Tuesday 26 February 2019
Arrangement of Business
My Lords, if there is a Division in the House, the Committee will adjourn for 10 minutes.
Shipments of Radioactive Substances (EU Exit) Regulations 2019
Considered in Grand Committee
That the Grand Committee do consider the Shipments of Radioactive Substances (EU Exit) Regulations 2019.
My Lords, this new instrument is being made under powers set out in Section 8(1) of the European Union (Withdrawal) Act 2018. It is being made to address specific inoperabilities arising from the UK’s withdrawal from the European Atomic Energy Community —Euratom—and would come into force on exit day only in the event of no deal between the UK and the EU. The instrument corrects deficiencies in retained EU law by revoking and replacing Euratom Regulation 1493/93 on the shipments of radioactive substances between EU member states. This instrument applies to the whole of the UK.
The regulations ensure that advance declarations will continue for shipments of sealed radioactive sources from the EU into the UK in the event of no deal. They enable the UK competent authorities to check that UK importers comply with requirements for the safe storage, use and disposal of sources before shipments are made. This process of advance declarations maintains the oversight of the UK competent authorities of the destinations and recipients of the sealed sources shipped into the UK. Therefore, in relation to imports, the regulations provide continuity for regulators and operators in a no-deal scenario.
The instrument covers the shipment of sealed radioactive sources. This means a radioactive material encapsulated by another material, usually metal, to prevent exposure. Such sources are widely used in industry, agriculture and medicine. Examples include sources to inspect the quality of welds on gas and water pipelines, to kill bacteria in food, to kill cancer cells in medical patients and to sterilise medical equipment. Approximately 100 businesses import radioactive sealed sources in the UK and the vast majority are in England. The regulations do not delay or restrict the UK’s ability to import such sources from the EU as they provide continuity with current practices.
Following exit, UK importers of sealed radioactive sources from the EU will be required, as previously, to make an advance declaration demonstrating that they comply with national requirements for the safe storage, use and disposal of sealed sources before shipments from the EU to the UK can take place. This declaration will be sent to the relevant competent authority in the UK, which will acknowledge receipt as per previous processes. The competent authorities are the ONR for nuclear-licensed sites and the UK environment agencies for non-nuclear licensed sites. The UK importer will then be required to forward the declaration to the EU-based exporter before the shipment can be made. These declarations can last for up to three years and cover more than one shipment. The UK will recognise all declarations made before exit day following the UK’s withdrawal from the EU. Shipments can continue to be made under existing declarations until those declarations expire.
In the event of no deal, the system cannot continue to operate in exactly the same way as now as the UK will no longer be a member state. The instrument maintains current arrangements in so far as possible, with three changes. First, the instrument applies only to imports from the EU into the UK, and will not apply to exports from the UK to the EU. This reflects the UK’s position outside the EU and that this legislation can cover only the arrival of shipments in the UK.
Secondly, the obligation on exporters in EU member states to submit a quarterly return of all shipments will no longer apply. This is because the UK cannot place an obligation on EU exporters to submit a return to a UK-based competent authority.
Thirdly, the instrument places the legal obligation to make an advance declaration on the UK importer, whereas the Euratom regulation placed the legal obligation to obtain the advance declaration on the EU exporter. This technical legal change is made for jurisdictional reasons but makes no difference to what is required of the importer in practice, since it would have needed to provide the information to the exporter. Therefore, requirements for making the declaration for UK importers remain the same.
The changes do not place any additional practical requirements on industry or regulators. We expect a very small, one-off familiarisation cost to all industry of between £1,400 and £9,000. Subject to Parliament’s approval of the regulations, guidance for operators will be published online in March alongside targeted industry engagement. Officials have been engaging with affected operators through various fora and channels, including the Environment Agency’s small users’ liaison group and the Radioactive Substances Policy Group. My department drafted this instrument in collaboration with the devolved Administrations, the UK environment agencies and the ONR.
In conclusion, the regulations are essential to demonstrate the UK’s continuing commitment to the highest safety standards for the control of radioactive substances and to ensure maximum continuity for UK importers. I beg to move.
My Lords, I thank the Minister for his exposition. I acknowledge that this is a complex and highly technical subject, but it is important to all citizens. I note on the first page of the document that “competent authority” means,
“in Wales, the Natural Resources Body for Wales”.
On page two, some lines down, it states that “shipment”,
“means the transport from the place of origin to the place of destination, including loading and unloading, of sealed sources”.
Should we presume that this refers to a sea voyage, as opposed to a road or rail journey? The word “shipment”, on paper, seems a trifle ambiguous.
In north Wales there are two nuclear power stations: Trawsfynydd in Meirionnydd and Wylfa in Anglesey, or Ynys Môn. I believe that the former is dormant and the latter is to be replaced, although I understand that plans for the new Wylfa are now on hold, which is a cause for concern across the island. It is not my intention to query those issues as such, but can it be presumed that shipment from plants such as these—should there be a need for shipment—would begin by road or rail? As I said, “shipment”, as referred to on page 2, is a trifle ambiguous. I recollect seeing the transportation by rail southwards from north-west Wales of a flask mounted on a rail-wagon frame. The flask, which was large and possibly made of steel or iron, was engaged within the train in just one wagon and was easily identifiable to people like me in the locality as a flask connected with the plants that I have instanced.
My Lords, I thank the Minister very much for presenting this statutory instrument. Obviously, this is not just a consequence of the Brexit decision but of the Euratom decision, so I put it on record that we regret that it is necessary. In the debate in the other place, this was billed as the last SI connected to Euratom, although I think the next one is as well, so I am not sure how that works. I know that previous SIs have been dealt with by my noble friend Lord Teverson.
I shall raise a couple of points. First, the Minister was clear that this relates to sealed transportation, yet the Explanatory Notes are clear that it covers both sealed and unsealed transportation, so I am a little confused about that. Certainly, in the debate in the other place, the Opposition Front Bench spokesperson also expressed some concern over how these regulations extend into the unsealed transportation—“unsealed” being vials, for example—of nuclear material. I would welcome some explanation from the Minister of why he chose not to talk about unsealed transportation while the Explanatory Notes are clear on that. Perhaps he could spend some time adding detail to that.
The Minister was clear that this is one-way legislation, which it has to be in that it applies to imports from the EU into the UK. It was clear that this affects about 100 concerns in the UK. On reciprocal travel, I am not aware that there is much material of this nature travelling in the opposite direction, but what is BEIS’s analysis of the traffic in the opposite direction, and what impact would that have were the European Union not to reciprocate in equal measure to the way we have gone about continuing the Euratom process?
The noble Lord behind me—I am afraid I do not know his name—
Jones of Wales.
I guessed it was Wales. The noble Lord mentioned competent authorities, and obviously the ONR is a competent authority to handle this kind of material. What extra competence is required of the environment and natural resource agencies highlighted in the Minister’s speech to manage this process?
Finally—again, this came up in the other place—there was some confusion between the Minister and some MPs in the debate over the ability of this process to continue to track radioactive material as it moves around the United Kingdom. The Minister seemed clear that it was competent to do this, and that was brought into question. The Minister promised to write to the Opposition Front Bench spokesperson on this subject. I am not aware that that letter has gone out but, given that the Minister in the other place saw fit to write on this subject, it would be helpful if the Minister could let us know the content of that letter to underline the competence or otherwise of this process to continue to track these materials as they travel throughout the United Kingdom.
