Wednesday, 10 July 2013.
My Lords, before we begin, may I remind the Grand Committee of the usual arrangement? If there is a Division in the Chamber, we will adjourn this Committee for 10 minutes.
Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Order 2013
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Order 2013.
Relevant documents: 4th Report from the Joint Committee on Statutory Instruments.
My Lords, on 5 June we announced an increase to the financial levels of fixed-penalty notices for most motoring and road transport offences, including making careless driving a fixed-penalty notice offence, following consultation last year. These changes are being made under the negative resolution procedure, and both the Fixed Penalty (Amendment) Order and the Fixed Penalty Offences Order were laid before Parliament on 28 June. Today is about a parallel scheme—fixed penalty deposits—which are for those alleged offenders without a satisfactory UK address. The draft Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Order before us today will enable the levels of fixed-penalty deposits to be increased by the same amount as fixed penalties for motoring and other road transport offences, and will include careless driving as a fixed-penalty deposit.
Fixed-penalty notices are issued by police and Vehicle and Operator Services Agency—VOSA—officers. Regardless of whether an alleged offender has a valid UK address, they are issued with a fixed-penalty notice. Those alleged offenders without a satisfactory UK address are then required to pay a fixed-penalty deposit. The Road Safety (Financial Penalty Deposit) (Appropriate Amount) Order 2009 prescribes the amount of financial penalty deposit that may be requested by an officer. To mirror the increases that are being made to most motoring and road transport fixed penalties, deposit levels will be increased as follows: £30 will rise to £50, £60 will rise to £100, £120 will rise to £200 and £200 will rise to £300.
If the nature of the offences or the manner in which they are committed are considered too severe or too numerous for the offer of a fixed penalty, the offender will be summonsed to appear before a court but will be required to pay a financial penalty deposit against any court-imposed fine. The order before us today increases the minimum court penalty deposit amount from £300 to £500. It also increases the maximum appropriate amount in respect of any single occasion on which more than one financial penalty deposit requirement has been imposed from £900 to £1,500. VOSA statistics show that in 2012-13 more than 10,500 deposit notices were issued, with a payment rate of almost 100%.
The intention of the policy behind the order was that parking offences would not be covered, as these are not road safety-related. The Committee will be aware that legislation is often complex. It has become apparent today that the order before us may capture some parking-related offences for those alleged offenders without a satisfactory UK address only, and therefore increase the deposits payable for parking offences. Departmental lawyers are currently rechecking the draft order to determine whether there is anything else that may be outside the policy’s scope.
The Committee will be aware that the graduated deposit scheme is aimed mainly at foreign HGVs, which were more difficult to deal with before the previous Administration introduced a deposit scheme. The vast majority of HGVs are maximum-weight articulated vehicles moving between large depots. Parking offences are not often a problem. In the main, offences relate to road-worthiness, driver hours and overloading. Therefore, it is unlikely that any serious adverse effects will arise from this problem. If necessary, we will lay an amending order to correct the issue.
I would also point out that, for foreign cars that make an alleged parking offence, normal procedure is to attach a fixed-penalty notice to the vehicle, irrespective of where it comes from. I will write to update the noble Lord, Lord Rosser, the opposition Front-Bench spokesman, and all noble Lords who speak in this debate before moving any approval Motion in the Chamber.
The changes to fixed penalties follow up key commitments in the Government’s Strategic Framework for Road Safety—referred to hereafter as the framework—which was published in May 2011. The framework sets out a package of measures that would continue to reduce deaths and injuries on our roads. It also recognises the importance of targeted enforcement to tackle behaviour that represent a risk to road safety. The measures announced focus on making the enforcement process more efficient, ensuring that penalties are set at the right levels to avoid offences being perceived as trivial and inconsequential, and making educational training more widely available for low-level offending.
Today’s order supports the framework’s objectives by introducing careless or inconsiderate driving as a fixed-penalty deposit and increasing the amount an alleged road traffic offender must pay as a result. We know that careless drivers put lives at risk and are a major source of concern and irritation for law-abiding motorists. The police will now have the power to issue fixed-penalty notices for careless driving. This will allow them greater flexibility when dealing with less serious careless driving offences, such as driving too close or lane discipline—for example, staying in the wrong lane—as well as freeing them from resource-intensive court processes. Drivers will still be able to appeal any decision in court.
Fixed penalty levels have not increased since 2000. Therefore, their real value has fallen substantially, by about 25%. For example, if the £60 fixed-penalty notice level set in 2000 had increased in line with inflation, it would now be £80. Penalty levels are now lower than other penalty notice offences of a similar severity. For example, lower and higher-tier penalty notices for disorder offences, which were recently increased, are now £60 for leaving litter and £90 for being drunk and disorderly. Increasing fixed-penalty deposit levels will not only ensure broader consistency with other, similar penalty notices, it will also reflect the seriousness of these offences. In addition, setting the penalty at these levels will remove the need to review penalties in the longer term. I therefore commend the order to the Committee. I beg to move.
I thank the Minister for his explanation of the purpose and thinking behind the order we are considering. I understand from what he says that a hiccup may have been found that needs to be addressed, and I thank the Minister for pointing that out. I am not sure that I have entirely understood the order. No doubt my contribution will make it clear whether I have or not, and the Minister will put me right if I have incorrectly understood what it says and what it provides.
We know that the order provides for fixed-penalty deposits to be increased in line with the recent increase in fixed-penalty notices, to which the Minister referred. It also provides for a fixed-penalty deposit to be extended to less serious cases of careless and inconsiderate driving in the light of the decision that fixed-penalty notices can be issued for careless driving offences.
The Explanatory Memorandum states that the fixed-penalty deposit may be imposed by a police officer or a Vehicle and Operator Services Agency officer at the roadside on an alleged road traffic offender who does not have a satisfactory address in the UK. The purpose of this is to provide a guarantee of payment of a fixed-penalty notice or conditional offer in respect of an alleged offence.
The Minister has said that Vehicle and Operator Services Agency statistics show that more than 10,500 deposit notices were issued in 2012-13, with a payment rate of almost 100%. That suggests that if the individual who cannot give an acceptable address says that he or she cannot pay immediately, the vehicle is immediately impounded pending payment. However, perhaps the Minister could confirm that that is the case.
One would have assumed that most of the fixed-penalty deposits are, or will be, imposed by police officers rather than an officer of the Vehicle and Operator Services Agency. I say that in the context of the statement by the Minister in the Commons when this order was discussed there on 2 July, who said that the more than 10,500 deposit notices issued in 2012-13 were issued by VOSA officers with apparently none by police officers, which suggests that these notices related to commercial vehicles.
If that is the case, what happens in respect of private motorists who cannot pay—perhaps a private motorist stopped in the future in relation to a careless driving offence—when presumably it will be a police officer who will have stopped that motorist? If the motorist is unable to pay in circumstances where he or she cannot give a satisfactory address, does it mean that their vehicle will be impounded and they will be unable to drive it away, thus presumably maximising the prospects of 100% payment of the fixed-penalty deposit?
Who is in receipt of most fixed-penalty deposits? Presumably it is most likely to be foreign drivers or drivers with foreign addresses, but how many are issued to British nationals? In what circumstances, other than having no fixed abode, could a British national be deemed not to have given an acceptable address unless they are no longer resident in this country?
In the debate in the Commons, the Minister said that he would inform the Committee by letter of the absolute number of fines unpaid. I am not sure whether the Minister in the Commons was referring to fixed-penalty deposits, fixed-penalty notices or both but, whatever the case, does the noble Earl have those figures to give today and, if not, may I be advised of the answer in addition to the Commons Committee?
Finally, perhaps I may make a point about the extension of fixed penalties to careless driving cases. The Explanatory Memorandum shows the really quite dramatic fall that there has been in the number of careless driving proceedings in court over the past 10 years or so. I am not sure to what the decline can be attributed, although the Explanatory Memorandum suggests some possible explanations. However, I just hope that, with fixed penalties being introduced in relation to careless driving, a check will be kept to ensure that they are being used in only the least serious of such offences. There must be a temptation to use them in more serious cases in the light of the time savings involved and the paperwork that does not need to be completed and prepared, as it would have to be for a case going to court. I hope—indeed, I am sure—that the Minister will confirm that the necessary effective checks are in place. After all, the difference between careless driving causing a collision and injury and it not doing so can often be a matter of luck rather than the degree of carelessness in the driving. Certainly, from the Opposition, we have no objection to this order.
I have no objections to the order at all.
My Lords, I am grateful for the positive response from noble Lords. As regards the hiccup, I will write to the noble Lord and the noble Lord, Lord Bradshaw, with full details of the impact and how we will cover it.
The noble Lord, Lord Rosser, talked about careless driving. Of course, careless driving is not necessarily a less serious offence. Some of the offences that we are already capturing under the graduated fixed penalty are less serious than careless driving. The issue is that we have brought careless driving into the fixed-penalty regime. I understand the noble Lord’s point about dealing with a more serious careless driving offence by means of a fixed penalty when it would be appropriate to take it to court. It is a matter for the police which way they go and I am sure that they will make the judgment correctly. However, I have details here about which would come out as less serious offences, able to be dealt with by means of a fixed penalty. I have no doubt that the more serious offences will continue to be taken to court. For instance, if a driver emerges from a junction incorrectly, he may pick up a fixed penalty but if he causes another motorist to take emergency avoiding action, his chances are that he will find himself in court.
The noble Lord, Lord Rosser, drew attention to the fact that the successful payment rate for these graduated fixed penalties is about 100%. He is quite right. Most of them are issued by VOSA because the target is the foreign heavy goods vehicle, which is going nowhere until the driver has paid the graduated fixed-penalty deposit against either the fixed-penalty notice or the possible court action. The noble Lord also asked what happens where this scheme is used for private motorists. The answer is basically the same. The vehicle is not going anywhere until the penalty has been paid. It can be immobilised with the so-called Denver boot. Payment is usually made by a credit card but there are provisions in the legislation to deal with the problem of someone mucking about by coming out with a very complicated payment system, such as asking several times for £5 to be taken off several cards. There are limits on how you can pay but the system is fair and I am confident that it works.
The noble Lord asked whether he can be copied in on any correspondence to his colleague in the House of Commons. Whatever we write in terms of the details to the opposition spokesman in the House of Commons will of course be copied to the noble Lord.
I think the Minister said that the figure given for the almost 100% payment rate related to commercial vehicles, because it was VOSA people dealing with it. Presumably, from what he has said, fixed-penalty deposits already apply to private motorists, where they relate to a fixed-penalty offence and where they have not been able to give a satisfactory address. Has there also been nearly 100% payment in relation to private motorists where it is a police officer dealing with the matter, rather than a VOSA officer?
My Lords, I think the noble Lord’s analysis is correct. It is mainly foreign heavy goods vehicles but no doubt private vehicles will be dealt with. When we drive on the continent as private motorists, we try as hard as we can to comply with the rules in, say, Germany and German drivers would try to comply as hard as they can with our rules. I suspect that the police apply the rules pragmatically.
What I am getting at is that, as I understand it, at the moment, if somebody is stopped for a speeding offence they may be given a fixed-penalty notice. I had asked whether there are any circumstances in which a British national might be deemed to be giving an unsatisfactory address, other than their having no fixed abode. However, let us suppose that it is a foreign driver. In a situation where that foreign driver is unable to give a satisfactory address, presumably at the moment they are given the fixed-penalty deposit because of that. Is there, equally, a successful payment rate of or near to 100%, as there is in relation to commercial vehicles?
I will check with the Home Office to find out more details for the noble Lord but I suspect that the answer is yes. That is because if the police determine that a motorist does not have a satisfactory UK address—in other words, if they come from overseas or are from the UK but cannot give a decent address, which for various reasons some people cannot—there is a vulnerability that they may not pay. So they would come into scope and that vehicle will be immobilised until the graduated fixed-penalty deposit is paid. I understand why the noble Lord is concerned and if I can give him any details about the success rate of private vehicles, I will provide them.
Highway and Railway (Nationally Significant Infrastructure Project) Order 2013
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Highway and Railway (Nationally Significant Infrastructure Project) Order 2013.
Relevant documents: 2nd Report from the Joint Committee on Statutory Instruments.
My Lords, this order will substitute a new Section 22 to, and amend Section 25 of, the Planning Act 2008 to amend the criteria for highway and rail schemes to be considered nationally significant infrastructure projects. In addition, it introduces thresholds for the construction or alteration of highways on the strategic road network and rail schemes in England only.
The new Section 22, which deals with highway schemes, sets out thresholds based on the area taken up by the scheme, which are as follows. For schemes on motorways, the threshold will be 15 hectares. For schemes on highways other than motorways that have a speed limit of 50 miles per hour or above, the threshold will be 12.5 hectares. For schemes on all other highways, the threshold will be 7.5 hectares. These thresholds will include land on which the construction or alteration will take place and any adjoining land to be used in connection with the scheme.
