister to undertake, as he said in his Statement,
“the wholesale reform of the international economic architecture built in 1945”.
That is a very ambitious and long-term goal. We on these Benches encourage the Government not to raise too high expectations of what is achievable in any group, whether it be eight, 20, 150 or, even worse, 192 or more.
How do the British Government see the adjustment to the rise of these new economies? Is the G8 now dead? Do we expect the G8 to continue meeting under the Italian presidency next year, welcoming the “deeply tanned” new President of the United States? Or do we expect the G8 now to go into a state of suspension? There is reference to,
“a greater voice and representation for the emerging and developing countries”.
The Financial Times today notes that this means that we have to recognise the over-representation of European states. It comments that the United Kingdom could give a lead in suggesting that we reduce the representation of European states. Do the Government have a view on the sort of lead that the United Kingdom might take?
I follow the noble Lord, Lord Strathclyde, in asking about the contributions that the rising economies are willing to make. The Saudis appear not to have agreed to contribute to the IMF; nor have the Gulf states with their substantial sovereign wealth funds; nor has China with its massive reserves. It would be more useful if they now recognised that with growing representation come growing responsibilities.
There is surprisingly little in the Statement about the contribution that the promotion of global development could make to getting us out of the recession. Kofi Annan had a very good article in the New York Times yesterday on maintaining the commitment to global development.
As to immediate measures, we welcome concerted fiscal and monetary measures. It seems to Liberal Democrats correct that Britain should focus on short-term tax cuts and longer-term investment in infrastructure. I note with interest that the Conservative Front Bench appears to be against countercyclical fiscal policy—a sort of pre-Keynesian approach to the way in which we should manage things.
We note the European framework for better regulation, in which the United Kingdom has led, and for greater transparency, but we are still a little puzzled about how global supervisory colleges of regulators will work. We note with interest stronger measures on tax havens, on which I shall be brief, since I have a Question on this tomorrow. Half of the world’s major offshore financial centres are under UK sovereignty. We are puzzled to know exactly how we will tackle excessive executive compensation schemes, or within what domestic or international framework the Government anticipate that some change in domestic law will be needed. We welcome the Government’s statement on the importance of finishing the Doha round, and we encourage the Government, with their European partners, to push ahead as far as they can on that.
Lastly, we welcome that the United Kingdom will be the chair of the G20 next year, and we hope that they will manage to strike the right balance between constructive leadership and an assertion that we were right and that we are leading the world. We need co-operative leadership for the present moment and not a hint of self-righteousness.
My Lords, these are difficult times in this country, but they are difficult times in the rest of the world. That is absolutely clear from the meeting that took place at the weekend in Washington. Of course, these are most difficult times for those individuals who have lost their jobs. This makes it unbearable for some families, and it makes it very difficult for the economy. That is why we as a Government are doing absolutely everything that we possibly can to retain jobs by boosting the economy and to assist those who become unemployed.
The noble Lord, Lord Strathclyde, asked whether I would apologise for the recession. It is clear from what was said at the meeting at the weekend that the world got it wrong and, if the noble Lord reads the communiqué and not just the Statement, he will see that the world has said that the world got it wrong and that we, the world, must do what we can to make things right.
The noble Lord asked about the estimate for the forthcoming trade deficit. I do not have figures, but it is clear that the current devaluation of sterling will boost exports and that will eventually be good for business. No, the UK will not accept external regulation that will strangle the City of London because, like the noble Lord, we recognise the importance of this jewel in our crown. In relation to protectionism and the USA, the US Administration were clear at the meeting that they were in constant touch with the transition team of the President-elect. I am hopeful—indeed, I am confident—that President-elect Obama will not resort to protectionism.
The noble Lord mentioned the carefully funded proposals of his party. One could interpret that as meaning no new money, at a time when the people of this country, the economy and the businesses of this country need more money so that we can kick-start the economy. Of course, the borrowing that we must do has to be sustainable, which is exactly what my right honourable friend the Chancellor will make clear in his Pre-Budget Report; he will say how he is going to make that borrowing sustainable. I reflect on the point that, at this time, the noble Lord and his party are not looking at finding any new spending, or new tax cuts, or at pouring money into the economy, whereas the leadership of the world at the G20 agreed that what was wanted now was precisely a fiscal stimulus.
The noble Lord, Lord Wallace, briefly mentioned partisanship. I, too, believe that this is no time for partisan politics and I am delighted that there is not a partisan approach in the world. As mentioned in the Statement, Governments throughout the world—left, right, north and south—all agree on the way forward. That is important. The noble Lord also asked about the wholesale reform of institutions. The Prime Minister is trying to keep up the pressure so that the necessary reforms take place. Without that impetus, we may not see the necessary reforms.
The noble Lord asked whether the G8 is dead. I do not think so, but at the moment we need the G20 more. That is why the meeting took place at the weekend and why there will be another very welcome meeting in April. Will there be a reduction in EU states in the G20? I do not think so; we will have to wait and see. The important thing is to have the right people around the table. The G20 has the right people around the table with five representatives from the Americas and five from the European Union, so it could be said to be balanced.
Development issues were covered by the communiqué and all leaders were conscious of the need not to forget such issues at this difficult time. On better regulation, greater transparency and how the colleges will work, we will have to wait to see how they work in practice. As I understand it, for every financial institution a college of regulators will be drawn from all the regulators in the most important economies in which those institutions work to ensure that there is proper regulation. On excessive bonuses, we do not want beggar-my-neighbour remuneration. We want to ensure that it is agreed around the world that excessive bonuses are anathema and that people are paid the proper rate for the job.
I am grateful for the comments made by noble Lords.
My Lords, if this meeting was as important as the Prime Minister has made out, how is it that the New York Times did not report it in its main section? The meeting only made page 3 of the business supplement, which is usually the territory of small earthquakes in Chile. In the absence of the new Administration, it was like inviting us to watch “Hamlet” without the Prince. Is the Minister aware that the biggest problem facing our country is the rise in unemployment, and as fiscal stimulus is now the fashion, could she ask the Chancellor to set out how many jobs are likely to be created by a tax cut of £5 billion, £10 billion or £15 billion? If that sort of money does not create jobs, it is perhaps not the right policy. That issue has to be addressed by the Government.
My Lords, I am sorry that the people of New York were not able to read in the New York Times of the success of the G20 meeting in Washington. That is their loss, not ours. The important thing to remember about this summit, notwithstanding the fact that President-elect Obama was understandably not present, is that if we had not started the G20 talks until the end of January with the new Administration, we would be two or three months behind where we are now. Twenty leaders, heads of state and government, have agreed on 50 action points. They have a route map so they know where they want to get to. As soon as President-elect Obama becomes President, they know where to begin their discussions with him rather that just his transition team.
Is the biggest problem unemployment? It clearly is one of the biggest problems. It is interesting to note that while in this country we are losing jobs, which is regrettable, other jobs are being created. I believe that there are just fewer than 600,000 job vacancies on the books at the moment. I may have to reflect on that figure and come back to the noble Lord, but there are many vacancies, although, regrettably, people are still losing their jobs. We shall do everything that we can to ensure that more jobs are created.
My Lords, it is intriguing to students of political etymology to hear the interpretation of the noble Lord, Lord Strathclyde, of “bipartisanship”, which the leader of the Conservative Party said would characterise his party's approach to the current global crisis. It was equally instructive to hear the noble Lord, Lord Baker—a veteran of Conservative Cabinets which included a Chancellor who said that higher unemployment was a price worth paying—give us the benefit of his concerns, rightly placed, at the prospect, indeed the reality, of rising unemployment.
Is it not encouraging to every family and business that the words and purposes characterising the conclusions of the G20 meeting in Washington were that fiscal stimulus to combat recession should be big, rapid, co-ordinated and co-operative, and supported by buttressing reforms to be fulfilled by next March? Is it not fortunate that the declaration that fast, stimulative fiscal action would bring the collapse of the pound was widely seen to be the desperate, irresponsible exhibitionism which, in truth, it was, derided by mature business and market opinion? Finally, is it not commendable that the energetic and intelligent leadership given by the British Prime Minister and Chancellor of the Exchequer is resulting in combined global efforts which have both the realism and the radicalism that current crisis conditions make vital?
My Lords, does my noble friend accept that the great importance of the meeting is that it begins the long-overdue reform of the intergovernmental organisation, which was highly successful in 1944-45? It is immensely important for that process to begin now. Does she also accept that we welcome bringing tax havens into more public scrutiny? That is also long overdue. Finally, I suggest, in passing, that she does not worry too much about the comments of the noble Lord, Lord Strathclyde. Throughout the past 50 years, the Conservative Party has been remarkably consistent in talking Britain down when in opposition and in taking Britain down when in government.
My Lords, the point made by my noble friend about the reform of international institutions is absolutely right and very important. However, it is interesting to note that my right honourable friend the Prime Minister has been arguing for the reform of those institutions for the past eight or nine years. He is the one to whom we should be listening at this time.
My Lords, my noble friend said that the G8 is not dead, but is it not significant that, at a time of such crisis, it is not the G8 but the G20 which is convened? Given the fact that any Prime Ministers and leaders of Governments have only a limited time, should we not now gently put the G8 to rest? To most of us, it is clear that the Prime Minister and the Chancellor took a lead in that, as on the recapitalisation. A cursory glance of the international press shows the esteem in which the leadership of the Prime Minister is held. By contrast, the utterances of the Shadow Chancellor have the gravitas of a rather young and immature student leader. In the crisis, Denmark has had to rethink its attitude towards entering the euro. Is it my noble friend’s judgment and that of the Government that the current crisis leads to some rethinking, some retilting of the balance of argument in respect of the United Kingdom and the euro?
My Lords, it would not be appropriate for me, at this Dispatch Box, to sound the death-knell of the G8. We shall just have to watch that space. It is absolutely clear that the G20 is the important body. At this time, it is the body which is most responsive to the needs of the 21st century. On the euro, at a time of such global economic turbulence it is even more important that the former Chancellor’s five economic tests are met.
My Lords, we have a serious global economic and financial problem. It is all the more serious that the noble Lord, Lord Strathclyde, could not find a single positive alternative. A fiscal stimulus is essential. That means an increase in borrowing. I do not know what serious alternative is being suggested. It certainly did not come from the noble Lord, Lord Strathclyde.
My concern is that it would be wrong if the fiscal stimulus were to result in increasing capital expenditure. I hope my noble friend would agree with this. It requires urgent and immediate capital investment, and I hope she can confirm that that is what the Government have in mind.
On regulation, one of the major reasons we have the banking problem today is a factor that did not apply in Keynes’s day or any other day I can think of; namely, the derivatives used by bankers, who used to be intelligent people. They have been spending money as if it did not matter at all. Not only that, they did not know what they were spending it on.
Who is going to put in place the new regulation that all sides want? Are we going to use ex-bankers? Perhaps my noble friend could tell us or give us some idea what kind of regulation the Government have in mind. This will be important if we are to get over these serious banking as well as economic and financial problems.
On monetary policy, the Prime Minister made it clear that he wants to see lower interest rates. In the past, the Governor of the Bank of England, who has the responsibility here, has been a little cautious, to put it mildly, in coming forward with interest rate cuts when he should have done. Is my noble friend really saying that, if the governor were to revert to his previous cautious position and not cut interest rates further, the Government would not use the reserve powers available to them in the Bill that set up the responsibility of the Bank of England? It would be a terrible situation if we left the Bank of England to act without any government responsibility.
My Lords, on fiscal stimulus and the increase of capital expenditure, I will leave these issues for the Statement on the PBR, which will be made by my right honourable friend the Chancellor of the Exchequer on Monday. I am sure, however, that he is well aware of the points made by my noble friend.
On derivatives, I agree with my noble friend that this is one of the key issues that need better regulation. We have to ensure that these are regulated and that it is a proper, transparent market. I am not, however, the best person to address this today and I will write to my noble friend on this.
On interest rates, which are now at 3 per cent, the lowest since 1954, the Bank of England is doing what it can. I am sure that it will continue to watch the economic situation and take appropriate action at the appropriate time. The Governor of the Bank of England has said that, if and when necessary, he will reduce interest rates.
My Lords, 10 years ago after the Asian financial crisis, the then Chancellor and now Prime Minister returned from a meeting of the G7 indicating that what was needed was an expansion of the Financial Stability Forum, the introduction of international financial standards and codes, greater transparency, early warning systems for the International Monetary Fund, and a more central role for the G20 because the G7 was somehow insufficient to deal with problems of this nature. Is that not exactly what is being proposed, 10 years later, and is not one of the problems that this action should have been taken then? The system might have been in better shape to withstand the storms that have now come.
My Lords, the noble Lord is right that my right honourable friend the Prime Minister was arguing 10 years ago for these reforms, and I think he will find that at every subsequent meeting he has been arguing for them. However, it is only now with the global crisis that other world leaders see that these reforms are absolutely necessary. They have all signed up to ensuring the reform of these global systems to meet the needs of the 21st century.
My Lords, does the Leader of the House think that the issue of derivatives raised by the noble Lord, Lord Barnett, will be solved by regulation or by the fact that the markets are now and certainly in the future will be much more aware of the problems associated with such instruments? Will that not in itself police them to a far greater extent than has been the case until now, and far more than could be achieved through regulation by former bankers or by anyone else, because they will be extremely difficult to regulate? Further, will the other countries which are apparently imitating us also lend to their banks at 12 per cent and expect those banks to lend on to their customers at rates regulated at close to 3 per cent?
My Lords, it was made clear at the weekend that, while there must be concerted and, where appropriate, co-ordinated action, each country must do whatever is deemed necessary for itself. I am sure that each country will look at these problems through its own spectacles, as it were. On the matter of derivatives, I am sure that the noble Lord is right to say that peer pressure will have an effect on that market, but it is also clear that some regulatory pressure needs to be applied. I would guess that the proposed international college of regulators will have something to do with policing the derivatives market.
