Monday, 17 October 2011.
Arrangement of Business
Before the Minister moves that the first statutory instrument be considered, I remind noble Lords that in the case of each statutory instrument, the Motion before the Committee is that the Committee do consider the statutory instrument in question. The Motions to approve the statutory instruments will subsequently be moved in the Chamber in the usual way. As usual, if there is a Division in the Chamber while the Committee is sitting, the Committee will adjourn from the sound of the Division Bell and resume 10 minutes thereafter.
Financial Services and Markets Act 2000 (Exemption) (Amendment No. 2) Order 2011
Considered in Grand Committee
With the leave of the Committee, I wonder whether I might make a statement before the Minister rises and request that he withdraw this order on the following grounds. First, much of the relevant material of this order is still under consultation by the Financial Services Authority. The consultation concludes on 31 October and today is 17 October. Secondly, I draw the Minister’s attention to the report of the Merits of Statutory Instruments Committee, which, on 13 October, wrote to the Treasury with a reminder of the need to make summaries of consultation responses available at the time an instrument is laid and to ensure that the summary for this draft instrument is available before the debate in this House.
Thirdly, a lot of the scrutiny of this order is dependent on the Opposition and other noble Lords having access to the results of the consultation so that they can properly and fully scrutinise the consequences of the order. The results of the consultation are not available and it is therefore not possible for noble Lords to effectively scrutinise this legislation. If we proceed, it would be the sort of action that brings Parliament into disrepute.
My Lords, there is perhaps some confusion about what we are doing here today and what else needs to be done in connection with this order from the Joint Committee on Statutory Instruments.
Let me start by explaining the situation we are in, because it is complicated. The previous Government in March 2010 made a decision—a joint decision of Treasury Ministers and Ministers of the Department of Enterprise, Trade and Investment in Northern Ireland—that credit unions in Northern Ireland should no longer be exempt from regulation under the Financial Services and Markets Act 2000 and that responsibility for their regulation should transfer from the Department of Enterprise, Trade and Investment to the Financial Services Authority. That decision was taken by the previous Government and we are considering the order today. As the Deputy Chairman reminded us, the formal business is moved on the Floor of the House. We are considering the statutory instrument that puts into place a decision by the previous Government.
The running consultation is about consequential provisions relating to the details of the transfer, the transitional arrangements, grandfathering, temporary powers for the FSA, how information will transfer between the department and the FSA, and consequential issues to do with money laundering and terrorist financing. Those will all be dealt with—to the extent they need to be—in the appropriate way through instruments or regulation. Therefore, what is being consulted at the moment is nothing that should detain us from putting in place a decision by the previous Government with which this Government completely agree. In our view, it is about time that we got on with the enabling instrument and there is no reason not to allow the consultation on the “how” of the transfer to carry on in the normal way.
The Treasury is publishing today responses to the original policy proposals in principle. However, the decision was originally taken and announced in a joint document by the UK Government and the Northern Ireland department in March 2010. I think we should turn to the substance of the order.
I am grateful to the Minister for giving way, but given my noble friend Lord Eatwell’s comments and the confusion that the Minister alleges my noble friend had, would it not have been easier to wait? Is there any reason why the Minister wants to move this Motion now, given that it would have been easier to consider the two orders together for the sake of clarity?
I am not alleging any confusion other than that this is a complicated series of manoeuvres that has to be gone through to effect the transfer. It is quite right that we should consult on the how. It is for this Committee to decide the simple and important issue of principle as to whether the people of Northern Ireland, 50 per cent of whose population have their money invested in credit unions, are given the proper and full protection which FSA regulation would give them. Of course it is important that the how of the transfer is properly considered, which is what the current consultation is all about, but it might be sensible if we considered the arguments—which I think are extremely clear cut; there is nothing between the previous Government and the present Government on this—that we need to get on and give those in Northern Ireland, a very significant number of people, the protection afforded to those who put deposits in banks in the whole of the United Kingdom and currently put deposits in credit unions in Great Britain.
Perhaps, if the Minister would allow me, we can clarify this matter. In the consultation document on the FSA website, the first question is:
“Do you agree with the proposed legislative measures outlined in chapter 3?”.
The order before us today is included in Chapter 3. Does the Minister know the answer to that question from the people of Northern Ireland?
My Lords, I believe that the Minister has not yet finished the speech he wishes to make in order to put the Motion. We must first put the Motion before it can be discussed, so we must wait until he is ready to say that he wishes to put it.
My Lords, credit unions operate throughout the United Kingdom, providing savings and loans services, mostly in their local communities. Although the credit union sector in Great Britain is relatively small, it makes a large contribution to the financial inclusion agenda by operating in areas of poverty where local communities often lack access to affordable credit. In contrast, the credit union sector in Northern Ireland is extremely significant within the financial services landscape. Approximately 50 per cent of the adult population of Northern Ireland are members of their local credit union.
That is why, quite properly, the previous Government decided that that situation needed to be looked at and resolved. It was the belief of the previous Government, confirmed by the present Government, that credit unions in Northern Ireland should be brought under the Financial Services and Markets Act. That is for three main reasons.
The first is for reasons of financial stability. Given the significance of credit unions in Northern Ireland, the collapse of the sector would have a devastating impact on entire communities’ access to financial services and credit facilities.
Secondly, the order will ensure that the deposits of each Northern Ireland credit union member will be protected by the Financial Services Compensation Scheme, the FSCS. This will guarantee each deposit up to the £85,000 limit, in line with credit union members in Great Britain. The current legislation exempts these credit unions from this guarantee. As a result, there is a distortion in the level of consumer protection provided for credit unions across the United Kingdom. Removing the current exemption from the Financial Services and Markets Act will address this distortion and prevent members from relying on untested depositor protection schemes run by the various trade bodies across Northern Ireland and the Republic of Ireland. Those credit unions that are unaffiliated with one of those trade bodies currently have no depositor protection. That is wrong. Northern Irish credit union depositors should be put on the same footing as those elsewhere in the United Kingdom; and as with bank depositors.
Thirdly, by removing the exemption from the Financial Services and Markets Act, the members of each Northern Ireland credit union will have recourse to the Financial Ombudsman Service if they encounter any dispute with their credit union. Again, this is an aspect of consumer protection not currently afforded to members in Northern Ireland and is another positive aspect of the proposed legislative changes.
The proposed changes will, of course, entail the industry bearing some additional costs. These costs are largely with respect to training staff on the new regulatory demands, amending computer systems and contributing to the FSCS levy. However, it is the Government’s view that these mostly upfront costs are a relatively small price for the sector to pay for increased consumer protection and financial stability. Moreover, the increased confidence in the sector that will result has the potential to have a positive impact to the extent that the Northern Ireland credit unions will be better placed to attract additional deposits. This uplift in confidence was seen in the Great Britain credit union sector after it was brought under the Financial Services and Markets Act in 2002. While the initial impact on UK financial services may have gone unnoticed, the growth of the Great Britain credit union sector has been extremely strong since the transfer.
The Government strongly believe, as did the previous Government, that Northern Irish depositors should not be treated any differently from depositors in Great Britain. These proposals go a long way to levelling the playing field in depositor protection across the United Kingdom and are eagerly awaited by those seeking peace of mind about their family finances. They also support the Government’s aim of promoting the mutuals sector in the United Kingdom as a whole, and in doing so have a positive impact on the diversity of financial services. For example, Northern Ireland credit unions will, subject to normal FSA approval, be free to offer basic products such as ISAs and mortgages. This can only be good for consumers and the mutuals sector.
While I look forward to hearing your Lordships’ views on these proposals, I believe that they are uncontroversial and have the support of both the current and previous Government. A decision on them was announced by the previous Government in March 2010. The consultation responses to the original question have been published. The consultation on the “how” of the transfer will, as the noble Lord, Lord Eatwell, says, carry on until 31 October, but today we are considering a very simple order that agrees the principle of the transfer. The details of how the transfer will be effected will, as I said at the outset, be the subject of either further orders or regulation in the normal course. I hope that the proposals will not be too long detained by procedural wrangling, which might get in the way of the Northern Irish people getting the protection that they deserve. I hope the Committee will offer its support to the order.
My Lords, I put a question to the noble Lord, which he has not answered, regarding the response of the people of Northern Ireland to the question about whether they agree with the order. On this side of the Committee we are entirely supportive of the objectives of the order. That is not the point that I am raising. My point is that the Merits Committee wrote to the Treasury on 13 October, reminding it to ensure that the summary of this draft instrument was available before the debate in the House. I have not been able to find a summary of the consultation on this draft instrument. Without the reactions of the people of Northern Ireland, who are closely and greatly involved in credit unions, as the Minister pointed out, it is very difficult to offer the order proper scrutiny. Therefore, I cannot continue, other than to say that it would be appropriate for the Treasury to ensure that relevant consultation material is published, as the Merits Committee requires, prior to consideration of draft legislation by the Committee.
My Lords, there seems to be a muddle over the consultation. The Explanatory Memorandum said that the summary of responses to the March 2010 consultation will be published shortly. I think the Minister said that it was published today. I do not know when the March 2010 consultation formally finished, but it was presumably quite a long time ago. It is indeed unsatisfactory that we do not have the results of that consultation.
However, I think it is appropriate to look at what the order says. It is an extraordinarily short order, and it says nothing, as the Minister said, about the detail of how this change will be effected. All it says is that the change will be effected and that Northern Irish credit unions will be brought under the ambit of the FSA. I do not know, but I would be surprised if there was a single, solitary soul in Northern Ireland who would oppose that change, particularly if they look at what has been happening south of the border in recent weeks. Only a couple of weeks ago, the Irish Finance Minister was called upon to inject €1 billion into the credit union sector south of the border, because many of those credit unions—and we are talking about a sector that is as predominant as it is north of the border—found themselves, as a result of rising unemployment and declining income, in some difficulties. Of the 407 credit unions in the Republic of Ireland, some 79 are now in need of this injection of capital. It seems likely not only that that will need to happen but that there will have to be some consolidation in the sector and smaller credit unions will need to merge.
My question to the Minister is, in a completely different sense to that of the noble Lord, Lord Eatwell, why it has taken the Government so long to bring this legislation forward, given that the majority of the population of Northern Ireland would be affected if their credit union got into difficulty. Even if we approve this order in due course, it does not come into effect until 31 March next year. My question to the Minister was going to be, and remains, whether he has any evidence that the travails that afflict the Republic of Ireland credit union sector are spreading north. Does he envisage that any individual credit unions north of the border will get into difficulties over the coming weeks and months? In the absence of any covering FSA jurisdiction, what would the Government’s response be were they to find themselves in the same position of the Government south of the border, where a significant number—in their case about 15 per cent of credit unions—required short-term capital support?
My Lords, I broadly welcome the intention of this order, but I find myself wanting to ask the Minister why it has taken such a long time to bring it forward when it was self-evident that it was necessary and had been agreed by the previous Government and endorsed by the coalition parties when previously discussed. It seems lamentable that the Government have allowed the situation to go on for as long as it has without taking any necessary action.
When it comes to this particular order, we do not have sight of the evidence that we were assured would be available to us in informing our discussion and agreement. What harm would be done if the Government withdrew the order and brought it back after we have had an opportunity to consider the evidence that is so clearly necessary to inform our decision on this matter? It simply cannot be acceptable that the evidence has been published only this morning. As far as I am aware, no effort has been made to make it available to those who are likely to attend this session and discuss this matter. That is an inexcusable failure by the Minister and the Treasury, for which the Minister owes us a full and proper account. The right approach would be to withdraw this order until we have had adequate opportunity to discuss the evidence.
In the mean time, I support the question that the noble Lord, Lord Newby, asked. Can the Minister give us clarity, given that the Government have been so slow in bringing this matter forward, as to the position of people with accounts and business relationships with Northern Ireland credit unions that have experienced difficulty? Do the Government stand behind them until such time as the Financial Services Compensation Scheme becomes an eligible right of those with relationships with credit unions? Will the Minister also assure us that to the best of the knowledge of the Treasury and the FSA credit unions are not currently offering products in Northern Ireland to which they are not entitled by virtue of their authorities? The Minister at the end of his speech listed some of the products that credit unions would be able to offer once this order was implemented, but which they are not currently able to.
Finally—I ask this having dealt with these matters myself—can the Minister tell us whether any further action is intended with respect of the failure of the Presbyterian Mutual Society, and in particular the directors?
My Lords, notwithstanding the welcome rare appearance of the noble Lord, Lord Myners, as a former Treasury Minister in this Committee, it is a bit rich of the Opposition to talk about delay in this order. The Northern Ireland credit unions were left out of FSA regulation from the time that the Financial Services and Markets Act was enacted in 2000 until the previous Government left office 18 months ago. So for members of the Opposition to talk about the delay of this Government in not getting the order through earlier while on the other hand asking for evidence of a decision that they had taken before the election—seemingly without waiting for the evidence that they are now asking for—is indeed a bit rich. If noble Lords on the other side really want to persist with this line, this order will not get through, as it has to in the next few days and weeks, in order to give the people of Northern Ireland proper protection of their money in mutuals from the proposed transfer date to FSA regulation of March 2012.
What does the noble Lord, Lord Eatwell, who has come along with all kinds of clever procedural tricks this afternoon, have to say to the people of Northern Ireland if he is to deprive them yet further of proper protection under the Financial Services Compensation scheme? We need to get this order through if the people of Northern Ireland are to be protected from March of next year.