I also thank the Minister for his introduction to the regulations. I confirm my understanding that they just cover the situation under a no-deal outcome and that if there is a deal, these would fall into the future relationship category, subject to negotiation. One might think that even a no-deal situation would lead to a deal of some sort downstream.
Labour agrees that we must have an effective, operable statute book under all circumstances at the time of EU exit and therefore does not oppose the regulations. That is not to say that we are at all happy in the round with having to face a no-deal scenario, which is not supported.
The regulations provide continuity and certainty regarding Euratom and the compliance with nuclear safeguards that the House agreed to last year. The Minister mentioned that the regulations will be implemented through the relevant competent authorities in the UK: necessarily, the Office for Nuclear Regulation for nuclear site licences, but also the Environment Agency in England, the Scottish Environment Protection Agency, Natural Resources Wales and the Northern Ireland Environment Agency, regarding their different agencies for non-nuclear licences.
As the noble Lord, Lord Fox, said a few questions about the regulations were necessarily explored in some depth in the other place. First, on whether the regulations apply only to imports from the EU to the UK, I wondered whether existing agreements on exports to the EU, currently operable through Euratom, would continue to apply. The second point regards the obvious obligations for exporters in EU member states that would fall away. Would a new system be under discussion with Euratom in a no-deal scenario, or would that happen only under negotiations on the future relationship? That is an important point to distinguish under a no-deal scenario.
Once again, I have noted and am grateful that the regulations were drafted in collaboration with the devolved Administrations, all the relevant agencies and the ONR. However, what about Euratom, which will need to continue to be the regulating authority of the Euratom membership? Has it been included in these discussions such that it is happy that we will be fully compliant with IAEA regulations—something that the Minister will have ensured in any case?
As the noble Lord, Lord Fox, said, in the other place, there was a query about the extent of the application to both sealed and unsealed sources. The Minister in the Commons stated that unsealed sources are not covered by the regulations, so it is a completely different matter with a completely different system. Against that, the Explanatory Memorandum states at paragraph 2.2:
“The Regulation covers both ‘sealed’ and ‘unsealed’ radioactive sources”.
There is confusion because that apparently was not made clear by the Minister in the other place, so it would be excellent if the Minister could reconcile that to us and follow up the queries to which I, my noble friend Lord Jones and the noble Lord, Lord Fox, drew attention.
Otherwise, I am content with the regulations.
My Lords, I thank the noble Lords, Lord Grantchester, Lord Fox and the noble Lord, Lord Jones, of Wales, as we shall now refer to him, if he is happy—I am sure he will be—with such a grand title.
And we won last Saturday.
I think the less said about last Saturday the better, but that is another matter. I shall start, because of last Saturday, by dealing with the noble Lord’s question, which is pretty straightforward. I can assure him that “shipment” refers to any form of transport. It might have the word “ship” in it, but it also covers trains, which, as he knows, have been used a great deal over the years to move nuclear waste and nuclear materials around all parts of England, Wales and Scotland. Whether by road or whatever, “shipment” covers everything.
I note also what the noble Lord said about Wylfa. Now is neither the time nor the place to go over that again. We hope that something will emerge in due course, but he knows the reasons why that could not go ahead.
I turn to the questions asked by the noble Lords, Lord Fox and Lord Grantchester. On whether the measure covers both sealed and unsealed transportation, I know that my honourable friend Mr Harrington is meeting his opposite number, Dr Whitehead, about that tomorrow. I hope they will be able to resolve whatever uncertainties there were between the two of them on that matter. I hope also that they will be able to follow up the confusion relating to tracking and deal with the letter to which the noble Lord, Lord Fox, referred.
I thank the Minister for that. I realise that his colleague is always right, but do we have any inkling as to how this question will be resolved? In other words, is the Explanatory Note that states the measure deals with “unsealed” as well as “sealed” incorrect, or was the impression given in the other place perhaps misunderstood and the Explanatory Note correct?
My honourable friend is always correct, but, as the noble Lord knows, even Homer nods, and he might not have been quite as correct as he normally is on every occasion. As I said, I would prefer to have that dealt with tomorrow, between my honourable friend and Mr Whitehead.
The noble Lord asked also about the impact on exports and the reciprocal nature of this. I am afraid I cannot give him any figures about how much is going the other way. If there are some figures on that, I shall certainly write to him. The position in relation to UK exports into the EU obviously sits entirely within the EU’s competence after exit. Operators have been advised that they should seek guidance from the EU and member states on any future requirements on exports to the EU. In that respect, I assure the noble Lord, Lord Grantchester, that we will continue to maintain close relations with Euratom, just as relations with the International Atomic Energy Agency remain important. It is keen that we bear in mind the standards that it will wish to maintain in this area, just as we have always done. I made it clear throughout the passage of that first bit of Brexit legislation, the Nuclear Safeguards Act—which I am sure noble Lords will agree seems quite a long time ago—that we would continue to maintain close relations with those bodies, and I make it clear it now. I think it was the noble Lord, Lord Fox, who asked whether this was the last bit of EU exit legislation relating to nuclear matters but then thought that the next instrument also dealt with such matters. The next statutory instrument is not technically an EU exit regulation, so I think my honourable friend was correct in saying that this was the last of our EU exit statutory instruments on nuclear matters. As he is aware, we still have to deal with quite a number of other EU exit SIs and legislation.
I think that deals with almost all the questions noble Lords asked. The final one was on the competence of the various environmental agencies and whether they have the appropriate skills. All the environment agencies have been dealing with these matters already, so there will be no extra burden on them and no extra skills to acquire. They will continue to work in this field.
Can the Minister confirm that it is about not just their skill set but their resource levels, which must be adequate to take on these tasks? It would be useful to have his confirmation on the financial implications of that.
I cannot give the noble Lord any precise figures at this stage, but I can make it clear that they will continue to be adequately resourced for whatever they need to do. I commend the regulations to the Committee.
Carriage of Dangerous Goods (Amendment) Regulations 2019
Considered in Grand Committee
That the Grand Committee do consider the Carriage of Dangerous Goods (Amendment) Regulations 2019.
My Lords, this statutory instrument will change the Carriage of Dangerous Goods and Use of Transportable Pressure Equipment Regulations 2009. These regulate the transport of most dangerous goods in Great Britain, and this instrument will update the sections that deal specifically with radioactive materials.
The amendments in the instrument will strengthen Great Britain’s emergency preparedness and response arrangements for the transport of radioactive materials. They will apply to transport by rail, road and inland waterway. The changes in the instrument will bring Great Britain into step with the highest international safety standards, as they implement the emergency preparedness and response requirements of the Euratom basic safety standards directive 2013.
One of the amendments introduces provisions on the control of so-called volatile organic compounds resulting from the storage of petrol and its distribution from terminals to service stations. It corrects an unintended revocation of guidance for the design and construction of petrol tanks in respect of the control of such compounds. The other simply updates a cross-reference in the Transfrontier Shipment of Radioactive Waste and Spent Fuel Regulations 2008.
On that matter, I should like to point out that, in the debate in another place, concerns were raised about the drafting of this amendment. It was suggested that the 2008 regulations had been revoked and replaced by the Transfrontier Shipment of Radioactive Waste and Spent Fuel (EU Exit) Regulations 2019, and that this amendment therefore constituted defective drafting, which would be fatal to the SI. I am happy to confirm that the amendment in question is legally sound, as the revocation and replacement of the 2008 regulations will take effect only if the UK leaves the EU on 29 March without a deal. In this unlikely event, the amendment would simply be null and void; its nullity would have no impact on the remaining provisions of these regulations.
