Tuesday 30 November 2021
Arrangement of Business
My Lords, Members are encouraged to leave some distance between themselves and others and to wear a face covering when not speaking. If there is a Division in the Chamber while we are sitting, this Committee will adjourn for 10 minutes.
Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021
Considered in Grand Committee
My Lords, the Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021 among other things support the implementation of the remaining Basel III standards and the investment firms prudential regime, the IFPR.
As I am sure noble Lords will recall, the Government legislated, through the Financial Services Act 2021, to enable the Prudential Regulation Authority to update the UK’s capital requirements regime to implement the remaining Basel accords. These standards were developed following the 2008 financial crisis, which highlighted major deficiencies in international financial regulation.
Now that the UK has left the EU, we must implement many of these standards domestically for the first time. Parliament has approved the implementation of these standards by expert independent regulators, alongside an overarching accountability framework. In September, this House approved the Capital Requirements Regulation (Amendment) Regulations 2021, made under the Financial Services Act, which revoked the provisions in the UK capital requirements regulation, or UK CRR, necessary for the PRA to make these updates. The Financial Services Act 2021 also enabled the Financial Conduct Authority to introduce the investment firms prudential regime, or IFPR, which is the UK’s new tailored prudential regime for FCA investment firms. This regime carves FCA investment firms out of the UK CRR. The combination of these two prudential packages requires consequential changes to the statute book. This instrument ensures that these changes mesh appropriately and provide a complete, functioning legal regime for firms.
I now turn to the instrument in detail, first in respect to changes that implement the Basel standards. Many of the measures contained in this instrument update references in existing legislation to the UK CRR, so that they now relate to the new rules made by the PRA, known as the CRR rules. In addition, this instrument revokes the reporting and disclosure requirements for the leverage ratio. I remind noble Lords that the leverage ratio is a capital backstop that prevents banks from becoming excessively leveraged. I reassure noble Lords that the PRA was already able to set leverage-based capital requirements through PRA rules. The UK leverage ratio framework has been, and continues to be, set by the Financial Policy Committee, which has indeed reviewed it in its entirety recently.
This instrument also removes a legacy equivalence determination on Article 132 that was tied to an equivalence regime that was revoked as part of the Capital Requirements Regulation (Amendment) Regulations 2021 earlier this year. This is therefore a tidying up. This instrument ensures that firms do not have to reapply for permissions where the relevant article of the UK CRR is revoked and replaced with PRA rules.
I turn to the changes in relation to the implementation of IFPR. Some of these changes are straightforward—for example, removing now defunct terminology due to changes stemming from IFPR. Two others are more substantive. First, this instrument extends the Securitisation Regulation’s due diligence requirements to all FCA investment firms. This ensures that all FCA investment firms buying securitisations must conduct due diligence, thereby helping to safeguard the integrity of the UK securitisation market. The second removes FCA investment firms from the UK resolution regime. This reflects the Government’s view that the FCA’s existing toolkit, along with the measures the FCA will implement in future through IFPR and the investment bank special administration regime, are more appropriate ways of managing such firms’ failure. FCA investment firms currently use existing rules and go into insolvency proceedings anyway, rather than going into resolution. Therefore, keeping them within the resolution regime only serves to create administrative cost for these firms for no benefit.
This instrument contains a savings provision and a transitional provision for the IFPR. It enables the FCA to continue to modify, revoke or amend IFPR-relevant technical standards. It provides for transitional provisions that support the functioning of the UK securitisation market by extending the existing risk retention requirements for one year to allow time for firms to transition their approach. The risk retention requirement ensures that firms retain an economic interest in a portion of the risk that is being sold on to investors.
Finally, this instrument addresses a small number of deficiencies arising from the withdrawal of the UK from the EU which have been identified during the process of making these Basel and IFPR amendments.
In conclusion, the Treasury has worked closely with the Bank of England, the PRA, FCA, industry and, in relation to the resolution change, the Banking Liaison Panel in the drafting of this instrument.
I hope that noble Lords have found my explanation helpful. In short, this instrument plays an important functional part in preparing UK legislation for the important Basel III implementation and IFPR packages. I would like to inform noble Lords that a correction slip has been issued in relation to a typographical error in this draft instrument. There is an incorrect cross-reference in the title of Regulation 38. The operative provisions in that regulation are correct. As a result, the error has no legal effect, and noble Lords can be assured that this change is minor. I beg to move.