My Lords, to refer to the fact that the Government have apparently published only this morning the evidence of the consultation and the raising of the objection of not having had access to it as a clever procedural trick is an abuse of language.
The point we are making is that the Government should take seriously the consultation with the people of Northern Ireland and make the results of the consultation available to the Opposition so that they can properly scrutinise and assess the impacts of the change. That is all that I asked for. I also pointed out that on 13 October the Merits Committee wrote to the Treasury requesting that the material be published, and it was not published until this morning.
As my noble friends and I have made clear, we are entirely supportive of this legislation. We want to get it through as soon as possible, but we want proper due process. This is an abuse of due process. I think it would be best if we let the Minister proceed with his Motion, because he is not interested in actually debating the issues.
I would always defer to the advice and conclusion of my noble friend Lord Eatwell, but the petulant language used by the Minister is a sign of how rattled he is by this subject. I invite the Minister to clarify. He has said that if this order is not approved today it would deny the people of Northern Ireland certainty and protection in due course, with effect from the end of March next year. Can the Minister confirm that delaying the approval of this order for another week so that the necessary information can be reviewed by Parliament would mean that that certainty could not be delivered and that this is, therefore, the last chance for us to discuss it? In the absence of a clear answer I think that the should withdraw this order and re-present it to the Committee in a week or so.
My Lords, the situation is that we need to have the process complete, as I said, within the next days and weeks. There are a number of orders that need to be laid. In particular, four orders will need to be laid containing the transitional and consequential provisions, because those follow the negative procedure and they can only be made and laid after this affirmative order. So there must be a sequencing here, which we are starting today. All the information that has been requested will be available for the consequential technical provisions, which formed the main substance of the consultation. If we do not get on and lay today’s order, with the four that follow, in the time that is available, there is a very serious risk that transfer to FSA control will be delayed by approximately six months. It could be longer, as the FSA would need to restart the clock on its transfer process.
I am sorry if noble Lords do not like my language, but for those who are looking at this from Northern Ireland and who thought that the previous Government had made a clear decision, I quote from paragraph 1.1 of the March 2010 document, which says:
“Following the decision that credit unions in Northern Ireland should no longer be exempt from regulation under the Financial Services and Markets Act”.
We are today discussing the order which, if formally made, will enact that decision, made by the previous Government last year. The four enabling orders, for which the evidence must, of course, be considered, will be put through by the appropriate negative procedure. However, they cannot be laid until after this affirmative order has gone through. I hope that that explains matters.
In response to the question from my noble friend Lord Newby and the noble Lord, Lord Myners, I accept that there has been delay in this process, although not the 10-year delay of the previous Administration. There has been some delay because this is a matter not just for Her Majesty’s Treasury, but also for the Northern Ireland department. There have also been elections in Northern Ireland. I would have preferred things to have been tidied up a little earlier, but I really do not think that this should prevent us making the critical decision which Northern Ireland is waiting for.
On the responses to the decision in principle, it is, indeed, supported by the Northern Irish public. The published responses are positive. I apologise if the document arrived rather late, but nobody approached us and asked to see it until five minutes before we started. Responses were, on the whole, in favour of the transfer. The concerns expressed, such as they were, were over the nature of the transfer, which is precisely why an FSA consultation is taking place, relating to the four subsequent orders which will come forward and be considered in due course.
The other substantive issues which have been raised in this short debate are important. My noble friend Lord Newby asked about the difficulties in the Republic of Ireland, the consequences of their spreading north and so on. Clearly, the credit union sector in Northern Ireland has been affected by the financial crisis but not to the same extent as institutions in the Republic of Ireland. There remains a divide in the business operations from those institutions over the border as credit union membership is usually limited to a local geographical common bond. There is some crossover with the Republic in the membership of trade bodies and their respective depositor protection schemes, which is another reason that supports getting on with this. However, it is something that we need to get on with as fast as we can anyway.
In answer not only to that question but the related question of the noble Lord, Lord Myners, until we get this new arrangement in place, credit union deposits will remain the responsibility of the devolved Administration, as they have been since the settlement with Northern Ireland some 15 years ago. That could have been cleared up by the Financial Services and Markets Act 2000 but it was not. This reinforces why it is right to get on with this, since the whole Committee seems to agree on the principle.
The noble Lord, Lord Myners, also asked for an assurance that credit unions are not offering products that they are not entitled to offer. That remains the responsibility of the Northern Irish department until 31 March 2012 and I cannot speak for the department. After that date, credit unions will fall within FSA regulation in the normal way. The noble Lord also referred to the Presbyterian Mutual Society, which was a sorry saga. The present Government stepped in and helped with the clearing up of it. However, the Presbyterian Mutual Society is not a credit union under the terms of the order and is therefore not directly relevant to this afternoon’s discussion. However, it points out in a different way the importance of seeing that Northern Ireland gets a fair deal across the whole spectrum of financial services.
In summary, these measures are positive for credit unions and their current and future members. The transfer is important for the long-term security of and confidence in a very important financial services sector for Northern Ireland. While there are some upfront costs, they are relatively modest in relation to what we are putting in place. This is positive not only for consumers of financial services in Northern Ireland but should enable the credit unions themselves to develop their business in a positive way by offering further products.
I can only apologise to the Committee for the fact that we did not have the responses out earlier. I believed that they were not a matter of significance in relation to the basic decision, in principle, that was taken in March 2010. If we had received requests for them earlier, we would of course have seen what we could do to have a discussion and go through what was available. However, I was not aware until shortly before the start of this Committee that there were such concerns. I appreciate that the noble Lord, Lord Eatwell, tried to get hold of my office but was not able to get through this morning. I say again that the evidence relates in particular to the four negative orders which necessarily follow and could never be laid at the same time as this order. I hope that this Committee will give its support to something which all speakers have said they approve of in principle.
My Lords, it is an extraordinary protocol whereby the evidence will be given only if we ask for it, otherwise it will not be volunteered, which is what the Minister appears to be saying. However, I shall support the order on the basis of the assurances that the Minister has given that the evidence is strongly in support of it. I shall support the order also on the basis that the Minister has assured us that failure to approve it would therefore slow the four consequential negative orders and could lead to the FSA delaying by up to six months taking on the responsibilities contemplated by this order. If the Minister’s assurances on that point are not as clear as I interpret them, I would continue to be of the view that the right and proper process is for Parliament to have examined the evidence before reaching a decision. However, I believe that the Minister has given us a very clear indication that it is absolutely critical that the order be approved in the next few days or weeks—I hope that by “weeks” he does not mean several weeks, but a week or two at the maximum.
Medicines Act 1968 (Pharmacy) Order 2011
Considered in Grand Committee
My Lords, the Medicines Act 1968 (Pharmacy) Order, being debated today, will remove the restriction placed upon pharmacists registered in Britain by virtue of a pharmacy qualification awarded by a relevant European state that prevents them being in charge of a newly established pharmacy. This refers to any pharmacy that has been registered for less than three years and is commonly known as “the three-year rule”.
The relevant European states referred to are Iceland, Norway, Liechtenstein, Switzerland and the European Union (EU) member states. It is not relevant to pharmacists who qualified in the United Kingdom.
I should first give the Grand Committee some background. All pharmacists practising in Britain must be registered by the General Pharmaceutical Council, as must all pharmacy premises. Some pharmacists are registered to practise in Britain under arrangements for the mutual recognition of pharmacist qualifications awarded by EU member states or other relevant European states.
EU Directive 85/433—now 2005/36/EC—includes provision for member states to place restrictions on the recognition of the qualifications of such pharmacists in the case of pharmacy premises registered for a period of less than three years. In Britain, the restriction applies to the pharmacist in charge of such pharmacies, known as the “responsible pharmacist”. In other words, while all pharmacists registered in Britain under the mutual recognition arrangements may work in any British pharmacy, however long it has been registered, such pharmacists cannot hold the position of responsible pharmacist in a pharmacy that has been registered for less than three years. The current restrictions on visiting pharmacists owning pharmacy businesses or acting as superintendents are not affected by this order.
The derogation in the directive was originally put in place in the mid-1980s for economic reasons, following concerns by UK MEPs. They believed that, given the UK’s comparatively open arrangements in relation to pharmacy ownership, there was a risk that the mutual recognition arrangements would put existing UK pharmacies at a disadvantage. Since then, however, much has changed both in terms of pharmacy arrangements in other EU member states and the evolution of domestic policy in Britain.
We have conducted a full public consultation on removing the restriction, both for established pharmacists—those fully registered with the General Pharmaceutical Council in part 1 of the register—and for visiting pharmacists—those temporarily practising in the UK and registered in part 4 of the register. However, the restriction has not affected any visiting pharmacists as, to date, none has been registered.
The response to the public consultation has been very much in favour of removing the restriction. The proposal has support from the General Pharmaceutical Council, the pharmacy regulator, the Royal Pharmaceutical Society, the professional body for pharmacists, as well as all the main pharmacy representative organisations, including the Pharmaceutical Services Negotiating Committee, Community Pharmacy Scotland, the Company Chemists Association and the devolved Administrations.
The proposal will encourage flexibility, efficiency and continuity of care within pharmacy. It will end the situation where a responsible pharmacist, registered here by virtue of the mutual recognition arrangements, can no longer continue in that role if their pharmacy relocates, even if it only moves next door, and therefore becomes a newly registered pharmacy. Removing this restriction will mean that patients can enjoy greater continuity of care in such circumstances; that all registered pharmacists will be placed on a level footing in terms of their employment prospects; and that employers will have a deeper pool of potential employees to draw upon and less bureaucracy to deal with when filling vacancies.
I should now explain the revision of the draft Explanatory Memorandum laid before your Lordships today and the change required to the final version of the Explanatory Note on the order. In undertaking preparatory work for this debate on the draft order, officials in the Department of Health realised that, contrary to previous understanding, “visiting pharmacists”, a sub-category of registrants from relevant European states who do not go through the full registration procedure, are covered by the removal of restrictions that the draft order would achieve. It will not, therefore, require a separate legal instrument to remove the restriction upon their acting as “responsible pharmacist” at new pharmacies. Up to this point, it had been thought that a separate legislative instrument would be required to achieve this. The confusion appears to have arisen in the understanding of the differences between the restrictions applying to those who either may own, or carry on, a pharmacy business or act as superintendent, on the one hand, and the provisions relating to the responsible pharmacist on the other. A superintendent manages a pharmacy on behalf of a company. A responsible pharmacist is in charge of a pharmacy at a given time, and takes on responsibility for the effective management of pharmacy law and practice within a single branch at a particular time. If the draft order is approved, it will still not be possible for a visiting pharmacist to carry on—that is, to own a new pharmacy—or act as a superintendent in relation to a new pharmacy.
However, a visiting pharmacist, and any other pharmacist registered by virtue of the mutual recognition arrangements, would, upon the coming into force of the order, be entitled to be the responsible pharmacist in charge of a newly registered pharmacy in Britain. It is the similarity between the different concepts of control that appears to have led to the confusion. The intention has always been to remove the restriction on responsible pharmacists for all those registered to practise in Great Britain under the EU mutual recognition arrangements, whether visiting or not. The consultation reflected this and the order as currently drafted would achieve this.
Because of the misunderstanding, the earlier version of the accompanying draft Explanatory Memorandum, and the Explanatory Note on the order itself, suggested that the order did not remove the restriction in relation to visiting pharmacists. In fact, the substantive provisions of the order achieve the intention and a further instrument is not, therefore, required. However, the text in the Explanatory Note that refers to the register was incorrect, and the reference to part 1 of the register will not appear in the final version. I apologise for any confusion caused by this late change. I commend this order to the Committee.
As the noble Earl stated, a lot has changed since the derogation in the directive was put in place. Much has changed in pharmacy arrangements in other EU member states and in the evolution of domestic policy. The reasons, as the Minister stated, were commercial.
In England, for example, there has been a welcome change over the past few years making it easier for people to get to a chemist, given that there are new pharmacies with longer opening hours. Clearly, such market restrictions are not appropriate today, and their removal will assist by increasing the pool of available pharmacists and ensure improved continuity of service delivery. I note that the change has also been welcomed by the key representative bodies of pharmacies.
I of course recognise that the restriction affects a relatively small number of pharmacies—just over 10 per cent, and just over 5 per cent of all pharmacists registered to practise in Great Britain. I also understand and accept the reasons for the change in the Explanatory Memorandum. However, these changes in the legislation raise broader issues relating to the competencies of the pharmacist and the person’s ability to manage a pharmacy. For example, the report on the consultation noted that concerns were expressed by respondents on competency in English. The Department of Health in its response stated that in the UK a check on the language knowledge of a pharmacist from outside the UK who is seeking work within the NHS is applied by the prospective employer, but that there is no check made at the point of registration.
This leads to three specific questions to the Minister. First, are there plans to introduce a standardised competency test to ensure that any pharmacists from the countries mentioned in the order who are in charge of a new pharmacy have all the required skills and competences? Secondly, are there plans to ensure that those in charge of a pharmacy will have a sufficiently high standard of English to avoid all risk of a patient misunderstanding any advice given? Thirdly, how can an employer determine whether the pharmacist in question is qualified in their own country and has no pending fitness-to-practise cases to answer?
My Lords, I declare an interest as chairman of the council of the School of Pharmacy of the University of London. I thank the noble Earl, Lord Howe, for a crystal clear explanation. I suppose, perforce, it had to be crystal clear to clear up some confusion arising from the Explanatory Memorandum. This is precisely the kind of uncontroversial deregulation that is important in the context. From both professional and consumer perspectives one could say that it is a perfectly formed small regulation. It affects a limited number of people who could not be responsible pharmacists in certain circumstances, but will now be able to be so where there are no significant safety implications from deregulating in the way that this order does.