The new Section 22 will also remove any alteration or construction of a highway from the development consent order regime where the Secretary of State for Transport is not the highway authority. In addition, certain highway schemes on the strategic road network that consist of the alteration of a highway are also removed, first, where the alteration is necessary as a result of a scheme that has already received planning permission; and secondly, where an alteration is necessary because of works by the local highway authority and for which an order has already been made. In both cases, the Secretary of State has to be requested to carry out the works. The new section also removes highway schemes where an earlier order has been made and which require a further order within seven years of the first order.
This order will also amend Section 25 to introduce a threshold so that any construction or alteration of a railway will come within the ambit of the Planning Act 2008 only where the construction or alteration of the railway track is not on operational land or on land acquired for the purpose of constructing or altering a railway and exceeds a continuous length of two kilometres. The order also includes transitional arrangements for existing development consent orders, and for applications for DCOs that have been submitted for determination prior to the coming into force of the order.
These amendments to the Planning Act 2008 are being proposed to ensure that only genuinely nationally significant infrastructure projects fall within the DCO regime. Currently, the Planning Act does not set any thresholds for nationally significant infrastructure highway or rail schemes, which means that any scheme, regardless of whether it is genuinely nationally significant, must comply with the DCO regime laid out in the 2008 Act.
The DCO regime is designed to speed up and improve the planning process for large or complex schemes that are of national significance. The process has already been used to good effect in delivering schemes that, due to their scale or complexity, may have become bogged down in the alternative planning systems. In these cases, the DCO is the most appropriate regime to use. However, some schemes—for example, a 500-metre sidings extension, the widening of a slip road or a small safety improvement scheme—are of only local importance and could not be considered to be nationally significant, yet are required to use the DCO regime. The necessary level of pre-application work and the requirement for an examination under the DCO regime, which is right for genuinely nationally significant schemes, would be disproportionate, and in some cases unnecessary, for smaller, less complex or more discrete schemes.
We have also identified that small schemes which would not have been nationally significant are being delayed or not taken forward. This is because the cost and time it takes to promote a DCO—in the order of 18 months—acts as a disincentive when looking to deliver schemes as part of an in-year based programme. Consequently, we sometimes have little choice but to adopt solutions which do not yield maximum benefit to road users, but which are far more readily deliverable.
During the recent national and local pinch point fund rounds, several schemes which would have benefited from using this funding to support growth were not considered because they would have been required to follow the DCO regime and the time taken to gain the order would have put them out of time for the fund. The proposed thresholds would allow the most proportionate regime to be used, and this would increase certainty that the most optimal schemes are being delivered, which would have a greater benefit for growth. The Planning Act, as currently worded, has also led to confusion about whether certain local schemes, because they have a purpose connected to the strategic road network, should be within the DCO regime. This has led to serious delays and added costs to developers while the wording in the Act is clarified. In a few cases the planning process had to be restarted leading to abortive work and cost.
By setting out in very clear terms that only those highway schemes for which the Secretary of State for Transport is or will be the highway authority, this confusion and potential avenues for delays to much needed growth are removed. Currently, in schemes that provide a development with access to the strategic road network, to mitigate the impacts of the development they are also required to use the DCO regime, even when those works already benefit from planning permission as part of the overall development consent. Under the DCO regime, promoters must submit full consultation and assessment documentation and undergo an examination even when they are uncontested. This can take up to 18 months for the whole process and can be undertaken only after the full development site application has been granted. Under the Highways Act, uncontested schemes that are part of the planning permission for a site and the required side road orders can be made without a hearing and without a charge, therefore making this regime quicker and less expensive. These mitigation works are needed to deliver new developments and, as such, any delay or cost increase affects delivery of new growth.
Local major schemes and schemes that are developer-funded would usually have already gone through public scrutiny via the examination in public of the local plan or through a full planning application process. Under the DCO regime, they would be required to undertake them again, adding further costs and delays to the scheme delivery. The proposed amendment would remove all local major schemes from the DCO regime and allow developers certainty to proceed through one regime under the Highways Act. There is still the option of using the DCO regime for a scheme that will now fall outside the development consent regime but which is none the less considered to be of national significance by the Secretary of State on application making a direction that the scheme is of national significance. This will then bring the scheme within the development consent regime. The position for railway developments under Section 25 of the 2008 Act has similarly resulted in schemes that would not ordinarily be considered nationally significant being required to obtain a DCO pursuant to the 2008 Act, and with similar consequences. As there is currently no threshold, any scheme for the construction or alteration of a railway that cannot progress using permitted development rights under the Town and Country Planning Act 1990 regime becomes a nationally significant infrastructure project and requires a development consent order, regardless of the size and scale of the scheme involved.
The proposed amendments to Section 25 of the Act will mean that railway construction or alteration schemes will require a DCO only if they include the laying of a stretch of railway track, whether single or multiple track, of more than two continuous kilometres on land that is not existing railway operational land. For these purposes, non-operational land would include any land acquired for the purposes of the scheme itself.
Because railways are by their nature generally long and linear, a distance-based threshold, as already applied to gas pipelines, for example, seems appropriate. Bearing in mind the scale and likely impacts of development, and mindful of the types of schemes that typically come forward, a two-kilometre threshold appears appropriate to ensure that only those schemes that have wider impact require authorisation by DCO. Smaller railway schemes and those on existing railway operational land will be able to proceed using the alternative planning procedures, reducing costs and enabling schemes to be delivered more quickly and with greater certainty.
The proposed amendment to Section 25 of the Act will ensure that only development that is justifiably regarded as nationally significant will be required to proceed under the 2008 Act regime. These amendments have been subject to a public consultation and were strongly supported by the respondents. I beg to move.
My Lords, this is another of those fairly formidable orders, certainly as far as volume is concerned. It is not always easy to understand fully, not what the point is, because I understand that, but what the argument is in favour of the order. Before I go any further, I will say that we are not opposing it, just in case the Minister gets the impression from some of my comments that we might be.
The purpose of the order, as the noble Earl said, is to make sure that only developments that can be considered to be nationally significant infrastructure projects have to be dealt with under the planning process set out in the Planning Act 2008. It does that by amending the circumstances in which projects are considered to be nationally significant, resulting in more projects proceeding instead under the planning regime set out in other legislation. The Explanatory Memorandum states that the amendments are being made with the intention of restricting the ambit of the Planning Act 2008. It states that the current provisions in respect of highway and railway developments mean,
“that developers have been faced with excessive burdens in order to deliver small, less complex or discrete but still important transport infrastructure improvements”.
I have read the Explanatory Memorandum, perhaps not as thoroughly as I might have done, but it appears rather stronger on statements about problems than on specific cases to help identify the problem that has currently arisen. The noble Earl’s comments about the problems of the present arrangements, which he just made, sounded quite dramatic. It would be helpful if he could provide more specific information about actual problems that have arisen to fill the gap that I believe is there so that that is on the record.
For example, how many schemes that have had to be dealt with under the Planning Act 2008 regime would not have had to be dealt with in that way if the terms of this order had been in force? What percentage of the total number of schemes dealt with under the Planning Act 2008 does that figure represent? I may not have read the Explanatory Memorandum as carefully as I should have done, and maybe the Minister will say to me that the information is in there, but at the moment I am not clear what the answer to that question is.
What additional costs have been incurred as a result of dealing with schemes under the Planning Act 2008 regime that it is now proposed are dealt with in future under the planning regime set out in the Highways Act 1980, the Transport and Works Act 1992 and the Town and Country Planning Act 1990 as appropriate? Once again, I have no feel for what these additional costs are.
The Minister made some reference to this in his speech, but how long does it take to deal with schemes under the Planning Act 2008 regime, which it is now proposed should be dealt with in future under the Acts to which I referred a moment ago, and how long will it take if they are dealt with under those Acts? What kind of saving are we talking about as far as time is concerned?
As I say, I hope that the Minister will be able to provide at least some of the information that I am seeking in order to give a better feel for what is involved regarding costs and delays, and what percentage of cases that currently come under the Planning Act 2008 would no longer do so if we made change in the order so that they were dealt with under the one or more of the three other Acts referred to. We need to have on record the information that has led to these changes being proposed, and to be satisfied that the case really stands up and is rather stronger than simply the desires of a few interested parties for whom the less troublesome the planning process is, the better. However, I reiterate that we are not opposed to the order, despite the impression that I might have given the Minister in my comments.
My Lords, the argument in favour is to allow projects to go forward in accordance with the appropriate planning process. The noble Lord quite rightly asks me about actual problems. During my discussions with officials, I was clear with them that there are problems, and they privately admitted to me that they have adopted less than ideal solutions in order to avoid the DCO process. This is because when the 2008 Act was going through Parliament, to be honest, it was not fully appreciated what the adverse effects of the legislation would be. If Parliament had realised that it would not have quite the desired effect, we would not have done it but would have done precisely what these amending orders do.
The best that I can do is to write to the noble Lord with some good, specific examples of schemes that have gone ahead, unless inspiration arrives. Part of the problem is that some schemes simply never see the light of day because the DCO regime is just too difficult.
The noble Lord asked about the time length under the Planning Act versus the Highways Act. It is about nine months for the Highways Act process, including consultation, and about 18 months for the DCO process. As the noble Lord will appreciate, that can cause pretty serious problems. I beg to move.
Public Bodies (Abolition of BRB (Residuary) Limited) Order 2013
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Public Bodies (Abolition of BRB (Residuary) Limited) Order 2013.
Relevant documents: 3rd Report from the Secondary Legislation Scrutiny Committee, 2nd Report from the Joint Committee on Statutory Instruments.
My Lords, this order transfers the function of BRB (Residuary) Ltd and then abolishes it. A transfer scheme will also be created that will transfer property rights and liabilities to the Secretary of State for Transport, Network Rail, London and Continental Railways and the Rail Safety and Standards Board, and will come into effect at the same time as this order. I commend BRBR on the sterling job that it has done since it was created in 2001 to manage the rump of property and ill health claims left after rail privatisation. It has disposed of 90% of those properties, generating in excess of £400 million.
BRBR was incorporated as a wholly owned subsidiary of the British Railways Board to hold and manage the residual property rights and liabilities of the board following privatisation. It was always intended that BRBR would be wound up at the appropriate time and its ongoing functions, properties, rights and liabilities transferred to successor bodies. The Public Bodies Act 2011 is the only efficient and cost-effective means of divesting BRBR of its statutory functions, including the statutory liabilities that arose in the original 19th-century Acts authorising the construction of the railways. The draft order proposes to transfer the majority of BRBR’s statutory functions to the Secretary of State for Transport, with a small number to be transferred to Network Rail (Assets) Ltd.
As I said, a transfer scheme will also be made under Section 23 of the Public Bodies Act—the draft is attached to the explanatory document. This will transfer the property, rights and liabilities of BRBR to London and Continental Railways Ltd, Network Rail Infrastructure Ltd, the Rail Safety and Standards Board Ltd and the Secretary of State.
The abolition of BRBR is further evidence of this Government’s determination to increase efficiency, reduce unnecessary overheads and remove management layers wherever possible.
The Government carried out a targeted six-week consultation between May and July 2012. This sought the views of interested stakeholders on the abolition and consequential transfer of BRBR’s functions, properties, rights and liabilities to the various successor bodies. The majority of the respondents were supportive of the abolition. Where concerns were raised, they tended to be about specific aspects of the plans, rather than questioning the underlying rationale. In addition, the Department for Transport liaised closely with BRBR and the proposed successor bodies in relation to the consultation.
London and Continental Railways Ltd is a company with specific expertise in managing and developing property assets within a railways context, as can be seen from the HS1-led regeneration at Kings Cross and Stratford. LCR is wholly owned by the Secretary of State for Transport. The properties transferring to LCR include sites with development potential, or where there is a policy of promoting or maintaining rail use.
Network Rail Infrastructure Ltd is the company that carries on the business of acquiring, owning, managing and developing the rail network in Great Britain. The properties which will transfer are assets which are of significance to the railway industry; for example, the 13.5-mile high-speed test track at Old Dalby in the Midlands, which is used for testing rolling stock. The other assets transferring are those one would expect the rail infrastructure owner to own or manage, such as memorials to railway staff killed in the wars or in railway accidents, as well as properties and structures that correct anomalies that occurred during rail privatisation in the 1990s.