My Lords, will my noble friend join me in congratulating my right honourable friends the Prime Minister and the Chancellor of the Exchequer on the continuing leadership and judgment they have shown throughout this evolving crisis? In particular, will she join me in welcoming the really tangible proof of the action that has been taken in the significant drop in the sterling LIBOR rate since 10 October and in the improving liquidity that we see week on week in the sterling bond markets? As I say, this is tangible proof that the action the Government are taking is working; that action has been noted not only by the Wall Street Journal but, I believe, even in comments in the New York Times.
My Lords, I join my noble friend in her congratulations, and in noting the effect of the Government’s policies. The effect on LIBOR rates and liquidity might be slower than we would wish, but these two things are essential if we are to regain necessary confidence in our banking system so that banks can lend to individuals and to business.
My Lords, some people need to save, but there are many people who need to spend. At this point, it is good when people put money into the economy. However, it is especially so when business puts money into the economy. We want businesses to invest in the economy so that they create jobs.
My Lords, I have been travelling fairly extensively in the Middle East over the past five weeks or so, and in that time I have consistently heard, not only from political leaders but from a wide range of business people, about the admiration they have for the leadership offered by my right honourable friend the Prime Minister. Noble Lords opposite may not like that but it happens to be true. Does my noble friend think that the statement that came out of the G20 summit not only demonstrates the Prime Minister’s prescience 10 years ago but his consistency in advocating something that is now recognised as being in the world’s interest?
My Lords, speaking from the Independent Labour corner, we must remember that the present problems have arisen because of profligacy in public and private expenditure. People have been offered 125 per cent of the value of their property and private consumption has exceeded the gross domestic product, and that has to be paid for some time. We have to take that into account.
I was rather impressed by the remark in the Statement that the world economy will double in size over the next 20 years. The next business is the Climate Change Bill. I am not much in favour of it, but we are not going to be able to meet its targets if we are going to double the standard of living of everyone in the world over the next 20 years. I hope that the Government realise that if that is to be so, we will not have the resources to meet the demand and we will be pushing a lot more CO2 into the air. Will the Minister comment on the hiatus between the Government’s policies?
My Lords, profligacy and greed might be at the root of some of our problems, but so are excessive risk-taking in too many financial institutions, inconsistent and insufficiently co-ordinated macroeconomic policies and inadequate structural reforms. The leaders of the G20 agreed that those issues were the root causes of the problems. There is a lot of potential for green jobs and for improving the quality of life when we adapt our economies and our societies to climate change. I understand what the noble Lord is saying, but I do not share his concerns. I am sure that we as a world society will be able to adapt to climate change to the benefit of all of our societies.
Climate Change Bill [HL]
My Lords, I beg to move that the Commons amendments be now considered.
Moved accordingly, and, on Question, Motion agreed to.
[The page and line references are to Bill 97 as first printed for the Commons.]
amendments Nos. 1 to 6
My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1 to 6. I shall also speak to a number of other amendments that are related to this group.
Amendment No. 1 removes Clause 1, the purpose clause, because we do not think it works in practical terms. Having any measure based on global temperatures means that what we have to do is dependent on what happens elsewhere in the world. While we are fully committed to taking action at home, emission reductions in the UK alone cannot deliver this objective. It is only though global action that we can maximise the chance of limiting the rise in global temperatures to 2 degrees centigrade. In future, there may be a different way of framing the level of global ambition. To place an explicit reference to the 2 degrees centigrade goal in the Bill would be inflexible and might become irrelevant, especially when one considers the long-term framework that the Bill’s targets and budget establishes.
Moreover, the early advice from the shadow Committee on Climate Change made a specific link between 2 degrees centigrade and the level of the 2050 target, which underpins every other action required of us by this Bill. The committee’s advice stated that the target to reduce the UK’s emissions by at least 80 per cent is a reasonable contribution to a global strategy of cutting global emissions by around 50 per cent by mid-century. Reductions on this scale are required to limit the expected global temperature increases to around 2 degrees centigrade above pre-industrial levels. In proposing to accept the committee’s advice on the level of the 2050 target, we therefore already intend to set our 2050 target in a way that would be consistent with the 2 degrees centigrade goal. We do not, therefore, consider a specific purpose clause to this effect to be necessary.
Amendment No. 2 would increase the level of the 2050 target to a reduction of at least 80 per cent. This follows the early advice of the Committee on Climate Change, which I announced we would accept in my Statement to the House on 16 October. By ensuring that the UK’s long-term target is based on the most up-to-date science and on independent expert analysis, we will continue to provide leadership within the international debate. This is particularly important in the context of negotiations for a global and comprehensive agreement in Copenhagen in 2009.
Clause 3 provides a power for the Secretary of State to amend the 2050 target, based either on significant developments in scientific knowledge about climate change, or significant developments in European or international law or policy. Currently the developments in scientific knowledge are those since the 2000 report of the Royal Commission on Environmental Pollution. We consider that it is no longer appropriate to refer to the royal commission’s 2000 report as our starting point, because the committee has provided advice on the basis of the latest scientific thinking, which we have accepted. Instead, we consider that the passing of this Act should be the reference point, and we propose Amendment No. 4 to effect this change.
Amendments Nos. 3, 13, 14, 15, 16, 19, 20 and 21 are also in response to the committee’s advice, and have the effect of including the other Kyoto greenhouse gases in the Bill’s targets and budgets. Amendments Nos. 5 and 6 concern the level of the target for 2020. As noble Lords will know, on 1 December the committee will provide its formal advice on the implications for the 2020 target of their advice on the 2050 target. We do not think that a change should be made to the 2020 target before we receive this advice, especially as we closely linked the committee’s advice to the first three carbon budgets. We want to ensure that we get the 2020 target right. Amendments Nos. 5 and 6 would therefore provide for the 2020 target to remain as it currently is; that is, a 26 per cent reduction in CO2 emissions. This recognises that a 26 per cent reduction target that includes all greenhouse gases, is not as demanding as a target of 26 per cent that includes only CO2. We accept that we will have to amend the target soon to account for the inclusion of the other greenhouse gases. As I have said, we simply do not consider it appropriate to make a change to the 2020 target until we have received the committee’s advice on this issue.
Amendments Nos. 8 and 10 revert to the Bill’s original drafting, and place the responsibility for publishing the report on proposals and policies, and sending copies of the report to the other national authorities, with the Secretary of State, rather than the Prime Minister. I understand that the House has been through this matter in some detail at earlier stages of the Bill, so the arguments may be familiar. The Government remain of the view that placing duties on the Prime Minister is unnecessary and inappropriate.
As is conventional in UK legislation, the Bill places a number of duties on the Secretary of State. By this, the law means “one of Her Majesty’s principal Secretaries of State”, which has the advantage that legislation does not have to be amended when the machinery of government changes, and that one Secretary of State can act for another should it be necessary. The doctrine of collective responsibility means that this is the established mechanism to place a duty on the Government as a whole. Thus, the responsibilities in the Bill—including those for meeting the targets and budgets and for producing reports—are not limited to the Secretary of State for Energy and Climate Change.
We therefore think that it is better to revert to the wording in our amendment. There is no question of our collective commitment to tackle climate change. The fact that we have a new department, which has been set up precisely to create a new focus on tackling climate change, is an indication of that. I assure noble Lords that my colleagues and I, working with the Prime Minister and the rest of Government, are committed to finding sustainable, cost-effective solutions to the twin challenges of reducing emissions and ensuring secure supplies of safe and affordable energy.
Moved, That the House do agree with the Commons in their Amendments Nos. 1 to 6.—(Lord Hunt of Kings Heath.)
My Lords, the Minister has given an excellent summary of what we have to discuss here. Let me say just two things. The first is that, as many noble Lords may know, I have taken an interest in this issue for some time. Indeed, I have even written a book on the subject which, I am glad to say, has already been translated into two European languages and three more foreign editions are on the way. It is possible that I have had slightly more influence in that way on affairs than by speaking in this House. That is not the only reason why I have not spoken previously in this House on the Bill. The other reason is that I felt that it was unbecoming for an unbeliever to take part in a religious service, which is what all this is really about.
Nevertheless, we have the amendments that come back from the Commons to us today. The Bill will go down in history, and future generations will see it, as the most absurd Bill that this House and Parliament as a whole as ever had to examine, and it has now become more absurd with the increase from 60 per cent to 80 per cent. I should like to address as briefly as I can—because I do not propose to speak on any subsequent occasion on this subject— why I think that the Bill is so absurd.
Let us pretend that the planet is warming. We know, of course, that it is not. The figures published each year and, indeed, monthly, by the Met Office or the Hadley Centre, which is a department of the Met Office in association with the climate research unit of the University of East Anglia, show without any doubt that there has been no warming so far this century at all. Some people say that there has been a cooling but, although that has been the slight trend, I think that the margin for error is so great that I would not press that, but there has certainly been no warming. The majority of climate scientists do not think that if there were a warming, it would be a disaster.
Nevertheless, it is possible that warming will resume. The majority of climate scientists believe that warming will resume. I am completely agnostic on that; I do not know. Maybe it will, maybe it will not. The complete standstill this century so far was certainly totally unpredicted by all the elaborate computer models that the scientists use. That is not surprising. The climate is an extremely complex system.
What lies behind this? It was implicit in what the Minister said, although he did not spell it out on this occasion, that by taking this massive step of virtually complete decarbonisation of our economy by 2050 in a mandatory way—something that no other country has done for good reason, because no other country has been so foolish, nor do other countries have the slightest intention of going in this way, but I will come to that in a moment—we in the United Kingdom are giving a global lead that other countries will follow.
To understand that, we have to go back briefly to the G8 meeting last year. At that meeting, Europe, led by Germany and the United Kingdom, sought to isolate the United States in its opposition to binding commitments to cut back carbon dioxide emissions by proposing that the whole of the G8 should agree to a 50 per cent cut in carbon dioxide emissions by 2050. I can understand why people are not dying to support anything that President George W Bush supports, but the plan to isolate the United States backfired horribly. Europe was isolated when we got to the G8 summit. The other member countries, Japan, Canada and Russia, all accepted the United States’ position and therefore there was no agreement on a 50 per cent binding commitment to a reduction in carbon dioxide emissions by 2050. Fast forward from that, what has happened? Far from making any headway in persuading the rest of the world, even Europe is now backing off.
I remind the Minister of the original plan, the unilateral European cut. We are committing ourselves to a unilateral cut really, irrespective of what any other country does. After all, we account for less than 2 per cent of total carbon dioxide emissions and that is falling. Therefore, it makes sense only if we can persuade the rest of the world to go along with this.
Even our supporters in Europe are busy backing off. The unilateral cut of 20 per cent by 2020, agreed to by the European Union—with a little teaser that, if the rest of the world joined in, we would go up to 30 per cent—has been completely abandoned. It was never a binding commitment because you can bind only individual member countries and the individual countries of the Union had not agreed—we had but the others had not—to go along with their share in the 20 per cent cut. The seven accession states of central and eastern Europe, plus Italy, have now said that there is definitely no way that they are going to go along with this. The European Union has agreed that this should be looked at again. Nothing will happen. It can only be agreed unanimously and will be looked at again in December this year, after the Poznan meeting, which I hope the Minister will grace with his presence. It will be an educational event for him.
Not only have those countries said that they will not go along with it, but Germany has always had a slightly equivocal position, because, in addition to ostensibly being very keen on this policy, it subsidises its coal industry more than the rest of the European Union put together. Indeed that is contrary to European Union law and it has to secure a waiver from European law to enable it do that, for which it fights to the death, and successfully so far. However, the German Government, have said that energy-intensive sectors must be exempted from the European emissions trading system. Indeed, an official government spokesman said only the other day that we have got to prevent companies being threatened by climate protection requirements. That makes nonsense of the whole policy. If Germany is saying that, the others will go the same way. Therefore, we are in the position of being completely on our own. The point is to get an agreement at Copenhagen, as the Minister said, a successor to the Kyoto agreement which will be about to expire.
The Kyoto agreement called for only a 5 per cent reduction in carbon dioxide emissions. So far, there has been at least a 5 per cent increase in carbon dioxide emissions from the signatories to the Kyoto agreement, and it is rising all the time. This country’s emissions have been rising steadily ever since this Government took office in 1997. The disparity between the words and the facts is astonishing. We got as close as we did to the Kyoto agreement—which was not very close—only because we in effect outsourced our emissions very substantially to the developing world, in particular India and China. This is because manufacturing industry relies on carbon-based energy to a very high degree, and the industry has migrated to a considerable extent to China and India. This is why China is now the biggest emitter of carbon dioxide in the world—bigger even than the United States.
Given that we could not get close to 5 per cent even while it was possible to outsource emissions, it beggars belief that we think we can get to a 50 per cent reduction by 2050, of which our share will be an 80 per cent reduction, at least—the agreement is meant to include China, India and everyone. There is no way in which we can outsource emissions to Mars, so this must be a real reduction. China and India have said that in no way will they accept this kind of curb on their emissions, and quite rightly so. These countries have a real problem that is very serious for them; they suffer from poverty, malnutrition, disease and premature death on a massive scale. They can get out of that only by the fastest possible rate of economic development, which requires using the cheapest energy that they can find. It might not be for ever, but for now and for the foreseeable future that energy is carbon-based energy. They will not take part in this.
Interestingly, the Indian Government recently received a report from a whole lot of experts who said that climate change presented no threat to India. One of the signatories to that report was Mr Pachauri, the chairman of the Intergovernmental Panel on Climate Change, who is Indian himself. No one who has looked at this seriously and dispassionately thinks that this is a sensible policy. Professor Gwyn Prins of the London School of Economics has written very eloquently on the subject—I am sure that the Minister has read what he has written. He is not a scientist, but he entirely accepts the conventional view of the science. He says simply that this policy is madness and cannot possibly work. He has written two well-argued papers, Time to Ditch Kyoto—which means the whole Kyoto approach—and a sequel, which he wrote to help the Poznan conference. The United Kingdom is completely isolated in this. What we are seeking to do is absolutely crazy; it will be immensely damaging to the economy as a whole, and to the poorest people in this country in particular, if we carry it through.