I want to raise the issue of reciprocity. The noble Earl mentioned that the reason for deregulation is that circumstances have changed. The noble Lord, Lord Collins, also referred to that. I am sure that in broad terms that is the case, but I should be extremely grateful to hear what the noble Earl believes the level of that deregulation would be. I remember doing a study of several EU countries, looking into what was permissible in pharmacy ownership and the level of regulation. That was about five years ago, when the level of regulation was extremely high—not just pharmacy regulation but the kind of licensing required to run a retail outlet, and so on. We have some extremely well run chains in this country, which would like to expand their offer in the EU more broadly. They have been largely frustrated from doing so by some of the regulation that applies. Therefore, reciprocity in these circumstances is extremely important. I am interested to hear just what the Minister believes to be the level of significant deregulation that has taken place.
My Lords, I am grateful to both noble Lords for their support for the order. The noble Lord, Lord Collins, asked me three questions. The first was about whether there are any plans to introduce a standardised competency test to make sure that pharmacists from the various countries mentioned have all the required skills to do their job. Under directive 2005/36/EC on the recognition of professional qualifications, which I mentioned, a pharmacist who holds a recognised qualification issued by one member state is entitled to recognition of that qualification in another member state, and would therefore be entitled to registration with a competent authority, such as the General Pharmaceutical Council.
However, employers of pharmacists should ensure that anybody they employ has the skills required to undertake the specific post. The General Pharmaceutical Council’s standards of conduct, ethics and performance, among other things, require the pharmacist to recognise the limits of their professional competence and practise in only those areas in which they are competent. Their continued registration is subject to adherence to the council’s requirement for continuing professional development—CPD—and standards of conduct, ethics and performance.
Secondly, the noble Lord asked whether there are plans to make sure that those in charge of a pharmacy have a high enough standard of English. The UK Government’s response to the European Commission’s consultation on the review of the directive on the recognition of professional qualifications clearly sets out the view that in the healthcare professions the ability to communicate with patients and service users is vital.
The Government also said in their response that it is vital that employers and organisations contracting with healthcare professionals undertake effective checks on language and communication competence. The management of the NHS is devolved, but in England I can say that there are statutory requirements relating to applicants wishing to provide NHS services as a pharmacy contractor; that means that their applications must be refused if they do not satisfy the local primary care trust that they have the knowledge of English necessary for the provision of pharmaceutical services in their area.
We expect and encourage those carrying on pharmacy businesses to engage staff, including those who may serve as responsible pharmacists, with a knowledge of English which is appropriate for the role that they will be undertaking. In addition, the General Pharmaceutical Council—the regulator for pharmacists and pharmacy technicians in Great Britain—requires as part of its standards of conduct, ethics and performance, that pharmacy professionals must be able to communicate effectively with patients and the public, and take reasonable steps to meet their communication needs.
The noble Lord’s third question was how an employer is supposed to determine whether a pharmacist from overseas is qualified in their own country and has no pending fitness-to-practise cases to answer. Any pharmacist wishing to register in Great Britain with the regulator, including those wishing to register under the EC mutual recognition provisions, must at the point of registration make declarations about any criminal convictions as well as ongoing criminal investigations.
In addition, the General Pharmaceutical Council also requires what is called a “letter of good standing”, or a certificate from the relevant competent authority— that is, the relevant regulatory or government body responsible in the country concerned, which is equivalent to the General Pharmaceutical Council. This is the mechanism by which any fitness-to-practise issues in the home member state are brought to the attention of the General Pharmaceutical Council.
The noble Lord, Lord Clement-Jones, asked a broader question about deregulation and reciprocity in our partner countries. At the time when the directive was made, most member states had greater restrictions on pharmacy ownership than the UK. That point in particular caught the attention of UK MEPs at the time. The UK has had the least restricted system for many years, with pharmacies owned by pharmacists and non-pharmacists—for instance pharmacy chains—but in some other member states, pharmacies have to be owned by pharmacists and they can only own one pharmacy, and not a chain of pharmacies.
That was the situation as it used to obtain. It is now a number of years since the directive was first cast, and some other European states allow ownership of pharmacies by non-pharmacists, enabling ownership by UK pharmacy chains. The level of reciprocity on pharmacy ownership, including for pharmacy chains, is very much improved.
As regards any restrictions which may apply to pharmacists who have qualified in Great Britain practising in other EU member states—which I think is part of the question my noble friend asked—our information is that only one other member state apart from Great Britain now operates a restriction under the derogation permitted by directive 2005/36.
Freedom of Information (Designation as Public Authorities) Order 2011
Considered in Grand Committee
My Lords, the purpose of this draft order is to bring the Association of Chief Police Officers, or ACPO, the Financial Ombudsman Service, or FOS, and the Universities and Colleges Admissions Service, or UCAS, within the scope of the Freedom of Information Act. The effect of the order is to apply the Freedom of Information Act to those functions of each body which appear to the Secretary of State to be of a public nature. That amounts to all the functions of ACPO and FOS and the applications and admissions functions of UCAS.
This Government are committed to ensuring greater openness and transparency in order to enable the public to hold to account those who deliver the services affecting their day-to-day lives. The coalition agreement set out this intention, stating that the Government would,
“extend the scope of the Freedom of Information Act to provide greater transparency”.
This order is part of our work to meet this commitment.
The Freedom of Information Act gives any person the legal right to request access to recorded information held by a public authority. It applies to more than 100,000 public authorities, including central government, schools, the NHS, local authorities and some publicly owned companies.
This order designates three additional bodies as public authorities for the purposes of the Freedom of Information Act, using the powers contained in Section 5 of the Act. Section 5 enables the Secretary of State to designate a person as a public authority either if they appear to the Secretary of State to exercise functions of a public nature or if they provide, under contract made with a public authority, any service whose provision is a function of that authority. The order covers bodies falling within the first limb: bodies which appear to exercise functions of a public nature.
Where a body is designated as a public authority under this limb, it is also necessary, under Section 7(5) of the Act, for the order to specify each of the body’s functions which appear to the Secretary of State to be of a public nature. Only those functions specified in the order will be subject to the Act. So an order under Section 5 can bring all or just some of a body’s functions within the scope of the Freedom of Information Act. Therefore, to understand how the order extends the Freedom of Information Act, it is important to look not just at which bodies the order designates but at which of their functions the order specifies.
With that background in mind, I turn to the detail of the order before us today. The order designates both ACPO and the Financial Ombudsman Service for all of their functions, and UCAS for its main functions, as public authorities for the purposes of the FOI Act. Before making the order, all three bodies were consulted and their functions analysed to determine which of them appeared to be of a public nature.
I turn first to ACPO, which provides leadership for the police force, aims to improve policing, acts as a voice for the force and provides the strategic police response in times of national need. By way of background, it is worth noting that the individual chief police officers who comprise ACPO are already subject to the Freedom of Information Act.
The draft order lists each of ACPO’s functions. These functions are derived from ACPO’s objects as listed in its memorandum and articles of association. Each function makes a fundamental contribution to the policing of the state, both individually and collectively. On this basis, the Secretary of State has concluded that all of ACPO’s functions appear to be functions of a public nature and this order will bring them all within the scope of the Freedom of Information Act.
The Financial Ombudsman Service administers an ombudsman scheme in the financial services sector under which certain disputes can be resolved quickly and informally by an independent person. The Financial Ombudsman Service’s functions are set out in statute. It provides an alternative, impartial dispute resolution process to the courts. There is a strong public interest and benefit in the provision of impartial, non-profit-making regulation of financial services. As all of the Financial Ombudsman Service’s functions are directed towards the provision of this service, this order will bring them all within the scope of the Freedom of Information Act.
UCAS’s main function is to provide and maintain a central application and admissions services for higher education and certain further education establishments. It also provides other, more commercially based functions, such as the provision of marketing services. The majority of bodies for which UCAS provides and maintains a central applications and admissions service are already subject to freedom of information legislation. There is clearly a strong public interest and benefit in the provision of an efficient and fair means of applying for entry to such bodies. Indeed, if these services were not provided by UCAS, it would fall to those educational bodies that are already subject to the Freedom of Information Act to provide them instead. This provides a clear basis for concluding that the applications and admissions function appears to be public in nature. However, UCAS’s other commercial functions can be seen as distinct from the central applications services that it provides and are not considered to be functions of a public nature. This order therefore includes only UCAS within the scope of the FOI Act for the purposes of providing a central applications and admissions service to bodies already subject to Freedom of Information legislation.
As I have outlined, the Secretary of State concluded that the three bodies subject to the order appear to varying degrees to exercise functions of a public nature. As a result, it is appropriate that these bodies be subject to the same scrutiny as other public authorities, so that they become more open, transparent and accountable. This order will achieve that aim for three bodies, but this is just the start. The Government are currently consulting more than 200 further bodies about their inclusion in future orders, alongside pursing primary legislation to extend the scope of the Freedom of Information Act to more publicly owned companies.
I hope noble Lords will agree with me that this order is an important step towards greater transparency, and I commend it to the Committee.
My Lords, I wonder if the Minister would just answer a simple question. I used to have some relationship with the police service. It is not at all unusual for police services from time to time to get caught up in security matters. It follows from that equally that the subject occasionally occurs in ACPO matters. The Minister said that all activities would be subject to the Freedom of Information Act. How will we resolve that particular dilemma if ACPO finds itself discussing security concerns?
My Lords, the Minister mentioned the discussion that took place within the coalition Government that brought these particular organisations forward. He also mentioned that there was an intention further to widen the scope of the Freedom of Information Act. Under one of those headings, could he tell us why there is an official at Her Majesty’s Revenue and Customs who claims that he cannot give information as to why he signed off a particular deal, which resulted in a big financial company being excused millions of pounds in disputed tax? He has pleaded confidentiality and I understand that he is appearing before the Public Accounts Committee in the other place to answer for that. The Minister knows that I do not like springing things on him, but will he answer two questions? First, why was it not brought forward or was it considered? Secondly, will he, in future, look into the scope of the so-called confidentiality clauses quoted by this officer to justify not giving the full details of why he allowed the appeal from that financial company?
The order before us is welcome, in general terms. As the extension of the operation of the Freedom of Information Act to the three bodies concerned was first raised as long ago as 2007, there has been plenty of time for grave, or even limited, concerns to be raised about the matter. There are, consequently, only some quite small matters that spring to my mind as being worthy of inquiry. These arise not so much from the propositions themselves as from the impact assessment, which was published in June of this year, and the very helpful Explanatory Memorandum.
This memorandum describes ACPO as being a professional body, not a staff association. I find that concept a little hard to come to terms with because there seem to be occasions when ACPO does, to some extent, consider matters that are peculiar to the police and may not have a direct public impact. I am thinking, for example, of whether it would be desirable for their reactions to a proposed restructuring of the police to be identified as the views of individuals participating in a debate on the subject. It is clear that the views of ACPO as a whole on such a restructuring should be engaged, but it cannot be entirely desirable for the way that debate took place to be made public. I know that individual members of ACPO are already subject to inquiry under the Freedom of Information Act, so perhaps I am splitting hairs. However, there must be matters that it is appropriate for professional associations not to disclose because they apply to them and not necessarily to the public.
The more important issue arises from the indication that the Government are continuing the process of scrutiny of the consequences of the Freedom of Information Act, although this may be just a failure of understanding on my part. The Explanatory Memorandum that we have been given indicates that that is an ongoing process, but that the results might be known by the end of this month. That is referred to in paragraph 12, “Monitoring & review”. It states that any changes to be made to the FOI Act as a whole will be contained in a memorandum to be submitted to the Justice Committee later this calendar year. How extensive and deep will the inquiry be? Are all the departments and all the many bodies covered being asked to make a submission? That must create a very considerable body of work.
That should be viewed in conjunction with what was stated in the impact assessment of the policy review; namely, that there will be no arrangements in place that will allow a systematic collection of monitoring information for future policy review. To invite all the bodies covered by FOI to make submissions once as a kind of big research exercise is perfectly sensible and reasonable, and was envisaged when the Act was brought forward. However, if we are to maintain proper parliamentary oversight of the effectiveness of this scrutiny, this openness and the purposes of the Act, it would make sense if problems that arose in the administration of the Act were noted and tabulated so that it was relatively easy for the bodies, where there is a conflict, to produce that information without going into the difficult process of historical digging, which would take far longer and require more public funding. I rather question the wisdom of not having a systematic collection of monitoring information for future policy reviews if that is the case.
Apart from that relatively minor matter, I endorse the intentions of the Government and am glad that these provisions have been brought forward.
My Lords, I thank the Minister for introducing the order so clearly and other noble Lords who have asked questions of some importance, particularly the final question, which the noble Lord, Lord Maclennan, majored on, which was around the Government’s plans for reviewing the Freedom of Information Act.
I know that the Minister is giving what they nowadays describe as a keynote address this Thursday at the Westminster Legal Policy Forum on the very topical subject of:
“The future of Freedom of Information—challenges for expansion”.
I, alas, cannot be present because of duties in the House. If this sounds like an advertisement to go and hear the noble Lord, that is exactly what it is. However, I hope that he may be able to say something both this afternoon, in response to his noble friend Lord Maclennan, and on Thursday, because I know that he has particular duties in ministerial terms as far as this Act is concerned. I hope that he can perhaps unveil slightly today what he may say to his other audience on Thursday.
