House of Lords
Monday, 10 November 2014.
Prayers—read by the Lord Bishop of Coventry.
Introduction: Baroness Janke
Barbara Lilian Janke, having been created Baroness Janke, of Clifton in the City and County of Bristol, was introduced and took the oath, supported by Lord Tope and Baroness Maddock, and signed an undertaking to abide by the Code of Conduct.
Asylum Seekers: Mental Health
To ask Her Majesty’s Government what is their assessment of the mental health of asylum seekers who have had to wait 12 months or longer before being allowed to apply for work.
My Lords, asylum seekers may apply for permission to work if their claim has been outstanding for 12 months. The Government have had no cause to assess the impact of this policy on the mental health of asylum seekers. However, we are always open to discussing any welfare concerns with voluntary sector and refugee groups.
I am grateful to the Minister for his Answer. However, does he not agree that we are all very much aware of the stress and tension that are caused when someone cannot find a job, which sometimes lead to suicide? Will he consider that asylum seekers, who are not allowed even to apply for a job for 12 months, face stress even worse than that faced by others? We know that there have been cases of suicide because of the prohibition against allowing them to work for that first 12 months. Would it not be a humanitarian gesture for us to reduce that 12 months to six months, so that asylum seekers have less time to wait until they can apply for work?
It is a very difficult situation. Of course, we have every sympathy with the people who come here. However, the reality is that, if they are allowed to work while they are not here legally, we are saying that they are able to compete in the labour market with people who are here legally. That would be unfair. It is not the case that they cannot work; they are able to volunteer in the community and they are getting support, with all their accommodation covered and access to education and health care, including mental health care if they need it.
My Lords, the denial of the right to paid work, as well as the inadequate asylum support system, can lead to severe poverty or even destitution. Last week, the Joint Committee on Human Rights heard evidence that women, many of whom have fled violence, are thereby made vulnerable to further violence and sexual exploitation. What steps are the Government taking to prevent this as part of their strategy to end violence against women and girls?
I accept the point that the noble Baroness is making about the importance of providing that protection. Of course, asylum seekers have accommodation with all utility bills and council tax paid, access to legal aid, safety and protection and a liaison officer allocated to them. However, in providing the care, we need to reach a decision on their asylum claims as quickly as possible so that they can get on and rebuild their lives.
My Lords, of course one wants quick decisions because it is not fair to keep people hanging on month after month after month. However, does the Minister accept that it is humiliating and frustrating to want to work and not to be allowed to? Would it save the country money if these people were allowed to work and contribute more to our society?
The six-month period applies broadly across Europe. We have arrived at the figure of 12 months but the key is to speed up the decision-making process. However, during that time we encourage people to undertake volunteering, learn the English language and take IT courses. They can get support with those types of initiative.
My Lords, I have heard concerns expressed by the BMA and others about the desperate need to train doctors and other workers who deal with people in immigration detention, including, particularly, to train them in awareness of post-traumatic stress disorder and other conditions from which asylum seekers and some other immigrants are likely to suffer. Is there better training provision outside detention?
The numbers going into detention on what is called a fast-track process are relatively small—about 15% of the total. We contract with Migrant Help, which does excellent work in providing advice to asylum seekers during their application process—for example, helping them register with a GP or getting their children enrolled in school. Progress is being made but I accept that we are talking about very vulnerable people.
My Lords, will my noble friend clarify what he said in reply to my noble friend Lord Roberts? I thought I heard him refer to people who are here illegally. However, the Question is about asylum seekers who are here perfectly legally, waiting for their case to be heard and a decision to be made, which, as he will know, sometimes takes years. In the mean time, they are not allowed to work. Will he clarify what he said earlier about illegality?
Absolutely; I am happy to clarify that. I was talking about people who had a legal right to seek employment in this country. They should be protected and be able to apply for jobs in the first instance.
The Government have to date not allowed retired NHS doctors who volunteer to work with asylum seekers to set against tax the cost of their General Medical Council and defence union payments. Will the Government undertake to look at this again? These doctors are acting as volunteers to meet the health needs of this group but are incurring huge expense in so doing.
I am very happy to look at this but doctors are in one of the shortage occupations and would be eligible to apply for work after the 12-month period.
My Lords, it is very hard for any of us to imagine the tragedy and fear that drive somebody to leave their home and travel many miles—thousands of miles in many cases—to seek sanctuary and asylum. They have often suffered considerably. The Minister said that he is concerned about mental health issues. May I ask him two questions? What measures do the Government take to assess someone’s mental health while they are seeking asylum? He also said that it is important to speed up the asylum application process. What evidence does he have that the Government have speeded up that process?
The process is genuinely speeding up. We have given a commitment that everybody who applied before 2012 will have their case decided by the end of this calendar year. Seventy per cent of applications are decided within six months, and 35% of those people are given the right to stay, so there is speed in the system. We have recruited extra people to help. As for mental health needs, that is clearly a clinical decision. When someone is registered with a GP and in contact with the NHS, their condition can be assessed.
My Lords, will the Minister answer the noble Baroness who raised a question a few minutes ago?
Judging by the general murmurings, I think that I may have misheard the noble Baroness. I thought the question was about whether asylum seekers would be able to work if they were doctors, but I gather that it must have been about something else—in which case I apologise, and I will be happy to write and clarify the matter.
Underoccupancy Charge: Carers
To ask Her Majesty’s Government what consideration they have given to exempting unpaid carers from the underoccupancy charge.
An unpaid resident carer is allocated a bedroom, unless they are the partner of the housing benefit claimant, in which case they will share a bedroom. A non-resident unpaid carer who regularly undertakes overnight care in respect of the claimant or their partner is also provided with a bedroom.
Does the Minister really think it justifiable to make carers who are providing round-the-clock care apply repeatedly for a discretionary housing payment in order to remain in their own homes—a process which, by the way, is lengthy and bureaucratic, and very uncertain in terms of getting the discretionary payment? Is this really a fair way to treat people who are providing vast amounts of care and saving the state vast amounts of money—often at great personal cost, as the Minister knows? I ask him again: will he consider an exemption for carers from this pernicious tax?
We clearly value carers greatly, and we have put support into the system at different levels for them. In this case we have given local authorities some guidance to make it absolutely clear that they can make longer-term determinations of discretionary housing payments. We have also made it clear that DHPs will be paid next year as well as this year.
My Lords, the Government’s own review of the spare room subsidy shows that discretionary housing payments are inconsistent, short-term and temporary. Indeed, the evidence is that most of the applications for those payments are made by the very groups who should be exempt—carers and those who have had adaptations made to their homes. Many local authorities are now means-testing the disability benefits of people in receipt of those allowances. Regardless of what may happen to this policy next year, is it not now time for the Government to fully exempt people in those groups, such as carers and those with adapted homes, so that they are not subject to this inconsistent approach to government funding and can get certainty in their lives?
As I said, we have made sure that long-term discretionary housing payments can be made. We have also provided guidance to make it clear that where claimants are using their disability payments for needs caused by their disability, such as paying for care or Motability schemes, those would not be included in the calculation.
My Lords, is it not the case that it is not just outrageous but downright cruel to require a partner—presumably a wife or a husband—whose day may be appalling anyway, to sleep in the same room as the disabled person? I find that statement utterly outrageous.
About 40,000 couples in which one is looking after the other were covered by the spare room policy when it was introduced. That is about 6% of the total. The discretionary housing payment system was set up precisely to look at circumstances in which the couple could not share a room—because, of course, many of them could, even though there was a disability.
My Lords, a lot of people are looking after severely disabled children, or older adults with long-term conditions—particularly dementia. In order to get some sleep, they have to chop and change, and need additional carers such as other members of the family coming in. They desperately need the extra room. Can those sort of carers usually get an exception to the rule and be allowed to have an additional bedroom?
This is precisely the kind of circumstance for which the discretionary housing payment is designed. It has not been found possible to have a general rule, and that is why this system, which has gone through the courts in quite some detail, has been found to supply support where necessary.
My Lords, if, as the Minister suggests, disabled families with family carers are effectively covered by DHPs, why not simply exempt them? If he is wrong—which I suspect he is—why are we, quite knowingly, making lives that are already hard even harder, perhaps thus ensuring that the family carers will themselves become disabled?
The courts have gone through this in some detail now and found that it is reasonable for the Secretary of State to take the view that it is not practicable to provide a further exemption for an imprecise class of persons, and that the flexibility of the DHP scheme can be relied upon to provide the additional help.
Does my noble friend not accept that this policy, which appears to be insensitively applied, does not sit happily with Conservative philosophy?
We have aimed to get rid of some of the areas where people are just not taking part in the economic life of the country. One of the things that has been happening is that the proportion of people who have been outside the labour market and in social housing has dropped dramatically from a peak of 49% at the beginning of this Parliament to 41% now—the lowest-ever level. We need to look to help all people that we possibly can to take a full part in the economic life of this country.
My Lords, the Minister’s department claims that the focus and scope of the family test is on strong and stable family relationships, with particular focus on extended families, particularly when they are playing a role in raising children or caring for older or disabled family members. Can the Minister explain to the House how the bedroom tax passes this test?
The removal of the spare room subsidy is designed, at its heart, to save money—it saves £500 million a year—and make sure that housing is allocated more efficiently. There are signs of that policy now working.
To ask Her Majesty’s Government where the public can obtain the details of their rights under Section 83 of the Enterprise and Regulatory Reform Act 2013 regarding the rights of leaseholders to seek redress against managing agents.
My Lords, I beg leave to ask the Question standing in my name on the Order Paper and declare my interest as a leaseholder.
My Lords, the schemes themselves are primarily responsible for publicising their service to leaseholders. My department has issued a number of press releases on the government and LEASE websites, and included information about the redress schemes in the recently published How to Rent guide. Additionally, we will be sending information to 30,000 leaseholders via the LEASE mailing list.
I thank the Minister for that reply. Can he tell me whether the ombudsman, to whom one will now have the right to apply for redress, will have the powers under that scheme to rule that if the head lessee or freeholder is found to be at fault, they cannot charge the costs back to the very people who made the complaint and were justified in doing so? This has now become a most unfortunate practice.
My Lords, first, I draw the attention of the House to my entry in the Lords register as a leaseholder and pay tribute to my noble friend’s consistent efforts in ensuring that the subject of leasehold remains on the Government’s agenda. In terms of the ombudsman, the chamber of the First-tier Tribunal stays, will continue to determine a wide range of residential leasehold disputes and will not be affected by the new requirement for managing agents to belong to redress schemes. For example, leaseholders and freeholders will still be able to ask the tribunal to decide whether a service charge demand is reasonable. Where the lease requires the freeholder to recover administration charges, the tribunal will still be able to issue orders to redress this.
My Lords, I draw attention to my entry in the register of interests. As well as the redress and complaints schemes arising under the 2013 Act, the Minister will be familiar with the EU alternative dispute resolution directive. The Government have 24 months after the directive enters into force to transpose it into national legislation. That will be in mid-2015, so the clock is ticking. Can the Minister confirm the Government’s continued support for that measure and say what progress has been made to date? In particular, can he say which pieces of domestic legislation have been identified for the transposition?
The noble Lord raises the issue of reform of leasehold legislation. The Government are aware of a number of concerns in the leasehold sector and have welcomed suggestions of how resolutions on leasehold can be improved, but at the moment they are not persuaded of the need for wholesale reform. The Government want to ensure that all leaseholders have appropriate avenues for resolving disputes. I will write to the noble Lord on the specific issue of the EU directive.
My Lords, in an area of the law where there is much existing legislation, as is I think accepted, does the Minister agree that the only way in which the leaseholder could find out his rights would be if the law were consolidated from time to time? Consolidation is a boring thing to do, as I know from experience, but it is important. Will he please give it a boost on this issue in particular? I ask the question as a former chairman of the consolidation committee.
All attempts to bring laws together across the field are welcome. The Government are making serious efforts on the issue of leasehold and the sharing of information. As I already alluded to in my original Answer, we have taken various steps to ensure that leaseholders are able to access information about the redress scheme and information about the First-tier Tribunal. There are also other efforts we are making, such as the model tenancy agreement, as a way of ensuring higher standards in this particularly important sector.
I draw attention to my housing interests given in the register of interests. I do not want to minimise the problems of leaseholders, but every year 300,000 tenants are evicted after making a complaint to their landlord about the state of their home. Would my noble friend the Minister agree that the sooner the tenancy Bill that is currently going through the Commons, proposed by my friend Sarah Teather, is put through this House, then the sooner tenants will be better protected against retaliatory eviction?
My noble friend makes an important point. The Government are supportive of Sarah Teather’s Bill. I think I already mentioned the steps we have taken, such as the model tenancy agreement, which safeguards the rights of tenants and, indeed, encourages much more long-term tenancies, which is I think to be welcomed by the elderly population and young families with children.
My Lords, tenants and leaseholders find it extraordinarily difficult, as we have already heard, to find their way through the complexities of the regulations and the present law. Could the Minister tell me what it would cost for a leaseholder, having got through that, to take action and make an application under the redress scheme regulations?
Each company is required to register under one redress scheme. If the scheme makes a decision, it will be for the company to pay. There are three different schemes and each has specific criteria. Without detailing each one, one costs £95 a year, but that is done on a case-by-case basis. Another costs £199, which is an all-inclusive cost. In the interests of time, I will write to the noble Baroness on the details of the three redress schemes, and share that information with the House.
My Lords, I declare my interest as chairman of the Property Ombudsman Council. It is an important point that the ombudsman redress services are free to the tenant or leaseholder and that they are paid for by the freeholder, the landlord or the agent and not by the person making the complaint. Does he agree that, if one has a complaint and needs redress, the best way to find out what to do next is to use Mr Google or AN Other and to put the words “property” and “ombudsman” together? In doing that, we hope, a lot of one’s problems will be solved.
The noble Lord speaks with great experience in the sector and he is absolutely right. To clarify, when I said, “the company”, I meant the scheme rather than the person to whom the complaint is made. He is correct to say that there is no cost to the leaseholder. In addition to Google, perhaps I may mention www.gov.uk as a source of information, as well as the LEASE website. We are also working closely with LEASE, which provides good information in this respect.
To ask Her Majesty’s Government what assessment they have made of the effectiveness of the allocation of resources for the Great Britain Olympic and Paralympic teams due to compete in Rio de Janeiro in 2016.
My Lords, through UK Sport, the Government are investing £355 million into summer Olympic and Paralympic sports during the Rio 2016 cycle, which is an increase from London of 7% into Olympic sports and 45% into Paralympic sports. Our ambitions for Rio are to be even more successful than London in both the Olympics and Paralympics, which no host nation in history has achieved. With record investment, UK Sport believes that this is attainable.
My Lords, Olympic and Paralympic sport is fair set for Rio, underpinned by unprecedented UK sport funding. Does the Minister agree that, post-Rio, there should be no compromise to the UK Sport no-compromise funding model? Does he also agree that we all owe a tremendous debt to the father of the lottery, Sir John Major, whose vision, drive and determination transformed the sporting and cultural framework of our nation for the better for ever?
My Lords, as one of our greatest Paralympians and the only Briton to win six gold medals at a single Games, my noble friend comes to these matters with exceptional experience. I entirely agree with him about Sir John Major and that many of the causes favoured by so many of your Lordships have been transformed because of what was done with the National Lottery. Looking at Sochi, where the no-compromise principles were adhered to for the first time, and the great successes at the Olympics and Paralympics, what my noble friend says has a lot of merit.
My Lords, what mechanisms are in place to ensure that all the home nations have been proactively engaged in the decision-making around the allocation of UK Sport’s investment for the GB Olympic and Paralympic squads for Rio 2016 and Tokyo 2020?
My Lords, UK Sport works very closely with all the national sports bodies, including Sport England, Sport Wales, Sport Northern Ireland and Sport Scotland, precisely to ensure that the allocation is correctly placed. It is trying to ensure that the best athletes come forward and are supported.
My Lords, what will be the effect on this programme of a decline in lottery receipts?
My Lords, I very much hope that there will not be a decline in lottery receipts generally and that people will play the National Lottery. I believe that there are many good causes. Clearly, if that happened, we would have to look at these matters across the piece.
My Lords, does my noble friend agree that, although the problems we had were solved by developing the lottery for the Olympics, we must go on and look at the funding of team games to give ourselves a broader base to encourage participation?
My Lords, my noble friend raises the issue of team sports and clearly we want all sports to have as many opportunities as possible—my noble friend may be thinking of basketball in particular. That has enormous potential to reach young people and we want it to grow in the country. That is why Sport England in particular is investing a great deal of money. Over the funding cycle about £10 million will go into basketball. We want teams to succeed but they need to be in a position to win Olympic medals, which basketball is not at the moment. While it is not in a position to win medals it is not in the Rio funding scheme.
My Lords, the no-compromise approach has winners and has done very well but it also has losers. Basketball has had its £7 million grant from UK Sport cancelled and yet, as the Minister said, it is hugely popular, with 70% of participants aged under 25 and more than 50% of those who play the game coming from BME communities. What can they do now? The Minister mentioned Sport England but its contribution is £1.2 million, hardly making up the gap to £7 million.
My Lords, as I said, the total funding to basketball is nearly £10 million over the cycle to 2017. In fact, there is investment through Sport England and also the youth and community scheme. Some £1 billion has gone from that scheme into precisely the sports and activities that the noble Lord was referring to, such as basketball.
My Lords, is my noble friend aware that in the year 1808 Rio de Janeiro was the capital of Portugal? Does he agree that the allocation by the British of resources behind the lines of Torres Vedras during the same period is a very good long-distance omen for the British teams competing in 2016?
That is a most intriguing question and I am not sure how best to answer it other than to say that I am sure that all your Lordships wish all the athletes, wherever they come from and whichever discipline they are participating in, enormous success.
My Lords, going back to the question from my noble friend Lady Armstrong, can the Minister say what the trend is on spending on the lottery? I do not mean spending of the lottery funds but spending by people who buy lottery tickets and whether therefore it is likely that the long-term sustainability of funding to both culture and sport will remain constant.
My Lords, I do not have the precise figures in front of me. I will look at the projection for National Lottery proceeds and come back to the noble Baroness. As I said, this is something that we will need to look at and I very much hope that the National Lottery will continue to be the enormous success it has been.
Draft Protection of Charities Bill
That the Commons message of 6 November be considered and that a Committee of six Lords be appointed to join with the Committee appointed by the Commons to consider and report on the draft Protection of Charities Bill presented to both Houses on 22 October 2014 (Cm 8954) and that the Committee should report on the draft Bill by 28 February 2015;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
B Barker, L Hodgson of Astley Abbotts, L Hope of Craighead, B Warwick of Undercliffe, L Watson of Invergowrie, V Younger of Leckie;
That the Committee have power to agree with the Committee appointed by the Commons in the appointment of a Chairman;
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have leave to report from time to time;
That the Committee have power to adjourn from place to place within the United Kingdom;
That the reports of the Committee from time to time shall be printed, regardless of any adjournment of the House; and
That the evidence taken by the Committee shall, if the Committee so wishes, be published.
Motion agreed, and a message was sent to the Commons.
Criminal Justice and Courts Bill
Clause 8: Recall adjudicators
1: Clause 8, page 8, line 13, at end insert—
“(4) Before this section comes into force, the Secretary of State shall lay a report before Parliament describing—
(a) the recruitment process for recall adjudicators;(b) the qualifications, experience and competences which will be required of recall adjudicators;(c) the training which will be provided for recall adjudicators; and(d) the anticipated costs of establishing a system of recall adjudicators in comparison with the costs of recruiting an increased number of Parole Board members and case managers.”
My Lords, I can be brief because I hope, and have reason to believe, that the Minister will indicate that he can give me the comfort I am seeking and which this amendment is designed to achieve. Noble Lords will recall that the Minister tabled a government amendment on Report that was designed to introduce a new figure into the criminal justice scene. He is to be the recall adjudicator and he will take over the responsibilities of the Parole Board in respect of reviewing those who have been released on licence but are being recalled for reasons such as their committing another offence. This could be of serious importance both to the public and, of course, to the offender who is being returned to prison. His liberty is at stake.
When the Minister introduced the amendment, he was not in a position to provide any details that would enable the quality of what was being proposed to be assessed. The noble Lord, Lord Beecham, who I am pleased to see in his seat, described it—I suggest accurately—as seeking a “blank cheque”. As we all know, it is never wise even to give Governments a blank cheque because you may find that it is not used in precisely the way that was intended. The noble Lord sought those details and, while giving the proposal a general welcome and hoping it would be successful, sought to impose both a sunrise clause and a sunset clause to cover the situation being created by the amendment.
The Government had acted on this so late in the day because of a decision of the Supreme Court in a case which was discussed on Report, and which indicated that it would be possible to have a body that was not necessarily created as a proper judicial body to perform this function—a sort of quasi-judicial body. The interpretation by the Supreme Court of Article 5 of the European Convention on Human Rights indicated that what was determinative was the original court sentencing, not the body reviewing the recall.
The matter was left at that, but I suggested on Report that the position was unsatisfactory and expressed the hope that the Government would consider the situation further. However, in case they did not do so, I tabled the amendment in question. It sets out what I would suggest is the minimum amount of information that needs to be provided before the new body is created. It would give those who are concerned about saving money in the hard-pressed criminal justice system information about cost and would seek information about the quality of those who are to be the new adjudicators on recall applications.
Before the new system is introduced it is important that Parliament should be given information that would enable it to use its powers to scrutinise what is proposed. The Minister accepted that there was an obligation for fairness in that situation, notwithstanding the decision of the Supreme Court in the Whiston case, 1914, UKSC39. That made it clear that he was thinking along the same lines as those who, like me, were concerned about what the quality of this new body would be.
If the Minister is prepared to give an undertaking that he would arrange for a report to be made to Parliament, setting out enough information to enable what was proposed to be evaluated, I need not detain the House further. In order to give the Minister an indication of whether what I have been told is correct, I propose to say no more, but at this stage formally to move my amendment.
My Lords, I understand that the Minister may accept the amendment of the noble and learned Lord, Lord Woolf, and in that case the noble and learned Lord will have entered the fold, but this time it is the ministerial sheep who will emerge wearing the Woolf’s clothing—and for that I am sure the House will be grateful.
The noble and learned Lord identified some of the potential problems that need clarifying and we look forward to receiving that clarification. I would like to add another issue that was raised in the debate on Report, and that is the possible availability of legal aid for such applications. I dare say that the Minister will confirm that that will at least be considered and that any reference to it will be contained in such a report in due course.
One other matter to touch on is no doubt encompassed within the terms of the amendment. There was an indication at an earlier stage that the Government would possibly be looking to the magistracy as a source of potential recruitment for those who would undertake this responsibility. The matter has aroused some concern. Obviously I am not asking the Minister to give an indication finally one way or the other, but I take it that he would confirm at least that that is not the only possibility that will be looked at—in which case we will await the Government’s response in due course with keen anticipation.
My Lords, I thank the noble and learned Lord, Lord Woolf, for his helpful explanation of the amendment to Clause 8 in his name, and for helpfully setting out the concerns that lie behind it. I understand them, and why the noble and learned Lord seeks to make sure that Parliament is given the opportunity to consider a report by the Secretary of State about how the recall adjudicator model will operate before the provisions can be brought into force. I have no objection to the principle of what his amendment is seeking to achieve and am happy to make a commitment that before the recall adjudicator provisions are brought into force, the Government will produce a report for Parliament on matters such as the recruitment process, qualifications, training and costs.
The amendment of the noble and learned Lord is quite specific on some aspects of what the report must contain. I bear in mind what he said, namely that this should be a minimum, as he saw it; we do not indeed anticipate that it would be restricted entirely to those matters. In particular he is specific about the anticipated costs of the recall adjudicator system compared to the costs of recruiting more Parole Board members and case managers.
While the Government would be happy to provide an analysis of the respective costs and benefits of the new model—and indeed we will be publishing a further impact assessment on this—we would not wish to be tied to including in the report such a direct comparison of the sort prescribed in the amendment. This is a constantly evolving area of work, with the Parole Board itself driving forward changes to its process, and new operating models, and we would want our cost-benefit analysis to have the flexibility to take account of those developments rather than tying ourselves in the legislation to making this very specific cost comparison. But we will provide information as to costs.
However, I accept the point and agree that our report should set out the respective costs of the new process and systems compared to carrying on with the Parole Board model. The Government’s position is that we would have no objection to providing a report on the sort of information that the noble and learned Lord asks for, but until we have had more time to consider exactly what that report should contain and how best to present the information, we would not wish to be constrained by the exact requirements of the noble and learned Lord’s amendment.
When the Government introduced the recall adjudicator provisions, I explained that the aim was to introduce greater flexibility in the way that determinate recall sentences are reviewed and to allow the Parole Board to concentrate its resources on indeterminate sentence prisoners. There is a great deal of further work to be done on the detail. The noble and learned Lord was quite right to identify the case of Whiston and the decision of the Supreme Court, which enabled the Government to bring forward this amendment, albeit on Report—but we would not have been able to bring it forward before then because the decision had not been reached. I think that inadvertently the noble and learned Lord suggested that the decision had been reached in 1914. It was a little more recent than that—2014, to be precise—but I am sure nobody misunderstood that. The Government move a little faster than that.
A noble Lord
We will operate an analysis of how it will deliver the benefits we envisage in the most cost-effective way. We are committed to undertaking this further development work in a collaborative and open way. It will be vital to get the new model right and to ensure that those with an interest in how this will work, including Parliament, are kept informed and have an opportunity to offer views on what is being proposed.
The fact that the Bill is silent on the precise workings of the recall adjudicator does not mean that the process will be devoid of safeguards. The Bill already makes provision for the Secretary of State to make rules regarding the way in which the recall adjudicators work. These rules will be made by statutory instrument, allowing for further parliamentary scrutiny. Ultimately, the protection of the public remains at the heart of any decision to release—or not to release—a prisoner from custody. That is why we will ensure that there is a robust system of selection and appointment of recall adjudicators. I have already indicated that it is our intention that such appointments would be filled by people with significant criminal justice experience.
In answer to the noble Lord, Lord Beecham, we have certainly not ruled out the possibility of using magistrates. The feasibility of using magistrates is very much a matter for consideration. Of course, they will be magistrates with significant and appropriate experience in criminal justice—not every magistrate—and they would be given rigorous and appropriate training before being allowed to perform the role of recall adjudicator. But there is in the magistracy a great deal of experience, and it would be unwise to rule out the possibility of using appropriately experienced and trained magistrates for that purpose. A solid foundation of knowledge and experience will be complemented by this training, as well as by guidance and oversight by the chief recall adjudicator.
The noble Lord, Lord Beecham, also asked about legal aid. He effectively asked whether recalled offenders would be denied legal aid under these proposals. The answer is that legal aid will still be available. For once, I can give a satisfactory answer, I think, to the noble Lord, Lord Beecham.
The Government are absolutely determined to ensure that all the necessary safeguards are in place before we implement these changes. I hope that this demonstrates to the noble and learned Lord our commitment to ensuring a fair, impartial and robust process for prisoners that does not put the public at risk.
Returning to the final point of the amendment tabled by the noble and learned Lord, which was about costs, he will understand that we are committed to ensuring that the new model is as cost-effective and efficient as possible. There is no question that we will have to achieve overall savings and benefits in the criminal justice system as a whole. It will do this primarily by diverting determinate recall cases away from the Parole Board, processing them in a quicker and less resource-intensive way, and by allowing the board to focus on making inroads into the backlog of indeterminate sentence cases, thereby avoiding delays in hearings and release decisions, which in turn has an impact on prison numbers.
We will, therefore, carry out a careful analysis of the costs and benefits of the new process as part of the development of the model and plan to publish a further impact assessment when that work has been done. The Government are willing to share that analysis as the model is developed, and I have already undertaken to consult the Parole Board as we go along and to provide a report for Parliament. I hope therefore that with the assurance I have given about the Government’s commitment to ensuring that adequate safeguards are in place, to working closely with the Parole Board and to providing Parliament with a report, I can persuade the noble and learned Lord to withdraw his amendment.
I thank the Minister for giving those assurances, which meet my expectations as to what he would say. Perhaps I may be excused if I point out that the point he makes about the rules of procedure is helpful but by no means meets the concerns that I was indicating because, of course, the rules committee cannot—by rules—ensure that the right people are doing the job. What the Minister says should achieve that; the only possible caveat I would have is with regard to his comments about magistrates. I should disclose I was a former president of the Magistrates’ Association. I say former president because unfortunately I belong to a club which was not to the liking of the Magistrates’ Association because it has no female members, and in consequence they have suggested that I am no longer president. That is a view to which they are entitled but I fear may not necessarily influence the members of the club concerned to the extent that some would like. That is a fact I have to bear.
Despite that, magistrates concentrate on criminal cases of a rather different level than those which will come before this new body. Some of the persons who will have to be considered by this new body have serious criminal records, and it is important that the persons concerned should have the proper capacity to deal with that. I would not rule out magistrates but I think that that is something to borne in mind. Finally, I am conscious, having disclosed my position as a former president of the Magistrates’ Association, that I should have indicated—and I apologise for not doing so—that I am, as I declared on Report, chairman of the Prison Reform Trust. The submission I made at the time, and would have made in more detail but for the intimation kindly given to me by the Minister’s team, was based on help that I received from the Prison Reform Trust and Justice. I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
2: After Clause 41, insert the following new Clause—
“Duties of custody officer after charge: arrested juveniles
In section 37(15) of the Police and Criminal Evidence Act 1984 (definitions for the purposes of provisions about detention in Part 4 of that Act), in the definition of “arrested juvenile”, for “under the age of 17” substitute “under the age of 18”.”
My Lords, Amendment 2 rectifies an ongoing anomaly in the way 17 year-old children are treated by the police. While all other children detained by the police are entitled to a local authority bed, 17 year-olds are not. This means they must be held in a police station. This is one of the remaining areas where 17 year-olds are excluded from the protections available to other children, and it needs to change. I tabled amendments on this matter in Committee and on Report and I will not repeat all the arguments made then, but I would like remind the House briefly why this matter is so important.
Since 2010, three 17 year-old children have taken their own lives after being treated as adults by the police. They were Kesia Leatherbarrow, Eddie Thornber and Joe Lawton. It is worth taking a moment to think about what it means for a child to die in this way, the terrible waste and the pain that it causes those they leave behind. These children are much loved and deeply missed, and I should like to take a moment to read out some brief words of remembrance about each of them. Nick Lawton said of his son, Joe:
“He was a beautiful boy, everyone agreed. Joe was a happy, successful 17 year-old studying for his A-levels. He is missed every moment of every day”.
Eddie Thornber’s mum, Ann, says:
“Eddie was head boy of his school, looking forward to studying in America. We would do anything to make sure Eddie was still with us”.
Martina Brincat Baines, Kesia’s mother, said:
“Kesia was my only daughter. She was beautiful. A funny, lively girl who, despite her mental health issues, was loving and great company, she was so hugely loved and is so hugely missed”.