My Lords, I declare a possible interest as a trustee of the Parliamentary Contributory Pension Fund. I want to put this on the record, as we are getting wide briefings at the moment. I also have some experience of the friendly society movement as a former chairman of the Tunbridge Wells Equitable Friendly Society and two Invesco investment trusts.
I particularly draw attention to paragraph 7.8 of the Explanatory Memorandum, which is key. It says that
“the framework in its current form does not appropriately cater for the differences between credit institutions and investment firms and can be disproportionate”
and “burdensome”, et cetera. That seems crucial. It then goes on to mention the consultation that has been carried out. When my noble friend winds up, could he make it clear whether all parts of Part 9C rules have been produced and circulated to the interested parties, or not? Certainly, implementation on 1 January 2022 does not fill me with enthusiasm. It is after Christmas and less than a month away, so I hope he will say that they have been produced, and when.
I am sure that my noble friend and all noble Lords would feel that there are some deficiencies in UK-retained law. I seek reassurance that we are confident that those deficiencies have been removed.
The other dimension I raise relates to paragraph 12.3. It will not surprise my noble friends that, once again, I feel very strongly about impact assessments and statements from Her Majesty’s Treasury that it considers that the net impact will be less than £5 million and very limited. Paragraph 14.1 says that
“the number of small businesses in scope is low.”
They may be small businesses, but they are important businesses to whoever is running them—and we are talking about financial firms.
It is always helpful to have a review of any legislation, particularly legislation relating to our coming out of the EU. That may not be proportionate in the judgment of the Treasury, but I do not know how many firms we are talking about. If my noble friend has that information, that will be helpful. I suppose that if we are talking of only three or four, that may be right, but I do not believe that that is the number—from my experience in the City, from some of the presentations we have recently had and, indeed, from some of the publicity about what is happening in the financial sector at the moment.
Is my noble friend absolutely confident that those firms do not want the SI reviewed after a period? If they all say no—that they do not want a review and are comfortable—fine, but my judgment is that, in life, it is helpful to have a review at some point.
My Lords, obviously I will not oppose this statutory instrument, but it raises a number of issues which need to be explored, and I shall look forward to the Minister’s response to our concerns. We raised these concerns during the passage of the Financial Services Act 2021, but they have not been alleviated.
The Act and this SI transfer significant power to set the UK rules on Basel III standards to the financial regulators accompanied by minimal parliamentary oversight. It is a crucial process and has a fundamental impact on financial stability, as it sets the capital and risk management requirements for banks and other financial institutions. The PRA and the FCA are expected to consult on their decisions, and parliamentarians can contribute to those consultations, but as no more than ordinary consultees, despite their responsibilities to the public, and can at best hope for a few comments on their points as part of the general response.
Committees of Parliament can question the PRA and FCA and undertake reports but, in practice, on only a handful of issues each year, so they are likely to be visited exceedingly rarely and probably only at a time of crisis, which is rather too late. Even the SIs offer no meaningful accountability, because they cannot be amended. This SI, with the powers it gives the regulators, will mean that the issues of Basel III, so crucial to our financial structure, will probably never again come before either this House or the other place, except through that committee arrangement, which is, as I said, pretty minimal. Perhaps the Minister will confirm that.
When we were members of the EU—I know mentioning that is not popular with the Government—basic Basel standards were implemented through EU law, where the process was open and accountable and as different as day from night from our current circumstance. Before the EU Commission proposed draft legislation, it held many conferences and public meetings involving parliamentarians; parliamentarians were engaged in briefings, expert evidence sessions and discussions with a wide range of relevant regulators and supervisory authorities; and the Economic and Monetary Affairs Committee would be involved in scrutinising the main directive and regulations by way of co-decision. With Brexit, the power has transferred from the EU, but the Government have chosen to do it in a way that essentially removes any meaningful democratic accountability. I should like to hear for the record why the Minister has chosen such a route.