The department held a joint consultation with the Ministry of Defence and the Health and Safety Executive on the changes made by this instrument. We published our response to the consultation in October last year. Of 71 respondents, 31 commented on the transport-specific elements of the consultation. I am happy to report that the proposals received broad support.
I shall now briefly outline the amendments made by this instrument. We have broadened the definition of “emergency” to include risks to quality of life, property and the environment. We have also updated the principles and purposes that duty holders are to have regard to when drafting emergency plans, to ensure that plans are flexible and proportionate. We are including in the regulations a definition of “emergency worker”, with comprehensive requirements for training. We are also expanding the requirement to regularly review and test emergency plans. For civil nuclear transport, the competent authority in Great Britain, currently the ONR, will have a duty to provide information to the public about the nature and effect of a potential radiation emergency.
These regulations will introduce a national reference level and will require the carrier and consigner of radioactive materials to ensure that the emergency plan prioritises keeping radiation exposure below that level. It was alleged in another place that these regulations do not take account of the circumstances under which an emergency worker may be exposed to a maximum dose of 500 milliSieverts; I can confirm that the regulations expressly state that such exposure is possible if this worker is engaged in activities for the purpose of saving human life and with their informed consent. The new regulations also include a duty to provide a handover report to assist the transition from an emergency exposure situation to the recovery phase.
As I have mentioned, Part 2 of the regulations makes a technical update to a cross-reference in the Transfrontier Shipment of Radioactive Waste and Spent Fuel Regulations. Part 3 reinstates a previously revoked provision that implements an EU directive on volatile organic compound emissions resulting from the storage of petrol and its distribution. The impact of these changes will be minimal: the main burden will be any costs associated with familiarisation with the amendments and making any revisions to emergency plans. This will be a relatively minor, one-off cost. The other two changes included in this instrument, those on volatile organic compounds and transfrontier shipment of radioactive waste, are purely technical and will have no impact on industry. I beg to move.
My Lords, I thank the Minister again for his exemplary exposition. This is a most important instrument. I look at page 5, under “Interpretation of Part 1”, and I see the words “ionising radiations”, “dose consequences”, “endangered persons”, “exposure” and,
“‘emergency services’ means those police, fire and ambulance services that are likely to be required to respond to the radiation emergency”.
I support what the Minister proposes and I will not detain the Committee but I will give an insight.
Some of your Lordships may have heard of CP Snow, a novelist who ended up in your Lordships’ House and was at one time a Minister under a trade union leader who was a Cabinet Minister, Mr Cousins. As a novelist, CP Snow wrote a series of 11 novels, Strangers and Brothers. One—which I have read, as I have the others—is relevant to these regulations, in a historical sense if no other, and might be of interest to the Minister and his able colleagues in the department who brief him.
The novel in question is The New Men, which describes, clearly based on what had happened, the consequences of an individual receiving an unwanted dosage—that is, a radiation emergency, the words in the regulation. The novel is set in north-east Wales in the small village of Rhydymwyn, where the first steps of Britain’s attempt to make an atom bomb were taken under the cover of chemical substances that were possibly to be used in war. That small village is outside Mold, the county town of Flintshire, and I have always lived within eight or nine miles of it.
Snow describes the scientists who were transplanted from their dreaming spires and assisted by university men from Liverpool and Birmingham, to name but two centres inhabited by the scientists who were making, or attempting to make, our first bomb. Noble Lords may know that the attempts were ended and went lock, stock and barrel to Los Alamos in New Mexico. A former Member of the other place wrote a tract entitled How the Americans Stole Britain’s Bomb. That is not for me to describe further.
The novel that I have been referencing is an attempt by the insightful novelist, who was engaged in science and the upper echelons of the Civil Service, to describe the making of our bombs. These regulations relate to that, and it may occasionally be the duty of any Parliament to consider how a regulation first came about. Once again, the novel is The New Men by CP Snow, part of the 11-novel Strangers and Brothers sequence.
My question, if I may pose it, is: how many shipments, if any, are by road annually? Is there any information that the Minister can give responsibly?
Sitting suspended for a Division in the House.
My Lords, I restate my question: how many shipments, if any, are by road annually? I presume that transportation is inevitably through urban centres. Is the Minister able to give us any detail or information of any responsible kind? The proposals on page 7, looking at emergency plans, are clearly well-considered and very sound, but who oversees them? What arm of the British state is responsible in the end for these emergency plans, when one takes into account the chain of command?
I referred very briefly to the village of Rhydymwyn in the county of Flintshire, where the dosages were first suffered. I conclude by telling the Committee that there was an upshot in 1979. It was a general election, and as a Minister I found myself in the wilds of Meirionnydd, not a million miles from Blaenau Ffestiniog. I was hunted in that locality by the constabulary, on the basis of urgent representations made by officials from my department at that time. They had established that in the proximity of Rhydymwyn, which was making something like mustard gas but deep in the bowels of the buildings, there was the beginnings of a trace of atomic energy. The point was: my officials told me that the road outside that factory had shown evidence of collapse, and very dangerous substance material was feared to be leaking. It did not happen, but that is the context of these words.
My Lords, I thank the Minister for introducing this statutory instrument. I am enjoying the novelty of dealing with one that is not related to Brexit, so it is almost like a holiday among all the others.
I have three points to make. First, I welcome the extension of the definitions of an emergency. Some of those are quite subjective in their description—for example, “quality of life”. I wonder what work has gone on to make sure that an emergency is indeed an emergency, and that transporters are not exposed to unwarranted legal action through what would be described as a loose definition in the Act. What impact analysis has been done on the litigation risk around the looseness of the term?
It was very helpful that the Minister brought up the issue of whether this was in order around the Transfrontier Shipment of Radioactive Waste and Spent Fuel (EU Exit) Regulations 2018. He mentioned that these regulations would in the event automatically be nullified—“nullity”, I think, was the word he used. How is that nullifying process triggered? Is it part of an overall Bill where a group of SIs or parts of SIs are triggered? My sense is that only a part of this SI gets nullified; or is all of it nullified? What is the mechanism for the triggering of its nullification?
The noble Lord, Lord Jones, paints an interesting picture of his home village. I cannot help thinking that it must be very beautiful and he is hell-bent on keeping people out with tales of mustard gas and atomic leaks.
I am not a nationalist. Borders mean nothing to me.
There is another point to consider. Essential to this is the definition of an emergency worker. Is it someone who is predetermined as an emergency worker? We have heard of the heroic efforts of ordinary engineers and ordinary people during the massive meltdown of the Japanese reactor, and we know that in Chernobyl heroic individuals took it upon themselves to be part of an emergency exercise. Although there is a definition of emergency workers in the SI, it is clear that, if there is an emergency—let us hope it never comes to pass—individuals will become de facto emergency workers by their proximity to what is happening. They perhaps are not covered by these regulations. In any case, how do you limit these people to 500 millisieverts when they are in the middle of an emergency? They do not necessarily have monitoring equipment to hand; they are dealing with an emergency. While this is a useful limit, no emergency is planned, so unless these people are already wearing the necessary monitoring equipment, they will not be monitoring the dose; and if they are accidental emergency workers—if you follow my drift—they will not have that monitoring equipment either. I would welcome the Minister’s response to those three points.
My Lords, I am grateful to the Minister for his explanation of the order before the Committee today, and for providing us with updated information on its passage in the other place. The noble Lord, Lord Fox, said that it is not entirely to do with a no-deal scenario; hence I am a little perplexed as to how this order is split—if that is the right word—into parts that will be nullified and those that will not at the relevant outcome.