In Committee and on Report, the Minister explained that a review was looking at the treatment of 17 year-olds in police custody and that the Government wanted to receive and digest its recommendations before acting. However, things have moved on since then. The review has recommended that the law be changed; the Home Office has committed to do so as soon as possible; and recently the All-Party Parliamentary Group for Children published the report of its inquiry on children and the police, and recommended that this change take place. I pay tribute to the chair of that group, the noble Baroness, Lady Massey of Darwen, for the work of that important inquiry.
There has been much movement forward. Almost 30,000 people have signed a petition requesting that today be the day that this law is changed. I look forward to the Minister’s response and beg to move.
My Lords, I have given the Minister’s office notice of the point that I am about to raise. It is to do with youth anonymity, which is a slightly different point from that made by the noble Earl.
On Report, the Government introduced amendments which are now Clause 77 of the Bill. Those amendments gave lifetime reporting restrictions in criminal proceedings for witnesses and victims under 18. The amendments clearly give the judge discretion to give lifetime anonymity to witnesses and victims. It is also clear from the Government’s amendments that that discretion of the judge does not extend to the accused.
What I would like to know—as I said, I have given notice of my question to the noble Lord’s office—is what the status would be of somebody if they had been found not guilty at trial. Clearly, after they have been found not guilty, they are no longer accused, but they may well still be a witness. Would that discretion of the judge extend to those found not guilty at trial?
My Lords, I commend and congratulate the noble Earl, Lord Listowel, on the progress that he appears to have been able to promote, and look forward to hearing the Minister confirm what the noble Earl has said after citing those very poignant cases. It seems that a mistake in the system can now be corrected. For that, although it has come late for the families to whom the noble Earl referred, I think everybody will be grateful. I congratulate the Minister in anticipation of his confirming that the Government have accepted that point. It is entirely to their credit that they have listened to the very strong representations made on that matter.
As to the point raised by my noble friend Lord Ponsonby, again, I hope that the Minister will be able to offer him some clarification of the situation along the lines that he has suggested.
My Lords, I will make a brief intervention. I very much commend the amendment of the noble Earl, Lord Listowel. Quite simply, the position of 17 year-olds has changed radically since 1984. The proportion of young people staying on in education to 18 or beyond has almost doubled in that time, and many young people continue within their family structures until the age of 18, which was not so much the case in 1984. So it is important that the Government look at this. Schools continue to have responsibility for young people who are at school until the age of 18. It would therefore be rather bitter if that responsibility was recognised as continuing while people are at school, but then ending when they cease to be at school.
There is some very disturbing information about the number of young people who commit self-harm when in detention, as a result, for example, of very serious mental health problems. Without detaining the House of Lords further, it is worth looking at whether the age of 18 is not a more natural bridge to a young person becoming a fully responsible adult than the present age of 17. It might do something to reduce the suffering that some of these young people undergo in detention.
My Lords, both in Committee and on Report, there was agreement around the House that this amendment had a great deal to recommend it. It follows the tragic cases of three 17 year-olds who committed suicide following their encounters with the police, to which the noble Earl, Lord Listowel, has referred this afternoon. Their families are determined that no other parents should suffer such a loss, and want to see a change in the law so that 17 year-olds are treated as children. I pay particular tribute to the noble Earl for his continued commitment to improving the welfare of young people, and for helping to keep this important issue at the top of the Government’s agenda.
Despite recognising the merit of this amendment, the Government resisted it both in Committee and on Report as they were still reviewing all the remaining pieces of primary legislation which treat 17 year-olds as adults. That review was proactively launched following the High Court’s decision in the case of Hughes Cousins-Chang. That the review was launched is testament to the commitment of the Government to ensuring that young people are protected and treated appropriately while in police custody, ensuring that 17 year-olds have the protection to which they are entitled. My noble friend Lady Williams makes an important point about how 17 year-olds have changed in many ways.
Seventeen year-olds who come into contact with the police are afforded important safeguards by Section 11 of the Children Act 2004. This places the police under an obligation to make arrangements to safeguard and promote the welfare of children when exercising their functions, and means that the police have to make arrangements to safeguard and promote the welfare of 17 year-olds. Additionally, following the amendments to PACE codes of practice C and H as a result of the Hughes Cousins-Chang ruling, children aged under 18 have access to appropriate adults at the police station, whose function is to support them throughout interviews and during procedures such as the taking of fingerprints and samples. A parent or legal guardian must also be informed of their detention. Indeed, it is common for a parent to perform the role of appropriate adult for their child.
On Report, the noble Earl welcomed the news of the internal review. He directly asked the Government if something could be done in this area by Third Reading, although he caveated that by saying, effectively, that he realised that such a change would be unlikely. However I am pleased to inform the House that the Government have listened to his plea and the passionate collective voice of the families of loved ones who are tragically no longer with us. The Government have now concluded their review and have arrived at a very clear conclusion: the provisions in PACE that relate to the treatment of 17 year-olds should be amended as soon as possible so that they are treated as children.
I must point out that this is a very complex area and the Home Office review was very wide-ranging—more so than the amendment that has been tabled today. This means that the amendment only partially affects the change in relation to the treatment of 17 year-olds. However, in the limited time available, this amendment makes the most substantial change, that relating to the overnight detention of children charged and denied bail. The effect of the amendment would be that 17 year-olds, as with 12 to 16 year-old children, must be transferred to suitable local authority accommodation overnight in these circumstances. The amendment has the full backing of the police. The Home Office will work with forces to help them prepare for implementation.
The noble Lord, Lord Ponsonby, asked a question that is perhaps not entirely related to this amendment but he was kind enough to give the Government notice of it. As I understand it, it concerns those acquitted after a trial, whereas the focus of the amendment to which he referred is victims and witnesses. Indeed, a number of statutory protections within the criminal justice system are applicable only to victims and witnesses. The position with an acquitted defendant is that the court retains its inherent powers to order reporting restrictions in the case of defendants where that is necessary to ensure that the administration of justice would not be seriously affected. It has that right. Of course, up to the age of 18 defendants will continue to be subject to the youth reporting restrictions that apply automatically in the youth court and may be applied in other court proceedings. That is the position.
Returning to this amendment and in conclusion, this Government share all noble Lords’ desire to ensure that children are always treated appropriately, including where they are suspected of wrongdoing. If how we treat our prisoners is a measure of how civilised a society is, this must surely apply to how we treat our children when they are in trouble and at their most vulnerable. Therefore, I trust that I have noble Lords’ support in the Government’s decision to seize the opportunity afforded by the Bill and accept the noble Earl’s amendment.
My Lords, I am most grateful to the Minister for his acceptance of this amendment, for his kind words to me and for the eloquent way in which he put the case for this particular change. It must have taken a great deal of effort on his part, and on that of the Bill team and many others, to move this forward so expeditiously. I thank the Minister, the Home Secretary, the Bill team and the local government officials who must have worked with them on this issue.
Great tribute must go to Martina and Matt Baines, the mother and stepfather of Kesia Leatherbarrow. Despite their terrible and at times overwhelming grief, they threw themselves into campaigning for what they think of as Kesia’s law. I also pay tribute to Jane and Nick Lawton, parents of Joe, and to Ann and Adrian Thornber, parents of Eddie. They, too, have fought for changes to the way that 17 year-olds are treated at the police station after the tragic deaths of their sons. Without the commitment of these extraordinary parents in their time of enormous loss, I do not think that the changes would have been made today.
I also express thanks to the charity Just for Kids Law for its hard work, commitment and support for the campaign, and to the Standing Committee for Youth Justice and the National Appropriate Adult Network. Finally, thanks, too, to the public law teams at Doughty Street Chambers, who provided free legal help throughout. I am so grateful to the Minister for moving on this at the unexpected point of Third Reading, accepting the amendment and making this change that will protect future 17 year-olds from the harms that these young people experienced.
Amendment 2 agreed.
Clause 94: Commencement
3: Clause 94, page 89, line 30, leave out “and (3)” and insert “to (4)”
My Lords, Amendment 3 relates to the mutual recognition of driving disqualifications between the UK and the Republic of Ireland. As I set out on Report, the convention ceases to apply in the UK on 1 December 2014 and we are in the process of negotiating a new bilateral treaty with the Republic of Ireland along similar lines to the convention. This amendment will correct a minor typographical error in Clause 94 concerning the commencement of transitional provisions. As the convention ceases to apply on 1 December, these transitional provisions need to take effect on this date and we therefore need the provisions to come into force on the day the Act is passed.
Amendment 4 is a minor and technical amendment in respect of reporting restrictions applying to under-18s and online content. It removes an inaccurate and unnecessary reference to the definition of publication in the new Schedule 2A to the Youth Justice and Criminal Evidence Act 1999. The definition of publication is in fact set out in Section 63(1) of the 1999 Act and applies to all sections of Part 2 of that Act. The Section 63 definition will apply to the new Schedule 2A because the schedule is enlivened by new Section 45A, and new Section 45A is being inserted into Part 2 of the Youth Justice and Criminal Evidence Act 1999 by a previous government amendment also tabled on Report in the Lords. I beg to move.
Amendment 3 agreed.
Schedule 15: Reporting restrictions: providers of information society services
4: Schedule 15, page 167, leave out line 32
Amendment 4 agreed.
That the Bill do now pass.
I apologise to the Minister for not raising the point that I am now going to mention. However, as it is based on a report that was published only last week, I have only very recently become aware of the position that I wish to raise. When I was the newly appointed Chief Inspector of Prisons, I found that the treatment of and conditions for women prisoners in Holloway was a national disgrace. I was frustrated to learn that current practice for handling inspection reports offered no hope of immediate remedial action, so I fell back on army practice and suspended my inspection for six months, during which period I expected defined action to be taken. I feel the same frustration about the proposal for a secure college contained in Part 2 of the Bill, having learnt that the rules of the House do not allow me to bring forward a Third Reading amendment based on a report that was published only last week, which I believe changes the whole nature of the proposal.
Before the Bill leaves the House, therefore, because the treatment of children is a matter of national importance, I feel that I must make one last appeal to the Government. Before doing so I assure the Minister that nothing I am going to say reflects on the way that he has taken the Bill through the House—during which, all noble Lords, while not necessarily agreeing with him, have admired the skill with which he, as a renowned advocate, has defended his brief, and been assiduous in briefing us, both verbally and in writing, on that brief. However, unlike the noble Lord, Lord Nash, during the passage of the recent education Bill, who was able to accept the case for inclusion of young offenders with special educational needs among those for whom education, health and care delivery must be provided, the noble Lord’s position in regard to any reasoned suggestion of change to the Secretary of State’s pet plan, appears akin to that of the tank commander with whom the Chinese student tried to reason in Tiananmen Square.
Last Tuesday, I took part in the launch of a British Medical Association report, entitled Young Lives Behind Bars: the Health and Human Rights of Children and Young People Detained in the Criminal Justice System. Welcoming it, Norman Lamb MP, Minister of State for Care and Support, wrote:
“The newly established Children and Young People’s Mental Health and Well-Being Taskforce, includes a specific working group on vulnerable children and young people, including young people in contact with the Youth Justice system and will focus on how services can best meet their needs”.
In her foreword, Juliet Lyon, director of the Prison Reform Trust, who has considerable experience of working with young offenders, wrote:
“This timely, authoritative report presents an overview of the complex reasons why children and young people offend, their multiple needs and the challenges they present. It enables practitioners and policy makers to reflect on their work with young people in trouble”.
She went on to say:
“An almost 60 percent reduction in child imprisonment over the last seven years … offers a tremendous opportunity for health and justice professionals to focus on the most vulnerable children and help them to get out of trouble”.
I quote two of the report’s recommendations:
“Practitioners should consider how best to encourage involvement and interaction with healthcare services, in a manner that is appropriate to the needs and concerns of children and young people in custody”,
“Health and wellbeing of children and young people should be seen as concerns for all those working in the secure estate, not just healthcare professionals. To this end, all staff working in the secure estate must be adequately trained and supported in identifying and reporting health concerns”.
I said on Report that the House is being asked to rubberstamp a pet project of the Secretary of State for Justice, without the known agreement of the Cabinet committee appointed to ensure that all departments drive forward the aims of the government’s social justice strategy, key indicator number 3 of which is a reduction in the number of young offenders who go on to reoffend. In addition to ignoring proven national and international good practice, as well as the advice and pleas of countless people with experience of working with young offenders, I now understand that the Secretary of State has ignored the advice of paid consultants such as Deloitte, which recommended smaller establishments on the lines of Diagrama in Spain—the subject of a fascinating article in the Guardian on Saturday entitled “Tough Love”—and current practice in America.
I admit that this is the first I have heard of the children and young people’s mental health and well-being taskforce working group, charged with focusing on the needs of the very children whom the Secretary of State is proposing to detain in his secure college. Far from being children for whom normal education and security provision might be appropriate, these have a multiplicity of mental health and behavioural needs, and their reaction to any regime, let alone one based on the education that almost all have rejected or from which they have been excluded, will be conditioned by the complexity of their problems. Furthermore, the majority are to be uprooted from their family and local social or healthcare workers, whose involvement in their post-release rehabilitation is crucial. A recent conversation with NHS England has caused me to look again at two remarks made about healthcare by the Minister on Report:
“We also have been working closely with NHS England… to test our designs for the secure college pathfinder”,—[Official Report, 22/10/14; col. 660.]
“a … health unit placed strategically in the middle of the design … will be the best way of delivering healthcare uniquely tailored to those individuals”.—[Official Report, 22/10/14; col. 663.]
True, a health unit is now placed strategically in the middle of the design, but it was not there when the Minister briefed us in July, suggesting that working closely with NHS England is a comparatively recent occurrence. What is more, as I am sure he realises, adequate tailoring of the delivery of healthcare appropriate to meet the multiple and complex needs of 320 damaged and vulnerable children requires more than just a strategically placed health unit. NHS England tell me that it is pressing for healthcare, particularly mental health care, to be embedded in the culture of the proposal, requiring confirmed resources, particularly of appropriately trained staff, without whom healthcare, adequately tailored or otherwise, cannot be delivered. But, as the Minister knows, there is an acute shortage of appropriately trained staff in the country, let alone in the middle of Leicestershire.
So the situation appears to be this. On the one hand, we have the Secretary of State for Justice who, without any evidence and in apparent defiance of government strategy as well as vast amounts of expert advice, insists on pressing ahead with his claim that his,
“new form of youth detention accommodation with”,
as yet unspecified,
“innovative education provision at its core … will equip young offenders with the skills, qualifications and self-discipline they need to turn away from crime”,
and believes that,
“it is right to focus on the educational outcomes that the establishment achieves rather than the staff it employs”.
On the other hand, we have the cross-government social justice strategy, a specific working party of the NHS children and young people’s mental health and well-being task force, and the declared opposition of countless experts who know from practical experience how essential trained professional staff are to the development and future well-being of this damaged and vulnerable cohort of children.
I said in Committee that the changed nature of the detained children population, resulting from the Youth Justice Board’s success, gave the Secretary of State ample justification for rethinking this proposal. I fully accept that I failed to persuade the House to vote that he should be required to obtain the approval of both Houses before proceeding with his proposal or to test the opinion of the House on a rethinking amendment. However, I submit that the evidence now available, thanks to the BMA report and the recent involvement of NHS England and the mental health and well-being task force, exposes serious flaws in the well intentioned, education-based secure college proposal, which clearly is not tailored to the characteristics, capabilities and needs of its suggested population.
I realise that that is not something that either the Minister or the Secretary of State can resolve, because of the involvement of the NHS and a Cabinet committee. I therefore ask the Minister that it be referred to the Prime Minister himself, who, I hope, will make a statement in the other place on whether, having examined all the available evidence, he authorises that the proposal should go ahead or that it should be put on hold until it has been rethought.
My Lords, I certainly endorse the remarks of the noble Lord, who has consistently questioned the detail of the Government’s proposals in respect of secure colleges. I must agree with him that the BMA report, published only last Tuesday, makes for sombre reading. The report emphasises the need for the state,
“to ensure that detained children and young people have access to healthcare that is appropriate for their age and health needs”—
which the EHRC has identified as a critical human rights challenge—given that,
“Custodial detention is the most extreme form of social exclusion that can be imposed by the state”.
That need is likely to be enhanced in the secure college context by the very nature of the institution and its physical remoteness from the family and community whence the offenders have come and to which they will return. After all, the report refers to the average time that offenders will be housed in the college as 85 days, which is not a long period. Clearly, after they move on, there will be a concomitant need for the provision of adequate healthcare and, indeed, educational provision.
It appears, then, that NHS England will have to do more than simply commission healthcare provision within the college. It is welcome that there will be such a physical provision, although the noble Lord has pointed out that, of itself, that will not be enough. NHS England will have to ensure that appropriate provision will be made when the offender returns home, quite conceivably in a different NHS region. How will that work? Will NHS England assume responsibility in a different region, or will it be involved from the outset? How will the commissioning process work, both for the period during which the offender is in the college and afterwards?
What will be the role of the relevant local authorities? Leicestershire, in the first instance, will be the site of the first college. Will the home authority deal with educational and childcare provision on the offender’s return home or return to residential care in the case of looked-after children? Have there been any discussions with local authorities—with Leicestershire in the first instance, which presumably will be able to provide educational and other provision if the project goes ahead within its boundaries—and with the Local Government Association on behalf of other local authorities generally, in respect of the need to follow up when the offender returns home?
The noble Lord has made a robust critique of the proposals this afternoon and throughout the debates on this Bill. When the Bill returns to the House of Commons, it is important that the other place should have a response to the questions that he has raised, the suggestions he has made and those which I have added.
However, at this stage, I join the noble Lord in expressing our thanks to the Minister who has, as ever, argued the Government’s case with great skill and perhaps conviction—but certainly with great skill. We are grateful to him and to the Bill team for the assistance that they have given. In some respects, the Bill has been improved, but this area remains extremely problematic. I hope that the Minister will be able to persuade his colleagues to look again at the questions and issues that have been raised, in which case he will be entitled to even more gratitude than that which I and others now extend to him.
My Lords, I am, of course, disappointed that the noble Lord, Lord Ramsbotham, remains concerned about the provisions in the Bill to create secure colleges. With 68% of young people reoffending within a year of leaving custody, the Government have taken the view that it is clear that things must change. As the House knows, secure colleges will put high-quality education at the centre of efforts to rehabilitate young offenders. These provisions in the Bill provide the framework for this approach.
As the noble Lord was good enough to say, the Government have gone to great lengths to engage Peers, stakeholders, practitioners and experts—and, indeed, young offenders themselves—on our plans. Indeed, we are currently consulting on our approach to secure college rules and, in response to concerns voiced in this House, we have amended the Bill to make these rules subject to the affirmative procedure to the extent that they authorise force, which was an area of particular concern.
The noble Lord described my position as being rather like that of a tank commander. I am not sure whether that was a compliment or the opposite. Be that as it may, it would be wrong to suggest that the Government are frozen in a rigid posture in responding to any new knowledge or learning that is available on the best way to treat these particularly vulnerable young people. The report from the BMA published last Tuesday will inform the Government’s approach to this issue and, indeed, to all issues.
Of course, the noble Lord is quite right, as was the noble Lord, Lord Beecham, to focus on the health needs of this cohort. The Government have worked closely with NHS England since the inception of the proposal, and I assure the noble Lord and the House that we have a very constructive and well established relationship with the Department of Health and NHS England on youth justice. I should remind the House that NHS England commissions healthcare for young people in custody. During the debates, I attempted to indicate to the House how the provision of healthcare within the secure college should enable its better delivery to these young people—better, we hope, than in the current youth custody estate.
As I say, we continue to develop these plans. We will, of course, bear in mind all advice from whatever source, particularly any new learning that is available. However, we continue to believe that these secure colleges—whatever anxiety may reasonably be expressed about them—will provide an appropriate means of giving education to young people who, sadly, have often lacked any continuity in their education and, at the same time, help them to rehabilitate and to emerge at the end of their sentence with a much better chance of leading useful lives. I hope that I have gone some way to reassure the noble Lord and ask the House to pass the Bill.
My Lords, before the Minister sits down, I would be grateful if he would comment on the role of local authorities through their children’s services departments, in addition to the health aspect. The two cannot be divided.
They cannot—but I am not going to comment in detail from the Dispatch Box on those precise roles. Of course, as the noble Lord will be aware, local authorities have statutory functions in relation to all young people in their local authority area. Those duties will continue, depending on the geographical position of the young person—and of course the NHS has its own obligations, wherever that individual may be. If I have any further information to elaborate upon my answer to that question, I will do so in writing.
Bill passed and returned to the Commons with amendments.
EU Budget Surcharge
My Lords, I shall now repeat in the form of a Statement the Answer given by my right honourable friend the Chancellor of the Exchequer to an Urgent Question earlier this afternoon in the House of Commons. The Statement is as follows.
“Last month the previous European Commission presented Britain with a bill for £1.7 billion, which it insisted had to be paid by 1 December. The Prime Minister spoke for taxpayers when he said that was completely unacceptable, and we set out to get a better deal. After intensive discussion with the new Commission and at the ECOFIN last week, we have achieved that.
I can tell the House that we have halved the bill, delayed the bill, will pay no interest on the bill—and have changed the rules of the EU so this unacceptable behaviour never happens again. Let me briefly give the details.
At the European Council last month, the Prime Minister made it clear to the Barroso Commission that, while annual adjustments to contributions were a regular part of EU membership, a sudden and unprecedented demand for a £1.7 billion payment on 1 December was unacceptable. He got agreement of all 28 Heads of Government that it should be discussed by the Finance Ministers urgently.
That meeting took place last Friday, and followed two weeks of intensive and constructive discussion with the new Budget Commissioner—Vice-President Georgieva—and other member states. As a result of those discussions, we achieved unanimous agreement that, first, expecting payment on 1 December was indeed unacceptable. Therefore, the budget rules will be rewritten to allow for a delay in any payments, and in Britain’s case that means we will pay nothing this year, and instead make payments in two instalments in July and September, in the second half of next year.
Secondly, the suggestion that we might have to pay interest charges was rejected. It was unanimously agreed that there would be no interest charged on these delayed payments.
Thirdly, in our discussion with the new European Commission, it was agreed that a full rebate would apply to the British payment, and that this rebate would be specific, extra to any other rebate we might expect next year, and, for the first time ever, be paid simultaneously with any money owed. It was not clear we would receive a rebate, let alone such a large one. No one in this House suggested we would. Indeed, it was only confirmed to us by Vice-President Georgieva on 6 November—last Thursday evening. It means that Britain’s payments have been halved from £1.7 billion to around £850 million.
Finally, all member states agreed with us that this entire episode was unacceptable. A deal was reached to make a permanent change in European law so it never happens like this again. In the face of this budget challenge we have far exceeded the expectations or predictions made by those before Friday’s meeting. We have achieved a real result for Britain. But this is only the first step of the reform we need in Europe—reform that we on this side of the House believe should be put to a vote of the people of Britain”.
My Lords, I genuinely feel sorry for the noble Lord opposite. In 10 years or so of speaking from that Dispatch Box, I now and again had awkward cases to argue but I never had a completely bankrupt one, such as the case that the noble Lord is trying to put forward. If the Chancellor had got such a good deal, why did he not go to the other place and make a Statement today instead of being dragged there by my right honourable friend the shadow Chancellor in order to answer some questions that have arisen around this issue?
Is it not clear that the Chancellor failed to reduce the UK’s net contribution by a single penny? The analogy that has been used widely is “smoke and mirrors”. I cannot see much through smoke and at the age of 75 I do not much like what I see in the mirror. I certainly do not like the Government’s smoke and mirrors on such a significant issue as this sum. What it all revolved around is the fact which the Government seek continually to deny—that they had omitted to identify the rebate to which we were entitled, a rebate that the Commission has made abundantly clear was never in the slightest doubt. On all sides, it has been made absolutely clear that Britain was going to get the rebate, and the saving that the Chancellor has made was achieved by subtracting from the bill he was presented with the rebate to which we were entitled. What a story.
I should just like to point out that what we have seen in the past few days is complete clarification of a situation. The reality is that the net payment is £850 million. Noble Lords may understand the situation better than me but until that point everyone assumed that the payment was £1.7 billion. The rebate was not at all clear. What officials spent the past two weeks doing was clarifying that the rebate would be available in a size that has effectively halved our payments. There are also no smoke and mirrors about the fact that the payment has now been delayed—it is in two stages. We have brought the rebate forward so that it offsets the notional second half of the payment. What we have introduced in the past few days is complete and utter clarity on the arrangement in hand.
My Lords, can the Minister confirm that the policy of constructive engagement and alliance that has brought this happy result will be pursued across the whole spectrum of EU policy, instead of one of hubris, bluster, threat and brinkmanship about repatriation of powers, as that is the way to get a good result? Can he also confirm that while of course the UK must always drive a hard bargain to get the best value, given that control of EU spending is vital, our UK contributions to the EU, which give us access to the world’s biggest single market and trade agreements with 50 countries, are less than a quarter of our annual national debt payments? Finally, can he also clarify the exact way in which the final bill has been calculated and whether the rebate is being applied to all 18 years—1995 to 2013—covered by the £1.7 billion GNI recalculation? What is the effect on the rebate in the next and subsequent years?
I thank my noble friend for the questions; there is quite a list there. My right honourable friend the Chancellor has demonstrated how effective his constructive engagement has been in producing this outcome. I would expect the same result from the Prime Minister’s constructive engagement on the reform programme that we will put to the British people in 2017. It is absolutely right that we drive a hard bargain and get better value for money. If one looks at the EU budget, my right honourable friend the Prime Minister has been the first to achieve a real-terms cut for the multi-year financial facility, through to 2020, which has thereby capped the amount spent. The weakest part of our performance of the past few years in that negotiation was, frankly, the poor rebate deal that the previous Government gave away, which put us in a much weaker position. That was by far the most ineffectual piece of negotiation. It is a complicated calculation to work out these rebates, but the rebate side of the calculation does not go back for the same full period as the GNI calculation.
My Lords, the original demand from the Commission was for €1.7 billion. Its demand is still €1.7 billion, against which a British rebate of approximately half that sum has to be offset. If that is right, and I think it is, it does not seem to me that the Government have reduced the amount of the demand by one penny—certainly not by one euro. What they have done, through some creative mathematics, is bring in a rebate that we were going to get anyway and then pretend that they have reduced the €1.7 billion, which they have not.
My Lords, I am afraid that I can only repeat the position. It was far from clear that the rebate would be applied. That is the point at issue between us. We can continue to have that discussion, but it was far from clear that the rebate would be applied. That is what was accomplished in the last two weeks. The other things that have been accomplished are a deferment of the payment and that there will be no interest on those payments. We have also changed the rules so that we cannot get ambushed like this again.
My Lords, would the Minister accept a welcome for the elegant and timely decisions reached in the Council last Friday, while recognising that the clarifications relate to the timing of payments, not to their scale? Will he also recognise that such technical adjustments, as I think the Chancellor said in his Statement, are an endemic part of the EU budget process, from which the UK sometimes benefits and sometimes loses? In future, it might be better to handle it all a little more calmly.
I thank the noble Lord for pointing out that these are, in practice, technical adjustments. Of course, it was a very large technical adjustment delivered with very short notice, which is why the Prime Minister reacted in the way that he did, and why, as part of the negotiations over the past couple of weeks, we have determined that the process will not work quite that way again. In summary, I agree with the noble Lord that there is a better way to handle these things.
My Lords, would my noble friend not agree that, when the announcement was first made that we had to pay £1.7 billion—it is pounds, not euros—we were told by the Commission, other member states and, no doubt, the party opposite that it had to be paid by 1 December, or else we would have to pay interest? We have now reached a situation where it does not have to be paid by 1 December; half of it has to be paid over a period next year. By the way, there was no mention of the rebate whatever at the beginning of this conversation. If this is smoke and mirrors, can we please have more of them?
I thank my noble friend for putting, with force and eloquence, precisely the points I have been trying to make in response to the last three questions.
My Lords, can the noble Lord explain exactly what the Treasury had been up to—it had been involved in all the calculations—and how it was that, after three months of negotiations, the Chancellor did not understand what it had been doing? The Chancellor also did not advise the Prime Minister before he went to Brussels, which is why the Prime Minister was caught on the hop. If we have not got just what we were going to get back in any case, can the Minister assure us that we are still going to get the rebate in 2015 and 2016, and that we have not merely already received it back as an advance?
I can assure the noble Lord that the rebate that we are discussing with respect to halving this payment is applied specifically to this payment. It is independent of other arrangements for the rebate.
My Lords, is the Minister aware—it was these Benches’ turn.
Actually, my Lords, we have had one question from each.
My Lords, I was saying to my noble friend: is this not the most skilful manoeuvre we have seen since Disraeli caught the Whigs bathing and ran away with their clothes?
It is hard for me to put it in historical perspective, but as always, the Prime Minister and my right honourable friend the Chancellor have done an excellent job representing the interests of this country.
There is a minute, so I have just made it. The country was treated to a lot of sound and bluster from the Prime Minister stating that he was not going to pay a penny. Today, by smoke and mirrors, the Chancellor has reduced that amount to £850 million. However, is the Minister aware that people think that that is a lot of money, which is to be added to the £11 billion we shall be making in contributions?
I agree with the noble Lord that £850 million is a lot of money. We will expect value for money for that kind of investment. I should make clear that the Prime Minister said that we would not be paying £1.7 billion on 1 December. In fact, we will pay nothing on 1 December. We will pay £850 million in two payments next year.
Infrastructure Bill [HL]
Report (3rd Day)
Clause 30: Maximising economic recovery of UK petroleum
113A: Clause 30, page 31, line 8, after “petroleum” insert “and the co-ordination of the transportation and storage of CO2”
My Lords, it is a pleasure to speak to the energy parts of the Infrastructure Bill on Report. We hope that these amendments will introduce a level of co-ordination into government policy, specifically with regard to the use of enhanced oil recovery for the furtherance of extraction of oil and gas reserves from the North Sea—and, in doing so, will join up with a policy on carbon capture and storage and the pursuit of carbon capture and storage. We on these Benches are clear that we must pursue a range of technologies if we are to meet our challenging greenhouse gas targets and, more specifically, if we are to decarbonise both our power sector and, importantly, our industrial sector. When we look at the industrial sector, it seems clear that CCS will have to play a considerable role.
Unfortunately, we have not yet seen the ground being broken on any CCS projects in the UK. We have seen CCS start to operate on a commercial scale in Canada and we will see a plant opening in the US. We are also told that commercial-scale projects are expected to be commissioned in China. Therefore, we have slightly fallen behind the curve in terms of leadership on this. Nevertheless, our geographic advantages in the UK are such that we can be a very fast follower. We can take the great learnings that we are seeing in other parts of the world and apply them here to become a leader in Europe in the application of carbon capture and storage.
