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Grand Committee

Volume 824: debated on Tuesday 11 October 2022

Grand Committee

Tuesday 11 October 2022

Arrangement of Business


I remind your Lordships that if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2022.

Relevant documents: 11th Report from the Secondary Legislation Scrutiny Committee

My Lords, due to the sad death of Her Majesty Queen Elizabeth II, the debate on this statutory instrument has been delayed, but I am pleased to be taking it forward now. This SI is largely administrative and makes only minor updates to provisions under the money laundering regulations.

This Government continue to recognise the threat that economic crime poses to the UK and our international partners and are committed to combating money laundering and terrorist financing. Illicit finance causes significant social and economic costs through its links to serious and organised crime. It is a threat to our national security and risks damaging our international reputation as a fair, open, rules-based economy. It also undermines the integrity and stability of our financial sector and can reduce opportunities for legitimate business in the UK.

That is why we have taken significant action to combat economic crime, including legislating for the Economic Crime (Anti-Money Laundering) Levy and the Economic Crime (Transparency and Enforcement) Act. We are going further by developing a second iteration of the landmark economic crime plan, and by introducing the Economic Crime and Corporate Transparency Bill, which has had its First Reading in the House of Commons. This Bill will include significant reforms to strengthen the role of Companies House. We are also working closely with the private sector and our international partners to improve the investigation of economic crime, strengthen international standards on beneficial ownership transparency and crack down on illicit financial flows. These efforts are making a difference. Over the last five years we have confiscated over £1 billion in criminal assets, and over the last year we have increased money laundering proceedings by 9%.

The money laundering regulations support our overall efforts. As the UK’s core legislative framework for tackling money laundering and terrorist financing, they set out various measures that businesses must take to protect the UK from illicit financial flows. Under these regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries. These are countries identified as having strategic deficiencies in their anti-money laundering and counterterrorist financing regimes which could pose a significant threat to the UK’s financial system. This statutory instrument amends the money laundering regulations to update the UK’s list of high-risk third countries by adding Gibraltar and removing Malta from the list. This is to mirror lists published by the Financial Action Task Force, the global standard-setter for anti-money laundering and counterterrorist financing set up by the G7.

For the purposes of the high-risk third countries list, countries include territories and jurisdictions. Therefore Gibraltar, as a UK overseas territory, is treated as a country in the high-risk third countries list. Gibraltar has been added to the Financial Action Task Force’s list as it has not completed the action plan set by the Financial Action Task Force. Improvements are still needed in Gibraltar’s use of effective sanctions to address anti-money laundering and counterterrorist financing breaches and Gibraltar’s actions to recover and confiscate criminal assets. The UK has offered support to Gibraltar throughout the Financial Action Task Force process and will continue to do so.

Malta has been removed from the Financial Action Task Force list after addressing the remaining commitments in its Financial Action Task Force action plan. This includes improvements in the detection of inaccurate company ownership information and the pursuit of tax-based money laundering cases, among other areas.

This is the fourth time we have updated the UK list to respond to the evolving risks from third countries. This update ensures that the UK remains at the forefront of global standards on anti-money laundering and counterterrorist financing. In 2018, the Financial Action Task Force assessed that the UK has one of the toughest anti-money laundering regimes in the world. The UK was a founding member of this international body and we continue to work closely and align with international partners such as the G7 to drive improvements in anti-money laundering and counterterrorist financing systems globally.

Lastly, this high-risk third-country list is one of many mechanisms that the Government have to clamp down on illicit financial flows from overseas threats. We will continue to use other mechanisms available to respond to other country threats, including applying financial sanctions as necessary.

This statutory instrument will enable the money laundering regulations to continue to work as effectively as possible to protect the UK financial system. It is crucial for protecting UK businesses and the financial system from money launderers and terrorist financiers. Therefore, I hope colleagues—or a colleague—will join me in supporting the legislation. I beg to move.

After the Summer Recess, it is good to be back in this crowded Room. I am grateful to the Minister for introducing these regulations. As he outlined, they contain the latest updates to the Financial Action Task Force list of high-risk countries. We are supportive of FATF’s work and these regulations, though I hope the Minister will be able to answer some questions for me.

In yesterday’s economy debate, I raised the new Administration’s apparent dislike of what they call economic orthodoxy. We saw the role of certain economic and financial institutions questioned during the Conservative Party leadership campaign. The occupants of Downing Street have doubled down on some of their criticisms in the intervening weeks. There have long been concerns that the Government have not taken money laundering seriously. That concern has related mostly to Russian money, with feet dragged in relation to a register of overseas entities. Can the Minister confirm today whether and to what extent the UK Government remain committed to FATF and its output? We were not always convinced of the previous Administration’s commitment to implementing FATF’s country-specific recommendations. Are we likely to see those timescales slip further still under the new Chancellor?

While this question does not relate directly to this SI, the noble Lord, Lord Callanan, chose not to answer it last night, so I am tempted to have another go. Do the Government remain committed to bringing forward the second economic crime Bill? If so, when will we see it?

Turning to the detail of the regulations, could the Minister comment on the Government’s view regarding the addition of Gibraltar? He will know that the Secondary Legislation Scrutiny Committee wrote to the Treasury regarding Gibraltar’s appearance on the list, asking what assistance, if any, the Government were prepared to offer. Does the position outlined by the former Economic Secretary to the Treasury that Gibraltar does not require any bilateral assistance to implement various actions remain current? Can the Minister confirm whether the newly appointed Treasury Ministers have had any contact with their Gibraltarian counterparts on these issues?

Finally, I thank officials at the Treasury for taking the time to discuss this statutory instrument and its Explanatory Memorandum with me before the summer break. We debate these instruments perhaps three times a year yet, despite our general familiarity with the subject, the Explanatory Notes are often unclear and inconsistent. No matter how technical the matters we consider may be, it should be possible for Explanatory Memoranda to make the subject accessible to a wider audience. Indeed, that is the aim of the Cabinet Office guidance. I hope the Minister will take that on board, as we are likely to have a high volume of Treasury regulations coming forward in the months ahead.

With that, the Opposition are pleased to support these regulations. I look forward to the Minister’s response to my broader questions about the Government’s efforts to combat money laundering, and I would be happy for him to write with any detail that may not be available to him this afternoon.

My Lords, I thank the noble Lord, Lord Tunnicliffe, for his remarks, and I shall endeavour to answer as many of his questions as possible. I too take note of the fact that this is rather an empty Committee. That is rather a shame. I certainly hoped that there might have been more people contributing to a debate on this important subject.

I reiterate what I said in my opening remarks very briefly: the Government are taking proactive action to ensure that these high-risk third-country changes are made, and that similar anti-money laundering controls are put in place and are making a difference. I will focus on sanctions for a moment: just last year, the Financial Conduct Authority secured a fine of around £265 million against a large bank for breaches of the money laundering regulations, so these regulations have to have some bite. I hope that what we are bringing in will provide some bite.

Turning to the noble Lord’s questions, I can confirm first that the Government remain entirely committed to FATF and its international standards on anti-money laundering and counterterrorist financing. As he knows, in 2019 the UK was assessed as having one of the strongest regimes for combating illicit finance, but I reassure him that we are not complacent. We are committed to addressing the remaining gaps in the UK’s system as soon as possible, and ahead of the UK’s next FATF evaluation.

Just a few weeks ago, we introduced the economic crime Bill before Parliament. This Bill, once agreed, will introduce the largest reforms to Companies House in over 170 years, making it harder for criminals to misuse companies to launder their dirty money. It will also improve law enforcement’s ability to seize and confiscate criminal assets held in crypto assets. We have Second Reading of the Bill on Thursday and are entirely committed to taking it forward. A draft of the Bill is now available on the Parliament website, should the noble Lord wish to access it.

The Government are also currently working with industry on the second economic crime plan, which I hope will provide some reassurance. The plan will be published in due course and will set out the steps the Government are taking with industry to tackle economic crime over the next three years.

