Wednesday 9 May 2018
Arrangement of Business
My Lords, I remind your Lordships that if there is a Division in the House, the Grand Committee will adjourn for 10 minutes.
Crime and Courts Act 2013 (Deferred Prosecution Agreements) (Amendment of Specified Offences) Order 2018
Considered in Grand Committee
My Lords, the order before the Committee today amends Part 2 of Schedule 17 to the Crime and Courts Act 2013. This sets out the range of offences where a deferred prosecution agreement, or DPA, may be considered. The intention of this schedule has always been clear: to allow the Crown Prosecution Service, or CPS, and the Serious Fraud Office, or SFO, to consider using a DPA to tackle serious economic crime committed by corporate entities. The order before the Committee today is simple: it corrects an anomaly with regards to making misleading statements and practices in financial transactions.
The schedule of crimes at Part 2 of Schedule 17 to the Crime and Courts Act 2013 currently includes a reference at paragraph 22(e) to Section 397 of the Financial Services and Markets Act 2000. It deals with misleading statements, practices and impressions in financial transactions. This provision was repealed and updated by the Financial Services Act 2012, which introduced new offences dealing with the same conduct under Section 89, on misleading statements; Section 90, on misleading impressions; and Section 91, on misleading statements regarding relevant benchmarks and misleading impressions as to the value of investments and interest rates that apply to a transaction. The order before the Committee today replaces the previous repealed offences under Section 397 of the Financial Services and Markets Act 2000 with the three current measures to ensure that the SFO and the CPS remain able to consider using a DPA to tackle such behaviour if they wish. At the moment, they cannot do so given the anomaly in the legislation. All of the current protections, including the need for a court to approve the order, will continue to apply in full.
As this is a matter of correcting a technical oversight, I hope it will not detain the Committee too long. But before commending the order for approval, I will set out some further details and provide the background to the deferred prosecution scheme and why the Government are taking this action.
Schedule 17 to the Crime and Courts Act 2013 sets out the scheme for deferred prosecution agreements. A DPA is a court-approved agreement between an organisation—not an individual—and a designated prosecutor who is considering prosecuting the organisation for a specific type of economic crime. These crimes are listed in Part 2 of the schedule. Under the scheme the organisation is charged with the offence, but upon a court declaration that the DPA is in the interest of justice and that its terms are fair, reasonable and proportionate, the indictment will be suspended for the duration of the agreement—usually two or three years. Upon the expiry of the DPA the proceedings are discontinued. The prosecution proceedings can be reinstated only if the DPA is terminated by the court before expiry because of a serious breach of the terms of the agreement.
There are no mandatory terms of a DPA but they are likely to include a financial penalty, disgorging any profits made from the offence, co-operating with investigations into the conduct of individuals, and the implementation and external monitoring of a compliance programme. Importantly, a DPA is not an alternative to individual criminal charges. If individual wrongdoing can be proved—for example, bribery—such charges can be pursued in addition to a DPA with the company.
DPAs are an appropriate and useful tool for addressing corporate economic and financial crime. A DPA is premised upon high levels of co-operation on the part of the offending company, which signals a willingness to address governance failures going forward. It allows companies to make redress for wrongdoing while also taking steps to safeguard against any future misconduct. DPAs are therefore a key means of encouraging the inclusion of economic and financial crime prevention as an integral part of corporate good governance. Where courts judge them appropriate, they are a means of allowing corporate entities to make full redress for crimes committed while avoiding collateral damage—for example, the company going into liquidation and laying off thousands of employees. Four DPAs have been agreed since the measures came into effect in 2014.
To reiterate, this order effects a technical correction of an anomaly required to allow DPAs in respect of offences dealing with misleading statements and impressions in financial transactions—it replaces like with like. Without today’s order, a designated prosecutor cannot enter into, and a court cannot approve, a DPA premised upon offending involving misleading statements and misleading impressions in respect a range of financial products. By introducing today’s order, we are ensuring that the CPS and SFO could consider applying for a DPA in these cases should they so wish. I beg to move.
My Lords, this is a perfectly acceptable amendment to the schedule to remove the anomaly that now exists. It is a moment, however, to consider the value and use of deferred prosecution agreements. As the noble Baroness pointed out, only four such agreements have so far been approved by the court, and only three of the judgments in those cases have as yet been published. However, those cases have made it possible to find some clear principles that should be applied. Sir Brian Leveson, President of the Queen’s Bench Division, put it this way: a deferred prosecution agreement,
“is a reward for openness”.
The first essential is co-operation with an investigation. The sooner a company comes in and self-reports, the more it has to be rewarded for. The SFO will look at what work has already been done to investigate, how thoroughly it has been done and how data has been dealt with—in a way that does not tip off potential suspects leading them to delete that data altogether. Secondly, the company must be committed to reform. This may mean removing senior staff responsible for the criminality and instituting changes in procedures. The SFO must be in a position to go before a judge and argue that the default position of a prosecution can be displaced in the specific case and that a deferred prosecution agreement is justified. The judge has to give his approval to this.
In the Rolls-Royce case, which is the largest of the cases so far, the judge commented that his first reaction to what was put before him had been that if the company was not to be prosecuted,
“in the context of such egregious criminality over decades, involving countries around the world, making truly vast corrupt payments and, consequently, even greater profits then it is difficult to see that any company would be prosecuted”.
Rolls-Royce had not self-reported, but it co-operated. It was its co-operation that enabled the SFO to take the matter before the court. What the company did report, when tasked with it, was far more extensive and of a different order to what may have been exposed without the co-operation that it provided. I hope that the committee of this House carrying out post-legislative scrutiny of the Bribery Act, which has just been formed, will give an opportunity to examine DPAs and how they should be used with great care.
My Lords, four agreements in between four and five years does not strike me as a particularly impressive figure. I appreciate that the Minister may not be able to answer several questions today, but perhaps she can answer them subsequently by letter. How many cases were considered but not proceeded with? On the four cases to which she referred, what financial penalty was imposed on the relevant companies? In addition to such financial penalties, were proceedings taken against individuals, which is clearly a separate matter? On the companies that were subject to the provisions, what changes may have been made within those companies, assuming things have gone wrong not necessarily with the companies’ full understanding at the time? How many cases have been investigated and not proceeded with, and was such a decision made because there was no case to answer or for other reasons—for example, lack of financial capacity in the company to pay any penalty?
What is the present caseload of the relevant department for these arrangements? Are any cases currently under consideration and, if so, roughly how many? How long will it take for such matters to be resolved? In other words, is there likely to be rather more than an average of one a year in future? If not, are the Government satisfied that the regime is proving effective, and what further steps might be taken to make more use of the provision now that it will be brought up to date?
I thank both noble Lords for their contributions today and for broadly welcoming the order. I thank the noble Lord, Lord Thomas of Gresford, for his insights into the use of DPAs and the Rolls-Royce case, which was indeed rather large. As he pointed out, there is now an ad hoc committee on the Bribery Act. Obviously, it is not for us to consider its terms of reference, but I am sure that it will look into these things. The Government continue to support the use of DPAs when appropriate.
Turning to the points raised by the noble Lord, Lord Beecham, he will be aware that I cannot say anything about the current caseload or casework going through the system at the moment, but I am very happy to write to him, as I would not want to mislead him. I am fairly sure that we can get the answers to a number of questions, and I will copy the answers to all noble Lords, because it would be good for noble Lords to understand how many DPAs have been used.
We should not necessarily assume that there have been too few or too many DPAs. They obviously have to be used only in appropriate cases. We may be able to draw conclusions from the information we get, but the Government continue to support their use. They can be very good for justice, fairness and jobs.
The order addresses a small but important statutory anomaly which is preventing future use of DPAs for this type of corporate offending. I therefore commend it to the Committee.
Crime and Courts Act 2013 (Commencement No. 18) Order 2018
Considered in Grand Committee
My Lords, the order will allow courts in England and Wales to impose what is called a stand-alone location monitoring requirement as part of a community sentence when it is considered to be proportionate and necessary to do so. In other words, an offender’s whereabouts could, for its own sake and for a specified duration of the sentence, be monitored through an electronic GPS tag fitted to their ankle. The offender’s location would be tracked by satellite using technology similar to that of a satnav or Google Maps. The tag will record the offender’s position and send that data at frequent intervals to a monitoring centre via a mobile network. The location data will be retrospective and monitoring will not be in real time.
The Criminal Justice Act 2003 already allows electronic monitoring to be used as part of a community sentence to manage a curfew or compliance with another requirement of the sentence, such as an exclusion zone. In practice, it has only been used in community sentences to monitor curfews through radio frequency technology; the GPS-enabled tags that are necessary to monitor an offender’s location are not currently widely available. That will change when the new electronic monitoring service that is being developed goes live in 2019 and GPS tags and the monitoring technology become widely available. The new service will begin on a date to be confirmed in the summer, following the conclusion of commercial discussions with providers.
This order, commencing a provision in the Crime and Courts Act 2013 to allow for a stand-alone location monitoring requirement to be imposed, provides courts and probation practitioners with an additional tool to help to manage offenders in the community. The approach that we are taking has been, and is being, piloted in specific geographical areas, commenced through a no procedure statutory instrument. This allows the Ministry of Justice and, separately, the London Mayor’s Office for Policing and Crime—MOPAC—to pilot the use of location monitoring. The Ministry of Justice pilot concluded in March this year and the smaller pilot being run in London by the Mayor’s office will come to an end in September 2019.
Findings from the independent evaluation of the Ministry of Justice pilot that concluded in March will not be available until the summer. Nevertheless, feedback from probation practitioners and offenders engaged in both pilots suggest that standalone location monitoring is a valuable tool. We believe that it will provide offender managers with information that allows more insight into offender behaviour, allowing for constructive conversations to take place to reduce the risk of reoffending, aid rehabilitation and help those they supervise to lead law-abiding lives. Let us say, for example, that a probation officer is dealing with a domestic abuse case where the offending behaviour is linked to gambling or alcohol. The location information may show the offender frequenting alcohol or betting shops and this would enable the probation officer to have a sophisticated and evidence-led conversation with the offender about their behaviour and take appropriate steps to address it.
Stand-alone location monitoring may also help to deter offenders from taking part in criminal activity through the prospect of discovery or by giving the offender an excuse to distance themselves from those with whom they might commit crime. In effect, this can offer offenders a fresh start away from the influences of crime. In some cases, it could also provide enough assurance to enable courts to impose a community sentence as an alternative to custody, leading to many of the benefits of rehabilitation that offenders may get from being with their loved ones or through employment in the community. Prior to the introduction of the new electronic monitoring service, the Ministry of Justice will take into account the lessons learned from the pilots and provide information to sentencers and those that advise them, such as legal advisers and probation court teams, on how to target the new location monitoring capability.
I recognise that during the passage of the Crime and Courts Bill that led to the 2013 Act, concerns were raised in your Lordships’ House about the potential for location monitoring to infringe civil liberties. Let me reassure the Committee that before imposing a stand-alone location monitoring requirement, the court must consider issues of proportionality and necessity, including any interference with Article 8 of the European Convention on Human Rights: the right to respect for private and family life. They must also have due regard to the five statutory purposes of sentencing: punishing offenders; reduction of crime; protection of the public; reform and rehabilitation of offenders; and the making of reparation by offenders. As they do now, the courts will continue to assess the suitability of any requirements for the offender, the seriousness of the offence and whether a community disposal is justified or imprisonment is warranted.
With regard to the processing of the offenders’ data in accordance with the Crime and Courts Act 2013, when commencing the legislation, my right honourable friend the Lord Chancellor and Secretary of State for Justice is required to publish a code of practice that sets out the expectations, safeguards and broad responsibilities for the collection, retention and sharing of information gathered on such orders. The necessary code was published in February this year, prior to laying this order before Parliament and after consultation with stakeholders including the police, probation, the Information Commissioner’s Office and the Investigatory Powers Commissioner’s Office. It has been written with the provisions of the Data Protection Bill in mind and its content will be reviewed once the Bill becomes law. In addition, all offenders who are given an electronic monitoring requirement will receive an induction when they are fitted with a tag to explain what is required and a fair processing notice setting out what will happen with their data.
Standalone location monitoring will provide courts with one more tool to help manage the risk of offenders in the community. The pilots have indicated the operational value that can be derived from location monitoring. When targeted appropriately, it should help rehabilitate offenders, reduce the risk of reoffending, protect the public and, in some cases, provide enough assurance to the court to impose a community sentence as an alternative to immediate imprisonment. I therefore commend the draft order to the Committee and beg to move.
