Monday, 8 February 2016.
Arrangement of Business
My Lords, if there is a Division in the Chamber, the Committee will adjourn for 10 minutes.
Transport for London Bill [HL]
Motion to Take Note
My Lords, it is quite unusual for a private Bill to be the subject of a certain amount of political attention and controversy. I have had a bit of a job explaining to friends what the difference is between a private Bill and a private Member’s Bill—it is not that widely understood.
Let me explain what my concerns are, because I put a stop to a fairly smooth process so that there would be a chance to have a debate, which is what I was after. Why has this Bill been around for so long? I understand that it first got to Parliament in 2010, nearly six years ago. It may have got stuck in the House of Commons—or it may not—but I am puzzled as to why it has taken so long. It is important to note that the time lag has meant that the housing market in London has changed, becoming much more acute and difficult. In one sense, the Bill is a bit out of date because of the passage of time. I have had quite a large number of representations about the Bill and am grateful to Transport for London, which came in to discuss it with me.
I have mentioned my first concern—the length of time the process has taken. It is quite difficult to remember the situation when the Bill first came to this House. It may have been more recently but it still means that some of us are not as up to date as we might be on what happened when it was before the House. What is not controversial is that the property market has changed quite a lot in the last six years, especially in residential housing. There are far more housing pressures and many people in London are finding it hard to find property to rent or to buy.
I understand that Transport for London is facing a large cut in its budget—up to £800 million in the year and £2.8 billion over a five-year period. I may be corrected on the precise figures, but it is a large cut. The politics of the Bill are that TfL has been told that its funding has been cut and it has to raise money by some other means. The main means open to TfL as far as this Bill is concerned is to dispose of assets of land at or near stations. In the initial phase, most of the sites—there are about 50—have been in zones 1 and 2 but the plan is to expand into wider zones. Of course, the value of the sites in zones 1 and 2 far exceeds the value of the sites further out.
TfL is intending to dispose of land for housing; some will be used for offices as well. It is obviously a good thing to use the land for housing but the next question is what sort of housing. Will it be for more affluent people or for ordinary people who are bearing the brunt of the housing crisis in London? The Minister wrote me a letter, for which I thank him, about the Bill and about housing. He mentioned three ongoing planning applications at Nine Elms, Northwood and Parsons Green, saying that these,
“will deliver … affordable housing levels ranging up to 40%”,
of the total.
The problem is: what is affordable housing? I have spent some time doing research into this. We understand what social housing is but affordable housing is variable and there is no clear indication as to whether housing that is affordable can be accessible to ordinary people. I have been looking at various definitions. For example, from the national policy and planning framework there is a glossary that mentions affordable housing. It says:
“Eligibility is determined with regard to local incomes and local house prices”.
and it talks a lot more about affordable housing. I find it difficult. If the answer is that all the housing, or a large part of it, will be affordable then that is not quite clear enough and I would like to know more about what sort of housing it will be. I appreciate that London boroughs decide how they define affordable locally and that is a difficulty. London-wide, a lot of the affordable housing is beyond the reach of ordinary people. Therefore, whereas I welcome the idea that the land to be disposed of is for housing, I question for what sort of people it will really be intended for. Of course we could discuss the definition of social housing and affordable housing for a long time but I put it as a question.
As I said, TfL is under enormous pressure from the Government to maximise its return. In a way I have sympathy for TfL, which is caught between pressure from the Government who are cutting its money and pressure from people who want better housing for Londoners at prices that Londoners can manage to pay. It is a bit unfair that TfL is put in this difficult position. Furthermore, TfL has the power via the Greater London Authority to make compulsory purchase orders for land adjacent to these properties. That will of course be a way of increasing the return but, again, it might be a way of taking housing away from ordinary people. So that is also a matter of some concern.
The land we are talking about is currently public land: it is a public asset. It is not a matter of one private developer selling to another, and it is a pity that some of that is not going to social or decently affordable housing. We are talking about public assets spread where there are TfL assets, particularly at stations. I believe the priority in disposing of public land should be land that would be used preferably for social housing or affordable housing at a price that would mean something significant.
In the Bill, TfL is to engage with property developers and there is this slightly puzzling concept of limited partnership; it has been much criticised for being less transparent and is a device used to minimise tax obligations. I am not certain whether joint ventures and limited partnerships are the same thing or whether there are technical differences between the two. All I know is that in joint ventures the private developer can have anything between a 10% and 90% stake. Therefore, there is an issue that is of real concern. Those of us who believe passionately that London has a housing crisis that should be tackled urgently do not want to support anything that means moving backwards and losing valuable land that can be used for ordinary people.
I understand that the contentious clause—Clause 5 —may be taken out of the Bill when it gets to the House of Commons. I do not think it is a secret so I am not giving anything away in saying that. First, I hope that can be confirmed. If it is taken out, can we have some indication as to the remaining basis on which TfL will be able to sell land? It still has the powers to do it though it will be more limited if Clause 5 disappears. Therefore, I would find it useful to know what sort of powers TfL will have left and whether there will be sufficient safeguards in that arrangement to meet some of the concerns that I have expressed. The proposition is a very simple one. I beg to move.
My Lords, I apologise for not having put my name down to speak. I support the noble Lord, Lord Dubs, because the whole issue of affordable housing is very complex. The waters have been completely muddied by the Mayor of London, who changed the whole concept.
Another issue that I want to put on the table in an urgent way is what is already happening on some of these sites; for example, at Parsons Green there is a thriving artisans’ hub and it seems very strange that those people should be driven out without any confirmation of where they can go or the possibility of return. So I stress to TfL that the direction is not only about housing. We all want housing, we all want affordable housing—some of us even want social housing—but we also want jobs and it is incredibly important that those factors are brought in as well with this Bill.
My Lords, I thank the noble Lord for initiating this debate. It is important, given the age of the Bill, that we have the opportunity to say something about it. As the noble Lord said, it has been around for a long time and I would argue that the financial and political mood has changed in that time. The Bill may no longer be as in tune with its time as it was four or five years ago.
There is greater concern now about corporate social responsibility, financial transparency and corporate taxation. Tied up with all this is a general public unease about the predominance of foreign ownership of much of our infrastructure. TfL itself has an excellent reputation for what it does and it is essential that it does not undermine that reputation. As a company owned by the public and working for the public, it needs to set the highest possible standards of social and financial responsibility and transparency.
I understand the imperatives behind the Bill. They have been reinforced since it was introduced. The Government’s spending review last November cut the revenue grant faster than ever—faster than expected—and it will be cut by £2.8 billion over the period up to 2021. In addition, the London housing crisis has intensified. The truth is, we desperately need the land that TfL will sell as surplus for new homes. So I support TfL in doing that, but with caveats.
First, Clause 5 deals with limited partnerships, which in my view are a step too far for a public body. It could mean additional risk for TfL and it certainly would mean a lack of transparency on ownership of land and who exactly the partners of TfL are. In addition, I urge TfL not to repeat the mistakes that have been made, for example, at Earl’s Court. That really is a recipe for how not to do it. I very much hope TfL will learn from that situation. There are too many flaws and disadvantages to that development for it to be called a bonus for the people of London. I would like TfL to commit very strongly and transparently to social housing and rentable housing—not just the umbrella term of “affordable housing”—on the sites that it sells.