Some people may say that I have forgotten the business opportunities from going along the route of non-carbon-based energy. I confess that there are business opportunities. Noble Lords may or may not be aware that there was a conference in London perhaps 10 days ago called “Cashing in on Carbon”. The promoters said of the conference:
“It is aimed squarely at investment banks, investors and major compliance buyers and is focused on how they can profit today from an increasingly diverse range of carbon-related investment opportunities. The programme features some of the most experienced and respected practitioners in the market and should have very strong appeal to anyone with a stake in this burgeoning market”.
I am glad to say that among those prominently represented was the group of which the noble Lord, Lord Stern, is deputy chairman. I am sorry that he is not in his place on a Bill of this importance. So the people who gave you the glories and the joys of mortgage-backed securities are now offering the great business opportunity of carbon-backed securities.
I always like to look on the bright side: it is possible that this Bill is not as bad as it might seem on paper. Under the Bill, there is no reason why we need to cut our carbon emissions. We can do it entirely by purchasing emission reduction certificates under the clean development mechanism from China, India or wherever. Although that would be a quite unnecessary transfer of resources to other countries—perhaps they deserve it, I do not know—it would be less costly than trying to cut back carbon dioxide emissions ourselves, which would be immensely more damaging.
A number of journalists and other academics have demonstrated the clean development mechanism to be a complete scam. What now happens is elementary economics: if a price is put on carbon dioxide, people will produce it. Various countries are busy producing emission reduction certificates so that they can be sold. The Chinese have done a very good business in this. They are very sharp and very much on the ball. They are now getting huge revenue from the certificates, which have no bearing on the carbon dioxide concentrated in the atmosphere. They are making so much money that the Chinese Government are taxing them in order to help their government revenues, which gives them more money to spend on their massive coal-fired power station programme. That is not only madness, but also highly unpopular.
There has been so much interest in the American presidential election that people have not looked as closely as they might have done to two other elections which have also taken place in recent weeks in English speaking democracies—in Canada and New Zealand. I say to my own party, in particular, that it should watch and take note of the fact that in both countries this issue was prominent in the debate. There was a rather weak, very shaky minority Conservative Government in Canada. The Liberal Opposition thought that it could come to power with what it called the “green shift”, which really tackled this issue. It was so unpopular that the minority Conservative Government increased their representation considerably and the leader of the Liberal Party of Canada is about to resign his post, if he has not already done so.
In New Zealand, a Labour Government, led by a very able woman Prime Minister, was in power for a very long time. Again, they said, “This is the big issue”. Although we may think that it is ridiculous for New Zealand to say that it is giving a global lead, it is no more ridiculous than us saying that. Having an elaborate system to cut back on emissions and having an emissions trading system was so unpopular that the Labour Party lost office. The Conservative Opposition, to their great astonishment, found that they won the election.
My Lords, that is a very good point. The main thing in the Australian election was that the people were sick and tired of John Howard, whom they felt had been there for far too long. It is true that the Leader of the Australian Labor Party said that he would sign the Kyoto agreement. People thought that that was a good idea. I happened to be in Australia at the time of the election and watched people being interviewed on television. The interviewer rather shrewdly asked a lot of people, “Are you in favour of signing the Kyoto agreement?”. A great majority said, “Yes, we are”. The next question was: “Do you know what the Kyoto agreement is?”. They said, “No, we don’t”. The new Australian Government are now having to implement these things and their standing in the polls has plummeted. I am glad that the noble Lord raised the issue of the Australian political scene, which is always an interesting one.
I shall take a moment to warn my noble friends on these Benches. This is extremely unpopular. The Government are shrewd in turning the tables on the Conservative Party on the tax issue, deftly jettisoning any idea of prudence and saying, “We are now the party of tax cuts”. As we move closer to the next general election, if it should happen that the Labour Party feels there is a possibility that it might lose it, the Prime Minister will have no hesitation at all in putting this issue on the back burner, saying grave things about other countries not having agreed to it, or the need to look after the economy in these difficult and stressful economic times, thereby leaving the Conservative Party high and dry.
The noble Lord, Lord Mandelson, who I am delighted is now a Member of our House, adds greatly to the gaiety of nations wherever he goes. It is great that he has come here. He is very shrewd, and I am quite sure that that is the advice he will be giving the Prime Minister. I hope that not merely for our party’s sake but, above all, for the sake of our country, we recognise that this is complete madness. We are on our own completely and should desist from going ahead with it.
My Lords, I used to be on a different side on this issue until I was given a small book written by an ex-Chancellor of the Exchequer, in which he showed that global warming stopped in about 2000; that the warmest year was in 1934; and that Arctic sea ice is bigger this year than it has been for several years. He planted in my mind not a small seed of doubt but a great array of cuttings of doubt as to whether global warming was continuing.
If we have all grasped the piece of religious mania that the world will be so hot that palm trees will grow only in Orkney, and that desertification will spread when the evidence for it seems to be very much less than before—serious doubt has arisen in my mind—we will all look awful asses for following the Pied Piper of Hamelin, or his next best friend, along a road that does not exist.
My Lords, I hate to argue the other way. I was about to speak specifically about the amendments, but without getting into a Second Reading debate, which could almost happen here, many noble Lords will want to make it clear that we read much of the scientific literature intelligently. We consider and assess the evidence, we look at what is happening around the world, and we see the consequences not so much for this country but for developing countries in the future. We say, “If there is anywhere that we apply a precautionary principle with action, it is here”. That is why most sides of this House have welcomed the Bill.
I particularly welcome the move to 80 per cent. As the noble Lord, Lord Lawson, pointed out, there are all sorts of ways in which we can dodge that, but we will return to it at a later stage. I congratulate the Government on having bitten the bullet on this target. None of us underestimates the effect of this, or what we will have to do to achieve it.
It is a shame that we have removed the Prime Minister’s responsibility for this voyage. If anything has a wide-ranging effect, it is this issue, and perhaps for once the head of the Government should take personal responsibility for it. It is not a matter of fundamental principle, but it would match the occasion. The purpose clause would be useful to show the objective but, again, it is not fundamental. The key issue is the target. I was concerned that we would still have 60 per cent while saying that we were going to have something else and so would have the wrong number in the Bill. The noble Lord, Lord Turner, needs congratulating on the work that he and his committee have done within the timescale, and I welcome the fact that we have the right number in the Bill.
My Lords, the noble Lord, Lord Lawson, may be unaware that this is my first entry into the Climate Change Bill as well. He described himself as a non-believer taking part in a religious ceremony. After my tour around the Department of Health, the Department for Work and Pensions and the Ministry of Justice, I could perhaps best describe myself as an agnostic. However, although I have listened carefully to what the noble Lord has said regarding what the Bill is really all about, supported by the noble Earl, Lord Onslow, one cannot ignore the reports of the various bodies that have looked into these matters so carefully. For instance, the fourth report of the Intergovernmental Panel on Climate Change showed overwhelming evidence of climate change. Its evidence was peer-reviewed by large numbers of expert scientists. It is indisputable that polar ice caps are melting—we can see that with our own eyes.
My Lords, that is not true of the past year. The noble Lord’s predecessors were seriously misinformed by his officials, and I suspect that he will be too. That is a real problem for him, and I feel for him. The fact is that in the Antarctic, where most of the ice is, the ice is thickening and has been for some time. In the Arctic this year there has been a greater extension of ice than ever before.
Furthermore, I would be interested if he could refer me to where in the fourth report of the Intergovernmental Panel on Climate Change it says that it makes sense for us to have a binding commitment to cut back carbon dioxide emissions by 80 per cent by 2050. That is what we are talking about here. The science may be the background, but we are discussing what is a sensible policy.
My Lords, surely the point is that that report and others have provided the evidence that the Government have now considered and which has informed our decision to go for the 80 per cent target. I refer the noble Lord to the committee of the noble Lord, Lord Turner, which, as he will know, reported a few weeks ago. It said that we know more about how rising temperatures will reduce the effectiveness of carbon sinks. It says that, unlike the authors of the report by the Royal Commission on Environmental Pollution, we have the benefit of models that include the warming effect of gases other than CO2. It says that the reduction in summer Arctic Sea ice in recent years has been greater than predicted by any of the models, and that the summer melt of the Greenland ice sheet has accelerated. It says that it is now realised that atmospheric pollution has probably masked some of the greenhouse gas warming that would have occurred, so that as air quality improvements continue to be achieved even more warming can be expected. It says that there is now a greater understanding of the range of potential climate change impacts. Finally, the latest global emission trends are higher than anticipated in most IPCC scenarios, largely because of higher economic growth and a shift towards more carbon-intensive sources of energy. It is not unreasonable for the Government to have taken that seriously.
My Lords, I am not a scientist, and it is not my role to debate the intricacies of scientific arguments, but I can and do pray in aid the reviews, the committees and the expert groups that have looked into these matters and which have informed the Government’s decision: it is on their conclusions that the 80 per cent target is now based.
I listened with great interest to the strictures of the noble Lord, Lord Lawson, about the Government taking a lead that he said other countries would not follow. I accept that the challenge we have set ourselves is massive, but I would not underestimate the potential of this country to influence international debate and considerations. I am not pessimistic about the current negotiations, despite the way that he has described them; I am confident that we will move from the EU into discussions towards Copenhagen. This country’s lead will have a powerful impact on our ability to come to international agreement.
The noble Lord raised issues about—shall we say?—the credibility of projects such as CDM projects. I understand the point he makes, but it is right that this country is a strong supporter of CDM initiatives. We look to international processes to ensure the integrity of those systems.
The noble Lord, Lord Teverson, has welcomed the amendment made in the other place setting the 80 per cent target, but says that there are ways it can be dodged around. I hope he will have confidence that it is not the Government’s intention to reach a conclusion on the level of the target and then legislate to find ways around it.
On the question of whether the Prime Minister should be in the Bill, I do not want to repeat my arguments from earlier but, although they may seem to be technical, they are in fact substantive. This Government and this Prime Minister are committed to what we have set out to achieve. On that basis, I hope the House will accept this group of amendments.
Amendment No. 7
7: Page 6, line 32, at end insert-
“(i) the emissions of greenhouse gases from international aviation or international shipping that the Secretary of State expects to arise during the budget period.”
7B: Page 6, line 32, at end insert-
“(i) the estimated amount of reportable emissions from international aviation and international shipping for the budgetary period or periods in question.”
7C: Page 6, line 32, at end insert-
“( ) In subsection (2)(i) “the estimated amount of reportable emissions from international aviation and international shipping”, in relation to a budgetary period, means the aggregate of the amounts relating to emissions of targeted greenhouse gases from international aviation and international shipping that the Secretary or State or (as the case may be) the Committee estimates the United Kingdom will be required to report for that period in accordance with international carbon reporting practice.
( ) Such amounts may be estimated using such reasonable method or methods as the Secretary of State or (as the case may be) the Committee considers appropriate.
( ) The duty in subsection (2)(i) applies if and to the extent that regulations under section 30 do not provide for emissions of targeted greenhouse gases from international aviation and international shipping in the budgetary period or periods in question to be treated as emissions from sources in the United Kingdom for the purposes of this Part.
( ) Section 30(1) (emissions from international aviation and international shipping not to count as emissions from UK sources for the purposes of this Part, except as provided by regulations) does not prevent the Secretary of State or the Committee from taking into account the matter referred to in subsection (2)(i) for the purposes of this section.”
My Lords, I beg to move that the House do disagree with the Commons in their Amendment No. 7, substituting the words on the Marshalled List in lieu, and that the House do agree with Amendments Nos. 12, 18, 25, 28, 31 and 74.
These amendments deal with emissions from international aviation and international shipping, perhaps the most technically complex issue we have had to discuss during the passage of the Bill. Throughout the discussions, the Government’s position has been that it is vital to put in place strong mechanisms for dealing with emissions from international aviation and shipping, but that finding the right way of deciding which of those emissions should be allocated as being the UK’s responsibility is not possible at the moment. The set of amendments on which I seek your Lordships’ agreement reflects that position. The amendments would take us as near as is currently possible to including these emissions in the Bill’s targets and budgets, and would also ensure maximum transparency about how we deal with them in the meantime.
Many contributors have provided valuable views and support in taking forward our thinking on this difficult matter. In particular, the Joint Committee which scrutinised the draft Bill considered it in great detail, and Members of this House and in the other place put forward proposals. More recently, the views of the shadow Committee on Climate Change have helped to shape the amendments which are being considered today.
In its interim advice the committee advised that international aviation and shipping emissions should be included in the UK’s efforts to reduce overall emissions by at least 80 per cent by 2050, but that they should not be included in the Bill’s targets at this time because of the lack of an appropriate methodology. The committee also recommended that emissions from these sectors should be reflected in its annual reports of progress and should be taken into account in the setting of budgets. This is a comprehensive set of recommendations, and I believe that all of them are provided for in the amendments that I bring before the House tonight, which would do three main things.
First, Amendments Nos. 12 and 18 would require that emissions from international aviation and shipping must be included in the Bill by 31 December 2012, or that the Government must lay a report before Parliament explaining why that is not the case. That approach is closely aligned with the view previously agreed by this House: the differences are in how we define the emissions and in providing an earlier deadline for inclusion or explanation that aligns with the budget-setting process.
On defining these emissions, the House recognised that one possible method would be by reference to the transport of goods and passengers. However, there are other potential options for definition, and we do not want inadvertently to rule them out. This is why we are seeking to revert back to the broader language of “international aviation and shipping emissions”, which is established terminology within the UN and EU.
Secondly, Amendment No. 25 would require that the Committee on Climate Change must, when providing its advice on carbon budgets, give its view on the consequences of including emissions from international aviation and shipping within the targets and budgets. Amendments Nos. 28, 31 and 74 are consequential to Amendment No. 25.
Thirdly, Amendment No. 7 reflects the view, as put forward by the noble Lord, Lord Turner, in his letter to the Secretary of State, that although the right methodology does not yet exist for including these emissions in the carbon budgets, decisions made by the committee or the Government in relation to the budgets must take into account projected emissions from international aviation and shipping.