On Gibraltar itself, bearing in mind the questions that the noble Lord raised, we stand by the technical decision of the Financial Action Task Force, of which the UK is an active member. In June, the FATF recognised that Gibraltar had made considerable progress since its FATF evaluation, but that it still needed to make improvements in key areas to complete its action plan. In particular, improvements are still needed to strengthen confiscation of criminal proceeds and increase supervisory outreach to non-financial sectors, such as lawyers. But throughout the FATF process, the UK has been working closely with Gibraltar. We have kept in close contact, and indeed have offered our support. Both Gibraltar and the UK are confident that it will be able to make the necessary reforms to be removed from the list within a short timeframe. By aligning the UK’s approach to the FATF, the UK is in line with international standards, and the identification of countries is underpinned by the FATF’s consistent and technical methodology.

Nearly lastly, let me turn to the noble Lord’s comments on Russia, which he touched on. We are absolutely taking a firm stance against Russia; we are working with our allies, and have introduced the widest possible financial sanctions to cripple Putin and his kleptocrats. Since the invasion of Ukraine, the UK has introduced sanctions to over 1,000 individuals and 100 entities. We are also restricting Russian access to finance, with asset freezes of 18 of Russia’s major banks, with global assets worth £940 billion.

Just to complete my response to the noble Lord—and I thank him again for his questions—I make a very brief comment about his concerns about how the Government view “certain economic and financial institutions”, to quote him. I reassure him that the Government remain fully respectful of such institutions. No names of institutions were mentioned by him, so I think that I shall not mention any either. It is just for the record to say that. As the papers have been saying, and as we know, the Chancellor meets the governor regularly to discuss current issues, while respecting that the Bank of England, for example, remains thoroughly independent.

I hope that the Committee has found today’s sitting informative and that it will join me in supporting these regulations, which I commend to the Committee.

Motion agreed.

Motor Fuel (Composition and Content) (Amendment) (Northern Ireland) Regulations 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Motor Fuel (Composition and Content) (Amendment) (Northern Ireland) Regulations 2022.

My Lords, these regulations relate to the introduction of E10 petrol in Northern Ireland. Regulations relating to the introduction of E10 petrol in Great Britain were considered and agreed to by your Lordships’ House in 2021, and I should note that this introduction has been successful, with no significant concerns raised.

E10 petrol contains up to 10% of renewable ethanol, double the amount blended into E5 petrol. Increasing the renewable ethanol content in standard grade petrol across the UK can reduce annual carbon dioxide emissions by 750,000 tonnes a year, helping us to meet our ambitious climate targets. The regulations’ purpose is to introduce E10 as standard petrol in Northern Ireland, while ensuring that the current E5 grade remains available for those who need it. This will bring petrol grades in Northern Ireland in line with those in Great Britain, where E10 was introduced in September 2021. We have completed the notification procedures required under the Northern Ireland protocol, meaning that an introduction in Northern Ireland is now possible.

E10 allows us to cut carbon emissions from cars, motorbikes and other petrol-powered equipment in use on our roads today. This is done by simply increasing the amount of renewable fuel blended into standard petrol. It is one of very few measures available to us which has an immediate impact. E10 is a proven fuel that has been successfully introduced in Great Britain and many nations around the world to deliver carbon savings. Following the introduction of E10 in Great Britain last year, these regulations ensure that consumers are provided with a consistent petrol grade across the UK. It is worth noting that the Republic of Ireland intends to introduce E10 in January 2023.

The UK has a valuable bioethanol industry, which has already benefited from the increased demand created by the introduction of E10 in Great Britain. Following our policy announcement to introduce E10 across the UK, one large facility operator announced that it would recommence production. The domestic bioethanol industry supports high-skilled jobs and improves our energy independence, delivering on a range of government priorities such as growth and energy security.

These production facilities also play an important role in their local economy, employing hundreds of skilled workers directly and supporting thousands of jobs in the wider community. That community includes the agricultural sector, with locally grown, low-grade feed wheat used to produce ethanol. Furthermore, valuable co-products of bioethanol, such as high-protein animal feed and stored carbon dioxide used by the food industry, reduce our reliance on imports, thus increasing our domestic resilience. It is vital to support these industries as we grow our economy and progress towards net zero by 2050.

Introducing E10 is part of a wider set of measures to encourage renewable fuels. Overall, renewable fuel blending is incentivised through the renewable transport fuel obligation, or RTFO, obligating larger fuel suppliers to supply renewable fuels. However, the RTFO does not prescribe how to meet low-carbon fuel supply targets, nor does it require specific fuel blends; it is market driven. It is therefore necessary to introduce the obligation to supply specific fuel blends to remove market barriers. This has been proven to be successful by the introduction of first E5 and then E10 petrol in the UK, as well as B7 diesel.

We have opted for introduction in Northern Ireland in November, as fuel suppliers and retailers have made it clear that an introduction at the same time as or shortly after the change from summer to winter fuel specification is the most efficient way to introduce E10 into the fuel system.

Over 95% of petrol-powered vehicles on the road are compatible with E10 petrol, and this figure is increasing all the time. All new cars manufactured since 2011 are compatible with E10 petrol, and most cars and motorcycles manufactured since the late 1990s are also approved by manufacturers to use E10. However, some older vehicles are not cleared to use E10. That is why this instrument includes provisions to keep the current E5 petrol, which contains up to 5% ethanol, available in high-octane “super” grade.

The same set of derogations and exceptions that apply to the supply of E5 and E10 in Great Britain in case of supply issues or infrastructure constraints will apply in Northern Ireland as well. This means that very small filling stations will be exempt from having to sell E10. Additionally, if supplying petrol with the required minimum ethanol content is not feasible for short periods of time, say due to factors such as technical or supply issues, the Secretary of State for Transport can grant refineries or blending facilities temporary derogations to ensure that fuel supply is not interrupted.

We have launched a comprehensive communications campaign involving local radio, roadside posters, social media and information at forecourts. This informs motorists in Northern Ireland of the changes that will be made to petrol this autumn—subject, of course, to the approval of this instrument—and directs vehicle owners to GOV.UK, where there is an online compatibility checker so that people can see whether their car is compatible.

In proposing this statutory instrument, my department has carefully considered a balance of interests, as we did when we introduced E10 petrol in Great Britain. I beg to move.

My Lords, I thank the Minister for her excellent introduction. Obviously, we welcome this statutory instrument. However, I want to use this opportunity to register my concern at the continued lack of an Executive in Northern Ireland. That is an issue that goes well beyond this. The lack of the Executive serves the people of Northern Ireland very badly indeed, condemning them to the slow lane on so many important issues. There is an example in this SI of how they are disadvantaged.

Paragraph 12.6 of the Explanatory Memorandum makes clear that the “added complexity” of supplying 95 octane E5 grade fuel to Northern Ireland while the rest of the UK has moved on to E10 grade has, not surprisingly, meant additional costs to producers. It goes on to make it clear that producers have had to provide

“separate production processes and storage.”

Paragraph 12.3 says that the costs of this have

“already been passed on to motorists in Northern Ireland”,

even though they have not been enjoying the advantages of it. They are paying the price without getting the benefits. Happily, however, this SI brings Northern Ireland in line with the rest of the UK. Presumably the SI includes any useful lessons learned from the Great Britain implementation. Maybe the Minister could tell us whether any specific issues have been incorporated as a result of this.

I have a few questions. The Minister has answered the first one; I was going to refer to the tight timescale. I see that the Government have anticipated that and have launched their information and awareness-raising campaign. There are older vehicles that are incompatible, of course, and there will continue to be supplies of the old grade of fuel for this reason. Classic cars might be the main reason for that, but petrol is not used just for cars. Indeed, the SI refers to its use for equipment. I declare an interest as the owner of what might politely be described as a classic petrol lawnmower. Does the public information campaign cover equipment in general—not just lawnmowers but other equipment—and not just cars? Putting the wrong petrol in can be quite disastrous.

