Thursday 10 January 2019
Business, Energy and Industrial Strategy
Outer Space Act: (Isle of Man)
The Government intend to extend, to the Isle of Man, the provision for a limit to be set on an operator’s liability to indemnify the Government against claims brought for loss or damage arising from regulated space activity.
Under the Outer Space Act 1986 (the OSA), operators are required to indemnify the UK Government for any claims brought to the Government for damage or loss arising from activities regulated under the OSA.
Before 2015, this indemnity had no limit, meaning that operators were fully liable for any damages their activities caused. This unlimited liability was seen by industry as a commercial disadvantage and a provision was included in the Deregulation Act 2015 to amend the OSA, introducing a limit to the operator’s indemnity.
Extending the provision for a limit to be set to the Isle of Man, would have the effect of creating a contingent liability for the UK Government for amounts above the indemnity limit in respect of licences issued under the OSA as extended to the Isle of Man by way of the Outer Space Act 1986 (Isle of Man) Order 1990.
The OSA was applied to the Isle of Man in 1990 and the Government of the Isle of Man has requested that the indemnity limit in the amended OSA is extended to them, so that operators based on the Isle of Man will not be at a disadvantage in comparison with their UK counterparts.
The Government have agreed to extend the indemnity limit to the Isle of Man on the basis that the current letters of agreement that are in place with the Government of the Isle of Man are to be updated and formally exchanged following Parliament’s approval of this contingent liability. The updated letters will set out that the Isle of Man Government will meet any liability incurred as a result of Isle of Man space activity, above any indemnity limit set in a licence, that is not covered by insurance. However, the letters maintain the assurance that a request for any contribution from the Isle of Man Government will not be for a sum large enough to destabilise the Isle of Man economy.
When a Government Department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, it is required practice for the Minister concerned to present a departmental minute to Parliament giving particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until 14 parliamentary sitting days after the issue of the minute, except in cases of special urgency.
As a matter of record, I will be laying a departmental minute today.
Energy Council: December 2018
The Energy Council took place on 19 December 2018. The UK was represented by the Deputy Permanent Representative to the EU, Katrina Williams.
Communication from the Commission: A Clean Planet for all
Miguel Arias Cañete, Commissioner for Climate Action and Energy, introduced the European Commission’s Communication “Clean Planet for all: A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy”. It stressed the need to achieve net zero greenhouse gas emissions by mid-century, and that the EU was well placed to lead efforts to mitigate climate change.
All member states intervened, and all broadly supported the Commission’s communication. A number supported the Commission’s call for net zero greenhouse gas emissions by 2050. The importance for businesses and citizens to inform the debate on reducing emissions and for the transition to be realistic was mentioned, as was the need for Europe to reduce its dependency on coal and invest in renewables. The importance of interconnection and the need to take account of energy security and competitiveness was raised. The importance of gas infrastructure was also mentioned.
In its intervention, the UK welcomed the communication and emphasised the urgency of addressing climate change. It pointed out that the UK Government had sought advice from the Committee on Climate Change on long-term targets. It also gave an overview of the action being taken to make the transition to a more flexible and smarter energy system.
Some member states considered nuclear energy to be an important option for decarbonisation, and called for technology neutrality. The UK said that it is important that member states are able to choose from all routes to decarbonisation.
Clean energy package
The presidency reported that it had reached agreement with the European Parliament on all elements of the clean energy package. It noted that the European Parliament and Council had now formally adopted the directive on renewable energy (recast), the regulation on governance of the energy union and the directive on energy efficiency (recast). Publication in the Official Journal was expected on 21 December 2018.
On the regulation on risk preparedness in the electricity sector, the presidency said that the regulation should give member states enough time to develop their plans for responding to risk. Regarding the regulation establishing a European Union Agency for the Co-operation of Energy Regulators (recast), it thought the outcome would allow the agency to function efficiently.
The presidency informed Ministers that in the early hours of the 19 December it had closed the two most complicated files: the regulation on the internal market for electricity (recast) and the directive on common rules for the internal market in electricity (recast). It commented that the deal would allow the internal energy market to operate efficiently and that contracts awarded under capacity mechanisms will be subject to limits on emissions of carbon dioxide. Furthermore, consumers will be able to choose their suppliers freely, and request dynamic price contracts and smart meters.
The Commission, congratulating the presidency, noted that completion of the energy union was one of President Junker’s 10 legislative priorities.
Comments made by individual member states included recognition of the value of national energy and climate plans, but regret about the deal struck on limits on carbon dioxide emissions for contracts awarded under capacity mechanisms, and concern at the difficulties involved in opening up interconnector capacity and in meeting energy efficiency objectives.
Any other business items
The presidency informed the Council about the state of play on the revision of the gas directive. A number of member states, including the UK, called for faster progress and challenged the latest compromise proposals, but others expressed concern about proceeding with the revision.
The presidency updated Ministers on the connecting Europe facility negotiations, saying that it had secured a partial general approach at the Transport Council. It then provided an update on the hydrogen initiative.
The Commission provided an update on the status of marine energy and external energy relations. A number of member states supported the Commission’s calls for more action to make marine technology competitive.
There was a brief discussion on the appointment of the director general for the International Renewable Energy Agency.
Finally, the incoming Romanian presidency presented its work programme, stating its priorities to be formal agreement on the clean energy package, to make progress on the gas directive, the tyre labelling regulation and the mandate for changes to the energy community treaty.
Ministers had an informal discussion over lunch on energy security and external dimensions of energy policy.
Contingent Liability Notification
I can today confirm that I have laid a Treasury Minute informing the House of the contingent liability that HM Treasury has taken on in authorising the sale of a portfolio of Bradford & Bingley (B&B) and NRAM commercial loans, acquired during the financial crisis under the last Labour Government, to a consortium formed of Arrow Global Ltd and Davidson Kempner European Partners LLP, who are specialist asset buyers.
On this occasion, due to the sensitivities surrounding the commercial negotiation of this sale, it has not been possible to notify Parliament of the particulars of the liability in advance of the transaction documents being signed. The Chairs of the Public Accounts Committee and Treasury Committee were notified in confidence ahead of the transaction being agreed.
The contingent liability includes certain market standard time and value capped warranties confirming regulatory, legislative and contractual compliance. In addition, there are further remote fundamental market-standard warranties. The maximum contingent liability arising from all contractual claims is approximately £61 million. The impact of the sale on a selection of fiscal metrics is as follows:
public sector net debt is reduced by £61 million in 2018-19;
public sector net borrowing is increased by a total of £7.9 million by 2022-23;
public sector net liabilities is increased by £30 million in 2018-19; and
public sector net financial liabilities is increased by £30 million in 2018-19.
UKAR will incur an accounting loss of £30 million on the transaction in 2018-19. UKAR is expected to make an overall profit in 2018-19. The net present value of the assets if held to maturity was estimated by UKAR’s advisors using Green Book assumptions. UKAR received less than this estimated hold value in exchange for the assets. The Government should not be a long-term owner of financial sector assets and it is right that these assets should be returned to private hands.
I will update the House of any further changes to B&B and NRAM as necessary.