I want to raise two narrow issues that are hanging loose. As part of setting Basel III standards, the PRA will determine MREL—the minimum requirement for own funds and eligible liabilities—and it will do so without any democratic oversight. MREL seeks to ensure that any bank failure can be resolved because the bank either has a very high level of capital or can bail in bonds to restore its capital position. Big banks can easily access the market for bail-in bonds, but mid-tier banks cannot, except at the most extortionate prices. The Bank of England has historically applied MREL to mid-tier banks, unlike its EU and US counterparts; that has been very much a UK decision. Late last year, the Bank of England started a review of MREL; I think it finally became aware that it was going to create major problems in the mid-tier market. Can the Minister please update us on what has happened with this review and where we now stand with MREL, particularly as regards mid-tier banks?
Lastly, during the passage of the Act that lies behind this SI, my noble friend Lord Oates and I moved amendments to get the PRA to seriously consider recognising the financial risk associated with stranded fossil fuel assets and to adjust capital requirements for the banks to reflect that risk. We were dismissed very casually. Now the PRA seems to be shifting its stance in its paper Climate-Related Financial Risk Management and the Role of Capital Requirements. Will the Minister please update us, as we have no other way of getting information? As I said, the effect of the Act and the SI is to remove any direct oversight of such issues from Parliament, except through the weak consultation and committee processes. As the one last opportunity, perhaps the Minister would inform us of where the status is today.
My Lords, I am grateful, as ever, to the Minister for introducing this latest set of Treasury regulations. These are not the first changes to arise from the Financial Services Act 2021, but this SI represents the biggest amendments to and revocation of the capital requirements regulation—the CRR—since that parent legislation passed. Many of the changes are to facilitate the implementation of certain Basel III standards from 1 January 2022. As the Minister and the Explanatory Memorandum noted, the UK played an active role in negotiating this reform package.
As we discussed at length during the passage of the parent Act, the Prudential Regulation Authority—the PRA—has taken responsibility for updating parts of the CRR through its regulatory rules. That such changes are being made at arm’s length might still rankle with some—the noble Baroness, Lady Kramer, reinforced that point—but that was the Treasury’s determination and it is the framework that we must operate under.
Other changes made by the instrument are designed to facilitate the implementation of the investment firms prudential regime—the IFPR—by the Financial Conduct Authority. That new system will ensure tailored regulation of non-systemic investment firms outside the scope of the CRR. The Explanatory Memorandum notes that although the FCA has introduced most of its IFPR rules, some more are required before the regime goes live on 1 January 2022. Can the Minister confirm whether these additional rules have been finalised and published since the SI and EM were laid? If not, does the FCA have an estimate of when they will emerge?
Could the Minister also outline what parliamentary engagement has been undertaken on the CRR and the IFPR reforms? Given the highly technical nature of these regulations and the various regulatory rules that must be read alongside them, is the Minister confident that everything is present and correct? This might at first glance feel like a trivial question but, as a veteran of dozens of EU exit SIs, it is vital that we have confidence in this process.
Moving on, the Treasury has, in its Explanatory Memorandum, pointed to the existence of accountability frameworks for the PRA and the FCA. However, in doing so, it neglected to mention the unease that has been expressed about this by several colleagues across your Lordships’ House. At the time, it was suggested that concerned colleagues may find comfort in the ongoing future regulatory framework review process. Some has indeed been found in the proposals outlined in measures 6 and 7 of Command Paper 548 to introduce statutory requirements for the PRA and FCA to notify relevant parliamentary committees of their consultations and provide written responses to any representations made. If adopted, these steps would mirror several of the key asks in our previous amendments. Nevertheless, as always, the devil will be in the detail. While it may not be strictly relevant to this SI, can the Minister outline the anticipated timescale for the review? When is the Treasury likely to come forward with the resulting legislation?
Another concern around CRR and IFPR rule-making was the extent to which the regulators would have regard to the steps needed to tackle the climate crisis. The Government eventually conceded that the PRA and the FCA should have regard to the 2050 net-zero target, but this requirement takes effect only on 1 January —that is, after most of the rules have been published and at the same time as they enter into force. Can the Minister outline what steps, if any, have been taken by the regulators to ensure that green issues have been considered as part of the current exercise, in so far as it is possible within the Basel III framework? Can he also explain how he envisages the new duty operating in practice? What kinds of regulatory changes would he expect to see as a result of that concession having been made?