BRBR currently owns and holds the intellectual property rights in 300,000 drawings and 30,000 maintenance documents relating to traction and rolling stock built before 1996. These drawings and documents have no quantifiable value but are of importance to the rail industry. I notice the noble Lord, Lord Faulkner of Worcester, ready to pounce on that issue. The ownership of the intellectual property rights in these drawings and documents will transfer to the Rail Safety and Standards Board Ltd, which is a not-for-profit company owned and funded by major stakeholders in the rail industry.
Any property, rights and liabilities which do not specifically transfer to a successor body will transfer to the Secretary of State. This includes 3,400 structures, such as bridges, abutments, viaducts, tunnels, cuttings and retaining walls associated with disused railway lines. The responsibility to maintain these for ever stems from the original Acts of Parliament which authorised the construction of the railways in the 19th century. This is known as the burdensome estate.
The burdensome estate will be managed by the Highways Agency on behalf of the Secretary of State. It has the engineering expertise, so there will be no diminution in the maintenance of these structures. In addition, most of BRBR’s employees who currently manage the burdensome estate will transfer to the Highways Agency, maintaining continuity.
A senior representative of the Highways Agency will sit on the board of Railway Paths Ltd, which is a charitable company which purchased some 220 miles of disused track and structures in 1999 as part of the national cycle network. The Highways Agency representative on Railway Paths Ltd’s board will help replicate the existing close working relationship between BRBR and Railway Paths Ltd.
Waterloo International terminal, North Pole depot in west London and Temple Mills bus depot near Stratford will transfer to the Secretary of State. These properties are, or may become, of strategic importance to the rail network and have some development potential over the longer term. They will be managed on his behalf by London and Continental Railways.
The Secretary of State will manage the continuing settlement of ill health claims made by former British Rail staff. These primarily stem from medical conditions that do not arise until some time, often many years, after an individual’s employment has ceased, such as asbestosis and mesothelioma. Noble Lords will recall that the board did not just operate rail services, but also hotels and ferries. The claims experts currently handling the workload at BRBR will transfer to the Department for Transport.
The remainder of the residual estate, which includes such disparate matters as shipwrecks belonging to former rail companies that were absorbed by the board and its responsibility as head lessee for 698 freight wagons leased to Freightliner Ltd, will transfer to the Secretary of State.
There are currently 44 employees working for BRBR, including four board directors. All employees have been consulted over the plans to abolish BRBR, in accordance with TUPE regulations. Compromise agreements offered to staff at risk of redundancy have resulted in 12 members of staff entering into such an agreement, with 23 members of staff remaining eligible to transfer to successor bodies, in accordance with TUPE legislation. Of these employees, seven will transfer to the Highways Agency, two to the general counsel’s office at the Department for Transport and 14 to LCR. The transfer of these employees will ensure knowledge transfer and business continuity. A further five employees will be made redundant and the employment of the four board directors will not be renewed when their current contracts come to an end on 30 September 2013.
The abolition of BRBR and the absorption of its functions into the various successor bodies, as I have described, represents a better deal for taxpayers. Total savings upon abolition will be in the order of £2.4 million per annum. Abolishing BRBR under the Public Bodies Act 2011 is extremely efficient. For example, it allows properties to be transferred to successor bodies without incurring huge costs for conveyancing, which could be up to £1.5 million for the several thousand properties involved.
In conclusion, the Government are confident that the abolition of BRBR and the transfer of its functions, properties, rights and liabilities to successor bodies will not only ensure business as usual but reduce overheads and management layers, as well as representing a good deal for the taxpayer. I beg to move.
My Lords, I intend to speak very briefly about this order. I agree completely with the Minister in his tribute to the work of the board of BRBR and its staff over the 12 years or so of its existence. The Minister may remember that I spoke about the inclusion of BRBR in the Committee stage of the Public Bodies Bill on 14 December 2010. The Minister has referred to how the British Railways Board (Residuary) has gone about fulfilling its responsibilities since 2001, and I agree with him that its record has been excellent in many respects. I have been particularly impressed by how it has dealt with the 6,400 or so industrial injury and other health claims from former BR employees, to which the Minister referred in his speech. I hope that these will continue to be dealt with as expeditiously in future as they have been by BRBR until now.
BRBR has also done really well in discharging its railway heritage responsibilities, and I thank the Minister for his reference to this issue in his speech. I speak as a former chairman of the Railway Heritage Committee and the current chair of its successor body, the Railway Heritage Designation Advisory Board, which as part of the Science Museum Group has taken on the RHC’s statutory powers of designation. This is partly thanks to the efforts of the Minister, who supported us in resisting its abolition under the Public Bodies Act 2011.
Very many significant railway artefacts have found their way to BRBR stores. The Minister referred to the drawings, which are literally priceless, but there are also some wonderful paintings from the railways’ art collection. Many of those are now on public display in museums and galleries all over the country as a result of, first, the statutory designation, and then the disposal procedures of the RHC and the co-operation of BRBR.
The other great contribution that BRBR has made in this area is in supporting the Railway Heritage Trust which, under the chairmanship of Sir William McAlpine, plays a huge part in restoring and preserving historic railway buildings. BRBR has been instrumental in securing third-party funding for the Railway Heritage Trust, particularly from Network Rail. In this context —I hope that the Minister will allow me to do this—I should like to put on record my own tribute to one of the unsung heroes of Britain’s railways, Peter Trewin, who is the legal and secretariat director of BRBR. He was also the secretary of the British Railways Board. He is a lifetime career railwayman, whom I knew first when he worked with Sir Peter Parker more than 30 years ago. He has played a crucial role in ensuring that the railway takes its heritage responsibilities seriously. I should like to thank him on the record for that work.
There is one further matter that I wish to raise with the Minister. He talked about burdensome estate— the structures that were once part of the operational railway—and that in the main these will be transferred to the Highways Agency. Can he give an assurance that this will not lead to roads being built on these remaining railway track beds? He will know from reading my recently published book that once the infrastructure has been built on, the opportunity to reopen railways on it is lost for ever. There are a number of heritage railways—I declare an interest as president of the HRA—that are looking at long-disused lines as future potential routes. We may also wish one day to restore some lines to the national network, as the demand for rail travel grows. That will not be possible if the infrastructure is converted into a road and we must not close down those options. I hope that the Minister will agree.
My Lords, I add my appreciation to that expressed by the Minister and my noble friend Lord Faulkner of Worcester for the work done by BRBR, and for the staff of that organisation. I thank the Minister for explaining the background to the order and the reasons for abolishing BRB (Residuary) Ltd, and transferring its functions to the Secretary of State for Transport and Network Rail (Assets) Ltd. The property rights and liabilities of BRBR will then be transferred to successor bodies in the transfer scheme, so I understand that it will be laid before Parliament after being made.
BRB (Residuary) Ltd is wholly owned by the British Railways Board. Perhaps the Minister can say what will happen to the BRB following the abolition of BRB (Residuary) Ltd, what functions and responsibilities it will continue to have, and for how long. The Explanatory Memorandum says that liability for handling claims in respect of industrial injuries, employment and environment-related claims, resulting from BRB activities as an operator of trains, ships and hotels, will transfer to the Secretary of State. Can the Minister give an undertaking that this will not result in a harder or a more long-drawn-out approach being adopted to such claims as a result of this transfer? How many claims are still in the pipeline and how many individuals do they cover?
I also support the request of my noble friend Lord Faulkner of Worcester that the assurance given in the Explanatory Memorandum that the abolition of BRB (Residuary) Ltd will not result in any change in the current process for releasing land designated for rail use, disposal, or for alternative non-transport use should be repeated by the Minister and thus placed on the record, including in the very specific terms that the noble Lord, Lord Faulkner, was seeking.
The order deals with the abolition of one body. How many other bodies for which the Department for Transport has overall responsibility are still awaiting the outcome of a review of whether they should remain in existence or be abolished? A few weeks after we questioned whether taxpayers were getting value for money with four separate publicly funded motoring bodies, the Government announced that they were reducing the number of agencies from four to three. Is the department now looking at other issues concerning the number of bodies for which it is responsible, including whether we need even three separate government agencies delivering services to motorists, and whether we need a separate company to deliver HS2 when we already have Network Rail, which is responsible for rail infrastructure? In view of the fact that some rights and liabilities of BRB (Residuary) are being transferred to LCR, do the Government see a long-term future for London and Continental Railways Ltd and, if so, is that in its current role or a changed role?
We are certainly not opposed to the order and I hope that the noble Earl will be able to provide the answers and assurances that have been sought by my noble friend Lord Faulkner of Worcester and me.
My Lords, I am grateful to the noble Lords, Lord Faulkner of Worcester and Lord Rosser, for their comments. It is right to pay tribute to the work of the BRBR. I did not take the Public Bodies Bill through the House; my noble friend Lord Taylor of Holbeach did. As the noble Lord, Lord Faulkner, said, I was acting behind the scenes in respect of the RHC and I am proud of what we achieved.
Both noble Lords talked about former employees of the railway industry with long-latency illnesses such as mesothelioma and asbestosis. I assure noble Lords that they will be properly looked after. The staff, including some of the legal staff, will transfer. I do not know the numbers but I suspect that, by and large, they arise when someone is, for example, diagnosed with mesothelioma and the case is handled. Those employees have the advantage that their former employer was BR or a railway company and they are backed up by the Government. Sadly, a lot of other people are not properly covered, and that is why we are taking the Mesothelioma Bill through your Lordships’ House.
The noble Lord, Lord Faulkner of Worcester, paid tribute to Peter Trewin, and I join him in that respect.
The noble Lord, Lord Rosser, talked about the transfer of some structures to the Highways Agency and the burdensome estate. There is no intention to build on those structures. The abolition of BRBR will not result in any change to the current process for releasing land designated for rail use for disposal or for alternative transport use. The current process requires BRBR to seek the approval of the Department for Transport before land retained for transport use can be sold.
To put things into perspective, BRBR has only 33 miles of former track bed, the breakdown of which is as follows: 8.5 miles is retained for access to structures within the burdensome estate; 22.5 miles is retained for possible transport use; and 2 miles is in the course of sale across the number of sites. Of those, 28.5 miles will transfer to the Secretary of State, 1.5 miles will transfer to LCR and 3 miles, mostly relating to Glazebrook to Partington, will transfer to Network Rail.
I was also asked about BRB and what happens to the board when BRBR is abolished, given that the current directors of the board will cease to be directors once BRBR is abolished. It may be helpful if I say a few words about this. The British Railways Board is a statutory corporation set up originally under the Transport Act 1962. It will continue to exist after BRBR is abolished, as it is one of the signatories to the rail usage contract. That contract is expressed to be made under French law and cannot be novated without the agreement of the other signatories to the contract, Eurotunnel and SNCF.
Since 2001, the board has had only two members. Previously, there had to be a chairman and between nine and 15 members. Its chairman, Terence Jenner, and its remaining director, Peter Trewin, are also directors of BRBR and they will both cease to be its chairman and director when BRBR is abolished.
The Secretary of State has the power under Section 241(3) of the Transport Act 2000 to remove a member of the board from office or to vary his terms of appointment. Replacement members of the board, including a replacement chairman, will be appointed by the Secretary of State under Section 1 of the Transport Act 1962.
The noble Lord, Lord Rosser, asked about the future of LCR. The best way of dealing with that would be if I write to him.
Renewable Heat Incentive Scheme (Amendment) (No. 2) Regulations 2013
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Renewable Heat Incentive Scheme (Amendment) (No. 2) Regulations 2013.
Relevant documents: 4th Report from the Joint Committee on Statutory Instruments.
My Lords, I am pleased to open the debate on the Renewable Heat Incentive Scheme (Amendment) (No. 2) Regulations 2013. Before focusing on the detail of these amendments, I will take the time to provide some background on the renewable heat incentive scheme, or RHI.
The scheme was introduced to improve our approach to using energy in the UK. Since the scheme launch in November 2011, more than 2,200 applications have been received to date, with around £27 million-worth of RHI payments expected to be paid out in 2012-13. By this time next year, we expect to have paid out more than £53.8 million through the non-domestic RHI, and 280 gigawatt hours of reported renewable heat have been produced through the RHI to date.
The recent spending review has reinforced our commitment to long-term support for renewable heat. The agreed budget for 2015-16 of £430 million enables us to continue to work to stimulate and achieve ambitious growth of renewable heat and, in turn, to create new jobs in the green sector.
The UK is legally bound to achieve a set 2020 renewables target of 15%, with interim targets between now and 2020. Our most recent interim target is to reach 4.04% of total energy from renewables as an average across 2011-12. Today’s statistics show that we achieved 3.94% across those years, short by just 0.1%, but within the margin of error for a statistical estimate. This means that we are currently on track for our 2020 target, but we must continue our work to ensure that this remains the case.