We support the order. The Freedom of Information Act was one of the substantial achievements of the previous Government. It will be long-standing and of substantial value to our freedoms. It does not always seem that way if you are sitting in a ministerial chair or even in a senior civil servant’s chair. It can be awkward, difficult and seem sometimes almost impossible, but that is precisely why it is in existence. So we support both the Act and this minor order—minor not for the three bodies involved but in the great scheme of things. It was in March 2010, as paragraph 8.4 of the Explanatory Memorandum tells us, that the decision to bring these bodies within the Act under Section 5 was made and communicated to each body. We are delighted to see the order before the Committee today.
My only question to the Minister is one that I mentioned to him briefly earlier. We read in paragraph 8.4 that two of the bodies “welcomed publicly” the fact that an order such as this one was to be made, bringing them within the scope of the Act. It does not say anything about the response of the third body, UCAS. Can the Minister help the Committee with how UCAS responded?
As I said at the start of my few remarks, we support what the Government are doing on this occasion.
My Lords, first, I apologise for being slightly late. I was listening to the debate on the Floor of the House and noticed that this subject had come up. I thought that I would come up and listen to the Minister.
I can well understand that we are talking about the chief police officers of England, Wales and Northern Ireland. Of course, we have a devolved Parliament for Scotland, and there are several police forces in Scotland. Will the Minister consult the Scottish Parliament to see that freedom of information will be available in this respect for police authorities north of the border?
The Minister has said that he, on behalf of his party, welcomes freedom of information. It did not stop those who were in an executive position complaining about freedom of information after it was pushed through Parliament. Many officials and Cabinet Ministers sleepwalked through that particular incident. I make no complaint about the legislation; I simply ask the Minister a question. Many journalists use freedom of information so that they can get what is best described as an angle for their particular story. When they ask the question and there follows a period of, let us say, 27 days—although I may be contradicted on that—I have known it to be the case with matters of the House that they have complained bitterly that the freedom of information was given to them and to the general public. They have complained bitterly that it spoiled their story that everybody else should get the information. Freedom of information is about everybody getting that information. They are on record as complaining; they are using it as a device to get a scoop, or whatever they call it.
I feel strongly that once the information is issued to the applicant for that freedom of information, it should be put in the public domain immediately afterwards. In other words, if the information is given to the applicant at 2 pm on a given day, by one minute past two everyone should be able to get that information. I know that some people say that the identity of an applicant should not matter and that you should not know who they are. However, it is a bit rich if an application is made by someone sitting in garret in Toronto, asking for information, which takes a considerable amount of public funding. We should at least know whether a taxpayer of this country is making that application. Can the Minister mention that? It is not fair that someone who has nothing else to do with their time in another country can make an application and no one has to say where they come from. That is very important.
I understand that in the Republic of Ireland, where an applicant seeks information from every local authority in that country and submits an identical question to each of them, the legislation of the Republic says, “Wait a minute. Let’s hold it there. This means that an official is working on it in every local authority”. Time is time. If an official is drawing this information together, it can cost a substantial amount. I hope that we look out for such situations when someone is seeking information just for the sake of gathering it and having officials in an authority running around.
In the same way, if a ministerial Question is submitted by a Member of this House or the other place and an identical Question is tabled by another noble Lord or elected Member, the Minister would say, “I refer to the reply I have given to the noble Lord on such and such a date”. That means that there is no duplication. I hope that due concern is given to the fact that we should not have duplication.
My Lords, I am very grateful for all the contributions, which have been extremely helpful in putting this order in perspective.
Let me deal first with the point raised by the noble Lord, Lord Dixon-Smith. If it was thought that a matter discussed by ACPO was should properly be protected for reasons of national security, the Act contains the capacity to claim exemptions for that information. That can, of course, be challenged through the Information Commissioner, The noble Lord is right to say that ACPO could sometimes discuss security matters but the Act makes provisions for the protection of national security in those circumstances.
The noble Lord, Lord McAvoy, raised a specific case in relation to Her Majesty’s Revenue and Customs. I cannot comment on individual cases. HMRC can protect commercial confidentiality in its dealings. I will be as interested as the noble Lord is to discover what the Public Accounts Committee finds out but it is a matter for that committee, rather than for us.
My noble friend Lord Maclennan, pointed out that the matter of those three bodies was first raised in 2007 and 2009. I am surprised not to see the noble Lord, Lord Wills, here, who turns up at these debates like Banquo’s ghost to point out that he was about to do X or Y on freedom of information, or that the noble Lord, Lord Bach, was. I acknowledge that this is part of a process started under the previous Administration. Indeed, I consider the Freedom of Information Act to be one of their great successes. The noble Lord, Lord Bach, is quite right: the fact that Ministers and public officials are sometimes discomfited by the Act has always been proof positive that it was a good piece of legislation.
My noble friend Lord Maclennan, asked how ACPO can have free and open discussions before ACPO policy is decided. We understand that bodies need a space in which to work out their policy but, as I recall, that was the great argument about Cabinet discussions as well. There is always a tension between having the right to know what has gone on in an organisation and protecting free discussion before a collective decision is made. ACPO welcomed its inclusion, and I am quite sure that it will manage to work out how to operate under the Act.
I understand the concern of my noble friend Lord Maclennan that we seem to be engaging in a one-off exercise, but that is not true; we will continue to monitor the working of the Act. I am very pleased that we have moved more quickly than we needed to post-legislative scrutiny; that is entirely healthy. The document to which the noble Lord referred is being prepared by my department as part of the process of post-legislative scrutiny. It will be an assessment of the working of the Act, which will provide a basic working document to the Justice Committee to allow it to start its work of post-legislative scrutiny.
That process will go in parallel with the exercise being carried out by my right honourable friend Francis Maude on the right to data, in which we will also try to push the boundaries of the citizen’s right to know about information. I understand where my noble friend is coming from in asking where all this fits. We are perhaps not moving in straight order on this, but we are getting the job done. By the end of this process many more organisations will be covered by freedom of information. We will have a lot more information proactively coming from government through the right to data process. As a result, we will have much more open government, with all the benefits that come from it.
I turn to points raised by the noble Lord, Lord Martin, a number of which I thoroughly agree with. There have been journalists who have turned freedom of information into a kind of cottage industry. I again hope that the transparency agenda will make this less necessary, and that people will get the information that they want. I take his point about immediate publication. In pushing forward the agenda we press organisations to publish immediately or as soon as possible. In certain circumstances there may be a reason to consult and delay, but in the main I agree with what the noble Lord, Lord Martin, said. This is not information for an individual journalist; this is public information, and should be made public as quickly as possible.
I was interested in his points about the Republic of Ireland. I was on the pre-legislative committee that looked at freedom of information. The noble Lord, Lord Bach, is nodding; he will recall that one of the most enthusiastic pieces of evidence we received about freedom of information was from the Irish freedom of information director.
Was it the Minister who came before us? The interesting thing about that was that the Irish have had post-legislative scrutiny of their own legislation and have brought in a number of restrictions, such as the one that the noble Lord, Lord Martin, referred to. They have brought in charges for some aspects of freedom of information.
The critics of freedom of information say that it puts unfair burdens and great costs on departments, as referred to before by the noble Lord, Lord Martin. I hope that the Justice Committee will take a good look at how the Act is working, take evidence from its critics and supporters, and then take us forward as we have indicated.
On the question that the noble Lord, Lord Martin, raised about ACPO Scotland, freedom of information is a devolved matter, and the inclusion of ACPO Scotland is a matter for the Scottish Government. I hope I have covered the issues raised—
I do apologise. The noble Lord, Lord Bach, raised that and I found the answer, which is twofold. Of the three, it was UCAS which raised some concerns when discussions began. Its concerns were the costs it would face in complying with the FOI Act, how it would protect sensitive information, and other costs outlined in the impact assessment. During consultation it was satisfied that the FOI Act exemptions could protect this information, and since those consultations it has been happy to see itself included within the ambit of the Act. I apologise that I got carried away with the questions asked by the noble Lord, Lord Martin. Does he have another?
If the Minister is getting carried away, I will perhaps push my luck. I noted that the Minister stated in his reply that he would encourage these organisations to put the information out to the applicant and the general public almost simultaneously. Encourage is not quite the word I was looking for. There should be a commitment to do this. For example, if an applicant asked a police authority for a piece of information then it could, by all means, give that information out at 2 pm on a specific day, but by 2.01 pm the rest of the world should know about it.
So far as I understand at the moment, what we can do is urge best practice by the wide range of bodies that deal with a very wide range of requests. I recently went to Northampton to congratulate the local authority on setting standards for devolving freedom of information which we thought were best practice. It is very difficult to have a single diktat for such a wide range of bodies, but the Justice Committee, when it does its post-legislative scrutiny, can perhaps look at this, and consider whether the Act should be given more teeth to have a one-size-fits-all approach.
There would be counterarguments that small bodies have more difficulty in managing freedom of information. However, the point that the noble Lord, Lord Martin, is pressing is very valid. Except in matters of national security, or if there are specific matters that argue against immediate publication, freedom of information is not in the ownership of the requester but in the ownership of the public at large. Freedom of information is the right to know of the public at large. I also take the point—if it is not already doing so I urge the Justice Committee to look at this—that it seems a bit rum for someone to be in favour of freedom of information but want anonymity when asking for it. I would be very interested to see what is considered best practice here. I would have thought there was considerable argument to say that if somebody asks for freedom of information they should not be worried that somebody else knows they have asked for it. That is another matter which will be given thorough consideration. In the mean time, I commend this order.
European Union (Definition of Treaties) (Second Agreement amending the Cotonou Agreement) Order 2011
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the European Union (Definition of Treaties) (Second Agreement amending the Cotonou Agreement) Order 2011.
Relevant document: 28th Report from the Joint Committee on Statutory Instruments.
My Lords, despite significant progress in recent years, considerable challenges remain in the efforts to eradicate global poverty. The European Union—which represents the world’s largest provider of official development assistance, the largest single market and the main trading partner for most developing countries—can potentially make a huge contribution.
The Cotonou agreement is the guiding framework for the EU’s engagement with some 79 African, Caribbean and Pacific—ACP—states. Signed in 2000, it has evolved to reflect the changing relationships between the EU and ACP countries, while retaining its overall objective of poverty eradication, sustainable development and the integration of ACP states into the world economy. Cotonou provides the framework for programming the European Development Fund and channelling money to some of the poorest countries in the world—importantly including countries where UK bilateral programmes are not present and where DfID does not have a presence on the ground.
The Government’s review of multilateral aid judged the EDF to be among the most effective, flexible and poverty-focused of all our multilateral aid instruments. It is closely aligned to UK priorities and provides significant assistance to Commonwealth countries and several of the UK’s overseas territories.
Negotiations on the second revision to the Cotonou agreement were completed in June 2010 in Burkina Faso. All parties have signed the agreement and the changes are being implemented under transitional arrangements until ratification procedures are complete. The revisions aim to improve the implementation of the agreement and to ensure that it reflects changes in the international environment. The revisions fall into three categories—political, trade and development—and I shall highlight several of the important changes.
On political relations, the revised text provides for greater coherence between regional initiatives, such as the Africa-EU strategy and Cotonou. The role of ACP Parliaments and non-state actors has gained enhanced recognition and the African Union is confirmed as a key interlocutor in peace and stability matters. The importance of tackling changing security threats, ranging from piracy to exogenous shocks, is stressed. The provisions concerning political dialogue have been updated with new language on non-discrimination and the inclusion of regional and continental integration, and global and sectoral policies impacting development objectives among the issues that can be discussed. Improved exchange of information between the ACP secretariat and the EU in Article 96 processes, concerned with remedying breaches of Cotonou’s essential elements, are now envisaged.
There are important new references to key global challenges such as climate change, HIV/AIDS, and recognition of the 2008 food crisis through stronger provisions on food security and agriculture. The key role played by fisheries and aquaculture in ACP countries is included, reflecting a desire to enhance coherence between fisheries policies and development.
Cotonou’s trade provisions have been updated to reflect the introduction of economic partnership agreements supporting deeper trade relations between the ACP and the EU, and bringing these into line with the rules of the World Trade Organisation. Language on regional co-operation and integration has been strengthened in recognition of the increased regional differentiation among ACP states.
Changes aimed at improving the programming and implementation of EDF assistance have been included with, for example, the creation of a role for ACP national Parliaments and the introduction of increased flexibility in responding to unforeseen needs and crises.
Her Majesty’s Government fully support all these changes. We firmly believe that they will help to enhance and strengthen the long-standing partnership between the EU and ACP states. I commend the order to the Committee.
My Lords, there is no doubt that the Cotonou agreement is a valuable instrument, aimed at preserving the relevance and character of the partnership between the ACP and EU states. As the Minister has mentioned, the order adapts the agreement to reflect the major changes in international and ACP-EU relationships by further clarifying the political dimension and creating space for a more productive political dialogue and clearer, more effective action. Here, I refer particularly to Article 8.7. The revision seeks to strengthen economic co-operation, regional integration and trade. Particularly important is the move towards extending humanitarian and emergency assistance, and providing new thinking on aid programming and management. This assistance and support is vitally important to many ACP states.
Equally important are the provisions that point to the interdependence between development, poverty reduction and peace and security. We should acknowledge that, increasingly, security threats—both man-made and from natural disasters—must be addressed in a co-ordinated manner, engaging not only the European Union but other regional organisations, including the African Union. With the AU acknowledged, as it is in the order, as a key interlocutor in matters related to peace and security, we can expect increased consistency and convergence of the Cotonou agreement with the strategic Africa-EU partnership. We should look forward to that.