At Commons Report stage, the Government accepted an amendment which reflected the committee’s view, but on the basis that we would need to discuss the specific drafting with parliamentary counsel. Amendments Nos. 7B and C provide the new, revised version. These amendments would require both the Government and the committee to have regard to projected emissions from international aviation and international shipping in setting, and advising on, carbon budgets, respectively. They also provide that these projections may be estimated using such reasonable methods as the Secretary of State or the committee considers appropriate. I beg to move.
Moved, That this House do disagree with the Commons in their Amendment No. 7 but do propose Amendments Nos. 7B and 7C in lieu.—(Lord Hunt of Kings Heath.)
7D: (to Amendment No. 7B in lieu) Line 2, leave out “reportable emissions from international aviation and international shipping” and insert “emissions of targeted greenhouse gases from international aviation and shipping attributable to sources in the United Kingdom”
7E: (to Amendment No. 7C in lieu) Line 2, leave out “reportable emissions from international aviation and international shipping” and insert “emissions of targeted greenhouse gases from international aviation and shipping attributable to sources in the United Kingdom”
7F: (to Amendment No. 7C in lieu) Line 7, leave out “will be required to report for that period in accordance with international carbon reporting practice”
The noble Lord said: My Lords, that procedure is probably longer than my speech. I do not know whether you can table probing amendments at this late stage of the Bill, but I am sure that the Minister will tolerate it. What concerns me, particularly in the case of international shipping, is that a number of studies over the past two years have made clear that the current measurement of emissions, both globally and relating to the UK in particular, underestimate the carbon emissions of the sector. I am not being negative about the shipping sector, because it is a very efficient form of transport in terms of carbon consumption. Indeed, if we could increase shipping at the expense of other forms of transport, we would strongly welcome that. What I seek do in these amendments, rather than leaving the term “reportable” that is vague and suggests adherence to the existing way of calculating these emissions, is to make sure that they are the emissions properly attributable to the United Kingdom. That is clearly what everybody means, but at the moment they are not the current reportable emissions. I would welcome assurance from the Minister on this matter. I beg to move.
7G: Line 11, at end insert “and the Secretary of State shall publish details of the methodology used”
The noble Lord said: My Lords, this group is of a complexity that I have not experienced before. Amendment No. 7G provides for the publication of methodology. As my colleagues in another place made clear on Report, Conservatives welcome the inclusion of aviation and shipping emissions in carbon budgets. I speak in support of the government amendments to Commons Amendment No. 7.
In the debate in another place, the Parliamentary Under-Secretary for Energy and Climate Change indicated that tidying-up amendments would be necessary. As in your Lordships’ House, there was a long and detailed debate in the other place on the issue of emissions from aviation and shipping, and it is not necessary to repeat that debate here. We on these Benches welcome the Government’s amendments, but still consider them incomplete because of the absence of any requirement on the Secretary of State to publish the methodology used to arrive at the estimated tonnage of emissions from these sectors. We have argued at every stage of this legislation that transparency, and government accountability to the expert opinion of the Committee on Climate Change, are of paramount importance. That is why we have tabled Amendment No. 7G to government Amendment No. 7C. I hope that the Minister will assure me and the House that, whatever methodology is used to come to an estimated figure on emissions from aviation and shipping, this will be made available for parliamentary and public scrutiny.
I understand the amendments of the noble Lord, Lord Teverson, to government Amendment No. 7, and his reasons for proposing them. I hope that we all agree on the necessity for more fully drafted amendments in lieu, as the Government have put forward this evening. However, it is important to note an area of weakness that is addressed by the amendments of the noble Lord, Lord Teverson. The government amendment requires “expected reportable emissions” to be taken into account, rather than “expected emissions”. This might sound like pedantry, but I have been made aware that the difference is significant. It is widely accepted that, particularly in the case of shipping emissions, there are weaknesses in the current reporting methodology that lead to the UK figures being significantly underestimated. We are all aware, thanks in part to the many debates in both Houses, that the Government are not in a position to legislate for a specific methodology to be used for the counting of emissions from international aviation and shipping. However, it is not sensible to limit the legislation to a method that is widely accepted to be flawed. We should make the remit flexible enough to include a better projection methodology, if or when one is developed in the future. I thank Friends of the Earth for bringing this issue to my attention and call on the Minister to give the assurances that I have sought from the Government. I beg to move.
My Lords, I am grateful to both noble Lords for their amendments. They provide an opportunity for the Government to respond to a number of points that are entirely reasonable given the changes that were made in the other place.
The issue of emissions from international aviation and shipping is very important. However, the fact that there is as yet no agreement on how to allocate those emissions means that we have to deal with this matter in a particularly sensitive way. That is the intent behind the government amendments. I say to the noble Lord, Lord Teverson, that calculating emissions that are properly attributable to the UK is a very important aim. The government amendments would require the committee and the Government to take account of the aggregate of the amounts of emissions of targeted greenhouse gases from international aviation and international shipping that the UK will be required to report for that period, in accordance with international carbon reporting practice.
The problem that we have with the noble Lord’s amendment is the link to the UK. Currently there is no agreement on what proportion of these emissions is attributable to the UK. This amendment puts us back in the position that we tried to avoid, of the Government deciding unilaterally on an allocation methodology. Our contention is that, while the UK is undoubtedly influential in international discussions relating to these sectors, we are not in a position to dictate how these matters are dealt with. It is important that whatever we do is consistent with international agreements. For that reason, the government amendments use the only internationally agreed way of establishing a link between the UK and emissions from aviation and shipping—the agreed reporting methodology. If the UN reporting requirements change over time, the government amendment is linked automatically to the up-to-date accepted practice. By making the link, we ensure maximum transparency about the approach taken, and consistency with whatever international negotiations provide for.
It is difficult to envisage a situation in which the UK would not have to report on emissions from international aviation and shipping to the UN or some other international organisation. In the unlikely event that the UK duty to report to the UN on those emissions was discontinued, the Bill has a mechanism to deal with this. We can specify an alternative approach by making an order under Clause 86, linking the report to any different reporting protocol at European or international level.
The second paragraph in government Amendment No. 7C would provide that projections might be carried out using,
“such reasonable … methods as the Secretary of State or … the Committee considers appropriate”.
That also gives us flexibility. Clause 11(3) already states that:
“Nothing in this section is to be read as restricting the matters that the Secretary of State or the Committee may take into account”.
For instance, the committee might choose to take a different approach, or international reporting requirements may change. However, that would not preclude consideration of international aviation and shipping emissions in whatever way was considered appropriate.
I accept that the question of the methodology is very important. In his amendment, the noble Lord, Lord Taylor, invites the Government to publish the methodology. I hope that I can reassure him on this point. The UK Government already publish projections of future CO2 emissions for international flights from UK airports, and we intend to continue to do so. The previous reports were published in 2004 and 2007, and it is intended that further forecasts will be published on a regular basis.
In the other place, the Government made a commitment that we will publish at least one forecast of international aviation emissions for each budgetary period sufficient to inform decisions on setting carbon budgets, so the basis of our projections will be perfectly clear. As I have already indicated, the Committee on Climate Change will provide advice in relation to each carbon budget, and that advice is required to take into account all the factors listed in Clause 11 including, if Amendments Nos. 7B and 7C are agreed to, emissions from international aviation and shipping. The committee is required to publish its advice and, if they take a decision different to that recommended by the committee, the Government are required to explain why.
In setting out proposals and policies for meeting the carbon budget, the Government must explain how those proposals and policies affect different sectors of the economy. In conclusion, the Government have sought to ensure that this is a robust process, within the current uncertainties about developing a methodology, but ensuring that their approach is as transparent as possible. As I have already indicated, if the Government took a different decision to that recommended by the committee, they would have to publish the committee’s advice and they would have to explain why they would take a different decision.
My Lords, I thank the Minister for going through that in some detail, and I recognise his full sincerity in what he said. I am not going to press my amendment, but—I agree that the committee will do this—it is extremely important that the Committee on Climate Change will make sure that the reality of emissions from the sectors are fully taken into account, rather than just reportable numbers based on bunkering, or on other basic measures that are somewhat unsatisfactory at the moment. I beg leave to withdraw the amendments.
Amendments Nos. 7D to 7F, as amendments to Amendments Nos. 7B and 7C in lieu, by leave, withdrawn.
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 9. In speaking to this group, I shall also address Amendments Nos. 11, 17, 17A to 17C, 49 and 50.
There has been substantial discussion during the passage of the Bill about the importance of driving emissions reductions in the UK. The Government agree with this principle, and we have designed the Bill to provide a clear framework for action. Under the Kyoto protocol, developed countries have each been given a maximum allowance, or target, for greenhouse gas emissions over the period 2008-12.
As noble Lords know, the UK is one of the few countries that is on course to substantially beat its target, but we are keen to make reductions beyond those required under Kyoto, and over a longer timescale. That is why we have brought forward the Bill. In trying to achieve deeper cuts, we are also strong supporters of the EU Emissions Trading Scheme, which sets a cap, separate from the Kyoto limit, for emissions from energy-intensive industry. That cap covers about 50 per cent of carbon dioxide emissions in the EU and in the UK.
Both Kyoto and the EU ETS allow countries and participating companies, respectively, to buy credits from projects to reduce emissions in developing countries that are not subject to a cap. The use of these credits is itself limited in both cases. The idea is that emissions reductions can be made where it is most economically efficient to do so, but that reductions are still very much driven in participating countries too. By supporting projects in developing countries, we are also helping those countries, so that their growing economies are low-carbon from the start. Project credits are subject to close scrutiny by a UN board to provide maximum certainty that they represent genuine emissions reductions.
Our aim is that the Bill should drive emissions reductions in a way that is consistent with our participation in both Kyoto and the EU ETS. The Bill, with amendments made in the Commons, contains specific provisions that enshrine in law our intention to reduce domestic emissions and provide transparency about what actually happens.
Clause 34 requires the Committee on Climate Change to advise on the extent to which the carbon budget should be met by action in the UK and by the use of overseas credits. In addition, having set carbon budgets, the Government must develop and publish proposals and policies for meeting them. Amendment No. 9 proposes adding further transparency. It would require that the Government’s report on proposals and policies for meeting budgets, under Clause 14, must set out the implications of those policies for the relative balance between action to reduce UK emissions and the use of overseas credits.
In addition, Amendment No. 11 would introduce a new clause requiring that, in considering how to meet the long-term target and the carbon budgets, the Secretary of State must have regard to the need for UK domestic action on climate change. That is a clear legal requirement and statement of intent, which for the first time puts into domestic law the need for action here in the UK to reduce emissions.
Clause 25 would set in the Bill a minimum level of domestic effort in meeting budgets; in other words, a flat maximum for the use of carbon credits. Noble Lords will be aware that the Government do not support this approach. That is why we have proposed Amendment No. 17, which would delete Clause 25. Our view is that setting a binding limit in the Bill would send the wrong signal to our international partners about our support for a truly global carbon market. This is particularly important given the ongoing negotiations on a comprehensive, global, long-term framework for action, which we hope to agree at Copenhagen in December next year.
The Stern review showed that international emissions trading under binding caps plays a vital role in the global response to climate change. The noble Lord, Lord Stern, reaffirmed this during debates on the Bill earlier this year:
“Carbon trading has a very powerful role not only through cost but in that much broader and deeper context of putting a global deal together”.—[Official Report, 11/3/08; col. 1416.]
We consider that a more appropriate method for tackling this key issue would be the requirement to set a flexible, less rigid limit on the use of credits. Amendments Nos. 17A, 17B and 17C have been proposed to achieve this.
Amendment No. 17B would require the Secretary of State to set a binding limit on the use of carbon units for each budgetary period in secondary legislation, taking into account the views of the Committee on Climate Change on the appropriate balance between domestic and overseas effort. This limit would also have to be set in the context of the requirement, which Amendment No. 11 would introduce, to have regard to the need for UK domestic action on climate change. In proposing a limit, the Secretary of State would also have to consider each of the matters in Clause 11 which must be taken into account in coming to,
“any decision … relating to carbon budgets”.
With the exception of the first budgetary period, where the limit is to be set at the same time as the level of the budget, the amendment would require that the limit be set 18 months before the start of the budgetary period in question. This would ensure that an appropriate limit could be set once the level of the budget is known and the wider policy context, including the international situation, is clear. If a limit was set in the Bill, as in Clause 25 and Amendment No. 17D, further primary legislation would be required to adjust this if it was considered necessary. This might be in order to comply with or maintain consistency with the requirements of a future international agreement.
Clause 25 also creates difficulties with timing. Due to the way the limit is calculated under Clause 25, the limit could be confirmed as an absolute amount of carbon units only once net UK emissions for the previous budgetary period are known. The final level of net UK emissions for the previous budgetary period, and thus the level of the limit on carbon units, would not be known until 17 months into the budgetary period to which the limit applies. This would considerably reduce the transparency about the amount of credits that may be counted towards the net UK carbon account and would undermine the certainty for business, stakeholders and parliamentarians. By contrast, under the process we are proposing, the limit would be known before the relevant budgetary period begins. This will allow policies to be put in place to ensure that the limit is not exceeded.
Amendment No. 17B would also provide an important flexibility, which Clause 25 and Amendment No. 17D do not provide, that particular units may be excluded from counting towards the limit. This would allow, for example, the exclusion of carbon units arising as a result of UK companies’ participation in the EU ETS counting towards the limit. A limit on credits which affected the EU ETS sector by including emissions allowances sourced from participants in the scheme elsewhere in the EU would conflict with the UK’s commitment to this key policy measure. This approach would also undermine the economic efficiency of the trading scheme by placing further requirements on UK-based participants which were not imposed elsewhere in the EU. Such a limit would also cause a real likelihood that we would find ourselves with inconsistencies or a lack of transparency, which would go against everything we are trying to do in this legislation. In addition, given the clear links between this issue and carbon budgets more generally, I consider that the devolved Administrations should have a similar clearly defined role regarding setting limits on the use of carbon credits. Amendment No. 17B provides for that.