Secondly, we need more public consultation and engagement, and more transparency, please. With that in mind, I strongly welcome the announcement last week that Transport for London is partnering with 13 specific organisations with which it plans to undertake long-term development. That is a really good step.
Finally, I urge TfL to take a long look at the mistakes of the past in the transport industry in general. Too often, land used for transport infrastructure was sold off too quickly and was then discovered to be strategically important. I know that there are clauses in the Bill—and indeed TfL manages its business in this way in general—which require it to get permission from the mayor and, in some cases where the land is of strategic importance, from the Secretary of State. However, there is no role, for example, for the National Infrastructure Commission, although that is understandable because it did not exist until recently. However, I ask both the Minister and TfL to consider whether there should be a role for the infrastructure commission in advising on the sale of large parcels of land, which could well prove to be of strategic importance.
My Lords, I thank my noble friend Lord Dubs for enabling us to have this debate today in Grand Committee. We should all be grateful to him for enabling us to highlight the important issue of social housing in London.
As we have heard, we have a housing crisis in London, and in particular a social housing crisis, which the Government are doing nothing to help us with. Only 11,000 council homes were built last year compared to 33,000 across the country in Labour’s last year in office. It is so disappointing that we are seeing people on modest incomes being driven out of central London. London is a wonderful city—probably the best city in the world. That is why the Olympics and Paralympics were such a success—the languages spoken, the community ties from all over the world, the art scene, the sport, the history, and the spectacle of London. However, for that to continue to grow and to keep London at the top we have to make proper provision for people on all incomes doing every job you can imagine to be able to live in this great city, from emptying your bins to sweeping the street, to working as a classroom assistant through to social workers, lawyers and business men and women, to some of the highest earners on the planet, who run some of the biggest companies in the world. Social housing provision with proper social rents has to be part of the housing tenure throughout this capital city.
If the noble Lord, Lord Ahmad of Wimbledon, comes back and talks about all the affordable housing in London, it would be better if he called it “unaffordable housing” for large numbers of people living in the capital. Where I live in Lewisham, which is a lovely part of London with rows and rows of Victorian terraced housing, people in the private rented sector pay over £2,000 a month to live in an ordinary terraced property, which is £24,000 a year. The new national minimum wage, which will come into force in April, will mean that you will earn £14,000 a year. Even if two people earn £20,000 in London, paying rent of £24,000 a year does not give a huge amount to live on for all the other expenses.
I am very grateful for the briefing note and for the meeting I had with TfL last week. I can understand that TfL must be very frustrated at the time the Bill has taken and the fact that it is still making its way through Parliament. It was originally deposited in 2010, as my noble friend Lord Dubs said. It is in everyone’s interest that these private Bills from TfL and other public bodies make much speedier progress through Parliament. I am sure that TfL would have preferred that the Bill was decided on, either way, in a much more timely fashion. It is probably not in his remit but can the noble Lord, Lord Ahmad of Wimbledon, talk to whoever is responsible for managing the process of getting these Bills through Parliament? I suggest that the time for a review is well and truly upon us. Six years on an eight-clause Bill, even though it is opposed, is far too long.
The most controversial clause is Clause 5; it is connected with the Earl’s Court development we heard about before, which delivers such a poor rate of return on affordable homes. TfL will say that the development would have gone ahead anyway, as the land it controls is not crucial to the development. I also understand and accept that in order to deliver a transport system that can meet the ever-growing demands of London, options need to be looked at for maximising revenues and minimising costs. That is of course due to the budget cuts we heard about earlier in today’s debate. However, when it comes to the redevelopment, rezoning and using public land to build housing, TfL has a responsibility to London and Londoners not only to seek to maximise the money it receives for the assets but also to ensure that it understands its responsibility and demonstrates its commitment to using its assets in a way that delivers the housing schemes, big or small, which it is involved in. That will enable Londoners to live in their community in a property they can afford to live in and be a part of this great city—and the affordable rent model is only one part of that. As I said, charging 80% of market rent is not affordable for many people in parts of London; in fact, it is totally unaffordable. My plea to TfL would be to make proper provision for property at social rents in schemes that it is involved in.
I understand that we will shortly be advised by the noble Baroness, Lady Grey-Thompson, of some amendments to be made to the Bill later, and I am happy with what is proposed. I concur with the questions of my noble friend Lord Dubs. With that, I welcome the Bill back to your Lordships’ House and we will look with interest at its progress through this House and the other place with the amendments we will shortly be advised of.
My Lords, first, I join other noble Lords in congratulating the noble Lord, Lord Dubs, on securing this important debate. I have listened with interest to the contributions that have been made by noble Lords.
As we have already heard, the Bill will enable Transport for London to use financial practices and mechanisms which will allow it to release greater value from its assets and financing arrangements.
Before I come to that, the noble Lord, Lord Dubs, and others raised the issue of the time it has taken for the Bill to reach this stage. It is not often during my five years or so in your Lordships’ House that I have taken up a Bill which was commenced prior to my joining, but this is one such.
If we look into the history of the Bill for the record, it is appropriate to note that it was read for the first time in the House of Lords on 24 January 2011, and received its Second Reading on 13 December 2011, when it was debated. As noble Lords may recall, the Bill was petitioned against by the West London Line Group. This petition was withdrawn when TfL agreed to delete a clause, and an Unopposed Bill Committee took place on 28 January 2014. The Bill was then read for a third time on 4 March 2014, and transferred to the House of Commons, where it had its First Reading that day. The Bill’s Second Reading took place on 9 September 2014, and the Opposed Bill Committee eventually took place on 13 January 2015. However, the Bill was blocked when it came up for consideration on 12 February 2015; that necessitated a debate, which was held on 16 March 2015. Time then ran out to debate all the amendments tabled by opposition MPs, which included the honourable John McDonnell and the right honourable Jeremy Corbyn.
We are back, however, in this Committee today to debate the use of financial practices and mechanisms which will allow TfL to release greater value from assets for financing. This is a principle that I welcome, especially given the Government’s continuing commitment to finding significant efficiencies in public spending, in the interests of both the taxpayer and the travelling public.
The noble Lord, Lord Dubs, raised the issue of the settlement. As the Minister responsible for London at the Department for Transport, I am acutely aware of the challenging budget discussions that we have had with Transport for London, but they have been held in a very co-operative climate, including those meetings we have held with the Mayor of London.
For information, as noble Lords may well be aware, TfL will receive about £11 billion of government support for the next control period, which runs from 2015-16 to 2020-21. This is a good settlement for London, and will enable TfL to continue to deliver the biggest ever investment across London’s roads and streets. TfL has confirmed that the settlement will ensure that it can continue the modernisation of the capital’s networks across transport, support thousands of jobs and the creation of new homes and promote economic growth across the UK.
I concur with noble Lords that London is an important city—indeed, it is the capital city of our great country—and therefore requires support and investment. The Government have underlined their commitment. I continue with other colleagues to work very closely with TfL to ensure the delivery of the infrastructure required so that London not only sustains its position on the global stage but strengthens it.
I understand from TfL that the Bill could realise in excess of £50 million in immediate benefits by improving its hedging power, enabling it to borrow money in a more cost-effective way and allowing it to make the most of its assets.
The department supports TfL’s commercial programme, and we want it to maximise its unique commercial position to ensure its assets are generating revenues to their greatest potential. We believe absolutely that giving TfL greater financial flexibility will provide it with the opportunity to run its business in a more efficient way.