The need for regional co-operation and integration has been recognised in amendments set out in the revised agreement to Articles 11, 23, 23a, 28, 29 and 30. Regional co-operation and integration are key to combating the threats of climate change and food security, and to promoting advancement and sustainability in agriculture and fisheries. I am glad to see that the Government welcome that.
The ACP states face major challenges if they are to meet the millennium development goals, and deal with food security, HIV/AIDS and sustainable agriculture and fisheries. The importance of each of these areas for effective development, growth and poverty reduction is underlined in these amendments, together with the joint approaches over which to co-operate.
The proposed revisions also recognise the impact of the fragility of and lack of security in some states, and the negative effect of that on development. A comprehensive approach, which combines diplomacy, security and development co-operation, encompassing political, developmental, human rights and security dimensions, is enshrined in this second revision of the Cotonou agreement, which can only be welcomed. Therefore, we welcome the revision and the attention that it gives to political dialogue in Article 8 and to climate change, human rights, gender, migration, discrimination and the resolution of violent conflicts. We particularly welcome the emphasis on good governance.
However, the order raises several comments and questions that I should like to put to the Minister. Article 8 refers to dialogue on issues such as “discrimination of any kind”. I understand that this formula was intended to embrace sexual orientation. How will this be pursued? Article 8 rightly emphasises the need for civil society organisations and national Parliaments to be associated with the dialogue. What efforts are being made to bolster the capacity of civil society organisations so that they can make a significant contribution?
The new Article 32a recognises climate change as a serious global and environmental challenge. How will co-operation in that area be taken forward? Are any further initiatives planned?
Article 33 recognises the importance of domestic revenue management and international tax co-operation. Maximising domestic revenue plays an important role in ensuring financial stability and reducing dependence on aid. What steps is DfID taking to support these efforts?
Article 34 refers to the need for ACP countries to participate actively in international trade negotiations. How can we best encourage the ACP countries to push for a successful conclusion to the Doha round?
Finally, Article 36 includes reference to the economic partnership agreements being negotiated between the EU and ACP countries. How will the Government assess their progress and the possible benefits?
My Lords, I should like to raise a couple of issues that have arisen from this. First, fishing has been mentioned a couple of times. One of the worst things to be inflicted on the developing world, particularly littoral states, has been the taking out of their fish stocks through EU agreements. Although this has improved over the years, given the complete lack of coastal protection for these nations and the voracious appetite of certain European fleets for those stocks, I wonder whether the Government will make sure through this agreement that the attempt to improve the situation continues.
Secondly, on aid, I am sure that the Minister will be well aware that there is a major aid effectiveness conference taking place in Busan, in Korea, next month. Are the Government encouraging parliamentarians to be present at the conference? There is a lot to be learnt not only by governments but by parliamentarians. Does she have any expectation for outcomes from that conference?
Lastly, it always seemed to me that the Cotonou agreement and its predecessors were made on a very imperialist-based system in terms of how the EU looks at the rest of the world. There is a division between those nation states who were the French and British empires and those who are not. I would like to think that at some point we can end that discrimination and look at the rest of the world in terms of its needs rather than in its imperial past. Do the Government share that view?
My Lords, I thank the Minister for introducing the order. I should say at the outset that we support it. The changes and the coherence to be added are welcome; trade arrangements will improve; all of that is positive territory.
The Cotonou agreement as a whole has proved, as it was always intended to, an essential framework, fostering development, co-operation, economic and trade integration and security of political institutions in the ACP countries. It makes complete sense for the EU to have embarked on this course, not only because of our long-term economic and political interests in the ACP countries but also because it reflects the colonial past, the legacy of that past and the obligations that we plainly face in dealing with it.
It is encouraging that when the predecessors of the EU in the European Coal and Steel Community forged those institutions in 1951, many of them were still colonial powers in the very countries in which these arrangements are now in place as a result of the Cotonou agreement. That is positive in many ways.
The continued mutual obligations plainly mean that we continue to have a shared EU-ACP interest in co-operation. In many respects, this has matured from simple co-operation into interdependency. Those interdependencies are created for pragmatic, economic and moral considerations. It is encouraging to be able to talk about the work of the EU in such a positive way; we do not always seem to do that in our House; so I am a little encouraged to have had the opportunity to look at that without people snarling about it.
The renewal of Cotonou comes at a critical juncture. Last year, the World Bank estimated that 64 million people had been pushed into extreme poverty by the financial crisis. Of course, most of those were in countries in the developing world. Noble Lords have already mentioned the impact of climate change and famine, which have had an amplified effect because of the financial challenges in the international community, especially in those countries where we are still slipping backwards on the millennium development goals. Those tasks demand a multifaceted response, and that is what the Cotonou agreement and the changes and revisions now help us to produce.
There is a good deal of independent research in Australian universities and universities across Europe that demonstrates that it is the interpenetration of democracy and institution-building with economic progress which gives economic progress the greatest prospect of success. Much of that research also shows that in those countries where you do not have those institutional and democratic opportunities, economic development is tried to the greatest extent.
It is not a perfect agreement. The point has already been made that, even with the new language on non-discriminatory practices, one area has still not been resolved in any way that I think we would regard as satisfactory in Europe. The democratic, economic and civil rights that have been extended in so many ways seem still to exclude those who are in same-sex relationships. That is a great pity. I know that people in the EU have attempted to see these issues raised in the European Parliament and elsewhere but have not perhaps made the progress with the countries on the other side of the agreement that they would have wished for. I just hope that we will not say, “Well, we are where we are”, but take every opportunity that we have in all the revisions that still lie ahead over the 20 years that the agreement will be in place to see whether greater progress can be made.
The Cotonou agreement has carried forward the EU’s 1992 human rights and democratisation policy. We supported it at that time; we have supported it on all occasions since, from its inauguration through its revisions; and we support it today.
My Lords, I thank noble Lords for the all points that have been raised and for the general welcome for this move forward. The noble Lord, Lord Teverson, is quite right that the agreement came about as a result of countries moving into the EU wanting to make sure that what had been part of their former empire was not disadvantaged. So it is a historic agreement looking after those countries and does not necessarily make best sense as we move forward. Looking at the current revisions to the Cotonou agreement, one is struck by the fact that it is moving towards looking at the regional dimension that may be more relevant for some ACP countries in the future. In the mean time, it is extremely important that those countries have access to the EU markets, which has benefited them enormously.
A number of points have been raised in the debate, and I welcome the Committee’s continued interest in the EU’s relationship with ACP countries and the Cotonou agreement. Europe is playing a major role in supporting developing countries, particularly in Africa, to meet the many challenges that they face. The second amendment to the Cotonou agreement is an important development in this regard.
Europe is not only a significant provider of development assistance but also an important global actor. The impact on poor countries of its policies in areas such as trade and the environment can be significant. We will continue to work with the Commission and other EU member states to call for further improvements in the effectiveness, results focus and transparency of EU aid, including the EDF.
The noble Lord, Lord Chidgey, is absolutely right that regional co-operation will be extremely important. It is excellent to see the emphasis being put on the African Union and its further development. He noted the fragility of some of these states; others are less fragile. Therefore, we agree that the emphasis on good governance is extremely important.
The noble Lords, Lord Chidgey and Lord Triesman, asked about discrimination. As we know, discrimination over sexual preferences remains a serious problem in many African states—there have been various pointers towards that recently. In effect, noble Lords are asking why we do not insist on the inclusion of a clause on non-discrimination. Article 8 clearly gives the EU a mandate to raise issues of discrimination of any kind in ACP countries, and the ability to have a dialogue to make progress on all issues of discrimination. It is a very important factor. The Cotonou revision gives the EU that mandate, but we realise that that is not, perhaps, as far as some might wish to go. However, this is a collective agreement, and at least it has that mandate in it. I expect we will find that that is taken further forward in the future.
My noble friend Lord Chidgey mentioned climate change, and its significance. We welcome the stronger statement on the global challenge of climate change in the agreement. The references give the EDF a clearer mandate to spend on these priorities. It is clearly recognised now that the mitigation of climate change—ensuring that we are not making things even worse, because it hits the poorest hardest and first—is extremely important to factor in when we look at development policy. The agreement acknowledges that that has to be integrated with development strategies.
My noble friend Lord Chidgey also emphasised the importance of civil society organisations, as well as governance. The EU certainly attaches great importance to the role of civil society organisations, and provides significant support to help them engage effectively on issues such as governance, democracy and human rights, across the ACP.
Looking at taxation, the importance of domestic revenue management is rightly something people are very concerned about. Many DfID country offices work with partner governments to strengthen tax policy and tax administration. That is certainly seen as important. For example, TradeMark East Africa, funded by DfID, has helped the newly established Burundi Revenue Authority to increase the country’s tax income by 30 per cent—which I am sure would be welcome in this country—from the first quarter of 2010 to the same period in 2011.
Then there is the question about Busan and whether parliamentarians will be present at the conference on aid effectiveness. I know that my noble friend Lord Chidgey is attending.
Could the Minister clarify an issue regarding Busan? I am delighted that noble Lords are all pleased that I am going to the farthest part of the world.
One of the problems we have faced in attempts to improve aid effectiveness by better scrutiny and better involvement and engagement of parliamentarians in the process of holding their Executives to account, is that while the parliamentarians from the recipient countries are getting quite a lot of help from the OECD, to get as many of them as possible to attend Busan, there is very little support for parliamentarians from the donor countries. I suggest to the Minister—and she may agree—that scrutiny and aid effectiveness is a two-way thing. Not just the recipients but also the donor countries should have a say in how well taxpayers’ money is being used to provide aid to developing countries.
My noble friend Lord Chidgey knows that very well from his experience serving on various boards of AWEPA, which tries to link European parliamentarians with those in Africa. From my own experience it does a very good job. I am glad that my noble friend is going, though not because he will therefore be unable to put questions to me.
I hope that I have covered most issues. I believe my noble friend Lord Teverson wanted some answers on fisheries. Article 23 and new Article 23a recognise the importance of fisheries and agriculture, as I mentioned in my introduction to ACP countries. Depletion of stock is clearly a key issue, and we are hoping that some of these issues will be addressed, presumably at the Busan meeting on aid effectiveness. No, I am told that that is not right. I am afraid that I cannot quite make out what it is that came from the sky, but I should like to write, if necessary, to the noble Lord to clarify where Cotonou stands on this.
I hope that I have covered most issues that noble Lords have raised—and if I have not I will write to them. I conclude by assuring noble Lords that the Government believe that Europe has a significant role to play in the international community’s efforts to eradicate global poverty. The updated Cotonou agreement continues to provide a valuable framework for the EU’s relations with ACP states.
Public Services Reform (Scotland) Act 2010 (Consequential Modifications of Enactments) Order 2011
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Public Services Reform (Scotland) Act 2010 (Consequential Modifications of Enactments) Order 2011.
Relevant document: 28th Report from the Joint Committee on Statutory Instruments.
My Lords, the draft order was laid before the House on 14 July 2011. Perhaps I may provide a brief explanation of what the order seeks to achieve.
The order is made under Section 104 of the Scotland Act 1998—with which Members of the Grand Committee have become familiar—and allows for necessary or expedient changes to UK legislation in consequence of an Act of the Scottish Parliament. This order is made in consequence of the Public Services Reform (Scotland) Act 2010—which I shall refer to as the 2010 Act—and secondary legislation made under it.
The Merits Committee of your Lordships’ House reviewed this order and has not noted it as being of special interest. The 2010 Act made provision for the reduction and simplification of public bodies in Scotland. The overarching purpose of the Act was to simplify and streamline the public bodies landscape in Scotland with the aim of delivering improved public services and better outcomes for the people of Scotland.
The 2010 Act dissolved the Deer Commission for Scotland and transferred its functions to Scottish Natural Heritage. It also dissolved the Scottish Arts Council, transferring its functions, and those of Scottish Screen, to a new public body called Creative Scotland. The Act dissolved the Scottish Commission for the Regulation of Care. Its functions in care service scrutiny, the functions of the Social Work Inspection Agency, and the child protection functions of Her Majesty’s Inspectorate of Education in Scotland were transferred to a new public body called Social Care and Social Work Improvement Scotland.
The functions of the Scottish Commission for the Regulation of Care concerning independent health care scrutiny and NHS scrutiny functions that were previously exercised by the special health board, Quality Improvement Scotland, were transferred to a new public body called Healthcare Improvement Scotland.
The 2010 Act also made provision to dissolve the water customer consultation panels and abolish the position of convener of those panels. This order will ensure that United Kingdom legislation is updated to reflect the changes made in the 2010 Act. It will ensure that United Kingdom legislation can continue to operate when it interacts with the new devolved legislation and makes provision, as necessary, in relative enactments for the newly established bodies and procedures. For example, the order ensures that the Health and Social Care Act 2008 is updated to ensure that obligations on care home providers to comply with certain provisions of the Human Rights Act 1998 continue to apply where the care home is in Scotland. The order also ensures that the Representation of the People (Scotland) Regulations 2001 are updated so that a care home manager who is providing care to a resident in respect of that resident’s disability can continue to attest to and sign that resident’s application to vote by proxy.
The modifications made to existing legislation by the order are of a technical nature. However, by the very fact that they are United Kingdom pieces of legislation, it is not within the competence of the Scottish Parliament to amend them. The modifications are required to ensure that existing legislation continues to operate effectively, by recognising the modifications that have been made to various pieces of legislation by the 2010 Act and subordinate legislation made under it. The order demonstrates this Government’s commitment to working with the Scottish Government to make the devolution settlement work. I hope the Grand Committee will agree that this order is a sensible use of the powers in the Scotland Act and that the practical result is to be welcomed. I commend the order to the Committee.