My Lords, I suggest that it is unwise to introduce this commencement order before the result of the pilots is known. I gather from what the Minister just said that the first pilot ended in March but its findings will not be available until the summer and that there is still a pilot operating within the City of London.
We are familiar with electronic monitoring. It has been used to date to ensure compliance by an offender with the terms of a community order, a suspended sentence or a licence to enable a prisoner to be released. Standalone monitoring of this sort is a significant step further. The proposal is to use GPS tracking to monitor an individual’s movements, not against the prohibitions that will be set out in a court order or on release on parole, but generally. It is therefore highly intrusive, as I think the Minister acknowledged in what she said. It goes beyond what is necessary for rehabilitation or the protection of the public.
That point is perhaps emphasised even more by what we were told: that the monitoring will not be in real time—I think I understood that—but be retrospective. In other words, it is not an immediate form of surveillance but means that a probation officer will look back to see what his client has been doing rather than keep a watch over him. It is perhaps less objectionable if it is not immediate surveillance, but it may be rather more effective to use the resources that will be involved in this new system for rehabilitation rather than for tracking offenders in this way.
If this statutory instrument were brought forward after completion, evaluation and publication of the pilot projects—because we have no idea of the results of those pilot projects—it would be possible to assess whether the right balance has been struck. What are the Government going to do to bring those results before Parliament and give us notice of them? Will they give an undertaking not to seek the approval of both Houses before that is done? Otherwise we are faced with the verdict first and the trial afterwards. We want to know what the trial says so that we can comment on it and see whether this statutory instrument should be opposed when it is brought before the House.
My Lords, we have some experience of monitoring of this kind of a rather unfortunate nature—I am thinking of G4S and its very poor record in bygone years. I wonder, first of all, who is to be carrying out the job: is it going out to tender or are people already lined up for it? Who has conducted or is conducting the trials at present? What is the cost involved in the work that is being undertaken? Is it a matter for the individual authority, probation service or whatever to commission this? What system will there be to get feedback at a national level about the success or otherwise of the scheme as it goes forward?
Presumably the Government will wish to be satisfied with the trials and that the system is working but, of course, we have to take a longer view about its working, not simply that it is mechanically working but that, in time, it is yielding the results that the Government seek for helping people to, if I may put it this way, stay on the straight and narrow and live a responsible life. That will take presumably some time. How long has the current exercise of trying out the system been going on for? Can the Minister enlighten us a little about where that has taken place, how many people have been put through it and with what result? I am certainly not minded to oppose the process but, given the rather unfortunate past regarding similar arrangements, I think there is a need to look very carefully at what is happening and to get a report back in the not-too-distant future. Can the Minister indicate whether there will be an annual review and report of how the scheme is working? That would be helpful both at the national and appropriate local levels, so that we can see the system is working both mechanically, as it were, and in terms of its intentions to help people stay out of difficulty and obey the law. Will there be oversight of that kind and, ultimately, reports about how the system is working in practice?
My Lords, I thank the noble Lords, Lord Beecham and Lord Thomas of Gresford, for their contributions. They raised a number of issues that I think are pertinent to the order that we are discussing. As I hope I mentioned in my opening remarks, feedback has already been received from the pilots that have already finished, and indeed the one that is ongoing, that the system does work and is useful for the task that has been set for it. The main feature now is for the Government to learn what they can about how the pilot operated and how to put that into the operations of the new system when it comes online next year.
A summary of the conclusions of the pilot will of course be made available. It is important that we look at this because, as the noble Lord, Lord Thomas of Gresford, pointed out, this is not surveillance and it is not real time, which would be far too resource-intensive. It is information that can be gathered and which allows probation officers and others to have a more informed conversation with the offender. The offender knows that they are being monitored. We believe that it will aid rehabilitation and it is my wish and my hope that it keeps some offenders out of prison, because in some cases that is certainly not helpful.
The noble Lord, Lord Thomas of Gresford, also mentioned the issue of timing. I am well aware that the results of the pilot are not available to us now, but we do know that the system works. We also know, as we spent most of yesterday discussing, that we are about to receive a tsunami of secondary legislation. It is therefore the department’s opinion that, if we lay this order before Parliament now, we can be confident that it will go through and become operational and that this is appropriate before Parliament’s mind turns to matters of a European Union nature and we are deluged with SIs from other areas. It also means that if we have an early decision in your Lordships’ House, that will give us plenty of time to liaise with the stakeholders—there are many in this system—and make sure that our plan for delivery is absolutely watertight.
The noble Lord, Lord Beecham, asked about the suppliers. I think I mentioned in my opening remarks that commercial discussions will be going on over the summer but we obviously know who the suppliers will be, subject of course to the conclusion of those commercial discussions. The first lot is for the electronic monitoring system itself, which will be going to Capita. Then we have Airbus, which will be mapping the data from the tags and then supplying it to the monitoring system. G4S will be providing the hardware, which I saw a prototype of this week; it looks entirely robust and fit for purpose. The last of the four lots is Telefónica, which of course is a mobile phone operator and will be providing resilient mobile telecoms for the network to enable transmission of data. That is where things are in terms of the suppliers.
I did not go into a great amount of detail about the pilots and I am happy to share a few details now with the noble Lord, Lord Beecham. The MoJ pilot was commenced in October 2016 and concluded in March 2018, so it ran for 18 months. It was carried out in Bedfordshire, Cambridgeshire, Northamptonshire, Nottinghamshire, Hertfordshire, Leicestershire, Staffordshire and the West Midlands—so, over a broad geographic spread, which gives us some comfort about the robustness of the system. It concluded that there were subjects from a variety of backgrounds, including those on prison licence, community sentences and court bail. At this time, in total for the MoJ pilot and the MOPAC pilot, there have been 661 cases. More will obviously be added to that number as the MOPAC pilot reaches its conclusion, which it will not do until next year. I feel that the pilot has been and continues to be robust. I must also mention that the MOPAC pilot is in north London and east London, as it is run by the Mayor of London’s office.
Having answered as many questions from noble Lords as I possibly can, I hope that the Committee will agree to commence this legislative provision. It is proportionate and a sensible step to take.
Child Safeguarding Practice Review and Relevant Agency (England) Regulations 2018
Considered in Grand Committee
My Lords, these regulations are essential to implement the safeguarding reforms set out in the Children Act 2004, as inserted by the Children and Social Work Act 2017. I welcome the work of the Secondary Legislation Scrutiny Committee in drawing these regulations to the attention of the House as an instrument of interest.
These reforms aim to improve the protection of children. As noble Lords may recall, they were based on the findings of the 2016 Wood review, which found widespread agreement that existing multi-agency working arrangements should be replaced with a stronger, more flexible statutory framework. Alan Wood also recommended a learning-focused system of reviews to replace serious case reviews. The Act enables the establishment of the Child Safeguarding Practice Review Panel. The panel will identify and commission reviews of serious child safeguarding cases which are complex or of national importance.
I am glad that, following a recruitment exercise conducted in accordance with Cabinet Office procedures, Edward Timpson has agreed to take on the role of panel chair. Following his advice and that of a skilled and representative assessment panel, we last week confirmed five appointments who will bring a range of experience to support him in this important work.
The Act also requires the three safeguarding partners —police, clinical commissioning groups and local authorities—to work together to make arrangements to safeguard and promote the welfare of children in their area. As part of this, they must determine the agencies with whom they intend to work. They must also identify and commission reviews of serious cases which raise issues of local importance.
These regulations will enable these provisions to operate effectively. The regulations set out the criteria which the panel must take into account when deciding whether to commission a national review. The panel must also set up a pool of potential reviewers. This arrangement will support our aim of improving the speed and quality of reviews. The panel may, however, select other reviewers if no one in the pool is available or suitably experienced. The panel may also remove potential reviewers from the pool.
As the panel cannot let its own contracts, the Secretary of State will hold the contracts with reviewers. Therefore, these regulations require the Secretary of State to appoint or remove reviewers from national reviews based on the panel’s recommendation. The regulations also specify details of the panel’s supervisory powers during a national review and of its final reports, including publication. Requiring public availability of reports for at least three years will ensure that national-level learning can be spread throughout the system, the key purpose of these new provisions.
The regulations also cover local reviews—the responsibility of the safeguarding partners. As for national reviews, the provisions cover review criteria, the appointment and removal of reviewers, reports and publication. Like the panel, safeguarding partners must make decisions on when it is appropriate to commission a local review, taking local review criteria into account. This includes any advice from the panel on whether a local review may be appropriate. The regulations support the timeliness and quality of local reviews. The safeguarding partners must monitor the progress and quality of local reviews and may seek information during the review to enable them to assess this. The regulations also specify some details that final reports must include and require reports or findings to be available for at least one year.
The regulations set out a list of agencies with which the safeguarding partners may choose to work. The Government first published the list in indicative regulations during the passage of the Bill. Safeguarding partners should select agencies relevant to their local areas. The list of those selected may change from time to time, although we expect schools always to be involved. The safeguarding partners should consult the agencies selected, and the published arrangements should include a list of those agencies. Duties on relevant agencies apply only to agencies included by the safeguarding partners in local arrangements. The Government consulted on these regulations and the associated statutory guidance last autumn. Consultees were largely positive, although some clarifications were made to the regulations as a result.
The panel will begin work on 29 June 2018, when the transition to the new multi-agency arrangements will also commence. Safeguarding partners will have 12 months to prepare and publish their arrangements, including selecting relevant agencies, and a further three months to implement them. Provided that the regulations are agreed, we will publish the final version of the statutory guidance Working Together to Safeguard Children within the next few weeks. This will support the new arrangements and complement these regulations.
I thank all those who have contributed to work on these reforms, including noble Lords present. These regulations will support more flexible joint-working arrangements, as well as promote better and more timely learning from reviews, and I commend them to the House. I beg to move.
My Lords, the protection of children is perhaps one of the most important things that we should be doing. We welcome the safeguarding practice panel; if noble Lords do not mind me saying so, what an inspired choice Edward Timpson is as its chair. His work on the Children and Families Act was second to none.
I want to raise a particular issue that I hope the Minister will address: self-employed tutors. Unlike tutors employed by agencies, they are not legally obliged to apply for a Disclosure and Barring Service, or DBS, check. Accountants, vets, even traffic wardens are required to have such checks, despite the fact that their jobs do not involve regular access to children, yet private tutors who regularly work and are involved with children do not. In a Commons Oral Question, the Parliamentary Under-Secretary of State for Education said:
“It is ultimately the responsibility of parents to assure themselves about the suitability of any private tutor they might choose to employ before they engage them, for example by seeking and checking references, and asking to see a copy of any Disclosure and Barring Service certificate”.—[Official Report, Commons, 19/3/18; col. 12.]
As it stands, self-employed tutors cannot apply for a DBS check. Instead, they can apply for a subject access request, containing similar information, for a fee of £10, but they are not legally obliged to do so. I hope that the Minister will use this opportunity to deal with this rather strange anomaly. Either we insist that all tutors, whether self-employed or employed by an agency, have the correct requirements or, as a second-best option, they can apply for the certification, as suggested by the Parliamentary Under-Secretary.
My Lords, I thank the Minister for introducing these important regulations. We recognise the paramount importance of child safeguarding, which should never be compromised, no matter the circumstances. We further recognise—in doing so, we are confident that we reflect public opinion—the need for a revamp of the system of serious case reviews following a number of deeply disturbing cases in recent years, compounded by the often inept handling of reviews into how such crimes were allowed to occur.
Many of those concerns were articulated during the passage through your Lordships’ House of the Children and Social Work Act and I do not intend to revisit them. Revised regulations and a new system of reviews was necessary and, in clearly outlining the requirements for such reviews at both local and national levels, these regulations perform an important function—no less so the requirements being placed on the relevant agencies to ensure the kind of joined-up action that was often absent in the past.
That said, it is difficult to avoid the conclusion that this is another incursion by central government into what is properly a local government responsibility, yet more resources are being found to establish yet another ministerial body—or are there? Just what resources, in the form of new money, will be made available is less than transparent. Yesterday, when these regulations were considered in another place, the Parliamentary Under-Secretary of State, Nadhim Zahawi MP, said:
“The funding should be sufficient to cover all elements of the arrangements. We do not expect the new arrangements to cost more than existing structures”.—[Official Report, Commons, First Delegated Legislation Committee, 8/5/18; col. 5.]