These regulations impose requirements on petrol filling stations to supply certain types of fuel. They impose additional responsibilities on those filling stations, so I use this opportunity to ask the Minister whether the Government will give urgent consideration to requiring them also to provide electric vehicle charging points. They are beginning to do so on certain rare occasions in Great Britain. The faster this happens, the greater we can all reap the environmental advantages of electric vehicles. EVs now encompass 16% of the new car market. Petrol stations are losing their market relatively fast and need to adapt. I think an imposition—with a timescale, of course—would be very useful in ensuring that we make the transition as soon as possible.

Paragraph 7.12 refers to fuel terminals still

“unable to blend … ethanol into their petrol”

and gives them at least two years’ exemption. I am concerned that these still exist. We have known for a long time that this change was coming, so I thought providers would have adapted by now. Can the Minister tell us what percentage of terminals this applies to? Is it just one or two? I notice that apparently there are none identified in Northern Ireland. Are we talking about a big section of the market in the UK, or just one or two outliers?

Finally, the documentation states that most petrol sold in Northern Ireland—which itself represents 3.5% of the total UK market—comes from suppliers who also supply the rest of the UK. I assume that some of the petrol sold in Northern Ireland comes over the border from the Republic, and I would be interested to know what percentage. Are the rules and regulations that now apply in the Republic identical to those being imposed on Northern Ireland, or is there some variation at some point? Obviously, this would have implications in terms of the protocol as well as a practical implication for motorists. Having put forward those questions, I am very pleased to see this measure before us.

My Lords, I thank the Minister for introducing this SI, which of course we will support. However, having done a little research on this issue, I have ended up with a few questions. First, I think she said that the situation in Northern Ireland and mainland UK will be precisely the same after 1 November. It seems to me that we have E10 and E5, and 97 and 95. As I understand it, in Northern Ireland all the E5 will be 97 and all the E10 will be 95. I should know this from when I fill up my car, but is that the situation in the UK today?

The second area I am interested in, from doing research on that glorious but occasionally seductively dangerous Google, is that there have been questions about whether there is a fuel consumption penalty. Indeed, looking it up on GOV.UK, there is an acknowledgement that there is. The government website suggests that it is 1% or 2%; some motoring magazines have suggested it is rather higher. It would not require much of an increase in overall fuel consumption to arguably negate the advantages of ethanol in the fuel.

If one is unfortunate enough to own one of the 5% of cars which, I think, are not E10 compatible—or perhaps fortunate because they are some of the nicest cars around—it seems that one would have to go to E5 97. My general experience is that 97 is substantially more expensive than E10 95, so it seems to be something of a penalty. Indeed, it might lead some people to use E10 even though they know their vehicle is incompatible. Can the Minister give us some feel for the impact on the engine of consuming incompatible fuel E10 95 instead of the E5 97 that should be used?

GOV.UK explained—it is set out in the EM—that carbon dioxide emissions are reduced by this process. I would be grateful if the Minister could explain the mechanisms by which that is achieved. I have to say that until today I thought petrol was petrol, but when I got on to Google I discovered that it is a gigantic mixture of all sorts of things, and that it varies according to the time of year, and so on. However, it is a hydrocarbon—that is, it takes its energy from releasing hydrogen and carbon from the molecules and creating water and CO2. That must be as true for ethanol because its chemical formula contains only carbon, hydrogen and oxygen, and, as far as I can tell, all the components of petrol contain carbon, hydrogen and oxygen. I therefore find it difficult to see how the emissions from the vehicle would be different. I can see that there is a difference between fuel which comes from various processing of vegetable matter, which of course captures the CO2 in its creation and then it goes through a cycle in order to be able to go into a car.

I also discovered with my friend Google that there are worries about some issues such as condensation, and potentially water in fuel as result of that, and about the possibility of degradation of hoses and seals. I wonder to what extent in this introduction those concerns have been taken account of. Otherwise, this is a wonderful idea and I beg to support it.

My Lords, I am grateful to the noble Baroness, Lady Randerson, and the noble Lord, Lord Tunnicliffe, for their consideration of the statutory instrument today. I am pleased that they are both able to support it, and they had some very good questions, definitely one of which I had to go and look up after I spoke to the noble Lord, Lord Tunnicliffe, this morning; I am very pleased to have an answer but I will leave it to the end, as it is my piece de resistance.

I turn first to the questions asked by the noble Baroness, Lady Randerson, although this also applies to some of the issues the noble Lord, Lord Tunnicliffe, raised. We have had this fuel in Great Britain now since September 2021 so, if there were any significant concerns, they would have been raised. We are not aware of any. I recognise that some motoring magazines might raise certain questions, but certainly there is no evidence at the moment that there is a significant problem with the introduction. The noble Baroness asked whether we had learned anything from the introduction in Great Britain. One of the key things that we learned was to make sure that we made the introduction when the specification of the fuel changes from summer to winter, so that you get the throughput at the same time as you are trying to flush through the winter grade, in this case, into Northern Ireland. In broad terms, therefore, as regards this introduction, where there are any risks they have been mitigated or we are aware of them, and otherwise I expect a very smooth introduction.

Of course, it is true that this SI was delayed a little by the sad death of Her Majesty the Queen; that is why the communications campaign in Northern Ireland has already started. The noble Baroness spoke about classic cars and indeed classic lawnmowers. We are aware that a number of items of equipment will need to continue to use E5. E5 will remain available, and we will make sure that the communications include guidance for owners to check their manufacturer’s instructions to see whether E5 is suitable. In the vast majority of cases, they can just use E10 and then E5 if it is available. Light aircraft should also be able to continue to use E5. Again, as with the introduction in Great Britain, although we noted it and it was a potential issue, it has not turned out to be the case.

The noble Baroness mentioned EV charging points and I look forward, now that I am back in my role, to speaking with her further about them. I note that we have a new Minister for the Future of Transport, whom I was speaking to only today. I am not saying that the last Minister was slacking at all, but the new Minister has come at it with great new vigour to look through all our plans, to make sure that the funding is going to the places which need it most. We have to fund areas where there is a market failure because there is a significant private sector there that is willing to invest, and we need to make sure that we target those areas—for example, rural areas—where the value-for-money case for the private sector might not be so good, but we absolutely need to get those EV chargers there.

On the percentage of terminals that cannot blend, I can say that bat the moment there are two terminals, which represent less than 5% of total UK petrol production. I am afraid that the point about the percentage of petrol from the Republic is a step too far, but I will write if we have that information. When the Republic introduces E10 in January, that will be consistent across the island of Ireland and within the whole of the UK. There will be consistency for the vast majority of people who are driving compatible cars.

I am afraid that the noble Lord, Lord Tunnicliffe, slightly lost me with his first point about Northern Ireland and the mainland and 95 and 97. I will go back to read it again to make sure that we can respond properly and that we have fully understood his concern about the supply of 95, 97, E5 and E10. He is right to note that there is a penalty in terms of miles per gallon when using blended bioethanol. We think it supplies about 1.7% less energy. As we noted when we did the last SIs, it is probably about the same as driving with the air conditioning on or driving with slightly flat tyres. It is not a game-changing decrease in the energy supplied from the petrol. That impact was of course included in the impact assessment on whether it was a good idea to do this at all. The impact on the consumer is fairly marginal.

I turn to the costs for those who have an incompatible vehicle. As the noble Lord, Lord Tunnicliffe, mentioned, some classic cars cannot run on E10 and would need to continue to use E5, which will continue to be available. I recognise that it might be a little more expensive than the E10 prices one would hope to see. For those who are unwilling to pay for super grade petrol, there are very good second-hand alternatives on the market. Unfortunately, that will probably be the option that they have to pursue.

As for what happens if you put the wrong grade in, whether E10 or E5, if you do it infrequently it is unlikely to damage your vehicle at all. It is not like when you put diesel in your petrol car or vice versa—then you really are in trouble. Your car will be fine and you can just go back to using the right one. Should you put the wrong one in on occasion, it is not going to be too much of a problem.