Heat is the single biggest use of energy. We use more energy for heating than for either transport or the generation of electricity. Therefore, it plays an important role in the UK being able to achieve this target. At the point of opening the RHI scheme, renewables produced less than 2% of our total demand. We are aiming for this to increase to 12%. In addition to achieving the renewables targets, the RHI will help to reduce greenhouse gas emissions, providing a platform on which to build towards eliminating greenhouse gas emissions from our buildings by 2050.
Ofgem administers the scheme and provides financial, tariff-based support for commercial, public sector, industrial and community renewable heating installations for the 20-year life of their tariff. The scheme has already provided financial support to a range of technologies, including biomass, solar thermal, heat pumps and biogas combustion. Applicants to the scheme are also spread across various sections of the non-domestic sector—small businesses, and public sector and community projects. The uptake of renewables is increasing but needs to be increased further for us to achieve our 2020 targets.
As with all taxpayer-funded schemes, all expenditure must be justified and provide good value for money. I should like to take a moment to reflect on the last time that I spoke to your Lordships about the RHI, which was back in March.
We discussed the introduction of a budget management system for the RHI. Following the March debates, in April, the degression-based approach to managing the RHI was introduced. This mechanism ensures that the RHI does not overspend while providing clarity and assurance to the industry about how the budget will be managed. Since those debates, we have seen the first degression take place, against medium biomass.
Medium biomass has deployed to the level that a trigger point has been met, which resulted in a 5% tariff reduction. Gradual deployment-led managed decreases like this will allow us to direct deployment so that we achieve an affordable, good mix of technologies in the scheme and ensure value for money in tariffs paid. It is important that we continue to evaluate the RHI scheme so that we ensure that it is incentivising uptake while ensuring value for money.
Before moving on to the main topic of today’s session, I will update the Committee on wider change and additions to the RHI. These regulations form part of an ambitious and busy schedule for renewable heating policy. The importance of low carbon and renewable heat in the long-term energy mix for the UK, and the “world first” nature of RHI, necessitates an ongoing programme of improvements, expansions and enhancements. For instance, the Government expect to be announcing the details of a domestic RHI very soon. We have also just concluded, on 28 June, an early tariff review consultation for the non-domestic scheme, proposing revised tariff levels for technologies where we have not yet seen the levels of deployment that we need. Initial feedback from industry is positive, and we are really pleased with the level of response to the consultation. We will analyse the consultation responses and further develop the policy before announcing our decisions in the autumn.
We are not only focusing on improving the existing scheme; we are also working on introducing support for other exciting renewable heating technologies through RHI. Our consultation last September made proposals for the introduction of support for air source heat pumps, large-scale biogas combustion, biomass direct air and expansions in the forms of waste that are eligible for the scheme. We also consulted on introducing new specific support for deep geothermal heat and for biomass and bioliquid combined heat and power. We are now considering whether we need to adjust any of our plans as a result of the spending review announcement on 26 June, and will publish an update on progress on the extensions to the non-domestic scheme and tariff review alongside our announcement of the domestic policy.
The regulations before us bring in a number of amendments delivering several distinct and wide-ranging changes, protecting the quality of the air that we breathe through the introduction of emissions limits for new biomass installations supported through the scheme; increasing the uptake of renewable heat by reducing the burden associated with metering; extending the scheme to commercial drying and cleaning, which takes place outdoors; and allowing the relocation of accredited installations. We are also using this opportunity to provide greater clarity to some areas of the regulations. It is our intention that these regulations will be made on 23 September, coming into force on 24 September.
The amendments in these regulations are predominantly based on the outcomes of the RHI Providing Certainty, Improving Performance consultation published in July last year. This consultation attracted 100 responses, and the final policy outcome was published in the Government’s response on 27 February this year. We proposed a method of demonstrating compliance with the air quality emissions limits announced in March 2011. More than 70% of respondents supported the proposals, and therefore the compliance regime detailed in these regulations remains very similar to the consultation proposals.
The simplification of metering requirements involved a number of proposals. These were aimed at reducing the number of heat meters required and driving down the cost of participating in the RHI, while protecting the public purse by ensuring that only eligible heat is paid for. More than 90% of respondents were in support of our proposed changes. Following this high level of support, we have moved to revise the RHI metering requirements, with the resulting requirements being very similar to our original proposals.
In addition to these headline changes, four smaller scheme improvements are included in these regulations and have been made with the intention of increasing uptake to the scheme. Two improvements were included in the July consultation: relocation of an installation and allowing certain processes to occur outside. Both were supported by those respondents who commented on them. These regulations will make it possible for an RHI accredited installation to be relocated and to continue to receive tariff payments for the remainder of the 20 years, provided that, on relocation, the system meets the necessary requirements. It will also be possible to receive RHI payments for commercial cleaning and drying processes that occur outside. Both these changes were supported by those respondents who commented on the proposed amendments.
Finally, two further amendments to the scheme were included to provide clarity to the regulations. The first is the addition of ground water as an eligible heat source for ground source heat pumps. The second is a minor word change to allow renewable installations that are used as the assessment installation—for an installer to join the microgeneration certification scheme —to be eligible for the RHI.
As these amendments show, the performance of the RHI is constantly under review. The need to increase uptake of renewables through this scheme is paramount to achieving our 2020 renewables target. Improvements to the scheme are focused on increasing uptake while still ensuring best value for money.
As I am sure the Committee will agree, good air quality is vital to our health, and it is essential that the RHI scheme does not have a negative impact on our environment. Since the announcement of the scheme in March 2011, we have made it clear that we are committed to introducing air-quality emissions limits for solid biomass boilers. The main pollutants which can be increased through increased combustion of biomass are particulate matter and oxides of nitrogen.
Currently, combustion of biomass contributes only a very small proportion of these harmful emissions. However, to date, biomass has made up a significant proportion of RHI accredited installations, and we expect this to continue. Where biomass replaces either heating oil or coal, there is no increase in the emissions levels of key air-quality pollutants. However, when replacing gas or electricity, the emissions are higher, meaning that it is important to limit the air-quality implications of burning biomass. The emissions levels to be introduced for biomass boilers producing heat from solid biomass are set at 30 grams per gigajoule of thermal heat input for particulate matter and at 150 grams per gigajoule for oxides of nitrogen.
New participants will be required to demonstrate that they meet the emissions limits by providing emissions certificates to Ofgem. These certificates will be provided to participants by the manufacturers of biomass boilers. When producing the certificates, manufacturers will be required to test their boilers and to show clearly through the certificate what types of biomass fuel their boiler can combust without exceeding the emissions limits. Participants will not be permitted to use types of biomass fuel that are not listed as being compatible with their boiler on their emissions certificate, and they will be required to demonstrate to Ofgem that they are meeting this requirement.
We are keen that that does not prove to be overly burdensome for manufacturers of boilers and we are therefore introducing flexibility through type-testing. This will mean that, when there is a “family” of boiler models which are identical apart from their capacity, only a limited number of them will need to be tested. Also, plants which have had to obtain an environmental permit will not be expected to provide an additional emissions certificate.
I will now cover the other major change to the regulations, the revised metering requirements of the RHI. This is another technically complex area covered by these regulations. Since the launch of the scheme in November 2011, the metering requirements have been highlighted as overly burdensome and considered a disincentive to joining the scheme. We place great importance on feedback from industry and from the scheme operator, Ofgem. This feedback led to our proposal to revise the metering requirements of the scheme. As all payments made on the non-domestic RHI scheme are on the basis of metered heat, it is essential that this is done absolutely right, by ensuring that only generated heat being used for an eligible purpose is paid for. Fundamentally, we remain committed to the principle that the non-domestic RHI payment is based upon metered heat. At least one meter will always be required to measure the heat used for eligible purposes.
The proposed changes to metering are to allow more flexibility and to reduce the number of unnecessary meters being installed. Under the revised regulations, there will be an increased use of heat loss calculations when participants have taken appropriate energy efficiency measures and insulated external piping to industry standards. We also recognise alternative ways of determining heat generated. When a back-up gas or electric fossil fuel heat source is still in place, we will allow its fuel consumption to be measured rather than the heat output. We will assume that 100% of the fuel consumed is converted into heat, ensuring the taxpayer never loses out to inefficient heat conversion, while still providing additional flexibility to the participant.
In moving on to the smaller scheme improvements included in these regulations, I will focus first on the two that are aimed at increasing uptake to the scheme. Allowing the relocation of an accredited RHI installation will increase the uptake of companies providing heat to third parties. The ability to relocate while continuing to claim RHI will remove the barrier of needing to obtain a long-term lease to make a renewable heat source a viable option. On relocation, the installation will need to be reassessed by our delivery partner Ofgem to ensure that it still meets the accreditation requirements before payments recommence. We recognise the need to provide greater reassurance for investors that renewable heat is a good investment. This change will help provide confidence that their asset will retain value, by enabling a renewable heat installation to be moved.
The final amendment expands the number of “eligible purposes” under the scheme. Currently, to be eligible for the RHI, any heat produced must be used within a building. However, this has restricted the suitability of the scheme for some industrial processes. In order to incentivise additional renewable heat, these regulations open up the scheme to commercial cleaning and drying, which can take place outside. This would allow woodchip and wood pellet drying to take place without the need to construct a shell of a building around the process. Allowing cleaning that takes place outside will encourage the use of renewables for heating water for commercial cleaning processes, such as washing a fleet of commercial vehicles.
The emissions limits being introduced were agreed on by both DECC and our colleagues in the Department for Environment, Food and Rural Affairs. Defra is the lead department on issues relating to air quality. The limits set were at a level intended to significantly reduce the air quality impacts of the RHI, but where we could also expect significant growth in the biomass boiler market and the rollout of renewable heat. The aim of introducing these limits is not to exclude any particular biomass fuel from the scheme but rather to ensure a good level of air quality. We accept that it will be harder for some fuels than others to meet the requirements of the scheme. However, we should not be supporting fuels which cannot meet the stated emissions limits.
The changes I have set out will apply to England and Wales, and Scotland. RHI policy in Northern Ireland is devolved. Colleagues in Scotland have confirmed that they are content with the changes I have set out today, and Scottish Ministers have given their consent to the regulations as required by the Energy Act 2008. Northern Irish Ministers administer a separate but equivalent scheme and have been notified of the intended changes, as have Welsh Ministers.
In conclusion, the RHI must drive up the uptake of renewables for us to meet our 2020 renewables targets. These amendments go some way to making that scheme more accessible. The renewables market is still relatively young and the improvements and extensions planned for the RHI will result in our seeing a significant increase in the uptake of renewable heat. The scheme is a key driver in helping to develop that market. I therefore commend the regulations to the Committee.
My Lords, I always find on these occasions that it is a great motivation to speak to a crowded House. I congratulate the Minister on her mastery of the subject. I did not even see her grasp for her water once, which is a tremendous start to the debate. I now understand the context of drying and cleaning. I could not quite work that out; I was thinking of washing machines, but it was clearly nothing to do with that.
This is a serious subject. As my noble friend said and as the Explanatory Memorandum sets out so well, heat is an important part of our energy usage in this country. It is an important part of decarbonising our energy requirements and meeting our 15% target by 2020. Starkly, as the Explanatory Memorandum says, we are now at something like 2% and we need to get that up to 12%. That is a big ask over the next few years and therefore I very much welcome this instrument.
There are bits of the regulations that I particularly like. One is the emphasis on air quality, which is really important in terms of solid biomass, and another is the flexibility that it gives to ensure that the scheme will be much more user-friendly than it is at the moment. The consultation showed that some of the metering requirements were difficult, and I congratulate the Government on taking that on board and trying to fix it in a very practical way. I shall come back to a couple of issues on that but, as I say, the air quality side is important as well. In my modest house I have two wood burners, and if the wind is in the wrong direction the air quality in my house is pretty bad with the solid biomass of the logs. However, that is not quite what this statutory instrument is about.
I wanted to ask the Minister about the domestic RHI but she has more or less answered that. I hope that the urgency on that continues because, apart from anything else, there has been a stalling of that industry in terms of waiting for the scheme to come along. It is very important to make sure that it starts now.
Coming back to the regulations and the Minister’s speech, she said that certain of these technologies have not met their potential with the RHI so far. What are those technologies? I particularly welcome deep geothermal technology as one of the things that the Government are starting to look at in terms of future moves on these schemes. That is excellent.
I should like to ask a question about Regulation 23. It refers to new Regulation 42A(3)(a), which states that,
“each length of piping which is 10 metres or less and situated outside a building is properly insulated”.
Although this document has technical depth, it says that the piping must be “properly insulated”, and we see that that is key when reading the document all the way through. I am surprised that there is not more of a specification there. I presume that there is an industrial definition of “properly insulated” but, to monitor and control the process, it would seem to be important to have a specification relating to the insulation. It is a term that I would like to understand.