Amendment No. 17C would supplement the new clause proposed by Amendment No. 17B by specifying in Clause 27 that any carbon units in excess of the limit set may not be counted towards the net UK carbon account. This amendment effectively puts in place the binding nature of the limit for the purposes of carbon accounting. The final amendments in this group, Amendments Nos. 49 and 50, are minor and technical and relate to the purchase of carbon units by Her Majesty’s Government.
Moved, That the House do agree with the Commons in their Amendment No. 9.—(Lord Hunt of Kings Heath.)
My Lords, I will speak to my Amendments No. 11A, 17F and 17G. Much has been achieved during the passage of the Bill, not least in this House. It is now a considerably stronger and better Bill than when it first arrived here one year and three days ago today. The time taken to see the Bill through reflects the consideration given to the issues raised by it. In the pre-legislative process, the Joint Committee of both Houses chaired by the noble Lord, Lord Puttnam, provided a great platform for improving the Bill, but the area of domestic effort and the use of carbon units remain its Achilles’ heel. We in this House made a clear and positive decision to quantify the domestic effort but the Government reversed that decision in another place. If we want the Climate Change Bill to be a world-class act, we need clarity on this issue.
We on these Benches have long argued that this Bill represents a crucial opportunity for the United Kingdom to lead the world, not only in legislation but also in the jump to a low-carbon economy and all the benefits that this will bring to the first movers in a new era. The whole point of this Bill is to provide the market with the long-term clarity and certainty it needs to compete and be the best in the world in this new economy. Business is up for the challenge and it is encouraging to see that one of the most enthusiastic advocates of this issue is one of Britain’s largest energy companies, Scottish and Southern Energy. Why does it support it? It knows that the investment decisions it makes today will lock in the carbon footprint of its business for the next 40 years. It needs to know now what the rules of the game are before it spends billions investing in new infrastructure that will bring heat and power to millions of people in Britain.
Another reason why we consider this to be a vital issue is that relying significantly on emissions reductions overseas is frankly a bad habit for our economy to get into. We cannot allow low-carbon economies to develop elsewhere in the world while we are left behind in an indulgence-buying, carbon-emitting, old style economy. It may be cheap to do so now when the carbon price is still relatively low, but this will become an extremely expensive habit if and when the carbon market does what it should and a tonne of CO2 becomes far more expensive. All the more reason not to lock in a carbon-intensive infrastructure now when we know it will become more expensive in the future. We would literally be asking our children to pay expensively tomorrow for our cheap and gluttonous extravagance today. Such a course would do little to show the rest of the world that the UK is serious about moving to a low-carbon economy with all the benefits for innovation, employment and new business opportunities that this will bring.
We also recognise that it is not necessarily possible to find an ideal or correct balancing percentage between domestic and non-domestic effort. The noble Lord, Lord Teverson, has tabled an amendment suggesting that the division between the two should be 50:50, whereas the original Clause 25, as agreed in this House, was for 70 per cent domestic and 30 per cent non-domestic effort. For this reason we have considered it important for the Committee on Climate Change to be consulted on this issue, as detailed in Commons Amendment No. 11. We all know that the committee as defined in the Bill will have expertise in far more than climate science. According to Schedule 1, the committee will also have expertise in, among other areas, business competitiveness, economic analysis and forecasting, and emissions trading. It would then seem only sensible that we consult this esteemed group on this vital question, just as we considered and will continue to consider its advice on the 2050 target and the setting of carbon budgets.
I am pleased to see that the Government have now decided to put a requirement on the Secretary of State to take the views of the independent committee into account, as clarified in the government amendments, and I thank the Minister for the way in which he explained that in moving the amendment. We greatly welcome the Government’s amendment to Amendment No.17, which shows that they have reconsidered their actions in the Public Bill Committee in the other place in removing what was then Clause 25. The Government’s new additions after Clause 11 will clearly go a long way to address our concerns over the limit set on the use of carbon units, but we think it is worth while to press the Minister on his definition of “carbon credits”. The Government’s amendment would allow limits to be set on the use of all carbon units, meaning the clean development mechanism (CDM), the joint implementation (JI) credits, and the EU allowances (EUAs). The subject matter is awash with acronyms but we shall try to keep our heads above water. To be effective in ensuring that the UK moves to a low-carbon economy, any limit needs to apply to all carbon units. However, the latest signals from the Government suggest that EU allowances are going to be exempt from this list, which will be limited to CDM and JI credits. Can the Minister tell the House whether that is the case, and if so, why?
The Minister will know that if that were to happen, the UK could simply buy more EU allowances from other EU countries. Those countries would simply import more CDM to compensate. It would be a form of carbon unit laundering, purchasing EUA credits from other EU states which replace the EUA credits that we have bought with more CDM credits, which they can then purchase from outside the European Union Emissions Trading Scheme. Can noble Lords be assured that the amendments which the Government propose will drive the de-carbonisation of our economy, particularly our power sector, which the noble Lord, Lord Turner, who unfortunately is not in his place, recently recommended was so vital?
Finally, I should be grateful if the Minister could clarify how the Government intend to account for the emissions from sectors under the EU ETS, which is a complex but critical issue. A recent consultation on carbon accounting from the Department of Energy and Climate Change—we on this side of the House welcome the creation of the new department—makes it clear that the Government intend to use the UK’s Emissions Trading Scheme cap for the first carbon budget period, which runs from 2008 to 2012. However, beyond 2012, the whole structure of the EU ETS will be radically transformed. Quite simply, Europe is moving away from an ETS cap, set at national level, and is moving towards setting a single, Europe-wide cap. While that has many merits it creates a very significant problem for accounting for the ETS traded sectors under the Climate Change Bill, as there will no longer be such a thing as a UK cap. DECC’s consultation acknowledges that there is an issue, but offers no solution to the problem. Can the Minister explain how emissions from the EU ETS sectors will be accounted for in carbon budgets after 2012?
There is also a risk that under the Bill sectors outside the ETS—for example, transport, building stock, and non-energy intensive industry—may be expected to take on more ambitious measures to compensate for a weak EU-wide cap on the ETS sectors. Can the Minister clarify what options the Government are considering which would allow the UK to set a tighter carbon budget for the ETS sectors, particularly in the power sector, than would be implied by the cap set at EU level? I look forward to hearing the Minister’s assurances on these critical issues.
My Lords, I wish to speak to Amendment No. 17D as an amendment to Amendment No. 17A. It says here that I have spoken to this with Amendment No. 9, but I am not sure about that. Clearly, this is a core area of belief and it is what the Bill is about. Should there be domestic targets or should this be written in the context of the wider world?
Before this debate, I would not have thought that the noble Lord, Lord Lawson, would be my major witness on how the targets for the Bill could be avoided. The minor ways are the banking and borrowing provisions which allow carbon output and accounting to be pushed from one period to another—all those fudge factors are in there at the moment—and the major one is offshoring. I am sure that, in the summer, the Minister saw a Defra and Stockholm Environment Institute report called Development of an Embedded Carbon Emissions Indicator. It is an excellent document. It asks what the carbon content of our exports and imports is. Effectively, it is asking what the carbon consumption of the United Kingdom is over time, as opposed to our carbon production. Of course, carbon consumption in many ways is a better economic indicator of carbon than production—what the UK consumes rather than just produces and perhaps exports.
That report highlighted the fact that currently we consume something like 37 per cent more carbon than we produce and that gap is getting broader. Why? It has everything to do with the global economics of trade, in that many of our carbon-intensive industries are going to the developing world, while we concentrate on and expand our economy in terms of services and low-carbon technologies. That is not good news. It says that as a country we are responsible for far more carbon emissions than we report, but we are able to offshore them. Ironically, we tut-tut at China for its increasing emissions, but a large proportion of those emissions are ones which we have exported.
I have tried to get to the bottom of this and to put in more normal language what we mean by trying to look at the domestic production of carbon in this Bill rather than the broader carbon budget. One could illustrate that by saying that perhaps, later this evening, I will invite the Minister to the pub next door and in there we will see two fat guys discussing how to lose weight. We might listen in to their conversation and they might challenge each other to lose weight. They might say, “We are both overweight, which is bad for us and it is not government policy either, so let's commit to losing five stone each within a year with the prize of a bottle of champagne”. Having listened to that, we think we will go back, in a year’s time, to see whether the task has been achieved. In a year’s time, we go to the pub again and one of the guys is substantially thinner but the other one is exactly the same. The thin one says, “I have achieved my target; I have lost five stone so I can have my bottle of champagne”, but the other guy says, “I have won as well and I claim my bottle of champagne because I have lost five stone”. The thin guy will say, “I am sorry; you look exactly the same weight as before”, to which the fat guy will say, “No, it is quite all right, I paid my brother to lose five stone and I have a certificate from his doctor to tell you that he lost five stone, so I win a prize as well”.
The Minister would say that that is absolutely all right because in terms of the nation's health, one person losing five stone is as good as anyone else losing five stone, but everyone in the pub will know that that individual is a fraud and I believe he would be treated with derision for having delegated his healthcare. That is exactly the same as how we look at the UK economy in regard to carbon. It is no good saying that we will delegate this task. Not only have we delegated our carbon-intensive production to the developing world, but we will be even cleverer than that now and will let the developing world do the carbon reductions for us; we will claim them and we will feel good while it has to do the heavy lifting. Somehow that is not right; there is a strange logic there.
That is why we on these Benches are still unhappy that there is no commitment in the Bill to domestic carbon reduction in the economy. I accept that the methodology used to move forward and the Conservative amendments are much better than the Bill was when it left the Commons, but there is an important issue about leadership here. Whatever we say as a nation, whatever the Government say and whatever is said about leadership, the gaping hole on the face of the Bill regarding finding someone else to do our cleaning up potentially wrecks that leadership and that moral authority.
I tabled an amendment which suggests that we move from 70:30, as the ratio was, to 50:50. I will not move that amendment because 50:50 is still derisory. I am glad, however, that the Government have understood that there is a big issue here and it is one that they have tackled to a degree. I have faith in the climate change committee and I hope it will come forward with good logic and tight targets. This is one area of the Bill, however, where I believe the Government have a major problem in their authority and global leadership.
My Lords, I, too, wish to speak on the subject. This evening marks the final phase of a legislative journey that for me started 18 months ago when I was asked to chair the joint parliamentary committee scrutinising this Bill. In another sense, it also represents the starting point in the far longer and more difficult slog of implementing the Bill’s best intentions.
This Bill will only be the first piece in the legislative puzzle that is likely to be required if we are to achieve our aim of a sustainable society and a sustainable planet. I have little doubt that by 2020 this House will be debating the pros and cons of what for the present I will describe as personal carbon allowances. After a great deal of argument, the House will pass some tentative legislation to this effect. I hope that it will not be so tentative that it will fail to achieve the result that by then will be badly needed.
If today I am able to give this Bill eight and a half out of 10, it is more to do with the ambitions it sets for itself than the rather limited means it has chosen to achieve them. On more than one occasion, I have warned of the possibility of this Bill morphing into a carbon trading Act. I am sorry to say that, despite the best possible intentions, this is largely what has happened.
Although a great deal could be said on this subject, I will restrict myself to addressing the broad thrust of this group of amendments. Why do I remain intransigent on the subject of a cap on the purchase of overseas carbon credits in compensation for domestic emissions? There are two principal reasons. First, I reject the simplistic economics that insist that a unit of carbon saved is the same wherever in the world that saving comes from. On a purely like-for-like basis, that may be true but the situation is far more complicated and rather more interesting than that. A unit of carbon purchased from a developing country has a tangible benefit both in its own terms and as a means of transferring capital from what for convenience I will call the rich north to the impoverished south. It is, however, solely a one-for-one transaction, having little or no afterlife or long-term value. A domestic carbon saving, on the other hand, can well be a precursor, as we have seen with recycling, to permanent behaviour change, leading to the saving of many carbon units. So, instead of one for one, or like for like, it becomes one for many. This should not be allowed to become a zero-sum game.
I was interested to hear the noble Lord, Lord Lawson, because in one respect, and only one respect, he is absolutely right. The notion of this Bill as a carbon trading Act is a real danger. The same fertile imaginations that brought us our present credit crunch are without doubt sharpening their swords to take a slice of the secondary trade in carbon emissions. It will only be a matter of time before one of our national newspapers blazons a headline, “Carbon trade scam revealed”. I urge the Government to look carefully at what they are setting in train. The conditions exist for something frightening to occur.
The noble Earl, Lord Onslow, who is not in his place, said he believes people will look back on this Act—as it will be then—and think we were a bunch of “arses”; I think that was his word. I have made a promise to myself that I intend to bind all contributions to this Bill in a leather book, give it to my great-grandchildren and ask them to read it, say every five years, and decide for themselves who were the greater arses during the passage of this Bill.
The second reason for my intransigence is well rehearsed. The Kyoto Protocol, of which we were an early signatory, is absolutely clear that purchased carbon credits will be supplemental to domestic savings. No amount of ministerial tautology—
As I was saying, no amount of ministerial tautology can convince me that “supplemental” means anything other than less than the principal sum, which this amendment generously concedes might be up to 50 per cent.
The full implications of this Bill will over time ask a great deal of every citizen in this country. For that reason alone, it must start its legislative life by being unblinkingly honest. Despite the many problems this amendment causes—over the past few months, officials have tortuously tutored me in all of them—it will be a great mistake to allow this piece of legislation to pass, leaning as it does on what to the man or woman in the street would appear to be a rather convenient piece of legal juggling, no matter how justified.
The Library of the House checked the Law Reports on the use of the word “supplemental”. I am satisfied that my understanding of the word is the one the courts use.