I know that we will be hearing from the noble Baroness, Lady Grey-Thompson, shortly on some of the matters relating to revised amendments to the Bill but, in principle, for all of the reasons I have given, the Government continue to support this Bill and hope that, after the long delays it has suffered in its passage through Parliament, it can soon be enacted.
My Lords, I declare an interest as a board member of Transport for London, which is a public body constituted under the Greater London Authority Act 1999, as listed in the register of interests.
The first part of the Motion of the noble Lord, Lord Dubs, asks the Committee to note the delay in the progress of the Bill. I thank the Minister for giving a brief history of the slow transition of the Bill. Following the debate on 16 March 2015, time ran out to debate all the amendments tabled by opposition MPs, and the debate was adjourned. At that point, TfL asked the House authorities to table a revival Motion following the State Opening of Parliament. This was tabled and the Motion was blocked. TfL subsequently asked the House authorities for a debate on the revival Motion in order to overcome the blocking Motion. Time was allocated on 16 November 2015, when the Commons voted to revive the Bill. On 30 November 2015, the revival Motion in the House of Lords was withdrawn when the noble Lord, Lord Dubs, asked to speak to the Bill, leading to this debate before the revival Motion on the Bill can be tabled again. The revival Motion is tabled for 9 February, after this debate, and only at that stage can the Bill progress through its next stages in the Commons.
Although the Bill has had a long passage through Parliament, it remains relevant and important as it will provide TfL with additional powers, so that it can meet its business needs more flexibly and take advantage of more efficient arrangements for the stewardship of its financial affairs. London’s growth is relentless. It is driving up demand for our services. There is record ridership on the Tube and on the roads. To keep London working and growing, TfL has to invest just to keep assets in good repair, modernise the rail and road networks and continue to improve reliability. TfL’s £11 billion capital funding settlement from government covers the period from 2015-16 to 2020-21, and includes a total of £5.8 billion in investment grant, £1.4 billion in general grant from the Department for Transport, alongside £3.8 billion in borrowing powers. This allows TfL to continue to invest some £1.7 billion a year to modernise London’s road and rail networks. The Circle, District, Hammersmith & City and Metropolitan lines will be the next four Tube lines to be upgraded.
From 2019, TfL’s objective is to cover all the operational costs of running the Tube and bus networks in London through non-DfT grant sources of income. It has planned for some time to achieve operational breakeven by running its business more effectively and efficiently. As part of a continuous savings programme, TfL has already taken 15% out of its costs.
Following the spending review in November, TfL must now accelerate and build upon its cost reduction programme because the revenue grant is being cut faster than anticipated, reducing its overall income by £2.8 billion over the period to 2020-21. The Bill will help TfL with this task by providing it with additional powers so that it can run its business more flexibly and take advantage of more efficient and economic financial arrangements. This will allow TfL to maximise the value of its assets, bear down on fares and deliver significantly better value for money to the public.
The second part of the Motion of the noble Lord, Lord Dubs, asks the House to note,
“the case for land disposed of under the provisions of that Bill being used to increase social housing”.
The provisions of the Bill do not give TfL any new or additional powers to dispose of an interest in or develop its land, contrary to assertions made. TfL has had powers to dispose of land since it was created in 2000 and the Bill makes no reference to them nor does it expand them in any way.
Under its existing powers, TfL must obtain the consent of the mayor to dispose of an interest in its land by sale or granting a long-term lease. If that land is operational, or has been operational land in the past five years, the Secretary of State must also give his or her consent. The Bill does not affect these arrangements.
Using these existing powers, TfL has already begun to undertake development on its land, and will be developing more than 300 acres of land to help create more than 10,000 new homes across London using its existing powers. TfL is working with the mayor, London borough councils and the commercial property development sector to bring forward developments in an innovative and creative way. TfL is committed to ensuring that it can achieve the right balance between providing affordable homes, delivering revenues to reinvest in the transport network and delivering local transport improvements. Local authorities set the levels of affordable housing in their areas in accordance with local policy. TfL currently works closely with local authorities, and will continue to do so, at each of its sites and engages in active discussions on a site-by-site basis to ensure that development plans reflect local borough priorities and needs.
TfL has established a commercial development advisory group which provides non-executive guidance to its commercial development programme. The group includes experienced advisers who have expertise in social and affordable housing provision. TfL has recently submitted three major planning applications which will deliver £100 million in revenue for investing in the transport network, a new step-free Tube station and 600 homes with affordable housing levels ranging up to 40%.
The proposed development above the new Nine Elms Tube station will deliver 362 new homes—around 25% of which will be affordable—2,318 square metres of office, 550 square metres of retail, a new public square, play space, pedestrian and cycle connections, cycle parking, and disabled car parking. Revenue generated from the new development will support the funding of the Northern line extension.
The proposed development at Northwood will deliver 127 homes, around 20% of which will be affordable, as well as a new Tube station with step-free access and a new bus and train interchange. It will also deliver a new public space and 300 parking spaces, as well as 1,300 square metres of retail floor space. TfL is exploring options to accommodate existing tenants in the development and is providing relocation options to assist them in continuous trade.
I thank the noble Baroness, Lady Jones, for her contribution—her comments about Parsons Green have been noted. The proposed development is on the site of a former London Underground depot adjacent to Parsons Green Tube station, which is currently used as workspace. The scheme will deliver 119 new homes, 40% of which will be affordable, as well as over 4,000 square metres of retail, workspace and restaurants. The development will also support around 300 jobs and enable the opening of three arches for commercial use.
The Motion of the noble Lord, Lord Dubs, raises a wider issue of policy concerning the disposal or development of land by the public sector generally, not just TfL. However, the discrete scope of the Bill should be taken as indicative of a desire by TfL to meet its business needs more flexibly and cost effectively. The provisions of the Bill will impact on TfL’s ability to manage its financial affairs more efficiently and flexibly, which will assist it in being able to operate effectively and bear down on fares, while still being able to provide a world-class transport network.
To summarise the Bill’s provisions, Clause 4 will give TfL subsidiaries the ability to access cheaper finance, subject to the consent of the mayor and, in respect of core operational assets, the consent of the Secretary of State. Clause 5 would have allowed TfL to form limited partnerships subject to the consent of the Secretary of State by way of order debated in both Houses of Parliament. However, TfL took note of the strength of feeling in the House of Commons during the revival debate about this clause. TfL recognises that, notwithstanding the amendments which were made to that clause by the Opposed Bill Committee, concerns remain about the possible future exercise of the powers which would be conferred by Clause 5. Accordingly, if the Bill is revived in the House of Lords, amendments will be tabled in the House of Commons at consideration stage to remove Clause 5 and references to limited partnerships from the Bill.
Clause 6 expands the list of entities through which TfL can undertake commercial activities to include limited liability partnerships and companies limited by guarantee, thus enabling TfL to conduct its affairs more flexibly and net the maximum value from its assets. Clause 7 gives TfL greater flexibility to mitigate its risks through hedging, including by allowing TfL to hedge commodity prices when it is exposed to fluctuations as a consequence of a transport contract and TfL’s contribution risk to the pension fund. In view of the significant benefits that it will bring to TfL, it is essential that the Bill becomes law as soon as possible.