When equipment is moved—again, I welcome this as part of the flexibility—does it have to be recertified or does it have so-called grandfather rights in its new situation?
My last question is on the impact. Paragraph 10.2 of the Explanatory Memorandum talks about air quality limits and states clearly that they will affect only people who are investing in the scheme. Does that mean that the air quality standards for an RHI installation are different from those for boilers otherwise—or are there air quality standards for these boilers otherwise? I should be very interested to understand whether there is a differentiation here and, if so, why, and how we move forward on that—or perhaps I have misread or misinterpreted that.
I am delighted to say that I have just completed a solar thermal installation on my house—at my own expense, obviously, as there is not a domestic RHI. I got it there just in time for the wonderful sunshine that we are having at the moment, and I am really enjoying free hot water. The more that British industry can do this, the better.
I thank the Minister for her extensive introduction to the regulations. The RHI, launched in November 2011, is a key financial scheme focused on encouraging climate change mitigation and is especially relevant to off-grid businesses in rural areas which are dependent on heating oils.
On all sides of the House, renewable heat is recognised as an essential component of the UK’s long-term energy mix. In a debate on the order in the other place yesterday, the Minister there gave details regarding uptake of the scheme, which is very encouraging—indeed, the Minister here has mentioned some of those figures today.
However, I am concerned about the application of the degression system, whereby tariffs are reduced if one or other or both of two thresholds of expenditure are reached—namely, a technology-specific trigger where an imbalance in take-up between technologies occurs and a total trigger that puts an overall cap on spending. While I am not critical of there being an overall total trigger, I am nevertheless concerned that the total may be set rather low, and therefore I am concerned about its effect on applications. If, as of 1 June this year, a scheme payout to date of £13 million has resulted—as the Minister in the other place said yesterday and the noble Baroness has repeated here today—the degression system is already in action.
I am concerned that a tariff reduction of 5% at this early stage will discourage schemes coming forward. The Minister in the other place went on to say that £53.8 million is expected to be spent by this time next year. Will this result in further tariff reductions and does this total include the effect of degression? When an application is made under the scheme, when is it known at what level the tariff will be paid? While it is not specifically relevant to the regulations, it is nevertheless important to understand how the scheme has worked to date and how details of the degression payments are published in real time to applicants. Will the payment level be set at the time of an application and thereby not be affected by later uptake by further applicants?
The developments in the RHI that the Minister has outlined today are entirely to be welcomed. Meeting renewable energy targets should not come at the price of increased risks to public health or the environment. Several key outputs will be achieved. First, air quality will be protected through the introduction of emission limits for new biomass installations supported through the scheme. Secondly, the number of excessive, burdensome compliance requirements will be reduced, thereby increasing take-up; for example, by reducing the burdens associated with metering.
Thirdly, the relocation of accredited installations will be permitted, thereby allowing asset values to be maintained and the economic life of assets to be extended. The Explanatory Memorandum is commendable in its assessments, judging that the total resource cost increase will amount to about 8% over the lifetime of the policy, that additional testing and certification costs are likely to be largely immaterial and that Ofgem’s administrative costs be limited to 0.5% of total costs. Against this, the benefits are estimated to outweigh costs by the commendable margin of eight to one.
I have one or two further questions for clarification. The regulations are set to come into force in September 2014, allowing manufacturers to have new biomass boilers fully compliant by that time. The memorandum identifies that, where a biomass installation replaces a non-net-bound fuel-based installation such as heating oil or coal, its introduction can improve emissions and therefore there should be no delay to any scheme. In contrast, where biomass displaces electricity or gas-fired heat, the air quality impacts are negative. Will the Minister clarify that, in the run-up to September 2014, biomass installation applications that displace electricity or gas-fired heat may well be rejected?
There is already confusion; I have heard that environmental health officers are recommending the rejection of installations even for oil-fired boilers because of the air quality requirements. Will the Minister provide assurances that in any assessment of an installation the environmental health officer will be able to provide advice on all the necessary compliances, whether under the Clean Air Act or under the requirements of these regulations? Will the limit set by the regulations supersede the limits beyond the Clean Air Act 1993? The Explanatory Memorandum is otherwise excellent in clarifying that the regulations will now be extended to small installations with a thermal capacity of under 50 megawatts.
The Minister has spoken regarding clarity on the types of fuel that the department expects will not comply in future, such as damp logs and soft woods. Will she clarify what checks and inspections will be able to identify whether any have been used and what penalty would then follow?
The regulations are necessary to allow the RHI scheme to evolve and achieve the take-up for renewable heat that is needed for the UK to achieve its 2020 renewable target. From this side of the Committee, I am content to agree to the regulations today as another step forward. I anticipate a further statement extending the RHI to the domestic market before the recess.
My Lords, I am grateful to my noble friend Lord Teverson and the noble Lord, Lord Grantchester, for their warm welcome to the regulations. I am also grateful for the quality, rather than the quantity, of the debate. In this House, the one thing that we do well is contribute with quality. A number of questions have been asked and I will try to go through them as much as I can. If there are any questions that I fail to answer today, I will undertake to write after reading Hansard.
My noble friend Lord Teverson asked what “properly insulated” means. I am advised that it means that it is a section of external piping that does not exceed the maximum permissible heat loss outlined in British Standard 5422. I am sure that means a lot more to the noble Lord, Lord Teverson, than it does to me. “Properly insulated” is defined in Regulation 3 of these regulations.
My noble friend also asked about relocation. I think that I referred to that in my opening remarks. However, I am quite happy to repeat myself if the noble Lord wishes me to. Basically, if any plant is relocated the participant will be entitled to the remainder of the existing tariff for the remainder of the tariff lifetime. The plant does not have to meet air quality requirements, for example, as it is not a new accreditation, provided that the original accreditation is provided.
My noble friend also asked whether air quality emissions limits will apply only to future installations. The RHI emissions limits in these regulations are more stringent than those that apply to the highest-emitting boilers currently in the market. As a result, we will be encouraging the use of lower-emitting boilers.
On the question of which technologies have not met their potential, the currently supported technologies that have been subject to the tariff review are large biomass—that is, with a capacity of over 1 megawatt—ground source heat pumps and solar thermal.
The noble Lord, Lord Grantchester, asked why we were using degression so early in the process. The deployment of medium biomass has exceeded the rate that we had expected when the tariff was originally set, which suggests that the tariff is higher than is necessary to incentivise installers. Therefore, we may be overcompensating further installations if we do not adjust our tariffs downwards. Although we encourage biomass through its size, we do not want to support one type of technology in particular when there are other technologies out there that may do as well and provide equal value for money—and it is value for money that we are really keen to get. I hope that that has answered the noble Lord’s question.
I am listening very carefully to the noble Baroness. Following the wise words of the noble Lord, Lord Teverson, my concern is that it is quite a big ask to reach our limits by 2020. I am concerned that, if the degression totals are set too soon and too early, we may choke off from coming forward those who could potentially help to meet these quite stringent targets.
The difficulty is achieving a balance between value for money and ensuring that we meet our targets. However, as I said, I think that we are managing to provide some encouragement and there is a great deal of interest. What we do not want is for one energy source to have an unnecessary advantage over another.
My noble friend Lord Teverson asked about the limits on boilers outside the RHI scheme. There are no emission limits for boilers outside the scheme but other measures may apply—for example, where environmental permits are required or where a boiler is within a smoke-controlled area under the Clean Air Act.
The noble Lord, Lord Grantchester, asked some other questions but I may have to respond to him in writing because I am finding it slightly difficult to read the responses. However, I shall finish with a response that I can read concerning a question from the noble Lords, Lord Teverson and Lord Grantchester, on the urgency of the domestic scheme. Details of the domestic scheme will be announced before the Recess—that is, in a matter of a few days rather than months.
I hope that, on that note, noble Lords will support these regulations and I commend them to the Committee.
Alternative Investment Fund Managers Regulations 2013
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Alternative Investment Fund Managers Regulations 2013.
Relevant documents: 4th Report from the Joint Committee on Statutory Instruments.
My Lords, these regulations implement the alternative investment fund managers directive, taking into account the European venture capital fund regulation and the European social entrepreneurship regulation. Member states are required to transpose the directive by 22 July this year.
The directive creates a new regulatory framework and a passport to market funds across the EEA for managers of investment funds that are not already authorised under the undertakings for collective investment in transferable securities, or UCITS, directive. The regulations also create an optional lighter framework for smaller managers of venture capital and social investment funds, including a marketing passport.
The investment management industry is one of the UK’s success stories. It serves millions of customers all around the globe and forms a key part of the UK’s financial sector, managing £4.9 trillion of funds and earning an estimated £12 billion a year for the UK economy. Around one-third of European assets under management are managed out of the UK and the industry is a significant provider of high value-added jobs and skills, with clusters of expertise in London and Scotland and across many UK regions.
Because of the importance of this sector to the country, sensible and proportionate application of the requirements of the directive is vital to safeguarding its future. Therefore, we have consulted extensively with industry and other stakeholders while developing these regulations. As well as setting up face-to-face meetings with a range of trade associations and individual firms, we published a discussion paper and two consultation papers. We received 27 responses to the main consultation paper. Jointly with the Financial Conduct Authority we also set up an open forum event, which was attended by more than 300 stakeholders. The regulations have been developed in line with the feedback that we received, and the asset management sector has been very supportive of our overall approach to their introduction.
We have made full use of the flexibility provided by the directive to ensure that our industry has as reasonable a timetable of transition to the new regime as possible. UK firms must therefore be authorised or registered in accordance with the directive before 22 July next year. A firm will need to comply with the relevant directive requirements by the time that its authorisation or registration is approved. The full scope of the directive applies to firms managing cumulative assets with a value in excess of the threshold of €500 million, or €100 million if they are leveraged—that is, if they have used debt to supplement investment. Other firms may also opt in to the full scope of the directive if they choose.
The directive prescribes uniform regulatory standards for fully AIFMD-authorised firms, in particular a requirement to appoint a depositary, new rules on delegation, disclosure of leverage to investors, liquidity management standards, common standards on valuing fund assets and restrictions on asset-stripping for private equity firms. In exchange, fully authorised firms will be able to benefit from a marketing passport. This will allow them to market the funds that they manage across the EEA, based on a single authorisation with the Financial Conduct Authority.
There is little discretion for individual member states on exactly how they implement these requirements. However, we are working closely with the FCA to ensure that these new rules are applied in a pragmatic and proportionate manner. We will not add any new regulatory requirements to firms below the threshold, with the exception of a few minor obligations imposed by the directive.
Implementation of the directive will represent a significant shift in the way that the European alternative investment fund management sector operates, and it is likely to increase operational costs for many firms. We have therefore explored every opportunity to minimise the negative impacts on UK firms. In addition to the 12-month transitional period to which I have already referred, we have made a number of policy decisions, including the use of available derogations to keep these impacts down. Also, we have not applied any gold-plating in our implementation of the directive. No directive requirements above the minimum required for implementation will be applied to UK firms and no other new requirements are being introduced.
Our regulations are also designed to ensure that UK investors continue to have access to funds in other jurisdictions, so that EEA and third-country managers seeking to market here will benefit from a similar transitional period to UK firms. EEA managers who cannot make use of the marketing passport will be able to market to UK retail investors on the same terms as a UK firm would, provided that the fund has been recognised as providing sufficient investor protection.
Third-country managers will be able to market to UK investors once they have completed a simple notification process with the Financial Conduct Authority. They will also cease to have to comply with the reporting requirements imposed by the directive as soon as there are no longer any UK investors invested in their fund. Again, this overall approach to non-UK firms follows the strategy of replicating the status quo of marketing arrangements as closely as possible within the framework of AIFMD.
Although the directive has not been without controversy in the industry, I hope that I have been able to reassure the Committee that the Government have worked closely with the sector to ensure that we have taken the most sensible approach possible to the implementation of the regulations. I am confident that the regulations will help to ensure an appropriate balance between protecting the interests of investors and promoting and safeguarding an important and successful UK industry.
The Floor is the noble Lord’s.
My Lords, I am delighted to have the Floor. I cannot think of anything more exciting than to discuss this SI with the Minister. It looks as though only the two of us will participate in this absolutely fascinating debate.
Of course, we agree with the broad terms of the SI. After all, the origins of the directive were derived several years ago from a position that we largely endorsed in government. The Minister will appreciate that we very much agree that supervision and control should be robust and effective, and we expect the Financial Conduct Authority to fulfil that function. The SI indicates the need of this important part of our investment and service economy to have the opportunity to seek custom right across the European Community.