That suggests that the Government do not treat this serious matter seriously enough to commit to additional resources, should they be necessary. The existing system was not performing adequately, hence these regulations. To suggest that this revamp, and the appointment of a new body, will not add to costs is surely not realistic.
We know that the former Children’s Minister, Edward Timpson—he of the shoe shop family—will chair the new Child Safeguarding Review Practice Panel. I echo the words of the noble Lord, Lord Storey, that, with his record, he is a man in whom we have some confidence to carry out the task effectively. He will bring experience and authority to the post and we wish him well. However, he will be a busy man because he was also appointed last month as chair of the Children and Family Court Advisory and Support Service. He will receive £500 a day as chair of the panel, and his members, £400 plus expenses. Those rates do not sound unreasonable but if I have a concern, it is over the number of times that the panel will be required to meet and the number of panel members that it will require. I suggest that the cost remains an unknown, but perhaps the Minister can give us the Government’s thinking on this and how much, in rounded figures, it is expected to cost. As I said, it is not realistic to think that establishing a new body will not involve additional costs.
In terms of the regulations, Regulation 4 is important, because it talks about potential reviewers. But it does not say who will be in the pool, just the process for appointing and unappointing. It says nothing about required experience and/or professional qualifications, and nothing about required training and quality assurance or professional supervision for the task. I am aware the Minister mentioned that five panel members have been appointed, and the Minister in another place was kind enough to list these people yesterday.
Of the five, I would say that four are very clearly qualified for the job on the basis of the information that follows their names. One I am less sure of, and it causes me some concern because there is no one from local government in terms of education. I cannot find the designation of the other member of the panel, but I think it was the chief executive officer of an academy trust. She may or may not be well qualified by dint simply of being part of an academy trust, but I am concerned that there is no representation from a director of education or a senior educationalist from the maintained sector. To me, there seems to be an imbalance, and I hope the Minister will tell me that the five panel members appointed are the first tranche rather than the final figure, because of the point I have just made, as well as the point I made earlier—that the workload is going to be considerable and that number of individuals, with their other responsibilities, will be insufficient to carry out the task.
I do not wish to say much more. The panel and its chair have very important work to do, and we hope it will quickly establish itself and help to restore some of the faith in the appropriate examination of child abuse cases that the public have, to a significant extent, lost in recent years.
I am most grateful to the noble Lords for their comments and questions on these regulations. I can address some of the points raised. The noble Lord, Lord Storey, raised an important point about the role of tutors and how they should be checked. I will write to him on that, as it is a technical matter.
The noble Lord, Lord Watson, raised several other points and I will try to address those. In terms of funding, it is important that the local areas have the flexibility to fund the arrangements that they design. The safeguarding partners should agree the level of funding secured from each partner, which should be equitable and proportionate, and the contributions from each relevant agency to support the local safeguarding arrangements. The funding should be sufficient to cover all elements of the arrangements. Any requirements for the national panel will be funded from the centre. We do not predict that there will be additional costs because we are hopeful that this will remove a lot of the overlap that there is in the system at the moment.
I am pleased that there is strong cross-party support for the appointment of Edward Timpson. He is very experienced in this area, but I take note of the noble Lord’s point about him being overstretched. The exclusion inquiry that he is looking into at the moment is a relatively short inquiry and should be completed within a few months, so I do not think that there will be significant overlap.
On costs, the fees and expenses of the members and chairs will be published and will be in line with the rates paid to other, similar expert panels.
The panel member that the noble Lord, Lord Watson, referred to is from an academy trust. We would also consider someone from a local authority who has experience at senior level. Both the Chief Social Worker and Mark Gurrey will bring that as well to the team.
I accept the local authority involvement regarding those named, but I was particularly talking about local authority education, because there has been some concern expressed that education has been left out of the loop, as it were, in terms of those involved. For education to be introduced only in the form of what appears to be a businessperson from an academy trust—I do not know her experience beyond that—without anyone from the maintained sector is a concern. Can the Minister answer the question that I posed earlier, that the figure of five on the panel is just the opening number and that it can be—and probably will need to be—increased?
My Lords, I agree that we should keep an open mind on the size of the panel. We have made clear through the statutory guidance that all the published local safeguarding arrangements must set out how relevant agencies, including schools and education providers, will be engaged with the multiagency working. The multi-academy trust member that we referred to, Dr Susan Tranter, has had experience as a head teacher and has had long service in the education sector, so she is not just an administrator but someone who has been involved in education.
These regulations underpin important safeguarding changes, as we discussed. They will give the safeguarding partners a framework to identify who is most appropriate to work with in order to support the safeguarding of children in their area and will give force to these decisions. The new child safeguarding practice review panel will be high profile, operate independently of government and promote genuine change in the safeguarding of children. The new arrangements for local and national child safeguarding practice reviews will enable the clear identification of any improvements that should be made to safeguard and promote the welfare of children. National reviews will also identify improvements at the national as well as local level, and the panel will follow up progress on implementation. The regulations enable these changes to function as intended and I sincerely hope that noble Lords will be willing to support them.
East Suffolk (Local Government Changes) Order 2018
East Suffolk (Modification of Boundary Change Enactments) Regulations 2018
West Suffolk (Local Government Changes) Order 2018
West Suffolk (Modification of Boundary Change Enactments) Regulations 2018
Considered in Grand Committee
That the Grand Committee do consider the East Suffolk (Local Government Changes) Order 2018, the East Suffolk (Modification of Boundary Change Enactments) Regulations 2018, the West Suffolk (Local Government Changes) Order 2018 and the West Suffolk (Modification of Boundary Change Enactments) Regulations 2018.
Relevant Document: 25th Report from the Secondary Legislation Scrutiny Committee
My Lords, I beg to move that the draft West Suffolk (Modification of Boundary Change Enactments) Regulations 2018, the draft West Suffolk (Local Government Changes) Order 2018, the draft East Suffolk (Modification of Boundary Change Enactments) Regulations 2018 and the draft East Suffolk (Local Government Changes) Order 2018, which were laid before the House on 19 March 2018, be considered.
These instruments, if approved by Parliament and made, will on 1 April 2019 establish two new councils: East Suffolk Council and West Suffolk Council. East Suffolk Council is made up of two existing councils: Suffolk Coastal District Council and Waveney District Council. West Suffolk Council is made up of Forest Heath District Council and St Edmundsbury Borough Council.
The instruments also provide for elections to these new councils to be held in May 2019 and each fourth year thereafter. This includes providing electoral arrangements—the warding arrangements that would be used for the first elections should the Local Government Boundary Commission for England be unable to conclude in time the electoral review which is expected it will undertake. In addition, they make transitional provisions, including for a shadow authority and shadow executive to prepare for the new councils during the period from when the order is in force until April 2019.
We have brought forward these instruments in response to locally-led proposals from each of the areas concerned. All of the existing principal councils in each area support the proposals and, as statute requires, have given their formal consent to the regulations. In line with the Government’s 2017 manifesto, we are committed to consider any locally-led proposals for district mergers and, as we told Parliament in November 2017, we will assess proposals on the basis that they will improve local government and service delivery, create structures with a credible geography and command a good deal of local support.
The Government are satisfied that these two merger proposals fully meet these criteria. In the case of East Suffolk, the merger is the next logical step to the many shared arrangements which the two existing councils in the area have today. It will improve local government in the area. It will achieve greater efficiency and resilience. It will secure for the future on-going savings totalling more than £20 million since 2010, as well as yielding further savings which the council estimates as £2.2 million per year.
The area of the new combined East Suffolk Council is a coherent geography with a population of around 240,000. This area is, in fact, the same area as the old county of East Suffolk that existed from 1888 until 1974. Finally, we are satisfied that the evidence shows that there is strong local support for this proposal, with a survey suggesting that 72% of residents would support the merger.
Turning to West Suffolk, the two merging councils already operate largely as one council. The merger completes and secures this and the benefits it brings. It will therefore improve local government in the area, securing for the future on-going savings of £4 million a year as well as yielding further savings which the council estimates as £850,000 per year. As in the case of East Suffolk, the new area recreates a traditional long-established area, that of the county of West Suffolk that existed prior to 1974, but with a population today of almost 180,000. As with East Suffolk, this proposal for a new West Suffolk has strong local support.
It may assist the Committee if before concluding I say something about the processes which have been followed by the councils and the Government and which have led us to conclude that these proposals do, indeed, meet the criteria and are worthy of implementation. In each case the councils concerned submitted their proposal after undertaking what we believe was a sound and full consultation exercise involving extensive local engagement and open consultation.
In the case of East Suffolk, in formulating their proposals, East Suffolk councils undertook a programme of engagement with residents and stakeholders from September 2016 until December 2016. The programme included: an independent, proportionally representative phone poll; a media campaign including press releases and promotion on social media; information packs for town and parish councils; an open consultation via a dedicated webpage and an online survey to collect comments on the proposals; formal communication to stakeholders; presentations and talks at resident and business forums and public events; and a frequently asked questions document updated with any common questions or concerns.
The independent poll commissioned to find out local residents’ views suggests that 72% of residents were in favour of the proposals to form a new single district council, with 22% raising concerns. All of the local institutional stakeholders, such as the NHS, the county council, major business groups in Suffolk and all the neighbouring authorities, are also in favour.
In the case of West Suffolk, the programme of engagement with residents and stakeholders took place from May 2017 until the end of August 2017 and included: an independent, proportionally representative phone poll; a media campaign including press releases and promotion on social media; information packs for town and parish councils; an open consultation via a dedicated webpage and an online survey to collect comments on the proposals; formal communication to 162 stakeholders; presentations and talks at resident and business forums and public events; and staff briefings for front-line employees. The opinion research commissioned to find out local residents’ views suggests that 70% of residents were in favour of the proposals to form a new single district council. As was the case in East Suffolk, 22% of residents raised concerns. All of the local institutional stakeholders, such as the NHS, the police, the county council, major business groups in Suffolk and all the neighbouring authorities are also in favour.
In both cases, where any concerns were raised, the councils made efforts to address each of the issues, and, where contact information had been provided, responded directly to explain how the concerns would be addressed. These responses were collated and published on the councils’ dedicated webpages.
Having considered all the material submitted to us, we do not share the view of the Secondary Legislation Scrutiny Committee—much as we hold it in the greatest respect—which reported that there appeared to be inadequacies in the consultation processes which relate to the instruments. Rather, we believe that the councils carried out a considerable exercise in consultation and made every effort to obtain a good appreciation of local opinion—and, in fact, achieved this. We are reinforced in our view by the support in both areas of many of the elected representatives, including all the MPs, for this proposal. Those elected locally to represent their area are clearly in a good position to know what local people are thinking.
Once the proposals were submitted, the next step was for my right honourable friend the then Secretary of State to announce how he was minded to proceed. In both cases, he announced that he was minded to implement the proposal. There then followed a period for representations. In the case of East Suffolk, a total of 25 representations was received: 20 in favour, one neutral and four against. None of the representations that were in opposition raised points which had not been raised and addressed in the consultation undertaken by the local authorities. I would add that these representations include five received outside of the timescale and beyond the 20 received during the representation period. We refer to those received on time in the Explanatory Memorandum, which, if Parliament approves the order, will be updated to include those responses received later. In the case of West Suffolk, all seven representations received were supportive of the proposal, including the local NHS, the county council and business groups.
It was following these processes that my right honourable friend the then Secretary of State decided to bring forward the secondary legislation which we are considering today to implement these two merger proposals. For each proposal, there are two instruments before us. In each case, the regulations modify the provisions of the Local Government and Public Involvement in Health Act 2007 in its application to the case concerned. The regulations are made under provisions of the Cities and Local Government Devolution Act 2016. These regulations modify the 2007 Act provisions to enable a locally led and supported merger proposal to be implemented without the need for a time-consuming boundary review, which can be undertaken only at the discretion of the Local Government Boundary Commission for England. I should add that the Boundary Commission sees no difficulty with the approach we are taking and is expected to undertake a full electoral review to re-ward both new areas before the elections in May 2019. In each case, there is an order to be made under the modified provisions of the 2007 Act, which provide for the new councils, their elections and transitional arrangements.
In conclusion, these instruments establish two new councils that are widely supported. I have full confidence in the local areas to implement the mergers by April 2019 and allow the good people of Suffolk to elect their new councils in May that year. On that basis, I commend the regulations and orders to the committee.