I also reiterate that we found it unfortunate that Euratom was swept up into the withdrawal letter, and hence into the withdrawal agreement, and that we need to leave Euratom at the same time as we leave the EU. That is deeply regretted, but I am grateful to the Minister for his updating remarks on the order in the Commons regarding the Transfrontier Shipment of Radioactive Waste and Spent Fuel Regulations 2008.
We see no issue with the order in general; however, I have noted the circumstances on which the Minister reported, and which have been taken up in other contributions around the Committee, around radioactive emergencies, notably in relation to exposure to risks for emergency workers. I welcome the consultation and the Government’s response: this does indeed strengthen the UK’s emergencies preparedness and aligns with IAEA best practice and the highest safety standards. I also welcome the fact that under the regulations the ONR has a duty to provide information to the public about the nature and effect of a potential radioactive emergency and that they introduce a national reference level below which exposure must be kept.
I put on record that it is of great benefit that there is now a duty to have a handover report to a recovery phase in any emergency and that training will be provided to give clarity to workers, including those that the noble Lord, Lord Fox, asked about, who might suddenly come within the bracket of the emergency regulations, though they may not necessarily have been designated as emergency workers.
The Minister paid regard to the setting of the definitive reference level that was part of the debate in the other place. Emergency workers will be exposed to levels potentially above the general level of 100 millisieverts, to a higher level of 500 millisieverts: this is well above the level that workers were exposed to at the Chernobyl disaster, which reached 350 millisieverts. I recognise that this level is in compliance with the EU directive, but will the Minister say whether it is future policy to look at this more closely and perhaps see what can be done to reduce this in order to be less above the level that would pertain in an ordinary situation? I know that an emergency could entail a wide divergence to very high levels; nevertheless, if he can say something about that, it would be helpful.
I also notice that the ONR will publish guidance. Will that have a statutory reference in relation to health and safety at work? Will it include action to be taken should there be a series of spikes that could cumulatively expose a worker to a level well above that which is generally provided for? Is there any responsibility to an emergency worker should he be put into such a position? With those questions, I am happy to pass the order today.
My Lords, again I thank all three noble Lords for their contributions; in particular I thank the noble Lord, Lord Jones, for his insights on CP Snow, particularly The New Men. It is a long time since I read any CP Snow, but I feel that I must go back and read some.
May I recommend to the noble Lord Corridors of Power, which delineates activities here in this House?
I will try Corridors of Power as well as The New Men. The one thing I will not do, because it is beyond what I should ask of my officials, who are absolutely wonderful and have looked after me very well through all these debates and others, is ask them to read CP Snow. However, they might also take guidance from the noble Lord, Lord Jones.
The noble Lord also asked about the number of shipments by road. I can give him quite a number of figures. The total number of packages containing radioactive material transported by rail was about 1,500, and that was a total number of about 750 consignments. On road transport, we think that there were around a total of 110,000 packages, but again, you have to halve that because of going to and fro. The total figure we seem to have for road, rail and other means is around 40,000 packages. The majority are transported to nuclear power stations, but the transport of radioactive material by rail arises from the civil nuclear industry and consists of transport between Sellafield and the nuclear power stations, and from Sellafield to the low-level waste depository at Drigg. The road transport includes medical and industrial sources, some of which are moved more than once, hence bringing that figure down to 40,000. PHE estimates that 76% of packages transported by road in the UK are medical, 4% are industrial, and the remaining 20% are in the nuclear industry.
I will quickly deal with the point made by the noble Lord, Lord Fox, about the nullifying part of the regulations. I explained that the provision would be nullified, but the noble Lord asked about how nullification happened. There is no formal process—it just happens because a provision has been nullified, and there is case law which indicates how the courts are to treat such a nullified provision. I presume that if it is nullified, it is treated as if it is not there. If the noble Lord wants the case law, it is Inco Europe Ltd v First Choice Distribution in 2000.
On the question of emergency and who oversees that, the emergency plans, which the noble Lord, Lord Jones, asked for, are a matter for the Office for Nuclear Regulation, which is laid down by the Energy Act 2013. Obviously, any definition of “emergency”, as the noble Lord, Lord Fox, points out, to some extent has to be subjective, but further details will be set out in guidance from the ONR. The reference here is based on the IAEA best practice.
The noble Lord also wanted to know just how we would then manage excessive doses. As I think I set out at the beginning, the regulations make lawful a deliberate exposure at high levels in an emergency. Obviously, in extremis workers might be subject to that higher level of exposure. They could not be ordered into such a situation, but—again, as I set out at the beginning—obviously, if it is a question of life and death, that is a different matter.
On the question asked by the noble Lord, Lord Jones, about the 500 milliSieverts level, the regulations provide that in exceptional situations—in order to save life, prevent severe radiation-induced health effects or prevent the development of catastrophic conditions—the reference level for an effective dose from external radiation for emergency workers may be set above 100 milliSieverts, but not exceeding 500 milliSieverts. In line with this provision, the CDG regulations disapply the IRR 2017 dose limits, subject to a maximum of 500 milliSieverts, providing that the emergency worker,
“is engaged in preventing the occurrence of a radiation emergency; or … is acting to mitigate the consequences of a radiation emergency”.
As I said, further guidance will be available from the ONR. These regulations tightly restrict the circumstances under which an emergency worker may be exposed to that maximum dose. They state that such exposure is possible only if this worker is engaged in activities for the purpose of saving life and with their informed consent.
That is slightly helpful, so I thank the Minister, but I am still troubled by what I call the first first responder, who may well be on the scene without the necessary equipment and monitoring of dosage available. We know that people of that nature run towards danger rather than away from it. These people could be knowingly or unknowingly exposing themselves to high dosages, whether at 500 milliSieverts or not. We will not know, because they are not being monitored. What is the policy on individuals who are exposed to radiation but are not in a position to measure that dosage? Is there a modelling process? How would we know what these people are exposing themselves to? Or does this legislation simply not deal with that situation and take the approach that, frankly, it happens but you cannot regulate for it?
I would prefer to write in greater detail to the noble Lord on that. We are bringing in this limit of 500—for the first time, I think I am right in saying—but obviously, in emergencies of the sort he is talking about, things often go beyond what can be regulated for. Would the noble Lord be happy if I wrote to him in greater detail on this? It would be a pity if I started getting things wrong. Obviously, I will copy that to the noble Lords, Lord Jones and Lord Grantchester.
I would appreciate that.
The final point that needed to be dealt with was that from the noble Lord, Lord Grantchester, about emergency workers suffering from cumulative spikes. Any facility suffering multiple strikes—multiple urgencies—could be shut down by the ONR. That is what the ONR is there for. I do not expect that scenario to occur in practice, but obviously there could be occasions. If I need to add more to that, I will write to the noble Lord. I beg to move.
Electricity and Gas etc. (Amendment etc.) (EU Exit) Regulations 2019
Considered in Grand Committee
That the Grand Committee do consider the Electricity and Gas etc. (Amendment etc.) (EU Exit) Regulations 2019.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
My Lords, I will also speak to the other four statutory instruments listed on the Order Paper.
As we approach EU exit, the department is working to ensure that our energy legislation continues to function effectively after exit day, ensuring that consumers continue to benefit from reliable, affordable and clean electricity and gas. A significant part of the legislation that governs our energy markets takes the form of direct EU legislation. This will be incorporated into domestic law as retained EU law upon our departure from the EU by the European Union (Withdrawal) Act. These instruments amend EU regulations that will become retained EU law and address a range of highly technical issues, from cross-border trade to the energy market objectives of regulators.