My Lords, this order appears to be uncontroversial and is before this Committee only because it is required to have an affirmative resolution. The only question I wish to ask is whether in the case of orders of this kind, which are not designed to amend the legislation, save—as my noble friend, the Minister, has said—to reflect, in a technical sense, the consequences of legislation by the Scottish Parliament, it might make sense, for reasons of expedition, to amend the Scotland Act to enable the measures to be incorporated in negative resolutions rather than affirmative resolutions. The Minister clearly explained that there is no issue of policy at stake here other than the maintenance of the status quo. As the Joint Committee on Statutory Instruments has not raised any matter about drafting or anything else, there is every reason to believe that this is an acceptable instrument. We now frequently see consequential legislation brought forward for extensive debates and this does not seem to be strictly necessary, bearing in mind the pressures on the United Kingdom Parliament.
My Lords, I thank the noble and learned Lord, Lord Wallace, for his clear exposition of what is in the order. This will save some time. I will start by disagreeing totally with the noble Lord, Lord Maclennan of Rogart, about helping Governments to be expeditious in getting legislation through. There is always somebody paranoid, suspicious and hostile to government—probably me—and I like to see things coming in front of me. I also thank the office staff of the noble and learned Lord, Lord Wallace, for offering assistance and guidance, as usual. This is extremely helpful for those such as me who are still adjusting to this place. The noble Lord, Lord Maclennan of Rogart, also says that the measure is uncontroversial. I take the view that very little is uncontroversial in Scottish politics at the moment that cannot be made controversial by the behaviour of the First Minister, Alex Salmond.
On the extension of the Scottish Executive over those bodies included in the order, I wonder whether they will be exhorted by the leader of the Civil Service in Scotland to go to watch “Braveheart” so that the Scottish public can see how Scotland lived under English occupation 700 or 800 years ago. That is the sort of nonsense we are getting in Scotland at the moment, so I do not accept that there is anything uncontroversial in Scotland. Everything will be seized on as we lead up at some point to a Scottish independence referendum.
For the avoidance of doubt, I would not say that there was nothing uncontroversial in the Scottish legislation of 2010. What I see as uncontroversial is the response of the United Kingdom Government, which is that this is a devolved matter and not a matter over which we have control. Nothing that has been done has, as I see it, required the United Kingdom Government to do more than preserve those things that have not been affected by the Scottish legislation.
My response to that would be: not yet, because you never know what will happen. I am not called Thomas for nothing. What raises my suspicion is reading the words Representation of the People Act—although I know that this order is about care homes and such things.
The serious question I have for the noble and learned Lord, Lord Wallace of Tankerness, in agreeing to these bodies understandably and logically coming under the remit of the Scottish Executive, is: are any of them in any way involved with elections or referendums? I know that this might seem wild, but you never know. In the order is a whole host of regulations, so I want to clarify just to make sure. Are any of them involved in the staffing of stations, administration or anything to do with the practical running of referendums? I should like to know to be sure that that is not the case.
In addition, the memorandum states:
“Part 1 makes provision for the purpose of simplifying public bodies”,
but ends up by stating,
“and provision in relation to the regulation of officers of court”.
Again, would any of those officers of the court be involved in ruling on disputes about referendums or voting in any way?
I have no intention of repeating the explanation of the order by the noble and learned Lord, Lord Wallace of Tankerness, which was absolutely fine. I am very grateful to the noble Lord, Lord Maclennan of Rogart, for getting involved. Those are my only serious questions. I know that folk may dismiss them as scaremongering or fantasising, but in Scotland at the moment we need to keep a very firm check on everything that comes through.
My Lords, can my noble friend clarify a couple of points? I listened to him but did not catch the fact that a couple of Welsh measures have wandered into the Bill. It is very interesting to see them in there. Can he reassure us that the Welsh paragraphs are an exact translation of the previous ones, because my Welsh is not up to understanding them? How many times has this Parliament passed measures in Welsh?
My Lords, I thank my noble friends Lord Maclennan of Rogart and the Duke of Montrose, and the noble Lord, Lord McAvoy, for their contributions to this debate. Although technical, the points they raised are important. Perhaps I may say to my noble friend Lord Maclennan that a similar thought crossed my mind as to the necessity for this. The truth of the matter is that it is specified by the Scotland Act that some orders under it can be approved by way of negative procedure, but when dealing with amendments to primary legislation, Parliament in its wisdom in 1998 thought that that should be done by affirmative order. Indeed, it would be invidious to decide which ones were or were not controversial. On the previous order we considered there was agreement on all sides that it nevertheless related to changing the powers of officers of the UK Border Agency and HMRC with regard to periods of detention, which is a substantive matter. It might be invidious to try to make judgments as to which orders are controversial and which are not when they all come under the same Section 104.
On the points made by the noble Lord, Lord McAvoy, it is perfectly proper that he should be aware and alert—as he said, he was not called Thomas for nothing. I can assure him that as far as I am aware, and as far as we could trace, no body involved in this order would be involved in elections or referendums. One could perhaps use one’s imagination as to how Creative Scotland could be creative. However, strictly speaking, no body would have responsibility for the running of a referendum or election—subject to the example I gave in respect of care home managers. However, the important point is that the order updates the situation that already existed. The noble Lord’s other point was about court officers. I am advised that under the order, none of them would have a role to play in election work.
My noble friend the Duke of Montrose raised a question about Welsh measures. I am assured that it is an exact translation—although I have to say that I have to take it on assurance because I do not speak Welsh. It is probably a Measure of the Welsh National Assembly that is referred to here. Regarding some of the reciprocal arrangements between Scotland, Wales, England and Northern Ireland, what has been done in Scotland has implications in Wales. If the Welsh legislation is in Welsh, the amendment to it has to be in Welsh also. That is the explanation. As I said, I take that on trust because, regrettably, although I speak in this House for the Wales Office, I do not have Welsh.
I hope that with those explanations the order will commend itself to the Committee.
Incidental Flooding and Coastal Erosion (England) Order 2011
Considered in Grand Committee
My Lords, Sections 38 and 39 of the Flood and Water Management Act 2010 allow the Environment Agency, local authorities and internal drainage boards to carry out works to manage flooding; coastal erosion or water levels for the benefit of nature conservation, including the conservation of the landscape); and the preservation of cultural heritage or peoples’ enjoyment of the environment or cultural heritage.
These powers were required because the definition of flood and coastal erosion risk management in Part 1 of the Act empowers authorities only to undertake measures to reduce the harmful effects of flooding or erosion; whereas some of the work that is required for environmental and recreational purposes involves the management of flooding, water levels and erosion to gain the beneficial effects of those processes.
Sections 38(8) and 39(12), commenced on 18 January this year, require the Minister to make an order applying the provisions of compensation, powers of entry and compulsory purchase in the Water Resources Act 1991 to Sections 38 and 39 of the Flood and Water Management Act, with or without modifications.
The purpose of the order is twofold: first, to protect the rights of occupiers and property owners who could be affected; and, secondly, to ensure that authorities have the necessary ancillary provisions. The order works by applying relevant provisions in the Water Resources Act 1991 with appropriate textual modifications to Sections 38 and 39 of the Flood and Water Management Act. However, it is important to understand that the provisions of the Water Resources Act are not amended by this order. I will now outline how each of the provisions will work and why they are necessary.
First, the order applies the compensation provisions in the Water Resources Act so that if any loss is suffered as a result of the use of powers under Sections 38 or 39, the relevant authority would be liable fully to compensate the injured party. This is necessary to protect the interests of landowners and occupiers. Before any work was undertaken, all necessary permissions and consents, such as planning permission, would need to be secured. Compensation would then be paid for any loss caused in the course of carrying out the work. Sums would be calculated on a case-by-case basis. If the person affected was not satisfied with the compensation offered, they could appeal to the Upper Tribunal.
Secondly, powers of entry are necessary to provide safeguards for landowners and occupier as well as for the authority, when an operator needs to undertake work on a third party’s land. The local authority or Environment Agency would write to the landowner or occupier notifying him of its intention to enter land. The notification would explain the nature and timing of the works and the entitlement to compensation in the event that any loss is suffered. The order requires a minimum notice period of seven days before entering agricultural land. This is a modification of how provisions in the Water Resources Act apply to Sections 38 and 39 of the Flood and Water Management Act. It makes the minimum notice period for agricultural land the same as that required for residential premises.
Compulsory purchase powers are needed so that an authority can, when necessary, obtain proprietary interests in land in order to protect its investment and ensure that works can be maintained. Powers of compulsory purchase can be exercised only with the express authority of the Minister. In all cases, the authority or agency would try to purchase by agreement before seeking ministerial authority to exercise its powers. The Environment Agency’s powers of compulsory purchase are limited in this order to purchases necessary for the purpose of enabling the United Kingdom to comply with its obligations under specified European directives—the water framework directive, the habitats directive or the wild birds directive.
Landowners and occupiers have rights under the Acquisition of Land Act 1981 to oppose the compulsory purchase. This includes provision for a public local inquiry, which may decide whether or not to allow the purchase or modify any particulars. If a landowner is still not satisfied, he may challenge the decision in the High Court.
I commend the draft regulations to the Grand Committee.
My Lords, I congratulate the Minister on his appointment. I know that that has been done on the Floor of the House by the various Benches, but I wanted to add my personal congratulations. It was an excellent appointment. I am sure that the good work that the noble Lord, Lord Taylor, has done will continue.
The Explanatory Memorandum refers to the Pitt review. Given that this is a short session, it would be useful to hear just of couple of headlines on how the Government view the Pitt review and whether they foresee any primary legislation coming forward in that area in due course.
The order makes a lot of sense, because it is clear that certain flooding is good for the environment. If flooding was prevented, there would be environmental and ecological degradation. Given that Sections 38 and 39 of the Flood and Water Management Act 2010 can be implemented only in relation to the powers of compensation, access and compulsory purchase, is the Minister satisfied that the right balance has been struck between there being a heavy responsibility on the authorities to undertake this work and the power of the landowner?
My Lords, I thank the noble Lord, Lord Taylor of Holbeach, for the clarity with which he set out the order. That was most helpful given that it is very difficult to get any clarity from reading it. That is why we have an Explanatory Memorandum—I thank the Minister’s officials for the clarity with which that has been set out. I also congratulate the Government on listening to the concerns expressed by the National Farmers Union and the Country Landowners Association in bringing forward the order, which I certainly support.
Like the noble Lord, Lord Teverson, I was interested in paragraph 7.6, on consolidation, in the Explanatory Memorandum. I would be interested in any news on when that consolidation of the Act might happen in response to the Pitt review.
I tried to work out the taxpayer liability from the impact assessment. I understand that a notional 100 hectares is being discussed in the Explanatory Memorandum because it is difficult to predict how much land will be affected by erosion. Am I right in calculating that 100 hectares—the equivalent of one square kilometre—would generate a cost of £2,000 per annum, or have I misread the way the sums work? With that question, I am very happy for the order to go forward.
I thank noble Lords for their comments. I thank in particular the noble Lord, Lord Teverson, for his pleasant greetings. He asked how the legislation related to the Pitt review. He and I were both around when the Act on which the statutory instrument is based went through this House. He will know that it was a foreshortened Bill; the water provisions were relatively limited within it. The Government, however, have made it quite clear that there will be a water White Paper shortly—it is likely to be published within the next six months. We will bring forward a Bill, probably within this Parliament, to legislate in the whole area of water and water management. It is important not just for issues raised by Pitt but also for the consumer interest in water.
The noble Lord, Lord Knight, asked me about the cost of the provision. I can assure him that his estimate of £2,500 per annum is about right. He also asked whether the whole business of consolidation might be considered. The Government are still committed to this, but he will know how difficult it is to get legislative time. However, this is something the Government will seek to do, if at all possible, within this Parliament.
The noble Lord, Lord Teverson, asked me if the balance was about right. He would expect me to say, and I do, that I think the balance is about right. This is a question of a balance of differing interests, and the statutory instrument has got it about right. It does contain the necessary provisions to protect the interests of those who would be affected, and the minimum required to allow local authorities, internal drainage boards and the Environment Agency to use, where appropriate, the powers provided by Sections 38 and 39 of the Water Management Act.
I hope that I have managed to cover all the points raised. I am particularly happy to present this order. I beg to move.
Electricity and Gas (Internal Markets) Regulations 2011
Considered in Grand Committee
Moved By Lord Marland
That the Grand Committee do report to the House that it has considered the Electricity and Gas (Internal Markets) Regulations 2011.
Relevant document: 28th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, the regulations under consideration implement the EU third energy package in Britain. This is a significant tranche of EU legislation, consisting of two directives on gas and electricity and three regulations. This legislation makes progress in enhancing consumer protection, promoting competitive energy markets, and increasing security of supply. It is a welcome step for the EU and the UK, where we will see many benefits for consumers and businesses alike. The regulations introduce new consumer protection measures to ensure that British consumers get the most out of a competitive market. Furthermore, the regulations focus on breaking down barriers to entry and enhancing competition in our energy markets. Northern Ireland has introduced its own regulations, and will be consulting on further implementation measures to complete UK transposition.