My Lords, I rise to speak on items six and seven, pertaining to west Suffolk. I speak as a resident and ratepayer of the St Edmundsbury Borough Council. This is a rather unusual piece of legislation in that it is catching up with reality. It seems to be about turning de facto into de jure. Its roots lay in the fairly recent past. They were conceived by the leader of St Edmundsbury Borough Council, John Griffiths. The opportunity arose to sell the council offices in the middle of Bury St Edmunds for them to be converted into flats and for new offices to be built on the edge of the town. The building has more room, is better planned, is environmentally up to date and is very smart indeed. It houses the council officials of both St Edmundsbury and Forest Heath. Most of those posts are already held in common by one official. In effect, there is already a substantial shadow administration. In a way, we are officially legitimising what has already been done. In old-fashioned terms, these two authorities have been living in sin for years, and this legislation will effectively make them man and wife, as one concept.
My Lords, I also speak as a Suffolk resident of almost 40 years, although not of either of the areas covered today. I am a former district and county councillor in Suffolk so I have a keen interest in this.
I have always advocated unitary government for Suffolk, perhaps going back to the old, two-council days before 1974, or possibly 1973, with serious devolution to the towns and parishes which want it. I felt that way because I truly believe that service delivery would be better if we brought together planning and transport, for example, under one council. Local people would not have to sort out which council does what. As a councillor, I know that that is a significant issue. The financial savings that can be made from creating unitary councils have been well established across the country where this has been done.
Opposition to my view has always been on the grounds of saying, “Well, district councils are important because they’re small and they’re local and the wards are small. Everybody knows everyone and they’re close to the people”. I buy that; I can see that argument. However, it seems that in merging these councils—I am talking about councils as opposed to their back-office functions—big wards will be created and the council offices will, in many cases, be moved away from the area they represent. The advantages of districts are lost without the benefits of unitary government. Bins will still be emptied by one council and the waste disposed of by another, for example.
I remain concerned about that. I accept the point that Suffolk councils have been in the process of merging their back-office functions to save costs for some years now. That is entirely sensible. However, my council in mid-Suffolk, having done that with the neighbouring authority of Babergh, has now gone completely mad and moved its joint offices to the middle of Ipswich. There is no local connection there. If you are going to defend three-tier local government on the grounds of local connection, you have to show local connection.
I am worried that all this is being driven by the parlous state of local government finance in this country, rather than some sort of rational, thought-out plan. It feels as though people who live in Suffolk are somehow not being properly engaged with—I will come back to that—or brought along in the process. It was interesting that the Secondary Legislation Committee shared some of those concerns. I appreciate the trouble that the Minister has gone to to allay those. Nevertheless, there is still a lot of work to do—to be charitable—to convince people in Suffolk and in town and parish councils that the proposals will work.
To give what I think is an important piece of context, the report that went to Waveney and Suffolk Coastal District Councils on 14 March 2016 stated:
“The potential benefits and pitfalls of unitary local government have been well rehearsed previously”—
“have not been reproduced here. It is uncertain whether the new Secretary of State will be open to such discussions … Similarly, this could not be done in any format without … an impact upon Suffolk County Council. It is assumed at this stage (and without any discussion with the County Council) that this would be strongly resisted”,
by the county council. In other words, in East Suffolk at least, this was kicked off in 2016 without really knowing what the Secretary of State or the county council thought.
With regard to the support to which the Minister referred, the problem was that nobody ever had a say about the benefits of unitary councils—which I think, had it been put as an option, would have been more significant—but that did not take place because a unitary authority had been ruled out.
This continues to be a model. On 21 March this year, the leader of Suffolk County Council announced that he had commissioned a report from ResPublica to look at options for local government in Suffolk over the coming years. This afternoon, the local press are reporting that he has suspended this work, saying that it is because his opponent in a leadership bid is opposed to it. I have no idea whether the second part is true but it shows, given the importance of local government to Suffolk and the services that it delivers, that it deserves better than this.
Before the noble Baroness sits down, would she make it plain that she is speaking primarily about East Suffolk? We in West Suffolk have been enjoying the benefits, or disbenefits, of the change now for a long while. We have been just living together and getting to like it.
I am very pleased to put a cloak of respectability over the noble Lord and the area in which he lives. I hope that he sleeps more soundly as a result. Yes, I was citing the report that went to East Suffolk, but there is a general point. I would have preferred a much more strategic look at the whole county and how services are delivered so that we can all feel that councils are genuinely representing us. I think that that is exactly where we will be in five years’ time, but that will probably have cost us a lot of time and money.
My Lords, first, I should draw the attention of the Grand Committee to my declaration of interests: I am a vice-president of the Local Government Association. I am not a resident of Suffolk, although I have friends there and visit often. It is a wonderful place to spend time.
I am clear that there is local support for the order. I know that the Minister has addressed the issue raised by the Secondary Legislation Committee, and I am happy with that. I have talked generally about consultation: we must ensure that our consultation processes actually involve talking to local people to get their views; we do not always do that. I am not saying that about this case.
I agree with the noble Baroness, Lady Scott of Needham Market. I think that local government in England is a little confused. If you go to one place, there is a unitary council that does everything for the whole county. In the next place, you will have four or five tiers of local government doing the same job. There is an issue there. That is not the case in other parts of the country. In some parts of the country, you can have a metro mayor and a combined authority, the PCC, a county council, a district council and the parish council, all delivering different services to you. In another place, you have just a unitary council or a unitary district. I know that the Minister will say that we like it being bespoke and everyone can do as they like, but you could equally argue that it is a bit confused and a bit of a dog’s breakfast in some parts of the country.
In principle, I am not against what is suggested here, bearing in mind the points I made.
My Lords, I do not want to add to the comments made by anybody who knows something about Suffolk, like my noble friend Lady Scott of Needham Market. I just remind the Committee of my interests as a councillor in Yorkshire and as a vice-president of the Local Government Association. The comment I want to make is that I have attended a number of these sessions where, as a Committee, we have considered mergers or boundary reviews and, in every instance, the existing local councils involved make claims about the savings that will be made and services that will be more efficient and that residents will be happy with the general situation. My question is: do the Government or the Ministry of Housing, Communities and Local Government do a review post hoc to test whether this is in fact the case? We always accept these claims at face value, and we have a very specific claim here about the savings that will be made. No doubt that is the intention of the councils involved, but my experience of what council officers claim and what actually happens is that they can often diverge. If such reviews do take place, I would really like to have access to them and, if they do not, I suggest that they are undertaken, partly because the funding savings that will be made are very specific. Councils always also make claims about efficiency of service provision, which may well be the case, but does anybody ask after the event whether it is the case?
I share some of the concerns expressed earlier, among all the comments that have been made, about the confusion of local government now and whether we are losing the “local” from local government. The area where I am a councillor, for example, serves 450,000 residents—it is a unitary, metropolitan council—and my ward serves 13,000 electors, so some 17,000 residents. This is compared with some local authorities where the wards will be considerably smaller. We have to ask the question about whether there is a democratic deficit for people in some parts of the country. How local is local government? There is, I think, a debate to be had between getting scale and service provision and losing the local touch, which democracy requires if it is going to work well. With those comments—well, questions—I will end what I have to say.
My Lords, I thank noble Lords very much indeed for their contributions in relation to these issues affecting Suffolk. I will deal with the contributions in the order that they were made, if I may. I turn first to my noble friend Lord Tebbit, with his personal experience of St Edmundsbury Borough Council—an excellent council in a lovely part of the country. My noble friend quite correctly said that this is de facto catching up with de jure, because this has been the position for a long while. I also remind all noble Lords that these proposals are locally led. This is not a government imposition of what we would like to see; this is something that is locally led so, in relation to the local democracy element, that is very important.
I am very happy as the Minister for Faith to be presiding over this union, this coming together, of these two parties—
I am sorry, but somebody will have to clarify whether I can speak. I was not here at the start of the debate, so I did not know that the Committee agreed to take the instruments en bloc. I intended to get here as quickly as I could, so I thought I could at least speak on the second pair when they were reached.
My Lords, the rules say that if a noble Lord is not present at the beginning of the debate he cannot take part in it.
I would be very happy to see my noble friend Lord Porter afterwards, if he has particular points, and to cover those in detail, if that would be helpful.
I am very happy to preside over the union of the two parties that have been living in sin, as the noble Lord put it. It all seemed to be going well until the noble Baroness, Lady Scott, got up to object—it reminded me of a scene in Jane Eyre or possibly Far from the Madding Crowd—but happily not in relation to the one union that was very close to my noble friend’s heart. She subsequently clarified her concerns about some of the issues.
Babergh and Mid-Suffolk were very close to an agreement in relation to a locally led proposal. It was not to happen, but that was a local matter, and as a department or a Government we have quite rightly not attempted to impose anything on them. So these are locally led proposals. On the unitisation issue, I shall not get sucked into Suffolk politics and matters pertaining to that great county as I do not know all the issues. Once again, however, it is open to authorities within Suffolk to come forward with locally led proposals if that is what they want.
I was not up to speed with the latest development on the review of the county council. I know the county council initiated it of its own volition without the involvement of the other areas, but if something were to come forward at a future juncture, of course we would look at it.
In relation to East Suffolk as well as West Suffolk, from the evidence we have of the consultation, these proposals are strongly supported by residents. All the districts concerned, including Waveney and Suffolk Coastal in the case of East Suffolk, are strongly in support of these proposals, which comes back to the locally led point.
That brings me to the noble Lord, Lord Kennedy. He and I have at the very least a nuance of difference in our approach here. Despite his very respectable Labour pedigree, the noble Lord has a slight Stalinist tendency to favour a standard approach for every council in the country, which is not necessarily what local councils want. These are locally led proposals. The same is true on a different canvas in relation to the mayoralties. They are not necessarily the same, but they are locally supported and bespoke.
Does the Minister accept that one of the problems, the one we are all grappling with, is that these proposals do not have any sense of originating from the people, so when people show support or do not do so they are showing support or otherwise for something that has been handed to them? It is the same now with many of the other structures of local government. We all share a deep commitment to local government structures and we want to be confident that they enjoy public support. This is not a political point. It is about local democracy.
I do not dissent from the general point that leadership means that proposals have to come from somewhere. I am keen to make the point, and perhaps to restate the point to overstate the point, that these are locally led proposals from local leaders. Of course they are not going to come from individual residents, but the evidence we have from the consultation, which the Secretary of State will have borne in mind when looking at these proposals, was that there was strong local support for them.
I take the point that there has to be a government policy, but the Government, of whom I am proud to be a part, are keen for there to be diversity and bespoke deals. The noble Lord probably takes a different view of this, but it is not a view that the Government subscribe to. We have a broad policy of saying these things have got to be locally led. We will look at them and scrutinise them to ensure that they are locally supported and represent value and so on, but local democracy is the key point.
I take the Minister’s point. I am conscious that in other parts of England there are other places where there are differences among what councils want. Oxfordshire is an example where there are very different views about what is wanted in the future. Do I take it from what the Minister said that if councils do not want things to happen, they will not happen?
Well, for district mergers, there has to be 100% support from the councils. What I am saying is that there does not necessarily have to be 100% support from the local MPs, for example, and that has not been the case. I am sure the noble Lord will appreciate—
I am making the point in relation to district councils, as it is district councils we are looking at. There are other considerations in relation to unitary authorities but, in relation to district councils, there has to be unanimous support from the authorities concerned, as there was in these cases. It happens that, in these cases, they have support also from the surrounding authorities, not all of which are in Suffolk itself.
Lastly, I will turn, if I may, to the point made by the noble Baroness, who also has great experience of local government. We are looking at Suffolk, but she will understand from the point of view of Kirklees the need for that local dimension. We have the local dimension here, as demonstrated by the feelings of the people in the area. That is the point I wish to emphasise.
In both cases, it is about recognising—once again I will adopt the words of my noble friend Lord Tebbit—a move from the de facto to the de jure. In both cases, there has been close co-operation. In both cases, for understandable reasons, it is intended that branch offices will be kept open while headquarters will be, in one case, in Bury St Edmunds, and, in the other case, in Melton, on the outskirts of Woodbridge. So there will be no change in that regard, but it is moving very sensibly from the de facto to the de jure, which is what they want. With that, I commend the regulations and the orders to the Committee.
Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018
Considered in Grand Committee
My Lords, the regulations being considered were laid before the House on Thursday 15 March 2018. The private rented sector is an important part of our housing market, housing 4.5 million households in England. Houses in multiple occupation, or HMOs, form a vital part of the sector, often providing cheaper accommodation for people whose housing options are limited. However, HMOs sometimes pose greater management challenges than single household accommodation, and some of the occupiers of HMOs are the most vulnerable people in our society. That is why mandatory licensing of HMOs was introduced in 2004 for properties with three or more storeys that are occupied by five or more people.
Since its introduction over a decade ago, mandatory licensing has been successful in raising standards and enabling local authorities to tackle overcrowded conditions and poor management practices. However, over the past 10 years, the private rented sector has doubled in size, which has led to increasingly small properties being used as HMOs.
As these smaller HMOs were not subject to mandatory licensing, some rogue landlords have been able to avoid local authority detection and enforcement by letting HMOs with fewer than three storeys. Poor practice by these landlords has led to negative harmful impacts on some local communities through the accumulation of rubbish and waste, as well as noisy and anti-social behaviour outside HMOs. It is to address these problems that the Government have extended mandatory licensing to properties of fewer than three storeys. We have already laid the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order on 23 February 2018; it will come into force in October 2018. We are working with local authorities on producing guidance to ensure they are able to meet this date.
In addition to extending mandatory licensing, the Government are creating two new mandatory HMO licence conditions to address problems which are common in these types of properties. These conditions are on national minimum sizes for rooms used as sleeping accommodation and a requirement to comply with council refuse schemes. These new mandatory conditions are the subject matter for debate before the Committee today. It may be helpful for noble Lords if I outline briefly each mandatory condition in turn. I will begin by setting out the proposed requirements for minimum room sizes for sleeping accommodation.
By amending Schedule 4 to the Housing Act 2004, the regulations will require local authorities to include a new condition within licences. This would require a landlord to ensure that the floor area of any room in the HMO is not less than 6.51 square meters, if used as sleeping accommodation by a person over the age of 10 years. This minimum room size is just that: a minimum. It is simply a standard below which a room cannot be used as sleeping accommodation. It is not intended to be the optimal room size. Local authorities will still be able to set minimum sleeping room sizes above that minimum, which reflect the layout, space and amenities in the HMO in question. These can of course be greater than 6.51 square meters when used by one person over the age of 10 years. This will be important, since local housing authorities will need the discretion to set a room size that reflects the conditions of housing stock within their local areas. However, it is important that there is a clear minimum room size in HMOs. The introduction of this condition will ensure a consistent minimum that is applied nationally, across different types of HMO in the sector, and clarify a standard that we would already expect landlords to comply with.
The regulations also clarify minimum sizes for rooms used as sleeping accommodation by children under 10 years of age and by two persons aged over 10. A landlord will have to ensure that any room used as sleeping accommodation by a person under 10 years is not less than 4.64 square meters in size; if a room is to be used as sleeping accommodation for two adults, it must not be less than 10.22 square meters. In granting licences, local housing authorities will have to specify the maximum number of persons who may occupy the specified rooms as sleeping accommodation. It will be a local decision as to whether a room is appropriate to be occupied by three or more adults as sleeping accommodation.
Non-compliance with the minimum room sizes is a serious matter. If a landlord knowingly breaches the condition, that landlord will be liable on conviction of a criminal offence. Conviction on indictment could result in an unlimited fine; alternatively, a civil penalty of up to £30,000 may be pursued. We know that most landlords are honest and trustworthy. There is no intention to criminalise landlords who do not deliberately create overcrowding or to displace tenants without warning. We have introduced transitional arrangements to give landlords time to comply with the new requirement and rectify overcrowding specifically to protect tenants who may otherwise be jeopardised by bringing these regulations in over too quick a timescale.
Local housing authorities must allow a reasonable period for the landlord to meet the requirement. This will be a period of up to 18 months before it considers prosecuting the landlord for breach of the licence condition. The landlord must be notified of the breach and the length of time they have to meet the requirement. Those HMOs which are already licensed will have to comply with the condition only when their current licence expires, and at the first renewal after 1 October 2018.
Turning to the household waste disposal facilities part of this order—the second new mandatory conditions that these regulations create—a new mandatory condition will need to be included in HMO licences requiring the landlord to comply with their local authority refuse storage and disposal scheme.
The purpose of this condition needs some explanation. People living in separate households in HMOs tend to generate more rubbish than is seen in single-household properties. While tenants should be responsible for properly disposing of their rubbish, they need adequate and accessible receptacles to do so. Making this a mandatory condition of licensing means that local authorities will have proactively to require landlords to provide waste disposal facilities in circumstances where there is a scheme. It will also provide councils with the necessary enforcement powers if landlords are not complying with waste disposal schemes.
We anticipate that the vast majority of landlords will already be in compliance with the new conditions since the minimum room aspects of these regulations simply clarify existing space standards under Section 326 of the Housing Act 1985. We consulted extensively on the introduction of minimum room sizes for sleeping accommodation along with the requirement to comply with council refuse schemes in 2015 and 2016. These regulations should therefore come as no surprise to local housing authorities or landlords. For those landlords not in compliance with minimum room sizes, there is a transition period.
I am very much of the opinion that these are necessary conditions to beef up the HMO regime and I commend these regulations to the Committee. I beg to move.
My Lords I remind the Committee that I am a vice president of the Local Government Association. The regulations have my entire support. This is a very welcome change. I have one question for the Minister, which I have raised on previous regulations. It takes a very long time to effect change—it is three years since the initial consultation took place in May 2015—and I wonder whether things might be speeded up a bit. We have to consult carefully on the regulation to get the right outcome, nevertheless it does seem to take a very long time.
It has to be right that local authorities can regulate the minimum size of rooms that may be occupied as sleeping accommodation. It has to be right that the local housing authority can specify the maximum number of persons who may occupy a specified room for the purpose of sleeping accommodation in that licenced HMO. It has to be right that local authorities can make schemes in respect of refuse storage and disposal that a landlord would have to implement. In all those respects this regulation has to be right.
There was a time when the definition of HMOs was adequate. They were of three or more storeys and were occupied by five or more persons forming two or more households. That was for many years a standard definition that stood the test of time. The difficulty now is, as the Minister said, that the private sector has grown to the point where it represents one in five household tenures in the UK, and standards have slipped. We have HMOs which, as the Explanatory Memorandum makes clear, are under the radar, and something has to be done about that.
I understand that there has been some debate about a reasonable minimum size for sleeping accommodation. As the Minister made clear, 6.51 square metres for one person over the age of 10 is a minimum size, not necessarily a desirable size. Indeed, it is actually very small. If you calculate that in your own mind, it is not very big at all. I understand that there are some residential landlords who would like all the accommodation in an HMO, which might include communal accommodation, to be calculated as part of the minimum amount. It seems to me that sleeping accommodation, which is the private space of an individual in an HMO, has to be of a reasonable size for someone to do things other than just sleeping. Therefore, I find 6.51 square metres small. I do not think it reasonable to say that we should include communal accommodation and reduce the amount that is required under the law for sleeping accommodation.
With reference to paragraph 7.9 of the Explanatory Memorandum, I wonder whether the period of 18 months’ grace is too long. For a while, I felt that once this has been approved, giving landlords a year, or perhaps nine months, would be adequate. Given the fact that it may prove complicated for local authorities to identify, investigate and agree with landlords what will happen, a period of 18 months is probably justified. When he replies, can the Minister explain the basis for the 18-month period as opposed to any other?
These regulations are very welcome. They help us to solve a problem. Where standards in the private rented sector are declining, they give local authorities powers to act to protect the interests of tenants. They should therefore be commended.
My Lords, these are important regulations before the Grand Committee. I, too, declare my interest as a vice-president of the Local Government Association.
I do not know whether any noble Lords here have ever lived in an HMO. I certainly have not. My honourable friend in the other place, Melanie Onn, and I were work colleagues in the Labour Party; she lived in an HMO as a young homeless person and she will tell you what conditions were like there. She has some knowledge about this. These regulations are important and I am very happy to support them; they certainly go in the right direction, but there is a lot more to do.
I have also been out in Newham on a number of housing raids. Of course, Newham has a licensing scheme, but the standard of accommodation some people are expected to live in is absolutely shocking. The regulations are a step in the right direction, but we must never lose sight of the poor accommodation that we have and expect some people to live in. I support improved rights and protections for renters; the regulations will go some way to improving the rights of some of the most poor and vulnerable people in our communities.
We have had discussion of the national minimum room standards. As the noble Lord, Lord Shipley, said, the room allocated to someone in an HMO is not just a bedroom. Other than the shared bathroom and kitchen, you need a bit more space to put a bed and a wardrobe in. This must be taken into account when concluding that the proposed minimum standard for a single occupier should be 6.51 square metres or 10.22 square metres for two people. Those sizes will be further compromised if young children are there as well.
Some local authorities may seek to provide larger minimum space standards in their licensing schemes, which is good. However, we need to consider carefully that these rooms are not just bedrooms. They are your bedroom and living room. They are the room where you put all your property. Everything you have in life goes into this one room. I certainly think that we have to look carefully at size there.
The Minister mentioned fines for letting out rooms that are smaller than the minimum, which is good. However, we must make the point that we can have all the regulations we like, but it becomes an issue when we cannot enforce them. The other issue with HMOs, particularly when they are very small or even illegally let, is the danger of overcrowding and overcluttering, which creates a fire risk and other problems that people get into in insufficient spaces.
Ultimately, we need to think also about issues such as the impact on mental health. You have to remember that people are letting one room and are sharing the building with people they do not know. Often, they will lock the door to their room at night, and that is not a great way to live your life. These are some of the most vulnerable people and there are real issues here, in particular for their mental health.
That leads on to the wider problem of a housing market in crisis, which we have talked about many times in this House and elsewhere. The standard and quality of some of the accommodation that people live in is shocking and we need to do much more about that.
I have to mention the dreaded Housing and Planning Act 2016, which offered little respite to people in this housing crisis. We need always to be on top of this. I support the regulations because they are a move forward, and I thank the Government for that, but we need to do much more. I am not sure if the Minister has been out to look at the situation, but I can recommend that he do so with Newham Council. He would find it shocking—I was last out with the council in February. For people to be living like that in HMOs in 2018, in one of the richest countries in the world and one of the richest cities in the world, is truly unbelievable. I am very happy to support the regulations before us today.
My Lords, I thank both noble Lords who speak on these issues on behalf of their parties. I thank them for their general approach, which is consistently responsible and, at the same time, questions aspects of the policy, which I fully understand.
I will deal first with the points made by the noble Lord, Lord Shipley. One thing that the noble Lord, Lord Shipley, the noble Lord, Lord Kennedy, and I have in common is that we always want these things to happen more quickly than appears deliverable. I understand, therefore, where the noble Lord is coming from when he talks about how long these things sometimes appear to take. We have touched on the fact that both noble Lords carry out visits to communities at the sharp end to see what is necessary, and similarly I have been to Sheffield and Luton and seen some of the problems that exist there, which are by no means unique. Tomorrow, I am in Leeds and Hull, and on Friday I will be in Bradford, and I expect to get similar messages there.
I thank the noble Lord, Lord Shipley, for what he said about the broader definition of HMOs that we have already brought in to take into account properties of three storeys and below. As a Government and as a country we have to be fleet of foot to change our definition in the light of new circumstances so that, as he said, things do not go under the radar. I accept that 6.51 square metres is relatively small, but, my gosh, he and I know that it is a massive improvement on some of the things that are happening now. As he rightly said, we must make sure that we focus on enforcement to make sure that these and other regulations are properly enforced.
The noble Lord, Lord Shipley, asked whether the 18-month period is appropriate. When I saw it, I also thought it seemed to be a long time. However, one needs to remember that this is not, primarily, to protect landlords. If anything, it is to protect tenants, some of whom I accept are currently sleeping in a space that is too small. However, we do not want those tenants to be forced out by a landlord saying that he has to do so because it is the law. The transitional period takes into account landlords to a degree, but, much more so, tenants as well as local authorities. Probably, 18 months is about the right period.
The noble Lord, Lord Kennedy, mentioned Newham Council, which I know does much good work. I will, when possible, visit Newham to see what is happening there. He made the justifiable point that this issue has far-reaching implications for mental health, a point which, I must confess, I had not homed in on. He is absolutely right. In a sense, I lived in a HMO as a student, but that is a very different experience from living in a HMO as an adult, particularly with children, and I understand what the noble Lord is getting at. It is not a desirable position in many situations. It may be appropriate for people on a transitional basis but it is not how most people would opt to live; I fully accept that. However, given that some people are in that position, we have to make sure that there are appropriate regulations.