We have two projects under consideration: in Peterhead in Scotland, and the White Rose project in the north of England. Both could help to establish a considerable infrastructure that would help CCS to be deployed in other sectors and at other power stations. In the creation of this infrastructure it is likely that we will see enhanced oil recovery playing a part, particularly in the Scottish project. The purpose of these amendments is to probe the Government on the degree to which CCS and enhanced oil recovery will be incorporated in this new approach to getting economic advantage and economic development in the North Sea. We understand that the Government have tabled amendments with a view to establishing a new regulatory body, following on from the recommendations of the Wood review, which mentioned CCS and EOR specifically. Recommendation 4 states:
“The new Regulator should work with Industry to develop and implement strategies”,
which include looking at CCS and enhanced oil recovery. Unfortunately, as tabled, there is no explicit reference to those strategies in the clauses that we are here to debate this afternoon. My two amendments seek to address that. I look forward to the response of the noble Baroness. I beg to move.
My Lords, I have some sympathy with the noble Baroness’s amendment. It has always seemed to me that if you are to have an effective carbon capture and storage policy, and if it is to be developed from the two projects which the Government are currently financing, it would make sense eventually to have what one might call a grid for the CO2 that would be separated as a result of the technology. Each individual power station developing its own method of disposing of its CO2 would not seem to me to be sensible.
However, we are at a very early stage in developing this technology. Yes, there have been other examples of a technology being worked in other countries. A number of noble Lords were in a party that I joined a year or two back when we went down to see the BP research establishment at Sunbury. We were given what I found a completely fascinating account of how carbon capture and storage has been operated in a large BP gas field in Algeria, with gas deposits spread over about 20 miles or more coming up to the collection point and the carbon capture and storage technology being applied and the CO2 going straight back down to the deposits from which the gas had been extracted. The gas, now free of CO2, was piped to the coast where it was delivered to markets.
I completely understand that that is a unique situation, but there are other examples in other parts of the world where the technology is working, and one hopes that this will be possible. If we are going to have to rely on fossil fuels—as I believe we will—for at least the next three decades or perhaps more, it seems desirable, if we can, to develop an economic method of carbon capture and storage so that it can be done without necessarily increasing the carbon that has to be discharged into the atmosphere.
I say this with some hesitation as the noble Lord, Lord Oxburgh, is sitting opposite and knows, I suspect, 10 times more about this than most of the rest of us. Nevertheless, the Government’s policy of having pilot projects and supporting them with the support of the industry is the right way ahead. It may well be that if this can be developed it will be necessary at the same time to develop a coherent system for disposing of the CO2 that is discharged from the plant. I shall be interested to hear from my noble friend on the Front Bench about whether this needs a change in the law. It seems to me that something along these lines may eventually be necessary, and I hope that perhaps the Government will recognise that in due course.
My Lords, can I ask the Minister when she responds to comment on two points? First, if we are now to be committed in this legally strengthened way to the maximum economic exploration of our oil and gas reserves, how do the Government see that to be compatible with the commitment under the Climate Change Act to reduce our emissions to only 20% of the 1990 level by 2050 without also having a strategy for carbon capture and storage, which I think lies behind the amendment?
Secondly, the amendment refers to the economic extraction of our hydrocarbons—I have never yet heard any reliable estimate of what the additional cost will be of having carbon capture and storage on a typical power station, be it a coal station or a gas station. What level of increase per kilowatt hour—in a unit that can be easily understood—is anticipated if carbon capture and storage is required on such stations? That impacts on what is economically recoverable.
My Lords, I have a question for my noble friend on the Front Bench arising from my work not long ago on carbon capture and storage. It concluded that every situation would be different and that it would depend not only on the oil wells but on the businesses trying to do this work. Some businesses might be able to pool their resources, and while it might be possible to set up a grid in a certain area, it might not be in another. Would not the amendments as proposed make that much more difficult? As my noble friend Lord Jenkin has reminded us, we are at a very early stage in CCS and the technology is not yet fully proven. An awful lot of work still has to be done, so to put something like this on to an industry which is in its infancy will surely cause more problems than it will solve.
My Lords, I thank the noble Baroness, Lady Worthington, for proposing these amendments and all noble Lords who have contributed to the debate. It gives me the opportunity to respond in full to both amendments in the group. They seek to extend the maximising economic principle objective to include,
“co-ordination of the transportation and storage of CO2”,
and would require,
“the establishment of a strategic vision for the permanent storage of CO2 in depleted fields”.
I reassure noble Lords that the UK has one of the most comprehensive programmes on CCS anywhere in the world in order to support the commercialisation of the technology and develop the industry. The programme includes a competition with up to £1 billion capital plus operational support for large CCS projects and a £125 million research, development and innovation programme. In addition, the Government set out how we are supporting the carbon capture and storage industry in a policy scoping document published in August. The document sought evidence and views from experts and stakeholders on a range of issues affecting the CCS industry going forward, including CCS with enhanced oil recovery. The deadline for submitting those views passed just over two weeks ago. Given that we are analysing the responses we have received and are in discussions with HM Treasury over its review of the fiscal regime for oil and gas, it would seem premature to make provision in primary legislation at this time.
The Government recognise that captured carbon dioxide could play a role in enhanced oil recovery, and likewise that enhanced oil recovery could play a role in the UK’s carbon capture and storage industry going forward, but the extent of any interaction between the CCS industry and the concept of maximising economic recovery of petroleum is not yet clear. Carbon dioxide transport and permanent geological storage is a nascent industry, so although it is important to promote the industry where possible it would be wrong to be too prescriptive now. That point was made eloquently by my noble friends Lord Jenkin and Lord Caithness. Further discussions with industry and the relevant trade associations are needed before we can say with certainty how the MER UK principle should apply to areas such as CCS.
The Oil and Gas Authority will have a significant function in considering the role of CCS when determining whether companies are operating in line with the maximising economic recovery strategy. The OGA will issue carbon dioxide storage site licences and approve carbon dioxide storage permit applications. It will also have responsibility to ensure that CCS is considered as part of a proposed decommissioning plan and will take into account the viability of utilising captured carbon dioxide in enhanced oil recovery projects. In addition, the transfer and storage of carbon dioxide is an important technology, which is why it is likely to form a key element of the technology and decommissioning sector strategies that will be developed by the OGA, in consultation with industry. These strategies will help to underpin the overarching strategy related to maximising economic recovery.
The right reverend Prelate the Bishop of Chester asked how this would help us to meet our emissions reduction aims as set out in the Climate Change Act 2008. Implementing recommendations contained in the Wood review will be done in a way compatible with the legally binding climate change targets. Our overarching energy strategy seeks to underpin secure and diverse energy supplies, including renewable, nuclear and indigenous resources. The carbon plan has shown that Britain will still need significant oil and gas supplies over the next decades while we decarbonise our economy and make a transition to a low-carbon one; projections show that in 2030 oil and gas will still be a vital part of the energy mix, providing around 70% of the UK’s primary energy requirements as we seek that transition.
The right reverend Prelate also asked about the costs of carbon capture. If he and noble Lords would allow it I would like to write to him and ensure that the Committee gets sight of the letter.
Having given those reassurances and demonstrated that the Government see that carbon capture and storage will be a part of our strategy in the future, though we are still at an early stage, I hope that the noble Baroness can be persuaded to withdraw her amendment.
I thank the Minister for her response and for the comments of noble Lords. I am encouraged to hear these explicit references to the work of the OGA in relation to CCS and EMR. It is not unnecessarily prescriptive to add it to this part of the Bill. As we go forward and if the Government come forward with other legislation to transfer the OGA from an executive to a private company, we may have a chance to revisit this. We are in a world where CCS is being taken seriously and EMR is often associated with that. We are also in a world where offshore oil and gas fields are running down. If CCS can achieve the double aim of reducing our carbon emissions and helping to maximise economic recovery, that should certainly be pursued. I do not see why it cannot be explicitly stated, as it seems such an obvious win-win, but I am happy to withdraw my amendment.
Amendment 113A withdrawn.
Amendment 113B not moved.
113C: Clause 30, page 31, line 22, leave out from beginning to end of line 39
My Lords, the UK oil and gas industry is of national importance. It makes a substantial contribution to the economy and supports around 450,000 jobs. Oil and gas will continue to be a vital part of the energy mix as we transition to a low-carbon economy, still meeting around 70% of our energy demand in 2030. Therefore it is vital that we maximise our indigenous supply, to put downward pressure on prices, support jobs and maintain secure supplies. The Government commissioned Sir Ian Wood in June 2013 to review UK offshore oil and gas recovery and its regulation, and we have been making good progress in implementing the recommendations.
Amendments 113C to 113F seek to remove from Clause 30 all references to commercial arrangements. This issue is clearly of the utmost importance, since a great deal of what industry does in its efforts to maximise the recovery of offshore oil and gas is affected through oil and gas’s commercial arrangements with one another. Never in the history of the UKCS has this been more true than today. As set out in the Wood review, collaboration between licence holders, operators and infrastructure owners will be a key requirement to meet the challenge of maximising economic recovery from the UKCS.
Clause 30 provides for this and makes collaboration a central part of the principle of maximising the economic recovery of UK petroleum. However, the Government recognise the legitimate concerns that industry has raised about the way in which commercial arrangements are dealt with in the clause. The industry is concerned that it may have an adverse impact on investment in the UK continental shelf, and we take those concerns seriously. It is not in anyone’s interests to undermine investment in the UKCS at such an important time.
We have just launched a call for evidence to discuss in further detail with interested parties the best way in which to implement the recommendations contained in the Wood review. We will use this opportunity to discuss how the maximising economic recovery strategy should apply to commercial arrangements without creating any unforeseen circumstances.
Amendment 131A is minor and technical in nature. Clauses 30 and 31 and Schedule 6 come into force on such days as the Secretary of State appoints by regulations. The purpose of the amendment to Clause 41(7) is that regulations bringing into force those provisions may appoint different days for different purposes. It is for these reasons that I propose these amendments and I beg to move.
My Lords, the House will know that we have been supportive of this new regulator and have very much welcomed its creation. Of course, the Wood review suggested that the measures within it would increase, as the Minister has indicated, the production of oil and gas from the North Sea by a third—and in doing so produce an additional 3 billion to 4 billion barrels, with a wholesale value of around £200 billion over the next 20 years. Those are significant numbers and anything that helps to produce figures of that kind to the advantage of our people and our economy is, of course, greatly to be welcomed.
This measure was welcomed by the industry although there were concerns about the power of the regulator to interfere with commercial arrangements. These amendments would remove the ability of the regulator to alter commercial arrangements. Therefore, I must say, they appear to water down its powers. We understand the anxiety about the commercial arrangements but if this change is necessary to ensure that investment is not deterred, we need to hear from the Minister the extent to which it can be said to have substantially altered the regulator’s power. If it has not made any significant change, what is the rationale behind these amendments?
Did the Government consult Sir Ian Wood before developing these amendments and, if so, what was his response? Obviously, it is important that we have his views if these amendments represent a significant change to the regulator, which we as the Opposition have fears that they do. The fundamental question prompted by this change is whether the regulator still has the required authority to encourage greater co-operation and asset-sharing, and, following on from that, whether the Government see the regulator as a facilitator or as someone who can insist on co-operation. I hope the Minister will recognise that our anxieties that the amendments might represent a weakening of the power of the regulator need to be allayed.
My Lords, it needs to be remembered—indeed, the noble Lord, Lord Davies, has acknowledged—that the industry very much welcomed the report of Sir Ian Wood.
Noble Lords will remember that perhaps the most important recommendation that Sir Ian Wood made was that in future if we are to maximise the economic recovery of oil and gas, there needs to be a tripartite partnership of the Government, the industry and the regulator. The industry signed up to that. That has been the basis of the substantial amendments which were moved in Committee with the intention of implementing the Wood review, and I am on record as having welcomed them very warmly.
I am aware of the concerns which have been voiced by the industry—to which the noble Lord, Lord Davies, has referred—but I take much comfort in the recent appointment of Andy Samuel as the chief executive officer of the Oil and Gas Authority. As my right honourable friend Mr Davey announced in the Statement last week:
“This is a significant milestone in the establishment of the OGA and demonstrates our commitment to the UK’s oil and gas industry and implementing Sir Ian’s recommendations”.—[Official Report, Commons, 6/11/14; col. 53WS.]
It has to be remembered that Andy Samuel has a very long background in the industry. He will understand as well as anybody the problems of getting industry members— hitherto seen as competing with each other all the time—to work together in this tripartite arrangement. Therefore, while I understand the concerns, I do not share the problem of the noble Lord, Lord Davies, because I think the industry is well placed to take this forward and achieve the very substantial advantages of additional production and national revenue that were outlined. I think these amendments are probably necessary to reassure the industry but I believe the industry is firmly committed to the tripartite partition for which Sir Ian called.
My Lords, I am extremely grateful to my noble friend for his intervention and contribution, because he lays out very clearly our position. In responding again to the concerns of the noble Lord, Lord Davies, we are committed to ensuring that the regulator is as strong, competent and influential as a regulator should be. However, it is important to ensure that the powers are practical and effective and do not create unintended consequences, as I stated earlier.
It is also important that we do not undermine investment in the UKCS at such an important time. As part of the call for evidence we will engage with interested parties to discuss how the strategy for maximising economic recovery should apply to commercial arrangements. The noble Lord, Lord Davies, asked if Sir Ian Wood was content with our amendments; the understanding is that he is content, but he also understands very clearly that we must not be undermining investment at this time. It is not our intent that the OGA has the ability to directly interfere with new or existing commercial arrangements. We will ensure that the strategy deals with commercial arrangements in a sensible and proportionate way.
We have listened very carefully to all concerns from industry and other stakeholders but, as my noble friend Lord Jenkin has rightly said, this is a tripartite understanding of investment within the UKCS, and therefore I hope that the noble Lord, Lord Davies, is content with my descriptions of why the amendments are important.
Amendment 113C agreed.
Amendments 113D to 113F
113D: Clause 30, page 32, line 20, leave out from “holder” to end of line 23
113E: Clause 30, page 32, line 27, leave out from “licence” to end of line 30
113F: Clause 30, page 32, line 36, leave out from “infrastructure)” to end of line 39
Amendments 113D to 113F agreed.
113G: Before Clause 32, insert the following new Clause—
“Underground access: environmental protection
(1) All sites extracting petroleum under the provisions of section 32 must—
(a) carry out an Environmental Impact Assessment,(b) ensure that independent inspections are carried out of the integrity of wells used,(c) publicly disclose the chemicals used for the extraction process, and the proportions in which they are used on a well-by-well basis,(d) consult with the relevant water company, and(e) carry out monitoring over the previous 12 month period.(2) The Secretary of State must by regulation specify what data shall be required under paragraph (e).
(3) Regulations under subsection (2) must specify as required data the levels of methane in the groundwater and ecological studies, that data shall include but is not limited to levels of methane in the groundwater and ecological studies.
(4) Regulations under subsection (2) must be made by statutory instrument and may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
My Lords, I shall speak also to Amendment 115A. These two amendments have been tabled to address what I think will prove a major oversight on the part of the Government. They would ensure that hydraulic fracturing for oil and gas in the UK could get off to a good start with the confidence of the general public. The oversight that I refer to is that there has been no word from the Government on the need for regulations to enhance environmental protection in light of this new activity.
Obviously, we have been used to extracting oil and gas from offshore in the UK for many years. However, the advent of fracking, as has been seen in the US, brings with it a unique set of circumstances and a unique set of potential risks. It seems odd that the Government have not seen fit to come forward with a comprehensive review of the current environmental regulations that would apply to this industry and have sought only to introduce a limited set of clauses to the Bill, which we will come on to debate, relating to trespass laws.
As I have said, fracking is a novel process which contains a number of different stages all of which will be subject to some forms of environmental regulation—let us be clear about that. However, the Economic Affairs Committee of the noble Lord, Lord MacGregor, in its thorough and detailed inquiry and recent report, clearly highlighted the need for a review of the existing regulations not only to simplify and clarify but to ensure that any potential loopholes are closed. Two in particular were mentioned by the noble Lords who were the authors of that report, one being the need for genuine independence of inspectors and the other—here, they cited a recommendation of Professor David MacKay—the need for baseline and ongoing monitoring of fugitive emissions. Our amendment puts forward those requirements as part of new regulations. We have also included two or three other issues.
We propose our amendments not out of any desire to see fracking held back or delayed but to give it the best possible chance of moving forward on the right foot from the outset. Just last week, a town in Texas, Denton, voted against allowing fracking to continue within the confines of the town. This is right in the heart of the oil and gas boom that has been brought about by shale gas in the US. The reason cited for passing the ban was that people had become tired of industry trying to work around environmental protections and environmental regulations.
Our aim in tabling the amendments is to ensure that we do not have that outcome here in the UK. We should take the time now to introduce a proper regulatory framework that enables the industry to get off to the right start and to learn from some of the mistakes that we have seen in the US, where patchy regulation has led to a number of pernicious scare stories being in the public mind when it comes to fracking. Once such stories have seen the light of day, they are very hard to root out. It is our contention that the Government have not done enough to go forward with a sensible and balanced approach to fracking in the UK—hence these amendments.
As I have said, in thinking about amendments, we read with great care the recommendations of noble Lords on the Economic Affairs Committee. I am pleased to say that we have taken forward the two recommendations that I mentioned, on independence of inspectors and in relation to the monitoring that is needed to establish a baseline. We can have a discussion about how that baseline should be established, but it would be in the interests of the industry to have baseline monitoring because what we do not want is for stories to keep abounding about shale gas having higher emissions than coal simply because we lack the data. It would be a shame not to put in place the adequate protections so that we can have access to those data and can refute such claims, and to show that fugitive emissions do not undermine the environmental case for fracking.
As I said in my comments previously on CCS, on our side we are committed to bringing forward a whole range of low-carbon technologies and fuels to enable us to decarbonise our economy. Shale gas can play an important role in that. I would far rather that we use homegrown gas than imported Russian coal. For that reason you will see that we are, in general, supportive of the Government’s moves to change the laws and the legal loopholes that we will debate today. However, we have tabled this amendment because this is a very serious issue. We need to get public support and public confidence and ensure that our regulators have every possible chance to ensure that this industry gets off to a good start.
I am sure that the Minister will claim that the experts say that it is all okay and we have all the environmental regulations we need, but that does not appear to be the case. I have been approached by someone who mentioned to me that the regulatory structure is really not good enough, both in its complexity and its lack of oversight in terms of some of the issues I have just mentioned. I would very much like to hear from the Minister what her response is to the question of independent inspection.
Equally, in our debate on Tuesday, a number of noble Lords made specific reference to the issue of fugitive emissions—here I refer to our Amendment 115A. Unfortunately, the Minister was not forthcoming in her response to either myself or the noble Lords, Lord Shipley and Lord MacGregor, who also raised questions about fugitive emissions. I hope that the Minister will use the opportunity today to put on record the Government’s approach to fugitive emissions, the baseline monitoring for those, the ongoing monitoring and who should pay for that and resource it.
I apologise to noble Lords if I am even more rambling than normal. I am not feeling 100% today, but I am here because this is an incredibly important aspect of this Bill. It is in our interest, and also that of industry and the economy, that we get fracking right. I do not believe that the Government have paid sufficient attention or listened carefully enough to the concerns from those in the environmental sector, pondering on what we think about the potential impact of this technology. I look forward to hearing the response of the noble Baroness. I beg to move.
My Lords I understand the case that has been made by the noble Baroness, Lady Worthington. I started my consideration of the details of this with the hugely important joint report of the Royal Society and the Royal Academy of Engineering back in June 2012. Indeed, I had substantial discussions with the chairman of the committee that produced the report, Sir Robert Mair, whom I had known previously. Perhaps the most important statement in that report—and it had a great deal of detail backing it up—was that they had reviewed the scientific and engineering evidence on risks associated with UK shale gas development and concluded that those risks,
“can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation”.
That has been at the heart of my continuing support for the development of the shale gas industry in this country.
My second point—and no doubt my noble friend will be able to elaborate on this—is that the regulation system that we have in this country, in general under the authority of the Environment Agency, is quite different from that in the United States. I am in no doubt that some of the regulation there has been quite seriously defective. That has given rise to accidents that have been reported, and to the lack of support that one is aware of here and that the noble Baroness has referred to. Of course, you only have to read the media to realise that every accident that happens there is greatly magnified through the media—with a trumpet, as it were. If noble Lords studied the various blogs that come out on this every day, I am sure they would realise what an unbalanced argument it has become because of the way in which all these things are presented here in this country.
I have been critical in the past of both the industry and the Government for failing to realise the extent to which they need to fight the case for the development of a shale gas industry. To be fair to the industry, it has now started a considerable programme called “Let’s talk about shale”. Briefly, the leaflet I have been sent speaks of the very considerable activities that the industry is now taking—primarily in the areas of the Bowland shale deposits, because that is where the main arguments come from at the moment, but of course that can eventually be spread nationwide. That is a welcome development, if perhaps a bit belated, but at least it is now happening.
The one point where I agree with the noble Baroness is that the Government have to match that as well, and take these scare stories seriously and counteract them. Indeed, when I talked to the head of the trade association UK Onshore Oil and Gas, I said, “Learn the lesson of instant rebuttal”. We learnt that from a previous Government. If they wanted to scotch a rumour, it had to be the subject of an instant rebuttal. I see very little sign in the media that either the industry or the Government are yet engaging effectively in the instant rebuttal of scare stories.
Having said that, I will perhaps anticipate what my noble friend will say. We now have the most effective system of regulation in the world for our oil and gas resources. It is of a very high standard and admired across the world. There is absolutely no suggestion that the existing powers of the Environment Agency and other bodies involved in this need reinforcing by additional statutory provisions, as in these amendments.
I read the amendments and thought, “For goodness sake, all this is happening already”. The noble Baroness mentioned baseline monitoring. The Environment Agency has the powers—as have the Scottish Environment Protection Agency and Natural Resources Wales—to require baseline monitoring of those environmental indicators it considers appropriate and for the lengths of time it deems suitable for each given site. We discussed this in Grand Committee. I was certainly there arguing that baseline monitoring is hugely important. If there is to be any question of contamination, you have to know what you are starting with. That is what it means and we do that in this country already. I have never heard it suggested that it is anything other than fully effective.
I am not sure that we need the additional provisions in the noble Baroness’s amendments. I have great faith in the ability of our existing monitors. They have these powers and the duties imposed on them. They do not need to be told in detail by Parliament what to do and how to do their jobs, so this is probably unnecessary. I understand the motives behind the amendments, but the issue should be dealt with effectively by proper information programmes to counter the mischievous rumours that one reads in the press every day. I shall be interested to hear my noble friend’s response from the Front Bench, but I do not think that these amendments actually add anything to what we have already.
My Lords, I rise to support Amendment 113G. I declare a past interest, having been chief executive of the Environment Agency for eight years. This is a technology that is deeply distrusted by the public. Certainly, my experience of regulation in the environmental field is that if a degree of certainty can be given to both sides—the industry and the public—that is hugely beneficial in removing tension, distrust and suspicion. Industry used to tell me time and again that it would prefer to see clear, unequivocal regulation, which it could then fit its business around and make sure that it was compliant with, so that there was no doubt about the requirements that would be laid upon it. This was the most successful way of developing a degree of trust on hotly contested issues that could have an environmental impact.
Therefore, I urge the Minister to think seriously about placing in the Bill an environmental impact assessment and some of the other associated requirements here. Some of these exist elsewhere in legislation, but there is no harm in making the point that whether they are implemented is not the decision of the Environment Agency but a requirement because this technology is so distrusted by the public. I think it should cover exploration as well as extraction. It should also be associated, if I may say so slightly in advance, with the two amendments—or at least one of them—that I have put down, which we will be debating later. Certainly in the initial stages of this hotly contested area, we need belt and braces, not just belt.
My Lords, I am content to support Amendment 113G as far as it goes but, to my mind, it does not go anything like far enough. I regret that I will be introducing rather a disconsonant note to the debate. I will outline my opposition to hydraulic fracking, lock, stock and two poisoned barrels, in the debate on a later amendment in my name—here’s to knocking these diabolical fracking provisions out of the Bill. These amendments give a modicum of increased environmental protection, and I welcome the reference to the levels of methane in underground water, to which I shall certainly be returning in a later bank of amendments. I seek some clarification from the mover of the amendment on whether either the Scottish Parliament or the National Assembly for Wales has any role in the consideration of these draft instruments.
My Lords, when one reads the amendment, one is clearly very favourable to it because it tries to do certain things and convey a message, which the noble Baroness is quite right about, in terms of public confidence in the fracking industry. However, sometimes in this debate we forget the amount of regulation and control that is already there. For a start, we must have the permission of the surface land owner. We need planning permission from local authorities. We need a licence from DECC from a series of auctions or allocations of those licences and areas for that. We need the Environment Agency to approve and we need health and safety to give the go-ahead as well. That is quite substantial. When I look through the amendment a little more, I certainly agree with independent inspections and disclosure of chemicals. I am far from sure about a 12-month period for a previous record of monitoring. From discussions on this in Committee, this is not particularly seasonal and 12 months is a long time—certainly, in terms of fugitive gases, methane in particular, that is extremely important.
However, I am not sure that the Bill is the right place to ask the Committee on Climate Change to do something. In fact, I am sure the Minister could speak to the chairman of the Committee on Climate Change quite easily—maybe even after the debate—and come to an agreement on whether that was needed. I agree that maybe a report is required. It could, of course, really look only at foreign experience, while perhaps UK experience becomes far more important. We clearly cannot do that until after at least some of the exploration stage, and maybe some of the production stage, has happened. However, I agree that we need the regulation of this technology to be comprehensive, and we have a good track record in general in this area. Perhaps we need that regulation to be in one place comprehensively so that not only the industry but we as parliamentarians can understand it and, more importantly, the public can see how this all works.
So while I do not really support this amendment in its current form, I hope that the Government are working on this anyway and will bring forward, perhaps later in the Bill or in secondary legislation, a comprehensive summary and description of exactly how all these levels of regulation will work within the industry.
My Lords, I was chair of the Economic Affairs Committee of your Lordships’ House during the inquiry into shale gas and oil. The committee wanted to be fully satisfied that the regulatory regime was equal to the task of protecting people and the environment. We took extensive evidence from regulators, academics, local communities, NGOs and exploration companies. We concluded that the regulations and the mandatory industry guidelines gave the regulators all the powers needed to ensure that the environment and the health and welfare of local communities could be effectively protected. The report in 2012 by the Royal Society and the Royal Academy of Engineering, already referred to by the noble Lord, Lord Jenkin, came to exactly the same conclusion.
We heard from many witnesses that the current regulation of offshore and onshore gas and oil drilling in the UK is widely regarded as best in class. Four of the proposals in Amendment 113G are already covered by existing regulations or industry guidelines, and there is no need to gold-plate them and include them in the Bill. We on the committee endorsed the recommendation in Professor MacKay’s report that fugitive methane should be measured when shale gas extraction begins. The industry agreed to this. To impose a requirement to monitor over the previous 12-month period is quite unnecessary, and only extends an already far too long 16-month timetable to get permission to drill.
We also recommended in our report, as my noble friend has mentioned, that wellhead inspections should be carried out by independent inspectors. The Environment Agency and the Health and Safety Executive will indeed conduct job inspections but the well examiners will be employed by the companies. This was raised in the debate by the Minister last week, and she pointed out that the companies would provide these. One of the important things about regulation is that not only must it be independent but it must be seen to be independent. So why not ask the companies to foot the bill—if resources are a concern, and I suppose they are—for one of the agencies to carry out these independent inspections?
Our report identified that the tortuous and bureaucratic process to approve exploratory drilling is the major impediment to finding out whether or not the UK’s shale deposits are economically exploitable. It is regrettable that amendments were not tabled to address this serious problem, which has the merit of being supported by the facts and which would have commanded cross-party support. If passed, these amendments would add further complexity to an already devilishly complex and bureaucratic approval process, and will potentially extend the timetable by a further 12 months. Having lost the argument on the facts of the case, delay is now the main weapon of choice for those who oppose fracking. To add further delay to the exploration of shale gas would be a misstep.
Shale gas and shale oil could be a major boost to our economy; create jobs and preserve them; boost public and local finances; and halve emissions by replacing coal, which currently generates 40% of our electricity. For these reasons, I will not be supporting this amendment.
My Lords, I declare an interest as the chairman of the Committee on Climate Change. It is true that the Minister and I easily could have a conversation, but I wanted to put into context where the Committee on Climate Change stands on the basis of this amendment. Our view is that it would be quite wrong to depart from the science here, when we spend so much time in asking that small group of people who still do not think that climate change is happening, to look at the science there. In other words, we have a responsibility to keep to the science. The science is very clear that there is no fundamental reason why we should not frack and produce gas. Indeed, there is no argument scientifically opposed to it. The royal societies have done us a great deal of good in their work, because we are able to state that as clearly as any fact can be stated. Of course, no scientific fact remains fact for ever; it can always be altered by new information. That is why all scientists are properly referred to as questioning. That is why I believe that we should start with those facts and say that we should go ahead and see whether fracking can give another way of providing the energy we need.
It is very important to say to those who do not want to frack that there is always somebody who does not want to do any of these things—people who think that neither onshore nor offshore wind is acceptable, or people who do not like tidal power. I am fed up with people who have their favourite bits and dislike every other means of generation. The climate change committee has said, rightly, that we want to have a range of means whereby we can meet our future needs. Fracking could, or should, be part of that because we have already said that we will need gas into the 2030s. I thank the Government again for confirming the fourth carbon budget. Following those budgets, we still will need gas. Surely it would be better coming from our own resources than being brought in from somewhere else, particularly given that we do not always have the confidence in many of those places “somewhere else” that we have in our own resources.
That is the background. However, I warn the Government that there is always a chance of snatching defeat from victory. I am afraid that the Government are not always aware of that, so I want to encourage them not to get into that position. I think that the amendment is unnecessary. However, it seems to me that the reason it has been tabled is that there is so much misunderstanding outside. It is terribly important for the Government to underline the very significant difference between the way in which we deal with environmental questions here and the way in which they are dealt with in the United States. First, we deal with them on a national basis, whereas the United States deals with them on a state basis; secondly, there is no doubt that the United States system is lacking very considerably. There are some really disgraceful examples of failure to insist upon basic environmental protections in the United States. I do not want us to have to fight the public, who are misinformed, not about what happens in the United Kingdom but about what has happened in certain states in the United States. Nor do I want the public to take the rather ridiculous view that because it happens in the United States we can do it here, that it is the answer to everything, and there is no need to think about anything else. Both ends of that spectrum are wrong. Those who think that fracking will be the answer to everything and that there will be lower prices are clearly wrong. I say to the noble Lord that to say that it is unacceptable or that it is a sin against the Holy Ghost is also fundamentally wrong and unscientific. We ought not to go back into that same area of the dark ages, which we are invited to do by those who do not believe in climate change. We have to have a sensible, central position, which the Government have.
I would like the Government to oppose this amendment but to say publicly that they will do three things. One is to make it much clearer to everybody in a simple form how the regulations will work and how they will be enforced. The second is to make it absolutely clear that where the Select Committee of this House has recommended that independent checking is necessary, the Government will find a way of insisting that that is done. That is important not just because the House of Lords has suggested it but, frankly, because no one believes any business if it is doing its own checking. It does not matter how good or how bad the business is, we all believe that checking should be done independently—the business can pay for it but it ought to be done independently. We ought to promise that and state it.