The Minister may nod his head enthusiastically, because I know his views on the European position, but I notice a dearth of Conservative support in the Committee on this issue. On issues such as this, in the absence of some of those noble Lords who, like their colleagues on the Conservative Benches in the Commons, always smell a rat in anything to do with the European Community, one always worries whether any such indication exists as far as this SI is concerned. Certainly, our side supports it.
The Minister identified the issue of costs, which, it is clear from the documentation, are not negligible. However, I ask the Minister to come clean on something that I do not think occurred in the other place. When this SI was being considered and the consultation had taken place with the industry, how is it that the Government, with extraordinarily adroit timing, also included in the Finance Bill £150 million of tax cuts to the industry? In this a case once again of the Government, with their well-known friends in the City and conscious that some costs are involved—I am not underestimating the costs—thinking that some softening of the impact must be made by other aspects of government policy?
All I can say is that I do not agree with that. I am not at all convinced about the necessity for that. After all, as the Minister was at pains to point out, and as was also made clear in the other place, there are considerable benefits from what the noble Lord referred to quite clearly as a passport for effective operation in Europe. That is not a negligible thing. Ordinary citizens pay for a passport when they have the right to go abroad, so I am not clear why the costs appear to have been partially defrayed by the Government acting in another legislative capacity to moderate costs for the industry with the tax concessions that they have made. After all, it is not as if the industry has not for some time been quite adroit at lobbying on this issue—with considerable effect, I might add.
I apologise if I am a little slow in understanding the position but perhaps the Minister can spell it out. I understand entirely the €500 million threshold on activity and the €100 million base, but I take it that those who fall below that threshold yet are in this category of activity are subject to some regulation from the Financial Conduct Authority. I was not quite sure whether the Minister had spelt that point out. I apologise to him in advance if he did and I merely missed it.
We endorse this SI and hope that it will bring to the industry the opportunities of using the passport for effective operation in Europe. I have one last question. The Minister referred to the date by which we were obliged to comply. What are the prospects of the other 27 states complying with that timetable? He says, “Well, we haven’t gold-plated this particular SI”. No, but fair is fair and a level playing field must exist across Europe. We therefore want some assurance that other actors on the European scene will meet the same obligations with the same degree of scrutiny and control as is to be applied in the United Kingdom.
My Lords, I am most grateful to the noble Lord for his intervention. Since he referred to the timing of this debate, I must apologise that we have chosen to have it on a particularly exciting afternoon in the first test. Australia were 19 for two when I last heard.
That is almost the best news that the Minister has ever presented to me in any Committee, or in the House.
I do not want to dampen the mood but the noble Lord will know the score at which England were all out, so I am pleased to have been able to assist him marginally.
Regarding the noble Lord’s questions, he raised the point about whether the decision in the Budget to abolish Schedule 19 stamp duty reserve tax was a sop to the industry that was being hit by this directive, to which the answer is no. It is not, if for no other reason than that the firms covered by this directive were not bearing the stamp duty. This directive covers hedge funds and private equity, which were not paying the stamp duty reserve tax in the first place, so that is not the case. The reason for abolishing that relatively modest bit of stamp duty was that we were undertaking a package of reforms designed to enhance the competitiveness of the funds industry, and to help secure our status as the global asset management centre. The scope within the EU to expand that kind of activity of fund management is considerable, in our view, and we do not want to constrain it by unnecessary burdens of any sort.
The noble Lord asked about the state of play in terms of the implementation of the directive elsewhere. We are aware that Austria, Bulgaria, Cyprus, the Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Romania, Slovakia and Sweden have stated that they will implement the directive by the deadline. The majority of those member states now have relevant legislation being considered by their parliaments. I am afraid that I cannot give the noble Lord any information on the state of implementation in Belgium, Estonia, Greece, Hungary, Lithuania, Poland, Portugal, Slovenia or Spain. However, as far as we are aware, there is no reason to believe that any of those jurisdictions will miss the deadline.
The noble Lord asked whether sub-threshold managers are authorised by the FCA. Yes, they are. All sub-threshold managers will be subject to at least the same regulatory standards and oversight by the FCA as they are now, so they are not unregulated. I hope that I have answered the questions posed by noble Lords and, on that basis, commend the regulations to the Committee.
Coroners and Justice Act 2009 (Consequential Provisions) Order 2013
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Coroners and Justice Act 2009 (Consequential Provisions) Order 2013.
Relevant documents: 2nd Report from the Joint Committee on Statutory Instruments.
My Lords, the order amends two key provisions in the Coroners Act 1988. The first is Section 4A(8), which governs the jurisdiction of coroners in Wales. The second is Section 13, which allows applications to be made to the High Court by, or under the authority of, the Attorney-General, for an inquest, or fresh inquest, to be ordered. These provisions of the Coroners Act 1988 will not be repealed when the bulk of Part 1 of the Coroners and Justice Act 2009 is implemented later this month. The purpose of the draft order is simply to amend the terminology of these provisions to make them consistent with the Coroners and Justice Act 2009.
Part 1 of the 2009 Act contains a number of important reforms to the coroner system. It creates the new post of chief coroner, the new judicial head of the system, and makes a number of changes that will help to speed up the inquest process, improve consistency between coroner areas and drive up standards.
Part 1 of the 2009 Act also introduces new terminology, including new titles for coroners and the areas they are appointed to. It also introduces the new concept of an “investigation” into a death, of which the inquest will form part. Under the 2009 Act, the coroner or jury will make “determinations and findings” at the end of an inquest rather than reaching a “verdict” and making an “inquisition”.
Following a consultation exercise earlier this year, we intend to commence the majority of the 2009 Act provisions, and new coroners’ rules and regulations, on 25 July. When we implement the 2009 Act, we will repeal the 1988 Act but with two important exceptions. The first exception relates to the deployment of coroners in Wales. Section 4A(8) of the Coroners Act 1988 provides that a coroner appointed to a district in Wales is to be considered a coroner for the whole of Wales. This gives additional flexibility in the deployment of resources in Wales. It means that a coroner with specialist skills can temporarily act outside his or her own district without having to be appointed as a coroner in the other district. This is particularly useful for urgent matters which may arise, such as the need to request a post-mortem examination or to facilitate organ donation. The draft order, therefore, updates the language of Section 4A(8) to make it consistent with the 2009 Act. It does this by changing the word “coroner” to “senior coroner” and “coroner’s district” to “coroner area”. We will repeal the rest of Section 4A.
The other 1988 Act provision that we need to save is Section 13. This important provision allows an application to be made by, or under the authority of, the Attorney-General to the High Court for an inquest or a fresh inquest to be ordered. Noble Lords will no doubt remember the important debate that we had about implementation of the post of chief coroner when the Public Bodies Bill was before this House. The Government listened to concerns expressed about the importance of the role of the chief coroner and agreed to take the post out of scope of the Public Bodies Bill. This was on the proviso that Section 40 of the 2009 Act, which created a new system of appeals to the chief coroner, would be repealed. In doing so, we were clear that we would instead retain Section 13 of the 1988 Act.
The order therefore amends the terminology of Section 13 to match the language of the 2009 Act. For example it allows the High Court to order an investigation, rather than an inquest, into a death where the coroner has refused or neglected to hold one, or a fresh investigation where a coroner has already held one. The order also allows the High Court to order a different coroner within the coroner area to conduct the investigation or fresh investigation. Alternatively, the chief coroner will be able to direct a coroner in a different area to conduct the investigation, using the power in Section 3 of the 2009 Act. Retaining Section 13 of the 1988 Act preserves an important means for bereaved people to challenge the outcome or conduct of a coroner’s investigation.
A concern was raised in the other House about the effectiveness of Section 13 for those bereaved people who are dissatisfied with a coroner’s investigation. The recent example regarding the tragic deaths at Hillsborough should be sufficient to demonstrate the merits of Section 13. Last December, my right honourable friend the Attorney-General lodged such an application with the High Court on behalf of the families of those who died at Hillsborough. The High Court subsequently quashed the original inquests and ordered new ones to be held. We expect the inquests to begin early next year. Without Section 13, the only available means for challenging a coroner’s decisions would be by means of judicial review, which was not an option for the Hillsborough families, given the time limits for bringing such proceedings.
In summary, I can reassure noble Lords that the Government remain committed to reforming the coroner system, to make it more responsive to the needs of bereaved families. Retaining those two provisions from the 1988 Act will help us to achieve those aims. I therefore commend this draft order to the Committee. I beg to move.
I am very grateful to the Government for this order, and I am glad to speak to it today. I thank the Government for the way in which this is happening because there has been a gentle transition that aims to enhance the experience of the public. When they are bereaved, people are incredibly vulnerable but there will now be a process that is kinder to them. If an investigation is required it can be conducted. If the investigation shows that it was a natural death, the coroner can simply register the death and the family will be spared the court process if it is not necessary. If, however, a hearing is required, the family will get an inquest and they will have the hearing that they may seek. That means that it meets the needs and expectations of the bereaved. I hope that having a process that is much clearer in its stages will also help with that group of deaths that are deaths by suicide. It has been particularly difficult even to ascertain the data on how many such deaths occur because of how they are often recorded. The term “verdict” is used, which is often seen as suggesting that there was some kind of criminal intent behind the suicide, when death by suicide is a very tragic event for everyone left behind.
This transition should also raise the overall standard of the experience of families from lower standards to the standards of the better and best. I have discussed the order with coroners, and there is an expectation that it will achieve what we have all wanted, which is to drive up the overall standard. I hope that the Government will encourage the chief coroner to have the courage to put pressure on those coroners that people have been concerned about.
My final point is to welcome the flexibility for Wales. We will have new transplant legislation before us in Wales fairly soon, and it will be particularly important that at all times of the day or night the coroner can be contacted in relation to organ retrieval. Having the ability to provide cross-cover should mean that we will have the service that is needed and that the coroners themselves will have a working life and home life that are compatible with enjoying living in Wales, rather than being exhausted. I am grateful to the Government.
My Lords, I have some second-hand acquaintance with the coroner system because I was articled to a coroner and subsequently became his partner. He was a part-time coroner in the north-east of England. I cannot resist the temptation—I rarely do—to recount a couple of incidents from that time. The first was the remarkable theory constructed by the coroner’s officer, who is a police officer attached to the coroner’s office, about a chap who was found drowned in the bath. The officer came up with the wonderful theory that this man had committed suicide by deliberately banging himself on the back of the head so that he would become unconscious and drown in the bath. My principal was not entirely convinced by this theory, and accidental death was recorded instead. On another occasion he had to show a bereaved widow the body of her husband for identification purposes. The body was produced from the cabinet and uncovered, and she acknowledged that this was indeed her husband. She turned to go away and my partner, as he then was, began to put the drawer back into the cupboard, but then she said, “Do you mind, Mr Henderson, if I have another look?”. “Oh yes, my dear”, he said, and pulled the thing out again and uncovered it. She looked down at her husband and said, “Well, there you are”—I will not repeat the expletives—“may you rot in hell”. So a coroner’s life can be quite an interesting one.
With regard to the order, my honourable friend Robert Flello raised a couple of points in the other place. The first was to regret the fact that it did indeed take something of a struggle to persuade the Government to retain the office of chief coroner. However, they did that, and I join the noble Baroness in commending that and, up to a point, the changes before us today. She and the Minister are right to refer to the continued availability of Section 13 of the 1988 Act and the possible process of obtaining an order from the Attorney-General. However, that is by no means a simple procedure; rather, it is convoluted and, given that the noble Baroness has reminded us of the state of mind of bereaved families, it is one that is difficult to pursue.
The point is that in the 2009 Act there was provision for an appeals procedure. My honourable friend asserted, and I agree with him, that it would have been better to have retained or implemented that provision, particularly as the alternative to the Attorney-General procedure, cumbersome and protracted as it is, will now be only to rely upon judicial review. Judicial review, of course, poses a question of cost and of course will largely be out of scope of legal aid. It will be yet another difficult process for someone, particularly in the circumstances of bereavement, to negotiate, both practically and emotionally. It is unsatisfactory that the Government have not retained—or, rather, implemented—that provision for an appeals process, and are leaving the potential applicant with an unsatisfactory choice between the Attorney-General process and JR, the access to which is highly questionable .
In replying to my noble friend, the Minister, Mrs Grant, said simply:
“The right answer is to raise standards”.—[Official Report, Commons, Sixth Delegated Legislation Committee, 26/6/13; col. 7.]
As my noble friend pointed out, the two things are not incompatible. Of course it may well be, as both the Minister and the noble Baroness have said, that standards should indeed be raised, but that does not necessarily mean that there will not on occasion be the perceived necessity on the part of bereaved members of the family or others to challenge a decision. There ought to be a proper scope to facilitate that, and the concern is that that is not easily available under the order as it will stand.