My Lords, I am extremely grateful to all noble Lords who took part in this debate. I repeat my thanks to all those who provided me with help in preparing for the debate today. I also thank my friend in the House of Commons, Andy Slaughter MP, who was very useful in giving me helpful advice in preparing for today’s discussions.
One or two things puzzle me a little. I have heard words such as “hedging power”. I am not an expert in finance, and am grateful to the noble Baroness, Lady Grey-Thompson, for the detailed exposition she gave us, but I do not know what hedging powers are, frankly. I do not have a clue what that means. I am suspicious of it, as it seems to be some sort of financial services device.
I am most grateful. I have learned something that is going to stand me in good stead in the future. In giving the TfL position, the noble Baroness said that revenue had been cut faster than anticipated. That is really the clue. Transport for London has taken a bigger hit in its finances that it had expected. We all want more housing in London but we also want housing that people can afford, not in the Government’s definition of affordable housing but in the common-sense definition: housing that ordinary people can manage to buy or afford to rent. The temptation in a debate like this is to range widely over housing policy. Clearly that is a temptation I have to resist because it would not be proper to do so. However, the temptation is very strong indeed.
I hope that when the Bill is revised and goes to the Commons, the Commons will have another good look at it and deal with some of the other concerns that have been alluded to. I also hope that TfL will reflect on the concerns expressed in both Houses of Parliament about the possible danger in its proposals of reducing the possibility of developing social housing for ordinary Londoners. That is the real risk. I hope Transport for London will take that on board. Of course, it is in difficulty. It is caught between two opposing forces and has been put in an almost impossible position, for which I have much sympathy. I hope, nevertheless, that Transport for London will do its best and maybe a new Labour Mayor of London will move things on in a better way. I beg to move.
Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016
Motion to Consider
My Lords, I beg to move that the Grand Committee considers the State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016 and the Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016. As the regulations and order both make provisions relating to the new state pension, it seems sensible that they should be discussed together. I confirm that the statutory instruments are compatible with the European Convention on Human Rights.
I propose to speak in most detail about the regulations. In summary, they enable a widowed person whose late partner was in the old state pension scheme to inherit graduated retirement benefit. They modify the rules for calculating a deferred increase, so that the payment accurately reflects the amount of new state pension the person had deferred. They maintain the long-standing policy of not uprating the state pension for people resident in certain countries overseas. Lastly, they insert a provision relating to survivor benefits that was in a previous set of regulations into the new set that replaces them.
Regulation 3 is a technical provision which relates to the calculation of the weekly pension increase for a person who defers their new state pension. The standard calculation method is set out in the Pensions Act 2014. It provides for the increment for each week in the deferral period to be based on the rate of pension that would have been in payment at the end of the deferral period, if the person had not been deferring. This allows the pension increase to reflect any annual upratings that would have been awarded in that period.
The provision made by Regulation 3 modifies that calculation to cater for what will be the relatively rare situation of a change in the weekly rate while a person is deferring for a reason other than uprating. The most likely reason for a non-uprating change would be where a person is widowed and becomes entitled to an inherited amount under the transitional arrangements. The modification is needed to ensure that the increase is based only on the rate of pension applicable at each stage of the deferral period rather than the rate at the end of the period.
Regulation 4 inserts a new Part 6 into the State Pension Regulations 2015, which will provide for a widowed person who reaches state pension age after 6 April 2016 to inherit graduated retirement benefit. These provisions correspond to the transitional arrangements set out in the Pensions Act 2014, which enable a person whose deceased spouse or civil partner was in the old state pension to inherit SERPS or state second pension in line with the pre-2016 rules. The survivor will be able to inherit half the deceased person’s graduated retirement benefit—the same as they would have inherited under the pre-2016 rules. This is provided that the same conditions are met as would have applied in the old system and the marriage or civil partnership existed before 6 April 2016.
Although the great majority of people in the old scheme have accrued some graduated retirement benefit, the amounts involved are small. As a result, we estimate that, on average, widows would inherit around £2.50 a week and widowers less than £1 a week under these provisions. They are therefore principally about maintaining consistency between the way we treat graduated retirement benefit—which was, of course, the first earnings-related state pension—and the rules for inheriting SERPS and state second pension.
The provisions introduced by Regulation 4 also enable the survivor of a pensioner who deferred their old state pension to inherit a weekly pension increase or, if applicable, a lump sum payment based on the deferred graduated retirement benefit. Again, these mirror equivalent provisions in the Pensions Act 2014 that protect the existing inheritance arrangements for the survivors of people who deferred an old state pension.
Regulation 6 is also a minor technical provision and inserts a new Regulation 27A into the Occupational Pension Schemes (Schemes that were Contracted-out) (No.2) Regulations 2015. The 2015 regulations replace the current 1996 contracting-out regulations. It was decided to replace the whole of these regulations to deal with the requirements necessary for the end of contracting-out, rather than simply amend the 1996 regulations. The aim was to produce a coherent set of new regulations for the end of contracting-out to assist the reader.
In fact, Regulation 27A replaces Regulation 69B of the 1996 regulations without amendment. It requires a scheme converting guaranteed minimum pension, or GMP, into scheme benefits to provide a survivor’s benefit in the same circumstances as a survivor’s GMP. However, new Regulation 27A requires the affirmative procedure and therefore needs to be debated before it is made, so it is inserted by this instrument.
Regulation 6 also addresses a procedural error. The provision now within new Regulation 27A was originally made as part of the new set of contracting-out regulations by the negative procedure last July. It should not have been, and the error was addressed very soon after those regulations were made. The regulations were revoked and remade as the 2015 No. 2 regulations without that provision, and these regulations now insert that provision to comply with the requirement for a debate before it is made. This debate would have been needed regardless of the mistake that was made in the earlier instrument. Regulation 6 also makes some necessary revocations in the earlier instrument.
I turn now to the provisions in these regulations that deal with overseas residents. Regulation 4 inserts a new Part 7 into the State Pension Regulations 2015 which provides for restrictions on uprating the new state pension for persons living overseas. Although we are making new regulations that will apply to people in the new state pension, the essential policy, which has been the policy of successive Governments for the last 70 years, remains the same: although we will continue to pay the state pension worldwide irrespective of where a person resides, only people who are ordinarily resident in Great Britain, who are covered by European co-ordination regulations or who are resident in countries with which there is a reciprocal agreement that provides for uprating will receive upratings.
We are introducing a change in the way we treat deferral where the deferrer is resident in a country where we do not uprate the state pension. Under the current arrangements, such a person will effectively get a double benefit from deferral when they finally claim: first, they will get the deferral payment like anyone else; secondly, that payment, and the amount of their weekly pension, will be based on the rate of state pension that is currently in force at the point of claim—that is, the rate of the state pension including any upratings. This applies even though they would not have received the upratings if they had not deferred their pension.
The regulations remove this anomaly for those in the new scheme, so that both the deferral payment and the weekly pension will exclude upratings that would not otherwise have been paid. The person will get a payment based on the rate of pension that would actually have been paid during the deferral period, in the same way as anyone else who defers. As we have explained in the Explanatory Memorandum to these regulations, this is to ensure we are consistent in how we apply deferral rules.