The third thing is, I am afraid, even more important—namely, the Government have to give a real undertaking that, when the moment comes, there will be no question of a shortage of funds for any of the institutions that are responsible for protecting the public. The public are very suspicious that it is all too easy to say, “We would have done it but we couldn’t because it was all too long so we did some random checks”. If this measure is to go ahead, we have to know now that there is no question of there being any shortage of funds for the necessary checking, and that it will be done independently. Those of us who believe in the market believe that the cost should fall, as always, on the people who are proposing the fracking.
I end with one simple comment. I am finding it more and more difficult to deal with those who talk about the free market but do not believe in it. They talk about the free market but mean the managed and biased market that we happen to have and which is convenient for them. I do believe in a free market but that means that the costs of the production of this gas should be placed fairly and squarely on the shoulders of the producers and therefore also on the shoulders of the consumers. Given that, I do not think that we need these amendments. The Government are right to proceed on the basis that part of our means of generating for the future will be our home-produced gas.
My Lords, I declare an interest: I live in Lancashire, which is a beautiful, well populated and much loved county, in case anybody has any doubts. I have listened very carefully to the points made in this debate and have read the proceedings on other stages of the Bill when I have been elsewhere in the House and unable to be present. I would like to concentrate on one issue raised by my noble friend Lord Hollick and other noble Lords. If it is managed and controlled carefully, I believe that a benefit to Lancashire and the north-west can be gained from the production of shale gas—and it is an area of the country which has much need of investment, regeneration and growth.
However, I happened to be in bed when the earthquake occurred in the Irish Sea and I have never been able to find out whether the integrity of the relevant well was a factor in that, as alleged in some of the local media. I am not asking the noble Baroness to tell me now whether she knows more about that but I would appreciate a letter.
I want to concentrate on public confidence. I am not a Luddite. I am not one of those who says, “Never”. However, given all the people who have spoken and written to me, I am very well aware of the grave concerns that people have, some of them for the reason that the noble Lords, Lord Jenkin and Lord Deben, referred to—that is, the scare stories. Those are felt to be real by the people in the communities most affected in Lancashire—and they are felt and feared very strongly.
When I go back to Lancashire, having stated my position, I want to be able to say that there is absolutely no doubt that the companies themselves will neither choose nor be responsible for the independent monitoring of the integrity of the wells. That is the least we can do for the people who are frightened, and to allay the fears of those who are tempted to believe—or do believe—the scare stories that emerge. Therefore I need the Minister to say that the companies will neither choose nor be responsible in any way for the process whereby, for example, the integrity of the wells is judged. I am not interested in an assurance that they will be given rules about choosing who does the monitoring. That will not satisfy the people in Lancashire.
As the noble Lord, Lord Deben, said, one of the problems is that different rules apply in different states in America. We have a strong set of rules in this country, but people need to know that those who judge, for example, the integrity of the wells, have no link, other than being funded by them, with the companies involved. I hope that the Minister will be able to assure me that the Government have taken that on board. I understand the point about the free market, but, as my noble friend Lord Hollick said, people need to know that it is not those with an interest in the business who are judging the safety and security of the wells, but those whose only concern is to report the truth. If the Minister cannot give that rock-solid guarantee, the people of Lancashire who have spoken to me will not be happy. That will delay the process, and nobody wants that.
My Lords, I think that the period for monitoring proposed in Amendment 113G—the previous 12 months—is unnecessary. The British Geological Survey found that background methane in aquifers is generally low. It also concluded that the majority of sites it studied showed little change in methane levels. That says to me that we should monitor situations on an individual basis, based purely on risk and not on anything else. Extensive monitoring like that proposed in the amendment is only going to delay safe projects from going ahead. Once we get a green light at an extraction site, we should get on with it.
On Amendment 115A, I do not see a great need for the Government to spend time putting together a report on fugitive emissions. Industry will already monitor emissions from the site; indeed, all the companies involved are committed to doing so. Fugitive emissions occur from leaks and poor-quality construction. In the UK the well design and plans have to be signed off by the regulators and reported on, so that is unlikely to be a major issue. Civil servants could spend their time far more productively than in producing such a report.
I support Labour’s amendments. They attempt to improve the regulatory framework but they do not go far enough. I hope that other amendments will be pushed through. We need a complete rejection of fracking. The things that have been said so far are not borne out by the facts and it would be very interesting to see future examples of just where fracking has gone very badly wrong.
We need to see a reprioritisation of renewables and energy efficiency. That would reduce our overall energy demand and make us much more able to fulfil our agreement under the Climate Change Act. Energy efficiency and renewables are already delivering jobs. They are very good at supplying employment and will do much more for energy security, lower bills and reduced emissions than an unacceptably risky shale gas industry can ever do.
The Bill contains some very worrying new measures that will, if given the green light by Parliament, threaten the UK’s wildlife. No one seems to take that into account. It will also promote the unfettered extraction of unconventional fossil fuels, which will undermine the Climate Change Act and our ability to avoid, as one nation among many nations, dangerous climate change.
The coalition talks endlessly about its supposed concern for future generations when it comes to reducing the budget but the same level of commitment is, surprisingly, absent when it comes to the environment and handing on a planet fit to live on. The next generation will be given a very degraded natural world if we do not understand the sort of damage that fracking can do.
If we want any more evidence that this is not the “greenest Government ever”, we need look no further than Clauses 32 to 37 and the deeply worrying and hugely unpopular new provisions to give companies the freedom to frack under our homes without letting us know. The Government have pushed ahead with this change despite recent polling showing that 75% of people are against it and the fact that 99% of respondents to the consultation rejected the proposals. I remind noble Lords that those people are voters.
If we look at just how much we have to do if we are not to allow the world to heat by more than 2 degrees—although it is probably already too late to avoid that—it is clear that fracking cannot be part of it. It is not even as though shale gas will bridge the gap that we keep hearing about between now and a future based on renewables. Shale gas will not be online until about 2020, or even well into the 2020s, so if the Government stick to our commitments under the Climate Change Act and coal is offline by the early 2020s, shale gas will not be replacing coal. We will see exactly what we have seen happening in the United States, which is that it is simply able to export more coal when shale gas fills its own energy needs. Shale gas merely displaces fossil fuels; it does not replace them. Professor Dieter Helm of Oxford University has told us that there is enough gas and coal to fry the planet several times. But of course we cannot use it. It must stay locked up. That is the most efficient form of carbon capture: leave it as coal.
These clauses will also allow fracking companies to undertake activities that have not yet been assessed for their environmental safety, including the keeping of substances within infrastructure on the land with no limits on what can be kept or for how long. Injection wells could be extremely damaging. They have caused problems in the United States, particularly in Ohio, where there have been earthquakes.
We know that the existing regulatory framework is full of gaps. Rather than continue the obsession with deregulating fracking and allowing the industry—an industry that the Chancellor proudly stated has the most generous tax regime in the world—to regulate itself, the Government should see this as an opportunity to introduce regulation that is fit for purpose in order to safeguard the climate. Balcombe, which has been the scene of a lot of interest in the context of fracking, has now decided to go carbon-neutral. If Balcombe can do it, the rest of us can do it.
Lord Lipsey (Lab): My Lords, I was a member of the Economic Affairs Committee, whose report, I am pleased to say, has received considerable praise today. When we started on our inquiry, I did not know what fracking was. I would have been hard pressed to distinguish it from another word beginning with “f” and ending with “ing”. However, in the months over which we heard evidence on the subject from every expert from every quarter, we had a clear impression of where the facts lay. The facts are reflected in a carefully balanced report, which says, quite clearly, that fracking must be allowed to go ahead for its enormous economic and social benefits but that we must have the right regulatory system in place. The report defines in some detail what that regulatory system should be.
That brings me to these innocent-looking amendments. If it is the mover’s intention merely to probe the Government’s intention, then I would go further and say that they are welcome amendments. In particular, the new clause proposed by Amendment 113G insists that the integrity of wells used should be independently assessed rather than it being possible for firms to use their own preferred consultants. I hope that the Minister heard the consensus around this House that that was a sensible recommendation and the disappointment that the Government have rejected it.
We need to set our arguments in a broader context. In the committee, we heard from the leading environmental groups, and I am afraid that the speech just given by the noble Baroness, Lady Jones, confirms that they were not really interested in whether the wells were integral, how much methane should lapse out or whether there were any risks of earthquakes. Instead, they sought to raise every empty canard about fracking and treat it as if it were a genuine concern. Their aim was transparent—to surround fracking with regulations and planning constraints to ensure that in practice it never happened without having, in theory, to oppose it. For example, I asked a question of Mr Molho, the spokesman for the environmentalists. I said that,
“if there was no threat of global warming in this gas, would you still be against it, or would you say … that if the regulatory framework is right, it could be a goer?”.
“We would revise the position accordingly, yes”.
In other words, what the environmentalists want is to stop fracking, and the Trojan horse they use to hide their armies is more and more regulation, which is in danger of killing the whole thing.
That was the environmentalists and, unfortunately, they are not heavily represented in this House, so it is always a delight to hear from the noble Baroness, Lady Jones. Unfortunately, their philosophy has popped up within these amendments. Amendment 113G specifies a 12-month period for groundwater baseline monitoring. It pops up in Amendment 115A, which demands a monitoring programme, including on fugitive methane, to report within six months of the passing of the Act—not, as the committee did, a report only when extraction begins. The amendment sets up a whole new system designed to ensure that fracking is compatible with climate change aims.
Those features make me worry about the position of our Front Bench. It says that it is not opposed to fracking. Indeed, I hope that the noble Baroness will say when she responds to this debate that she is in favour of fracking with the right regulation. However, in practice, it wants to make it more difficult than even your Lordships’ Economic Affairs Committee wanted. We are somehow left trying to ride two horses at once—no doubt, cheers from some environmentalists, although, in my experience, they are never satisfied by whatever concessions you make to them; not the extreme environmentalists. We are saying that we are in favour of fracking in principle but want to make it harder in practice. The noble Lord, Lord Maxton, is not in the Chamber but his predecessor, Jimmy Maxton, said that if you could not ride two horses at once you should not be in the circus. In this particular case, the trick becomes a little demanding when the horses are galloping in opposite directions. Are we for fracking or against it, subject to the right regulation? At the end of reading these amendments, I was in great doubt.
The energy future of this country is a grave matter and may be one of the biggest issues in the years to come. On the one hand, there is global warming, and man’s contribution to it, and Britain’s contribution to man’s contribution. On the other hand—this should matter to the party of working people—there is energy security, industrial costs that feed into jobs, and the amount that people have to pay for their fuel. These complex considerations have to be balanced, as the Economic Affairs Committee balanced them. That balance will not be totally upset if these amendments are carried. It will not be the end of the world. It will just make it a tad more likely that the next generation will pay more for its fuel, a tad more likely that our industry will be less competitive relative to other nations, and a tad more likely—I put it no higher—that one hard winter the lights will go off in the homes of those who would have liked fracking to take place as well as in the homes of environmentalists.
As I say, if they are merely probing amendments, it is excellent that we have had this constructive debate about them and I look forward to the Minister’s reply. However, if our Front Bench was so unwise as to press them to a vote, I shall be in the Government’s Lobby.
My Lords, it gives me great pleasure to re-engage in this debate. In particular, I wish the noble Baroness, Lady Worthington, better health and applaud her braveness for coming in today. I had the great pleasure of opposing her, or being opposed by her, for quite some time, as Members will know. There was never anything between us. In fact, when we took the Energy Bill through the House, there was very little between us—and there is not now with these amendments. I am taken by the noble Lord, Lord Lipsey, who believes that these are probing amendments. I, too, believe that they are probing amendments.
There is nothing between us because, as the noble Baroness said in her opening remarks, she was in favour of fracking. She also said that it had to be properly regulated. We have heard in the debate, particularly from the noble Lords, Lord Teverson and Lord Jenkin, that we have the best regulation in the world for this part of the industry. To overdo regulation is to kill it. What it will kill is our ability to progress economically as a nation, as the two noble Lords on the opposite Benches have said; it will not enable us to have fuel security, which fracking gives us the opportunity to have; and it will not enable us to have cheap fuel in our homes. For people in this country these are the critical things that matter to the future of this economy and country. I am therefore delighted that the Government have taken on the work started four-and-a-half years ago in this field. It is fundamental to us all that we press on with it. The longer we debate it and get carried away in different directions from the core issues, the longer it will take to get this country back and going.
My Lords, I share the concern of the noble Lord, Lord Lipsey, as to where the heart of the noble Baroness, Lady Worthington, lies on fracking. Her heart on this subject is a little closer to that of the noble Lord, Lord Wigley, but she is putting on a very brave front, because she has to, and says she supports fracking. We have been at hydraulic fracking in this country for more than 50 years. As so many of your Lordships have said, this is a highly regulated industry and Britain is a world leader in it. It is totally inappropriate to compare our standards and form of regulation with some of the scare stories from America. However, it is about presentation and, at the moment, the industry and the Government are losing the presentation battle, although that might be beginning to change. As my noble friend Lord Deben will remember only too well, it is fine to say, “I wish the Government would improve their PR”. It is difficult to do that in practice because if it is a good news story our press do not want to know about it. All they want to know about are the bad news stories.
I made my comment about the noble Baroness, Lady Worthington, because these amendments will make the whole process much more difficult and time-consuming. For example, new subsection (1)(a) in Amendment 113G requires all sites to,
“carry out an Environmental Impact Assessment”.
We know that environmental impact assessments are hugely important. They cover a range of other industries. However, European standards have been agreed on for fracking. Within those standards are certain exemptions for the small fields and for some experimental wells, but there are also restrictions. It is not a total blanket; it is a limited exemption. Why does the Labour Party want to gold plate what is already in existence and covers the whole of Europe?
When I was on Sub-Committee B and we inquired into energy, what came over abundantly clearly was that the rest of Europe—which has quite a lot of shale gas, too, particularly Poland—is looking to Britain for a lead. When Britain does it, the rest of Europe will get on and do it. We in Europe can all benefit from that. If we do not take the lead, the others will not do it by themselves. That is why I support all those who have said that we must get on with it, regulate it and make transparent who is regulating what and why, so that we can give the maximum amount of reassurance to the public.
My Lords, in taking part in the debate, my only interest is that we should make a judgment based on supported evidence, rather than on allegations. If nothing else, the amendment is important because there is a battle of ideas on fracking that we need to win. Noble Lords have said that we are not currently doing so well on public opinion. Unfortunately, the scare stories are believed. There has been an important event since we debated this in Committee: the publication of The Economic Impact on UK Energy Policy of Shale Gas and Oil. It is a very important report. No one has questioned its integrity or the evidence it contains. I stress that point again and again.
Like many others, I looked at Amendment 113G. I was pleased to hear my noble friend Lady Worthington say that she was not opposed to fracking. I suppose the amendment is a bit like the curate’s egg: it is good in parts. It is probably better than the average curate’s egg because most of the parts are good. I support an environmental impact assessment—I agree with the noble Lord, Lord Teverson, that that is something that needs to be done. I support independent inspections of the integrity of wells used; I am pretty sure the fracking companies would as well. They are also prepared publicly to disclose the chemicals used for the extraction process. Again, read the report: they are in there. For the most part they are used in tiny amounts, and for the most part there is no problem with them whatever.
It is true that some practices that went on in the States were not helpful to the process of fracking. That is not to say that everything that happened in the States was bad, because it was not—there are plenty of good examples from there. We should not forget that fracking substantially reduced emissions in the States. It did and has created jobs and it has brought industry back to the States. We should not forget that important aspect.
The noble Lord quotes the economic impact report, which I have with me. Paragraph 269 says that the Government,
“must also explicitly address the safety issues”.
The committee that produced that report was clearly not entirely happy on that count.
Of course, we have to address the safety issues. I am not seriously saying that anybody in the Chamber is recommending that we embark on a process of mining or whatever activity without addressing safety issues. I listened carefully both to the noble Lord, Lord Wigley, and to his companion sitting next to him, the noble Baroness, Lady Jones. They both expressed a deep-rooted opposition to fracking, which frankly puzzles me. If we do not have fracking we will still be dependent on LNG, on which I think about 27% of our energy is based. I do not understand the basis of their opposition. I sometimes do not understand the green analysis of a number of issues because it is not always evidence-based. I could say the same about GM foods, but that is another issue.
To return to this important subject, I, too, want to hear what the Minister has to say. I heard it once in Committee, but it is worthy of repetition. I listened to and understand the concerns of my noble friend Lady Farrington, but I direct her to the report. It said that when people talk about earthquakes, it might be better if we talk about tremors. There was one in Wigan in Greater Manchester, which was of a 1.5 magnitude. It was about the same as a heavy lorry passing.
My Lords, I thought it was a bomb, living as we do half way between both the aerospace centres, with planes going over all the time. The noble Lord was not in my bedroom.
That is an indisputable fact and I am glad it has been affirmed. I may not have been there when the earth moved for the noble Baroness, but I am going by the evidence of the recorded seismic shock. I again appeal to the House: that is what we must do if we want to win the battle of ideas. It is a really important one.
Of course we need to get the regulation right, but it needs to be proportionate and evidence-based. We have the capacity to do that. If we do not, we will see what has happened in Balcombe and in various other parts of the country. Instead of fracking being seen as a perfectly valid contribution to energy security, the cost of energy and the capacity to create a significant number of jobs, those who are opposed to it will succeed in creating the view that it is something to be feared. I do not believe that that is the case. Noble Lords do not need to look just at the evidence of the report. Durham University, in a totally independent survey, addressed the issues in a serious way. The industry is not financing it; it is totally independent research.
I welcome the amendments because it is important that the House debates this issue and makes clear what we expect from regulation. We and the public expect a safe, regulated, transparent and accountable process. I look forward to the Minister addressing those concerns.
My Lords, these amendments are useful as probes, as my noble friend Lord Lipsey said. They also have important political and economic implications for the whole process of fracking. I will not explore the political side at this hour; I will point out on another occasion how very unproductive it is for the Labour Party to appear—I stress “appear”—to oppose shale fracking by artificial regulatory delay when shale offers the hope of 70,000 new jobs, billions of pounds of investment in the regions, lower energy prices, keeping our energy-intensive industries alive and here, and providing energy security. That seems to me to offer hope, which is still to be fully proved, to millions of ordinary British people. I do not think that Balcombe necessarily represents the majority of them. Public confidence is a factor that is repeatedly raised. In the polls, 75% of the public either support or, to a greater extent, do not oppose fracking.
Leaving the politics reluctantly on one side, I shall focus on the amendments. I support my noble friend Lord Hollick in his argument that all these environmental concerns are apparently covered by existing regulations. They need to be properly implemented, which I fully support. But if there is some need for further gold-plating—my noble friends Lord Hollick and Lord Lipsey mentioned that possibility—that can be pursued later. We should not use the very mixed regulatory experience of the United States to go into this bureaucratic jungle to delay fracking for ever. If one reads some of the official reports that have investigated it—I particularly call attention to that of the Geological Society—one will see that these matters put into perspective the statement that our British regulatory regimes are the best in the world and that we can rely on them. However, we cannot always rely on local authorities to have the resources to pursue them, which is a factor that should be pursued further.
I direct my next point especially to my Front Bench. It has not been explained to me in prior discussions why on earth we need a vote today. These excellent probing amendments explore the matters fully but I do not see the need for a vote. This jungle of bureaucratic regulations, including the existing ones, which I accept have already given excuses for the delay in extracting these precious reserves, mean that we have only one well today. We can express our views and Members have taken part in an impressive debate on all aspects. We can explore the matter but such a vote from this side—I am speaking very much as a lifelong Labour man—will send the wrong message. It will send the message that Labour wants to delay the great shale gas contribution to our economy. Conveying that message, which is hostile to job creation, lower energy prices and energy security, could push me, with my noble friend Lord Lipsey and perhaps others, into the very unfamiliar territory of the government Lobby. I trust that we will not get to that point.
The Government should agree tonight to explore further how genuine concerns about fracking can be allayed. I stress again that our concerns are genuine and that I am not referring to fictional scaremongering. However, we need to bear in mind that the Green Party’s concerns will never be allayed. I think that we are all grateful to the noble Baroness, Lady Jones, for confirming that tonight. They will never be allayed because, in reality, however disguised, the Greens want to stop shale gas because it threatens their beloved windmills. With great reluctance, I shall vote against this amendment if, unfortunately, it is pressed to a vote.
My Lords, I am extremely grateful to the noble Baroness for putting forward the amendment and to all noble Lords who have contributed to this very informative debate. We are absolutely clear that shale development must be safe and environmentally sound. We agree with the Opposition that the issues they raise should be thoroughly addressed but that the existing regulatory regime does so in a robust and proportionate manner. I am minded to repeat some of the contributions that have been made already today because it is necessary and important to do so. I hope that over the next few minutes I am able to allay the fears of those noble Lords who are supportive of these amendments.
As noble Lords have said, we must ensure that the public are properly informed. I agree with my noble friend Lord Deben that fracking must not be seen as a silver bullet. It can offer huge potential to ensure that we have a home-grown supply in a diverse range of energy mixes. It has been pointed out by my noble friend Lord Deben and others that evidence in the United States referencing shale developments has, on occasion, led to public mistrust. However, it is important to note that the latest evidence continues to show that such cases in the States are due to faulty surface operations or faulty well construction rather than hydraulic fracturing.
On another issue again rightly raised by most noble Lords today, it is important to emphasise that in the UK we have an entirely different regulatory system to the US. The UK benefits from a comprehensive and stringent set of statutory and non-statutory requirements. My noble friend Lord Jenkin and other noble Lords rightly pointed that out. In the US, practice between different states varies considerably and regulation is in some respects less stringent. For example, unlike some US states, we do not allow open-pit storage of chemicals or waste fluids and we require independent verification of the design of the wells. I will respond to the questions raised towards the end of my contribution.
The UK’s globally recognised expertise in the offshore oil and gas industry is well known. Noble Lords, including, I think, my noble friend Lord Caithness, referred to the fact that the UK has more than 50 years’ experience in regulating onshore oil and gas production. We are confident that the regulatory system will continue to provide robust protection for the environment. Our position is backed up by reports from the Royal Society, the Royal Academy of Engineering and Public Health England. These reports have considered a wide range of evidence and have looked at the UK regulatory system. Their advice has outlined the risks and concluded that, overall, as my noble friend Lord Jenkin pointed out, they can be managed or are low if industry meets all regulatory requirements.
I will now turn to each of the areas raised by the noble Baroness. First, where there are likely to be significant effects of a proposed scheme on the environment, environmental impact assessments are prepared by companies at an early stage in the development of proposals. They have a key role in informing regulators, planning authorities and the public about the likely significant effects of a proposed scheme on the environment. They enable mitigation measures to be identified to reduce or avoid significant effects. If the significant environmental effects cannot be mitigated, planning permission could be refused.
The UK has a strong track record in assessing the potential environmental impacts of development and in ensuring that they are appropriately mitigated. This is based on more than 20 years’ experience of adopting a proportionate, evidence-based approach to the environmental impact assessment. But what is proposed here misunderstands its purpose. Existing regulations already require the assessment of all proposals which are likely to have significant effects on the environment. Legislating to force mandatory environmental impact assessments on all shale sites, even where significant effects are not considered likely—bearing in mind that hydraulic fracturing may not even be proposed—would be disproportionate and unnecessary. Not only would it slow down or delay development for no discernible environmental benefit, it would create a damaging precedent for other new industries in the future, both in the energy sector and beyond.
The proposal to make EIAs mandatory for all shale gas activities was discussed during the recent negotiations on the revision of the environmental impact assessment directive and was roundly rejected by member states, including the United Kingdom. We appreciate the importance of building public confidence in the shale gas sector and the fact that this includes being open about environmental impacts and how they are to be addressed. The existing EIA regime is already well suited to meeting these requirements.
Changes here would also affect other areas of development. There is an ongoing issue with planning authorities taking an overly cautious approach to environmental impact assessment. To gold-plate the requirements of environmental impact assessment in this way could significantly impact upon developments such as housing. We are therefore keen to maintain the existing rigorous and consistent approach across all sectors of the economy. We welcome the industry’s public commitment to carry out environmental impact assessments for all exploration wells that involve hydraulic fracturing. This commitment has already been seen through in the planning applications that have been recently submitted by Cuadrilla in Lancashire and we will support the industry in delivering on this commitment over the coming years.
The second area concerns well inspections. The integrity of the well is critical to ensuring the safety of the site and protecting the environment. For this reason the Health and Safety Executive checks the design of all wells and approves them prior to any construction taking place. The HSE also monitors well construction based on weekly reports to its well specialists. It is the well operator’s responsibility to appoint an independent well examiner separate from the immediate line management of the well operations. This allows a scheme of quality assurance and quality control, where an operator’s employee is not responsible for verifying their own work. This approach is flexible in that it allows in-house checks but only where the appropriate safeguards are in place. In this context, it is the competence of the well examiner that is most important. In reality, due to the size of shale gas operators, the well operator will generally appoint a company to act as its well examiner.
The third area relates to chemical disclosure. One of the problems we have seen in parts of the United States is where companies have refused to disclose the chemicals used in their fracking fluid, which raises safety concerns and alarms the public. In the UK in contrast, full disclosure is already required of every chemical the operator proposes to use, ahead of any fracking being allowed to take place. The environmental regulator requires this information when companies apply for the relevant permits to assess the safety of what is proposed and any potential risks to the environment. The Environment Agency has confirmed that it will publish the permit with this information, including naming each chemical and the maximum concentration of each at each well. In addition, the industry has committed to publish this information itself at each well along with the total volume of fluid used.
The fourth area concerns water companies. We recognise the importance of ensuring that water companies are fully engaged in shale gas development. Their role underpins the strict controls that are in place to protect the quality and availability of water supplies. The environmental regulator is already required to check the potential impact on groundwater of any shale gas proposal for which permission is sought and will not grant a permit where our water supplies could be affected. The Opposition are seeking to ensure that oil and gas operators will consult with the relevant water company. However, the water industry and shale operators have already agreed a memorandum of understanding to engage early and share plans for water demand and wastewater management. Making this a legal requirement does not add any value to an existing arrangement.
The fifth area is baseline monitoring of environmental indicators, including methane levels in groundwater. Good quality baseline monitoring, prior to operations, is essential to enable a rigorous assessment of any subsequent changes. It also provides local communities with information on the current state of their environment, potentially preventing those unfounded scare stories later. The UK already has a good set of regional groundwater data, thanks to the work conducted by the British Geological Survey since early 2012. At the more local level, the Environment Agency has confirmed that it would typically require baseline monitoring of groundwater methane for each specific site proposing to undertake fracking. It would not normally require this where no fracking is proposed, because there is no discharge to the environment. Moreover, the environmental regulator has the powers to require baseline monitoring of those environmental indicators it considers appropriate and for the length of time that it deems suitable for each site.
For fracking sites, the precise length of the period of monitoring the Environment Agency would require would depend on its expert assessment of the characteristics of that particular site and any risks associated with it. Typically, this would be a minimum of three months, not 12 months, although the regulations afford the agency the flexibility to require a longer period of monitoring should this be deemed necessary. For other indicators, such as surface water and biodiversity, the degree to which these will be relevant and the time required to monitor them will vary so much between sites that any fixed requirement would be inappropriate. Setting fixed requirements on monitoring will not strengthen these protections; they will simply impose unnecessary obligations in cases where environmental experts do not believe they are required.
The sixth and last area is fugitive emissions reporting. We already report the UK’s greenhouse gas emissions annually as part of our international reporting obligations to the UN Framework Convention on Climate Change and under the EU’s monitoring mechanism regulation. This reporting includes an estimate of fugitive emissions from onshore energy extraction, is done in accordance with guidelines produced by the Intergovernmental Panel on Climate Change and is audited annually by a group of international experts. Our obligations mean that we will be required to include emissions from shale gas exploration and extraction in this reporting once these activities begin in the UK. Fugitive emissions from conventional onshore oil and gas extraction were estimated at around 0.03% of the total UK greenhouse gas emissions in 2012.
The MacKay-Stone report entitled Potential Greenhouse Gas Emissions Associated with Shale Gas Extraction and Use responded to a request from the Secretary of State in 2012 to assess potential greenhouse emissions associated with shale gas extraction and use. The report found that if properly regulated—as the noble Lord, Lord Young, highlighted—local greenhouse gas emissions would represent a small proportion of the carbon footprint. In April 2014, my department accepted the recommendations in the MacKay-Stone report, four of which relate to emissions monitoring, and a research project is planned to measure on-site emissions in line with the development of UK shale gas operational activity. The research will address uncertainty relating to fugitive emissions and inform decision-making on future monitoring. As we already have a robust process in place for reporting of fugitive emissions, and have plans in place to monitor and report any emissions from shale gas exploration and extraction once these activities start in the UK, additional reporting in this area would be redundant.
I hope that noble Lords have been reassured that we have examined closely each of the concerns in detail and are confident that these are fully reflected in the existing regulatory system, which has been operating well for decades for onshore oil and gas development.
The noble Baroness asked how the regulators would be funded, as did my noble friend Lord Deben. The regulators have confirmed that they have sufficient inspectors to deliver the regulatory regime they are responsible for during the current shale gas exploratory phase. If large numbers of wells are drilled to produce shale gas, the regulators may need to increase their resource accordingly, and they have plans in place to review that at relevant times.
The noble Baroness, Lady Farrington, asked how confident we are that fracking will not cause earthquakes, although there was a difference in the definition of whether they would be earthquakes.
My Lords, I said that this was one of the stories that is circulating. I asked the Minister for an assurance that the companies that are drilling and maintaining the wells would not appoint the people who will judge their safety, either while they are being built or when they are being used.
My Lords, I am grateful for the correction, and I think I mentioned that issue in my response on independent well operators. Perhaps I may clarify the position as regards the concerns of the noble Baroness. The Health and Safety Executive scrutinises well design and monitors progress to ensure that the operator is managing risk effectively, and will continue to do so throughout the life cycle of the well. An independent well examiner will also review its design and construction. To date, onshore operators have used separate companies to provide this service; they have not delivered in-house.
As I understand it, seismic monitoring is done on a continuous basis. While I cannot remember the exact figures, I think that if a tremor registers 0.5, the operation is stopped. That is a very low-level seismic shock and reflects a high level of safety precaution. Can the Minister confirm that?
I am extremely grateful to the noble Lord, Lord Young. He is absolutely right to point out that exploration is immediately stopped once the level of 0.5 is reached. However, I will clarify the point and write to him, and put a copy of the letter in the Library.
With these reassurances, I hope that I have been able to convince the noble Baroness to withdraw her amendment.