To that same person in the street “supplemental” will continue to mean “supplemental”. Until the forthcoming Copenhagen summit decides to remove that injunction, or at least find another way of describing it, no honeyed words from my noble friend on the Front Bench are likely to change my view that this is a disproportionately important matter. It is disproportionately important because this is all about trust. If Governments have learned nothing else in these past few months, it should have been that trust is not just one factor in their relationship to the electorate; it is the whole ball of wax.
The Government sit on a knife edge. If trusted, they might achieve a great deal. If they allow that trust to slip, however, the abyss beckons.
My Lords, it is a pleasure to respond to this debate. May I say to my noble friend Lord Puttnam, who is agonizingly close to missing his aeroplane, that it was a privilege to hear him speak. It is interesting to hear what he will say to his grandchildren about this Bill. I was trying to decide with the excellent team of officials who have formed the Bill team over a long time what comparative piece of legislation one could compare this Bill to. The best I can come up with is the 1948 NHS Act—a Bill of immense importance which, 60 years later, is still relevant.
I accept that the Bill has been improved enormously during the passage through your Lordships’ House and another place. I agree with my noble friend that this is a question of trust because this is partly about legislative requirements and partly about leadership. It is about leadership in this country—Government and Parliament showing how important it is to deal with climate change—but also about giving the UK a solid basis from which to negotiate internationally.
I disagree with the general sentiments of my noble friend and the noble Lords, Lord Taylor and Lord Teverson, on this matter. Before I come to the amendment, it is important to reflect that the critical requirement is on the UK Government that net emissions must be reduced by at least 80 per cent by 2050. The Government must set and meet five-year carbon budgets starting from this year. It also requires that the Secretary of State, in carrying out his duties, must have regard to the need for UK domestic emissions reductions. Government Amendment No. 17B would require a limit to be set for each budgetary period on the number of overseas credits that can be purchased to meet the budget, and the Committee on Climate Change will be advising on the appropriate balance between domestic effort and the use of overseas credit.
We think that we have listened carefully to the principal points made in the debate, but as I have explained, the government amendments will provide the flexibility to exclude credits of a certain description that we believe to be essential to preserve the integrity of the EU ETS.
My Lords, I do not mean to suggest that in moving his amendments, the noble Lord is seeking to undermine the integrity of the EU ETS. Our fear is that that might be an unintended consequence—I put it that way—or certainly in relation to how it might be seen internationally. We are worried about the impact in terms of UK support for the EU ETS. We might disagree, but I would not want to suggest that the noble Lord himself in his amendments is seeking to undermine the EU ETS, and indeed I have taken on board his comments about ways in which the scheme should be regulated more rigorously. I hope that I have clarified the issue up to a point.
We do not want to penalise companies which decide that it is more cost-effective to generate energy in the UK than in other EU countries, resulting in UK emissions going up, but EU-wide emissions coming down. I want also to address a very important point made by noble Lords. The use of uncapped credits by the EU ETS needs to be carefully controlled. We are in the middle of negotiations on phase 3, but my understanding is that the Commission is proposing that there should be no new access to the clean development mechanism credits in this phase. Although we do not want to legislate in an area that we fear might be seen to undermine our support for the EU ETS, we recognise that additional measures are needed in the traded sector.
I understand the points made by noble Lords about the probity, if you like, of the trading scheme. The noble Lord, Lord Taylor, asked how EU ETS credits will be accounted for after 2012, and reflected that we have already acknowledged that the accounting process will become more complex in phase 3; that is, post-2012. The way to consider how best to link the Bill to phase 3 is once the EU negotiations have concluded, but it is a matter to which we will need to pay close attention. Having expressed his support for the noble Lord, Lord Teverson, the noble Lord, Lord Lawson, has not stayed to develop the theme he introduced in his speech at the beginning of our debate. However, it is clear that we need to do all we can to ensure the integrity of the credits used. We want to do all we can to ensure that the process is transparent and robust. To that end, we will need to keep on monitoring and working internationally to ensure that that is so.
In answer to the noble Lord, Lord Taylor, on what the carbon units will be, in the consultation we are currently undertaking on carbon accounting regulations, it states:
“We propose to count the following as carbon units: assigned amount units, certified emission reductions for the clean development mechanism, removal units, emission reduction units and the European unit allowances for the EU ETS”.
I am happy to provide further information on this if the noble Lord requires it.
We then come to the substance of the debate. The noble Lord, Lord Teverson, tempted me down to the pub to witness two thinnish men observing two fat men drinking. He thought that it simply is not acceptable that even though the fat of the nation had reduced by the relevant amount, one of the fat chaps had said he was going to reduce his weight, but in the end did not do so. The noble Lord found that to be a problem. He knew that my response would be that collectively it is all right because the overall fat of the nation was coming down, and he knows that I will answer by saying that ultimately what counts is reducing emissions generally worldwide. We believe that through the enactment of this Bill and through the hugely challenging 80 per cent target, we are demonstrating the kind of leadership that both he and my noble friend Lord Puttnam require.
It is also fair to point out, and it has been acknowledged, that the last thing the Government want to do is say, “It’ll be all right because we can simply trade away the issues we need to tackle in this country”. I think that the Government have clearly signalled that they have done and will continue to do all they can to reduce emissions in this country. The amendments I have tabled articulate that aim and make it clear that the Committee on Climate Change will ensure that these matters are brought to the attention of the public and Parliament. However, in the end we worry about the impact of the amendments tabled by noble Lords on the EU ETS, and that is why we think, after a great deal of consideration and debate in the other place, along with the amendments being brought forward, that we have achieved the right balance that allows the necessary flexibility within the context of an utter determination for us overall to meet the 80 per cent target.
On Question, Motion agreed to
Amendment No. 10
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10. I have spoken to this amendment with Amendment No. 1.
Moved accordingly, and, on Question, Motion agreed to.
Amendment No. 11
11: Insert the following new Clause-
“Duty to have regard to need for UK domestic action on climate change
(1) In exercising functions under this Part involving consideration of how to meet-
(a) the target in section 2(1) (the target for 2050), or
(b) the carbon budget for any period,
the Secretary of State must have regard to the need for UK domestic action on climate change.
(2) “UK domestic action on climate change” means reductions in UK emissions of targeted greenhouse gases or increases in UK removals of such gases (or both).”
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 11. I have spoken to this amendment with Amendment No. 9.
Moved, That the House do agree with the Commons in their Amendment No. 11.—(Lord Hunt of Kings Heath.)
[Amendment No. 11A, as an amendment to Amendment No. 11, not moved.]
On Question, Motion agreed to.
Amendments Nos. 12 to 16
17: Leave out Clause 25
17B: Insert the following new Clause-
“Limit on use of carbon units(1) It is the duty of the Secretary of State to set a limit on the net amount of carbon units that may be credited to the net UK carbon account for each budgetary period.
(2) The “net amount of carbon units” means-
(a) the amount of carbon units credited to the net UK carbon account for the period in accordance with regulations under section 27, less(b) the amount of carbon units debited from the net UK carbon account for the period in accordance with such regulations.(3) The limit for a budgetary period must be set-
(a) for the period 2008-2012, not later than 1st June 2009, and(b) for any later period, not later than 18 months before the beginning of the period in question.(4) The Secretary of State must set a limit under this section by order.
(5) The order may provide that carbon units of a description specified in the order do not count towards the limit.
(6) An order under this section is subject to affirmative resolution procedure.
(7) Before laying before Parliament a draft of a statutory instrument containing an order under this section in relation to a budgetary period, the Secretary of State must-
(a) take into account the advice of the Committee on Climate Change under section 34(1)(b) (advice on use of carbon units) in relation to that period, and(b) consult the other national authorities.”
17C: Page 14, line 20, at end insert-
“( ) The net amount of carbon units credited to the net UK carbon account for a budgetary period must not exceed the limit set under section (Limit on use of carbon units) (limit on use of carbon units) for the period.”
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 17 and do propose Amendments Nos. 17B and 17C in lieu of the words so left out of the Bill. I have spoken to these amendments with Amendment No. 9.
Amendments Nos. 17D to 17G, as amendments to the Motion, not moved.
Moved accordingly, and, on Question, Motion agreed to.
Amendments Nos. 18 to 21
Amendments Nos. 22 to 24
My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 22 to 24. I am most grateful to the Deputy Speaker for his professional guidance through the intricacies of this stage of the Bill. In moving these amendments, I shall speak also to Amendments Nos. 26, 27, 29, 30, 32 to 39, 53, 55, 60, 65, 69, 70, 72, 73 and 75. The key amendments in this group form a comprehensive package of government amendments introduced in the other place to clarify the role of the adaptation sub-committee of the Committee on Climate Change. These amendments also concern the formal vesting date of the Committee on Climate Change, the date by which it is to provide formal advice on the 2050 target and the level of the first three carbon budgets.
We listened carefully to the arguments put forward in this House about adaptation. We fully agree that expert advice and scrutiny of how the Government assess the risks and implement their adaptation work programme are important and useful, and we believe an adaptation sub-committee of the Committee on Climate Change could have a potentially useful role in this regard. However, we believe that the Committee on Climate Change’s role on adaptation should be consistent with its work on mitigation; that is, giving technical advice and analysing and scrutinising progress. We think it should have a slightly different role from that originally proposed by this House. Our amendments propose that it should provide technical advice to the Government and the devolved Administrations on the UK risk assessment and progress reports to Parliament about the UK Government’s adaptation programme.
As we propose new adaptation functions to the work of the Committee on Climate Change, we have made small amendments around the provision of information, guidance and directions relating specifically to the committee’s new adaptation functions. We also propose to change the date by which the Committee on Climate Change’s advice is required and the commencement date for Part 2 in order for the committee to be brought to life and formally give its advice on 1 December. There are also a small number of minor and consequential drafting amendments in this group. I hope noble Lords will accept that this has been a positive response to debate in your Lordships' House.
Moved accordingly, and, on Question, Motion agreed to.
Amendments Nos. 25 to 39
My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 40 to 42. I shall speak also to the other amendments in this group and address Amendments Nos. 43A and 43B, which have been tabled in response to the clear views expressed by the Delegated Powers and Regulatory Reform Committee in its 15th report of the 2007-08 Session.
The purpose of the first group of amendments is to achieve a significant reduction in the number of single-use carrier bags distributed in the UK. More than 11 billion single-use carrier bags are distributed each year. They have a direct environmental effect as a particularly visible form of litter when discarded irresponsibly, through the risk they present to marine life and the emissions that they generate from transport and waste management. However, their disposable, easily-substituted nature also makes them an iconic symbol of our throwaway society. By taking action on single-use carrier bags, we hope to catalyse other beneficial behaviour changes, including an increase in public waste awareness and greater participation in recycling by consumers.
As announced in the Budget, we wish to take enabling powers to require retailers to charge for single-use carrier bags. However, before these powers are exercised, we want to give retailers the opportunity to pursue, on a voluntary basis, a significant reduction in the number of bags they distribute. We believe that we could achieve at least a 70 per cent reduction in the number of single-use bags distributed if a charge were introduced. The Government would be prepared to impose a charge if a similar reduction could not be achieved through voluntary action.
The effect of the new clause introduced by Amendment No. 43 is to introduce a new schedule conferring powers on the relevant national authorities in England, Wales and Northern Ireland, but not Scotland, as requested by the respective devolved Administrations, to make regulations about charges for single-use bags. The specific powers are contained in the new schedule, which Amendment No. 78 introduces. It is split into three parts covering powers to require a charge for bags, powers to create civil sanctions in respect of sellers who breach such regulations and procedural matters.
Part 1 of the new schedule provides powers to make regulations about charging for the supply of single-use carrier bags. It provides for regulations to: require sellers of goods to charge for single-use carrier bags supplied at the place where they are sold or for the purpose of delivering goods; define sellers of goods; define a single-use carrier bag; specify the minimum amount that sellers must charge for each single-use bag; appoint an administrator to administer the provisions made by regulations and confer appropriate powers and duties on him, including enforcement powers and duties; and require that records are kept of the amounts raised by the charge and the uses to which the proceeds are put. We will consult formally on these points of detail, prior to the introduction of secondary legislation. The first set of regulations will be subject to the affirmative resolution procedure.
Part 2 of the new schedule contains provisions about civil sanctions. The provisions in Part 2 follow the model used in the Regulatory Enforcement and Sanctions Act 2008. Of the possible sanctions in that Act, we are proposing fixed monetary penalties, variable monetary penalties and compliance notices only. Administrators will be able to choose which sanction is appropriate on a case-by-case basis. We will not be creating any criminal offences and have proposed that any fixed penalty fines in respect of breaches of the proposed bags regulations be kept to a minimum of £5,000. There is, however, provision to require retailers to publicise the fact that they have breached the regulations.
At this stage, I should like to bring to the attention of the House the government amendment to Commons Amendment No. 43, Amendment No. 43B, which ensures that any future regulations concerning the levels at which variable and non-compliance penalties are set will be subject to the affirmative resolution procedure. That was recommended by the Delegated Powers and Regulatory Reform Committee. The Government are grateful for its advice and are seeking to comply with it.
Part 3 of the new schedule provides for the regulations to be made by a single national authority or by two or more national authorities as joint regulations. There could therefore be a single set of regulations covering England, Wales and Northern Ireland if the three authorities agree. It also disapplies the hybrid procedures to any draft regulations made under the powers contained in the new schedule as we are providing for the power to name specific retailers who will be subject to the charge. The same approach is taken in relation to the waste reduction scheme provisions in Clause 70(5). Amendments Nos. 52, 54, 56 to 59, 61 to 64 and 67 are consequential on the new clause and schedule.
By tabling these amendments, the Government are responding to clear, strong public demands for action on single-use carrier bags. These enabling powers provide a powerful lever in our continuing efforts to phase out single-use carrier bags in favour of longer-lasting, more sustainable alternatives.
The other amendments in this group—Amendments Nos. 40, 41, 42, 66, 77 and 80—relate to powers to allow for up to five pilot waste incentive schemes in England, as set out in Part 5. Amendment No. 41 ensures that the Secretary of State may exercise powers to make subordinate legislation or issue guidance under the waste reduction provisions separately to the designation of a specific pilot area. This ensures that the Government can provide a clear framework for pilot authorities wishing to pilot a scheme before they submit proposals. Amendment No. 40 is a technical amendment consequential on Amendment No. 41.