Lastly, I turn to the second of the two instruments we are considering today, the Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016. As the title indicates, these amendments are essentially technical in nature rather than implementing substantive policy measures. The order basically makes consequential amendments that result from the introduction of the new state pension. They ensure that national insurance credits for parents and carers awarded after April 2016 that relate to a period before April 2016 are included in a person’s starting amount. They also ensure that inherited additional pension payable to a survivor in the old state pension whose spouse is in the new scheme includes the appropriate revaluation and upratings. They provide for taxation of inherited lump-sum payments based on deferred graduated pension in line with the arrangements that apply to inherited lump-sums based on deferred main old state pension. They extend the list of factors that can be considered when setting the earnings trigger for auto-enrolment to include the rate of the new state pension. The list already includes the basic state pension. Finally, they amend a provision in the Equality Act so as to allow pension schemes to continue to offer bridging pensions, where tax rules allow, until November 2018, when men’s and women’s state pension ages equalise.
I trust that on that basis your Lordships will be content for me not to take up time going into any further details on the order. With that, I commend the regulations and the order to the Grand Committee.
My Lords, I thank the Minister for her introduction of these regulations and the order and note that the two Motions are to be taken en bloc.
The draft Explanatory Memorandum reminds us that this is the second tranche of affirmative legislation which is needed to support the introduction of the single-tier or new state pension on 6 April 2016, and there is more secondary legislation to come. We have been asked today about taking some SIs on 22 February. Is that it or is there still more to be scheduled?
We know that part of what is to come will cover national insurance credits for spouses and civil partners of Armed Forces personnel to cover past periods of accompanied service overseas. We obviously support this but recall that when we debated this before there were concerns, surprisingly, about the data. Perhaps the Minister will confirm how these have been satisfactorily addressed.
The scope of these regulations is a reminder of the complexity which is still very much a part of our pensions system—state and private—and whatever the promise of simplicity to come from the new state pension, that simplicity is, frankly, some way off. The need for effective communication could not be greater, especially as the change comes in the midst of other pension changes, including the accelerated changes to the state pension age, particularly hitting women, and the so-called flexibilities for private provision. This complexity also requires particular diligence in drafting. I am bound to say that slipping through regulations just before a Summer Recess, which have to be unpicked subsequently is not an efficient way to legislate. However, we acknowledge that eventually the new state pension will simplify matters and bring forward the point at which women get equivalent state pension outcomes to men, but not until the 2040s. We also note that the IFS concluded that in the long term the new pension will be less generous than the current system to almost everyone.
We have heard this afternoon that the regulations cover four main topics: deferral of the new state pension; transitional arrangements for inheriting graduated retirement benefit; pension uprating for those living abroad; and technical amendments relating to contracted-out occupational schemes. As we have heard, Regulation 3 deals with the deferral of the new state pension. The opportunity to do this exists, of course, under the current system and is something we support. It is an encouragement to those who wish to stay in the labour market and earning. However, the terms are to be less generous in the future, with the reduction in the accrual rate from 10.4% to 5.8% a year and no opportunity, outside transitional arrangements, to take a lump sum. Any increase is applied to the weekly rate of pension immediately before the end of the deferral period, but this is now to be reduced when there has been an increase other than through uprating. As regards what has been described as an anomaly, does this happen under the current system? What has changed in the need to back out these issues?
The Explanatory Memorandum tells us that the most likely cause of such upratings is where someone has inherited an amount on the death of a spouse or civil partner, so could the Minister please tell us what percentage of entitlements to inherited amounts on death accrue to women rather than men? What is the estimated saving to the Treasury from this measure? Although for those wholly in the new scheme there will not be opportunities to inherit a percentage of a late spouse or civil partner’s additional state pension, we can at least support the transitional arrangements that enable someone to qualify for a survivor’s pension in respect of additional state pension entitlement built up in the current scheme. We also support the new provisions introduced by Regulations 4 and 5 enabling the inheritance of graduated retirement benefit, including deferral payments. Even though amounts are likely to be small, as has been said, it is reasonable that the transitional arrangements are consistent.
With regard to the uprating of pensions paid abroad, I confirm that what the Minister said is correct: in government we, too, resisted calls to uprate the state pension payable abroad other than to those territories set out in the Explanatory Note. This, too, was largely on the grounds of cost, as well as the uprating factors. Carrying over these provisions to the new system is therefore reasonable. We note, however, that one small change is to include Sark in the reciprocal arrangements. Where on earth did that come from? Can the Minister tell us why and say what representations have been received and from whom in respect of this matter? The definition of an overseas resident is somebody,
“not ordinarily resident in the UK”.
But can the Minister confirm that a person could be ordinarily resident in the UK but still not domiciled in the UK? As we have heard, the substantive change to the arrangements relates to the deferral rights of overseas residents. It is understood that the position is to back out the uprating component of the deferral calculation to prevent a benefit being received which would otherwise not be available if there were no deferral. We have no problem with that.
We note that the legislation is deficient in other respects in not allowing a disapplication of uprating where a survivor’s benefit is not to be uprated because the deceased person’s pension was not to be uprated—perhaps the Minister could expand a little on those circumstances. So I ask: can we therefore look forward to another Pensions Act if that is what it is going to take? The provisions generally relating to contracted- out defined benefit occupational schemes, the GMP requirement and the right to convert to ordinary scheme benefits take us back to the challenges of the 2007 Act. What was essential for conversion was the need to enable a survivor to have benefits at least equivalent to the survivor’s GMP. This looks to have eventually been achieved under the new arrangements by paragraph (6) of these regulations and Regulation 27A of the 2015 Regulations. However, this reminds us that contracting out is no longer available from April 2016, with higher rates of national insurance contributions being payable by individuals as a consequence. We have probed before what this means in terms of extra tax and perhaps the Minister would like to take this opportunity to update us on precisely how much the Treasury expects to garner from the switching off of contracting out.
As far as the order is concerned, we support the provisions enabling credits for parental and caring responsibilities awarded after but relating to pre-6 April being included in a person’s “starting amount”. We wonder why HMRC has to take over the Secretary of State’s authority in connection with entitlement to credits but note that this is not a new provision. As for extending the factors that the Secretary of State can take into account to trigger auto-enrolment and set the band of earnings to include the full rate of the new state pension, can the Minister please explain what practical effect it is considered that this change will have?
Paragraph 9 of the Explanatory Note refers to the multichannel communications campaign. Perhaps the Minister can tell us how this is is going. Mention is made of a new online service to be rolled out in 2016, which will provide a projection of the new state pension at state pension age. Is this on schedule? What volume of inquiries is currently being experienced and what are the response times?
The regulations and order are complicated but we thank the Minister and officials for a very detailed Explanatory Memorandum. Overall, we judge that they contribute to making the new state pension work properly, and we will not oppose them.
My Lords, I am grateful to the noble Lord for his contribution to this technical debate. He has raised several questions, and I will attempt to answer some of them. If he requires further answers, I will of course write to him.
It is indeed the case that the analysis conducted by the department shows that the majority of those reaching state pension age between now and 2013 will receive more from the new state pension than they would have done under the old system. In the long run, the aim is that the rollout of automatic enrolment will provide a supplement to that state pension for future generations of retirees. Therefore, in the long run, the overall amount paid out by the state may reduce, but that is to be offset by the impact of automatic enrolment.
Women will get more state pension, on average, under the new system than they would have done under the old one. Notwithstanding the equalising of state pension ages, over their lifetime women will on average get 10% more state pension in total than men of the same age. The idea that women are losing out needs to be modified by some of the data that we have already produced.