Then we come to carbon calculations. When I spoke to the noble Lord, Lord Tunnicliffe, this morning, he got me thinking. Of course, he is absolutely right. I had to get my head around this. It is true that when you put bioethanol into petrol, it is combusted and it produces carbon dioxide. However, the point is that the carbon dioxide in that bioethanol is from the short-term carbon cycle. It is from the air and you could probably calculate how many months it has been gone. It is from the air, it goes into feedstuffs, it goes into the vehicle, it comes out of the tailpipe and it returns to the air again. Because it is from the short-term cycle, it is basically a case of taking it out temporarily and putting it back. Using bioethanol is stopping us using that percentage of fossil fuel-based petrol, which comes from stored carbon and is what we do not want to add to the atmosphere. That was a great learning point for me and I am grateful to the noble Lord for raising it. I am going to do a bit more digging to make sure we fully understand that. We know that this is not carbon dioxide free at the tailpipe, but it is a short-term cycle rather than the long-term release of greenhouse gases, which is absolutely what we are trying to reduce in this country. On that basis, I commend the regulations to the Committee.

Motion agreed.

Merchant Shipping (High Speed Craft) Regulations 2022

Considered in Grand Committee

Moved by

My Lords, these draft regulations relate to the safety of high-speed craft, which are generally all rapid passenger craft but can be cargo craft. They primarily operate domestically in UK waters, although some operate between the UK and the Isle of Man, the Channel Islands and France.

High-speed craft are defined in the International Maritime Organization’s International Code of Safety for High-Speed Craft, SOLAS chapter X. They include some twin-hulled vessels, hydrofoils and air-cushioned vessels such as hovercraft. Examples include the Isle of Wight hovercraft and the Thames Clippers. The definition of a high-speed craft set out in the international documents relates not only to its speed but to its displacement.

These regulations will be made under the safety powers conferred by the Merchant Shipping Act 1995. However, they are subject to the enhanced scrutiny procedures under the European Union (Withdrawal) Act 2018, as they will revoke the Merchant Shipping (High Speed Craft) Regulations 2004, which were made under Section 2(2) of the European Communities Act 1972. That is a long way of explaining why these have an affirmative attachment to them; in and of themselves, they are fairly straightforward and mostly technical. They do not implement any EU obligations.

As I have noted, these high-speed craft regulations replace those from 2004 to implement the most up-to-date requirements of chapter X of the annexe to the International Convention for the Safety of Life at Sea 1974, known as SOLAS, affecting high-speed craft. Chapter X gives effect to the high-speed craft codes of 1994 and 2000, which contain the requirements applying to high-speed craft. As their name suggests, these codes were first agreed internationally by the International Maritime Organization in 1994 and 2000, but they have been updated, most recently in 2020.

What do these regulations do? They further improve the safety standard for high-speed craft and will enable the UK to enforce these requirements against UK high-speed craft, wherever they may be in the world, and non-UK high-speed craft when in UK waters. This provides a level playing field for industry. These amendments bring UK legislation up to date and in line with internationally agreed requirements.

The updated requirements of SOLAS chapter X, which these regulations seek to implement, introduce both a new requirement for crew drills on entry to and rescue from enclosed spaces, such as machinery spaces, to be conducted every two months, and the recording of those drills alongside other similar recordings currently kept for fire drills and other life-saving appliance drills. These updated requirements came into force internationally on 1 January 2015.

In addition, the regulations implement two further changes to the codes. First, they introduce updates to the requirements for life-saving appliances relating to rescue boats and life rafts. Secondly, they abolish the current monopoly on satellite service provision to ships, opening the market to any provider meeting the required standards. Both these measures came into force internationally on 1 January 2020.

While many other nations adopt such resolutions into their domestic law immediately, our dualist legal system can lead to delays and a backlog has occurred. We intend to avoid such delays in future by using ambulatory references in our regulations. Indeed, we are using ambulatory references in these regulations to put matters agreed at the IMO into our domestic law.

On the UK flag we have about 30 high-speed craft to which these new regulations apply. There are no foreign-flag high-speed craft operating in UK waters. The 1994 code applies to older vessels and the 2000 code to vessels built or substantially modified in or after 2002.

I believe that is about as much as I can say about these regulations. I have one more thought: they also make amendments to the Merchant Shipping (Fees) Regulations 2018. That is purely to enable fees to be charged for the inspection, survey and certification of these high-speed craft by the Maritime and Coastguard Agency. On that note, I beg to move.

My Lords, I am grateful to the Minister for describing these regulations. As she said, under chapter X of the IMO’s SOLAS convention the high-speed craft codes are regularly updated to incorporate advances in safety technology. That is the reason for these regulations.

The changes the Minister outlined are acceptable to the UK shipping industry, as evidenced by the response to the consultation process. The addition of the ambulatory reference provision to keep UK law aligned with IMO obligations is also welcome. As she said, we hope it will speed up the process as this is just another of those maritime SIs that we should have discussed some time ago.

I understand that many of the changes proposed have already been adopted by UK owners, especially by those trading internationally, because it is in their own interests to do so. I believe that some of them would like to have more advance warning of what new changes are being discussed at the IMO so that they have an idea of what might come through the pipeline.

As the Minister said, these high-speed craft come in many shapes and sizes. I have been slightly mystified as to what the size parameters are, because the only thing I have found relates to cubic metres, and I cannot relate cubic metres to a vessel. She mentioned Thames Clippers, so it obviously comes down to a relatively small craft. An upper limit does not really apply, because these craft do not get to enormous sizes.

Another area for high-speed craft, and one that is rapidly increasing, is in the offshore service sector. I looked this up to see what was going on, and I understand that there is already a High-Speed Offshore Service Craft Code. Presumably, those sorts of craft are not included in these regulations. If the Minister and her advisers could help me with a parameter for these regulations, in relation to the vessels they cover, I would be most grateful.

In the offshore sector there is enormously interesting development going on, with the latest things being all-electric craft that fly on foils. Seen from ahead, you wonder how on earth they manage to go about their business, when the ship is high out of the water and there is just a single foil going down into the water. These are exciting prospects and ones that I hope will lead to great commercial success in future. In the mean- time, I welcome the regulations.

My Lords, it is good to see another small step on the long path facing the Department for Transport, as it tries to catch up with the backlog of maritime legislation waiting to be adopted into UK law. The legendary Secondary Legislation Scrutiny Committee has been watching this process and has produced three reports on this problem over three different Sessions of this House. The impact of this backlog is that the UK is failing, in effect, to live up to its international obligations, which is a matter of concern to many of us—and I think is undoubtedly a matter of concern to the Minister, to judge by what she has said before. Some of her colleagues are not that concerned about international obligations, but I know that she is.

This current lapse seems to be a potential matter of life and death, because these regulations relate to chapter X of the International Convention for the Safety of Life at Sea 1974. Since they also specifically refer to high-speed craft, I assume that there is potential for considerable risk.

I have read the legislation and the Explanatory Memorandum, and I remain a bit confused as to exactly what is covered, because the Explanatory Memorandum specifically refers to

“fire-retardant aspects of construction and fire detection and extinction devices, life-saving appliances (including life-rafts and lifejackets), navigational and stability systems”.

Paragraph 13.3 of the EM refers to these as having

“key implications for safe operation”

and it seems obvious that they do, because they are an area where technical improvements in design and manufacture will have increased the effectiveness of that equipment. But the legislation also talks about people being drunk at sea, obeying orders to leave the ship and so on, so I would welcome clarity from the Minister as to exactly which of these sets of issues we are very late in implementing, if I can put it that way. Several different dates are fired at us in the Explanatory Memorandum. How late are the Government in implementing this? Exactly how much of this is gravely overdue?