My Lords, I am grateful to the Minister for her comments and to noble Lords on all sides of the House who have spoken in this illuminating debate. As is characteristic of this place, it has been based on fact and has reflected the care and understanding that is always applied to these issues. However, having listened to the noble Baroness’s response, I have to say that she has not reassured me that the Government are listening on the very important issue of the need, for the industry’s own sake and for the economic benefit of this country, to be absolutely certain that, while we have a world-class regulatory system in place today, we will not see it become overwhelmed as the use of this form of extraction of the UK’s natural resources expands. There is an absolute and clear link between requirements in statute and the resources that are made available to meet those legal standards. I think it was the noble Baroness, Lady Young of Old Scone, who pointed out that it is imperative that we have a clear and transparent regulatory system so that we know what is required of everyone and so that adequate resources are made available to ensure that, in the future, fracking has the best chance of proving to its detractors that it can be done safely. It is not correct to say that everything is in place for a world-class regulatory system today. There are loopholes and, while the noble Baroness has sought to give us some reassurances on independent inspection, I do not believe that she has addressed all the questions that have been raised in the debate. On that basis, I will not withdraw the amendment and I seek to test the opinion of the House.
10 November 2014
Division on Amendment 113G
Amendment 113G disagreed.View Details
Clause 32: Petroleum and geothermal energy: right to use deep-level land
113H: Clause 32, page 38, line 8, at end insert—
“(c) outside—(i) Special Areas of Conservation as designated under European Council Directive 92/43/EEC;(ii) Special Protection Areas as classified under European Council Directive 2009/147/EC;(iii) land which is functionally linked to Special Protection Areas and Special Areas of Conservation;(iv) Sites of Special Scientific Interest;(v) National Parks;(vi) the Broads;(vii) Areas of Outstanding Natural Beauty; and(viii) World Heritage Sites.”
My Lords, I am slightly nervous about speaking to Amendments 113H and 115 in my name on the Marshalled List. The mood of the House appears to be that if you dare to utter a word that strengthens environmental protection in any way you are immediately regarded as an anti-fracker. In my case, nothing could be further from the truth. I hope that my track record in having managed a good balance between business and the environment for many years in the Environment Agency and before that is an example of how environmentalists can be keen on ensuring good levels of protection, while not then getting in the way of progress or commercial activity.
The two amendments are about the need for protection of our most important conservation areas. Amendment 113H is similar to one about which we talked in Committee but has some significant differences. I thank the Minister for meeting me last week to discuss my concerns and to debate the best way forward in addressing them. The reality is that there are possible impacts on nature conservation and biodiversity as a result of fracking. We know about them; in terms of water abstraction and pollution, and habitat damage and disturbance, they have been rehearsed adequately here and in another place.
I will give an example—which I am sure is absolutely uppermost in your Lordships’ minds every minute of the day—and that is pink-footed geese. The pink-footed geese in this country in the winter comprise about 85% of the global population. We are hugely important for the survival of the species on a global basis. They are highly dependent on three parts of the UK for their wintering grounds and at least one of those, if not more, is a key site for shale gas extraction; that is, the Bowland area in the north-west. We really have to get this one right, not just for us and the pink-footed geese but for global conservation. If we expect other countries to look after their biodiversity in order to prevent species going extinct, we have to play our role with those species for which we have a huge international responsibility.
That is the whole purpose of some of those protected areas, to ensure that important habitats and important species are not put into jeopardy as a result of other activities. So there are areas where, when push comes to shove, their biodiversity importance has to take predominance. Less than 12% of the area currently potentially available for shale gas extraction comes under such designations, so we are not talking about huge areas. The amendment is seeking to demonstrate that we need to make special provisions and avoid extraction in those areas or where it would impact on land that is functionally linked to those areas, which would also create detriment as a result of that linkage.
Apart from the biodiversity and conservation importance of the amendment, it is vital to try to put up front what the key requirements are so that the industry is clear about what it needs to steer away from. In the very early stages of the offshore wind debate there were a number of sites in the North Sea that were, quite frankly, barking in terms of their biodiversity impact. To give them their due, organisations interested in biodiversity conservation and the industry worked together to identify the areas where it would be crazy to try to get offshore wind developed and, therefore, the areas where by default it was a sensible idea to press ahead. That good piece of work demonstrated very clearly where the industry could get ahead, get licences and start to generate power in a way that was not going to be stultified by conflict with the conservation movement. That is the approach we should be taking with shale gas extraction, to ensure clarity about those areas where it is really not a good idea to be proposing this, so that people can get ahead and move much more quickly in the areas where there is not that potential for conflict.
That is Amendment 113H. I know that the Minister is not inclined to accept it but there it is, for what it is. I am sure the Minister will say that there is the National Planning Policy Framework, which puts in enough controls, and that there is other European-linked legislation that will put in other controls, but I believe that it is worth putting it in the Bill, in one place, so that nobody is in any doubt about the areas that both the Government and the public would like shale gas extraction steered away from so that other areas can be much more rapidly exploited.
Amendment 115 is a fallback proposition—plan B, as it were—should the Minister not be inclined to accept the list, which is actually a shorter list than in my original amendment in Committee; I have taken out all the local wildlife sites and kept only the nationally and internationally important sites. If the Minister is not too thrilled with Amendment 113H, Amendment 115 might be a more practical proposition.
There is already precedent. There is planning guidance that the Government, in a very welcome fashion, have put down with regard to applications for development within AONBs—areas of outstanding natural beauty—and national parks. What I am asking for in Amendment 115 is a degree of consistency across all the landscape and conservation designations, with other protected areas being brought into that planning guidance. If not, there will be a feeling in the industry that if the Government think it is so important to give planning guidance for AONBs and national parks, and since they have not thought it as important to give planning guidance for SACs, SPAs, Ramsar sites and sites of special scientific interest, there is some sort of hierarchy and that the areas of outstanding natural beauty and the parks are more to be steered away from than the other designations because the Government have given additional guidance on them.
It would be useful if the Government would acquiesce to Amendment 115 and expand the planning guidance that has already been given to some protected sites to others in order to send a signal that the Government believe—and I absolutely accept that they do—that all these protected sites are important. I beg to move.
My Lords, I thank the noble Baroness for introducing the amendment. I do not need to tell the House that I am a passionate defender of the areas of outstanding natural beauty and the national parks. We have to be vigilant all the time on that. There is no room for complacency because the pressures against what we believe in are always there and we have to beware of erosion. The point she has made about a wider application of those principles is very important.
As I listened to the previous debate, I felt my blood pressure rising because it is a travesty to suggest that environmentalists are against economic progress. Of course we are in favour of economic progress. We want to see it effective and driving as hard as it can. But we are equally determined, as custodians and trustees of all that we have inherited in terms of the environment, scenic beauty, biodiversity and the rest, to keep those issues as equally important. Therefore, it is a matter of rational, strategic decision-making about how you have clear areas for driving ahead, so that people are not worried about constraints of one kind or another but know that they have got green lights going all the way, and areas where we are saying, “Yes, but there are other considerations to be taken into account and if we want a Britain worth living in and if we want our children and grandchildren to inherit a country worth living in, these other issues are crucial”.
When I listened to the noble Lord, Lord Deben, in the previous debate, my feeling was that, yes, I do believe that the market has a key part to play in our economic affairs, of course it has. I happen to believe, rather traditionally—and I am not ashamed of that—in a mixed economy. But having said that, I believe in a managed market and I will take the opportunity to say why. The trouble is that the market operates from a short-term time perspective and these other issues of the environment, scenic beauty and the inheritance by our children of a country worth living in do not have the same immediacy in play in the market as other factors of a more essential economic character. Therefore, one must make sure that those points are on the table, being seen to be taken seriously and being given the muscle to be taken seriously. From that standpoint, I am very glad indeed that the noble Baroness has raised the point that what we want to apply to parks and areas of outstanding natural beauty should not be exclusively limited to them.
My Lords, neither the noble Baroness who has moved this amendment nor the noble Lord, Lord Judd, appears to have recognised that what we are talking about in Clause 32 is developing land 300 metres below the surface. Looking at the list of the various sites in the noble Baroness’s amendment, I cannot of think of one of them which could remotely be affected by horizontal drilling 300 metres below the surface. I am surprised that neither the noble Baroness nor the noble Lord seems to have acknowledged this. We are not talking about actually drilling down in a special area of conservation or a site of special scientific interest which implies development on the surface. We are talking here about horizontal drilling 300 metres below the surface and I just cannot understand how either the noble Baroness or the noble Lord can think that this could affect these important sites. Perhaps I have missed something.
My Lords, first, I thank the noble Baroness, Lady Young of Old Scone, for introducing these important amendments. Perhaps I could immediately pick up the points made by the noble Lord, Lord Jenkin, a moment ago. Yes, there will be drilling across—of course there will be—but somewhere they have got to drill down. If he is saying there shall be no drilling down at all in these areas, just drilling across into them, then at least I would understand what he was saying, but he appears to say that there should not be any rules whatsoever appertaining to these special areas because the drilling can only come from the side. Well, it cannot only come from the side, and I would have thought that that is something that perhaps could be addressed later if this amendment was accepted.
I wholly welcome this amendment—
The noble Baroness had an amendment in Grand Committee which addressed the question of whether there should be downward drilling and whether pads for developing shale gas could be located in any of these places. Although we did not vote in Grand Committee, the argument was perfectly clear that it would depend on the site. You have got planning permission and you have got a whole range of other things. I must confess I have not reread the noble Baroness’s debate on that occasion, but what we were talking about here is 300 metres below.
Perhaps I may give just a couple of examples. Water pollution and the impact on aquifers in general could be quite a substantial issue. We already know that the volume of wastewater coming from shale gas extraction sites is substantial. For the most part that will be brought back to base, but where aquifers are involved we are not absolutely clear about that. There are a number of issues which are not just the site-based issues on the surface. They are about what is happening in terms of underground processes as well.
As I was saying before such diverse interventions, I welcome these amendments. They exclude important parts of these islands from the impact of fracking.
I come back to the experience of the United States—I will be talking more about that in the next group of amendments. The experience of the United States has been scorned in our previous debates, but it teaches us to be extremely careful before allowing such developments in our more sensitive rural areas. I accept that perhaps the rules will be different in the United Kingdom compared to the United States. That is one of the reasons why we need to have rules in the United Kingdom to look after these areas. Most certainly in the United States, to my knowledge, there are areas that have suffered not just from the effects underground but also very badly on the surface.
Noble Lords will be aware of the classic book Rape of the Fair Country by Alexander Cordell. We in Wales know what such extractive industry can do to our beautiful countryside and its effect on all sorts of wildlife. My only reservation with this amendment is merely that it does not go far enough and that many sensitive environments are excluded from being governed by it.
My Lords, I only wish that I could agree with the noble Lord, Lord Judd, that it is a short-term exercise to get planning permission for this sort of development. The planning permission process will take many months, probably years, and cost a large amount of money. It is not a short-term exercise, and that is why I think this amendment is unnecessary because it will be up to the local council or local planning authority to grant the planning permission, with all the pressures put upon them to make the decision to protect the environment. With these sites listed in this amendment, I do not think they are going to get the planning permission which the noble Baroness fears they will. I really do not think it is going to be possible.
Secondly, I am sorry that—despite trying to listen to it—I am not sure I fully understood the meaning of “functionally linked”. How wide a definition will that actually be in practice? I wonder whether the noble Baroness could help in explaining that?
My Lords, I rise to oppose these amendments. I understand the principle behind them but, as my noble friend Lord Jenkin has reminded us, we are talking about something that is going to happen well below the surface. Having taken that into account, and while I agree with him that the amendment is in the wrong place, I also think that the principle of the amendment is quite important. However, what the noble Baroness has totally failed to do, and what the noble Lord, Lord Judd, has failed to do, is to explain why the present system of controls is not adequate.
I do not class myself as an environmentalist; I class myself much more as a countryman. I have a much broader range of interest than an environmentalist would have. The house that I used to own very recently up in Caithness was right beside an SSSI, and on that SSSI there wintered whooper swans and lots of geese and ducks. Around us there are now eight wind turbine farms. This is a huge area—an important one for nature—but the argument was looked at for every single one of those turbines. More recently, a planning application was made for four wind turbines to be sited much closer to the SSSI. My house was perhaps one of the nearest that was going to be affected by that and I lodged my objection on the grounds of nature and what effect the four wind turbines—which are considerably bigger than anything we are talking about in the fracking process and would be at a higher level for much longer—might have on the flight path of geese and swans.
The planning process worked perfectly and the decision was turned down. It has gone to appeal and I do not yet know what the result of that is, but my point is that the existing procedures are there now to protect such sites as these. I used the existing procedures and the planners looked at the existing procedures and agreed with all of us that had objected to these four wind turbines. I believe that what we have got in place is sufficient and we do not need any more.
Before the noble Lord sits down—
My Lords, I am looking at the Companion in terms of rules of debate on Report. We are getting quite close to contravening them and I would just like to say to noble Lords that we should be cautious of that.
Before the noble Lord sits down, would he not agree that, whatever the value of the regulations and the means of implementing them that exist at the moment, it would be of considerable assistance to industry and those behind this important and vital initiative for the British economy to see clearly on the face of Bills such as this the areas on which they can and cannot concentrate their attention?
My Lords, it is clear now. Industry does not need further clarity. It works.
My Lords, those who oppose these amendments are missing the point. The amendments may well be in the wrong place; they may well be too wide. I did not intervene in the previous debate because I thought that it was becoming far too polarised. Public opinion on the issue of fracking is polarised, but public opinion is not polarised in relation to the protection of our national parks and our areas of outstanding natural beauty. Unless the Government in some way recognise within the overall approach to fracking that there are certain sites which have to be protected—whatever provision exists elsewhere in terms of general planning law and so forth—the outcry against fracking will grow rather than be reduced.
The Government should at least have the grace to recognise that that is a reality. In terms of public acceptability of fracking, protection of our protected areas is an important element which needs to be in the regulations and in the Bill. Whether the amendments in the name of the noble Baroness are technically in the right place or not, the politics and the PR for fracking need to make that point. If they do not, the 25% of people who fundamentally oppose fracking will grow in number. The Government have the opportunity to ensure that that does not happen. I hope that, if not now then in the process of this Bill through the Commons, the Government will put that right.
My Lords, I am grateful to noble Lords who have contributed to this debate, which has been another interesting exchange of views on how best to get the fracking industry off on the right foot and to minimise the degree of public opposition that might arise.
I recently visited the Lake District, which is one of my favourite parts of the country. I visited a mining museum and, in doing so, I realised that we often see such parts of the country as having a great value now in terms of tourism, wildlife and appreciation of scenic beauty, but that they have in previous times been quite diversely economically active and been able to accommodate different activities within the boundaries of the parks as we know them today. Therefore, I for one am not of the opinion that these special places need to be preserved in aspic but that it is about achieving the right level of balance.
That said, it is absolutely clear that, when you have a Government who say that they are all out for fracking and that it will be the silver bullet that solves all our energy needs, and slightly overhype it, you can see why people get nervous that all due consideration and care are not being taken. I shall be interested to hear the Minister’s responses to the two amendments. The second of them, Amendment 115, points to something of an inconsistency, with planning guidance having been issued for national parks and AONBs but not for other nationally significant sites. Such sites, because they tend to be smaller, more fragmented and under considerable pressure from a wide range of economic activities already, arguably deserve even greater levels of protection than those larger national parks and AONBs, which I think can accommodate economic activity within them and generate jobs and economic benefits. I look forward to hearing the Minister’s response.
My Lords, I welcome the commitment of the noble Baroness, Lady Young, to protected areas and was grateful for our meeting prior to today. Such areas are nationally and internationally important in terms of their environment, and all noble Lords who have contributed today, from whichever perspective, have highlighted their significance.
As the noble Baroness made clear in Committee, these areas are the jewels of our country and we agree that they need to be accorded appropriate protection. While I recognise the intent behind the noble Baroness’s amendments, which is to ensure the necessary protection for habitats and species in or near to protected areas, I assure her that such areas are already offered a high level of protection derived from EU directives transposed into domestic policy and through the planning system, as noble Lords have alluded to today. The National Planning Policy Framework, the supporting planning guidance and a government circular on biodiversity and geological conservation all recognise that there are areas designated for natural conservation and biodiversity value, including sites of special scientific interest, special protection areas, special areas of conservation and Ramsar sites, and that they should be given a high level of protection. They are clear that protected areas need to be fully and appropriately considered by mineral planning authorities when exercising their planning duties, both in preparing local plans and determining planning applications.
The planning authorities assess each application for shale and geothermal development on a case-by-case basis. For example, the National Planning Policy Framework makes it clear that development should not normally be permitted if, either individually or in combination with other developments, it is likely to have an adverse effect on a site of special scientific interest. That applies even if the development is outside site of special scientific interest boundaries.
The Conservation of Habitats and Species Regulations 2010, which transpose the EU habitats and wild birds directives, ensure strict controls on any plan or project that might affect European sites such as special protection areas and special areas of conservation. Development cannot occur on or near such protected areas unless it can be shown to a high degree of scientific certainty that there will be no adverse impact on the integrity of the site. This is a very high bar for securing development in such areas. In addition, the Natural Environment and Rural Communities Act 2006 and the Nature Conservation (Scotland) Act 2004 place a duty on all public authorities, including the Secretary of State for Energy and Climate Change, when exercising their functions, to have regard to the purpose of conserving biodiversity. Public bodies also have comparable duties relating to national parks, areas of outstanding natural beauty and sites of special scientific interest.
It is important to note that the regulatory system in the UK fully recognises these protections. Before any oil or gas operations can begin, operators must gain a permit from the environmental regulator, the Environment Agency or an equivalent agency. The Department for Environment, Food and Rural Affairs is currently preparing revised guidance on protected wildlife sites as part of a wider project to make all the department’s guidance quicker to use and easier to understand—the noble Baroness raised that when we had our meeting the other day. This will help ensure that these requirements are clearly communicated to developers and regulators.
The noble Baroness, Lady Worthington, said that the Government looked on shale as being a silver bullet. We have always maintained that we do not see it as a silver bullet but that we see its potential for ensuring that we have home-grown supply and energy security and for helping drive down costs to the consumer. The debate should be in that context rather than shale being taken out of context in the wider arena.
In drawing the attention of the noble Baroness, Lady Young, to the robust regulatory regime that is already in place and the full recognition that the planning system already gives to protected areas, I hope that she is reassured that such areas are already accorded significant protection and, on that basis, will withdraw her amendment.
My Lords, I thank the Minister for her words, and all noble Lords who have contributed to this debate. I am reassured that there is already strong environmental protection for these sites, but I am not reassured that it is necessarily always going to work.
There are two dimensions. First, I was interested in the experience of the noble Earl, Lord Caithness, and his wind farms. There was an example where there were environmental considerations that should have given a strong signal to the developer that it was not a sensible place to put a wind farm, but he nevertheless barrelled on. One assumes that it will go to appeal. So we are not giving the right signals to potential developers of sites that it is a waste of their time, effort and money to get into disputes in areas where there is a very strong case for the protection of the biodiversity interest, and where it is therefore going to be a struggle for them to get permission. We need to give them very strong signals that it is going to be a lot easier and cheaper for them not to set their hearts on some of these highly protected biodiversity sites.
We also have a case in Kent at the moment, for a housing development being proposed to the local authority. I am earnestly hoping the planning authority will turn it down. It is a proposition for 5,000 houses to be built on 300 hectares of a site of special scientific interest. If the development goes ahead it will be the largest loss of SSSI land for the last 30 years in this country. It will be a complete outrage. But the developer has been barking enough to set themselves on that site. That is an example where the developer is simply not reading the signals, so the signals need to be absolutely explicit.
I very much appreciate the point that the noble Lord, Lord Whitty, made. This is an effort to try and make sure that fracking gets off on the best possible foot, with a really clear commitment linked specifically to shale gas extraction about environmental protection being absolutely paramount. We should not rely just on other pre-existing legislation but gather together the real requirements that this industry needs to take account of, so that we can reassure the public and move ahead.
I was hoping that the noble Baroness might give me hope for Amendment 115 at future stages of the Bill, because the situation seems totally anomalous. I would like to understand from her why the Government felt it necessary to issue guidance on areas of outstanding beauty and national parks, which have strong environmental protection requirements already, but not on the other nature conservation sites. However, I beg leave to withdraw the amendment and hope the Minister might think more kindly of the amendments in pushing the Bill to another place.
Amendment 113H withdrawn.
114: Clause 32, page 38, line 15, at end insert—
“(6) This section shall not extend to Wales unless an order authorising it has been passed by the National Assembly for Wales.
(7) An order under subsection (6) may contain any conditions which the Assembly deems appropriate.”
My Lords, I shall speak to Amendments 115B, 115C and 123, which also stand in my name and are grouped with Amendment 114. First of all, could I say a word about the whole issue of fracking? Noble Lords will be aware that when this Bill was given its Second Reading there was no reference to the provision it now makes in relation to fracking. When we first started in Committee, there was no sign of the amendments we knew were being prepared. Ostensibly, we had to wait until the conclusion of the consultation process in August, before amendments were formulated. But since little notice seems to have been taken of the overwhelming opposition to fracking expressed by the general public, this seems to have been little short of a charade. It is not good enough to take an arrogant and disparaging attitude to those who harbour genuine fears.
Now that we have the amendments in the Bill and the provision for fracking is likely to be confirmed as part of it as we move forward from Report, unless we challenge it rigorously tonight, then the fears that people have will be underlined and reinforced. That is why I have tabled my amendments. But before I address the detailed wording, I will make it clear why I unreservedly oppose the application of fracking technology to extract underground gas. I have grave reservations about this technology. I do not express these doubts and concerns on the basis of a nimby approach. There are no identified areas of potential fracking activities in my home county of Gwynedd, nor do I harbour doubts about any form of modern applied technology.
My university degree, many years ago, was in physics, and I rejoice in the progress of science in making life so much better for millions around the world. But science needs to be applied with a degree of the precautionary principle. We all remember the tragedies of thalidomide, the dangers of radiation exposure, and the potential disaster which was associated with CFCs in the atmosphere. It is just as stupid to blindly accept the application of science as it is to blindly apply a knee-jerk reaction against the wonders of modern science, and what it can bring us. We need a balanced approach, and that means asking awkward questions and challenging glib assumptions. That is what I want to do in regard to our apparent acceptance of fracking technology.
The dangers associated with fracking can be summarised under five headings: first, direct dangers to human health and to animal and plant life arising from the chemicals used in the fracking process and the likelihood of them entering our water supply systems; secondly, the possibility of fracking technology triggering seismic tremors, as we have heard about in earlier debates tonight, and in the extreme, earthquakes, as apparently happened not so far from Blackpool in 2011; thirdly, the implications, by building a cheap gas economy, of worsening our carbon footprint at the very time when we should be putting every priority into reducing our fossil fuel usage and investing in reducing demand for fuels by insulation and fuel efficiency programmes, and re-orientating our energy systems into using renewable low-carbon technologies; fourthly, the highly questionable principle of giving developers carte blanche to enter people’s property or dig under their land under a blanket assumed permission to do so, undermining the checks and balances which have been carefully crafted into our town and country planning systems; and fifthly, the environmental squalor which fracking has left in its wake in so many of those communities in North America which have been blighted as a result of the fracking invasion of their countryside, and now this Bill will allow fracking companies to walk away from their clapped-out equipment, which they leave under the ground after them.
We are told of the economic benefits which will flood into these areas as a result of fracking, but all experience shows this to be a total nonsense. Only a handful of jobs are created, and they usually go to migrant workers who move from location to location as the fracked-out wells are exhausted, leaving behind them the industrial squalor so often associated with the extractive industries. We are told that there will be immense wealth from exploiting these untapped reserves of gas. But that wealth does not go to the communities which have suffered the ravages of exploitation; it goes to the supranational corporations, which are only too ready to respond to the Government’s inducements. Of course, the money will go into the Treasury to bail out a near-bankrupt economy, with the danger of being squandered in the same way as has happened to the UK’s North Sea oil reserves. Local families, local communities and local environment pay the price, and distant pockets bulge with the proceeds.
All these are matters of concern to me. But let me concentrate, in the limited time we have available on Report, on the dangers of chemicals contaminating the water systems of those areas where fracking takes place. In Wales, we provide water not only for our own communities, but for many English conurbations: in north-west England, in the Midlands, and in probably increasing quantities to southern England. The purity and safety of those water supplies have been taken for granted. Let me mention just some of the chemicals used in the fracking process. Each fracking “job” requires between a million and 8 million gallons of water, and each such job uses 40,000 gallons of chemicals, involving as many as 600 different chemicals, including carcinogens and toxins such as lead, uranium, mercury, ethylene glycol, radium, methanol, hydrochloric acid and formaldehyde.
In the United States, there have been over 1,000 cases of contaminated drinking water in locations next to areas of gas drilling, and these have led to cases of sensory, respiratory and neurological damage which have been attributed to ingesting contaminated water. Less than 50% of the fracturing fluid is recovered; the remainder of the toxic fluid is left in the ground. Overwhelmingly, it is not biodegradable.
In the United States, waste fluid is often left in open-air pits to evaporate, releasing harmful, volatile organic compounds into the atmosphere, creating contaminated air, acid rain and ground-level ozone. A whole plethora of legal cases have arisen in the United States. In April, the Parr family in Texas were awarded $3 million damages against the Aruba fracking company for the pollution of air, water and soil which had seriously impacted on the family’s health. The following month, in May, there was a rig blow-out in Morgan County, Ohio, with a spillage of 184 barrels of toxic fracking fluid, which apparently reached the nearby waterway. In Pennsylvania in June, a fracking company was fined almost $200,000 for a toxic hydraulic fracking fluid spill of over 200,000 gallons into the local environment that led to the evacuation of local families from their homes. In Texas in August, it was reported that in a survey of 100 water wells up to three kilometres away from the fracking locations, over 30% had arsenic levels above the safety limit. A survey by Dale University said that water sources—again in Pennsylvania—showed an elevated level of methane in locations a kilometre or more distant from drilled areas. In some instances, the methane concentration was so high as to be explosive.
Britain is much more densely populated than the United States, with consequently higher likelihood of water sources used for human or animal consumption being polluted. Given this sort of experience, it is of little surprise that states such as Vermont have banned fracking since 2012. They did so, in the words of the state governor, Peter Shumlin, in order for Vermont to,
“preserve its clean water, its lakes, its rivers and its quality of life”.
I was told graphically when in America in August by Eluned Jones, Professor of Economics at South Dakota State University, that the economic benefit gained in her state by fracking had been attained at an environmental and social price that was a profound disaster. Other parts of America are waking to the dangers of fracking. Only last Tuesday, as we heard earlier, the city of Denton in Texas—in the heart of fracking country—voted in a referendum to ban any new fracking operations. Civilised European countries that put the safety of life and the environment above commercial profiteering have banned fracking. France has done so since 2011. Both Germany and the Netherlands have placed a moratorium on it. That is what my party, Plaid Cymru, has also called for.
In these amendments I urge the House to take a first step towards a moratorium throughout Britain by refusing to carry forward Clauses 32 and 33. They were inserted in a blind moment in Committee and I urge the whole House to reject them emphatically. If, for whatever reason, I cannot carry the House with me—as I suspect may be the case having heard earlier debates—then I implore the House to at the very least agree Amendment 114. That would allow this clause to be applied in Wales only if it was so approved by the National Assembly, and allows the National Assembly to impose whatever conditions it deems fit on any fracking development. My hope would be that, irrespective of what happens in England, it would say no to fracking in Wales.
However, there are cross-border issues relating to fracking. My parliamentary colleague, Hywel Williams, MP for Arfon, was told in a Written Answer that fracking developments in north-west England may well look to Wales for the enormous supplies of water they will need for those purposes. As noble Lords will be aware, water is an incendiary substance in Wales. Any suggestion of the drowning of further valleys in Wales to provide water for fracking in England—no doubt without any compensatory payment—will generate a howl of outrage the length and breadth of my nation. Water is to Wales what oil is to Scotland, so let there be no misunderstanding whatever that the exploitation of water resources in Wales, without the sanction of the National Assembly or adequate payment, is a non-starter and will be fought every step of the way. I cannot make it clearer than that.
In many ways, it would be totally perverse not to devolve to the National Assembly responsibility for allowing, banning or putting conditions on fracking in Wales. The Assembly has responsibility for virtually all aspects of town and country planning in Wales, it has total responsibility for the environment and agriculture, and it has responsibility for the healthcare services in Wales. All these are policy portfolios impacted by the effects of fracking. If Wales is to have coherent public policy, then control of fracking must also be devolved. Indeed, the Government have tacitly admitted this in their response to the House of Commons Welsh Affairs Committee’s report on energy generation in Wales. The committee recommended that the UK and Welsh Governments should co-operate on regulatory and planning matters, including the “environmental risks” associated with hydraulic fracking. The Government’s response was that planning was a devolved matter. That being so, surely the Government must accept the thrust of my amendment.
Incidentally, I would be grateful to the Minister if we could have some clarification as to whether these draconian provisions will apply to Scotland directly, or whether the Scottish Parliament has some control over their applicability. I suspect that if you were to tell Mr Salmond that Scotland will have to allow fracking willy-nilly and by Westminster diktat, there would be such an eruption north of Hadrian’s Wall as to re-open the whole relationship between this place and Holyrood. Yet if Westminster were to allow a Scottish veto over fracking, then on what earthly basis is such a provision to be denied Wales?
My preferred outcome of this debate would be for the Government to withdraw or the House to vote these appalling clauses out of the Bill. In the event of failure to do this, I implore the Government to either accept my Amendment 114 to allow the National Assembly to determine these matters in Wales or undertake to bring forward their own clause in another place for the same purpose. Whichever way they proceed, this issue will not go away. I beg to move.
My Lords, I do not want in any way to suggest that Wales should not have its own authority over this area. As a citizen of Cornwall, I absolutely agree with the noble Lord—though I do not know enough about what the relationship is here.
On the attack on fracking, down in Cornwall our geology does not support shale gas but it does support deep geothermal, in which fracking plays an important part. I think that the noble Lord spoke on the whole about fracking in relation to shale gas, but there are issues around fracking for whatever purpose, and seismic events are one of those. In one of the early EU-funded geothermal tests in Alsace, there were seismic events and a lot has been learnt from that. There were also events in Blackpool, but as I understand it the industry is able in the right locations to make sure that such matters are very well controlled.
I make the point that fracking can be good. It can be good for renewables. I hope that in the longer term fracking will be available for deep geothermal in terms of power generation. At the moment, it looks like we will go through a heat revolution with not quite so deep geothermal, but in the long term we may get to generate baseload electricity through deep geothermal. I wanted to make that point, because fracking is not just around shale gas; it has those other benefits as well.
However, Wales should be able to steer its own course.
My Lords, I rise briefly to ask the Minister for her comments on the issue of devolution and fracking. I am particularly interested in the Scottish question raised by the noble Lord, Lord Wigley. As I understand it, Holyrood already controls planning permission and the permitting regime, so it would not be a huge step to devolve this aspect of the control of fracking and rights of access. I just ask that question.