The instruments simply remove inoperabilities in retained EU law in the event that we leave the EU without a deal. In the main, they remove references to the EU and EU institutions that would make no sense following EU exit. This ensures that, in the event of a no-deal exit, we would retain the regulatory functions and frameworks needed to keep Great Britain and Northern Ireland’s electricity and gas markets working effectively, facilitating continuity for UK industry and consumers. This is a sensible contingency to minimise uncertainty and disruption to our energy markets.
The instruments make similar amendments to legislation applying to Northern Ireland and Great Britain, although they are not always identical. This will ensure a consistent approach to retained EU legislation that previously applied across the UK while still recognising the unique nature of the single electricity market on the island of Ireland. On the single electricity market, let me be clear that the Government will take all necessary steps to seek to ensure that it can continue in a no-deal scenario. These instruments help to facilitate that. In preparing this legislation, the department has worked closely with Ofgem in Great Britain, and the Department for the Economy and the Utility Regulator in Northern Ireland.
In sifting this and related instruments, the Secondary Legislation Scrutiny Committee Sub-Committee A reported that the draft regulations,
“are necessary to enable UK energy markets to operate effectively if there is no agreement with the EU”,
“the proposed changes … do not appear to present significant policy or regulatory changes”.
The Electricity and Gas etc. (Amendment etc.) (EU Exit) Regulations amend and make “workable” the retained EU electricity and gas legislation that was created to harmonise energy markets and regulation across the EU. They also revoke guidelines for trans-European energy infrastructure which set out processes for development of EU infrastructure, as these will be redundant in a domestic setting.
The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations amend retained EU gas legislation. They ensure that the regulatory framework relating to gas is maintained, including the technical EU network codes that cover the cross-border gas trade. This will maintain maximum business continuity and efficiency for UK gas operators and UK gas consumers. It also maintains the framework for dealing with security of supply, such as responding to gas supply emergencies by updating the security of supply regulation to remove references to EU institutions.
The Electricity Network Codes and Guidelines (Markets and Trading) (Amendment) (EU Exit) Regulations address EU electricity legislation relating to markets and trading, ensuring that they operate as part of domestic law. In particular, this instrument amends a wider package of rules, known as EU network codes for electricity. It revokes the guideline on forward capacity allocation and the guideline on capacity allocation and congestion management. These codes govern how cross-border trade operates within the EU’s internal energy market. The EU has been clear that, were the UK to leave the EU without an agreement, we would no longer be part of the internal energy market. These codes would therefore have little to no practical application in UK law and are being revoked. Alternative arrangements for cross-border trade are being put in place by GB interconnectors similar to those that were in place prior to European market coupling. Fallback arrangements will be in place for the interconnectors between the single electricity market and GB to ensure that trading can continue to take place in a no-deal scenario.
This instrument also amends the inter-transmission system operator compensation mechanism regulation, which established a mechanism to compensate national transmission system operators for hosting cross-border flows of electricity. The cross-border elements are removed as they cannot be provided for by domestic UK legislation. Provisions relating to the setting of domestic network charges are retained.
The guideline on electricity balancing will be largely retained in Great Britain, with amendments made to remove provisions relating to a European platform for the exchange of balancing energy. In Northern Ireland, the guideline on electricity balancing will be revoked as it does not apply to islands not interconnected with the rest of the EU.
The Electricity Network Codes and Guidelines (System Operation and Connection) (Amendment etc.) (EU Exit) Regulations deal with EU legislation relating to the operation of the electricity system. Two of the EU regulations amended by this instrument—system operation guideline and emergency and restoration network code—concern the activities of electricity system operators, which balance supply and demand on the system in real time and ensure that electricity flows securely to customers across the UK.
The instrument amends the obligation on National Grid to co-operate with other system operators. It requires National Grid to assist SONI, the Northern Ireland system operator, with a similar reciprocal requirement on SONI. It removes the obligation to co-operate with other system operators. This does not preclude such co-operation happening, which we would encourage. However, we do not think it would be right that the GB system operator would be under a legal duty to co-operate that would not be legally required by our EU neighbours.
The unique shared arrangements underpinning the single electricity market on the island of Ireland mean that a different approach is required. In a no-deal scenario, the EU regulations oblige EirGrid, Ireland’s system operator, to endeavour to conclude a co-operation agreement with SONI because of the shared nature of the single electricity market. Therefore for Northern Ireland we are retaining a similar requirement for SONI to endeavour to conclude an agreement with EirGrid.
In addition, the instrument revokes the “connection codes”—a set of three EU instruments for electricity. These codes apply only under EU law and from a date after exit, so will not be incorporated via the withdrawal Act. A similar issue arises for some provisions of the gas transmission tariffs.
Finally, the Electricity and Gas (Market Integrity and Transparency) (Amendment) (EU Exit) Regulations deal with measures to ensure market integrity and transparency. They amend retained EU law to ensure that UK regulators can maintain effective market surveillance and enforcement, and that market participants will continue to publish relevant inside information.
In conclusion, while leaving the EU without a withdrawal agreement is not what the Government want or are aiming for, these regulations make the necessary changes to ensure that the electricity and gas markets continue to function as normal, including the continuation of the single electricity market on the island of Ireland. This will maximise business continuity for UK market operators, facilitate the continued efficient international trade in energy and ensure that consumers continue to benefit from reliable, affordable and clean electricity and gas. I beg to move.
I think we are down to the hard core now.
If I were a member of the EU 27 and I were sitting over there listening to this, I would detect a pulling up of the drawbridge, because that is what it feels like. Of course we are doing no such thing, because for UK consumers to continue to have the electricity and gas they need, they will rely very much on the interconnector and on gas pipelines, and on the island of Ireland there is an integrated supply. So it is with great regret that we are having this debate.
Even though we are debating what would happen in the event of a crash-out, for us to participate in the single European energy market seems very unlikely, no matter what deal Mrs May and others manage to hatch. This points the way not just to the future of this country’s energy market in the event of a crash-out but to what sort of market we will have and how we intend to regulate it even in the event of a deal. Again, that is regrettable.
Even if we are not within the energy market, our electricity system will remain contiguous with that on the continent of Europe thanks to interconnection, and our gas system will remain plugged into European gas networks. It seems to me that completely absenting ourselves from balancing and suchlike is not where we want to be—although I understand that that is what we would do in the wake of an emergency. I would like some assurance from the Minister that this is not where we want to be in the event of a negotiated exit or no-deal exit.
We are placing consumers at some risk, not least around the point of no longer participating in balancing. If there are outages or if supplies go down in one place, we have been able to use the European energy market to fill in and take more power quickly through interconnection. On security of supply for British consumers, we will be absenting ourselves from having that option. In the event of a crash-out or of not having made an appropriate deal to remain part of the energy market, consumers will be at more risk of blackouts and interruption of supply. Perhaps the Minister would like to comment on that point.
Ofgem clearly has an important role, and I have the same questions that I have asked Ministers lots of times. Does Ofgem have the capacity and capability to do that? If not, is it likely to have it at the end of next month, or when will it have? What extra requirement is needed for Ofgem?
I note that we have in the SI a requirement to commence registration four weeks after exit day. It is not clear to me what happens in the four weeks between exit day and the registration of suppliers. Where are they legally? Are they in limbo? I await the Minister’s answers.