In July of last year the Government issued a consultation on proposals to implement the third package’s requirements. This was followed, in the autumn, by two more detailed consultations on areas of particular interest to industry: the amended licence modification process and the need for owners to license exempt networks to provide third-party access. In our approach to implementation we have tried to take on industry concerns and minimise uncertainty as far as possible. However, it has been important to try to strike the right balance between the interests of consumers and industry, while ensuring that we fully implement the requirements of the third package.
The implementing regulations before us today cover four main areas: consumer protection measures; measures which encourage competition by imposing minimum separation and independence requirements when companies or their associates have control of key infrastructure and carry out certain energy activities, such as supply; the extension of third-party access requirements to licence-exempt undertakings; and changes to the duties and powers of the regulatory authority, including a new licence modification procedure.
I shall give a brief summary of some of the key measures included under each of these headings. Consumer protection is covered in part 2 of the regulations and in the changes to supply licences made by Schedules 7 and 8, introduced by part 10. Primary changes include a requirement for customers to be switched within three weeks of expressing a wish to do so, from the end of any cooling-off period. Suppliers will also have a new obligation to improve the switching process. In addition, there are new requirements for energy suppliers to provide customers with more information, to ensure that customers are aware of their rights and enable them to make informed decisions. A consumer checklist of information is to be provided and will be produced by Consumer Focus to this end.
Changes are being made to ensure that certain activities are carried out independently of other energy activities; such separation is referred to as unbundling. This will increase security of supply by promoting fair access to infrastructure, with resulting benefits to competition. Furthermore, these measures promote unbiased investment decisions by large players in the market, and create a fairer playing field for smaller companies and new entrants.
Part 3 of the regulations requires the ownership of transmission systems and interconnectors to be completely separated from interests in those of supply and production, unless an exemption is held or the operator satisfies the requirements of one of the alternative models being made available. It will be for Ofgem to decide whether companies qualify for these alternatives when individual applications are made. The alternative models to ownership unbundling have been made available to provide British businesses with as much flexibility as possible.
Part 4 of the regulations prevents owners of gas storage facilities producing or supplying gas, and requires facilities to be operated independently of such interests, unless the storage facility is not considered to be technically or economically necessary for the operation of an efficient gas market. Part 5 prevents distribution system operators producing gas or generating electricity, though an exception is being made for businesses with less than 100,000 customers. This is to avoid conflicts of interest in investment decisions and promote transparency.
Another significant change introduced by the regulations is the requirement for licence-exempt owners of distribution networks to grant unrelated—that is, third-party suppliers—access to their systems, as established in part 6 of the regulations. This will benefit consumers connected to these networks, who as a result of this change will be able to choose their energy supplier and receive the advantages of competition.
Some industry parties have expressed concerns regarding the burdens that this will place on small businesses. As a result, we have tried to impose the lowest burden possible on these networks within the EU requirements, and will produce guidance to provide as much clarity as possible for affected businesses.
Of the changes relating to Ofgem, which part 7 of the regulations designates as the regulatory authority for Great Britain, the most noteworthy is the alteration to the licence modification procedure, as set out in part 9 of the regulations. Under the third package, the regulatory authority must be able to take autonomous decisions and implement binding decisions by the European Commission and the Agency for the Cooperation of Energy Regulators. In parallel, parties affected by those decisions must have access to suitable mechanisms of appeal.
Under the current system Ofgem’s proposals for licence modifications can be blocked by 20 per cent of relevant licence holders based on market share or number of licence holders. Besides disadvantaging small players in the market, this can hardly be described as autonomous decision-making. We are therefore introducing a new licence modification process that allows Ofgem to make decisions and act on them autonomously, but gives those affected by the decision the right to appeal.
I am aware that some market participants do not welcome these changes and believe that by applying this system to all licence modifications, rather than simply those resulting directly from European obligations, we have gone further than is strictly necessary in our implementation. However, in many instances modifications may relate to both an EU obligation and a domestic matter, rendering a dual system impractical, if not impossible, to operate. Instead, we are proposing a robust, transparent and coherent decision-making framework, with an appropriate appeals mechanism.
I hope that the Committee will agree that these regulations represent a sensible transposition of the third package requirements. They will improve the functioning of our energy markets and bring real benefits to consumers while improving our long-term security of supply. I therefore commend them to the Committee.
My Lords, I am grateful to the Minister for his explanation, which means that I now understand a very small part of these regulations a bit better than I did. I found it infinitely depressing when I went to the Printed Paper Office and suddenly found myself presented with 197 pages of regulation and 184 pages of Explanatory Notes. If anybody in this Room is familiar with the content of all of them, I would be very surprised. I do not doubt that there are plenty of people who know how to reference every little last word, but do not think that it is possible for anybody to put their hand on their heart and say that they are familiar with it all.
I am really interested only in part 9. I will admit that I had representations made to me by one of the electricity companies, which was concerned about it for two or three reasons. First, although some might argue that the previous arrangements were a bit cosy, the licensees have to work very closely with Ofgem in forming any regulation. The result is that on the whole there is a great degree of agreement between the two when the regulations come out. Of course, the right to appeal to the Competition Commission is always there in the background.
Part 9 introduces this new body, the European Agency for the Cooperation of Energy Regulators. I really wonder how that was written into the European treaty. I assume that it must be a treaty matter; otherwise, how do we come to have a European body that can tell national Governments what to do? However, the Northern Irish can apparently get away with it, because they are only a devolved authority, but they have the power to say that this provision does not apply to them, as I understand it. The Minister may be able to explain that.
What concerns me is that we still have the appeals process to the Competition Commission, which is fine—but what is the relationship between the commission and ACER? If there is an appeal, which is upheld and is against what might be described as a binding decision of the new regulatory body, what happens? Do we have a power over it? I find a bit of confusion in the first paragraph, where it says why DECC is proposing these regulations, stating:
“The Third Package requires Member States to ensure that national regulatory authorities are able to take autonomous decisions”—
that is fine—
“and implement any binding decisions”.
Okay, but binding decisions are certainly not autonomous. Then we have an appeal mechanism, which can set the whole lot aside. I would be very grateful if the Minister could explain to me rather better how that relationship will actually work in practice. At the moment it looks a bit like a recipe for finishing up in the divorce courts.
My Lords, I apologise to the Committee for not getting here at the start of these proceedings. It is a terrible thing to say, but I went to the wrong room and got lost.
My interest in this issue stems from talking to many ports and airports around the country. I recall having correspondence with Ministers a few years ago on one issue in particular. Ports and airports which already had a network might have tendered out the supply of electricity to get the best deal for their various tenants, but if one tenant decided to go to another supplier then, in order to comply with the directive and the Citiworks judgment, the port could not stop them. This may be fair enough but the port might then be saddled with the very high cost of upgrading its internal electricity network to grid standards. I know that Ministers at the time—I think it was before the election—understood the problem, but it has not gone away. It seems that there is something of a rush about getting this through, which I cannot believe is happening in any other member state. Can the noble Lord tell me whether any other member states are implementing these regulations at the same speed as we are?
The costs of doing this, whether capital cost or anything else, and the pricing methodology for assessing the charges, worry me and this needs further discussion. It is good that, at the seminar on 9 May, Ofgem announced a helpful concession to allow a higher capital cost figure to be taken into account in assessing the charges. However, these additional costs cannot be taken into account in the case of the input of the opt-out on existing bulk purchase contracts, where the local network provider has committed to a minimum threshold. This seems rather unfair. If a port has put in a network and negotiated a bulk electricity deal, then half its tenants decide to go somewhere else—which they can do—it is left holding the baby with quite a big loss. One port told me that if all this went ahead and it was forced to implement it, it could lose in the region of £10 million a year. That seems a very high figure. There is clearly no way to stop this and it is probably right that tenants should be able to choose to buy power where they want. However, the cost of such a change should be borne by the tenant who wants to make the change, rather than by the landlord losing out.
Ports and the port businesses are also being hit by the carbon reduction commitment, which, as we know, is a tax on energy used by businesses. CRC is currently payable in respect of all business electricity users on port estates, even when they are below the minimum usage threshold for paying it. This may encourage more tenants to opt for third-party suppliers, which also puts more pressure on the port. Could the Minister see whether these effects can be mitigated, either through further discussion with Ofgem or further meetings with airports and port operators, to try to redress some of the adverse effects that are perceived at the moment?
My Lords, I broadly support the second package and the transposition of it. However, it leaves a few loose ends, and I want to raise three points, one of which relates very much to what my noble friend Lord Berkeley just mentioned: inclusion in the need to provide access for consumers and businesses those who are licensed for local networks.
I am in a dilemma here—no doubt, so are the Government—in that if you are locked into a local network and there is no alternative supplier, choice does not apply. On the other hand, if you open it up to choice, as the noble Lord explained in relation to ports, the economics of the local network change. There is a real problem here. I ask whether that would apply, for example, to a relatively small CHP system on an industrial estate where all the other units on the estate had agreed to sign up and the economics had been worked out on that basis; or indeed a residential district heating system—I am very much in favour of both such developments of localised and decentralised energy. Opening that up to competition or to the secondary user's choice of supplier makes the economics much more difficult. That is a dilemma. Two principles clash here: one of encouraging decentralised energy and the other of consumer choice. Simply including them under the same obligation as the big network suppliers does not resolve that. I am no closer than the regulations—or, probably, the department—to supplying a solution, but it is not supplied by the regulations.
My second point relates to the reference to consumer protection and Consumer Focus. I declare my past allegiance as former chair of Consumer Focus and—although this applies more to my third point—as currently undertaking some work for the Consumer Council for Northern Ireland. The requirement for Consumer Focus in part 2 to provide a consumer checklist is an extension to what is provided in the Consumers, Estate Agents and Redress Act 2007. It is a more prescriptive requirement on Consumer Focus—the National Consumer Council, in legal terms—than exists under that Act. Even in its current form, one could say that it is an incursion on its independence. The organisation already supplies significant guidance and information available to consumers. However, on balance, I do not object to the current setup.
As the Minister will be aware, under the Public Bodies Bill it is intended to move the role of Consumer Focus on energy either to a third-sector organisation, Citizens Advice or—another proposition currently in play—to Which?, which is, for these purposes, a private sector non-profit-making organisation. Is not the requirement for it to do the job in a certain way an even greater imposition on an independent organisation than it is on a quango? Is the Minister clear that such a requirement would survive a transfer of those functions to organisations that have not been in this game before and that have their own charitable and, in the case of Which?, slightly different structure of obligations and priorities?
Clearly, it is a bit of a problem to get the current powers of what was Energywatch and then Consumer Focus into a completely non-governmental organisation in the first place, but the more prescriptive that that becomes the more difficult it is to ensure that the provision in these regulations survives such a transfer.
My final point relates to Northern Ireland, to which the noble Lord, Lord Dixon-Smith, already referred. He seems to think that this lets Northern Ireland and the separate system of regulation off the hook. I am sure that in Northern Ireland he would be relatively happy for that to be the case, but my understanding is that there is concern about this over there because Northern Ireland organisations are not party to the ACER set-up. There can be only one regulator there, and the energy market there is very different to ours. The gas side is on an all-Ireland basis or is pretty much moving towards that. The Irish regulator would be there but not the Northern Ireland regulator. There are different structures of competition and supply. The regulations are not necessarily appropriate to a very different sort of market with a different sort of fuel supply. I should like the situation on Northern Ireland to be clarified—if not today, then at some point in the near future—because there seems to be a bit of a lacuna in the set-up.
My Lords, I should like to raise a couple of points—again, primarily on the consumer side, which I suppose is appropriate, given that it is a topical subject in government. I hope that the Official Opposition Front Bench do not take half an hour on the various provisions relating to competition and energy. However, that is entirely up to them.
The only issue that I wanted to raise was that a lot of this relates to competition and openness of markets. I want to understand where the Government are in terms of their recent announcements and the particular Ofgem proposal that 20 per cent of energy production be auctioned, which would at least start to open up the market.
The niche area that interested me is the one that the noble Lord, Lord Whitty, mentioned at some length—the energy consumer checklist. On page 19 of the annexe to the Explanatory Memorandum it is stated that the European legislation,
“Requires Member States to ensure consumers are provided with the Energy Consumer Checklist and that it is made publicly available”.
I understand how that started to work from reading the third column on that page. However, I draw the Minister’s attention to the fact that I tried to find out from a European Commission website and the DECC website what the energy consumer checklist was—particularly as the proposal is to have it printed on all bills. There nothing definitive whatever on the European Commission’s website. It was completely vague and the Commission had obviously decided that this was a good idea, had delegated and had then done not a lot else. On the DECC website there was a copy of a letter from the Directorate-General Energy and Transport to Kim Darroch, the UK’s permanent representative. Some 78 questions were listed on all the things that consumers ought to be able to ask about. My understanding from this—I am sure that the noble Lord, Lord Whitty, already knows the answers, but forgive me if I pursue the issue—is that the National Consumer Council boils those down and makes them work. I am interested in how we make that obligation relate in a useful way to consumers, so that they can actually make real decisions. That is obviously tied up with all the issues around the swapping of accounts and everything else that has been high on the agenda in recent times. However, I should like to understand how the energy consumer checklist will be effective.
Perhaps the Minister can give us an insight into how other European member states are approaching this. I am particularly interested in the auctioning activity and whether the Government feel that other EU member states are starting to move out of the ice age and into global warming in terms of making sure that some of this deregulation and more market competition in terms of unbundling, or whatever, actually happens as regards those other European markets where, historically, we have been well ahead of the rest of the pack.