There is a perception—I have outlined my concerns before—that while the Chancellor likes to talk green, he is somewhat less keen on acting accordingly. Many firms in the financial sector are cognisant of the need to make their business practices more sustainable. Some have acted as outriders, setting ambitious targets and creating interesting schemes for change. However, more needs to be done. A voluntary approach to things such as investment in fossil fuels will get us only so far. Some will do the right thing but others may see opportunities to gain competitive advantage. If, by the time we get to the next financial services Bill, these kinds of issues have not been adequately addressed by the PRA and FCA, can the Minister commit the Treasury to taking action?
Implementing Basel III and IFPR is one thing, and we do not oppose these regulations’ small part in delivering those reforms. However, meeting the challenges of the future is another matter and it is not yet clear that we are on the right course.
I thank noble Lords for their contributions today. Some important points have been raised during the debate. I will attempt to answer them but there may be one or two where I will have to write.
To start, my noble friend Lord Naseby asked about impact assessments. A de minimis impact assessment has been published alongside the instrument. As the equivalent annual net direct cost is less than £5 million, the only direct costs to businesses in scope of the instrument will be approximately £900,000. This is for provisions relating to the securitisation regulation.
Regarding the amendment to Article 2(12)(g) of the securitisation regulation, including all the FCA investment firms in scope of due diligence requirements, the net impact to firms is expected to be £900,000 per annum, based on the relevant firms investing in 20 securitisation positions per year. This figure represents the aggregate compliant costs for firms that are being brought within the scope of the due diligence requirements. This figure has been calculated from information provided by the FCA and industry; the calculation is based on the type of investment firms on which the amendment has an impact, the estimated number of such firms and the estimated cost of complying with the due diligence requirements.
The noble Baroness, Lady Kramer, asked about future regulatory reform and parliamentary oversight. The Government and the regulators are committed to ensuring that Parliament has the opportunities it needs to scrutinise the PRA’s rules and respond to anything raised. The Government consider that Parliament has a wide range of powers to request information and conduct effective scrutiny of the regulators, including through the Select Committee system. To support this work, the Government have proposed formalising through statute the mechanisms through which the regulators provide information to Parliament to ensure that it has the information it needs to undertake this scrutiny.
The noble Lord, Lord Tunnicliffe, asked me to outline what parliamentary engagement has been undertaken on both the CRR and IFPR reforms. Ultimately, it is Parliament that sets the regulators’ objectives. It is of course right that Parliament has an appropriate opportunity to scrutinise the work of the regulators and their effectiveness in delivering the objectives that Parliament has set them. The regulators committed to sending their consultations and draft rules on Basel and the IFPR to Parliament during the passage of the Financial Services Act earlier this year.
Consultation on these changes started in December 2020, so there has been plenty of time for Parliament to review and report on it, including through the Select Committee process. The PRA and the FCA also published their near-final rules over the summer to provide ample time for familiarisation well in advance of this debate. As part of the ongoing future regulatory reform, as I have mentioned, we have proposed formalising through statute the mechanism through which regulators provide information.
The noble Lord, Lord Tunnicliffe, and my noble friend Lord Naseby asked whether the detail of this instrument and the accompanying rules set by the regulators are present and correct. The answer is yes. Treasury officials have worked extensively with their counterparts at the regulators to ensure that the changes mesh and make a cohesive whole. Where appropriate, both the Treasury and the regulators have consulted on the measures implemented through this statutory instrument. The noble Lord and my noble friend also asked whether the IFPR rules have been finalised and published since the SI and EM were laid. I can confirm that the FCA has now published all the IFPR rules, including the final outstanding set of rules, which were published on 26 November.
I thank the noble Lord, Lord Tunnicliffe, for his assertion that two of the measures in the recent financial future regulatory framework review consultation provided him with some comfort on the question of the regulators’ accountability to Parliament. He also asked about the timescales of the review. The Government published their consultation on 9 November, with a closing date for responses of 9 February next year. We will bring forward further detail on our approach to implementing the proposals in the review in due course.