When we have discussed other delayed maritime legislation, the Minister has attempted to reassure us that, for various reasons, we have been in effect carrying out the legislation anyway. The noble Lord has just referred to the fact that a craft operating internationally would have had to do that, but those operating just domestically would effectively have been exempt. It seems to me that if we are referring to changes made to chapter X in 2014, we are eight years behind schedule. Have I understood this right? Can the Minister tell us whether there have been any incidents or accidents where the lack of this legislation has been a factor?

The delay in bringing these new powers definitely seems to have been one of the more reprehensible issues that have come from the delay in so much of this maritime legislation, and therefore I am extremely pleased to see that the department is continuing to try to catch up on this issue.

My Lords, we are looking at the high-speed craft regulations—the high-speed craft code. I assume—I may be corrected—that the code is de facto in two parts. There is presumably a part of the code which relates to construction—I noticed the reference to stability—and clearly there is a part which relates to operation. That is a classic division in international transport; it happens in aviation, and essentially, the international code for the construction of aeroplanes is obeyed more or less by every country to the same standard, which makes life very straightforward. There is a code about operation but clearly, that tends also to be influenced by the domestic philosophies of the airlines and operators concerned. Is my assumption that the code divides into two accurate?

Secondly, to what vessels or craft does the code apply? I discovered the formula—I cannot remember whether it is in the Explanatory Memorandum, the regulations or on Google, but wherever it is, how I would apply it did not entirely leap to my mind. However, as I understand it, it relates to volume and it then manipulates that volume to create a speed, which defines whether a craft is high-speed. If it goes faster than that, it is a high-speed craft, and if it goes slower than that, it is not. However, it means that the image of what a high-speed craft is is not self-evident. I understand that the “Queen Mary 2”, for instance, can achieve 30 knots—it normally goes around the world at about 20 or 22 knots. That sounds quite fast, but I believe it is not a high-speed craft. Equally, smaller vessels—the Minister mentioned smaller vessels which operate domestically—which clearly do not do 30 knots are categorised as high-speed craft.

My next question is on whether we have any in the UK; the noble Baroness has already told us that we do. If my conceptual division is right, clearly, this code would apply to how they are operated. I presume it applies to how they are manufactured. The question then is: do we manufacture any of these vessels in the UK? My sense from my Google exploration is that we do not, although I may have misread that. Are we comfortable that the philosophy behind the code has been applied in the original construction of these vessels?

Finally, the code is different. It says in paragraph 7.3 of the EM—and in the code, which I have looked at only very superficially:

“The HSC Codes take more of a risk-based approach than many maritime standards, which tend to be more prescriptive.”

Indeed, it is the history of transport that most specifications originate from simply building the particular transport facility, be it a train, a boat or an aeroplane, seeing how many of them crash, and from each crash you learn something new and put that in a regulation. You end up with a large amount of prescriptive things, and if you do it enough, you get pretty close to the optimum. Indeed, the high performance of aviation recently has shown that this approach works—sadly, with the notable exception of the 737 Max; it took two horrific accidents for Boeing to take its responsibilities seriously.

The interesting point is that taking a risk-based approach to safety, as opposed to a learning-based approach that creates the prescriptive codes, requires a different philosophical approach by the safety regulators. If the Minister agrees with my division between these two approaches, can she say whether the people who now enforce that code in the UK are equipped and educated to move from the prescriptive way of going about these things, which in a sense is quite challenging but really straightforward—it passes the prescriptive feature: it has the right number of this and that and will break or not break at this level, and so on—into the more judgmental or risk-based way and to apply the code in that flexible way? Have they exercised that sort of discretion in a way that can give us confidence? The problem with the risk-based approach is that until you get a mature group of regulators, it is possible for people to make poor judgments under such a code.

I have no further questions. We will support this code being incorporated, of course. While I deplore the delays, I will forgive the Minister because we have gone on about that enough.

I am grateful to all noble Lords who have taken part in today’s short debate, especially the noble Lord, Lord Greenway, for his insight as a relative expert in this area. I will start by trying to help all noble Lords with the definition of a high-speed craft; they may or may not need calculators. A high-speed craft is one

“capable of a maximum speed in metres per second”

equal to or exceeding 3.7 times the one-sixth power of

“the volume of displacement corresponding to the design waterline”

in metres cubed,

“excluding craft the hull of which is supported completely clear above the water surface in non displacement mode by aerodynamic forces generated by ground effect”.

I hope that is helpful.

I did read that definition, so I am not surprised by it. I really want to know what are typical high-speed crafts and what are not. Am I right that the “Queen Mary 2” is not a high-speed craft but that some smaller craft that do 30 knots are designated as high-speed craft?

I will see whether I can get further written clarification of that. My understanding is that a craft knows that it is a high-speed craft, is certified to be such and then falls under these regulations. Clearly, there is a balance between the speed and the displacement. We might come up with a nice little picture of the displacement and the speed, saying whether it is high speed. That might be quite interesting for all noble Lords, as we are unlikely to talk about high-speed craft again any time soon. Let us see how we do.

The other thing I want to cover at the outset is the impact of the delays, as mentioned by the noble Baroness, Lady Randerson. I think the noble Lord, Lord Greenway, said it best; I believe he said that many of these changes are already adopted. During analysis, the UK’s high-speed craft were found to already comply with all the elements of these regulations, which transpose these international safety requirements for high-speed craft from chapter X into domestic law.

There are the two different codes, as noted by the noble Lord, Lord Tunnicliffe. The noble Baroness, Lady Randerson, talked about being drunk at sea and a list of other things. Essentially, everything within those codes comes over to domestic law. I got a little confused at this point, so I will go back to Hansard and check that I have properly covered that issue, which I know was raised by both Front-Benchers.

On the delay in bringing them into domestic law, I hope I have been able to reassure noble Lords that all the UK craft were already doing it. The main benefit of the regulations today is the fact that we will be able to enforce them against foreign and UK craft if they are not. The MCA will certainly do that. The delay for enclosed spaces, et cetera—I am sorry; I cannot read my writing—was seven years; that came into force in 2015. On life-saving appliances and the deregulation of satellite services, there was a two-year delay. But as I say, the requirements were already in place and we are not aware of any incidents relating to vessels that did not put these requirements into place.

The noble Lord, Lord Greenway, asked about high-speed offshore service craft. Indeed, he is absolutely right: there is a completely different set of regulations, which I was going to mention in my opening remarks. I then decided that it would confuse all noble Lords because we would be talking about entirely different vessels which do very important things. I completely appreciate that there is huge innovation going on in that area with electrics and the foils—you only have to look at the America’s Cup vessels to see that they fly. They do not sail anymore; they just fly. It is amazing. But, yes, we are not talking about those vessels, or indeed offshore service craft, today.

I will take the point about advance warning of future changes back to the department to make sure that we have good stakeholder engagement before future changes, either international or domestic, are foisted upon the industry. We want stakeholders to be prepared, and it is obviously really important that we get their feedback as well.

The noble Lord, Lord Tunnicliffe, asked whether we manufacture in the UK. Yes, we do—we manufacture hovercraft, and we also have a number of high-speed craft in development. I suspect that these might relate to some of the more innovative maritime things coming through, some of which are very exciting. Obviously, those craft will take account of these regulations, as would any vessel imported into this country before it can be certified.

Turning to the issue of a risk-based approach, I understand where the noble Lord is coming from. However, the high-speed craft codes of 1994 and 2000 have always taken a risk-based approach, so there is no change in mindset among the regulators here in putting a risk-based approach into place. Unless I have misunderstood the issue he raised, we believe that the MCA already operates in that way.

I have one last comment on our favourite topic: the maritime backlog. I recognise that this is one more brick in the wall, which is very good. This is one of the 13 outstanding statutory instruments, and I am sure noble Lords will join me again later this year as we debate some more. We are making progress. As I always say, I apologise, but we hope to get everything done by the end of 2023, which is what we committed to the Secondary Legislation Scrutiny Committee.

Motion agreed.

Terrorism Act 2000 (Alterations to the Search Powers Code for England and Wales and Scotland) Order 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Terrorism Act 2000 (Alterations to the Search Powers Code for England and Wales and Scotland) Order 2022.