I am grateful to the Minister for his full and thorough explanation of the regulations before the Committee. Once again, I note that this instrument is brought forward under a no-deal scenario, such that it merely transposes existing regulations into UK jurisdiction with no appreciable policy differences. I am therefore happy to approve the instrument: it does exactly what it says on the tin.
However, I would add that, as they would normally be negative instruments, I am grateful to your Lordships’ Secondary Legislative Scrutiny Committee for recommending that they be upgraded to the affirmative procedure. I agree that they are important for the internal energy market and, more importantly, for the all-Ireland energy market.
We are nevertheless concerned that, in future scenarios, interconnectors will become a key feature in the supply of electricity to the UK and to the EU. How it will operate effectively into the future is a matter of anxiety.
At present, it is an integrated seamless supply, and the single energy market should be able to operate unimpeded in any situation after withdrawal. Last week, Munir Hassan, head of clean energy at CMS, told Utility Week that even in the event of no deal the internal energy market “just has to continue”. In view of this, and of the fact that the internal energy market is seamless, will it be a bit less easy to understand the nature of the electricity market should frictions be put in place with changes between the all-Ireland energy market and the UK, and across the interconnectors into the EU? Is the Minister confident that these regulations and others will enable all that to happen with seamless continuity?
As a result of these regulations, powers will be transferred to UK organisations such as the Gas and Electricity Markets Authority, represented by Ofgem. I Fourth Delegated Legislation
Committee ask again: what organisational and budgetary support will be offered to these groups by the Government to allow them to cope with every necessary increase in workload?
There is also concern over how the all-Ireland energy market will operate in relation to the EU internal market through southern Ireland and into the internal energy market of the UK. I agree that the regulations are largely technical in nature but they assume agreement. We can agree to a grid agreement update, but this nevertheless brings philosophical anxiety.
Lastly, there is concern that the Explanatory Memorandum has not been amended in relation to the upgrade to an affirmative instrument. Under a negative instrument, there are often sections dealing with compliance with the European Convention on Human Rights, but that has not been included. These points may not be strictly material to the upgrade, but nevertheless it would be informative to understand from the Minister why there has not been a redrafting in relation to the affirmative procedure.
My Lords, as I made clear, these are pretty technical regulations that are designed purely for no deal. We laid a package of five instruments to resolve those inoperabilities across the body of retained EU law. As I think the noble Lord, Lord Grantchester, implied, although the committee that looked at them—I am trying to remember which committee it was; I think it was the Secondary Legislation Scrutiny Committee—recognised that they were absolutely necessary, it felt that the cumulative effect of all five warranted the affirmative rather than the negative procedure. That is why we are here today. Whether that means that the Explanatory Memorandum needs an upgrade, I really cannot tell him. I will write to him and deal with that point if it needs dealing with.
The broader question from both noble Lords, but particularly from the noble Lord, Lord Fox, is whether we would continue to participate in the internal energy market in the event of a deal. In the political declaration we agreed that we should put in place mechanisms as part of the future relationship to ensure as far as possible continued efficient electricity and gas trade over the infrastructure linking the UK and the EU, supported by technical co-operation. Further details are obviously a matter for negotiation. It is our position to seek a deal, and I reiterate that the regulations are for a no-deal scenario only.
It is worth reminding the noble Lord, Lord Fox, if he was being overly negative, that interconnectors are already in place between the UK and France and other countries. There is advantage for both parties in continuing to make use of them.
That was the point I was trying to make.
We use electricity at different times and, therefore, when we have a surplus, we can export it to them and vice versa. I cannot see that that will not continue to happen and bring benefit to consumers.
I move to the question of registration and the remit of Ofgem. Ofgem and its counterpart in Northern Ireland, the Utility Regulator, intend to continue to recognise registrations made by each other and by EU regulators, so we believe this will have no impact on the regulators’ ability to regulate. I hope that they will continue to be able to do the job that they do very well at the moment. We have engaged extensively with them and are confident that they will be able to meet their obligations within existing budgets. Where new systems are required, such as reporting mechanisms under the remit, the cost can be recouped through fees.
Finally, the noble Lord, Lord Grantchester, asked about Ireland and the single electricity market. We are confident that new arrangements can be put in place for trading in a no-deal scenario that will minimise disruption to the single electricity market. We have been working very closely with colleagues in the Northern Ireland Civil Service, the Northern Ireland Utility Regulator, Ofgem, systems operators and interconnectors to understand what day one arrangements for trading between the SEM would be in a no-deal scenario—not only the SEM within Ireland but interconnectors going to and fro between the two countries.
I think that deals with the points made by both noble Lords, and I therefore commend the first of the five regulations.
Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019
Considered in Grand Committee
That the Grand Committee do consider the Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
Electricity Network Codes and Guidelines (Markets and Trading) (Amendment) (EU Exit) Regulations 2019
Considered in Grand Committee
That the Grand Committee do consider the Electricity Network Codes and Guidelines (Markets and Trading) (Amendment) (EU Exit) Regulations 2019.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
Electricity Network Codes and Guidelines (System Operation and Connection) (Amendment etc.) (EU Exit) Regulations 2019
Considered in Grand Committee
That the Grand Committee do consider the Electricity Network Codes and Guidelines (System Operation and Connection) (Amendment etc.) (EU Exit) Regulations 2019.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
Electricity and Gas (Market Integrity and Transparency) (Amendment) (EU Exit) Regulations 2019
Considered in Grand Committee
That the Grand Committee do consider the Electricity and Gas (Market Integrity and Transparency) (Amendment) (EU Exit) Regulations 2019.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2018
Considered in Grand Committee
That the Grand Committee do consider the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2018.
Relevant document: 10th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
My Lords, these regulations, laid before the House on 23 November last year, will amend the domestic minimum standard provisions within the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. In our clean growth strategy, we set out our ambitions to upgrade the energy efficiency of all buildings by the 2030s. The 2015 energy efficiency regulations, which set minimum energy performance targets for properties in the private rented sector, are an important precursor to that work, helping the Government to deliver our fuel poverty and decarbonisation commitments.
Although I appreciate that noble Lords may already be familiar with the minimum standards, some background on the sector and the 2015 regulations may still prove useful before we discuss the specific effect of these amendments. There are about 4.5 million privately rented homes across England and Wales, making it the second largest tenure after owner-occupation. Most of these properties already have an Energy Performance Certificate, or EPC, rating of E or above. However, about 290,000—that is 6% of the market—have a rating of F or G and, as such, are particularly energy inefficient and costly to heat. In fact, it costs about £1,000 more per year on average to heat an F or G-rated home than one rated at band D. Moreover, many tenants of these properties are among the most vulnerable and approximately 45% are in fuel poverty.
The 2015 regulations were designed to drive energy efficiency improvements to these inefficient privately rented homes and established a minimum energy efficiency standard of EPC E for these properties. Since 2018, the regulations have required landlords who let properties below the standard to improve them to EPC E before granting a new tenancy or renewing an existing one. However, the regulations also state that improvements are required only where they can be made at no cost to the landlord, using third-party funding: notably Green Deal finance. Where a home cannot be improved to EPC E, either because funding is unavailable or because of legitimate technical concerns, the regulations permit the landlord to continue to let it, provided they have registered an exemption on the new minimum standard exemptions register. However, access to no-cost funding, particularly Green Deal finance, is more constrained than was originally anticipated when the regulations were made. This means that most F and G-rated properties now qualify for an exemption.