I am also grateful to the noble Lord, Lord Teverson, for drawing the attention of the House to the fact that, when we talk about these provisions and rights of access, they apply to more than just the extraction of petroleum. Indeed, they apply to deep geothermal, which arguably needs the loophole to be changed more urgently than in the case of fracking for oil and gas. It may change the view of the noble Lord, Lord Wigley, on this that you can frack for coal as well. Fracking of deep-mine coal might bring a degree of economic development back to Wales. I am not saying that that is the only way that Wales should develop; I am much more interested in some of the marine technologies, biomass and wind in a Welsh context—those seem to have huge potential. However, I would never rule out the idea that deep coal mining could come back as an economic activity if done in combination with carbon capture and storage.
In summary, these clauses potentially relate to more than just oil and gas extraction, and I am interested in the noble Baroness’s response on the Scottish question.
My Lords, I note the clause stand part amendments and the amendment proposed by the noble Lord, Lord Wigley, regarding the application of the right to use deep-level land for the purposes of exploiting petroleum or deep geothermal energy in Wales. The Government support the development of shale gas and oil. Natural gas from shale could play a crucial role in supporting UK energy security, as well as an important role as a part of the transition to a low-carbon economy, and that was well debated previously. The carbon footprint of UK-produced shale gas would likely be significantly less than coal and lower than imported liquefied natural gas. Domestic shale gas could also benefit the UK in terms of jobs, tax revenues and growth, mitigating some of the falling revenues from the North Sea.
However, it has become clear that difficulties in obtaining underground access pose a barrier to exploring this new industry. The same problem also applies to the deep geothermal industry, which is likewise at an early stage of development in the UK. New lateral drilling methods that can cover much larger areas underground mean that existing processes for obtaining underground access can be disproportionately costly and time consuming in relation to the potential benefits. Currently, companies must negotiate rights of access with every landowner living above underground drilling. If these negotiations fail, an oil and gas operator can make an application to the Secretary of State, who may refer the matter to the courts. This process gives a single landowner the power to delay a development significantly and, in the case of geothermal, it is likely to stop the project entirely.
The right to use deep-level land would help unlock exploration for shale gas and deep geothermal as we move towards a low-carbon economy. However, let me be clear that we are not proposing any changes to the regime for surface access, and the regulatory system that deals with the potential risks associated with drilling and hydraulic fracturing will remain the same. I can reassure noble Lords that a company looking to develop shale or geothermal would still need to obtain all the necessary permissions, such as planning and environmental permits. The onshore oil and gas industry has committed to engage with communities at the early stage of operations, as well as consulting through the planning application process. Our robust regulation will protect residents while allowing this source of homegrown energy to develop in a way that is fair to communities.
EY has estimated a thriving industry could mean 64,500 jobs nationally. Locally, that could mean cementing contracts, new facilities and jobs for local companies. Communities that host shale development could see a share of this, which is why we welcome the developers community benefit package, similar to other technologies such as wind. This will pay communities £100,000 per hydraulically fractured well site at exploratory stage and 1% of revenue if it successfully goes into production. As with wind farms, wider communities will benefit too, as local councils will also be able to retain 100% of the business rates that they collect from productive shale gas. Therefore, there are many potentials of this industry to communities in Wales if shale production takes place.
Petroleum extraction is a non-devolved matter. As such, the proposals for oil and gas will apply across England, Wales and Scotland. The proposals on deep geothermal energy also cover England, Wales and Scotland, where in Scotland deep geothermal energy is exploited for the sole, or main purpose of electricity generation. Schedule 7 to the Government of Wales Act 2006 sets out the conferred subjects over which the Welsh Assembly can exercise legislative competence. Oil and gas are clear exemptions from the conferred list of economic development and, furthermore, the exploitation of deep geothermal resources could not be considered to have been conferred under any of the subjects in Schedule 7.
Although deep geothermal and oil and gas activity may impact upon conferred subjects such as environmental protection, that is not what they properly relate to for the purposes of the legislative competence test in the Government of Wales Act 2006. In addition, the right of use clauses are not removing any existing regulatory requirements. We therefore see no ground on which this measure would be within the legislative competence of the Welsh Assembly. On that basis, there is no rationale for requiring approval by the Welsh Assembly before the section can apply in Wales.
It is also worth noting that, while oil and gas are non-devolved matters, all existing planning authority procedures and powers will remain in place. As such, the different UK planning regimes will continue to regulate shale gas or geothermal developments according to their existing planning procedures. I have reflected on the noble Lord’s amendment and in response to his concerns I have offered him a government perspective. Therefore, I hope that the noble Lord, Lord Wigley, will withdraw his amendment.
I am very grateful to those who have taken part in the debate and to the Minister for her response. Quite clearly, I would be unlikely to carry the House on the amendment that the clause should not stand part of the Bill. Although my heart would want me to go down that road, I suspect that I would come to a blind alley. Therefore, I will not press it on this occasion because there will be opportunities in another place. I have no doubt that many Members of all parties in the other place will wish to come back to this because there is deep concern outside.
Even if one was in favour of fracking in principle, I would have thought that it would be very wise to pay attention and take the maximum possible notice of the reservations that exist outside, because these are the real fears of real people in real communities, and they need to be addressed. Members in all parts of the House have expressed that in the series of debates we have had tonight.
Turning to the lead amendment in the group, which relates to the powers of the National Assembly for Wales, I think that it is ironic that at a little earlier than this time tomorrow—as the noble Lord, Lord Bourne, on the Government Front Bench, will be well aware—we will consider an amendment that would change the model of devolution for Wales to a reserved-powers model of the sort that exists for Northern Ireland and Scotland. This was a recommendation of the Silk commission, of which the noble Lord, Lord Bourne, was a member, and which appeared to have all-party support in Committee in this House. The Report stage of that Bill takes place tomorrow. That being so, unless there was a specific exemption made for these purposes, it would not be enough to rely on the 2006 Act, which the Minister has relied on in the debate tonight.
However, rather than argue technical, legalistic points arising out of legislation, I put this to the Minister in conclusion. When the National Assembly for Wales has responsibility for the environment, particularly for town and country planning, transport, and economic development within Wales, as well as health proposals, then surely it makes all sense to put the responsibility for this area also into its hands—at the very least to make sure that there is a working together. That surely was the intention of the Government when they responded to the Select Committee on Welsh Affairs report. I will not quote it again, but it underlined the fact that planning policy is a devolved matter and that planning is integrally involved in the decisions we are talking about in regard to fracking.
Therefore, I ask the Minister whether she will take this away between now and the debates in another place and give further thought, particularly in the light of the debate we will have on the Wales Bill tomorrow, as to whether there is a mechanism to make sure that the National Assembly for Wales and the Government of Wales are totally on board in a dialogue on these matters so that, in keeping with the principle of subsidiarity, the decisions affecting communities can be taken as close as possible to those communities—in this context, decisions affecting Wales can be taken by the National Assembly where possible. On that basis, I beg leave to withdraw the amendment.
Amendment 114 withdrawn.
Amendments 115 to 115B not moved.
Clause 33: Further provision about the right of use
Amendment 115C not moved.
Clause 34: Payment scheme
115D: Clause 34, page 39, line 18, at end insert—
“( ) The regulations must require contributions to the contingency fund or funds from relevant energy undertakings which are sufficient to meet—
(a) any loss caused directly or indirectly by the operation of the oil and gas activity;(b) the costs of—(i) remediation;(ii) enforcement action against the relevant energy undertaking;(iii) other measures taken by a public authority in respect of, or in consequence of the loss, or the activity which gave rise to the loss.( ) The regulations must ensure that the contingency fund is protected in the event of the insolvency of a relevant energy undertaking which has made payments to the fund.”
My Lords, I am trying to help the Government out here. This is yet another part of the jigsaw that is necessary to ensure public acceptability of fracking in appropriate circumstances. The amendment deals with the issue of damage caused by fracking and who is liable for it.
We have had a debate about the nature of the regulations, whether or not they are effective and whether there are enough resources to enforce them. Even if we accept that we have world-class regulations and regulators in this area, if fracking takes off in the way in which its proponents—and, to some extent, I—hope it will, then there will be hundreds of sites across Britain and, however good the regulatory process, however vigilant the regulators themselves and however well motivated those companies that are responsible for those operations, there will be problems. There is no prior form of energy where there have not been some accidents, leakages or effects on the environment, on neighbours, on businesses or on the water supply.
The failure of even a fraction of the number of wells that are being talked about could have a significant impact on the landowner, on the farmer, on the community close to the fracking site, on individual households or indeed on individuals, or it could have an effect on other businesses, whether small local businesses or giant water companies. We therefore need to have an effective liability arrangement that ensures that the cost of such damage and its remediation do not fall on the public purse. We have historic examples here in the energy field. Whether you are talking about deep coal mining, opencast mining or the nuclear industry and the cost of decommissioning there, the reality has been that the costs of damage, waste and pollution have been borne almost entirely by the taxpayer. I want to see a provision in the Bill whereby that does not arise in the case of substantial development of the fracking industry.
My amendment would therefore deal with the Secretary of State’s obligation to bring forward regulations to ensure that any operator within this field, whether in the exploratory or subsequent stages, has sufficient resources to cover any loss arising from the operation, the costs of remediation and the costs incurred by the public authorities in enforcing that. That may require a separate fund within the company or a common fund. I leave that to the Secretary State in the regulations. However, such provision is necessary.
I am afraid that the Minister’s reply, when I referred to this issue in rather similar form in Committee, raised several concerns. It was argued by the Minister that companies can be required to remediate the effects and prevent further damage from pollution under existing regulations. However, in general, that applies only if land itself is contaminated in the strict terms of those regulations. It is not clear that funds need to be available from the outset to foot the cost of this remediation activity.
The Minister made a big point of saying that we should not treat fracking differently from other industries and that existing law is robust. However, one has only to look at one of the examples that I mentioned: opencast mining in Scotland cost £200 million in Scotland alone, and the entire cost fell on the public purse. My amendment also therefore seeks to ensure that that would not arise in this case and that a fund would be provided in advance, as it were, and in effect would be bankruptcy-proof.
The Minister also argued that environment regulators already have the power, although not the requirement, to require up-front financial bonds to address the risk wherever they deem that necessary. Article 14 of the European mining waste directive is relevant here but it is limited; it relates only to the situation where the waste itself is hazardous or is managed at a category A site. Neither of those things needs to apply for substantial damage to be caused if there is some leakage or other damage caused by the fracking operations.
The amendments are fairly straightforward. They require anticipating what has happened in other industries at the same time as we are designing the permitting system for fracking operations. It would be a substantial piece of foresight by the Government to introduce such requirements and to ensure that the operators in this field had sufficient resources to meet such contingencies. However, probably more importantly, to outline a point that I made in my brief intervention earlier, it is also a vital part of ensuring that the public, the businesses, the communities and the landowners who are anxious about the effects of fracking are reassured from the outset that if something goes seriously wrong, their interests will be respected and it will not be the taxpayer who pays but the operator. The noble Lord, Lord Deben, who is no longer in his place, said at an earlier stage that it should be clear in relation to the enforcement of regulations that the polluter pays. That must be true also in relation to any negative effects that require action and remediation as a result of these operations.
This would be a reassurance, and in extremis it might become an absolutely necessary reassurance, so that we do not go through the sequence of events that followed earlier generations of energy exploitation in coal and nuclear power, where no such liability was placed on the operator and where, in fact, the taxpayer has paid and is continuing to pay. In the case of nuclear in particular, the taxpayer will continue to pay for many generations to come. Let us anticipate that and at the same time reassure large sections of the community who may not have any fundamental objections of the type that the noble Lord, Lord Wigley, has to fracking but nevertheless are anxious about their own interests and the effect that this may have on their own businesses and their way of life. I beg to move.
My Lords, when I saw the noble Lord’s amendment, my immediate reaction was to say, as he has done, “Look at what’s happened in other industries, notably the nuclear industry, and then look at what has been happening recently in relation to offshore oil and the measures that are now being taken there”. That led me to approach the trade association that covers the fracking industry, which was extremely helpful. My noble friend’s department has produced a very long paper of financial guidance on the whole question of petroleum licensing. At this hour of the night, when there is further business to come, I will not go into that in great detail, but the fact is that, having read that and the paper that has been produced by the trade association, UKOOG, I am satisfied that the difficulties that the noble Lord, Lord Whitty, has raised are in fact being addressed very positively. It is not only the question of whether the company that will get a licence will have the resources to carry out the work and continue to operate any shale gas well that it constructs. The papers address very specifically the questions that the noble Lord has made most of—the decommissioning of plant and financial liability if things go wrong. The existing regime provides for the remediation of environmental damage and contaminated land, and that includes water. If we take all the regulations together, if a company causes damage, harm or pollution to the environment, it can be required under the regimes in force to remediate the effects and prevent further damage, which is the same approach as applies to other industries.
Furthermore, the Government appear to have very clear powers: they can require financial evidence that there are resources available to pay for that. UKOOG has relieved my anxieties in that regard. Unlike the earlier industries to which the noble Lord, Lord Whitty, referred, the approach to this industry, which is still at a very early stage of its development, as he rightly said, has been extremely responsible. I shall be very interested to hear from my noble friend what those measures are. I am satisfied, but I will listen to my noble friend’s reply.
My Lords, I have been glad to put my name to this amendment, which is very wise and prudent. It has been suggested in recent years that the interpretation of welfare capitalism has changed. The original concept was that capitalism had a social responsibility that it should discharge for the well-being of society as a whole. It seems that quite a lot of people have come to believe that perhaps welfare capitalism is about ensuring that while wealth generation and profit is privatised, risk is nationalised and is the responsibility of the taxpayer. The point in the amendment that is particularly important in this context is what happens in the case of insolvency, when all the best predictions can be blown away in the wind in the chaos that follows.
If a scheme is put forward and is being properly costed, the cost of dealing with potential damage, closure or the consequences of that is an essential element in the calculations. We are concentrating today on this new and exciting aspect of shale development but we are beginning to see infrastructure across the country in connection with power generation and its distribution that is no longer required. We need to be very careful that we are ensuring that any adverse results of that are not left just for the taxpayer to settle, but that they are the responsibility of the people who, while they are operating, are receiving the profits that come from that.
My Lords, I am grateful to my noble friend for tabling his amendment and for continuing the discussion that we started in Committee. I am sympathetic to the intention behind these amendments and am particularly interested in the aspect of liability arising from orphaned sites. We are talking about a potential new industry that will see a large number of distributed sites developed. We may well see smaller companies that perhaps do not have the assets or deep pockets of more traditional extractive companies, and there would be considerable potential for orphaned sites. I am very interested to hear from the Minister how we would address any liability arising from such orphaned sites.
I think my noble friend Lord Whitty said that he is seeking for the Government to demonstrate foresight. It strikes me that the Government are demonstrating foresight in some respects of fracking, in imagining the future benefits and future economic wealth that will come. Over the weekend, we even heard comments about the imagined spending of all this great tax revenue. We shall debate that aspect shortly. That foresight is possible, but perhaps we should apply it in the slightly more realistic context of learning from previous experiences of extractive industries in trying to plan for what happens if everything does not go according to plan. I would have thought that companies would be able to take out insurance against some of these liabilities. Again, I would be interested to hear from the Minister about what type of insurance she might expect companies to undertake and what liabilities would be insured. We are entering uncharted territory in the types of company, the types of project and their distribution across the country. It is right that we should proceed with caution.
There is a lot of merit in the amendments tabled by my noble friend Lord Whitty. He started by saying that he was trying to help out the Government. A number of us have tried to help out the Government during tonight’s debate. However, I suspect that the Government are not listening and do not want to be helped out, but there we are. I look forward to the comments from the Minister in response to this amendment.
My Lords, I am always grateful to the noble Lord, Lord Whitty, for trying to help out the Government. I have listened very carefully and of course I recognise his concerns and those raised by the noble Lord, Lord Judd. However, as my noble friend Lord Jenkin very eloquently put it, there is already a lot in place that addresses the concerns raised by the noble Lord, Lord Whitty. The existing regulatory system covering onshore oil and gas is robust. We already have more than 50 years’ experience of regulating the onshore oil and gas industry. There are controls and regulations in place to ensure on-site safety, prevent water contamination, mitigate seismic activity and minimise air emissions.
While the Government are keen for shale and geothermal exploration to go ahead, shale gas development must be safe and environmentally sound. I agree with noble Lords that we need to be sure that we are responding robustly to the perceived concerns that the public raise. One of the central aims of the current regulatory framework is to ensure that wells are appropriately designed and operated, and that when operations cease they are properly decommissioned.
A petroleum licensee cannot search for, bore for or get petroleum without a petroleum exploration and development licence, the terms of which are in the model clauses set out in secondary legislation. All drilling or production operations, and the abandonment of any well, require the consent of the Secretary of State. In addition, there are regulators and controls that can be relied on to minimise risk and any impacts associated with oil and gas activities. Those controls include conditions attached to environmental permits issued under the Environmental Permitting Regulations 2010 in England and Wales and the equivalent regime in Scotland, as well as safety scrutiny by the Health and Safety Executive.
The current regime, as it applies to shale gas, includes the management of mining waste and naturally occurring radioactive minerals, the scrutiny of well design and construction, the suitable restoration of sites, the protection of habitats and 10 different EU directives addressing environmental concerns. In addition, the Environmental Protection Act 1990 and the domestic Environmental Damage (Prevention and Remediation) Regulations 2009 provide for the remediation of contaminated land and serious environmental damage. This regime, together with the operators’ responsibilities under their licences and permits, is sufficiently robust to ensure that operators are required to remediate any damage or pollution to the environment.
If, for any reason, these controls were not enough—we have no reason to think that this would be the case because the UK has a well developed and very strong regulatory regime—and if any damage were to occur, in accordance with statutory requirements and government policy, remediation of the damage would be dealt with under the main regimes for dealing with contamination. These regimes are sufficiently robust to ensure that, if a company causes damage, harm or pollution to the environment, operators can be required to remediate the effects and prevent further damage or pollution. This is the same approach that applies to other industries, and we believe that the existing law is robust.
As noble Lords rightly highlighted, the environmental regulators have powers to require upfront financial guarantees to address this risk in circumstances where they deem this necessary. In addition, mineral planning authorities can require a financial guarantee to cover restoration and aftercare costs, although this will normally be justified only in exceptional cases. The Government have also been working with the industry’s trade body, UK Onshore Oil and Gas, to ensure the development of a mutual industry scheme that would, where necessary, step in and pay for necessary remedial action in the event that the liable company is unable to do so. My department has powers that can be exercised to require membership of such a scheme, where one exists, or the provision of equivalent security by other means. This range of financial securities, along with the statutory regime for dealing with damage or pollution, provides the reassurance that taxpayers or landowners will not be left to foot the bill for liabilities.
Since the noble Lord, Lord Whitty, raised these concerns in Grand Committee last month, I have given this issue particular consideration. While I am confident that we have a strong regulatory system for managing liabilities, I have heard concerns regarding unintended impacts of the right to use deep-level land on landowners, specifically, the situation whereby a landowner whose land is accessed through our proposed legislation might face claims from third parties for damage done by the operator. I have reflected on that and intend to bring forward an amendment on that issue.
I hope I have been clear on other issues that the noble Lord has raised. Given the reassurance that we already have a very robust framework in place—
I am sure that my noble friend shares my gratitude for the full way in which the Minister is replying. However, there is just one point she made which intrigues me. She said that the regulator has powers that he can use in these contexts. However, if the taxpayer is faced with the possibility of having to foot the bill, why is it not compulsory to require that these things are covered?
My Lords, I hoped that I had reassured noble Lords that we do not wish to see the taxpayer foot the bill or any bill, and that there will be processes in place to ensure that that is the case. Having gone through the amendment of the noble Lord, Lord Whitty, and his concerns, I hope that he will see fit to withdraw it.
My Lords, I am very grateful to the noble Baroness for her full reply and for the matters that the noble Lord, Lord Jenkin, drew to our attention. It has always been clear to me that the Government and the regulatory authorities have the powers to require remediation. The issue I was attempting to cover was if sufficient funds were not available to do that. The Minister said that the authorities, in granting a licence, have the ability to say, “You have to provide some money upfront”. There was also reference to a mutual industry scheme. It seems to me prudent for the Government to make that a condition of the licence—either that a fund is established or that the relevant body is a member of the scheme being established by the industry. Otherwise, we will end up with a situation whereby, as a result of an unforeseen accident combined with financial problems for the company, or, as a result of a situation whereby, many years hence, there is an abandoned site, orphan site or a site that has been badly decommissioned, there is damage but there are no funds available to cover it, so at the end of the day the taxpayer will pay for that.
I accept a lot of what the Minister and the noble Lord, Lord Jenkin, said but unless this is a condition of a licence, either through insurance or by establishing a fund, we will not have the situation entirely covered, and that is not entirely reassuring to those who are worried about the potential impact of that on their environment, business or dwellings. The Minister has gone some considerable way on this issue and I will certainly not press the amendment any further tonight, but her reply was not quite as reassuring as I had hoped. Nevertheless, I thank her and others who have contributed to this debate. I beg leave to withdraw the amendment.
Amendment 115D withdrawn.
116: After Clause 37, insert the following new Clause—
“Renewable heat incentives
(1) Section 100 of the Energy Act 2008 (renewable heat incentives) is amended in accordance with subsections (2) to (4).
(2) After subsection (1) insert—
“(1A) Regulations under this section may confer any function on any person.
(1B) Regulations under this section may provide for a function conferred on a person to be exercisable on behalf of another person.”
(3) In subsection (2)—
(a) in paragraph (a), for the words before sub-paragraph (i) substitute—“(a) make provision giving any of the following persons entitlements to payments (“RHI payments”) in specified circumstances—”;(b) in paragraph (b), for “such payments” substitute “RHI payments”;(c) after paragraph (b) insert—“(ba) make provision about the circumstances in which, and descriptions of persons to whom, the whole or a part of an entitlement to an RHI payment may be assigned (whether the person has the entitlement by virtue of regulations under paragraph (a) or regulations under this paragraph);(bb) authorise or require the Secretary of State, the Authority, designated fossil fuel suppliers, or any person with any other administration function, to make an RHI payment—(i) to the person who is entitled to the payment by virtue of regulations under paragraph (a), or(ii) where that entitlement has been wholly or partly assigned in accordance with regulations under this section, to the person or persons for the time being enjoying the entitlement or any part of it;”;(d) in paragraph (c), for “such payments” substitute “RHI payments”;(e) for paragraph (d) substitute—“(d) authorise or require a person to provide specified information;”;(f) in paragraph (e), omit “to the Secretary of State or the Authority”;(g) in paragraph (h), omit “for the Secretary of State or the Authority”;(h) omit paragraph (i);(i) at the end insert—“(j) authorise the Secretary of State to make payments to a person in respect of the exercise by the person of functions under regulations under this section;(k) make provision about the resolution of disputes relating to the exercise of functions under regulations under this section, including provision about arbitration or appeals (which may, in particular, provide for the person conducting an arbitration or determining an appeal to order the payment of costs or compensation).”(4) In subsection (3), after the definition of “fossil fuel supplier” insert—
““other administration function” means a function relating to the administration of a scheme established under this section, other than a function conferred by regulations under subsection (2)(bb);”.
(5) Section 105 of the Energy Act 2008 (Parliamentary control of subordinate legislation) is amended in accordance with subsections (6) to (8).
(6) In subsection (2)—
(a) in paragraph (a), omit sub-paragraph (vi);(b) after paragraph (aa) insert—“(ab) regulations which contain (whether alone or together with other provision) affirmative resolution provision made under section 100 (renewable heat incentives);”. (7) In subsection (3), after “(2)(a)” insert “, (ab)”
(8) After subsection (3) insert—
“(3A) Provision made under section 100 is affirmative resolution provision if—
(a) the provision is made under any of the powers which always attract the affirmative resolution procedure, or(b) the provision—(i) is not made under any of those powers, and(ii) meets condition A, B, C or D.(3B) The powers which always attract the affirmative resolution procedure are the powers conferred by—
(a) section 100(2)(c), (e), (f), (g), (h) and (k),(b) section 100(5), and(c) section 100(6).(3C) Provision meets condition A if—
(a) it is made under the power conferred by section 100(2)(bb), and(b) it requires a designated fossil fuel supplier to make a payment under an RHI scheme.(3D) Provision meets condition B if—
(a) it confers an administration function on a person who is not the Secretary of State or the Authority, and(b) the time when the provision comes into force will be the first time that an administration function under the RHI scheme concerned is exercisable by a person who is not the Secretary of State or the Authority.(3E) Provision meets condition C if—
(a) it is made under a power conferred by paragraph (ba) or (bb)(ii) of section 100(2),(b) it is made in relation to an RHI scheme that was in existence immediately before the coming into force of this subsection, and(c) it is the first provision to be made under that power in relation to that RHI scheme.(3F) Provision meets condition D if—
(a) it is made under a power conferred by paragraph (a), (b), (ba), (bb), (d) or (j) of section 100(2),(b) it is made in relation to an RHI scheme that was not in existence immediately before the coming into force of this subsection, and(c) it is the first provision to be made under that power in relation to that RHI scheme.(3G) In deciding whether provision meets condition B, the following matters must be ignored—
(a) for the purposes of subsection (3D)(a): any provision which confers a payment function on designated fossil fuel suppliers;(b) for the purposes of subsection (3D)(b): any payment function under the RHI scheme concerned which (before the time when the provision comes into force) is, or has been, exercisable by designated fossil fuel suppliers.(3H) The fact that provision is to some extent made under a power conferred by section 100(1), (1A) or (1B) does not prevent that provision from being taken (for the purposes of subsections (3A) to (3F)) as being made under any other power conferred by section 100.
(3I) In subsections (3B) to (3H) and this subsection—
“administration function” means a function relating to the administration of an RHI scheme;
“designated fossil fuel suppliers” has the same meaning as in section 100;
“payment function” means a function of making a payment under an RHI scheme (whether the function authorises or requires the making of the payment);
“RHI scheme” means a scheme under section 100 to facilitate and encourage renewable generation of heat.”
(9) In section 105 of the Utilities Act 2000 (general restrictions on disclosure of information), in subsection (3)—
(a) in paragraph (a), omit “or section 100”;(b) after paragraph (a) insert—“(aa) it is made for the purpose of facilitating any functions of any person under section 100 of the Energy Act 2008;”.”
My Lords, as noble Lords know, this Government are committed to ambitious action to reduce carbon emissions and increase renewable energy generation in the UK. To this end, the non-domestic renewable heat incentive was introduced in November 2011 and followed with a domestic scheme in April this year. These schemes are the world’s first long-term financial support programmes for renewable heat. Switching to renewable heat can in some circumstances bring significant bill savings to businesses and households and helps the Government meet their challenging targets on climate change.
The government amendment before the House responds to one tabled by the noble Baroness, Lady Eaton, in Grand Committee, on which I undertook to return to noble Lords on Report. The new clause proposes three changes to Section 100 of the Energy Act 2008, which provided for the creation of the schemes. I shall take each of the changes in turn. As noble Lords will be aware, administration of the schemes is currently limited to either Ofgem or the Secretary of State. While Ofgem is successfully administering both schemes, our inability to run a competitive process is a constraint on achieving best value for money. The Government, therefore, signalled their intention to seek the necessary legal powers to enable an alternative administrator to be appointed in their consultation on the domestic scheme in 2012.
Ofgem will continue to administer the scheme for the time being and in making this change the Government will retain the power to appoint Ofgem to administer the scheme in the future. The ability to appoint a new administrator means that the Government will require the flexibility to adapt the appeals processes to any new administrator and to ensure that these remain robust. The amendment therefore also allows the Government to make regulations covering dispute resolution through appeals processes.
The second change deals with payments. Payments under the scheme must currently be made to the owner of the renewable heat installation or to the producers of biomethane, biogas and biofuels for heating. The amendment will allow the schemes to be redesigned to mean that these parties can have the option to assign their payments to a third party. For the domestic scheme, this would mean that the upfront cost of renewable heating systems could be funded by third parties for households unable to afford them, with scheme payments then made directly to the third party, making this an attractive opportunity for investors. For the non-domestic scheme, assigning rights to payments may allow for simpler financial arrangements between parties, reducing the costs of, and barriers to, the installation of renewable heating. By incentivising new funding arrangements, this change could lead to an increase in both demand for and supply of renewable heat technologies and a mix of higher deployment and lower costs.
Implementing changes would require secondary legislation, on which we intend to engage with stakeholders. In making any changes, we will also work with the scheme administrator and other parties to ensure appropriate design of the consumer protection framework and to integrate the assignment of rights into the scheme’s existing cost control mechanism.
The amendment would also allow some changes to the schemes to be made by the negative resolution procedure. At present, all changes must be made by the affirmative procedure, regardless of their complexity or materiality. In practice this is much slower than the negative procedure. The Government have found that their inability to make changes to the schemes quickly, in response to market changes and other factors, may risk undermining confidence in them. For example, we cannot update regulations quickly to allow them to reference updated technical industry standards.
The amendment tabled by the noble Baroness, Lady Eaton, proposed that all secondary legislation in relation to the schemes be made by the negative procedure. I have considered the comments made in Grand Committee in response to that proposal. The amendment now before us aims to achieve greater flexibility while still ensuring appropriate parliamentary scrutiny. It stipulates that some uses of the powers in important areas remain subject to the affirmative resolution procedure. For example, this would include making provision covering sanctions, enforcement and appeals, establishing requirements on fossil fuel suppliers to fund the renewable heat incentive, or amending Section 100 of the Energy Act to change the general type of heat-generating methods that can be funded through the scheme.
For other powers, the amendment stipulates that the first use of the power should be via the affirmative procedure, but allows for use of the negative resolution procedure for subsequent uses of the power in relation to the same scheme. This will allow for appropriate scrutiny where powers are first used, such as to provide for assignment of payments in the schemes, but means that minor subsequent changes can be made by negative resolution.
The Government expect that future changes to the existing schemes are likely to be straightforward and uncontroversial—for example, measures to reduce red tape, or technical changes to allow the schemes to keep pace with market innovation. I do not consider use of the affirmative procedure necessary in these circumstances. The negative procedure, while still allowing for adequate parliamentary scrutiny, provides flexibility to address issues as they arise, rather than delaying matters while suitable legislative opportunities are sought.
Together, these changes will allow significant improvement in the efficiency and cost-effectiveness of renewable heat incentive schemes, allowing the UK to meet its carbon reduction and renewables targets, while also making efficient use of taxpayers’ money. I beg to move.
My Lords, I welcome these moves, which will make financing much more flexible, and mean that money really can flow into the RHI. I therefore congratulate the Minister on the amendments, and on moving this matter forward.
My Lords, I am grateful to the Minister for speaking to her amendments. As she said, there are three aspects to this group. The first is the potential for somebody other than Ofgem to administer the RHI. I am intrigued by this aspect and I wonder whether we may be creeping towards a bit more joined-up government in terms of renewable energy. There is always a tendency to equate renewables with electricity, whereas under the EU mandatory targets agreed for 2020 we are required to move forward on renewable energy, which means electricity, transport and heat. There has been rather a stop-start process of renewable transport fuel support, and a separate body oversees that. Under the RO the renewable electricity side has been the responsibility of Ofgem, and it is now moving to the department, for the Secretary of State specifically to oversee, while Ofgem has been given the RHI to look after. It would seem sensible to me to have one consolidated agency to deal with all renewable energy, so that we could properly assess the best application of our renewable resources to the different markets.