The equalisation between men and women of state pension payments may come in the future but, in the mean time, notwithstanding whether they get slightly less than men—the gender gap will be much narrower—over their lifetime they will get more, because the average woman lives longer than the average man. Once equalisation occurs, the gender favour to women will be even greater. In the mean time, the new state pension will put women in a much stronger position under the new state pension rules relative to the old ones. This is a significant improvement in the position of state pension payments for women on average, who, as we all know, have lost out in the past; we are remedying that to a large degree.
The noble Lord asked about contracting out. The idea of removing contracting out is not so much about cash flow or increasing the amount of money that comes to the state, because contracting out merely replaces what the state would have otherwise paid out in the state pension. By ending contracting out, the national insurance payments that are increasing will be offset over the long run. Indeed, depending on the average life expectancy, it could perhaps end up meaning that the Government pay out more in state pension as a consequence of ending contracting out than they do under the current system, where part of the state pension is contracted out to an employer who promises to replace the additional state pensions.
Therefore, it is not clear to me that there is a cost saving. It is clear to me that it is absolutely essential that we move to a simpler state pension system, which people can understand and deal with, because currently they cannot do so. At present, the existence of contracting out means that part of people’s state pension builds up in a private pension, which confuses the messages and the planning. Therefore, the principle of the new state pension is that everybody pays the same type of national insurance without some people being able to pay less than others because they are in a particular type of private pension scheme, and that everybody, regardless of their earnings, the type of credit they have or the type of national insurance contribution they pay, will be able to build up the same state pension each year as they accrue another year on their contracting-out record.
Of course that is not what I am saying. I am saying that we have to look at the state pension over the long term. National insurance is paid now but it relates to liabilities that will be paid over a long period of time, and Governments, quite rightly, have to plan for that with regard to the money flowing in now and the liabilities that will ensue from that over the longer term. As we know, the new state pension is expected to be cost-neutral to the taxpayer. Given that, I am not convinced that it is appropriate to consider contracting out as a money-saving exercise.
I am delighted that the noble Lord supports Regulations 4 and 5. Most of the measures that are being put in place here are indeed technical in nature and try to maintain the principles of the new state pension as well as protect people when we move from the old system into the new system—in particular, as we said, widows or widowers who inherit parts of the state pension entitlements that they would be able to inherit today.
The noble Lord also mentioned the importance of communications, and I completely agree with that sentiment. Indeed, as he alluded to, we are engaged in a widespread campaign to inform people and improve communications around state pensions. An enormous amount of time, effort and money has been put into this exercise, and we will continue that over the coming period. I assure the noble Lord that we have very much adopted the idea of communications being particularly important and will continue to work in that way.
The noble Lord also mentioned the complexity of the new state pension rules and some of the issues that have arisen with the drafting of the regulations. Of course it is a matter of regret that we had to come back with an affirmative regulation, which should have been done in the appropriate way in the first place. However, the debate is now taking place, as required.
We must not forget that the old state pension is what is so complicated. Dealing with past complexity is imposing difficulties when moving to a new state pension system. We have not been able to just sweep away the old system; we have to carry people into the new state pension system. That means carrying with it the complex rules and the many adjustments that were made over the many years for which it has existed. Once that new system is in place, the scale of complexity will be vastly reduced. For most people, it really will be a simple system, but we have to get from the old system into the new one, when it is fully up and running, and that will take some time before we can reconcile all the records as at April 2016 to know what everyone is starting the new system with.
As for national insurance credits for spouses and partners of people in the Armed Forces, we will be providing data when we bring forward those regulations. As the noble Lord said, we plan to have that debate on 22 February. We believe that we have reliable data that we can put before the House. Unfortunately, as I explained, the old system is very complicated. We need to bring in a huge number of moving parts from the current system to try to ensure that people do not lose out.
The noble Lord mentioned inheritance. In the new state pension system, widows will be able to inherit the additional pensions of their late spouses or partners. That inheritance currently exists and will be carried forward. I can reassure the noble Lord on that matter.
The noble Lord asked me about digital state pension statements. At the moment, they are in testing. The testing will be carried out over the next few weeks, and we will then be gradually rolling out the new digital statements, which will be much clearer and more helpful, so that people can see forecasts of what their new state pension will be able to give them.
As for the issue of deferral, as I said, the regulations will correct an anomaly that exists. The new state pension will ensure that the deferral for those who live in overseas countries which do not have a reciprocal arrangement with us, and those countries in which pensions are not uprated at the moment, will apply only to the pension at the date at which the person reached state pension age. That is the increment that will be added for deferral, rather than adding an increment to an increased state pension, which would otherwise give them a double benefit.
The debate has ranged rather widely—probably more widely than the provisions—so it may be helpful if I remind the Committee of what the regulations do. They enable a widowed person whose late partner was in the old state pension scheme to inherit the graduated retirement benefit. They provide for increments from state pension deferral to be based on the amount of new state pension the person would actually have been entitled to if they had been receiving their pension instead of deferring it. They maintain the long-standing policy of not uprating the state pension for people resident in certain countries overseas. They replicate a provision relating to survivor benefits that was in an old set of regulations in the new set that replaces them. The order simply makes consequential amendments that result from the introduction of the new state pension. I therefore commend the regulations and the order to the Grand Committee.
State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016
Motion to Consider
Producer Responsibility Obligations (Packaging Waste) (Miscellaneous Amendments) Regulations 2016
Motion to Consider
Before I explain the specific changes, I remind noble Lords why the Government are amending these regulations or, to be precise, deregulating. The Government remain committed to reducing burdens on businesses—none more so than in the waste sector. Today, we are considering the important topic of packaging. We all use packaging in our day-to-day lives and it serves many essential purposes. These include keeping our food fresher for longer, protecting products from damage and providing security. For instance, the humble cucumber can have its shelf life extended by up to 14 days with proper packaging. Vacuum-packaging and shrink-wrapping can keep meat fresher for twice as long, and resealable packs prevent foods such as cheeses from drying out.
Packaging therefore has a key role to play in the prevention of waste. In addition, at the end of its useful life, packaging can be recycled into a number of new products including clothing, chairs, car parts or construction materials, and there is closed-loop packaging recycling such as bottle back to bottle. Like the valuable role of packaging, the changes we propose are equally important. They are deregulatory and part of this Government’s ongoing commitment to cutting unnecessary red tape. These particular changes stem from and build upon the earlier Red Tape Challenge initiative, and have the potential to deliver a net benefit to businesses of about £20.4 million over the next 10 years.
We know that around 10.38 tonnes of packaging were placed on to the UK market in 2013, and 64% of our packaging is currently recycled or recovered each year. Although it is difficult to be sure of exact costs for the financial damage of improperly disposing of packaging waste, we know that local authorities spend nearly £798 million a year clearing up litter, of which about 30% is packaging in some form.
Turning to the legislative changes, as I said, the Government want to do ever more to reduce waste and encourage the recycling of valuable secondary resources such as packaging. Importantly, we also want to streamline the processes that packaging producers have to go through to adhere to regulations. There are four main proposed changes. First, the removal of operational plans will remove the requirement for packaging compliance schemes, or directly registered producers of packaging, to provide operational plans. This change, subject to full take-up by industry, will reduce significantly administrative burdens, with a potential saving to business of up to £5 million over 10 years.