The noble Lord asked me to outline what steps, if any, have been taken by regulators to ensure that green issues have been considered as part of their rule-making processes. He is of course correct to say that the Financial Services Bill 2021—now an Act—was amended to include
“have regard to the net-zero carbon target”,
which will apply after 1 January next year. This means that the PRA does not need to have regard to climate change considerations in making the Basel III rules, nor the FCA in making the IFPR rules, for 1 January. This was done to ensure that there is no delay in implementing the Basel III and IFPR reforms. It will be for regulators to determine how the new duty will operate in practice. The Government anticipate that it will function in much the same way as other similar obligations did during the PRA’s implementation of the Basel III standards, such as the need to have regard to the ability of firms
“to continue to provide finance to businesses and consumers in the UK”.
The PRA and the FCA are aware of the need to respond to the potential risks posed by climate change. For example, on 28 October, the PRA published its second climate change adaptation report, finding that under the existing regulatory capital framework there is scope to use capital requirements to address certain aspects of climate-related financial risks. This and future work will no doubt feed into how the PRA sets its rule from 1 January 2022.
I assure the Committee that the Government are prioritising tackling climate change. In October, we published Greening Finance: A Roadmap to Sustainable Investing, setting out our long-term ambition to green the financial system and align it with the UK’s world-leading net-zero commitment. Among other things, the road map outlines measures that we are taking to tackle greenwashing and to implement a new green taxonomy.
I remind noble Lords of this instrument’s key purpose. In short, it enables the implementation of the Basel III standards, regulation that is key to the UK’s international standing. It also updates the new IFPR definitions and takes FCA investment firms out of scope of the UK resolution regime. Finally, it irons out some of the wrinkles of existing EU regulation. I shall write to the noble Baroness, Lady Kramer, with a copy for the House, on some technical questions that she raised. Together, these measures will give UK firms certainty over the final elements of the Basel III standards and the IFPR regimes. I commend this instrument to the Committee.
Terrorism Prevention and Investigation Measures Act 2011 (Continuation) Order 2021
Considered in Grand Committee
My Lords, I beg to move that the order, which provides for the continuation of the Secretary of State’s TPIM powers, or terrorism prevention and investigation measures, for a period of five years, be approved.
The Government take all necessary steps to protect the public. The threat we face from individuals and groups who wish us harm is significant and enduring. It is vital that we have the tools necessary to keep this country safe. It is right that our first response to terrorism-related activity should be to prosecute or deport those involved, but it is not always possible. That is why we continue to require the powers conferred on the office of the Home Secretary within the Terrorism Prevention and Investigation Measures Act 2011. Section 21(1) of the Act states that the Secretary of State’s TPIM powers will expire at the end of five years from the date the Act was passed. Due to the continuing threat to the UK from terrorism, and following consultation with the Independent Reviewer of Terrorism Legislation, the Investigatory Powers Commissioner and the director-general of the Security Service, there can be no doubt that TPIMs remain an essential component of our toolkit to manage the threat from terrorism.
The Act provides the Secretary of State with powers to impose a TPIM notice on an individual if the conditions set out in Section 3 of the Act are assessed by the Secretary of State to have been met: namely, that she reasonably believes that the individual is, or has been, involved in terrorism-related activity, and reasonably considers that it is necessary, for purposes connected with protecting members of the public from a risk of terrorism, to impose the measures on the individual.
In addition to the power to impose a TPIM notice, the Secretary of State has powers to extend and vary a TPIM notice that is in force, and to revive a TPIM notice that has been revoked. Since the introduction of the Act in 2011, 24 TPIMs have been imposed. As of the last published set of figures on 21 October, five TPIMs were in force. If the TPIM powers are not extended, these five dangerous individuals will be at large without any measures in place to reduce the risk they pose to the public. TPIMs are imposed as a tool of last resort, when the Security Service judges that there are no other means, or that a TPIM notice is the only satisfactory means, to manage that risk.
I shall now outline some of the background to TPIM powers for the Committee. TPIMs are civil preventive measures designed to manage the threat posed by individuals who cannot be prosecuted for a terrorism-related offence, or deported in the case of foreign nationals. There is no question that TPIMs are extraordinary measures. That is why the 2011 Act provides for broad judicial oversight, including a requirement for High Court permission to impose the measures, except in urgent cases where the notice must be immediately referred to the court for confirmation; an automatic review hearing in each case, unless the individual requests that the hearing be discontinued; and rights of appeal for the individual against the refusal of a request to revoke or vary a measure.