The other aspect that the Minister might perhaps touch on is what is left to be done. Just last week we had a response to the consultation on other aspects of implementing the reform, and I assume that there will be further orders to come. I do not know if he is in a position to indicate when that might happen—I hope it will not be for a while so that some of us, the Minister included, can take a breath in the mean time from the tide of regulations and orders that we will be discussing over the next couple of weeks. One might have thought that it made sense for the whole thing to be brought together, but we have to deal with the order today. In the circumstances, we cannot object to it but we have regrets about the limited way in which the 2009 Act is being implemented. We look forward to seeing how the other aspects of it that remain to be dealt with emerge in due course.
My Lords, I am grateful to both the noble Baroness, Lady Finlay, and the noble Lord, Lord Beecham, for their contributions. I pay tribute to the noble Baroness. Whenever a Government listen to wise advice and make an adjustment of policy, the Opposition immediately and churlishly brand that a U-turn rather than what good government should be, which is to listen to wise advice. I think that everyone now believes in the campaign that the noble Baroness very successfully worked on to restore the office of chief coroner; I do not think that anyone would now go back on that decision. Indeed, one of the more welcome things about what has happened is that His Honour Judge Peter Thornton has hit the ground running in his job. He has been visiting coroners across England and Wales, meeting stakeholders, issuing guidance to coroners on issues such as the location of inquest hearings and less invasive post mortem examinations, and drawing up proposals for specialist cadres of coroners to conduct certain types of investigation. He has been working very closely with my own office, the MoJ, on the rules and regulations under the Act, and has set up a new coroners’ training group and is working with the Judicial College to deliver training for coroners. Therefore, the hopes and expectations that the noble Baroness, Lady Finlay, has for the office are justified by the new chief coroner’s “hit the ground running” attitude to his appointment, as I described it. He certainly has my support in that.
I am pleased to note, and welcome, the noble Baroness’s point about the way that the new chief coroner is approaching his appointment and the way that the Act is being implemented. He is taking a kinder approach at a point of vulnerability. These cases are always very heart-wrenching, particularly those involving suicide. A case came across my desk recently in which the parents simply did not want to believe that their son had committed suicide. Reading the case, I thought that one should always give the widest margin of interpretation where there is a scintilla of doubt, because it is the people who are left behind who are left with the questions and doubts. It is a point of real vulnerability.
The collection of data is key to lifting standards, and I think that the chief coroner will bear that in mind as part of his exercise in lifting standards. As the noble Baroness rightly said, the flexibility now given to the coroner system in Wales is another plus as far as this legislation is concerned.
The noble Lord, Lord Beecham, tempted me to tell a couple of stories of my own but I had better not do so. We can do it in the margins. I can tell the Committee that they are good ones but I know that the noble Baroness in the Chair would give me one of her looks.
I understand the point that the noble Lord, Lord Beecham, made about Sections 13 and 40. For cost and other reasons, we did not want to implement Section 40. If we are to help bereaved families to achieve closure, the addition of a further layer of appeal rights is not the answer. This can simply encourage distraught relatives to pursue lengthy legal challenges and to exhaust all avenues of redress. The Government consider that it is better to focus on raising the standards of coroner investigations to ensure that bereaved families are satisfied with the process rather than to have new appeal rights and expensive litigation. Retaining Section 13 in addition to judicial review will provide a mechanism for challenges to coroners’ decisions where things go wrong. Bereaved families wishing to pursue claims of judicial review will be able to apply for legal aid, subject to the usual tests of means and merits.
There are no further SIs in the pipeline at the moment. Our new rules and regulations will come into force on 25 July, and no further changes are planned.
There is one other point not raised by either the noble Baroness or the noble Lord that I should put on the record. One of my noble colleagues raised the particular problem experienced by Jewish and Muslim families over the speed of their burial services. I looked into this matter following my noble colleague’s representation and found that there is a lack of consistency across coroner services in England and Wales over what is available in the way of out-of-hours cover, which allows for quick decisions in this kind of area. It depends in large part on local authority and police authority funding of the coroner or his or her officers. However, the chief coroner plans to work with local authorities and police authorities to produce guidance for coroners on providing out-of-hours cover, which we hope will meet these communities’ concerns.
I am very grateful to the Minister for raising this matter, which I confess I have also been approached about and had intended to raise, but immersed as I have been in several regulations and debates and preparation for them, I am afraid I had overlooked that. I am particularly grateful to the Minister for making that clear. I suppose that I ought also to declare an interest as a member of the Jewish community in that regard.
I sincerely hope it is a facility that the noble Lord does not need to use personally for a very long time. As he says, both the Muslim and Jewish communities have raised this issue, which again proves the value of having a chief coroner. It means that when communities raise an issue it can go to the chief coroner, who will now take responsibility for issuing guidance and getting the right responses. I thank the contributors and again hope that this SI will be accepted by the Committee.
National Health Service (Licensing and Pricing) Regulations 2013
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the National Health Service (Licensing and Pricing) Regulations 2013.
Relevant document: 4th Report from the Joint Committee on Statutory Instruments.
The Health and Social Care Act 2012 gave Monitor a new role in regulating provision of NHS services and an overarching duty to protect and promote the interests of patients by promoting NHS provision that is economic, efficient and effective. These regulations provide key details that enable Monitor to carry out its new functions of licensing providers of NHS services and regulating the prices payable by commissioners for NHS services, in order to protect and promote patients’ interests.
The licence is a key tool by which Monitor will regulate providers of healthcare services for the NHS. Monitor has now taken on its new licensing powers in relation to foundation trusts and we expect this to extend to other providers of NHS services from April 2014.
A provider’s licence is made up of licence conditions that set out the requirements providers must meet if they wish to provide NHS services. In future, all providers of NHS services must hold a licence unless they are exempt under separate regulations, which were laid before the House on 4 July.
Monitor published its first set of standard licence conditions in February this year, after approval by the Secretary of State for Health. They include standard conditions such as requiring licensees to provide information to Monitor, which will apply to all licence holders, or to particular types of licence holder, such as conditions applying to providers whose services are designated as a commissioner-requested service. There are also special conditions that will apply to an individual provider, such as conditions for NHS foundation trusts. The Act sets out a process that Monitor must follow in order to either modify a standard licence condition or include a new standard licence condition that applies to all licences, or licences of a particular description.
These regulations allow the Secretary of State to determine the extent to which licence holders should be able to influence Monitor on any changes to the standard licence conditions, to ensure a balance between allowing real concerns to be addressed and not imposing unnecessary delays to the licence modification process. Monitor intends to engage potentially affected licence holders on the scope and scale of any changes to the standard licence conditions before reaching the statutory process, much as it did when engaging on the first set of standard licence conditions.
The statutory process then ensures that there will be proper engagement with affected licence holders and other relevant bodies about any change to the standard licence conditions, and includes a statutory check on Monitor’s ability to change the standard licence conditions. This check comes in the form of an ability for licence holders who would be affected to object to the change.
The regulations set the two objection thresholds at 20% of licence holders or 20% of market share of NHS provision. If either threshold is met, Monitor will be unable to make the change. However, Monitor may refer the issue to the Competition Commission. Monitor could make the changes only if the Competition Commission judged that the changes were in the public interest.
I turn to the second aspect of these regulations. Monitor has powers to take action where a person—which may be a licence holder, an exempt provider, NHS England or a clinical commissioning group—has not complied with a request for information documents, records or other documents that it considers necessary for Monitor to carry out its regulatory functions. Monitor also has powers to take action where a provider is in breach of the requirement to hold a licence or a condition of the licence.
The Act sets out Monitor’s powers to impose three different types of discretionary requirements, and I remind the Committee of them as a refresher. The first is a variable monetary penalty of such amount as Monitor may determine, up to 10% of the organisation’s turnover in England. The second is a compliance requirement, or, in other words, action to stop the breach in question or to ensure that it does not happen again—for example, a requirement that a provider ceases plans to dispose of an asset needed for the provision of a specified service. The third is a restoration requirement, an action to revert to the position before the breach occurred. For example, Monitor could require that a provider reopen a service that it had closed in breach of a licence condition.
Monitor’s guidance sets out how it will determine the use of its enforcement powers, including fines, and these regulations set the definition of turnover that Monitor will use when determining the level of fines. Simply put, providers’ turnover is defined as their turnover from NHS income. The turnover of clinical commissioning groups and NHS England is defined in terms of administrative spend; total spend would be vastly disproportionate.
I turn to the final aspect of the regulations. The Government want to ensure that the health system delivers better health, better care and better value for money. Better value for money and more accurate pricing will be a key part in delivering enhanced services to patients and in equipping the NHS to improve standards. The new system will drive improvement through providing mechanisms to ensure that prices better reflect costs of supply, incentivise better data recording and collection and make available better incentives and stronger compliance mechanisms. Monitor will have the specific duty of promoting healthcare services that represent value for money and maintain or improve quality. Monitor will achieve this by working with NHS England to regulate prices and set rules for determining prices for local pricing and flexibilities.
NHS England will set the scope of the tariff and define “units of service” for which prices or rules will be specified. NHS England will also set rules for determining local variations. At all stages, Monitor and NHS England will have to agree elements of the tariff with each other.
The Act includes a new statutory basis for providers and commissioners to raise formal objections to the methodology that Monitor proposes for calculating national prices. It is very like the process that I have described for objecting to modifications to licence conditions. Following comprehensive engagement, Monitor will be required to publish a final draft of the national tariff and allow 28 days for commissioners and providers to object formally to the proposed methodology for calculating national tariff prices for specified services.
Following the consultation, Monitor will calculate the percentage of commissioners objecting, the percentage of providers objecting and the percentage share of supply held by the objecting providers, which allows providers’ objections to be weighted proportionate to the nationally priced services that they deliver. If the threshold for any of these three types of objections is met, Monitor has three options. Monitor may drop the proposed methodology in light of the objections received; it may put forward alternative proposals in the light of the objections received, and publish these for consultation; or, it may refer the proposed methodology to the Competition Commission, which would then be required to investigate and report on whether the proposal was appropriate.
These regulations set the three objection thresholds, each one at 51%. The thresholds are higher than for licensing. This is because the threshold for licensing was based on precedents for objections to licence changes in other sectors, but there are no precedents for price-setting. The department proposed a higher threshold for pricing because the group of potential objectors is wider there. Following consultation, the department has concluded that setting the thresholds at this level will effectively balance the interests of patients, while protecting commissioners and providers from a pricing methodology that could be unfair.
These regulations will help to enable Monitor to undertake fair and proportionate regulatory action, and will support a fair and transparent system for setting tariff prices. I commend the regulations to the Committee.
I have a short query, which I hope that the Minister can clarify for me. It relates to the cross-border flow between England and Wales, either of providers or patients as users of services where NHS Wales is paying for services provided by NHS England or a provider in England. I would like reassurance that there will be no way that the experience of patients going from Wales into England, or the ability for providers from Wales to provide services to patients along the border, are in any way jeopardised within these arrangements and that they have equality within the provision.
My Lords, I declare an interest as chair of an NHS foundation trust, president elect of GS1 UK and a consultant and trainer with Cumberlege Connections. I am grateful to the Minister for his explanation of these regulations. I want to put a few points to him.
I start with Part 2 on licensing, specifically paragraph 3 concerning monetary penalties. Can I ask the Minister about the logic of fining providers, when all that happens is that worse care will be provided for patients as the organisation will have less money? I think that the figure of up to 10% of turnover would virtually bankrupt most providers. While I certainly accept the need for penalties and consequences for failure, I wonder whether they would be better being not financial, as the reality is that they will not happen in many cases because the people who suffer will be those who get services. I just wonder about the logic of that.
It took NHS England months to wake up to the fact that the A&E problems were to do with the failure of systems, but for months it was pressing CCGs in some parts of the country to fine hospitals for poor A&E performance. I think that NHS England has completely lost the plot when it comes to understanding what is happening in the health service. I cannot think of a more hopeless response to the crisis than to come along and say, “We should fine hospitals”. I worry about this whole approach to fining. I say to the Minister that there are very limited signs that systems understand the winter problems and there is a real reluctance to get to grips with what needs to happen. This is a worry for the future which may not have much to do with the regulations, but my seeing the Minister here represents a good opportunity to raise them with him.