When the House previously discussed the Bill, my noble friend Lord Rooker, who was the Minister in charge at that point, mentioned our intention to bring forward an amendment to clarify that a local authority’s duty to arrange for collection of household waste in England is discharged by collecting waste that is presented for collection in the way specified in a Section 46 notice to residents; for example, in a specified receptacle. Any waste left in contravention of a Section 46 notice need not be collected. Once a local authority has informed residents of how they should present their waste for collection—for example, by putting it in a bin—the authority need not collect any waste left lying outside that bin, the so-called side waste. Amendment No. 42, which would apply to all waste collection authorities in England and Wales, seeks to achieve this. As explained, such policies have been successfully operated by a significant number of authorities, with the support of their communities, using powers conferred by the Environmental Protection Act 1990. As part of a good overall service, they have helped householders to understand how much waste they produce and encouraged them to increase the amount that they recycle. In line with good practice, the Government expect that authorities will use all the powers available to them proportionately and sensibly, hand in hand with effective communications and support for residents.
We do not believe that the sensible use of these powers should lead to uncollected rubbish building up in local communities. It is important to note that all authorities will continue to have to meet existing requirements to collect household waste. In addition, local authorities have a duty, under Section 89 of the Environmental Protection Act 1990, to keep land under their control clear of litter and waste. This approach is not a new one; Defra set out its position in a letter to local authorities in August 2005, but it has not always been clearly shared by all authorities, which is why it will be helpful for local authorities to have a single, clear point of reference in legislation.
Amendment No. 66 is consequential on Amendment No. 42. Amendment No. 77 would ensure that the power to allow waste collection authorities to require an occupier to place waste for collection in receptacles identified by specified means—for example, by tags or stickers—is available only to those authorities in England which are operating a waste reduction scheme in their area. Finally, Amendments Nos. 80 and 81 would amend the Long Title of the Bill to reflect the addition of the subject matter introduced by Amendment No. 42. I clarify one point that I made earlier about fixed penalties for breaches of proposed bags regulations. I stated that the penalties would be kept to a minimum of £5,000. This was a slip of the tongue; I meant a maximum of £5,000 and apologise for that error. I commend the amendments to the House and beg to move.
Moved, That the House do agree with the Commons in their Amendments Nos. 40 to 42.—(Lord Davies of Oldham.)
My Lords, before I speak to these amendments, I declare an interest as a co-chairman of the Associate Parliamentary Group on Strategic Resources. This used to be called “Waste”, so it is connected to this topic. I am happy to support this amendment and I thank the Minister for introducing this and the other amendments within this group. My party supported the inclusion of Schedule 6 in Committee in the other place. Energy costs and climate change notwithstanding, we consider it vital to act on the scourge of plastic bag litter in our country. The single-use carrier bag is an icon of our throwaway society. On a journey through the countryside, there are few things more infuriating than seeing plastic bags stuck in trees and hedgerows. They cause environmental damage, endanger our wildlife and pollute our seas and waterways. This country currently uses more than 13 billion single-use carrier bags each year; that is more than 500 bags a year for every household in Britain. We agree with the Government that something must be done to reduce this figure. I am happy to support Commons Amendment No. 43 and emphasise a new imperative to see waste as a strategic resource.
My Lords, I welcome the plastic bag initiative, whether it is enacted or whether persuasion works on retailers. Over the time that I have been a Member of the House, we have heard many Questions in the Chamber about plastic bags. A village called Modbury in south Devon, with which I have been associated for much of my life, was, I think, the first village or settlement in the country to ban the plastic bag within a community. It shows how such matters can mushroom. I very much welcome the amendments.
On Question, Motion agreed to.
Amendment No. 43
43: Insert the following new Clause-
“Charges for single use carrier bags(1) Schedule (Charges for single use carrier bags) makes provision about charges for single use carrier bags.
(2) In that Schedule-
Part 1 confers power on the relevant national authority to make regulations about charges for single use carrier bags;Part 2 makes provision about civil sanctions;Part 3 makes provision about the procedures applying to regulations under the Schedule.(3) In that Schedule “the relevant national authority” means-
(a) the Secretary of State in relation to England;(b) the Welsh Ministers in relation to Wales;(c) the Department of the Environment in Northern Ireland in relation to Northern Ireland.(4) Regulations under that Schedule are subject to affirmative resolution procedure if-
(a) they are the first regulations to be made by the relevant national authority in question under the Schedule,(b) they contain provision imposing or providing for the imposition of new civil sanctions, or(c) they amend or repeal a provision of an enactment contained in primary legislation.(5) Otherwise regulations under that Schedule are subject to negative resolution procedure.”
43B: Line 21, after “sanctions,” insert-
“( ) they increase the amount or maximum amount of a monetary penalty or change the basis on which such an amount or maximum is to be determined,”
My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 44 to 46. I shall speak to the other amendments in the group. I will also discuss Amendment No. 48A, which is an amendment to Amendment No. 48. The amendments in this group give effect to the Government’s proposals for a new community energy-saving scheme. Amendments Nos. 44, 68, 79 and 82, if agreed to, will make the changes necessary to enable the Secretary of State to bring forward secondary legislation setting out the detail of the new scheme. The community energy-saving programme was announced by the Prime Minister in September as part of the home energy-saving package. It forms a central plank of the Government’s new proposals to help households save energy and money, which is more essential than ever at this time of high energy prices. The precise arrangements will be subject to extensive consultation and we do not yet have fixed ideas on all aspects of the programme. It might help if I mention some of the key features that would be included in the subsequent secondary legislation, as we envisage them.
The programme will be based on the model of the existing carbon emission reduction target, under which we set the energy companies’ targets for promoting energy efficiency in households. In this case, we will be looking specifically for a community-focused approach. We want to see the programme delivered, as far as possible, through the partnership of energy companies, local authorities, community groups, third-sector organisations and other bodies. Experience suggests that it is when all the key local players work together and deliver action on a street-by-street and house-by-house basis that communities and individuals respond best to the help available. The new scheme will be funded and delivered both by the energy suppliers and the electricity generators. The generators are not, at present, covered by the carbon emission reduction target, but we believe that all companies in the energy market now have a responsibility to help those in need of support. We will set out more precise detail as we move towards the stage of public consultation. I hope I have been able at least to give an outline of an important and imaginative scheme to deliver assistance to households at a local level, involving the co-ordination of partners.
I turn to Amendments Nos. 45, 46, 47 and 51, which concern corporate reporting on greenhouse gas emissions. We agree with those who have spoken earlier in this House and with opinion expressed in the other place on the need to find the right way to ensure that businesses play their part in the nationwide effort to reduce emissions. We propose our amendments in that context.
My Lords, I will come to that point as I deliver my argument, because there is a full context for that activity. The noble Lord has raised an extremely important point but, if I may, I shall describe how we envisage the whole structure working. I may be able to answer him more precisely within that framework.
We want to provide as much certainty as possible for the business community—the noble Duke/Earl is reflecting uncertainty—about the levels. I understand the point that he is making. That is why we are concerned to resolve that and a number of other points. He will recognise that we want to show leadership internationally in this area for the business community. The amendments are therefore designed to reinforce the Government’s commitment to the importance of corporate transparency, and to taking forward the process as quickly as possible.
Amendment No. 45 would require the Secretary of State to introduce guidance on corporate reporting by October 2009. That will provide a structure to help companies and others to report their emissions where they choose to do so. We will consult on the guidance next year, working closely with key stakeholder groups, including the CBI, to ensure that it fully reflects current best practice and is practicable for businesses to work with.
Since we last considered the issue of corporate reporting in this House, we have looked a little further at the evidence of costs and benefits of requiring all large and medium-sized companies to report on their greenhouse gas emissions. Our initial analysis shows that, although companies which voluntarily measure and monitor their greenhouse gas emissions may be more likely to manage them effectively, there is no settled evidence that being required to report on emissions would drive emissions reductions.
More work clearly needs to be done to clarify the situation. Amendment No. 46 would commit the Secretary of State to review the contribution of mandatory corporate reporting to achieving the UK’s climate change objectives, and report back to Parliament by December 2010 at the latest. The review will allow us to assess the current legislative and voluntary requirements and design a targeted reporting requirement that addresses those gaps proportionately.
Of course, I am strongly mindful of the view originally taken by this House on the role of mandatory corporate reporting. Amendment No. 47 would require the Government to introduce mandatory reporting by April 2012, or to lay an explanation before Parliament as to why they have not done so. That would make clear in the Bill our intention to move towards mandatory reporting of emissions, provided that we can be sure that it is environmentally beneficial and cost-effective.
Setting a deadline of 2012 to establish a standard will allow time for businesses to prepare and for proper consideration of the issues by government and stakeholders. We consider that it is important to include a deadline, as that provides greater certainty to businesses and stakeholders. I believe that the proposals are both ambitious and proportionate, while containing important flexibilities. For that reason, I consider that Clause 80, which was proposed in this House, is no longer necessary. Amendment No. 51 would remove it from the Bill.
I now turn to Amendments Nos. 48 and 48A and 48B. Amendment No. 48B is a re-drafted version of Amendment 48. I propose that Amendment No. 48 should be disagreed to, and that the new clause in Amendment No. 48B should be added to the Bill in lieu.
Amendment No. 48B would require the Treasury, acting through the Office of Government Commerce, to produce an annual report on progress made towards improving the efficiency and sustainability of the government estate. The report will specifically cover the steps taken to reduce the size of the civil estate; to achieve further efficiencies from the Government’s existing buildings; to improve the sustainability of those buildings; and to ensure that new buildings procured are in the top quartile of energy performance.
It is right that the Government lead by example. We must get our own house in order if we expect others to take the necessary action to tackle climate change. That is why we are committed to taking action in this area, which builds on other commitments we have made on improved sustainability. For example, government departments will be included in the carbon reduction commitment, which will incentivise the introduction of energy efficiency measures and the occupation of more energy-efficient office space.
My Lords, we want the Government to lead by example in tackling the issues involved in the exercise. That is why, as the noble Lord will appreciate, our main energies will be devoted towards making sure that government offices and buildings hit the targets.
The question of whether there may be an aspect of trading is a good try, but I will not be called on that question at the moment. If the noble Lord is saying that it would not look very good if the Government purported to set an example of direct action and then found other ways to solve the problem, it is quite clear from our amendments that we want to rest responsibility on government departments to shape up to those challenging objectives, because of the crucial issue of leading by example. The plastic bag issue is the same. We all recognise that plastic bags are not the only form of waste over which we need to get control, but they are one on which we can demonstrate that we set an example that we expect others to follow.
We have put in place robust mechanisms to provide a strong role for the Office of Government Commerce, as the government office which leads on improving the efficiency and sustainability of the government estate and operations. The procurement of new energy-efficient buildings is just one element of the strategy to reduce energy consumption, but we are fully committed to procuring buildings in the upper quartile of energy performance. I am that sure noble Lords will recognise the seriousness of our intent. To allow the provision to be kept relevant and up-to-date, we have also provided an order-making power so that descriptions of buildings covered by the report can be changed over time. Any order would be subject to debate in both Houses.
The final amendment in this group, Amendment No. 75, makes a small change to the trading scheme powers in Schedule 2, by ensuring that trading scheme regulations may make provision to levy charges from third parties, as well as participants, for the cost of operating the trading scheme. We want third parties to have access to trading schemes, as that will ensure that a deeper and more liquid market may develop than would be the case if only participants were allowed to trade. In the absence of the amendment, third parties would be able to take part in a scheme’s trading element but there would be no express power to levy charges from them towards the cost of operating a scheme. We do not think that desirable. There is a clear, practical need behind this adjustment, which is to ensure equitable treatment of both trading scheme participants and third parties.
In moving the amendment, I am conscious of the point that the noble Earl, Lord Montrose, identified—
My Lords, the noble Duke. That is at least the second time that I have made that catastrophic error; I do apologise to the noble Duke, and I hope that he will forgive me on this occasion, especially as he will recognise that most of the provisions of the amendments apply to England, Wales and Northern Ireland and do not affect Scotland at all, so I am very grateful for his presence. It keeps me in order in addressing noble Lords properly and accurately in this House.
I wanted to say to him that, because the clauses in the Bill and the amendments that we have tabled are, inevitably, about general powers, and we clearly have to consult about the detail, which we intend to lay out in secondary legislation, I cannot give him a precise answer to his question.
I am able to say that it is exactly that kind of question—which category of corporate body would be subject to the requirements—that we need to consult on, before we decide the details that will be subsequently developed in secondary legislation. I hope he will appreciate that, at this stage, the Bill sets out to create the framework in which we will be able to operate constructively, particularly as a great deal of this work will depend on the willing co-operation of a large number of corporations, bodies, local authorities and the voluntary sector in this country.
My Lords, I shall speak to Amendment No. 47B. We support the government amendments to the Commons Amendment No.48, just as we supported the original Amendment No. 48 introduced on Report in the other place. Anyone who has heard my colleagues’ contributions on this Front Bench—in the daisy chain of Bills: Planning, Energy and Housing and Regeneration, the latter now an Act I believe—and my contributions on climate change will know that we have long recognised that the benefits of going low carbon extend far beyond stabilising our climate. Going low carbon will also mean saving people money by making their homes and businesses more energy efficient.
The amendment will improve the sustainability of existing public buildings and ensure that new buildings procured by the civil estate are in the upper quartile of energy performance. We believe that energy efficiency improvements are one of the keys to short term domestic emissions reduction, as well as having positive carbon abatement costs, which will create new jobs and generate new wealth for our economy. We are also mindful of the fact that home energy prices are at record highs and that many of Britain’s poorest families will be facing a tough winter ahead. While we cannot expect the measures detailed in these amendments to help people this coming winter, in the longer term, we can acknowledge the difference that they will make in helping those suffering fuel poverty. I am happy to support these important amendments.