My Lords, I beg to move that the order, which was laid before this House on 18 July, be approved.

Following the horrific terrorist attack at Fishmongers’ Hall in November 2019, the then Home Secretary commissioned the Independent Reviewer of Terrorism Legislation, Jonathan Hall KC, to review the Multi Agency Public Protection Arrangements, commonly referred to as MAPPA, used to supervise terrorist and terrorist-risk offenders on licence in the community.

The Police, Crime, Sentencing and Courts Act 2022, hereafter referred to as the 2022 Act, established three new powers for counterterrorism policing: a personal search power, a premises search power, and a power of urgent arrest. These powers were established in response to recommendations made by Jonathan Hall KC following his review of MAPPA.

This order relates to the new power of personal search, the creation of which was also recommended by the Fishmongers’ Hall Inquests—Prevention of Future Deaths report. The personal search power has been inserted into the Terrorism Act 2000, in new Section 43C, by the 2022 Act. The new search power came into force on 28 June this year.

As was set out by the Government during the passage of the 2022 Act, the new personal search power applies across the UK, enabling the police to stop and search terrorist and terrorism-connected offenders released on licence who are required to submit to the search by their licence conditions, should the Parole Board determine such a condition is necessary. The officer conducting the stop and search must also be satisfied that it is necessary to exercise the power for purposes connected with protecting members of the public from a risk of terrorism.

Section 47AA of the Terrorism Act 2000 imposes a requirement on the Secretary of State to prepare a code of practice containing guidance about the exercise of search powers that are conferred by that Act. In June, Parliament approved regulations laid by the Government that amended Section 47AA so that it extends to cover the new personal search power inserted into the Terrorism Act 2000 by the 2022 Act. This created a requirement for the Secretary of State to prepare a revised code of practice that includes guidance on the exercise of the power conferred by new Section 43C.

We have duly prepared a draft revised code of practice, and this order seeks Parliament’s approval to bring the revisions we have made to the existing code of practice into force.

I will now set out the nature of the revisions the Government have made. The primary update to the code of practice is the incorporation of the new stop and search power provided for by Section 43C of the Terrorism Act 2000. The revised code sets out important parameters that govern the use of the Section 43C power and provides clarity for police officers on the power’s scope. This includes providing guidance on the thresholds to be met before the section 43C power can be used, scenarios in which it might be appropriate for use and the powers of seizure associated with the search power.

We have also set out clearly within the revised code the limitations on the clothing that a person can be required to remove when the Section 43C power is being exercised by the police. In keeping with existing stop and search powers, police officers exercising the Section 43C power may not compel a person to remove any clothing in public except for an outer coat, a jacket or gloves, and an intimate search may not be authorised or carried out under the new power.

The new Section 43C stop and search power has been specifically created to help manage the risk posed by terrorist offenders on licence who are assessed to be high or very high risk to the public. The Government plan to collect data from police forces on the use of this targeted power, as we routinely do for other stop and search powers, and make this data publicly available through future statistical publications.

Given that the existing version of the code was brought into force in 2012, the Government have also taken this opportunity to make other minor changes to the code to ensure that it accurately reflects current practice, legislation, terminology and organisational responsibilities. The updated code reflects the creation of police and crime commissioners and structural changes to other police authorities, including the creation of authorities overseeing combined police areas.

We have also ensured that organisational names have been updated, for example replacing previous references to the Association of Chief Police Officers’ counterterrorism co-ordination centre—it does not trip off the tongue—with up-to-date references to the Counter Terrorism Policing national operations centre.

The revised code also includes a new paragraph which references the Children Act 2004, and its Scottish equivalent, to highlight the need for the police to ensure that in the discharge of their functions they have regard to the need to safeguard and promote the welfare of all persons under the age of 18. Although this is not a new policy, the Government considered it important when revising the code for safeguarding duties such as this to be made explicit.

In addition, we have used this opportunity to make other minor but necessary amendments, such as updating links and contact details within the code, including refreshing the web address where the most up-to-date version of the Government’s counterterrorism strategy, known as Contest, can be found.

In the course of revising the code, the Home Office has consulted the Lord Advocate and other appropriate persons and organisations, including the Independent Reviewer of Terrorism Legislation, Counter Terrorism Policing and Police Scotland, all of which are supportive of the approach being taken.

The revised code promotes the fundamental principles to be observed by the police and helps preserve the effectiveness of, and public confidence in, the use of police powers to stop and search under the Terrorism Act 2000. I very much hope that noble Lords will support these alterations to the code of practice.

My Lords, I congratulate the Minister on his elevation to Home Office Minister. If it were me, I would also be thinking, “Oh goodness, what have I done?”, but I am sure he will be excellent in his new role. I thank him for explaining this order. As when we considered the primary legislation that lies behind this order, clearly we are supportive of the changes in the legislation. We know from the tragedy at Fishmongers’ Hall how the risk posed by offenders on licence is an inexact science. These additional powers for the police to stop and search people on licence on the recommendation of the Parole Board are an important tool in trying to manage that risk and act as a deterrent to those on licence from carrying out the sort of appalling attacks that we saw at Fishmongers’ Hall.

As the Minister explained, the order is about the revised code of practice, which is quite a lengthy document. We are here to hold the Government to account for, in this case, the changes that have been made to the extensive code of practice. I understand the issues around the change in the legislation and Section 43C but, as the Explanatory Memorandum and the Minister have explained, a series of other amendments have been made to the code. The Explanatory Memorandum says that these “include”, and then gives a list of those changes, as the Minister explained. It would be extremely helpful to have a “track changes” copy of the code of practice so that we could see exactly what the changes are to the revised code of practice. Although the changes to incorporate the new Section 43C are fairly obvious, as I say, the others are difficult to find in among the code of practice. However, this is an important step forward in terms of giving these additional powers to the police for those who may pose a risk after they have been released from prison, and it is important for the police to have a code of practice to go with those changes. Having said that, we are supportive of the order.

I congratulate the noble Lord, Lord Sharpe, on his promotion and wish him well in his task—not too well, perhaps, but pretty well. But seriously, I know that he will be diligent in the execution of his duties and will work with his usual co-operative manner.

We too support what is obviously a very sensible and necessary step forward by the Government. I have a couple of questions that I want to ask. The Fishmongers’ Hall attack clearly highlighted some problems, which the independent reviewer took up and made recommendations about. It is good that the Government have reacted and responded to that. Along with the noble Lord, Lord Paddick, we support what they are doing here.

The order is called the Terrorism Act 2000 (Alterations to the Search Powers Code for England and Wales and Scotland) Order 2022. It revises the code of practice with respect to those three, yet its extent is to the whole of the UK, which includes Northern Ireland. I do not quite understand how a code that relates to three parts of the UK extends to all four. You would expect the title to refer to England, Wales, Scotland and Northern Ireland.

We all appreciate the sensitivity in Northern Ireland, but can the Minister explain how a British order, which does not include Northern Ireland, extends to the whole of the UK, as in the notes? If there has been widespread consultation, does that include Northern Ireland and who has it been with, notwithstanding that the Northern Ireland Assembly has not been sitting? I just do not understand the process or how that works. I am sure there is a very simple reason laid out by somebody, but I cannot find it. I do not understand this, but it is laid out in the order.

The Explanatory Memorandum says that this new power can be used with a convicted terrorist who is released on licence, provided that a search power is included in the licence. Can the Minister explain for all our benefit in what circumstances a terrorist released from prison would not have a search power included in their licence? If that were the case, what power would a police officer or whoever else have with respect to a potential terrorist?

One would assume—the noble Lord, Lord Paddick, would know better than me—that if a police officer thought a terrorist act was about to be committed, they would have a power to try to do something about that. If that is the case, why would you have a new power included in the Act? In other words, what is the purpose of including the search power in the Act and in what circumstances would you not have that anyway? That would be interesting to know.