If we apply a biomass unit of energy to the generation of heat we get far more efficiency and far more displacement of carbon in the heat market than we would by going into electricity—or, indeed, into transport fuels. We need a bit of joined-up thinking on our various ways of supporting renewable energy. I wonder whether this gives us an opportunity to have a look at the regulatory framework.
On the second part, about third-party payments, I am very supportive of the amendment. It will help to overcome a barrier about which people have personally petitioned me, and said how much of a barrier it is.
On the third point, however, I am afraid that I am not quite so supportive. I do not want to detain us too long, but the Minister and I have spent many a pleasurable afternoon in Committee discussing the RHI. It has not been unnecessarily time-consuming or difficult—we generally tend to get through SIs quickly—but it gives us an opportunity to revisit the RHI and see how it is doing. It would be a shame if we were to create any uncertainty in the industry by moving to the negative resolution procedure. I seek clarification from the Minister. She speaks of uncontroversial straightforward changes and describes them as technical. If that group of potential changes included changes to the subsidy levels for different technologies, that might cause alarm for some people in the sector—particularly if they felt that they would not have the opportunity to petition Members on both sides of the House, to discuss and to raise concerns.
This is an industry that has seen quite a lot of changes, and is subject to rigorous derogations and price control mechanisms. They are incredibly complex, and I do not really want to spend any more afternoons debating them—but I would do so if that would give comfort to the industry. It is a new and growing industry, and we are not quite on track yet for meeting our targets. We need to see considerably higher growth in renewable heat if we are to meet the challenging targets that we have set ourselves. I am seeking reassurances from the Minister that these negative resolution procedures will not increase uncertainty in an industry that we need to see getting stuck into the job of delivering and putting us on a strong footing with regard to our EU targets.
My Lords, I agree completely with the noble Baroness that we must ensure that there is proper parliamentary scrutiny. I assure her that the amendment aims to achieve greater flexibility while retaining appropriate parliamentary scrutiny. The amendment stipulates that some use of the powers is important in areas that remain subject to the affirmative resolution procedure. We will not move away from that where there is cause for it. Where we just want to make some minor, technical changes is where it is probably more likely that we would wish to use the negative resolution procedure.
Will the noble Baroness write to me? What I am most interested in is change to the level of subsidy given to different technology bandings.
I of course undertake to write to the noble Baroness and place a copy in the Library.
Amendment 116 agreed.
Clause 38: Consequential provision
117: Clause 38, page 41, line 36, leave out from “under” to end of line 40 and insert “this Part (other than section 29).”
Amendment 117 agreed.
118: After Clause 38, insert the following new Clause—
“Revenue from shale gas: sovereign wealth fund
(1) The Secretary of State may, by regulation, establish a sovereign wealth fund to receive and deploy revenue from the extraction and sale of shale gas.
(2) The regulations shall provide—
(a) that the fund shall receive no less than 50% of any revenue received by the United Kingdom Government from any activity connected with the extraction and sale of shale gas;(b) that the assets of the fund shall be deployed to serve long term public objectives other than those connected with monetary and exchange rate policy;(c) that the assets of the fund may be deployed in the United Kingdom or overseas;(d) that no more than 4% of the assets of the fund may be paid out in any one year; and(e) for the governance, independent oversight and transparent reporting of the activities of the fund.”
My Lords, the purpose of the amendment is simple, although the policy implications are perhaps more complex. It is to insert a new clause that will provide a statutory framework for the establishment of a UK sovereign wealth fund to receive a proportion of the Government’s revenues from fracking and shale gas.
I tabled a similar amendment in Committee on 14 October and I hope that my noble friend will forgive me if I say that I did not find her response entirely convincing. I have therefore retabled the amendment. It is primarily a Treasury matter, of course, and I am therefore pleased and grateful to see that my noble friend Lord Deighton has taken up the cudgels and will reply to this debate. I am grateful also to my noble friends Lord Jenkin and Lord Teverson, and the noble Lord, Lord Whitty, for adding their names in support.
The background to and reasons for my amendment are as follows. This country has been blessed with a wide range of natural assets. These can be divided into two parts, the finite and the infinite. The infinite includes the sun, rain and wind—all of which we can harness in various ways. However, there are finite resources. For example, our huge reserves of coal that powered the industrial revolution for a time made this country the workshop of the world. In the 1970s, we discovered another great gift from nature—North Sea oil. At the time of the original discovery, it was expected that by now it would all have run out. In the event, because of improved technology and higher oil prices, despite our having extracted some 40 billion barrels of oil, it is estimated that at least some 16 billion barrels remain recoverable. But—and this is the important but—one day the oil will inevitably run out and this gift from nature will have been entirely consumed.
Successive Governments and the country have benefited hugely from this oil. Estimates of the overall revenue run as high as £400 billion, but every penny of that revenue has been spent. A debate on whether it has been wisely or foolishly spent would occupy your Lordships’ House for many a long day. That is not the point this evening. The point this evening is that the revenue has all been spent and nothing has been put aside for the future.
On the other side of the North Sea, Norway, which has also benefited from North Sea oil, had an extremely fierce political debate about how to use its proceeds. In the end, it was decided that it should establish a sovereign wealth fund. Norway has a much smaller population than we do—about 10% of that of the United Kingdom—and its oil and gas reserves are commensurately larger. Therefore, I do not wish to push the metrics too far. The fact is that in the 20 short years since revenue started to flow to the Norwegian sovereign wealth fund, it has grown to $800 billion—£500 billion. At this point, I should apologise to Members of your Lordships’ House because when trying to send a letter to you from Chicago I mixed up my “millions” and “billions”. The figure is, in fact, £500 billion, not £500 million, as in my original letter. That is not the end of it. It is confidently expected that the $800 billion will reach $1 trillion in the next few years. The fund generates between £20 billion and £25 billion every year. That is a lot of money. It is roughly two-thirds of our annual defence expenditure or what we expect to spend on our nuclear deterrent over its life. It is roughly 10 times what the Leader of the Opposition thought was necessary to save the National Health Service. He referred to £2.4 billion in his speech at his party conference.
In this country, we took a different approach, and the decision is irrevocable. Every penny that we receive in future will be spent until the oil finally runs out. But we now appear to have received another potential gift from nature: natural gas extracted as a result of the development of the new fracking process. I argue that we should learn from the decisions of the past, as well as from the example set by Norway, and provide for the establishment of a sovereign wealth fund to receive at least part of the proceeds from shale gas exploration and development. I do so on three principal grounds. First, the costs of infrastructure projects, which are so essential to this country’s long-term prosperity, are notoriously difficult to forecast. The returns from a sovereign wealth fund would help to plug some of these overs and unders.
Secondly, a sovereign wealth fund would provide some insurance against future uncertainties. Governments are constantly urging us as private citizens to save more to guard against the rising costs of our increasingly long lives. We are told that we must forgo current consumption individually for our long-term benefit. It would surely be no bad thing if the Government occasionally practised what they so assiduously preach.
Thirdly, and most importantly, it is about intergenerational fairness and equity. These gas reserves have built up over millions of years. Are they properly ours to plunder and spend in a couple of generations? Should we not ensure that some parts of the proceeds are left for those who come after us?
In his amendment, my noble friend says that no less than 50% of any revenue received should go into the fund. Can he indicate what he expects that revenue to be and why he chose 50%?
If my noble friend waits for one minute, I shall explain the detail of the amendment. That will take care of the 50% point. Since I think there is possibly an indication that other uses should be made for this revenue, I will come to that immediately after that point. If I have not answered those questions in a couple of minutes I invite him to intervene again.
I turn to the details of my amendment. As I have said, it is an enabling amendment. It does not require the Government to do anything now, but it does indicate a direction of travel. The enabling provision is subject to five provisos. The first, as my noble friend Lord Forsyth has just pointed out, is that the Government should get 50% of the revenue from shale gas. That is part of the fairness argument: 50% for us, knowing that at least some of it will be spent on projects that will benefit future generations, and 50% put aside for those generations directly.
Secondly, the fund should support long-term public policy objectives. That underpins the philosophy and approach behind it.
Thirdly, the fund may invest overseas, as well as in the United Kingdom. That is necessary to ensure that the fund obtains the best returns. In that context, it is worth noting that the Norwegian sovereign wealth fund now owns more than 1% of the entire world’s quoted equities.
Fourthly, no more than 4% of the fund may be paid out in any one year. The need for a limit is obvious. Without one the fund would almost certainly be drained very quickly indeed. My proposed maximum level of withdrawal, 4%, is calculated based on a 2% long-term rate of real return and a 2% allowance for inflation. That level should mean that a well managed fund should be able to operate long into the future.
Finally and most importantly, proposed subsection 2(e) provides that the operation and activities of the fund must be transparent and open to public scrutiny. If noble Lords read the literature, it is clear that transparency has been a vital part of creating trust and confidence among the Norwegian public in the operation of their fund.
So much for the reasons for the fund and the detail of my amendment. Before I conclude, let me briefly address the reasons given for not having a fund, which I think underlie the intervention from my noble friend Lord Forsyth. There are essentially three of them: first, this is not the right time to do it because we do not yet know how large and profitable the shale gas development will be. That is absolutely true. My answer is that the amendment is permissive—it requires only an indication of the direction of travel. I hope the House will not think me unduly cynical if I say that, in the absence of any specific prior commitment, I believe the chances of establishing a sovereign wealth fund once the revenues are beginning to flow are even closer to zero than the chances of the Government accepting my amendment tonight.
The second reason is that any revenue from shale gas should be used to reduce the deficit. Again, that is a perfectly understandable argument, but one that undermines the concept of intergenerational fairness. In any case, under my amendment, half the proceeds are available to reduce the deficit. However, to suggest that all should be used for that purpose is akin to me saying to my children, “I was going to leave you a decent sum of money, but I’m afraid I’ve been living beyond my means and I’ve run up debts. I don’t wish to take difficult decisions to reduce my standard of living, so I’m afraid that if you want your inheritance, you’ll have to take all my debts with it—or, of course, I could use your inheritance to pay off my debts”. We need to face the consequences of our own actions and not slide them on to a future generation.
The third and last reason revolves around the most feared word in Treasury-speak—hypothecation, the sin that dare not speak its name. If one consults the Oxford English Dictionary, hypothecate is defined as:
“Pledge … by law to a specific purpose”.
I argue that the establishment of a sovereign wealth fund which has no specific purpose would require an unusually broad interpretation of the concept of hypothecation. Of course, in reality, this is all a smokescreen. The real reason for Treasury opposition is that it always opposes policies that in any way diminish its direct day-to-day control over every aspect of our national life.
To conclude, this enabling amendment is designed to balance the long-term national interest against short-term political expediencies, to enable future generations to share in this potential windfall and to encourage Governments to follow the saving practices they so urgently suggest we individually adopt.
My noble friend has not answered my question on what he anticipates the revenue to be.
I think I answered it by saying that the reason given for opposing a fund at this stage is that nobody knows quite how much money is going to flow. No one can know. I pointed out that if you do not get something in principle in place now, once the revenue starts to flow, the chances of having a sovereign wealth fund are very low. If we do not get a peg in the board now, when revenue starts to flow there will be a million reasons as to why it should not be put in place at that stage.
I was most encouraged by the remarks of the Chancellor of the Exchequer over the weekend about the advantages that a sovereign wealth fund would bring. I hope that my noble friend will put some flesh on these bones when he winds up. The very last word must rest with Jens Stoltenberg, the then Prime Minister of Norway. In September 2013, at the John F Kennedy School of Government, he said:
“The problem in Europe with the deficits and the debt crisis is that many European countries have spent money they don’t have. The problem in Norway is that we don’t spend money we do have”.
He went on to say that to achieve this happy state of affairs needs actions to be taken that require “political courage”. It is that political courage that I am looking for from the Minister tonight. I beg to move.
My Lords, I added my name to my noble friend’s amendment and I congratulate him on the way in which he moved it. I want to make two points. First, I was the Minister for Energy in the very early stages of our North Sea oil and gas. I was the Minister for only seven weeks when we lost the election at the end of February 1974. At that stage, no one had the remotest idea of setting up a sovereign fund. I do not remember the thought crossing my mind or my desk. As my noble friend Lord Forsyth has indicated, we did not have the slightest idea of how much it was going to be.
In a sense, I take issue with my noble friend Lord Hodgson for saying that it was a massive mistake. I find it difficult to accept that. There may have come a time when one should have seen that the prospects were going to be as bright as they have been and one might have done something to meet my noble friend’s wish. But to have expected that to happen in the very early stages when the oil and gas had scarcely begun to flow is a little unfair. At the time, when BP was investing in the Brent oilfield, which became the most important oilfield, its financial director said that he had established a law; namely, that, however much is spent in developing a North Sea oilfield, the amount still to be spent would be constant. It stands constant. It does not go down. That was the climate in which the oil industry was operating then. The Government, I think, gave it every opportunity to develop and we have enjoyed the success.
Secondly, I hesitated to put my name to my noble friend’s new clause because of the figures. My noble friend Lord Forsyth has already raised this. Nevertheless, I think the principle is sound, particularly what was said about intergenerational equity. Where you have the prospect of major wealth, is it right that it should all be spent on the present generation? It seems to me that there is a principle here that it is desirable to support. My noble friend referred at the end of his speech to what my right honourable friend the Chancellor said over the weekend about,
“making sure money is not squandered on day-to-day spending”.
When you have the indebtedness we have it is unrealistic to say that when you are spending money to keep the economy going to meet the needs of social services and so on that somehow if we spend the revenues from something such as shale gas we are squandering it. However, there may come a time, as happened in Norway, when it would be right to set up a fund. My noble friend’s new clause says that the Government “may”—it does not say “must”. I have already indicated that I have some doubts about the figures he has put in at the end but the principle seems to be very sound and I hope that the opportunity may come when we shall do something about it. Like him I look forward to the reply from my noble friend on the Front Bench.
My Lords, I have also added my name to this amendment. This is for two reasons—partly, I was swept away by the rhetoric from the noble Lord, Lord Hodgson, in Committee; it is such an obvious strategic decision that I thought I must support it. The second reason is purely historic. Somewhere in the archives of the TUC, from about 1973, there is a paper with the initials “LW” on it. In that paper I argued that we should set up a fund to invest in upgrading into the new technologies of the manufacturing industry and acquire assets at home and abroad to meet the interests of the state and of the British economy out of the tax revenues which we anticipated would come from the North Sea. We had no idea how much revenue would be coming in from North Sea oil at that time but it would clearly be substantial. I do not think anybody thought at that point it would be as substantial as it turned out, altering the terms of trade of the UK, with the level of sterling rising to the detriment of the competitiveness of the British manufacturing sector which was, of course, already a bit deadbeat and uncompetitive.
If only they had listened to me then. I am afraid that I never got my paper to the noble Lord, Lord Jenkin, while he was still in office but the next Government took no notice of it nor, indeed, the one after that. It stayed through all that period of North Sea oil revenue the Government received—I would not use “squandered”. I disagree with a lot of the priorities of the Government of the 1980s as noble Lords know, but that revenue was not used for the long-term benefit of the British economy when at least a fraction of it should have been. I thought the noble Lord, Lord Hodgson, had an important point here. If this industry develops to the extent that many of its proponents are saying, although none of us knows that yet, there will be a serious tax revenue that is in a strict sense a windfall for future Governments and a windfall for the British economy. We should not make the same mistake and we should take a lesson from our Norwegian cousins by investing in a fund that can provide some degree of security and improvement of the British economic situation for future generations. I am very happy to support in principle the noble Lord’s amendment.
My Lords, I welcome this amendment and I was pleased to add my name to it both in Committee and now on Report. The important point to make is that my noble friend Lord Hodgson is absolutely right: if we do not put this on to the statute book as something that can happen, the temptation will pass and it will be as if it never happened. That is why I am keen that it should be done now.
I should say just as an observer, if you like, that it is very easy to expand government expenditure and very difficult to pull it back. It is easy to find uses for income if it is there, but perhaps those uses are not always the best for our long-term future. It is easy when there are financial and fiscal constraints of the kind the country is confronting at the moment, but that is not always the case. It is hoped that we will get over the current deficit at some point in the not too distant future. That is why it is important to prepare for a sovereign wealth fund so that we can build it up in an intergenerational way, as has been advocated already.
The other aspect is completely different and not at all the most important. In the last parliamentary Session this House set up a Select Committee to investigate the nature of soft power. I was not a member of the committee, but it seems to me that countries with sovereign wealth funds exercise considerably more soft power in global affairs. That is not surprising because money talks—not just within the family or in business, but across nations as well. Why does Norway enjoy its stature? It is in part because of its sovereign wealth fund. The same can be said for a number of Gulf states and for China. In terms of Britain’s status in the future, we would gain quite considerably if we were seen to be a country that is able to save, invest and exert influence financially beyond our borders in this way rather than one that just keeps its current account going through non-renewable resources that cannot be brought back. That is why I feel strongly that we should at least take the step of this enabling legislation and then let future Governments decide how it should be used.
My Lords, I did serve on the soft power committee and I have to say that the countries with sovereign wealth funds are not exercising soft power; they are exercising hard power because they are lending us money to keep going. Every year we are spending roughly £100 billion more than we have income. The leader of the Opposition forgot about the deficit in his speech at his party’s conference. I have to say that I have very considerable respect for my noble friend, but he seems to have forgotten about it too. He did mention at the end of his speech that there is the issue of debt, which might be a reason why people would oppose this policy. It is certainly why I would oppose it.
The national debt will have doubled during this Parliament. The coalition Government are absolutely determined to reduce it, but it is still growing. We are not meeting our targets in terms of bringing the deficit under control. The idea that we should pre-empt resources that may or may not come from shale gas is like going along to the bank manager and saying, “I would like to borrow £1.4 trillion and, by the way, I would also like to open a savings account into which I shall put the proceeds from shale gas”. This is a noble thought. It would be great to have a sovereign wealth fund, but it would perhaps be a first step to live within our means and pay back the debt that we have accumulated.
My noble friend has talked about the importance of recognising our obligations to future generations and the finite nature of the resources. However, this national debt that we are growing is a charge on those future generations. It is a millstone around their necks. At the very least our priorities should be to pay that down and not to think of new ways of spending money that we do not have.
I agree with my noble friend Lord Jenkin of Roding. When we discovered North Sea oil, inflation was running at something like 24% and interest rates were not much below that. I suppose that we could have argued that we would have got quite good interest, but the inflation would have taken away any benefit. We had a country that was haemorrhaging billions from the nationalised industries and that was dependent on industries with a great past but no future. That money, particularly in Scotland, was used to transform the economy, and create new industries and new opportunities. At that time, Scotland had more public housing than the communist countries of central and eastern Europe.
The economy was transformed in the 1980s. The blessing of North Sea oil provided for that. To use the word “squandered” is grossly irresponsible. That money was invested in building a new future for our country. As we have just heard repeated over and over again by the leader of the Scottish nationalists, Scotland is now the richest part of the United Kingdom outside the south-east, and that is not just because of the Barnett formula. It is because of the way in which the prosperity from North Sea oil was invested and developed by the private sector. There is an argument that we could have achieved even more if the tax burden on those in the private sector who took the risks had not been so high.
We have just won a referendum in which we discredited the nationalist leader, Alex Salmond, for wanting to set up a sovereign wealth fund with the proceeds of North Sea oil while at the same time spending the money from North Sea oil. We are not in a position to be taking any tax revenue, whether from shale gas or anything else. We should not be doing anything other than paying down the debt that is due to us.
If we embark upon this idea that we need to set up funds for future generations, why should we limit it to shale gas? Why do we not have other sources of revenue? My noble friend said that the Treasury was concerned about hypothecation. This is not hypothecation. The definition of hypothecation is surely to take a certain quantity of revenue and apply it to a certain purpose. That is what his amendment does. It says that,
“the fund shall receive no less than 50% of any revenue received by the United Kingdom Government”.
I have another objection to my noble friend’s amendment. He said that we need to put down a marker because, if we do not, when the money starts coming in the Treasury will not want to hypothecate it for this purpose. If we put a marker down with 50% of the revenues given to this purpose, the Government will have every incentive to raise the tax on the people who are developing the shale gas and the industry. But with a new industry, we should be ensuring that as much of the available revenues as possible are used to invest and develop and take the thing forward. I very much regret that this is a proposal that we should not accept. I was slightly dismayed to see the Chancellor over the weekend appearing to smile upon it, and to describe the alternatives as squandering the money at a time when we do not have the money we need to fund public services may have been a slip of the tongue.
I very much hope that my noble friend will reject this amendment and put to one side any thought that we should do anything over the next five or 10 years other than to reduce our deficit, eliminate our deficit and eliminate the debt. I do not know quite how we can do that: £1.4 trillion is an enormous sum and if we are not going to have inflation eroded, it is a superhuman task to pay it off. I hope and pray that shale gas will help to provide some of the revenue that we need to do that for the sake of those future generations that my noble friend has spoken of.
My Lords, I am delighted that the noble Lord, Lord Deighton, has joined us for this debate. I had anticipated that perhaps he would have a slightly more comfortable ride than he did earlier this afternoon in trying to justify the Government’s position on the European issue. But the noble Lord, Lord Forsyth, has made this debate pretty challenging as well and I hope therefore that the noble Lord, Lord Deighton, will enjoy sailing between the shoals of difficulty in this proposal.
We all enjoyed the contribution that the noble Lord, Lord Hodgson, made in Committee. I very much enjoyed reading his piece in the Telegraph this morning—not a journal I go to for enlightenment very often—which was an excellent explanation of the sovereign wealth fund and its benefits. But someone had to point out its problems and the noble Lord, Lord Forsyth, has certainly done that.
I would like to add a dimension to this question. Of course, it looks attractive because it looks as if we are acting like benevolent grandparents—after all, we are the right age—trying to ensure that the future for our grandchildren is reasonably rosy. I am in favour of that. I am sure we all are. But the problem is, of which decade in the 20th century, or in the 19th century, would you have said, “The resources that that society commanded in that decade ought to have had an element of hypothecation not to be spent at that time but to be looked after for the succeeding generations”? The problem with that is if you were able to anticipate the periodic crises in the capitalist society in the 19th century and also get the 20th century right, then you could make appropriate judgments. Otherwise, what we are facing is a situation where, one decade after the next, the society gets considerably richer.
We have been used to 2.3% growth. Of course I recognise the crisis that we all face at present. In fact, I have from time to time upbraided the Government’s Front Bench for seeming to portray it as a British crisis, quite unable to recognise that the whole of Europe and the advanced world, particularly the United States, are under the same strains. But we are having a period of very significant constraint upon growth at present; in fact, of course, we have had a negative position for a number of years. That is why it is right, surely, that all the resources we have available are directed towards improving the balance of this society, as the noble Lord, Lord Forsyth, has indicated. But in previous generations, such as the one after the Second World War, when it was quite usual to have 2.3% growth a year, within a quarter of a century this country had doubled its wealth. That generation would have looked pretty silly to have hypothecated money for those 30 years down the line when the growth in society ensured that the later society was so much wealthier than it was. We have to rehabilitate—and I am glad I am not the first person to actually try to do this—the word “hypothecation”. After the noble Lord, Lord Hodgson, had spoken in Committee I went and had a little chat. I probably indicated in Committee that I took issue with my colleagues at the other end who have got some responsibility for the Opposition’s position on the economy.
Hypothecation is a real problem. Once any area is hypothecated, in effect the flexibility that attends a Government is inevitably reduced and we are all operating—at this time of all times—on the tightest of margins. I think it was said by the outgoing Government at the last election that there was no money left. The incoming Government after the next election are not exactly going to be rolling in vast resources which they can allocate as they wish, hence the reason everybody is reining in the ambitions of potential Governments for the next few years.
I hope that the noble Lord, Lord Deighton, will address himself to what I think is a complex debate. He starts off, of course, from a very strong base because he is the Minister responsible for infrastructure and, after all, will always need to look a decade or more ahead rather than the immediate five years in order to get infrastructure that is effective and accurate at a location. I am not sure the noble Lord, Lord Deighton, can spend too many warm words on the enthusiasm that the Chancellor has shown over the weekend towards this idea. It is an idea worthy of exploration because the noble Lord, Lord Hodgson, has got a concept that could well capture the public mood and would encourage people to say that in fact we need to look to the longer term future in our investment plans. However, I hope that is what Governments intend to do in any case.
Therefore I have no doubt that when the Minister responds he will have warm words to say towards the noble Lord, Lord Hodgson, for the work that he has done and the speech that he has made this evening. However, I hope that he will explain why it is so very difficult for a Government to accept what is—in fact—a majestic argument for hypothecation.
My Lords, as the noble Lord, Lord Davies, has pointed out, superb cases have been made for each side of this argument by my noble friends Lord Hodgson and Lord Forsyth.
Shale gas represents a huge economic opportunity for the UK. It could create thousands of jobs, generate business investment and in future provide substantial revenue for the Exchequer. A sovereign wealth fund would create a legacy for the long term and ensure the benefits are shared with future generations, and we have heard a lot about intergenerational fairness and the issues around that. It is a complicated issue to get right.
As a Government we support the idea and want to explore—I think those were precisely the words used by the noble Lord, Lord Davies—creating a sovereign wealth fund with the money that comes from shale gas. It would be a way of making sure that this money is invested in the long-term economic health of the north of England, because of course that is where most of the reserves are located, and in other areas hosting development to create jobs and investment there. My right honourable friend the Chancellor found this an appealing concept because for him it is all part of building a northern powerhouse, which is at the heart of the Treasury’s current economic strategy. As my noble friend Lord Hodgson pointed out—
Given what my noble friend has said, what answer would my right honourable friend the Chancellor give if Alex Salmond suggested that we should set up a sovereign wealth fund now using the proceeds from North Sea oil so that Scotland would benefit from it? Where does this hypothecation end?
I think the difference between the two opportunities is that, in one case, we are right at the beginning and, in the other, we are right at the end. Now is the time to explore the opportunity with respect to shale gas.
My noble friend Lord Hodgson pointed out that a sovereign wealth fund was implemented successfully in Norway, but that fund was established in 1990, which was nearly 20 years after oil was first produced. The fund was set up when the levels of revenue were already well known—this was a point that my noble friend Lord Forsyth was also getting at. The UK shale gas industry is still in the exploration phase. We will not be able accurately to forecast the scale or timing of shale revenues until more work is done to determine the extent of gas that can be technically and commercially recovered. Therefore, coming up today with a clear plan for how this might fit into issues related to determining how we reduce the deficit and how we invest in the long term is extremely difficult without understanding what the revenues will be—I fully take on the point made there by my noble friend Lord Forsyth.
It should therefore be for future Governments to think about how such a fund could be designed, but we commit to the principle. The Chancellor will demonstrate his commitment to bring forward a proposal in the next Parliament in his Autumn Statement. With respect to the request made by my noble friend Lord Hodgson for a peg in the board now, and for those others who support this idea, I think that the right timing is when we have better information and are able to look at this matter properly. On that basis, I trust that the noble Lords, Lord Hodgson, Lord Whitty, Lord Teverson and Lord Jenkin, will agree not to press their amendment.
Perhaps I might follow up on my noble friend’s point about the Scottish position. He said that we were right at the end and not at the beginning. What would his response be to a proposition that said, “Well, for new fields that are discovered, we should have a sovereign wealth fund”? Let us bear in mind that there are considerable potential resources to the west of the Shetland Islands and so on. Surely this is a very dangerous argument given the delicate situation that we are in, where we appear to be saying that, for some parts of the country and for some energy resources, a different view will be taken of the long-term future. Is this not a very dangerous proposition which could unravel rather badly?
That is one of the reasons for our anticipating that this subject would be explored in the next Parliament rather than this one.
My Lords, I thank all those who have taken part in this debate. I am grateful to my noble friend Lord Jenkin for his experienced view. I accept his stricture that it would have been hard in 1970 to foresee the flows from North Sea oil. I thank the noble Lords, Lord Whitty and Lord Teverson, for their support.
There was a characteristically combative speech from my noble friend Lord Forsyth from which I drew four things. The first was that the priority must be debt repayment; otherwise, it is a charge on future generations. That is fine, so long as you do not think that there should be any intergenerational fairness and you think that the assets that flow from shale gas are ours to use to repay the debts that we have created. That is a philosophical question. Secondly, he said that we should not spend money that we do not have. However, a sovereign wealth fund is not spending; it is saving. It is not actually spending but making sure that we do not spend it. Thirdly, he said that it is like going along to your bank manager and asking to borrow £1.4 trillion. Of course it is, but what we are doing at the moment is saying, “We’re not going to take the actions to cut that; we’re going to pledge some future assets that actually might belong to future generations”. That is the conversation that we are having with our bank manager rather than one about how we cut our coat according to our cloth. On my noble friend’s last point, this is a permissive amendment. It is not designed to set out how things are going to work; it is designed merely to say that, if things develop in a certain way—that is, profitably—then we should look at it again at that point.
In response to the noble Lord, Lord Davies of Oldham, on the question of hypothecation, when we are talking about a finite natural resource that might belong not just to this generation, we should consider whether there is a special case for dealing with it in a particular way, which you might or might not call hypothecation.
Finally, I turn to the Minister’s reply, for which I thank him greatly. It is interesting that, given institutional concern about this, the Kuwait Investment Authority, which is the sixth largest sovereign wealth fund in the world, is worth about $600 billion. It was set up in the 1950s, at a time when Kuwait looked to this country for guidance and help and support, by a team entirely from the UK Treasury. So we have tried to deal with the sovereign wealth fund idea, but not here—only with people who were looking for our advice.
I recognise, and am grateful for, what is at least half—probably more than half and possibly two-thirds—of a loaf tonight. I think that I heard my noble friend say that he wholeheartedly commits to the principle of a sovereign wealth fund, a commitment which he said the Chancellor will reaffirm in his Autumn Statement. Further, the Chancellor will at that time commit to bringing forward a proposal for a sovereign wealth fund in the next Parliament.
There is of course many a slip between principle and practice. I equally have to recognise that my amendment is a pretty rough and ready one on which to hang such a radical new departure for British public policy. Weighing all of these factors up, I am going to trust that practice will follow principle, and watch developments closely. In the mean time, I thank my noble friend for his reply, and I beg leave to withdraw my amendment.
Amendment 118 withdrawn.
119: After Clause 38, insert the following new Clause—
“Part 4AImpact of infrastructure spending on costs for consumersImpact of infrastructure spending on costs for consumers
(1) The Treasury may by regulations make provision for the regulators to provide data, in a manner prescribed by the regulations, about the anticipated impact of infrastructure spending on the cost of products for consumers.
(2) Regulations made under subsection (1) may prescribe—
(a) the type of infrastructure spending about which data must be provided;(b) the nature of the data to be provided;(c) the methodology for collating and manipulating the data, including assumptions that should be made; (d) the form in which the data should be presented;(e) the persons that should receive a copy of the data.(3) The regulations may make different provision for different regulators where necessary.