Does the Minister think that fines and targets can lead to some perverse incentives? Of course, it is right to issue targets, but I wonder whether the Minister might comment on a very interesting section of the Chief Medical Officer’s Report for 2013, published earlier this year, where she refers to the low number of instances of MRSA and C. diff. I do not think that there is any doubt that the targets that were set for the health service have been responsible for the focus that has led to this very welcome improvement. My understanding is that part of the response to this by the NHS has been to use antibiotics which should have been reserved for hard-to-treat infections. There is now real concern that the antibiotics that go with those hard-to-treat infections have been used rather widely, which is causing great problems in more general infection control. According to the CMO, while the typical, large, 1,000-bed acute NHS hospital has two to three MRSA bacteraemias per year and 50 to 60 C. diff cases, 400 to 500 bacteraemias involving Gram-negative bacteria can occur in a 1,000-bed-type hospital, 10% to 15% of them being due to strains resistance to those antibiotics for hard-to-treat infections. You can reach a point where individual targets become counterproductive because the focus of the NHS is simply on C. diff and MRSA and not on the wider infections which clearly need to be tackled as well.
Will the regulations lead to more specific targeting which can in turn lead to perverse incentives, or is a more sophisticated approach likely to be taken? It is clear that the Chief Medical Officer is concerned about the way in which some MRSA and C. diff targets are leading to perverse behaviours.
On Part 3, the rationale for each of the thresholds described for penalties, prices and licence changes has not been explained in relation to an evidence base. In other words, why are the thresholds where they are? What work has been done to suggest that those are the right thresholds? Of course, now they will only be tested post-implementation, but it would have been good to have seen a clearer review mechanism that enabled a sensible approach.
In respect of the mechanisms to lodge an objection to the pricing methodology, my understanding is that the Foundation Trust Network has stated throughout the development of the policy that the 51% threshold for an objection, together with the denominator comprising all tariff services, is too high a threshold to be met. Is the noble Earl prepared to look at this? That might be a reasonable approach for general objections to the general approach, but it is insufficiently sensitive to address sections of the tariff that may be inadequately compensated—cancer services, for example. The noble Earl will be aware that there were issues around the tariff for children’s services and women’s services. My reading of that is that if you were a specialist adviser your chances of reaching the 51% threshold would be very limited. Could this be looked at?
If my noble friend Lord Warner were here I am sure he would raise this. It is the question of what happens to non-foundation trusts. I know that Monitor is working closely with the NHS Trust Development Authority, but I would welcome clarity about what will happen to trusts outside Monitor’s remit to ensure that there is an even-handed approach across all providers in the sector. No one is more admiring of the work of Sir Peter Carr as chair of the NHS Trust Development Authority. The noble Earl knows that Sir Peter has held chairmanships under both Governments for many years. While he is a marvellous person, there is a fear that he will hold the chairmanship of the NHS Trust Development Authority for many years to come because of the issue about what on earth will happen to those non-foundation trusts that are clearly not going to reach FT status any time soon.
The noble Earl mentioned the Competition Commission.
Sitting suspended for a Division in the House.
My Lords, I was just going to refer the Minister to his remarks about the Competition Commission, because it is relevant to the regulation. There is great confusion in the health service about the commission’s role. The Minister will know that there have been interventions in Dorset and Bristol on what seem to be entirely sensible proposals. In Dorset it was the merger of two small acute trusts, while in Bristol it was the “divvying up”, I suppose the phrase is, of services between two trusts in order to allow for more patients to be treated and all the benefits that you get from that, with one trust focusing on some services and the other focusing on others. In anyone’s terms, those are both examples of the kind of configuration of services that is entirely sensible and that the Government in other guises are supporting.
It is quite clear that the OFT has been trying to get into the health service for some years. I will not get into Section 75 now but the OFT now feels that it can get into the health service, although it is very difficult to see what the point of that would be. The OFT is independent, I understand that, but Ministers have been silent about this. There is utter confusion in the health service and, I believe, among the regulators about how to run these two issues—on the one hand, the Competition Commission and OFT approach, and on the other the need for us to be aggressive in terms of the reconfiguration, and in many cases the centralisation, of services. This matter needs to be teased out.
The regulations ought to be considered in relation to more general policy on pricing as part of the national tariff. The Minister will know that in October last year, when the House of Commons Health Committee had its annual accountability hearing with Monitor, David Bennett, the leader of Monitor, talked about perverse incentives with regard to the tariff. He said that he was not sure that they were fundamental to the pricing system but he agreed that the way it is working can create perverse incentives. One example he used was that if we want to move activity out of hospitals and into a community setting, one thing we have to think about is that there some real transition costs which will have to be paid one way or another. The question is: is the tariff being adjusted to allow for that?
The Health Select Committee published its subsequent report in March of this year and concluded:
“The setting of the tariff is of great significance to the NHS because of its implications … for short term cash flows in the system, and for longer term incentives for”,
service changes. It recommended that,
“Monitor and the NHS Commissioning Board … attach a high priority to this process … because NHS parties need to know the likely tariff in 2014–15 as soon as possible, but also because the long term framework of the tariff will have an immediate effect on service design and the integration of service provision”.
I would be interested to know whether it is the noble Earl’s view that progress is in fact being made, so that the regulations and the tariff to which they relate are much more sensitive to the need for change and reconfiguration in the health service. We must reorganise our services to get higher quality, and the work that Bruce Keogh is doing is surely driving us towards this. However, it sometimes seems as though some of our regulatory apparatus is now at risk of getting in the way of what, on anyone’s evidence base, would be a sensible move. I would be interested if the noble Earl is able to respond to any of those points.
My Lords, I am grateful to both noble Lords who have spoken. First, I hope that I can reassure the noble Baroness, Lady Finlay, on the question she posed about the cross-border aspects of patient flows and the tariffs that apply. The tariff will apply only to services commissioned by commissioners in England: that is to say, CCGs and NHS England. Any provider who provides healthcare services for the purposes of the NHS which are covered by the proposed tariff will be able to object to Monitor’s proposed methodology, so I do not see that patients in Wales or on the border need to be anxious about this.
The noble Lord, Lord Hunt, asked a series of questions. First, he questioned the wisdom of allowing Monitor to fine providers. It is worth saying that the discretionary requirements which Monitor can impose, as laid down in these regulations, are based on those used for other regulatory offences. In fact, they are based on Part 3 of the Regulatory Enforcement and Sanctions Act 2008. That menu of options has been picked up and put into the 2012 Act.
As regards fines, we need to be clear—and it is certainly my understanding—that Monitor regards fines as a last resort. It will need to consider each case carefully and has a responsibility to ensure that its regulatory actions are reasonable, while deterring poor conduct in the future. It must also consider whether its other powers would be more appropriate. I understand the point that the noble Lord has raised but it is unlikely that we will see Monitor exercising this power with any frequency. We must bear in mind that 10% of turnover is of course a maximum figure.
The noble Lord asked about the thresholds as laid down in the regulations. The 20% threshold relating to licensing is based on a similar process which was in place for modifying licences in the energy sector. We considered that the situation here in the health service was comparable, and it is a threshold that commanded general acceptance.
On pricing, the thresholds are higher than for licensing because the threshold for licensing was based on precedents for objections to licensing changes in the energy sector, as I mentioned. However, there are no precedents for price-setting in any other sector. We have proposed a higher threshold for pricing because the group of potential objectors is wider. We consulted on this and, following that, we concluded that setting the thresholds at this level would achieve the balance that I referred to earlier between the interests of patients, the interests of commissioners and the interests of providers.
We have taken on board the concerns raised by stakeholders during the consultation and we will of course keep the thresholds under review as the system beds down. We will carry out a review of the licensing regime as a totality in 2016-17.
Turning next to the noble Lord’s question about the foundation trust pipeline, the 2014 deadline for reaching foundation status has, I think, done quite a lot to galvanise the NHS trust sector and drive improvement. However, in the light of the Francis report, we have allowed the NHS Trust Development Authority to agree trajectories for NHS trusts to reach foundation trust status but to go beyond 2014 on a case-by-case basis. In doing so, we will ensure that the primary focus of the NHS Trust Development Authority and of NHS trusts themselves is on improving the quality and sustainability of services for patients.
The noble Lord asked whether I felt that the regulations might lead to a target culture, which could have perverse effects. I do not see the regulations in that light. There are in fact no targets for healthcare standards in these regulations. The regulations set the thresholds for objecting to Monitor’s proposals on licensing and pricing, as I have described, so in that sense they are very narrow in their focus.
Next, the noble Lord asked me about the role of the Competition Commission. The commission clearly has wide experience of determining similar questions in a number of other sectors. It is the body best placed to consider these questions for the purpose of the new licensing and pricing regimes. It will not apply a competition-based approach but, rather, a test of public interest in the case of licence modifications and a test of appropriateness in the case of the pricing methodology. However, I am sure that I do not need to remind the noble Lord that the issue of competition in the health service is not by any means new, and it was for that reason that the Co-operation and Competition Panel was set up under the previous Administration. As he knows, that panel has now been absorbed into Monitor.
I am of course aware of that but the reality is that the Competition Commission and the OFT did not really start intervening in the NHS. Clearly, they have been interested in areas such as dentistry for some time but they have not intervened in the wider NHS. I think that the problem is that it is now very unclear what is to be done when a reconfiguration of services takes place and, although I do not want to anticipate tomorrow’s debate on funding, it must be in the interest of greater centralisation of services, which, in a Competition Commission/OFT view, might be said to lead to reduced competition.
The problem is that it takes long enough to get change through in the NHS. The costs of delay to the health service if there is a Competition Commission referral and an investigation are very high. I wonder whether we can really afford it, given the imperative to get on with service changes. I know that guidance has been issued by Monitor which has reflected on the various roles, but at the end there is a lot of confusion. The Competition Commission and the OFT have not exactly made themselves available to debate either in Westminster or in the NHS about those issues. All we can read are the slightly acerbic comments by the staff of the Competition Commission and the OFT. I am not aware that they have ever made themselves available for a general discussion about their policy approach, which might be helpful in these circumstances.
I take the noble Lord’s point about uncertainty and confusion that I know exists in certain parts of the health service as to what all this means. I can tell him that officials in the department have had some very productive discussions with both the OFT and the Competition Commission to ensure that their approach need not set unnecessary hares running as regards apprehensions that a purist competition-based approach will be taken by these bodies. I am satisfied that that will not happen. My advice is that the Competition Commission, in particular, has welcomed the input of departmental officials in terms of the factors that need to be brought into play when making a judgment on what is in the best interests of the health service and patients.
At the same time I am aware that a number of useful events and conversations took place within the health service itself when we clarified with providers the considerations that the OFT and the Competition Commission will look at in proposed mergers. We are ensuring that when proposals are made the benefits of mergers are clearly defined in terms that will resonate with the competition authorities. The noble Lord is right that we are in new territory in many senses, but I am optimistic that the system will work in the way that it should. It is certainly about looking at competition aspects but, more pertinently, looking at the criteria that I mentioned earlier, such as the public interest in the case of licence modifications, the test of appropriateness in pricing methodology, and in the case of mergers, the interests of patients in the health service. The OFT and the Competition Commission must take into account the benefits of a proposed reconfiguration if they consider it under the Enterprise Act 2002. I remind noble Lords that that is the governing Act, so in theory at least, we have been in this situation for more than 10 years. In doing so the competition authorities must consider whether those benefits would outweigh any substantial lessening of competition that they find.
The noble Lord asked about the tariff, and in particular, primary care. We agree that payment mechanisms need to be aligned to drive better outcomes and better value for patients. They also need to be responsive and flexible, for example to enable services to be provided in an integrated way. Monitor and NHS England will work together to move the tariff in this direction. They are best placed to do that given their different roles.
The noble Lord asked me what would happen if the tariff proved to be inadequate. We expect the tariff in future more closely to relate to the costs of providing particular services. If the price payable for a service would make it uneconomic for a provider to provide a service, Sections 124 and 125 of the 2012 Act provide for a process for local modifications of the price payable.
My advice is that NHS England and Monitor are working very well together in this regard. Guiding principles have been defined and six shared principles for pricing have been agreed: that the pricing mechanism should enable and promote improvements in care for patients and taxpayers; that it should enable efficient providers to earn appropriate reimbursement for their services; that it should have regard to sustain the NHS offer in the long run; that it should not preclude the delivery of the Secretary of State’s mandate for NHS England; that it should have regard to the principles of better regulation; and that it should support movement towards a fairer playing field for providers.
I hope that I have answered most if not all the questions, but I undertake to write to noble Lords if I have failed to do that.
I seek a small point of clarification. I take the example of a Welsh provider that is providing services for Welsh patients and that is also licensed to provide for patients coming across from England. In the event of them being deemed not to meet the conditions and therefore a fine potentially being levied at 10%, would that be only 10% of the contract issued on behalf of the English patients? Two very different healthcare systems will be operating.
I realise that this is complex, but the two healthcare systems are becoming more divergent yet the population on the border has to access both sides, I am concerned that these are some of the things that need to be clarified. It is a detail, I know.
My Lords, it would only be the turnover relating to English patients that would govern that particular equation.
Committee adjourned at 6.58 pm.