Can the Minister say a little more about the thresholds? It seems to me that in most cases, and particularly in Section 43C, we are talking about powers to search without suspicion. What are the thresholds for that? Is that where the officer has a belief that a terrorist act is going to be committed, even though they have no grounds for that? How does that happen?

As the noble Lord, Lord Paddick, quite rightly said, there are a number of changes. The Government talk about minor changes being made, but it is very difficult to understand what those changes are and to track them through. For example, the Minister said that there are examples in the code of what a police officer can or cannot do with respect to clothing or in a public place. Is this the same or has that changed as a result of the new power that this secondary legislation gives to police officers? Is there any change in relation to who can carry out the search—for example, a female officer searching a male terrorist, or the other way around?

The Minister talked about children and this applying to children under 18. Is there a lower age limit? What do we mean by children? I understand that children means those under 18, but is there a lower limit or does this apply to anybody, irrespective of age, who a police officer believes may be about to commit a terrorist act?

As the noble Lord, Lord Paddick, said, the questions we have laid out are important because public confidence, particularly in the use of stop and search without suspicion, is of real importance. I would be keen to hear what steps the Government have taken to ensure that public confidence has been and will be sought in some of these situations. One can imagine the difficulty for the police operating in communities where this power might be used and the sensitivity of it.

I had a question about oversight. I was very pleased that the Minister talked about the fact that the Government were going to collect data on the use of the power and keep it under review. Presumably, the Independent Reviewer of Terrorism Legislation will also be involved with all that. I was pleased that the Minister included that in his remarks, because the oversight of how the legislation will work is particularly important. Given that the legislation commenced on 28 June, has anything happened since which has informed the Government about the code of practice?

With those few remarks, generally speaking, we are very supportive of what Government are doing and hope the legislation helps keep our communities and our country safe.

My Lords, first, I thank both noble Lords for their warm welcome; I hope that we continue to operate in total agreement.

I am not sure about that either, but we will try.

On the specific points that both noble Lords raised, to the noble Lord, Lord Paddick, we will be happy to provide a tracked change version as he requested, and I will make sure he gets that as soon as possible. That was the easy question.

Moving to the questions of the noble Lord, Lord Coaker, I shall try to deal with them in order. He asked about the extent of the code of practice and why it is confined to Great Britain. A separate code exists for stop and search powers under the Terrorism Act in Northern Ireland—a fact that the noble Lord alluded to. The Northern Ireland Office is responsible for that. We continue to work with colleagues there and offer them support in updating their equivalent code in Northern Ireland, which they have advised is likely to happen next year.

I just ask, because this is a very important point. The new power exists with respect to Northern Ireland, but the code of practice under which it operates is separate, legislated for under a different Act and in a different way. Is that correct—the power is a new power to be extended to Northern Ireland?

As I understand it, it could be extended to Northern Ireland, but the Northern Ireland Office is, of course, responsible for the application of such things in Northern Ireland. I may not be entirely correct on that, so I will come back to the noble Lord if I am not.

I am sorry to labour this point, but it is so important. I may be wrong, but I understood the Minister to be saying that a different code of practice applies to Northern Ireland, hence this is called a code of practice for England, Scotland and Wales—in other words, Britain. For Northern Ireland, there is a separate code of practice. Given that the new power extends to the whole of the UK, one presumes that the police and others in Northern Ireland will have the ability to stop and search without reasonable suspicion a terrorist out on licence, where that is part of their licence. Is that the case or not?

To clarify—I think this does—the new search power applies UK-wide, but there are two separate codes. Does that make sense?

That makes absolute sense. It is not what I understood the Minister to say in the first place, but I was just trying to clarify that. If I had realised that, I would have made different remarks, because it is a quite interesting extension of power with respect to Northern Ireland, for obvious reasons.

Understood. The noble Lord asked me how it is determined who qualifies under the new code. To go back to the point I made in my opening remarks, in most cases the Parole Board determines whether it is appropriate for the offender, when released, to have their licensing condition expressed as a part of the conditions of their release. Its assessment is based on a contemporary assessment of the offender’s risk profile, including whether they are judged to represent a high or very high risk to the public.

How is it determined which terrorist offenders should have licence conditions permitting the search imposed on them? As I say, it is imposed on offenders convicted of terrorism or a terrorism-connected offence and assessed as posing a high or very high risk of serious harm. In those cases, it may be imposed where there is a concern that the offender may carry a weapon or to provide an additional protection for staff—for example, where they are subject to polygraph testing, a search can be carried out prior to the examination for the safety of the examiner. I hope that clarifies that.

The noble Lord, Lord Coaker, asked about the sex of the searching officer. The answer to his specific question is no: a same-sex officer is not required unless the individual being searched requests one. The noble Lord also referenced the data that is collected. I can assure him that it will be extensive. He asked about age as well. I will come back to him on that; I do not have a specific answer. The notes I have deal only with the 18 year-old point.

In closing, I reiterate that this order provides for alterations that the Government have made to the code of practice for the exercise of search powers conferred by the Terrorism Act 2000 to be brought into force. I think I have covered the rest of the information requested, and as such I commend this order to the Committee.

Motion agreed.

Warm Home Discount (Scotland) Regulations 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Warm Home Discount (Scotland) Regulations 2022

Relevant documents: 9th Report from the Secondary Legislation Scrutiny Committee

My Lords, I beg to move that these regulations, which were laid before the House on 29 June 2022, be approved. This Government have taken decisive action to support people with their energy bills. From 1 October a typical household in the UK will pay no more than £2,500 a year on their energy bill for the next two years. This is in addition to the £37 billion of support announced earlier this year, including the energy bills support scheme that provides a £400 discount for around 29 million households. The warm home discount complements these measures, focusing on those at risk of fuel poverty, primarily through the provision of a £150 direct energy bill rebate.

We have already passed legislation for the extension, expansion and reform of the warm home discount scheme in England and Wales, with better targeted and automated rebate provision. The Scottish Government have devolved powers under the Scotland Act 2016 to design and implement a warm home discount scheme in Scotland. The BEIS Secretary of State has certain reserved powers, including approving any scheme for Scotland. Earlier this year, Scottish Ministers requested that the UK Government make provisions for a continuation of the scheme in Scotland. In May, the UK Government consulted on this continuation and expansion of the scheme in Scotland, which was supported by a majority of respondents.

This SI extends the WHD scheme in Scotland to 2025-26, providing much-needed certainty on energy bill support to low-income and vulnerable households in Scotland. The Government committed to expanding the scheme in the energy White Paper 2020. The £475 million —at 2020 prices—spending envelope is set for Great Britain and will be approximately £506 million in 2022 prices. The warm home discount in Scotland will increase proportionately in line with the GB-wide increase to the scheme. The UK Government will apportion 9.4% of the total spending to Scotland; this means £49 million of the overall scheme value, an increase of around £13 million compared with last year.

Overall, around 280,000 Scottish households in or at risk of fuel poverty will receive a rebate this winter, which is 50,000 more households than last winter. The apportionment of spending to Scotland is based on the number of domestic gas and electricity meters across Great Britain and ensures that the costs of the scheme are spread evenly across all customers. As a result, the proportion of spending in Scotland will exceed Scotland’s share of the Great Britain population.

The scheme participation threshold for energy suppliers is lowered to 50,000 domestic customer accounts in 2022-23 and to 1,000 domestic customer accounts from 2023-24. This mirrors the scheme in England and Wales, and will mean that from 2023-24, suppliers obligated under the scheme will cover over 99% of domestic customers.

As requested by Scottish Ministers, the WHD scheme in Scotland will be a continuation of the scheme previously in place across Great Britain in 2021-22 and therefore will continue to include three main components: the core group, the broader group and Industry Initiatives. First, under the core group element of the scheme, around 90,000 low-income pensioners in receipt of pension credit guarantee will continue to receive their rebates automatically. Secondly, under the broader group element, around 190,000 low-income and vulnerable households, mainly of working age, will receive a rebate following an application to their energy supplier. The broader group is expanded to include housing benefit as one of the mandatory eligibility criteria, as per the England and Wales scheme. Income thresholds for the criteria relating to child tax credits and universal credit are increased.