(4) The Treasury must scrutinise the data provided under subsection (1) and assess—
(a) the impact of infrastructure spending on the cost of products for consumers;(b) the affordability of any anticipated increases in the cost of products for consumers, taking into account factors other than infrastructure spending that are also likely to significantly impact the cost of products; and(c) differences in affordability between different groups of consumers, if any.(5) The Treasury must publish the data provided under subsection (1) and the assessment made under subsection (4) in such manner as it reasonably deems appropriate.
(6) The Treasury must take into account the assessment in subsection (4) in making decisions about the extent, prioritisation or timing of infrastructure spending.
(7) In this Part—
“consumer” means any individual or household of individuals that purchases a product or products;
“product” means a good or service the provision of which is regulated by a regulator;
a “regulator” means any of—
(a) the Northern Ireland Authority for Utility Regulation;(b) the Office of Communications;(c) the Office of Gas and Electricity Markets;(d) the Office of Rail Regulation;(e) the Water Industry Commission for Scotland; and(f) the Water Services Regulation Authority,and “the regulators” means all of them.”
My Lords, I thank the two noble Lords who added their names to the amendment. We turn from the question of spending the proceeds of shale gas to the question of who is paying for the infrastructure investment on which the country has embarked and for which there is a great deal of support.
When my noble friend Lady Kramer wound up the debate on the new clause in Committee, she was kind enough to suggest that I might approach my noble friend Lord Deighton to discuss this matter as it was entirely a matter for the Treasury. It was therefore no surprise that a day or two later I received an invitation from my noble friend’s office to go to a meeting. It was a very helpful meeting and I will refer to it later. However, I was most grateful for his readiness to meet me on that occasion, and for his presence here this evening to respond to the debate. I recalled his splendid speech when he opened the second day’s debate on the Loyal Address last June. He demonstrated his deep commitment to the Government’s major programme of renewal and expansion of Britain’s infrastructure.
The new clause concerns one important aspect of that. I refer to the absence at present of any systematic system for calculating and publishing what part of the costs will fall on consumers and have to be paid for in their bills. I suggested in Grand Committee that it was time for the Treasury to “lift the veil”. But we are not the first. Last year the National Audit Office produced an interesting report. I will quote two passages from it. First, in paragraph 16, the NAO said:
“Government has made no assessment of the overall impact of infrastructure on future bills or whether those bills will be affordable. Therefore government and regulators are taking decisions on behalf of consumers in the absence of full information about the situation for consumers”.
Later on, on page 11 of the report, it recommended:
“The Treasury should ensure that there are mechanisms in place to assess the cumulative impact of infrastructure investment on consumer bills and the affordability implications, particularly for low-income households”.
I say straight away that I have accepted the arguments that to try to do this cumulatively right across the whole range of infrastructure is at this stage probably unrealistic. In the present new clause, we have removed any reference to the cumulative assessment that we had in the version of it in Committee.
The NAO report was taken up by the Public Accounts Committee, which made a number of recommendations. One of them was to pick up that point made by the National Audit Office. On the same day, the Government published their response to the PAC report. That was really quite an interesting document. They accepted most of the recommendations but rejected the PAC’s recommendation that the,
“Treasury should ensure that an assessment of the long-term affordability of bills across the sectors is produced and published”.
However, at the end of that response, the Government added:
“Nonetheless, the Government agrees that there is scope to improve understanding of affordability in this important area and will continue to work with the regulators on these issues, including through the UK Regulators Network which is considering affordability as a key element of its work-plan”.
I regarded that as a very important pointer to a possible way forward, in particular the reference to the UK Regulators Network. I was unaware of this body, so explored its origins with Ofgem and learnt that it is indeed a more formal and authoritative body than the previous informal association of regulators. Here I come to my meeting with my noble friend Lord Deighton. He told me that the Treasury was in full support of the UKRN. Indeed, its creation was on the initiative of the Treasury itself. I also gathered that that paragraph in the response had actually been approved by my noble friend. I was delighted to hear that. As I said, I have taken on board what I think was the most difficult aspect of the proposal—the question of aggregating consumer impacts across several different programmes. We are now looking at just assessing the impact on consumers of each individual industry.
My noble friend told me at our meeting that the Treasury regarded the regulators network as the right body to take this initiative forward and that the Treasury would take very seriously any recommendation which it might make. There is no doubt that the impact on consumers is an issue of not only great but growing importance. This has been repeatedly acknowledged by the coalition Government, not least in the recent Statement of my right honourable friend the Secretary of State for Energy and Climate Change.
The PAC report of last July has not yet been the subject of a debate in another place. In those circumstances, I would not think it the least bit appropriate to invite the House to vote on the new clause. Rather, I see this debate as providing my noble friend Lord Deighton with an opportunity to give the House his assessment of where we are in greater understanding of the impact of infrastructure investment on consumer bills and what his department may be able to do to advance that understanding. There is no doubt about the importance of the subject. Indeed, the presence of my noble friend to respond to the debate indicates that the Government share that view. I beg to move.
My Lords, I am very pleased to support the noble Lord, Lord Jenkin of Roding, on the amendment. My noble friend Lord Whitty apologises; he had to leave. Presumably he thought this would come up a little earlier in the proceedings. The noble Lord, Lord Jenkin, told the House a number of very useful and interesting ideas about how this issue is going to be taken forward. I shall be very interested to hear the response of the noble Lord, Lord Deighton. First, obviously, I welcome the Government’s commitment to so much new infrastructure. It is not before time. Most of it is sensible and should be good value for money. However, as the amendment seeks to point out, we need to know the effect on consumers, not just this year and next year but in the long term; some of these projects take a long time to construct. If there has been some kind of financial arrangement in the private sector to finance them, we need to know the long-term effect.
It is worth pointing out that many of the sectors mentioned in the amendment are by definition monopolies: railway infrastructure is a monopoly; water services are generally monopolies; and gas and electricity are not generally monopolies, but some of them are. I think it is true to say that all regulators have a duty to protect the interests of consumers while also ensuring that the companies they regulate are financially sound and capable of investing and delivering for the future needs of their customers.
I will take one or two examples. We have to ask how successful these industries and the regulators have been in protecting the customer’s interests. We have had much debate this year over electricity prices, resilience of supplies—are all the lights going to go out?—and people complaining that Hinkley Point EDF may be a deal that has screwed the Government. I do not know whether that is true: I am not an expert on it. Then, of course, there is the latest investigation by the Competition and Markets Authority into the big six electricity suppliers in terms of vertical integration. Where the customers come in all this is quite difficult to understand for the average payer of electricity and gas. That is something that could very usefully come as a result of discussions on the amendment.
On the railways, to take another example, the Office of Rail Regulation’s role is not directly to help the customer—it does, because the charges relating to Network Rail’s costs have come down—but it is relevant because it is regulating a monopoly. Everybody said at the beginning that Network Rail was pretty efficient but it could probably do with a tweak here or there. However, the regulator over the last 10 years has succeeded in reducing Network Rail’s costs, or efficiencies, by something like 40%. If it was 40% over what it should have been as an efficient operator, that is quite an achievement for a monopoly. Now the regulator is expecting another 20% from it in the next five years, and many people say that there is more to come. I do not think that other infrastructure managers of monopolies are probably much different, which is quite worrying. We have very efficient regulators across the sector and they have achieved a lot, but how much more is there to achieve? I just do not know.
The water industry is a different issue. We have had many debates here, some of which I have instituted, about whether the regulator has regulated Thames Water in order to ensure that it had enough assets to provide the investment it believes is necessary for its long-term operation—personally I do not believe it is necessary, but that is not the point—and whether the regulator was doing its job properly in ensuring that there was not a load of asset stripping, which appears to have gone on. More importantly, when is the regulator going to come up with some credible estimate of the effect that the Thames tideway tunnel and the other changes to the industry are going to have on the customers? There has been lots of talk about this; it would be interesting to know, but I suspect that that might require a bit of pressure.
Several newspapers today say that the Prime Minister is apparently going to announce 300 new roads. Whether they are all Highways Agency or strategic road company roads, I do not know—I suspect that the noble Baroness will tell us one day—but that is not the point, really; he is going to announce them, although I do not know how they are going to be financed. Under the Bill, which some of us think is being set up for them eventually to be privatised, the roads will probably be turned into toll roads, although the Minister has strongly denied that at every opportunity. There is still a question of how these new roads will be paid for, though, so should there not actually be some toll roads? However, we are not going to go any further on that today.
The amendment is therefore very important. Having some consistent statistics and data across all these different sectors regarding how much the consumer is going to have to pay, and over what period, would be very useful. It might also put pressure on the regulators to come up with a bit more consistency than they have shown up to now. The UK regulators network is a good idea and I think it is making progress; I have also been involved in some suggestions that there should be a European rail regulator, or an association of European rail regulators, across 26 member states, though at the moment that seems to be a step too far. Still, the concept of regulation is developing, and the question we have to ask ourselves is: is it sufficient that the regulators apply self-regulation to themselves? I have my doubts and would prefer the Treasury to do that to start with, but maybe the Minister will be able to persuade us that they are capable of doing it themselves, with a good deal of Treasury supervision. It will be interesting to see what happens. Again I thank the noble Lord, Lord Jenkin, for bringing this to our attention on Report.
My Lords, this gives me the chance to congratulate the noble Lord, Lord Jenkin, on the assiduous way in which he has pursued this topic and the way in which he has clarified many of the issues. He did so to our great advantage in Committee and has been a great strength today, so the noble Lord, Lord Deighton, knows the nature of the opposition to which he needs to respond.
We regard the noble Lord, Lord Jenkin, as entirely right to raise the key question of the costs to consumers; he is certainly right to repeat the call of the Public Accounts Committee, which argued that departments should consider very carefully the costs to consumers of the policies that they pursue on infrastructure. He is also right, of course, to raise the fundamental issue of ensuring that costs are not unfairly passed on to consumers. If we had more time, we would dwell on the number of occasions where we consider that to have been the case. It is clear that in many sectors costs to consumers have risen very significantly: one in eight households says that their water bills are unaffordable, while around one-quarter of households and 64% of the poorest households spend more than 3% of their disposable income on water bills. Those bills are 40% higher in real terms than they were in 1989. Obviously the licence agreements set a maximum price, but whether Ofwat has quite the powers that it needs to alter those agreements is still unclear. Likewise, the rise in energy bills has been very well documented. The House will of course recognise the extent to which we have been concerned about electricity bills, to the point of indicating that under the next Labour Government there will be a period of time when bills are frozen.
There is an apparent lack of connection between wholesale prices and the retail prices that hit the consumer. It seems pretty obvious to us that the consumer is often getting a bad deal. None of us underestimates the extent to which infrastructure needs to be improved. I am sure that the noble Lord, Lord Deighton, will dwell on that point. However, we need to ensure that increased infrastructure investment does not fall on the consumer, mainly because currently we are very badly in need of better infrastructure delivery. It is absolutely clear that, given that output has fallen by over 19% since May 2010, less than a third of the projects in the Government’s infrastructure pipeline are classed as in construction. Therefore there is a great deal to be done. The Government are rather better at indicating promise and intent than at acting in reality. The imperative is clear. We need to ensure that our infrastructure output increases; likewise, we need to ensure that the costs are not unfairly passed on to consumers, as they have been in some areas in the recent past. I hope that, just as the noble Lord, Lord Jenkin, indicated, the presence of the noble Lord, Lord Deighton, will guarantee that we are pointing in the right direction towards achieving the right balance and a better one than has obtained in recent years.
My Lords, I shall begin by thanking my noble friend Lord Jenkin for raising this matter in the House. As we know, infrastructure investment is a key element of the Government’s economic plan. I agree with the noble Lord, Lord Davies, that it is key to improving our long-term productivity and that delivering it effectively is a part of the Government’s responsibility in working with the industries involved. Of course, we must ensure that it is delivered in a way that is affordable for consumers and taxpayers. That is a crucial and quite complicated issue. The way that we finance and deliver infrastructure in each sector differs. The road sector, which the noble Lord, Lord Berkeley, referred to, is of course financed exclusively through taxpayer funding, so the question of passing the price on does not exist, whereas the energy and water sectors, for example, are predominantly financed in the private sector.
I am pleased to have this opportunity to set out personally the Government’s position on this important issue. If we look at the future pipeline of infrastructure expenditure, it works out that about 60% of it is expected to be privately funded—water, energy and telecommunications are the sectors where that is the case. To ensure that such privately funded investment is affordable for consumers now and in the future has to be central to the Government’s approach, and independent economic regulation is at the heart of that. At the core of the argument I am going to make is that it is actually in our long-term interest to have the regulators primarily focused on this. That is where the expertise is. The fact that they operate independently of the short-term changes that may come from government policy is a very healthy thing in terms of both protecting the consumer and creating an environment that encourages investors to put their money into our infrastructure for the longer term.
In that respect, protecting the consumer is central to the work of our regulators—particularly in the case of Ofwat and Ofgem—and is enshrined in their statutory duties. They are able to take a long-term view free from political involvement, as I said. This is a tried and tested system. Indeed, the ability of regulators to undertake their work independently of government interference is a cornerstone of our regulatory system’s success. Our regulatory system, which has its challenges, is the envy of the world. We need to keep on improving it, but it is a strong competitive advantage for this country.
The regulators have the expert knowledge which allows them to scrutinise companies’ proposed infrastructure investment plans to ensure that they are necessary, are delivered efficiently and are in the interests of the consumers we are serving. One of the concerns that I had about the amendment was that I did not think it was in the interests of getting this right to have the Government take over some of those roles. We need to focus the regulators on what is important, encourage them and ensure that they deliver on this mandate so that the impact of the investment programme is appropriately managed in terms of its impact on consumer prices.
The relationship between infrastructure investment and bills is a very complicated one. Infrastructure investment is one of many inputs into the ultimate price, and the price itself is driven by many other factors. The price of our utility bills is one component in the overall cost of living equation, so you have to look at not only the detail but the macroeconomic situation. A whole range of factors come into play in the final price paid by the consumer. Those can include commodity prices, the cost of debt and capital expenditure and also, of course, operating expenditure. There is quite a focus now on looking at what one might refer to as total expenditure as a way of determining price settlements.
We should not forget that infrastructure investment, if it is done well, ultimately reduces the future costs of supply, maintenance and renewal. That will drive down prices as well as giving us other improved outcomes. Telecoms is the best example in recent history where the improvements in broadband and mobile data speed and coverage brought about by huge infrastructure investment have come alongside falling prices for consumers. So you have to be able to see both sides of the equation here. Similarly, not investing in energy generation now could be expected to increase prices further down the line if demand started to outstrip supply. Given all those complexities—this takes me back to my noble friend Lord Jenkin and his focus on this—I very much welcome the fact that, as part of its first annual work programme, the UK Regulators Network is already looking at improving the understanding of affordability pressures across the sectors and, indeed, the part that infrastructure investment plays in this.
The noble Lord, Lord Berkeley, said that it was important to achieve consistency across regulators. One of the key objectives of the Regulators Network is to transfer best practice and to look at the differences, ask whether they are justified and examine how we can improve overall performance. I think that there will be significant focus on this area of infrastructure investment and affordability. This work will include looking at patterns of household spending across sectors, characteristics of an essential service and how these influence household spending decisions and can be drivers of customer decisions. I am happy to reiterate that the Government have made clear that they are committed to supporting the UKRN in taking this work forward. In fact, we are currently consulting on how we can best support and encourage the UKRN to help to embed this co-operation more widely between the regulators.
Of course, this is not the only way that the Government can take targeted action to help with the cost of living. Sometimes it is appropriate to intervene in other ways to reduce the cost of living, through more targeted action on bills. For example, in the Autumn Statement alone, we announced a series of steps that are saving the average household around £50 on its energy bills. Only recently, we announced an extension to the freeze on rail fares; with last year’s freeze, this will save season ticket holders around £75 over 2014 and 2015. There are other ways of intervening to manage the impact of what is effectively amortising the investment spend through the pricing variable. There have also been other measures—such as increasing the tax-free personal allowance, freezing fuel duty, and helping local authorities to freeze council tax—all of which reduce the cost of living burden on our citizens.
More specifically on infrastructure, a unit of the Treasury, Infrastructure UK, is also taking forward a considerable amount of work with industry to reduce the costs of infrastructure projects in both the public and the private sector.
In conclusion, I can reassure my noble friend that the Government fully recognise the importance of ensuring that vital infrastructure investment is cost-effective and affordable. That is why we have a system of independent regulation that has the consumer at its heart. The regulators are the ones with the expertise in weighing up these complex issues, and it is better that we should look to them to do so. I very much welcome the fact that they are working together through the UK Regulators Network to further our understanding of these issues. Indeed, I can give the assurance that the Government are committed to doing everything we can to support them in this important work, at the same time as taking action to help with cost of living more broadly.
I thank my noble friend for giving me the opportunity to discuss these issues today. I hope that what I have set out reassures him, and that he will feel comfortable in withdrawing his amendment.
Before I withdraw the amendment, may I say that I am immensely grateful to my noble friend for his reply to the debate? I—and others, I am sure—will want to study carefully what he has said, because this represents, in some respects, a new departure in trying to assess who is actually having to pay for the huge programme of infrastructure investment on which we are currently embarked.
I thank the noble Lord, Lord Berkeley, and I should also mention that the noble Lord, Lord Whitty, apologised to me for the fact that he had to leave. This has been a useful debate, and I am grateful to my noble friend for having been here to reply to it in the way that he did. I beg leave to withdraw the amendment.
Amendment 119 withdrawn.
119A: After Clause 38, insert the following new Clause—
“Application of duty to limit emissions
(1) The Energy Act 2013 is amended as follows.
(2) In Schedule 4 (application and modification of emission limit duty), after paragraph 1(1)(b)(ii) at end insert—
“(iii) substantial pollution abatement equipment dealing with oxides of sulphur, oxides of nitrogen, heavy metal emissions or particles is fitted to the generating station.””
My Lords, a number of noble Lords may recognise this amendment, because this is not the first time we have had this discussion. I am afraid that I do not intend to apologise for retabling it; I shall keep retabling it until the issue is resolved. At the moment, whether because of a lack of joined-up thinking or because it is the Government’s intention, we are seeing perverse effects arising from their energy market reforms, leading to a reinvestment in old coal.
I said earlier that I would far rather we used home-grown gas to generate electricity than see imported Russian coal being burnt in stations built in the 1960s and 1970s that are now well past their use-by date. When I tabled this amendment in Committee, the Minister’s response was to say that she agreed neither with my analysis of the current position nor with my prediction of the future, and was not convinced that the amendment, which, essentially, would bring in a backstop power to enable us to limit the operating hours of old coal, was needed.
Last week Eggborough, one of the coal-fired power stations built in the 1960s that is seeking a three-year contract to extend its life under the capacity payments mechanism, was sold to a Czech energy company which, in addition to running power, heat and energy provision services in the Czech Republic, is also the third largest coal producer in Germany. This is its first entry into the UK market. The company is EPH, whose spokesperson, Daniel Castvaj, said that there were obviously questions over the long-term operation of the plant but that the company intended to run the existing units for as long as possible.
Today a report was released by WWF with the help of Imperial College London. It made the point that I have continually been seeking to make to the Minister and the Government that just wishing old coal away is not going to work. If we want coal to come off our system and be replaced by cleaner, more efficient infrastructure, we will have to regulate to make that happen. We were told during the passage of the Energy Bill that this would be achieved by financial measures, through the introduction of a carbon price floor, which was in the Finance Bill, and that that would see an end to coal. No sooner did that Bill pass into law than that financial provision was frozen. The escalator, intended to drive off coal, was removed.
Everything that the Government told us during the passage of the Energy Bill has changed since it passed into law. More information has now come to light on the impact of the capacity mechanism. That was intended to enable investment in new infrastructure—to bring forward cleaner infrastructure and make sure that the lights stay on. However, the Government’s choices in how they have implemented that measure have meant that there is now a real possibility that we will not see the capacity mechanism bringing forward investment in new gas infrastructure. If we do, it will be on a very small scale. Instead there will be reinvestment in old coal.
Overall, the capacity mechanism and the people who have bid into it demonstrate that we have more than sufficient plans for infrastructure and supply than is demanded by the capacity mechanism. In fact, it will come down to a straight choice between investment in old coal and investment in new gas. The costs of that are such that it is my expectation—we will find out in December whether this is the case—that it will be old coal that wins and new gas will not. Essentially, the capacity mechanism favours short-term investments by allowing coal plant to continue operating unconstrained, at high load factors but lower efficiencies, than if there were investment in cleaner gas.
I am sure that I will hear from the noble Baroness that she disagrees, but the Imperial College study launched today and commissioned by WWF said:
“Imperial College’s economic modelling shows that it is unwise to simply assume that coal-fired power stations will all close in the 2020s. If government wants old coal stations to close it needs to ensure that happens through legislation. We modelled a variety of scenarios and, with the UK’s existing suite of energy policies, in every instance coal still played a role in generating electricity and 2030 emissions targets were missed”.
That was picked up today by the Independent, which went one step further and said that this really showed that the coalition’s commitment to being a green Government was in tatters and that it did not have credibility in its comments on moving to a decarbonised electricity system.
I saw the noble Lord, Lord Turner, here earlier but he is obviously not in his place now. He commented on WWF’s report and I shall take the liberty of quoting him. He said:
“"The Intergovernmental Panel on Climate Change’s latest report update on climate change science makes it unequivocal that we must reduce carbon emissions dramatically to avoid major harm to human welfare. And we cannot achieve the required cuts unless we eliminate unabated coal from the electricity generating system”.
At the end of an extensive comment, he concludes:
“A clear commitment to get unabated coal out of the UK generation system is needed to provide certainty against which businesses can invest”.
The amendment has been tabled a number of times and I make no apology for that. I will keep tabling it, probably until I run out of breath, because I care passionately about achieving decarbonisation at least cost and by keeping our energy supplies secure. It is a very short-term attitude to think that if we patch up old coal and keep it running at high load factors it will somehow be beneficial for the country as a whole. Yes, it may make a small difference in the short term, but in the longer term it will be wasted investment. If we are to hit our targets, we need to get our electricity systems almost fully decarbonised by 2030. We need unabated coal to come off. These stations are old, inefficient and highly polluting. If we do not phase them out, using measures such as the EPS, we will simply see ourselves running very fast to stand still. Every coal station that stays open emits twice as much as a gas station. More renewables and nuclear have to be built to compensate for those extra emissions, at a greater cost. This is really not that difficult to work out: old coal should come off first. It is the most polluting and we are wrong to set in place a capacity mechanism that keeps it going a moment longer than it needs to.
I hope that at some point the Government will see the logic of my argument and accept that something needs to be done if we want to get these coal stations out of our system early in the 2020s. I beg to move.
My Lords, I very much agree with the amendment. I have backed similar amendments to other Bills. Unfortunately, we did not manage to get any further on it. It is Liberal Democrat policy that we should get unabated coal out of the energy generation system by 2025—to me that seems an eternity. One of the key things that would do, as this amendment would do, would be to stop long-term investment of any size in unabated coal generation and facilities. That seems to me an absolutely fundamental prerequisite, not only of meeting our carbon budgets, but of ensuring we meet our international obligations, such as on air quality. It will be very difficult to continue to lead on climate change—as we do and as we want to continue to do into the future—if we have a continued electricity generation industry based on coal for the long term.
There are all sorts of other ways to do stop that reinvestment. We have rehearsed these arguments many times before. It is the Chancellor’s and the Treasury’s wish that we should have gas investment at a reasonable level in this country over the next few years. Of course, the more we take the risk of encouraging coal to reinvest into the future—we do not know how much of that will happen but some of it already has—the more we will crowd out investment in other technologies. I suspect that the Minister will not accept the amendment, unfortunately, but I know that a number of Ministers and people in DECC understand the importance of taking coal out of generation. I hope that the Government will one day come to a single view that this needs to be done.
My Lords, we were treated yet again to an exposition by the noble Baroness on a matter that we debated at length and voted on last year on the Energy Bill. Here we are doing it again. If the noble Baroness and her party had really wanted to meet some of the targets then they should not have flapped around like wet hens in a thunderstorm when they were in power and got on with doing something about nuclear. As a result of this Government, the energy programme is taking off in a way that it should have done a long time ago. We all agree that we want to get coal out of the system. It is about getting the timing right for that, without creating extra costs for the consumer and without switching the lights off. The coal power stations have to meet the new directive on, I think, 1 January 2016. This subject has been debated long and often and we have voted often. We will obviously continue to do so, but thankfully we are now heading in the right direction. I hope that my noble friend on the Front Bench will not accept the amendment.
My Lords, I thank the noble Baroness, Lady Worthington, for yet again bringing this subject to the attention of the House. As my noble friend Lord Caithness eloquently said, we debated this amendment during the passage of the Energy Bill less than a year ago. Noble Lords will recall that, after careful consideration, this House and the other place decided that it should not be adopted. I do not propose to set out in detail again the reasons why the Government did not support this amendment when it was last considered. However, noble Lords will recall that the Government’s main concern was that it could lead to circumstances where existing coal plants closed prematurely, leading to a need for more generation capacity to be built earlier than would otherwise be necessary, and resulting in totally unnecessary and avoidable cost to consumers.
I want to address the points made by the noble Baroness that developments since we last considered this amendment make it necessary to reconsider the conclusion we reached at the time. It is true that there have been a number of developments over the course of this year. We have set about implementing our electricity market reforms, which include taking the actions that are delivering new investment and our plans for a secure, affordable and low-carbon electricity system. That is well demonstrated by the allocation in April of the first contracts for difference to eight renewables projects. These projects include offshore wind farms and coal to biomass conversions, which alone will provide up to £12 billion of private sector investment by 2020, supporting around 8,500 jobs and providing a further 4.5 gigawatts of low-carbon generation capacity to Britain’s energy mix.
The noble Baroness pointed to the capacity market and the fact that four of the 11 remaining coal plants are seeking a three-year capacity agreement to refurbish their plant. She said that that is evidence that these plants will upgrade to comply with the industrial emissions directive allowing them to continue operation long into the future and generating at levels inconsistent with our decarbonisation plans. She also pointed out that the freezing of the carbon price floor improves the economics of continuing to operate coal-fired power stations. The fact is that neither of these developments is expected to have a significant impact on the overall future outlook for coal.
The Government’s latest projections, which take into account recent changes to the carbon price floor, suggest that virtually all coal will have retired by the end of 2025. Only one of the four plants seeking a three-year capacity agreement has fitted the equipment needed to comply with the directive and operate without constraint when it comes into force on 1 January 2016, as my noble friend Lord Caithness rightly said. We are not aware of evidence that any of the other plants will be compliant with the directive at the time it comes into force.
Even were these plants to achieve compliance at some point in the future, our assessment remains that overall levels of generation from coal will decline over time as multiple factors, including age, environmental regulation, increasing levels of low carbon generation and a strengthening carbon price, act to reduce coal generation, although the additional resilience to our energy system that comes from a small number of compliant plants while they are still economic to operate would not be unwelcome.
The risks that would be created by this amendment are also more immediate. I would like to draw the attention of noble Lords to the first auction under the capacity market that will be held in December, which is our response to ensuring security of supply at the least cost to the consumer. A potential impact of this amendment is to constrain the ability of plants to generate when it is otherwise economic for them to do so. Accepting this amendment will therefore create a significant regulatory risk to those plants seeking refurbishment contracts in the capacity market. Their response may therefore be to seek a higher capacity clearing price to compensate for this possible reduction in electricity market revenue, particularly in the years preceding the first delivery year in 2018-19. Alternatively, these investments may not go-ahead. Neither scenario is desirable, with the risk that the cost of the capacity market is pushed upwards with no accompanying benefit to security of supply.
We should also consider what sort of signal it sends to investors of all types of generation, not just coal, now and in the future. They will interpret this as further intervention of a measure that has already been rejected by this House and so close to the first capacity market auction where we will be seeking competitive commitments from over 48 gigawatts of capacity to ensure continued security of our electricity supplies over the course of this decade. It is also important to remember that over 10 gigawatts of new gas has come forward to participate in the December auction, highlighting that we have the right incentives in place to ensure security of supply at the least cost to consumers and to encourage competition through new investment. As we discussed last year, I will oppose an amendment that has the potential to increase consumer bills and increase the risks to security of supply.
There is an almost unanimous consensus on the need to substantially decarbonise our electricity system on the pathway to cutting our greenhouse gas emissions by at least 80% by 2050. There is a similar consensus that it is only with carbon capture and storage that coal will continue to play a role in that future. The measures we agreed last year to reform our electricity market are already bringing forward the investment needed to achieve this cost effectively and securely. Against this background we continue to believe that applying the EPS as proposed by this amendment is a potentially risky intervention in the market.
I hope I have gone half way to convincing the noble Baroness that the developments since the Energy Bill was before this House less than a year ago are unlikely to have the impact she assumes and I hope on that basis she will be willing to withdraw her amendment.
My Lords, I thank the Minister for her response. It may well be true that up to 10 gigawatts has bid into the capacity market but my point is that not one of those apart from Carrington, which is already under construction, will successfully be awarded a capacity mechanism contract. They are going to be frozen out by contracts that will be given to existing coal. It is pointless telling me that lots of people out there want to build gas if in reality we are going to keep coal open at the expense of those investments in cleaner, more efficient technology.
We have spent the largest part of this evening talking about fracking rather than the need to develop the resource of gas so that we can use it as a bridging fuel. There is absolutely no point us investing in that if there are not going to be any stations in which we can burn it efficiently. The losers in this capacity mechanism at the moment are the operators of existing gas stations and those who wish to build new ones. That is because we continue to tell ourselves that the lights will go out if we constrain coal and that that will necessarily force a higher price on to consumers. The money we are spending on propping up old coal is going to be money wasted—we will have to shut these stations anyway at some point. Why we seem to be perpetually telling ourselves that we cannot do without these ageing dinosaurs in our electricity system is beyond me.
I do not intend to detain the House any longer at this stage and I will, of course, withdraw my amendment. However, I reiterate the words of Dr Gross from Imperial College that we will not see the end of old coal without government intervention. If this Government refuse to do it then it will fall to another Government. There is a future for coal; it is with CCS and only with CCS. Unabated coal is simply not something we should be sustaining through the 21st century and no end of anyone telling me otherwise is going to persuade me. However, I will withdraw this amendment now.
Amendment 119A withdrawn.
Clause 39: Regulations and orders
119B: Clause 39, page 42, line 9, leave out “or 35” and insert “, 35 or 36”
My Lords, as part of our proposals on the right to use underground land to exploit oil and gas and deep geothermal energy, each of these industries has put forward a voluntary offer for a payment and notification system. The Government support this offer. We think that the offer is in the communities’ best interests because it ensures that the payment scheme will be flexible and tailored to the specific requirements of each community. We have proposed to take a delegated power in the Bill, both as an incentive to adhere to the voluntary agreem