The key amendment under discussion today addresses this by requiring landlords of domestic properties to invest their own funds in energy efficiency measures where third-party funding is insufficient or cannot be secured. To ensure that landlords are not overburdened, this investment requirement will be capped at £3,500 per property, inclusive of VAT and any third-party funding obtained. Ancillary amendments will also be made to the exemptions framework to ensure that the investment requirement delivers improvements where they are most needed.
I shall now briefly discuss the choice of £3,500 for the cap. At consultation, £2,500 was proposed, with a range of other caps presented for comparison. Following overwhelming calls, from 67% of respondents, for a higher cap, and from the results of further modelling, £3,500 was ultimately selected. Our updated modelling shows that of the caps considered in the consultation, £3,500 was the most effective at balancing the costs to landlords against the benefits to tenants and society. Specifically, that analysis shows that under a £3,500 cap: 48% of F and G properties will reach band E, with an average cost of £1,200; the remaining 52% of properties will be able to receive at least one improvement, at an average cost of £2,000; and tenants in improved properties will save an average of £180 a year on their energy bills. The £3,500 cap strikes the right balance between ensuring that a meaningful number of properties are improved to EPC E while ensuring that those improvements are affordable, particularly for smaller landlords who make up the majority of the sector.
However, I should also highlight that, alongside the clear benefits of thermal comfort for tenants, landlords themselves will benefit from the improved energy efficiency of their properties: specifically, in the form of reduced maintenance costs and increases in property capital value, as well as increased tenant satisfaction and following that, one would hope, shorter void periods.
In conclusion, these amendments will help ensure that the domestic minimum standard regulations can operate effectively in line with Parliament’s original intentions and deliver meaningful energy efficiency improvements to the least efficient homes in the private rented sector. I beg to move.
My Lords, I thank the Minister for presenting this statutory instrument. The noble Lord, Lord Grantchester, is a world expert in the new Green Deal, so I look forward to his contribution and will defer to him in all ways in this area.
First, in many cases we have had to take the Government to task for not consulting but it seems that there has been an extensive consultation in this process, which should be acknowledged.
I became a little confused when I looked back at when this was debated in the other place. I found a debate that goes back to June 2016; if noble Lords can cast their minds back that far, Andrea Leadsom was then the Secretary of State. It appears that this was debated at that time. What happened to it in between—what has been going on? The then Secretary of State refers to all sorts of dates with regard to launching the register, which have passed. Perhaps I have got terribly confused, but it seems that this is the SI that was being debated and that there has been a very long gap in between. In due course I will refer to something the Secretary of State mentioned in that debate.
As the Minister set out, this deals with some of the least satisfactory housing in the country: nearly 300,000 substandard private rented sector homes. As the Secondary Legislation Scrutiny Committee pointed out:
“The Committee is of the view that, as a significant proportion of tenants in ‘substandard’ properties are in fuel poverty”.
The committee recommends that the,
“Department may wish to monitor whether the proposals lead to any adverse impact on vulnerable tenants”,
and recommends that the department might wish to monitor how the proposals lead to the impact on vulnerable tenants and whether they become less or more fuel poor. I would welcome a response from the Minister to that recommendation.
Moving forward, the fact that we have moved from public investment into the new Green Deal to private finance providers flags up concerns—I do not know whether the noble Lord, Lord Grantchester, will go into more detail. We talk about private finance providers. Private finance initiatives in other sectors are clearly not covered in glory at the moment, so I am interested in and concerned about how those finances are regulated and registered and what level of their returns on their finance we are expecting back. What kind of cap do they have on their returns?
As the Minister set out, the key proposal here is the removal of the no-cost-to-landlord aspects of the legislation. I think that that is right, because it is quite clear that work needs to be done and it will come at a cost. The Minister highlights this as being an important element of the green agenda, and it is very clear that there are big wins to be had for relatively small investment.
Sitting suspended for a Division in the House.
As I was saying, I romped through some questions around private finance providers and details of registration control and the management of that process. I welcome the removal of the “no cost to landlords” clause and the insertion of the £3,500 cap, but there are some issues with that. I note that VAT is included within it, and so obviously it is 20% less than you think. It includes also any other funding that the landlord is able to pull in, including local authority or Green Deal funding. Already, it starts to look like less, as it will not always be the landlord putting the £3,500 in.
I would not call them loopholes, but we then have some other ways for the landlord to invest less. One is the recognition of previous investment, which clearly is often possible. How do the Government expect to avoid that in many cases? The second point I have concerns about is the high-cost exemption. It is not hard to get estimates for jobs. Frankly, if you ask a builder to give you high estimates for jobs, they are usually better at that than they are at low estimates. I suggest that that is a gaping loophole for unscrupulous landlords, sadly many of whom operate in this sector. I would welcome the Minister’s view on that.
Another potential issue was brought up in the debate of 2016 to which I referred earlier. The Secretary of State, Andrea Leadsom, said that,
“landlords will be required to install only measures that cost the same as or less than their expected energy savings over a seven-year period, and they will be eligible for an exemption if the improvements do not meet that payback test”.—[Official Report, Commons, Fourth Delegated Legislation Committee, 8/6/16; col. 4.]
There is no mention of that payback test in the accompanying material to this SI. Could the Minister please explain that status?
My final point is this. The Minister mentioned that those obtaining an exemption will be put on a register. Will he undertake that this will be a public register so that those landlords would be fully knowable to the wider community? I await the answers to those questions.
My Lords, I thank the Minister once again for his exemplary introduction to the regulations before the Committee today. I note that, at last, we have come out of the jurisdiction of no-deal outcomes to look at matters of great importance that are, nevertheless, outwith our previous debates on the tranches of SIs that deal with a no-deal scenario.
We come now to the important aspect of energy efficiency, a necessary and effective part of our infrastructure improvement to reduce and remove carbon emissions in the longer term. I always thought that it was a very key part of the Green Deal, introduced— I hasten to advise the noble Lord, Lord Fox—during the coalition years under a Liberal Democrat Minister of State in DECC, and it was to his great regret that it eventually collapsed, as we showed at the time, through very great difficulties in its construction.
This SI provides amendments to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, which introduced mechanisms to require landlords to improve their properties so that they could reach the minimum long-term lettable level of EPC band E by 2020 following that primary legislation. If they have not improved to this standard or do not have an exemption certificate after this date, such properties will be deemed substandard, and in principle not legal to let.
The Green Deal came in in 2011 and was of such complexity and difficulty that it took four years to produce the 2015 regulations. However, they were cancelled almost immediately afterwards following their difficulties. The regulations relied extensively on the assumption that bill payers could avail themselves of the Green Deal to improve their properties, and the cost to the landlord was appraised on that basis—that is, if a landlord had an assessment and the improvements were economic up to band E with a Green Deal loan programme, that would discharge his or her improvement responsibility.
However, with the cancellation of the Green Deal, the SI became inoperable; hence it has taken another four years for the 2018 amendment regulations to retain the requirement to improve and the level of improvements to aspire to, but they substitute for the “no cost to landlord” provisions related to the Green Deal a maximum spend for an F-rated or G-rated property of £3,500 by the landlord in order to reach the minimum. If the property cannot be improved to band E for that sum and the landlord can show that he or she has spent the maximum on it, a certificate of high-cost exemption can be applied for, which exempts the landlord from doing further work to bring the property up to band E.
As I said, the original 2015 regulations took four years to arrive following the passage of the Energy Act 2011, and they collapsed almost immediately. As simple arithmetic shows, there has been an eight-year period to bring various features to improve the energy efficiency of homes. They have eventually been laid following tortuous argument about the level of financial liability which landlords should be responsible for when they rent out very poorly insulated properties in bands F and G, and the point at which they should then be able to rent out such low-standard properties after 2020 if exempted from the full cost of raising the standard of the property.