The TPIM legislation also places a duty on the Secretary of State to consult on the prospects of prosecuting an individual before measures may be imposed, and a duty to keep the necessity of measures under review while they are in force. The Counter-Terrorism and Sentencing Act 2021, which amended existing measures and introduced new TPIM measures, also reintroduced a requirement on the Independent Reviewer of Terrorism Legislation to publicly report on the operation of the TPIM Act.
The TPIM Act has been extended once, in 2016, by this House. Unless a new order is made under Section 21(2)(c), the powers in the Act will expire at midnight on 13 December this year. Just as was the case five years ago, it is absolutely essential that we have all the necessary powers to protect the public from terrorism-related activity. Having consulted as required by the Act, the Home Secretary has decided, due to the significant terrorist threat facing this country, to make this statutory instrument to provide for the continuation of TPIM powers for a further five-year period, which is the maximum allowable in the legislation.
It is essential that our counterterrorism strategy enables us to tackle the full spectrum of activity. TPIMs have been endorsed by the courts and successive Independent Reviewers of Terrorism Legislation, while the police and the Security Service believe that they have been effective in reducing the national security risk posed by those subject to the measures.
Our message is clear: we remain steadfast in our determination to defeat terrorism and we will take every necessary action to counter the threat from those who hate the values that we cherish. The safety and security of the public is our number one priority, and I commend the order to the Committee.
My Lords, here we are again: the five-yearly renewal of the TPIM scheme, which has been in place since 2006. I oppose these restrictive measures, which are an extrajudicial way of interfering with the rights and liberties of people who cannot be convicted of any crime.
I am curious to know whether the Home Office has explained to the Prime Minister that it is doing this. I ask because, while MP for Henley in 2005, Boris Johnson wrote of the Act in his Telegraph article of 10 March:
“It is a cynical attempt to pander to the many who”—
forgive my language here—
“think the world would be a better place if dangerous folk with dusky skins were just slammed away, and never mind a judicial proceeding; and, given the strength of this belief among good Tory folk, it is heroic of the Tories to oppose the Bill. We do so because the removal of this ancient freedom is not only unnecessary, but it is also a victory for terror.”
I hope that the Minister will at least pass this back to the Home Office to make sure that the Prime Minister is happy with this renewal. It must be so difficult for Ministers to do anything without Boris Johnson having opposed it somewhere at some point in the past; there is always an article somewhere that one can track down. Our Prime Minister is so very often so wrong, but on this rare occasion he was so right: it is heroic to oppose these measures, and the Greens in your Lordships’ House will register their opposition every five years when this continuation order comes round. I actually hope this will be the last time.
As Independent Reviewer of Terrorism Legislation in 2016, I had no hesitation in recommending the second renewal of TPIMs in that year. I share the Government’s view that TPIMs, although they involve a particularly severe deprivation of liberty and intrusion into private life, may be an appropriate tool for dealing with a small number of individuals who are believed to endanger the public but whom it is feasible neither to prosecute nor to deport.
However, close scrutiny of TPIMs is important, all the more so since the maximum duration of a TPIM was significantly increased by the Counter-Terrorism and Sentencing Act 2021. I am here to raise with the Minister one concerning development that has arisen since my time as independent reviewer: the refusal of legal aid to TPIM suspects who cannot afford to progress the automatic review of each TPIM that is provided for in Section 9 of the TPIM Act 2011.
Jonathan Hall QC, the current independent reviewer, reported to the Government in November 2020 that, in the previous year, three subjects of so-called light-touch TPIMs, known as JD, HB and HC, requested the court to discontinue the reviews in their cases and that
“the absence of funding was a factor”.
In each case, they had been refused legal aid. The independent reviewer’s report, published in March 2021, recommended that, subject of course to means, legal funding should swiftly be made available to TPIM subjects for the purpose of participating in Section 9 review hearings. Mr Hall informed me this afternoon that, more than eight months after publication, there has still been no response from the Home Office to this recommendation. Can the Minister say when a response will be provided?