My Lords, I agree—perhaps unusually—with the noble Lord, Lord Dixon-Smith. When I first picked up the package of papers I saw that it was, as he said, nearly 200 pages on the order itself, and the Explanatory Memorandum. If we look further to the impact assessment and the implementation and consultation, it is quite a hefty range of documents, and I am not sure that this Committee could do justice to those documents if we stayed here until tomorrow.
It is long, detailed and fairly complex. I am grateful to the Minister for trying to bring some order to it in the comments he made, and I think there is much in here with which we are quite happy. There are some errors and disappointments, and the noble Lord, Lord Berkeley, expressed some concerns, as has the noble Lord, Lord Whitty. I was struck by one comment he made when he said that on licensing the Government felt able to go further than was in the directives, which I understand and am not unhappy about.
However, it seems to me that the area in which the Government might have wanted to go further is consumer protection and the issue around switching and information for customers. I cannot see why, or how, switching can be effective for the consumer or the customer unless they have the information and are able to understand it and make use of it. The noble Lord will recall the noble Baroness, Lady Oppenheim-Barnes, who spoke for many of us last week when her frustrations boiled over into anger as she spoke of her experience in trying to switch energy companies.
Certainly, what is here today can make it easier. But, again, at the summit today at Downing Street, Chris Huhne made a comment about making switching easier. If we are going to put so much emphasis on the ability of the consumer to save money by switching energy companies, there is far more we need to do than what is in singular. Therefore, I welcome it, as far it it goes.
I have some questions that might help me assuage my disappointment and help me understand some of the issues. I am sure the noble Lord shares my disappointment at the response to the consultation from the energy industry. I would have liked it to be a bit more positive.
We have heard comments from the energy industry that it wants to help people reduce their bills, but its response to the consultation was a bit disappointing. On the issue of switching within three weeks—which is exactly the right thing to do in that area—while their IT companies were saying it could be done, the companies themselves were expressing concern and were, I think it is fair to say, less than enthusiastic.
I would like to ask the noble Lord a few questions on consumer protection, as I am not entirely clear about the effects of implementation. Is the three-week period from the end of the cooling-off period for the customer, or from when the customer first signs the documentation required to say that they want to switch? We have had two conflicting responses on that, so it would be helpful if the noble Lord could clarify that.
Also, I noted in the consultation document that the energy companies raised concerns about making it a legal right for customers to expect their supplier to be changed within three weeks. What was the outcome of that? I have been through the Explanatory Memorandum and the order itself. I may be missing something, but if an energy company fails to meet the 21 days for switching the customer, what action can the customer or the regulator take? What are the practical implications of it?
If the only action open to the consumer is to take action against the supplier then the company will have nothing to fear. I am also unsure as to how the customer will know which is at fault: the company they are switching to or the one they are switching from. Could the Minister outline the consequences of a company failing to meet the 21 days, particularly if it is a regular failure, rather than an occasional mistake?
The ability to switch depends on having the time, the capacity, ability and information to do so. The Select Committee in the other place has drawn attention to this issue. I have seen the new regulations and I take the point made by the noble Lord, Lord Teverson, about the checklist. What will be in it and will it be in a format that is clear, understandable and concise? A list of 58 questions and answers will not be satisfactory for any consumer. The Explanatory Memorandum states that the information will be put on the internet. If consumers have to go to the internet and wade through 58 questions and answers, it might be a week or so before they decide that they want to switch. Are the Government satisfied that the information available to the consumer will allow them to make an informed decision about their bills and supplier?
In a recent survey, Which? called the six major energy suppliers 12 times in a week and asked about the cheapest deal for the consumer. In most cases, the energy company got it wrong and failed to offer the cheapest deal. I think that EDF performed best, offering the cheapest deal in five of the 12 calls. One company said that the cheapest tariffs were available only online. Exit fees were not mentioned in a third of all cases. If the energy companies themselves are unable to give to the customer correct and accurate information about the cheapest deal, how can the consumer, who is not an expert, be expected to find them out for themselves?
It would also be helpful if the consumer was advised not to switch on the doorstep. Forty per cent of those who switch as a result of doorstep selling find that they have got not a better deal but something that is worse or no better than they have already. I would like energy companies to offer every customer the best deal available—I have never understood why there are so many different tariffs anyway.
Annex 1 to the Explanatory Memorandum outlines directive 2—the electricity directive. I am not sure why directive 1 is not there. It sets out the articles of the directive and what has to be done to comply with them. Why under Article 3(7), which requires member states to introduce a number of measures to protect vulnerable customers, is Warm Front listed as something that the Government are doing, when that programme is being phased out, indeed abolished? I am unclear why that is still in the transposition notes on action being taken by the Government. It seems unusual to refer to something that is being phased out. I appreciate that, when the consultation was undertaken, there was no intention on the part of the previous Government to get rid of Warm Front, but now that it has gone, I do not understand why it is still in the document. Since that programme is being phased out, do we have to go back to the EU and say what else we are doing?
The document also mentions the Green Deal as helping vulnerable customers. It does not say that it is a very limited measure that does not help those in the private rented sector as Warm Front did. There is a gap, because that help will take some time to come in. Can the Minister explain why that information is being given?
A further issue brings us back to Consumer Focus. Consumer Focus is going; the Government are getting rid of it. The legislation, the Explanatory Memorandum and the accompanying documents refer to the successor body. Which successor body will that be? Will it be Citizens Advice, which was mentioned during the passage of the Public Bodies Bill, or will responsibility come back to the department? I am not clear who will undertake that role and what funding will be available to ensure that it is properly undertaken.
The Minister mentioned networks, access and storage facilities. All those are referred to in the impact assessment as ensuring greater competition and falling bills. Does the Minister understand a slight scepticism being felt about that? Very few customers see their bills coming down; they may see a smaller increase. Can he give us more information on how this will impact on the consumer and assure us that the cost savings will return to the customer and not just mean larger profits for the energy companies?
The final part is on the regulatory framework. There has been a reprieve for Ofgem in the Public Bodies Bill. Is the Minister satisfied that it has the resources to undertake the additional regulatory functions it is taking on? I endorse the comments made by my noble friends, Lord Berkeley and Lord Whitty. The local estate heating system is a bit of a minefield. There are estates in my former constituency where people feel their bills are too high and want the opportunity to switch companies, but this would have the effect of increasing bills for others. This is a dilemma and more work is required.
In relation to the comments made by the noble Lord, Lord Berkeley, the impact assessment does not refer to the impact this would have on airports or ports. It talked instead about the costs to Ofgem. If there are associated costs that are not referred to in the impact assessment, or that I have missed, then there is an issue. We need to find a way of not imposing costs that would make businesses unprofitable and put them in jeopardy, particularly in times of recession. The impact assessment states that further legislation would be required. Does that mean we will have another opportunity to look at this before it is implemented? I hope that the Minister can address some of the points and concerns that have been raised.
My Lords, it is, as always, a great opportunity to look at the contents of the Bill. I am afraid that I agree with the noble Lord, Lord Dixon-Smith, about its size. Let us not forget that this regulation was agreed by the previous Government in 2009, at a negotiation in Europe. So I share the noble Lord’s complaint: I have inherited this vast document of noble exchanges at a very high level—beyond my pay grade—in Europe. The net result is that we have a broad regulation which we have attempted to modify and improve, taking on board what a number of noble Lords have said. We have largely accepted everything that is here, because it has been imposed upon us by the EU, through previous negotiation. We have taken four issues which we have tried to mitigate and improve on. Those are: loosening the private network owners’ situation—about which the noble Lord, Lord Berkeley, is concerned—small generation interests, gas storage, which we have tried to find a more transparent way of managing, and switching licences. These are four areas which we, as a department, have decided it would not be in the best interests of the consumer to adopt wholeheartedly.
It comes as no surprise that the noble Lord, Lord Dixon-Smith, has heard from one or two of the major energy companies, because they, quite naturally, do not like everything that is going on. We in Government—and I think that we would all in this Room agree about this—want, largely, to protect the consumer, not the provider. It therefore comes as no huge surprise that, in this particular instance, one or two of the companies are disappointed. That does not mean that we do not have to work with these big six, because they are fundamental to delivering supply and we must congratulate them on much of their work.
The noble Lord asked me a specific question in relation to ACER. The point about ACER is that it deals with cross-border issues, whereas Ofgem deals with issues in relation to the UK. ACER has, of course, a broader remit than Ofgem. My noble friend, Lord Teverson, asked about the views of the other European states. I am afraid that is way above my pay grade. Who would be able to navigate the minefield of the views of some of the European states? My concern is what goes on in this country and I know that is his primary concern despite his great knowledge of Europe.
This brings us, happily, to the issue of Northern Ireland, which a number of noble Lords have mentioned. It has taken a decision to wait and see what actually happens. The Department of Enterprise, Trade and Investment in Northern Ireland makes it clear that it will consult on these licences, and the appeals progress, but I suspect that it will largely be onside with these excellent things negotiated by the British Government.
I turn briefly to the noble Lord, Lord Berkeley, who always speaks on the issue of transport, of which he has great knowledge—I have enjoyed sharing experiences with him on that front. There was a notable train journey that we took along the coast of Cumbria on the reopening of that line. It was a magnificent moment and a very enjoyable experience.
The issue of ports has been raised by the noble Lord and other noble Lords on a number of occasions. In this negotiation process, we have tried to push it as far as we could within the confines of the EU regulation that has been imposed on us. The short answer is that ports do not have to upgrade their network to those of a public network, which I hope the noble Lord will be pleased about. On a specific question that I was unable to answer, existing bulk contracts can stand but customers must be able to switch if they wish before deals are agreed. I hope that that answers the noble Lord’s question.
The noble Lord, Lord Whitty, comes at these things from the perspective of Consumer Focus, where people tell me that he was a brilliant chairman. It was not the noble Lord who told me, but I am sure that he would not disagree. The noble Baroness asked how the functions will be transferred. They will transfer to Citizens Advice, which is the appropriate place, not to Which? I have mentioned about loosening the private networks. The short answer to the question of whether CHP is provided for is yes. I hope that the noble Lord will therefore support these provisions.
My noble friend Lord Teverson mentions the business of checking. I am very pleased to be able to tell him that today the Prime Minister and our Secretary of State, Chris Huhne, opened something called “Check, Switch and Insulate to Save”. I know that he is going to leave this place and go to the website, on directgov.uk under home energy. It ensures the publication of cheaper tariffs. There will be a consumer checklist and a concise version will be summarised and the relevant information given.
The noble Baroness is quite right that it is a minefield going into the issues of where the cheapest price is and how people can get to it. She rightly raised very valuable points, which I have written down, about the interrelationship between the consumer and these new regulations. She asked whether there was a cooling-off period and when it starts. It starts from the end of the three-week period that we talked about. She asked what penalty could be imposed if the supplier did not supply in time. In fact, the penalty can be as much as 10 per cent of the turnover, so it is a very significant figure. Of course, it will be imposed on them, because it is very important that we represent the desires of the consumer.
That is really helpful, but just for clarification could he tell me how that would fall into place and whether it would be the consumer who had to take action to ensure that happened, or whether it would be a matter for the regulator to deal with?
I guess that it would be both, because the consumer will apply to the regulator, which would be the normal way for the regulator to impose that on the supplier.
I dealt with the question on checklists. Warm Front still exists, of course, and will do so for another year, so it is reasonable to use it. Of course, we brought in a whole load of other measures, which the noble Baroness knows. For the sake of clarity, from December 2011, 4 million of the most vulnerable energy customers in Britain will receive letters to tell them that they are eligible for free or heavily discounted insulation of their loft or cavity walls, which is the Green Deal that we were talking about earlier.
Yes, they will get the ECO through the Green Deal. A whole amount of measures was issued at the energy summit today, with which I will be very happy to furnish the noble Baroness. As for the issue of PRS and Green Deal, I think that we have debated that quite extensively and I really do not want to go over the old ground. We share a significant problem and concern, and in the end I think that we were all singing off the same hymn sheet in that debate.
Lastly, on the question of whether Ofgem has the right resources, it is important that it has. It has a task to manage this enormous amount of legislation in front of us, and we will watch very carefully to ensure that it is up to the task. The noble Baroness was quite right to raise that issue now, because it is important that customers at all levels are protected. I believe that the legislation goes a long way to doing that. As I said earlier, it is legislation that we have inherited, but there is a lot of good stuff in it. Would we have done everything to the letter of the word? Perhaps not. Are you pleased with everything that we have done to the letter of the word? Perhaps not. But it is legislation, and good legislation with the consumer in mind, and I think that we would all applaud that.
I am very grateful to the noble Lord for the answers that he gave me on ports, airports and the bulk tariffs. My question applies equally to some of the examples from my noble friend Lord Whitty on the bulk suppliers of power to tenants, as we could call them, who opt to go to another supplier. As a result, the bulk supplier may lose the level of discount that he would have got if he had been selling to the whole lot. My impression from the Minister’s answer was: “Well, tough on the bulk supplier”. It could be a not-for-profit organisation; it does not have to be a commercial port. Is my interpretation of that correct and, if so, is there anything that Ofgem could do to mitigate the effect with a little bit more discussion? I would be grateful for his response.
I am concerned to give the right answer about not-for-profit organisations, so I shall write to the noble Lord on that rather than ask him to whisper more in my ear. I do not know the answer, and it is an important question.
I should clarify one point about the switch to Citizens Advice. The detail is being worked out and no decision has therefore been made, but that is the likely intention of the transfer. With that in mind, I commend the regulations to the Committee.
Committee adjourned at 7.10 pm.