I return to my Amendment No. 47B on the issue of carbon reporting for businesses. While we on the opposition Benches acknowledge the distance moved by the Government on this issue, we feel that still more could be done. If any noble Lords saw the opinion piece in the Financial Times on Friday 16 November 2008, from James Murdoch, the chief executive of News Corporation Europe and Asia, they will have seen that many leading businesses clearly agree with the Conservative Party that the Government are not leading sufficiently strongly on this issue.
This House will recall that it was here that the original mandatory carbon reporting requirements were put into this Bill, only to be removed in the Public Bill Committee in another place. After some considerable pressure, the Government clearly saw the error of their ways and settled on the stipulation that the Secretary of State must make regulations for certain companies by 6 April 2012. This certainly is an improvement, but the message coming to us from many large and progressive businesses is that they are already accounting for their carbon emissions and do not see why they should have to wait another four years before they should report.
To quote James Murdoch's Financial Times article:
“The UK government is afraid this will be a burden, but many of the best companies already do it. They are finding cost savings and opportunities”.
Mr Murdoch further notes that:
“Saying we can tackle climate change without public company disclosure is akin to thinking obesity”—
we are back to the champagne again—
“can be solved if people do not weigh themselves”.
For this reason we have tabled an amendment to Commons Amendment No. 47, which would give the Secretary of State powers to choose not only the classification of companies which are to be included but the date from which such inclusion would commence, in advance of 6 April 2012. We accept that there must be discretion for the Secretary of State to choose which category of company should be included and when. However, this means that, for example, all FTSE 350 companies could be regulated to report by January 2010.
We think it wise that the largest of businesses, which already have significant environmental reporting responsibilities, should not have to move like some sort of Second World War Atlantic convoy, at the pace of the slowest ship. Instead, the biggest companies should be regulated to break ahead of the pack and allow the smaller and less regulated companies to enter the process at a later date. In today's economic environment it is imprudent for any business with responsibilities to its shareholders to continue to ignore the commercial risk of not accounting for the low cost of its carbon pollution, a cost which we now agree is here to stay.
I finish by again quoting the chief executive of News Corp Ltd, who last Friday said:
“The government should go further in the vital area of company emissions measurement and reporting. The Climate Change Bill, which is now in the final stages of its passage through Parliament, is an opportunity to commit to making reporting of carbon emissions mandatory by 2010 at the very latest. There is no time to lose”.
These Benches entirely agree with those sentiments. There is a lot of pressure out there and that is why we call on the Government to consider Amendment No. 47B as a valuable and necessary enhancement to the Bill.
My Lords, I speak to my Amendment No. 47A as an amendment to Commons Amendment No. 47. This is one of the areas where the pace of understanding of climate change is getting quicker and quicker. A number of us were at a launch of One Vision: Consistency in Corporate Carbon Reporting by the CBI in a room in your Lordships’ House. The CBI is very much—I was going to say a convert, but that probably does not do it credit—a strong advocate of agreeing a sensible and appropriate carbon reporting system and getting it into place, but how long does it take to get the right system which everybody applies in a consistent way? That is the question I have about the timescale, but I very much agree with the view of the noble Lord, Lord Taylor, that we need to do this quickly.
Indeed, regarding slightly smaller or medium-sized businesses, the director of the corporate leaders’ group at the Institute of Directors said that once you realise that it is inevitably going to happen and that the only future is a low carbon future, you want to get on with it sooner rather than later. This is an area where business wants to move ahead, sees that it is right to do so and that there is competitive advantage and cost savings in moving in this direction. Therefore there is an urgent need to get these reporting standards right and implemented.
Hence my shock, I suppose, when I read government Amendment No. 47. It reminded me of one of those plays one used to do at school. You used to have the Sheriff of Nottingham, who seemed to be the authoritative character and who would make a declaration. Here I suppose it is:
“The Secretary of State must, not later than 6th April 2012—
(a) make regulations”—
and so forth, to which you thought, great. But then, of course, in the school play, there is an aside in brackets, “and whispers off to the left”, or in this case:
“lay before Parliament a report explaining why no such regulations have been made”—
and the dastardly Sheriff of Nottingham rides off. Come on, the Government talk all the time about giving certainty to business. I have spent most of my life in business and that is what you want from Government. Some things you may want them to get on with quicker. Some things you may not like particularly, but you want to know where you are. I cannot see any captain of industry, whether of a small business or one of the world’s largest companies, understanding why the Government make such a strong statement but then say, “By the way, if we do not get around to doing it, we will put a report before Parliament. Why not?”. It gives absolutely the wrong signal. It says, “Yes, we want to do this: we are committed, but we might not do it, and this is what we have to do when we fail”. It is a plan for failure.
What business ever says, “This is what we will do when we fail to deliver our corporate mission”? No one does so. One may have contingency plans for failure, but this is not a contingency plan; this is an alternative route—A or B. I do not understand why there is a plan B—a get-out clause in the Bill to broadcast to our corporate nation that, although it wants to get on with it, the Government have no conviction that they will able to make it. That is a great shame. Once again, the rug is pulled out from under the Government’s good intention.
I do, however, congratulate the noble Lord, Lord Davies, on his excellent explanation of why there should not be a trading scheme for government buildings. I wish that I had had that speech to put into one of my other speeches earlier on in the debate.
My Lords, I had not intended to speak, having arrived rather late for the remainder of this debate, but I cannot restrain myself from speaking on mandatory reporting. I very much support what the noble Lord, Lord Teverson, said. I cannot believe that we are still discussing this issue at this stage in the climate change debate. Given the acknowledgement that climate change is one of the most severe threats facing the globe and that businesses, individuals and organisations in this country need to rally round and reduce carbon emissions, the fact that the Environment Agency has produced a valuable series of reports on environmental reporting by British industry, as well as the fact that a disparate variety of companies, large and small, are reporting sporadically on carbon but in a way that is singularly unuseful in tracking progress over time or making comparisons between businesses, it staggers me that we are still talking about some sort of discussion and consultation, with a timescale within which to reach a view about whether there will be mandatory reporting by 2012. All the arguments made by the noble Lord, Lord Teverson, are absolutely the case.
We not only have the sheriff with his noises off; the noble Lord, Lord Davies, seemed to come clean when he remarked that reporting does not necessarily serve as a good indicator for managing emissions. That gave the game away completely. We need not bother to go out to report, so far as I can tell, because the Government seem to have made up their mind. Those graphs in the Stern report on the early reduction in carbon emissions were the most telling; it is not what we do by 2050, but what we do in the next five years, that counts. However, we are going to faff about for four of those five years trying to make up our minds whether some of the biggest companies in this country—which, by reducing their carbon emissions, will benefit by cost-reduction and developing technologies that will serve them well in the global market—should simply write down in some reasonably standard way the product of the work that they inevitably will have to do if we are to hit the carbon-reduction targets. I cannot believe how pusillanimous the Government are being on this issue.
My Lords, I have been caught in some rather devastating crossfire. After all, the noble Baroness, Lady Young, is upbraiding the Government because they seem to have made up their mind, and the noble Lord, Lord Teverson, is upbraiding the Government because they have not made up their mind. It is difficult for me to respond to that duality, except to say that it will not do to argue that Governments are only about good ideas and good intentions. Governments are certainly about good ideas and goods intentions—this Government in particular are full of both—but we are responsible in Parliament for good legislation.
We are discussing not some generalised formula for the nation this evening but what we put into law. I hope, indeed beg, the noble Lords, Lord Teverson and Lord Taylor, not to press their amendments because they both have this element in common—they would put into legislation and make certain something about which the Government are not definitive at present and that would require considerable consultation. It is easy for noble Lords to pluck out of the air one article in a newspaper from however esteemed the source might prove to be, but it will not do for idle reference to be made to the top three FTSE 250 companies, or whatever. The Government cannot work on the basis of surmising these terms; they must have some precision about who is to be involved in this.
I think the noble Lord, Lord Taylor, would certainly accept that his noble friend the Duke of Montrose was concerned about this issue and challenged me first—probably, if I read his interjection accurately, on where the line would be drawn. Corporate reporting certainly involves a burden, and I am quite sure that the noble Duke, the Duke of Montrose, was concerned that the burdens on companies of a certain size might be excessive and might not provide sufficient benefit, consequent upon reporting, which the Government seek. We are not being definitive about that at this stage. We are saying that we must have provision for reporting and the opportunity to ensure that we can take this argument a stage further and make it definitive.
I am grateful to both noble Lords for tabling amendments that are constructively expressed, but the Government are not being definitive at this stage. We need to carry out extensive consultation before we can be definitive, which is why it should be recognised that the Government have amendments in place to create the capacity to act effectively. We are not in a position to be definitive in primary legislation about just where that categorisation takes place or how the reporting should be conducted.
My Lords, does the Minister agree that my amendment would do exactly that; it would give the Secretary of State the power to make different dates for compliance for different categories of companies? Indeed, it very much reflects the sentiment that the Minister has been trying to express; namely, that there is no need to hold back on getting something going simply because there are difficulties with smaller companies. Perhaps one would never include smaller companies in such a scheme.
My Lords, I am grateful to the noble Lord for recognising some of the difficulties that are consequent upon this. That interpretation of his Amendment No. 47B does not detract from the Government’s case, which I have been putting. In fact, it largely follows the line of thinking that I have sought to express. However, we already have this framework in the Bill. The noble Lord’s amendment would not give us any additional flexibility. In fact, we have a slightly greater definition than we are prepared to accept at this point, but I do not think that the positions of the Government and the noble Lord are that far apart. He properly recognises that a considerable amount of additional work needs to be done in consultation. I hear the pleas on all sides. The noble Baroness, Lady Young, would not be in her place if she was not concerned to speed the Government’s processes and I accept the point that she made.
I am merely indicating that the Government need flexibility with regard to this issue. We know that we have to legislate with precision. The whole point of secondary legislation is to fulfil that role. In such an important Bill as this, it would be wrong to insert precision which is not accurate and which we cannot defend. At the same time, it is essential that we have a framework on which we can make considerable progress. I do not think that the Government’s proposals are vastly different from that of the noble Lord. Having heard how close we are to his thinking, I hope that he will not feel it necessary to divide the House on such a limited disagreement.
My Lords, does the Minister recognise the fact that the Government are asking for time to make progress against a background of eight years of annual reporting in considerable detail with City institutions and reporting of these issues by registered listed companies? Eight years’ worth of data and pressure for mandatory reporting seem to indicate that the Government are taking rather a long time to reach a view.
My Lords, that is true with regard to certain categories of companies, but the noble Baroness will recognise that what will be put in legislation will govern all companies so specified and that we have quite a significant task to fulfil in achieving that. I hope she will appreciate that, with regard to these amendments and the very substantial consideration of the issues that we have had in this House and the further consideration in the other place, the issue is not the Government in any way, shape or form resiling from the necessary advance that needs to be made; it is getting the legislation right so that we can make effective and accurate progress. I merely indicate to the House that I will have to take the noble Baroness’s criticisms at this point that some information is available and that we could build on that. We can, but we do not have enough to solve the issues, nor for me to give the definitive reply that the noble Duke, the Duke of Montrose, hinted that I would have to give if I wanted to assuage his anxieties at this stage. Until I am in that position, primary legislation will need to be expressed in the terms which the Government have suggested.
On Question, Motion agreed to.
Amendment No. 47
47: Insert the following new Clause-
“Regulations about reporting by companies(1) The Secretary of State must, not later than 6th April 2012-
(a) make regulations under section 416(4) of the Companies Act 2006 (c. 46) requiring the directors' report of a company to contain such information as may be specified in the regulations about emissions of greenhouse gases from activities for which the company is responsible, or(b) lay before Parliament a report explaining why no such regulations have been made.(2) Subsection (1)(a) is complied with if regulations are made containing provision in relation to companies, and emissions, of a description specified in the regulations.”
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 47.
Moved, That this House do agree with the Commons in their Amendment No. 47.—(Lord Hunt of Kings Heath.)
[Amendments Nos. 47A and 47B, as amendments to Amendment No. 47, not moved.]
On Question, Motion agreed to.
Amendment No. 48
48: Insert the following new Clause-
“Report on the civil estate(1) It is the duty of the Office of Government Commerce to lay before Parliament each year a report setting out the progress Her Majesty's Government has made towards improving the efficiency and sustainability of its civil estate.
(2) The report must include the progress made towards-
(a) reducing the size of the civil estate;(b) improving the sustainability of the buildings that already form part of the civil estate; and(c) ensuring that any new buildings procured for the civil estate are in the upper quartile of energy performance. (3) Where any new building procured for the civil estate is not in the upper quartile of energy performance, the report must state the reasons why this is the case.
(4) A report under this section must be laid before Parliament not later than 1st June in the year in which it is to be so laid.”
48B: Insert the following new Clause-
“Report on the civil estate(1) It is the duty of the Treasury to lay before Parliament in respect of each year, beginning with the year 2008, a report containing an assessment of the progress made in the year towards improving the efficiency and contribution to sustainability of buildings that are part of the civil estate.
(2) The report must, in particular, include an assessment of the progress made in the year to which it relates towards-
(a) reducing the size of the civil estate, and(b) ensuring that buildings that become part of the civil estate fall within the top quartile of energy performance.(3) If a building that does not fall within the top quartile of energy performance becomes part of the civil estate in the year to which the report relates, the report must state the reasons why the building has nevertheless become part of the civil estate.
(4) A report under this section must be laid before Parliament not later than 1st June in the year following the year to which it relates.
(5) In this section “building” means a building that uses energy for heating or cooling the whole or any part of its interior.
(6) For the purposes of this section, a building is part of the civil estate if it is-
(a) used for the purposes of central government administration, and(b) of a description of buildings for which, at the passing of this Act, the Treasury has responsibilities in relation to efficiency and sustainability.(7) The Treasury may by order provide for buildings of a specified description to be treated as being, or as not being, part of the civil estate for the purposes of this section.
(8) Any such order is subject to affirmative resolution procedure.”