In the hope that it may influence the substance of any response, which, I might add, I do not expect today, I shall make four points. First, on 12 October 2020, the Government wrote to the UN High Commissioner for Human Rights, defending the TPIM regime on the basis that, among other things,
“all TPIM subjects have an automatic right to have a court review the imposition of their TPIM and each of the measures imposed. This hearing also provides an opportunity for the subject to hear the national security case against them.”
I assume that in the last sentence the reference is to the gist of the national security case, which is now provided to the TPIM subject. It is plain from what I have said, and from what the independent reviewer has said, that there is, in reality, no automatic right to review and that there will be no such right for as long as legal aid is refused to TPIM subjects on grounds other than means.
Secondly, it would be unacceptable if funding were to be denied because of a misapprehension that a Section 9 review is a form of challenge that requires a TPIM subject to establish reasonable prospects of success. As the independent reviewer explains in his report, Section 9 review was designed not as an add-on but as an integral part of every TPIM. Furthermore, it is not feasible to apply a merits criterion to the grant of legal aid, because the requirements of national security mean that TPIM subjects do not know, and will never be told, the full reasons for the Secretary of State’s decision to impose a TPIM.
Thirdly, if the aim is to save money or a desire to avoid giving money to lawyers for suspected terrorists, that aim is not only misguided but likely to be counterproductive. The legal aid issue affects very few cases—just three in 2019, as I indicated—but is bound eventually to lead to prolonged litigation about the fairness of proceedings.
Fourthly, and finally, I ask the Minister to reflect that judicial consideration of TPIMs, and in particular light-touch TPIMs, can help MI5, CT policing and the Home Office to work out when future TPIMs will be proportionate and how much evidence will be required to support them. The courts have generally been very supportive of TPIMs, but if light-touch TPIMs, which I welcome in principle, are to go unreviewed because funding for review is not available, it will be more difficult to calibrate the effort that is required to achieve the measures that are judged appropriate. Light-touch TPIMs may, for example, impose a lower burden on the Government in exculpatory review, disclosure and witness evidence. Without review in the courts, we will never know.
The independent reviewer recorded in his last report that steps were being taken by Home Office, which is not itself responsible for funding decisions, to understand the reasons for the Legal Aid Agency’s decision-making. I hope that these steps have been fruitful and that the Home Office will soon be in a position to respond positively to the highly pertinent points made by the independent reviewer—points that illustrate not only the quality of the current reviewer but the considerable value of independent review in this area.
My Lords, I thank the Minister for introducing this statutory instrument. As she explained, the sunset clause means that every five years the TPIM powers need to be reviewed. I say in response to the noble Baroness, Lady Jones of Moulsecoomb, that we support the measures because they are necessary. I think she said that they are extrajudicial. Yes, there is no criminal trial in the way somebody who is deprived of their liberty would normally be subject to a criminal trial, but these proceedings are not extrajudicial in that they still have to be approved by the court; there is some sort of judicial involvement.
We support the measures, but it is essential that there are safeguards. As the noble Lord, Lord Anderson of Ipswich, said, the Government are, when challenged, citing defences of TPIMs that do not appear to be completely the case. If three subjects have abandoned their review, citing lack of funding for legal aid, clearly some of the safeguards are not being upheld.
The other issue is that, if the Government are citing to the UN body the fact that TPIM subjects will hear what the national security case is against them in those court proceedings, clearly that is not true either. TPIMs are usually for cases where the security services have intelligence on an individual but do not have evidence that they can present in open court, so it is very unlikely that a TPIM subject will hear what the national security case is against them. On the face of it, it sounds as if the Government are misrepresenting the safeguards that should be part and parcel of the TPIM process.
What worried me about the noble Baroness’s comments, which were very similar to those made by the Minister in the other place this morning, was that TPIMs are cited as being for cases where people cannot be prosecuted or deported. My understanding is that these terrorism prevention and investigation measures were intended as a stopgap while evidence was collected in order to prosecute the individual, not as a permanent replacement for prosecution.
There is a continual refrain: “Well, if we can’t deport or prosecute somebody then we’ll deprive them of their liberty on an almost permanent basis through TPIMs.” That strikes me as going against the sort of rights and freedoms that the noble Baroness said we need to protect through combating terrorism. We are almost taking away people’s rights and freedoms by the use of TPIMs in that way.