The Government’s consultation proposal was that landlords should be exempted after a maximum of £2,500 of expenditure. This received a frosty reception from consultees, 79% of whom argued that the limit was too low. Among other arguments put forward, it was pointed out that, according to the Government’s own impact assessment figures, only 30% of F and G properties would be uprated at that level; the rest were to be exempted. The favoured level of landlord contribution of £5,000 was endorsed by half of the total number of consultees, and 60% of those said that the £2,500 level was too low. Impact assessment projections suggested that, with a £5,000 level in place, some 73% of F and G properties would successfully be rated up to band E.
The first thing to be said is that on this side of the House we somewhat regret the lower level that the Government put into the regulations. Indeed, the Government’s response to the consultation was to concede the uprated figure of £3,500, which has been incorporated into this SI, as their operational alternative to the 2015 SI. This would mean that 48% of properties would reach the required level. In other words, turning it upside down, it means that 52%, the majority of properties, would end up exempt, with the landlord not required to do any more to an F or G-rated property let out after 2020.
So while we support the fact that a cap is now in place that creates an environment for the improvement of properties, removes uncertainty and will necessarily increase minimum standards, nevertheless the assumption that properties in another category of multiple occupancy are still largely excused from the regulations for a further five years is particularly regrettable. We regret that this lower level has been introduced. I ask the Minister whether the Green Deal could be repurposed to provide finance for landlords, above the £3,500 level, to £5,000, such that the future affordability of this very necessary amendment to implement the Green Deal could be brought forward.
The noble Lord would like a higher figure than the one we came to after considerable consultation—the increase from the £2,500 we originally proposed to £3,500, which is what these regulations are about. He has suggested, and I presume this is official Labour Party policy, a figure of £5,000. I suspect that if we had suggested £4,500 or £5,000, he would have suggested £6,000, so I do not think we can win on this. The simple fact is that we thought it right that those landlords who are not making any contribution should be encouraged or made to make some contribution. We are talking only about those 6% of properties that fall below the standard I set out in my opening remarks. The implication behind that is that the landlords of the other 96%—it is actually 94%, I am grateful to the noble Lord, Lord Fox—are doing the right thing, as any sensible landlord would do. It is not just about being good to their tenants—although that has an obvious benefit in encouraging tenants to stay and reducing the amount of void time—but much of the expenditure on improving the property will improve its capital value and be of benefit to the landlord. So although I believe, as a good Conservative, in the rights of property, I think it is right that we offer some encouragement to landlords—and this is more than encouragement—to spend money on maintaining their properties and ensuring that their tenants and the wider public benefit from improving the energy efficiency of those properties to at least band D and to higher bands in due course.
I thank the Minister for stating that the added benefit of the rise from £3,500 to £5,000 produces a very considerable increase in the number of properties that would then comply. This would provide a win-win scenario whereby the tenant had reduced future bills for maintaining the property and the landlord saw an increase in the value of his property of more than £8,000: the impact assessment puts the increase at £8,500. Both these figures are considerably higher, so we would have preferred to have seen a £5,000 limit in the regulations.
Again, I note what the noble Lord says; I imagine landlords up and down the country will be listening to his words. We had to make a decision based on a number of factors, but also on the viability of the whole sector. We did not want to see the whole sector being adversely affected on the basis of further modelling of the costs and benefits of the £3,500 cap. The noble Lord, Lord Grantchester, also asked why it had taken so long—four years, as he said—to lay this SI. It took time to build consensus among the wider stakeholder base and to consult properly, which on this occasion was welcomed by the noble Lord, Lord Fox.
The noble Lord, Lord Fox, then confused me by referring to the 2016 debate, implying—I am sure he did not intend to—that that was the debate on these regulations. That debate was to postpone the launch of the exemptions register by six months. It did not relate to this amendment to include a landlord contribution. All this does is to seek that the landlord should make a contribution. These regulations were debated in another place on 14 January this year. They were introduced by my right honourable friend Claire Perry, and it is open to the noble Lord to look at the First Delegated Legislation Committee from that date in Hansard. What happened in between? The 2015 regulations were made on 26 March 2015 and the provisions we propose to amend came into effect in April 2018.
The noble Lord then asked if the register will be made public. Yes, the register opened in 2017, and information registered on it is publicly available and searchable. The noble Lord, Lord Fox, regretted the inclusion of that in the £3,500 cap. We acknowledge that that has an impact on the scale of the improvements that can be delivered, but we nevertheless believe that that is offset by the increase from £2,500 to £3,500. The noble Lord, Lord Grantchester—being more severe than me—would like to take that yet further. Again, these are questions of balance and I believe we got it right with £3,500, even though the £3,500 includes that.
The noble Lord, Lord Fox, asked if the amending regulations are asking landlords to provide three installer quotes and whether that was making it too onerous and complicated. The requirement to provide three quotes applies only where the landlord is looking to avoid making any improvements and to register an exemption on the basis that even the cheapest improvement would exceed the value of the cap. Our analysis showed that virtually all properties can receive at least one measure costing less that £3,500, so we expect this exception to be invoked very rarely. The noble Lord will know that it is plain common sense to get more than one quote. If they are using it to seek an exemption, it is quite right that there should be three.
I appreciate that answer. Clearly, if anyone is considering work, it is helpful to get more than one quote. I was implying that this would be a construct to not do the work rather than to do the work cost-effectively. It is not beyond the bounds of human ingenuity to use the high-cost exemption to get out of doing work. On that basis, I ask that the Minister’s department monitor the use of the exemption and come back to Parliament after some time to tell us whether his thought is correct and it is not being used very often, or whether it is in fact becoming a useful loophole for unscrupulous landlords.
I fully accept the noble Lord’s point that the unscrupulous—we are talking about a relatively small number of very small landlords—could seek exemption by getting quotes from friends and all that sort of thing. We all have our views about certain aspects of the building trade and so on, but I do not think it is worth me going any further at this stage. I give him an assurance that we will do what we can to keep an eye on this issue—to monitor it, as he puts it—and if it turns out that too many exemptions are being sought for the sort of reasons that he mentions, I think my right honourable friend would be the first to say, “This is not working as we intended so we’ve got to try something else”.
The noble Lord, Lord Grantchester, made two other points. The first was about houses in multiple occupation. They will be covered if they are legally required to have an EPC and if they are let on a qualifying tenancy. Some HMOs are not required to have an EPC at this time, but that is something that the department is keeping under review. If we think it is necessary that we act, we will do so.
Will the Minister write to me on how many would be exempt and how many would fall into the regulations with which he says they would then have to comply? My understanding was that more would be exempt, and there were a very limited number of occasions on which property in multiple occupancy would have to abide by the regulations.
I offer to write to the noble Lord. I will see if we have the sort of figures that he wants on HMOs and whether I can bring a bit more detail on that.
Finally, I make it clear that the Green Deal has not been cancelled. It still exists. The Government ceased funding it in 2015 but the mechanism remains active and private finance continues to operate in the sector.
I asked one question about the limits on profitability in the private finance investment in the Green Deal. If the Minister wants to write to me on that rather than answering at the Dispatch Box, that is fine.
I apologise to the noble Lord; I am afraid I had not jotted that down. I will write to him in due course and give him an answer on that point. Other than that, I think I have dealt with all the questions.
Committee adjourned at 5.49 pm.