However, in order to ensure that packaging compliance schemes continue to function efficiently and effectively, we have made provision to retain some key safeguard elements by incorporating these within revised conditions of approval. There are three retained conditions in respect of compliance schemes, and they will ensure that our environment agencies are able to monitor the accuracy of information provided by scheme members; that compliance schemes acquire packaging recovery notes, or PRNs, and packaging export recovery notes, or PERNs, in a manner that least hinders the ability of operators to purchase them; and that compliance schemes preserve sufficient financial resources to maintain the necessary expertise to acquire PRNs or PERNs.
The second proposed change is to the approving body. This change will transfer the responsibility for the approvals process for packaging compliance schemes from the Government to the appropriate agency. Currently, the regulations require Defra to approve a packaging compliance scheme and for one of the environment agencies to register the scheme. Although this is a small transfer between government bodies and a small additional function for the agencies, the change will put both the approval and registration processes directly into the hands of those with the most appropriate expertise to best assess applications.
The third change is the delegation of sign-off arrangements. This will allow an approved person in a packaging business to delegate their responsibilities for signing off reports. This will remove a significant burden on business and will ensure that the authorisation for the signing of reports rests with the person who is the most appropriate and knowledgeable in the organisation. A quality assurance backstop will be put in place that requires the appropriate environment agency to be notified so that appropriate checks can be carried out.
The fourth change is the one-stop shop for packaging scheme application approvals. This will provide operators of packaging compliance schemes based in both Great Britain and Northern Ireland with the right to apply for approval from one UK approving body. This is in contrast to the present arrangement, where operators face the significant burden of having to make applications to two bodies. It will also allow the Northern Ireland Environment Agency to act on behalf of the British agency and vice versa.
The Government consider that the changes proposed in the order provide a significant opportunity for businesses to reduce their administrative burdens and costs. These changes will allow even greater focus by industry and regulators on what really matters: increasing our recycling rates, reducing waste, protecting our environment and continuing to build an economically strong and ever-more-resilient waste industry. I therefore commend the order to the Committee.
My Lords, I am grateful to the Minister for introducing the amended regulations. On the face of it they appear to make sense. Certainly, the changes to the approving bodies, the extended sign-off arrangements and the one-stop shop for the devolved nations are broadly welcomed and have clearly received considerable support during the consultation. It seems that the claims of savings that will be made by these changes are slightly overegged, but I take the point that there is an established way of calculating such savings and I am not going to quibble about the methodology at this point. That is a matter for another day.
I have two main questions arising from the proposals. First, they remove the requirement to produce an operational plan, as the noble Baroness outlined. I appreciate that the current requirements may be unwieldy and overdetailed, but is it not probable that removing the operational plans altogether also removes a major discipline and pressure on packaging producers to comply with their obligations under the EU directive?
We all acknowledge, as did the noble Baroness, that the priority is to increase our rates of packaging recycling, so how does the complete removal of the operational plan help that? Might we not be better off replacing it with a simplified format that achieves the same objectives? How will its complete removal impact on the monitoring of performance and compliance of individual companies? The noble Baroness referred to that, but perhaps she will enunciate it a little further. Also, would we not be wiser to delay the changes to these regulations so that we can take account of the proposed extension of producer responsibility schemes in the Commission’s new circular economy package which relates to these measures?
Secondly, what more is being done to ensure that producers cover the full cost of processing their packaging waste? As I understand it, unlike the rest of Europe, in the UK, the producers’ fees cover only about 10% of their waste costs. As a result, a disproportionate cost for collecting and recycling falls on local authorities. This, in turn, means that much of the cost is met by taxpayers rather than the product manufacturers. This goes against the principles of producer responsibility as originally envisaged by the EU. What more are the Government doing to ensure that the costs fall where they belong: at the door of the manufacturers? What further pressures can we bring to bear to encourage excess and unnecessary packaging to be designed out before goods hit the marketplace in the first place?
This is a policy area where we cannot afford to be complacent, because we still have some way to go before we meet our EU targets. Therefore, it would be helpful if the Minister could make it clear what new levers will be introduced to drive up compliance and innovation in the sector. I realise that these latter points are slightly wide of the content of the new drafts before us today. Nevertheless, they are important and I look forward to her response.
My Lords, I am most grateful to the noble Baroness, Lady Jones, for her remarks and for the fact that she broadly approves of what we are trying to do.
As regards operational plans, any producer who does not comply with their obligations will face enforcement action by the Environment Agency. We feel that the current operational plan does not add to the value of its function. We are very conscious of the circular economy in relation to recycling. Any amendment will not come into force until 2020 at the earliest. These deregulatory changes will reduce the burden on businesses ahead of that. I hope that that answers the noble Baroness’s questions. These additional regulations will allow the Environment Agency further to increase its focus on tackling those who may seek to skirt around or deliberately evade their obligations.
Another piece of inspiration has come from behind me. We acknowledge that producer responsibility costs do not all fall on producers, as they do in Europe, but our market-based system delivers comparable recycling rates. Does that answer the noble Baroness’s question?
Infrastructure Planning (Onshore Wind Generating Stations) Order 2016
Motion to Consider
That the Grand Committee do consider the Infrastructure Planning (Onshore Wind Generating Stations) Order 2016.
Relevant documents: 15th Report from the Joint Committee on Statutory Instruments, 23rd Report from the Secondary Legislation Scrutiny Committee
My Lords, I will set out the impact of the statutory instrument which I am bringing forward. This affirmative instrument seeks to amend Section 15 of the Planning Act 2008, removing the obligation in that Act to obtain consent from the Secretary of State for Energy and Climate Change to construct, extend or operate an onshore wind farm in England or Wales. To be clear, this provision relates only to proposed new wind farms with a capacity greater than 50 megawatts. Smaller wind farms, including those owned by the community, are already consented by the relevant local planning authority.
This change, alongside secondary legislation and proposed primary legislation in relation to the Electricity Act 1989, will have the effect of removing the requirements for planning consent to be obtained from the Secretary of State for the construction of new onshore wind farms. Instead, developers will need to apply for planning permission under the Town and Country Planning Act 1990, where the primary decision-maker is the relevant local planning authority. This Government were elected with a clear commitment to give local people the final say on whether to have a wind farm in their area. These changes help deliver just that, as was stated in our manifesto.
The changes are further supported in England by the implementation of the Written Ministerial Statement outlined by my right honourable friend the Secretary of State for Communities and Local Government on 18 June last year. The combined effect of the measures is to ensure that new onshore wind is consented to at local level and built only where local people have said they want it.
Finally, I remind the Committee of the support that the Government have received on this issue both in this House and during the Committee sittings in the other place which were held just last week. I should also be clear that the intention of this statutory instrument, and indeed of the statutory instrument already made to the Electricity Act 1989, is purely fully to implement the devolution of onshore wind-consenting powers to local authorities and away from Whitehall. The order does not change or affect the regime for town and country planning in either England or Wales.
Furthermore, once onshore wind-consenting powers are fully devolved to Wales, it will be for the Welsh Assembly and the Welsh Government to determine how new onshore wind farms in Wales are granted consent. On that basis, I beg to move.
My Lords, I thank the Minister for his brief introduction. I fear that I will show a lot of my own personal ignorance about the subject in my questions because, as he said, it is one part of a jigsaw; the question is how it fits in.