Each energy supplier’s obligations under the scheme will be set according to their market share in Great Britain. This is the fairest way of spreading costs across all customers in Great Britain and will ensure consistency across the two warm home discount schemes.

The Government recognise that there are differences in the proportions of energy customers that suppliers have in the different nations. There will be different challenges for suppliers with a higher proportion of customers in Scotland and those with a lower proportion. We are making allowances for these differences by allowing suppliers with few broader group customers in Scotland to transfer up to 100% of their broader group target to Industry Initiatives, which of course will be subject to Ofgem’s approval. Ofgem’s approval will mainly be based on each supplier’s market share in Scotland relative to Great Britain. Only energy suppliers with a disproportionally low number of broader group customers are likely to be permitted this flexibility.

Scottish households in or at risk of fuel poverty will continue to benefit from support under Industry Initiatives funded under the warm home discount. This element of the scheme will continue to provide valuable support to households, such as energy advice, benefit entitlement checks, energy debt and emergency financial assistance, as well as energy efficiency measures. We increased the cap on spending on Industry Initiatives to £7 million per annum, which is broadly proportionate to the spending expected in England and Wales in 2025-26.

Although activities permitted under Industry Initiatives will be the same as in previous years, there will be some exceptions. Part of the permitted Industry Initiatives spending on debt write-off is ring-fenced for customers with pre-payment meters, as these customers are particularly at risk of self-disconnection. Again, this mirrors the scheme in England and Wales. As per the scheme in England and Wales, limits are imposed on boiler and central heating system installations supported under Industry Initiatives, which will help to support our decarbonisation objectives.

No caps have been imposed on the amount of Industry Initiatives spending that can be used for financial assistance. The list of eligibility criteria for financial assistance has been expanded to include the mandatory eligibility criteria for the broader group. This will include suppliers whose broader group is oversubscribed to direct customers to financial assistance under these Industry Initiatives.

In conclusion, the warm home discount remains a source of critical support for low-income households across Great Britain. These regulations extend the scheme in Scotland until 2026 and increase energy bill support from £140 to £150 for over 280,000 low-income and vulnerable households each winter, when they need it most. This is an additional 50,000 households receiving vital support compared with last year. Therefore, I commend these regulations to the Committee.

I thank the Minister for his very full explanation. I start by expressing regret that this scheme is necessary in the first place. I think all of us recognise that while fuel poverty is really high profile at the moment, it is a scourge that has been with us for a long time, as reflected by the fact that the original scheme came in in 2011. Many people and families have struggled to pay their bills for a very long time. Of course, as outlined by the Minister, we recognise the support that has been given for the extreme circumstances we have found ourselves in recently.

I do not want to spend too much time going through the detail. I recognise that there has been extensive debate on the England and Wales scheme in the Commons and in this place, and that these regulations are bringing in the necessary additions to meet the requirement to have a separate scheme for Scotland, as has been outlined. We recognise that point, but I would like further clarification and reassurance that the Scottish Government are happy with the outcome of the debate and consultation as it has gone forward. That is very important; obviously, there are peculiar circumstances in terms of the responsibilities of the Scottish Government and the role that the UK Government have to play.

As we have heard, most respondents to the second consultation agreed with the proposed extension of the current scheme until 2026, but the other question that came up was whether it was possible to have an earlier review of the scheme given the circumstances people are facing at the moment. There is concern generally about the higher fuel poverty rates in Scotland that the evidence suggests. Obviously, concerns were raised about the method for apportioning spending to Scotland, and some asked for higher apportionment to reflect those higher rates. I think it is fair to say that some energy suppliers also expressed concern about the additional costs of running two separate schemes, in England and Wales and in Scotland, and I do not know whether there is any assessment of what that additional spend will be.

Of course, it was probably inevitable that there were many requests for the value of the rebates to be increased. I understand that the rebate is fixed at the level proposed for consistency with the England and Wales scheme, but I will leave that issue there as something that will probably come up in the Minister’s response. I wonder if there are any comments to be made on how we will assess the situation as we go forward into continuing uncertain times.

The way the scheme is structured means that the cost of the rebates will be passed on to consumers in Scotland. My understanding is that the suppliers will pass on the cost of the scheme to their customers. This is estimated to come out at about £19 per dual fuel account, which is an increase from £14 under the current scheme. The Minister is shaking his head; I take from his response that he has a comment to make on this. I look forward to hearing that this is not the case. The reason I raise it, of course, is because we are seeing across the whole of the UK more and more people starting to struggle to pay their energy bills—and an additional cost for some who might not be eligible for this rebate scheme is probably not sustainable and could end up forcing more people into needing to take part.

I shall leave my comments there. It is very important that we approve the regulations so that we can get them into place, so families can benefit as quickly as possible. I end my comments with the general view that I hope we are not losing sight of the wider imperative of moving forward with schemes that will actually reduce the need to use fuel. I am thinking of home insulation, for example. There is some uncertainty at the moment, and I would welcome reassurance that the work that has started will be continued and, indeed, increased.

I thank the noble Baroness very much indeed for her questions. She deserves admiration for being the only Member to turn up to discuss this important issue, so I am grateful to her for that. I am happy to confirm that the Scottish Government are very satisfied with the scheme before us today; in fact, they asked us to implement it on their behalf. They originally talked about doing a separate scheme for ECO and the warm home discount for Scotland, then they decided that they could not and therefore requested us to launch the process and implement it for Scotland. That is why we are debating these regulations separately from the England and Wales regulations. So not only are they satisfied with it but it is at their request that we do this.

On the noble Baroness’s question about a review, it would be possible for the Scottish and UK Governments to carry out a review and consult on amendments to the scheme, should they consider it appropriate. We are apportioning a fair amount to Scotland; it is equivalent to 9.4% of the overall spending, which is proportionate to the number of domestic gas and electricity meters in Scotland compared to the rest of Great Britain. This is higher than Scotland’s proportion of the population in Great Britain, which was 8.4% in mid-2020, and it will also exceed its share of means-tested benefits recipients. This approach makes it fairer for consumers across England, Wales and Scotland, ensuring similar levels of cost and benefit across consumers.

On the administration costs of the schemes, the scheme in Scotland is a continuation of the current scheme, so there would be limited additional burdens in implementing it, and there would be continuity for suppliers. The reform of the scheme in England and Wales will reduce the administrative burden of running the scheme compared to the current one, and flexibility to transfer the broader group into industry initiatives will reduce the burdens for suppliers with low or zero broader groups in Scotland.

On the noble Baroness’s point about the cost of the scheme on energy bills—I think that she cited the figure of £19—the ECO scheme and warm home discount form part of the so-called green levies, which the noble Baroness will recall the Chancellor announcing, rather than being funded through bills. The scheme will be funded, at least for the next two years, by the Exchequer directly under the energy price guarantee scheme. So we are continuing with the scheme as previously, but the suppliers will be refunded by the Exchequer from that.

The noble Baroness also asked a very important question about our insulation schemes. As she will know, we have insulation and energy efficiency schemes of about £6.6 billion through a number of different initiatives. I am thinking of the home upgrade grant, the social housing decarbonisation fund, the public sector decarbonisation scheme, the local authority delivery scheme, and so on. I am happy to confirm that they are continuing, as well as the ECO scheme, which is also part of the obligations on suppliers. Indeed, I am happy also to confirm that we are extending it. As part of his recent Statement, the Chancellor announced an ECO plus scheme, which will be worth about £1 billion over three years. We are currently working on implementing it, and we will bring a regulation back to this House to discuss its further implementation in future.

I hope that has dealt with all the noble Baroness’s queries. Again, I commend the draft regulations to the Committee.

Motion agreed.

Committee adjourned at 5.41 pm.