I again thank the noble Lords for their comments and for their general support. I commend these regulations to the Committee.
Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018
Renewable Heat Incentive Scheme Regulations 2018
Considered in Grand Committee
My Lords, the draft Renewable Heat Incentive Scheme Regulations 2018 were laid before the House on 23 March 2018, and the draft Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018 were laid before the House on 7 February 2018. Just to save the noble Lord, Lord Stevenson, some trouble, I can let him know that the common commencement date rules do not apply to this type of regulation as they have no impact on business, so he need not raise that.
I am grateful to the noble Lord. As I said earlier on, I will endeavour to improve; I know that the noble Lord will keep a record on these matters.
The purpose of the draft orders is to implement reforms to the renewable heat incentive, or RHI. The reforms will deliver changes that will strengthen the focus on long-term decarbonisation, offer better value for money for taxpayers, increase protection for consumers and further support supply chain growth in the renewable heat sector. Heat accounts for around half of the UK’s energy use and one-third of total carbon emissions. Increasing the share of heat derived from renewable sources is a critical challenge, both to meet our renewable energy targets and to deliver the Government’s long-term carbon goals. Building a vibrant renewable heat sector is a key objective of my department’s clean growth strategy and the industrial strategy. The RHI is the main programme to deliver those goals over this spending period. Before the RHI started, only 1% of our heat came from renewable energy sources; that figure is now around 7% of total heat.
This type of tariff-based support for renewable heat is the first scheme of its kind in the world. Inevitably, there are lessons to be learned, and these reforms are a response to some of the lessons from the early years. The National Audit Office published a review of the RHI in February this year, which we were pleased to receive. Many of its comments related to issues covered by the draft regulations, which I hope will go some way towards addressing some of the issues raised by the NAO, which were also noted by the Secondary Legislation Scrutiny Committee. The draft orders will deliver a series of important reforms that will help us to deliver a more strategic mix of technologies and improve value for money over the next three years until the scheme closes in March 2021. I will highlight the main ones.
We will increase the tariffs available for biogas and biomethane technologies while introducing new restrictions on the feedstock that those plants use. That will encourage the increased use of food and agricultural waste and will reduce the use of energy crops, making better use of farmland for food production. Alongside changes already made last year, this will rebalance deployment away from biomass in favour of heat pumps, biogas and biomethane, which will all play a much stronger role in the scheme over the long term.
Another important change is that we will bring in tariff guarantees that will allow RHI applicants to secure their place on the scheme in advance of construction. This will support investments in larger plants that deliver better value for money. We will cap the amount of heat covered to 250 gigawatt hours per year to protect the scheme budget.
In the domestic scheme, take-up to date has been dominated by owners of larger homes. To promote wider uptake, we will introduce the assignment of rights. This will allow third parties to finance renewable technology and to be repaid directly from the RHI. Crucially, that will open up access to the scheme for those without up-front capital to pay for a new heating system.
Following consultation last year, we will limit the eligibility of certain heat uses. These provisions will remove most instances of wood-fuel drying and waste processing or drying. In addition, we will remove the use of heat for drying digestate in anaerobic digestion facilities as an eligible heat use. We consider that these processes are poor value for money and that many would not exist without RHI support. We will also remove support for heating swimming pools on the non-domestic scheme, unless the pool is for commercial or municipal use.
We are also introducing changes to allow more than one heat pump to use a common or shared ground loop. This should facilitate greater deployment of that important technology. The introduction of electricity metering for heat pumps across both schemes will allow participants to better monitor the efficiency of their plant and build confidence in the technology.
Following consultation, another change will be to increase the power efficiency threshold of combined heat and power technology from 10% to 20% to reduce the risk of overcompensation and to encourage plants to run more efficiently. There is also a whole series of mainly administrative changes to tighten cost control, reduce the risk of gaming and improve Ofgem’s delivery of both schemes, including by tightening its enforcement powers.
The Renewable Heat Incentive Scheme Regulations 2018 also consolidate all previous revisions to the original regulations, as recommended by the Joint Committee on Statutory Instruments. The RHI plays a central role in the Government’s programme to decarbonise heating. These regulations are an important step in refining the scheme and I commend them to the Committee. I beg to move.
My Lords, in general, I welcome this secondary legislation, in that the National Audit Office report from February certainly needed some reaction from the Government on the way that the scheme operates. Just to put it in a bit of context, the audit report included some very interesting figures: between 2012 and 2017, there have been some £1.4 billion-worth of payments, which should lead to commitments of some £23 billion. To me those sound like big numbers but, as we know from smart meters, they are absolutely piffling. There have been 78,000 installations already and there were expected to be 500,000 by 2020. It is estimated that we have got to about a fifth of that original target. To give the Government their due, they have responded to reality in this area and moved some of those targets.
Although the Minister made a strong point about this being a major contributor to our carbon targets, the point I want to make is that, in many ways, it is a small drop in the ocean of what we need to do to meet our carbon budgets in future. The renewable heat incentive is certainly nothing like sufficient to meet those budgets in the heating sector, nor was it ever meant to be. That sector is so important, but it is one in which we still have so few solutions for meeting our targets. In electricity generation, we are well on our way; in transport, we at least have the solutions on hand; but in space heating, we do not yet, and the RHI is never going to get us there. There are big challenges for this scheme.
I was quite surprised to see in the audit report that Ofgem, which is the manager of the scheme, had not really managed to tackle some of the gaming issues and was uncertain on the overpayments side. I guess that all auditors have to find something. Certainly, the report praises the GB scheme in comparison with that in Northern Ireland, where clearly the scheme got completely out of control and caused the political difficulties that we now have there. However, it is estimated that we still have some £3 million-worth of overpayments.
The noble Lord mentioned biomass heat pumps and anaerobic digestion. One of the things I have installed in my own house, at my own expense, is solar thermal. I do not know whether this will be an area that is targeted in the future. Solar energy for electricity generation has been so successful, and I cannot see why it is not something we should be able to better promote through this scheme.
The issue I would like to raise with the Minister is this: I can think of particular anaerobic digestion operators in the south-west that are really concerned about the amount of feedstock that is available to the industry. On anaerobic digestion, I understand that food waste available to existing AD plants is declining and that gate fees have been declining over some considerable time and in some cases are negative. Under these regulations and future plans, what are the Government doing to make sure that the stream of food waste that can go to anaerobic digestion will be available? I do not know whether this is on the Government’s horizon, but one thing I would like to see is a complete ban on food waste going to landfill and much better food waste collection by local authorities. Are there any Government plans in this area?
It has been pointed out to me that the new tariff guarantee procedure could be used to make sure that, when that process goes through, there is a sufficient waste stream available to the new AD facilities to ensure that the contract can be met over the 20 years. Further, I welcome the assignable rights; that is a very positive move forward.
One thing I had not realised, which came out in the sub-committee I chair, is that the renewable heat incentive scheme is part of an agreement on the proceeds of the EU Emissions Trading Scheme. Some of that, in a sort of hypothecation, has to be ploughed back into certain energy schemes, and I understand the RHI is part of that contract. I wonder whether that, and the Government’s views about the RHI, will change once we are out of the EU—although I understand from Minister Claire Perry that we are going to remain in the EU ETS during the transition period. However, I would like to understand whether that affects the long-term funding of the scheme—which of course is funded by taxpayers, as opposed to the electricity schemes, which are funded through consumer bills.
The delay to the laying of these regulations has been hard for the industry. We will not stand in their way; however, perfect they are not.
I am sure the Minister will understand the need to keep a watch on their effect as they come into being as there may be unintended consequences—some of which I shall run through. I seek the Minister’s assurance that the Government will keep them under review and make further changes and revisions where needed. I shall put forward a raft of suggestions in that vein.
One of the shocking aspects of the RHI is how far short of the expected targets it has fallen, as mentioned by my noble friend Lord Teverson. I was watching the Public Accounts Committee session on the RHI and was astonished at the BEIS response to questioning from the committee on the fact that the original target for number of installations was 513,000 by 2020 but, as was mentioned, only 78,000 had been installed by December 2017, as stated in the NAO report.
The BEIS response was even more shocking because it was that this meant we had saved money and that was a good thing. BEIS prayed in aid unsubsidised companies which were doing brilliantly. The Government would reach their targets for emissions reduction and renewable energy production anyway, so it did not matter. I thought that was a concerning approach to the desperate need to decarbonise heat.
The NAO report demonstrated that the ambition of the Government in this regard has been scaled down from their original ambition. The proportion of renewable heat that will not be eligible for RHI has gone up by 270% and the lifetime emission reduction resulting from the RHI has gone down by 44% compared to the original ambition. The Government are not on track at all to reach their fourth and fifth carbon budget targets, and they will be missed. We were all celebrating when we signed the Paris agreement, yet there has been no step change in actions to match the step change needed to meet our commitments, particularly on heat. In terms of our debate today, there is a cliff edge coming in 2021, so will the Minister say what is the Government’s plan? What is going to happen when the scheme ends? The Government have said that they will bring forward lots of studies this year and report on their review in the summer of 2018, which is nearly upon us. Can the Minister be explicit in his response and tell us what we can expect to see and when we can expect to see it?
As the Minister said, there has clearly been a lot of gaming to get subsidies that are not in the spirit of this agenda. Can he tell me how many companies have been caught gaming the system? In the committee, it seemed that most of the checking is done at the point of accreditation and there is relatively little in terms of inspection and audit. If we need regulations changed to clamp down on this, perhaps the Government should also be looking far more strictly at their compliance regime.
I want to address one of the changes in these regulations that have been brought in to address some of the gaming that was mentioned; the drying of wood. It is obviously not the intended purpose of the subsidy, and companies which game the system should be ashamed of themselves, but shame clearly is not working. I totally understand and support the Government’s desire to make changes that will exclude this type of gaming, which unfairly means that those who play by the book find themselves at an economic disadvantage, and margins are extremely tight.
However, there are potential unintended consequences of the new regulations about feedstock rules, and I should like the Minister to address this issue. The regulations in relation to AD rightly want to encourage the use of non-crop feedstock. That means that there will be a greater need for feedstock processes, such as pasteurisation or hydrolysis, to make sure that digestate is safe to lay across the land. It also means that a wider range of feedstock will be used. This is not my specialist subject, but removing potential bugs from the digestate, meeting the requirements of the Environment Agency and reassuring end users that the digestate is okay to spread to land seem pretty important.
As we rightly shift to non-crop feedstock, this will become a bigger issue and the need for these processes will increase, so companies doing the right thing may find themselves penalised economically for doing so under the new rules. Going forward, all RHI projects will use some waste feedstock, and the change to waste eligibility potentially rules out these uses. If the RHI subsidy is not allowed for plants using these processes, projects may be unable to go ahead. The original consultation referred only to withdrawing support from drying “industrial or municipal waste”, and it is a good move in these regulations to remove the ability to game in that way. Is it intended that the policy should also capture pasteurisation and/or hydrolysis in AD plants with the exclusion process for waste? If that is the Government’s intention, how will it work if only a proportion of the input feedstock is waste? Does it mean that even a tiny amount of waste feedstock would render all heat generated ineligible for support? Could the amount of support paid be adjusted based on the proportion of waste feedstock used?
There is a call from some in the industry for flexibility in the system, as there is a difference between AD projects that use heat for pasteurisation or hydrolysis as opposed to blow-drying wood. To indicate some of the financial implications, although each plant is different, this one is an example of potential financial implications on set-up. Funding projects with a current long-term investor requires returns of minimum 8.5%; it would need to be more like 9.5% to 10% on the open market. For an average plant, therefore, the overall cost to build is £12 million. The RHI heat income that would be lost if the changes are interpreted as “no RHI paid on heat for pasteurisation or hydrolysis if any waste is used” means that £880,000 would be lost over a project’s lifetime, taking 0.4% off the project’s returns. Given that these projects are only just achieving the required level, a project that is just about fundable now would not be funded as the return would fall to only just over 8%.
I know that is very detailed. I obviously want to give the Minister time to think about this, but these issues have been raised by the industry. The Minister is getting sympathetic looks from my noble friend on my right. My point is that this is detailed and close, but when margins are close, this is important. We want to encourage these people to set up new plants, not discourage them. This needs looking at and we need to keep an eye on it because it puts people out of business. As small as it seems, it is hugely important.