Perhaps I am being naive but I expect the Explanatory Memorandum to be fairly objective. Paragraph 7.1 states:
“Local communities are often opposed to onshore wind farm development, arguing that they have direct noise and detrimental impacts on their communities”.
Yes, it is true to a degree that some are opposed but, on the whole, they are not. It is usually a vociferous number of people who object to them and make planners’ and local councillors’ lives very difficult. It is up to them to stand up to that sort of pressure and make the right decision. That does not represent the majority.
Paragraph 7.3 states:
“Such reviews help to strike the right balance between keeping consumers’ bills as low as possible, while reducing emissions in the most cost effective way and ensuring public acceptability of particular technologies”.
As we know, wind power, as shown by the ROC rates and everything else, is one of the cheapest renewable sources of energy, so I am not sure how that paragraph fits in.
Part 10 of the Explanatory Memorandum concerns the impact. I have not read the impact assessment: I think that there was a problem in that it originally referred to the wrong one, but the memorandum states:
“There is no impact on business, charities … voluntary bodies”,
“the public sector”.
Then what is the point of it? I can see the point, but if there is no impact whatsoever, that is rather strange.
I actually welcome the order in principle. The Minister is absolutely right: local communities should have much more say over their local areas and decisions such as these. Placing them back into the local authority planning process is the right thing to do, so I welcome that.
What I want to understand—this is where my ignorance comes out—is how it interacts with the National Planning Policy Framework, which specifically uses the phrase “a golden thread” of sustainable development: that there should be acceptance that schemes should go ahead if they promote sustainable development. Does that still apply when local authority planning decisions are questioned further up the decision tree on appeal?
Paragraph 97 of the National Planning Policy Framework states:
“To help increase the use and supply of renewable and low carbon energy, local planning authorities should recognise the responsibility on all communities to contribute to energy generation from renewable or low carbon sources”.
Then it goes through a list of bullet points of things they ought to do. How do those obligations on local planning authorities tie in with this secondary legislation and the other areas that the Minister mentioned around it?
The Explanatory Memorandum also says that local authorities’ planners have to take account of neighbourhood plans or local plans. I want to understand whether that is a “both” or an “either/or”, because a lot of local plans have renewable energy and wind farms in them. What happens if this is not included in the neighbourhood plan but is included in a local plan, for instance? I suspect that that will often be the case given that neighbourhood plans still do not cover large proportions of areas that local planning committees take an interest in.
I have a couple of other quick things for the Minister. Five-megawatt wind farms are pretty large, and I would be interested to know how many applications for such wind farms there have been over the last five years or so. I do not need a specific answer but perhaps the Minister could give an idea of the kind of scale we are talking about. Also, are there other areas where local authorities do not have control over less than 30 megawatts? A number of parallels have been made with shale gas—which I am not against—where there is a big push the other way in terms of trying to put pressure on local authorities to give permission or to call the decisions in if they do not. I would be interested to hear how the Minister reconciles the two opposite directions that energy policy seems to be going in at present.
I thank the Minister for his explanation to the Committee today. The order seems to be primarily technical in that it changes the planning consent process from one where the Secretary of State is included to one where the local planning authorities make the decisions on an application concerning onshore wind-generating stations over 50 megawatts—that is, from the Planning Act 2008 to the Town and Country Planning Act 1990. This is in the context of the Conservative Party’s manifesto for the 2015 election and will make the procedure for consent for stations that generate above 50 megawatts consistent with that governing those that generate less than 50 megawatts. Perhaps to underline the simple policy objective sought here, can the Minister confirm that, apart from changing the ultimate determining authority from the Secretary of State to local planning authorities, no other feature will be affected by this change and that there is no other difference between the two processes for onshore generating stations above and below 50 megawatts?
We are content to support this SI. Indeed, we support the right of local authorities to decide onshore wind power applications so that they can decide on the case made in terms of them supporting jobs, providing energy stability, cutting energy bills and contributing to action to mitigate possible global warming. This change is also reflected in Clause 79 of the Energy Bill, which is currently undergoing scrutiny in the other place. During consideration of the Bill, it has been noted that the Conservative Government judge local authorities effective to rule on onshore wind applications, yet will not allow local authorities to assess applications regarding fracking. We consider that communities should be allowed a pertinent voice in both situations.
Your Lordships’ Secondary Legislation Scrutiny Committee drew attention to the lack of a wider impact assessment on the UK’s generating power. The noble Lord, Lord Teverson, drew attention to the wider impact on the national infrastructure framework. I support him in asking the Minister whether he will report to Parliament six months after the passage of the present Energy Bill to update Parliament on the effect of this SI, especially in relation to the carbon impact and the Energy Bill.
My Lords, I thank noble Lords for their contributions and for their general support. I turn first to questions posed by the noble Lord, Lord Teverson, on the Explanatory Memorandum. He is absolutely right that with this policy we are emphasising the importance of the local say for communities—that is the predominant factor in this legislation. The noble Lord quoted from the Explanatory Memorandum and suggested that it was tilted in favour of one particular view of onshore wind. I recognise, as has become very apparent from the Energy Bill and contributions in other debates, that opinions vary on onshore wind.
Picking up the points on the impact assessment raised by the noble Lords, Lord Teverson and Lord Grantchester, I apologise that initially a wrong impact assessment was posted. It was corrected fairly expeditiously but I apologise for that. Criticisms have been made about the fact that the impact assessment does not assess the number of likely applications or the economic impact of the measure. Our point here is that it was a manifesto commitment. More importantly, we cannot second-guess the planning system. We cannot know how many applications are going to come forward and how many will be successful. It is in that context that we approach that criticism.
The noble Lord, Lord Teverson, asked about the national policy framework and whether sustainability was still important. Yes, it still is, although obviously within the context of local decision-making, which I am pleased he recognises as being important. He asked about the interrelationship between the local and the neighbourhood plans. The neighbourhood plan is discretionary, it is not as of right, and the local plan will prevail over the neighbourhood plan. It needs to take account of it but in the pecking order, as it were, the local plan will have the superior say. It will take account of the neighbourhood plan but is not obliged to follow it. The noble Lord also asked about wind farms of over 5 megawatts—I wonder whether he meant 50.
Not at all. I guessed that was what he meant but I just wanted to confirm that. Two developers were involved in discussions about the transition from the old scheme to the new scheme. That perhaps gives a flavour of the fact that it is not that many. I believe that the noble Lord also referred, as did the noble Lord, Lord Grantchester, to the different regimes in relation to shale. In both, local involvement is key. We recognise that. It is right to say that there is talk about a new system for shale gas exploration. There is a difference when a new technology is being brought on but I reiterate that in both systems we consider a local dimension to the decision-making to be vital.
I am most grateful. I have mislaid the further questions from the noble Lord, Lord Grantchester. I am not sure whether I have covered everything. Here we are: the noble Lord, Lord Grantchester, asked whether there was any move other than making local authorities responsible for these decisions rather than the Secretary of State. That is essentially true. There is an element of devolution to Wales as well but it just mirrors that in relation to the Welsh Government and Welsh Assembly. There is no other intention here. The noble Lord also referred to the fact that this is coupled with what is now Clause 78 of the Energy Bill—we have lost a clause somewhere along the way—he is absolutely right on that. With that, I commend the order to the Committee.
Committee adjourned at 5.18 pm.