My Lords, I intervene just to say that I caught the noble Baroness’s noble friend’s eye and he was looking faintly sympathetic towards me. The noble Baroness is making some very valuable points, some of which I will be able to respond to. In relation to the point being made by the noble Lord, I will write to the noble Baroness in much greater detail and make the letter available in the Library, as she knows I always do.
I know that the Minister will always write to me. He writes to me often. I will leave that issue for him to ponder and, I hope, address in his response; I am happy to have in writing whatever he cannot address now.
I want to move on to other issues that need addressing or reviewing as soon as possible in the regulations. I thank Energy UK for drawing my attention to the assignment of rights, for which we are all grateful. Will the Government extend similar rights to small and medium-sized businesses and, if so, when? The changes to support household customers with high up-front costs are excellent, but small and medium businesses need a similar provision. The Secondary Legislation Scrutiny Committee report was clear that a comprehensive review of the RHI is needed and that BEIS needed to be,
“rigorous and ongoing if the deficiencies of the past are to be redressed”.
To be sure that money is being spent appropriately, this needs to happen before the end of 2018 to make sure that what is yet to be spent is spent efficiently. Moreover, it is extremely important to introduce a long-term low-carbon heat incentive going into the future, beyond the cliff edge.
The NAO pointed out the scheme’s failure to be cost-effective and essentially said that that was down to poor monitoring and targeting. Can the Minister tell us how the Government will address the NAO’s concerns in monitoring and ensuring the appropriate targeting of the RHI in future?
Energy UK has helpfully published a report that lays out a way forward for the industry, the Government and Ofgem in terms of actions and decisions needed in order to decarbonise heat. Given the gap between where we are and where we need to get to on decarbonising heat—I was going to go into fracking but I will spare the Minister that—I suggest that the Minister not only reads that report by Energy UK but acts on the very good advice that is in it.
My Lords, I thank the Minister for his excellent introduction to these regulations and other speakers who have contributed. It is a truism to say that these regulations are an important part of decarbonising the economy and reducing greenhouse gas emissions in line with our international commitments and targets. The key question has to be whether these regulations before us will help us in our drive to achieve the Government’s stated aims, which include a,
“focus on long-term decarbonisation, promotion of technologies with a credible role to play in that transition, and offering better value for money for taxpayers”.
I couple that observation with a question to the Minister: does he agree that the evidence before us—which, as has just been said, is not complete by any means—seems to show that we have been less successful in reducing carbon from heat in this country than we have been in decarbonising electricity generation? It may be that that is a lesson that we need to learn and expand upon during this process.
The noble Baroness, Lady Featherstone, has just said that we are approaching a cliff-edge. Not only is this scheme time limited, but we have had very little information on how the Government are going to drive this policy through to 2030 and beyond and, indeed, on whether they are focusing sufficiently on decarbonisation or are falling into the trap of choosing some current technologies over others, which experience tells us is not the way to go. We need to go single-mindedly for the higher carbon-generating technologies and stick with that before we start playing around with too many other options that may well not be as efficient in getting us to the target.
Turning to the regulations, we do not disagree with the proposed changes. There have already been delays that have been far too long, revisions and seemingly endless consultations. The most important thing is to get on with delivering progress in renewable heat generation. However, we have to bear in mind, as the NAO report, which has already been mentioned, has brought into clear focus, that this reset of where we currently are translates into a very severe overall reduction in ambition. Can the Minister give us some indication of the longer-term plan that the Government have for renewable heat, and of what exactly the plan will consist? The ambition, which I thought all parties shared, of a substantial decarbonisation of heat cannot be achieved on the RHI alone. Indeed, as has been mentioned, these regulations are going to end, and will be closed to new entrants in March 2021. This is very short-term target and few, if any, new projects can be expected to be devised, tested and financed, or even introduced, in that timeframe. So, while we welcome what is being done, the Government need to answer some key questions: what is going to happen next and when will it happen? Where is the research on different heat-demand scenarios? What is the future for hydrogen, which recent reports have talked up? What changes will be needed in the grid, for example, if there is a large- scale uptake of heat pumps, and who will pay for that? What is the proper role of bioenergy, given its sometimes adverse impact on the natural environment? All we know is that the Government intend to publish a full report on the evidence by summer 2018, which is not, frankly, enough, and is, of course, already too late.
We have, as the Minister said, the benefit of a NAO report, which was picked up by the Secondary Legislation Scrutiny Committee. The key point that emerges from that is that the amount of renewable heating funded by the RHI will have reduced to 65% by 2020, and the lifetime carbon emission reductions achieved by the RHI, in terms of the current ambition compared with the original starting ambition, is a reduction of 44%. This is a substantial downgrading, which is very disappointing. As a country, we surely deserve better.
I have some specific questions for the Minister, some of which have been raised already. On the assignment of rights, which we agree is important, surely it is important for both domestic and non-domestic RHI, but the regulations restrict it to domestic. Can we have an explanation of why that is the case? On tariff guarantees, the regulations are sending the wrong signals; people need certainty, and making these TGs subject to closure if the guarantee amount is exceeded in any particular period is obviously helpful in capping the costs, but will be disastrous because they leave investors and operators uncertain about the likely financial return they will obtain from their investment. We welcome the geothermal element in the non-domestic scheme, but the funding identified seems very ineffective and insufficient. Can this be looked at again? Finally, I am surprised at the outturn position of 20% adopted on the CHP efficiency threshold, as 71% of the consultation responses disagreed that the level should be returned to 20%. The argument goes that CHP, because of its variable outputs, does not work on the basis of a known level of electricity certainty. By setting the level at 20% as if it were achievable across the board without exception, the scheme potentially undermines the viability of good CHP schemes that cannot operate entirely on that basis. I would be grateful for a comment from the Minister on that.
I look forward to the response from the Minister, but I echo what has just been said by the noble Baroness, Lady Featherstone: if he wants to add to his letter-writing, I am sure that we can wait for that.
My Lords, as always, I make the offer of a letter to all noble Lords who took part in the debate, because obviously I will not be able to pick up all the points. I am grateful for noble Lords’ general welcome for the regulations and our response to the NAO report.
The noble Lord, Lord Teverson, talked about this being a drop in the ocean given the large sums of money that are involved—we all know that a billion here and a billion there soon adds up to quite a large sum. Take, for example, AD, which was mentioned by the noble Lord, Lord Teverson, and the noble Baroness, Lady Featherstone. We know that AD will never solve all our problems, but it can deal with a certain amount of waste. As was pointed out by the noble Lord, Lord Teverson, the important thing with any AD plant is to make sure that you have adequate waste as feedstock for the future. We do not want people producing waste for the sake of waste just to go into a plant. We want to use only genuine waste or, on occasion, to top it up with a certain amount of crops that are grown for that purpose. Principally, however, plants would be designed to deal with waste.
In my former life as a Defra Minister, I saw quite a number of AD plants taking in waste from very different sources. Where they were attached to a supermarket, one would see bucket loads of old yogurts or whatever else had gone past its sell-by date being tipped in. That was a good way of using it, and we want to devise schemes that will, as the noble Baroness rightly said, prevent that waste going to landfill. I saw excellent small schemes also. I remember one used by a salad producer, which took the waste from its own products—the stalks from tomatoes are actually rather difficult to break down—and used it to produce both heat and power to grow more tomatoes in due course, and used the digestate that comes out in the end to fertilise those tomatoes. It was, wonderfully, almost a closed loop. There are terrific advantages to AD, but, as we all know, it will not solve all the problems.
RHI will be an important step in helping to reduce carbon emissions and—I say this to the noble Lord, Lord Teverson—make progress towards the legally binding renewable energy targets that we have. As I made clear, we will certainly look very carefully at ensuring that there is suitable waste feedstock and that the scheme ensures current and future supplies to anaerobic digestion. If the noble Lord has a local problem in the south-west, it is important that he, and those in that world, brings it to the attention of the department when it is reviewing this matter. I assure the noble Baroness, Lady Featherstone, that my right honourable friend Claire Perry and the department will look constantly at these matters to make sure that there can be further tinkering to get it right.
The noble Lord, Lord Teverson, asked about solar thermal. My understanding is that it is eligible for both schemes, so it is already supported by RHI. If he wants to look at that for his own domestic arrangements, he is welcome to do so.
As I said, I very much welcome what the noble Baroness, Lady Featherstone, had to say. I made it clear that we will keep these matters under review. I cannot give a precise date for when and how my right honourable friend will respond. I will certainly respond to some of the noble Baroness’s more detailed questions, particularly those relating to electrolysis and other matters, most of which I shall make a complete hash of if I try to respond to them now. I think all those taking part in this debate would be far more grateful for a written response.
The noble Baroness is right to raise the whole question of detecting abuses and gaming—something touched on by other noble Lords and which the NAO was wary of. As she pointed out, with any changes that we make, there are always potential unintended consequences, and we keep that under review. It is a large and varied scheme, and the non-domestic scheme in particular has huge variation in size, heat and use and the technology used between projects.
Despite all those challenges raised by the NAO, the department—the former Department for Energy and Climate Change, which noble Lords on the Liberal Democrat Benches will know well because it was one of their great Secretaries of State who sat in that department, which is now within BEIS—is working with Ofgem and, I think, developing a better approach to identifying gaming. We will certainly respond to the NAO in due course.
The noble Lord, Lord Stevenson, also welcomed the changes, and I am again grateful. He particularly welcomed the assignment of rights, but was concerned that it might lead to a lack of access to loans or other finance for a number of businesses and that that could be a barrier for them. I can only say that we have no plans to widen the assignment of rights beyond the household sector at the moment, but we would always want to keep all matters under review.
What is the logic to that? The issue for small and medium-sized businesses is exactly the same as for domestic users: it is about high capital outlay, which is equally difficult for SMEs as for private, domestic householders. This has really got in the way. The Government have a great solution there now for the domestic sector; if the principle is being breached, I do not see why it is a difficulty to extend it to the SME sector.
I appreciate what the noble Lord says about there being no logic to it. It is just that there is no evidence at the moment that lack of access to loans is a barrier to business. If the noble Lord thinks otherwise and can produce evidence, it can be looked at.
As I said, the order has largely been welcomed, and I am very grateful for that. These changes are necessary as a result of the NAO report. I think that we would all agree that there have been considerable successes this year. It is only part of the whole scheme of trying to decarbonise the system—again, we wish to pursue that even further.
I want to pick up on one final comment from the noble Baroness, Lady Featherstone. If I could persuade her and some of her Liberal friends of the benefits of what she referred to as fracking and of pursuing greater domestic production of gas—of which there is potentially a great deal in this country—in that it improves both our chances of a degree of decarbonisation and our energy security, I would feel that I had achieved a very great thing. That will no doubt come in the future. In the meantime, I will give way before I finally put these regulations to bed.
Without going into a detailed back and forth discussion on fracking, I simply want to add to the point I made about the Paris agreement. Bringing on stream another fossil fuel at this point might be a distraction from a real solution to our problems in the future.
I do not believe that it would be a distraction. It would have considerable benefits for the United Kingdom, bearing in mind what is available to us here. I hope one day to persuade the Liberal Democrats of the virtues of that approach. We might get there.
European Organization for Astronomical Research in the Southern Hemisphere (Immunities and Privileges) (Amendment) Order 2018
Considered in Grand Committee
My Lords, I am sure that I speak for myself and the noble Lord, Lord Collins—perhaps more for him than for myself. I am sure that he saw a captive audience at the back of the room; he was very impressed by the fact that we would have someone looking in. That was quickly diminished because, as noble Lords can see, the captive audience is made up of my officials.
I welcome the noble Lord, Lord McNally, and my noble friend Lady O’Cathain to the debate. It is good to hear that this issue has interest in it. The order is interesting. As the noble Lord, Lord Collins, will no doubt remember, the order was laid before the House on 29 March. It amends the European Space Agency (Immunities and Privileges) Order 1978 and the European Organization for Astronomical Research in the Southern Hemisphere (Immunities and Privileges) Order 2009. I am sure that those orders are well-known to my noble friend Lady Goldie.
I start with the importance of the space sector. The European Space Agency and the European Organisation for Astronomical Research—also known as the European Southern Observatory, or ESO—are both important to the UK. We contribute more than £20 million annually to the ESO budget, for a share of just over 16%. We also contribute more than £300 million to the European Space Agency, making the UK the fourth-largest contributor. We are one of only six countries to host a European Space Agency, at the European Centre for Satellite Applications and Telecommunications in Harwell, Oxfordshire. This centre is a vital part of our strategy to develop the UK space sector—an area I know well from my time as a Minister at the Department for Transport. This is an important sector for the development of the UK economy in the future. The centre provides a focal point to showcase UK capability and partnerships. Working in partnership with the ESA, we are planning to develop an extension to our Oxfordshire campus which will house a meeting and exhibition space and a new conference centre. This will provide benefits not only to the space sector but to all sectors involved in the use of satellites, which currently contribute £250 billion to the UK economy. The space sector offers significant research and economic opportunities for the United Kingdom. British academics and businesses working in the sector are recognised internationally as leaders in the field and are in a strong position to take advantage of those opportunities.
I turn to the details of the order as it relates to each organisation. I turn first to the European Space Agency, established by a convention in 1975. The United Kingdom acceded to the convention and joined the agency the same year—although we had been collaborating with other European countries in this field for some decades before that. In 2013 we welcomed the European Centre for Space Applications and Telecommunications to Harwell in Oxfordshire. This order amends the European Space Agency (Immunities and Privileges) Order 1978, which afforded privileges and immunities to agency staff and high ranking officers. The revision confirms the immunities and privileges to which staff are entitled and the number of high-ranking officers that the UK will recognise.
Specifically, it confers the status of high-ranking officer on the head of the Harwell centre, and also provides for the ESA director-general and a maximum of seven further members of staff working at the centre to be considered high-ranking officers. This means that they are entitled to certain privileges and immunities, including exemptions from social security contributions. They are not, however, entitled to immunity from suit or legal process, except for actions carried out during their official functions or inviolability of residence. These high-ranking officers play a significant part in shaping ESA policy, and are world leaders in their field. The presence of high-ranking officers at the space centre in Harwell strengthens our capability and credibility and is crucial for the growth of the UK space sector and for attracting inward investment.
I want to reassure noble Lords that the privileges and immunities afforded to officers of the agency are limited to those that are required for them to conduct official activities. They are in line with those offered to officers of other international organisations of which the UK is a member.
If I could perhaps pre-empt questions before they are asked: leaving the European Union will have no direct impact on the UK’s membership of the European Space Agency. The ability for UK staff to work effectively for the organisation before and after the UK’s departure from the European Union is controlled by our adherence to legislation that accurately reflects the convention and its protocol and the privileges and immunities it affords to staff.
I now turn to the European Organisation for Astronomical Research in the Southern Hemisphere. The Committee may recall that some of the provisions of the order that relate to that organisation were debated in this House early last year. That earlier version of the draft order exempted only high-ranking officers of ESO from social security contributions. Having reconsidered the position, my department came to the view that we can properly exempt all members of staff from these contributions. We regret that this issue was not addressed fully during the debate on this order on 30 March last year. Rather than continuing with the 2017 draft order and amending it in short order, we have decided it would be better to lay this further amending draft order and to include in it the new provisions in relation to the ESA, which were not contained in the 2017 draft order. I beg to move.
My Lords, I address the orders, which I welcome and see as perfectly sensible for international organisations. I have two particular points. Yesterday, we debated in the House how Parliament will deal with the tsunami of SIs that are coming our way as a result of Brexit. As the Minister has just done in his conclusion, I draw attention to the fact that these orders contain three apologies for errors in previous orders and two corrections. This is a fairly simple, straightforward endorsement of the workings of multinational organisations in our country and abroad. There were five mistakes in one SI. With the best intentions in the world, we have to look at the real problems we will have in dealing with statutory instruments and the need for accuracy and effectiveness.
I can see a little scepticism in the room about me talking about the space industry. That is one of the great things about being in the House of Lords. I served as one of the main spokespeople for the party on the Space Industry Bill. We greatly enjoyed taking it through, but I immediately started getting letters that began with, “As an expert on the space industry”. I am not an expert but I should declare that my son, James, is a space engineer working in Munich for a Franco-German company.
My views are all my own and they impinge on the way in which the Minister introduced these orders, with reference to the space industry. I agree with the Minister that the prospects of the space industry are among the most exciting that face us. I am very proud that, under the coalition Government, the noble Lord, Lord Willetts, and Vince Cable did a lot to reinvigorate the space industry. I am reading Ken Clarke’s memoirs at the moment. He talks about the 1980s, when he was in the DTI, and how he and most of his colleagues had little interest in the space industry as a growth industry for the future.
Now, it is the exact opposite. There is tremendous excitement and a great deal of potential there. The Government have done a lot of good things since 2015 to carry the industry forward. I understand that the legislation covering the European space industry and other international commitments relating to space has nothing to do with our membership of the European Union. As I said, my son works in a Franco-German company; he works with Poles, Italians, Germans and the French as well as Brits. It stretches credulity not to imagine that an organisation such as that, which depends so much on international co-operation, will find it more difficult outside the EU to partner.
Space ports are a good example. When Europe looks for its space port, I wonder whether the Scottish, Welsh or Cornish bidder will have a better chance than the Portuguese when Europe makes its decision. It is the same with Galileo: we have already seen the removal of one of the Galileo preparatory units from Portsmouth back to mainland Europe. We have to face the fact that what is a very exciting industry will have some question marks over it, because of the decision on our membership of the EU. I once saw a very interesting documentary about what is going on down in Chile—although the ESO headquarters are in Munich, not where my son works, its main work is of course down in Chile. The documentary showed that it is exciting and right at the cutting edge of space exploration.
My only words to cloud this optimism is that I remember very clearly where I was 50 years ago, when man landed on the moon. Those of us who were alive then could not imagine that, 50 years later, we would have made so little progress in space exploration. On the other hand, my father, who was born in 1899, used to talk about how, as a boy growing up in Liverpool, he remembered seeing the first aeroplanes flying and what happened to flight in the 20th century. What I learned from the Space Industry Bill is that the space industry is probably where they were in the early 20th century and that it could make similar amazing progress. Along with that, the progress regarding satellite technology, deep space probes, the mining of asteroids and so on are on the agenda of our scientists and could make a massive difference to the century ahead.
I support the passage of the regulations, but I just give those two gypsy warnings about the difficulty of dealing with the SI tsunami that we face and the problems of making our space industry viable outside EU partnerships. Again, some of us are old enough to remember Blue Streak and other adventures into space and that going it alone did not work.
My Lords, I know it is late in the day, so I will try not to bang on too much. I must admit, I did not expect to be making this speech again; as one of my brothers in the trade union movement used to say, it is déjà vu all over again. I do not know whether the Minister has had the opportunity to read the Lords Hansard from the last time we had this order but, if he has not, I will remind him of some of the contributions that I made. One mistake I made the last time we debated this order is that I managed to speak without saying the words, “the European Organisation for Astronomical Research in the Southern Hemisphere”. I realised this because, when I was searching for my last contribution using the Hansard search facility, it did not bring up my contribution, as I had managed to not say those words. So, for the record, I have said them now, so that just in case we have to return to this subject again, I know I will be able to find it.
I appreciate the contribution made by the noble Lord, Lord McNally, and I share his sentiments completely, and those of the Minister, about the importance of this. It is, strictly speaking, a sort of HR issue. This is about how we are going to treat employees of this organisation in accordance with an international treaty. I do not object to that—it is quite proper and should be done.
The concern I have is that this relates to a convention from 1962, according to the noble Baroness, Lady Goldie. We may be talking about other issues, but the protocol that we agreed to in the 2009 order—which took effect in 2012—and which we were talking about last March, was discovered to be defective in June 2014. There was a considerable period of time when this error went unnoticed but we now have to return to the subject. Last time we discussed it there were 40 employees: 38 in Chile and two in Germany. What is the score now? How many people are we talking about? What has been the impact of this error? Have people suffered a detriment? What is the cost to those individuals? If there has been a cost or a detriment to these individuals, what is the Foreign Office doing to address that? Will there be some form of retrospection?
When the Minister, Sir Alan Duncan, wrote to me, he acknowledged the parliamentary time that had been taken up and he regretted that it had been wasted. I accept that errors and mistakes happen, but this order has had a rather unfortunate journey, and I think we need an explanation. We need an assurance that things will be put right, and that the error has not resulted in people suffering a detriment. It may be that over this period of time, people have gone into and out of employment, which may complicate matters even more. I do not want to put too many onerous questions to the Minister. We have had a busy day already and are at the final hurdle but I hope that he will be able to answer me. The noble Baroness, Lady Goldie, was unable to answer me last time but I am hoping that the Minister will be able to on this occasion.
My Lords, I am very grateful to the noble Lord, Lord Collins, and the noble Lord, Lord McNally, for their contributions. As we have agreed, being part of the European Space Agency brings real opportunities for British industry. Our scientists and engineers collaborate with their European colleagues at the European Space Agency to deliver important advances. Let us not forget that in 2018—the “Year of Engineering”—the inspiration that the European Space Agency provides is even more significant.
The amendment order puts in place the necessary immunities and privileges to allow the European Space Agency to operate effectively in the UK. It also aligns domestic law with obligations we have to our European colleagues at the European Space Agency, with whom we share an interest in increasing our knowledge of space. As both noble Lords have said, it also corrects errors in the order relating to the European Organisation for Astronomical Research in the Southern Hemisphere —it comes off the tongue so smoothly that I am sure we will all remember it for future reference. There may be a test in a year’s time—hopefully not in the Chamber. Just as we benefit from our association with the European Space Agency belonging to this organisation, also known as the ESO, opens up a galaxy of opportunities for our scientists. I notice that my officials have used real space terminology. The UK’s commitment to both the European Space Agency and—here we go again—the European Organisation for Astronomical Research in the Southern Hemisphere remains unchanged.
I have already referred in my opening remarks to the regret that we have. Let me assure the noble Lords, Lord McNally and Lord Collins, that as the noble Lord, Lord Collins, just said, the journey which this order has been on has been turbulent. I understand totally their concern at the errors which were made in the order. The process is important. Let me assure the Committee that my department takes this issue very seriously. After the previous time this order was debated my noble friend Lady Goldie, who took that debate, followed up on it and we put right many of the clearance processes and revised our internal procedures for such orders. Although I cannot guarantee that there will be no error in any order in future, I can say on the record that our processes should pick up an error before orders are laid before Parliament. I totally empathise and align myself with the sentiment that we need to get this right.
The noble Lord, Lord McNally, talked about the tsunami of SIs which awaits us. It is important to ensure that in the approach we take when we lay orders in your Lordships’ House, and in the other place as well, the work is done and our processes reflect the importance that is attached to these issues.
The noble Lord, Lord Collins, asked about the staff. For clarity, let me say that the provision would apply only to those who are UK staff or UK nationals working in the UK. In this case, there are 42 employees who are UK nationals and ESO staff but none is currently in the UK. All are in Germany or Chile. We would therefore need to interrogate individual employee records since, as the noble Lord said, people may have moved locations. When he raised this issue with my noble friend previously, we said that we would put right any wrong in this respect. I can reassure him that, as I said, there are currently no such UK nationals employed in the UK. On the last occasion, the Government also undertook to treat sympathetically—I think my noble friend used that word—any approach made by any employee caught up in such a situation. I can confirm on the record that we have not been approached by any individual in that regard, but I assure the Committee that we will keep a watch on this. If there are any implications, I will certainly share them with the noble Lords concerned.
I hope that I have given reassurance to the noble Lords, Lord Collins and Lord McNally, about the importance of the procedure that should be deployed on statutory instruments in general, and specifically on this order. I hope that this is the end of it on this legislation. The noble Lord, Lord McNally, talked of how people are inspired and said that his son is employed in the space agency. We learn a lot from our children. After a conversation about space, I may have two aspiring astronauts: a six year-old called Mansoor and a four year-old called Faris. I am not embarrassed to admit that when my four year-old said, “Daddy, how many planets are there in the solar system?”, I responded with the figure nine. He said, “No”. I named them and he went, “Daddy, Pluto is not a planet. It’s a dwarf planet”.
We live and learn from our children, from our elders and seniors and from noble Lords. In doing so, we all align ourselves with this important industry and we want to inspire not just the current generation, as taken up by the son of the noble Lord, Lord McNally, but future generations. Maybe at some point in time when my six year-old and my four year-old understand the concept of statutory instruments, I shall share this chapter of their father’s life with them as well. I am grateful to noble Lords for their contributions.
Committee adjourned at 6.44 pm.