We have heard about some worrying developments from the noble Lord, Lord Anderson of Ipswich, about reviews, a crucial safeguard as part of TPIM measures, and we have heard about the apparent misrepresentation by the Government of what the safeguards are and how what the Government appear now to be using TPIMs for goes beyond what they were intended for when they were initially envisaged. We are clearly concerned about the safeguards, but not to the extent that we feel that TPIMs are not necessary in exceptional cases as a temporary measure. Bearing in mind that the Investigatory Powers Commissioner, the security services and the independent reviewer have been consulted and are content with the renewal of the use of this power for another five years, and despite those reservations, we support the continuation of TPIMs.
My Lords, I, too, thank the noble Baroness for introducing this statutory instrument, which has vital implications for our national security. It keeps our citizens, their families and our communities safe. We will not oppose the instrument, which renews the Secretary of State’s powers to impose, extend, vary and, where elapsed, revive a TPIM notice. This is a technical measure and is required every five years by the 2011 Act. It would be incomprehensible to let these powers elapse on 13 December.
TPIMs are a tool in an arsenal to combat terrorism. The TPIM system needs to be agile and robust to respond to the ever-changing terrorist threat. Individuals with no criminal conviction can have these exceptional measures applied against them. It follows that there need to be strong safeguards to balance the protection of our citizens with the rights of an individual to be treated within the law and in a human rights compliant manner.
Does the Minister believe that TPIMs are effective? As she said, there are five TPIMs in force as of this October. Does she believe that the resources necessary to properly administer them are in place? What impact have the recent changes had operationally? We have seen the impact of so-called lone-wolf terrorism tragically recently. The Labour Party has called on the Government to look at this specifically and to publish a review. How does a TPIM combat this type of lone-wolf terrorist threat?
I also ask the Minister about funding for community counterextremism projects and the recommendations of the Government’s own commission of experts, in particular the ISC proposals on precursor chemicals for explosives. My honourable friend Conor McGinn in the other place referred to the Government not following the recommendations of their own experts. I will widen the question: can the Minister say something about their use of experts? How do the Government believe outside experts can be best used to develop and implement a strategy to combat terrorism?
Today’s SI deals with the renewal of TPIM powers, but can the Minister say something about the Prevent scheme? It is concerning that referrals to the scheme have dropped to just below 5,000, which I understand is a 22% drop and a record low. What is the status of the independent review of Prevent and when does she expect it to be published?
I will pick up some of the points that noble Lords have made in this short debate. The noble Baroness, Lady Jones, quoted from an article by the Prime Minister in the Telegraph. She went on to express her hope that this is the last such debate. I agree with that sentiment. We all know that the Prime Minister sometimes uses colourful language to make strong points, but she agreed—I see that she is nodding her head—as I do, with what the Prime Minister said in that article. But I am not driven to the same conclusion as the noble Baroness. We need these measures and we need them now, which is why we support a renewal of this SI.
The noble Lord, Lord Anderson, is undoubtedly the most expert among us today. He raised four questions and I would be interested to hear the response to them, because I thought that they were very pertinent.
The noble Lord, Lord Paddick, put his questions succinctly and I will reiterate a couple of his points. My understanding of TPIMs agrees with his: they were not seen as a permanent replacement but as an intermediary step before prosecution, yet we see people being kept on this type of regime for long periods. The noble Lord, Lord Paddick, essentially also made the same point as that of the noble Lord, Lord Anderson, about the safeguards not being properly funded, so that, for example, it is not possible for people to take advantage of legal aid to review the TPIMs on them. I thought that the questions from the two noble Lords were important and the Government need to answer them.
My Lords, I thank all Members of the Committee who have spoken in today’s debate. First, I will correct the noble Baroness, Lady Jones of Moulsecoomb: the TPIMs have been in place not since 2006 but since 2011, I understand, so this is their 10-year anniversary. But I will certainly pass the noble Baroness’s point to the Home Office.
The noble Lord, Lord Anderson, asked me a few questions, but his main thrust was on legal aid. He outlined the opinion of Jonathan Hall QC on this. I can confirm that he has raised those concerns and that the Government will respond to both the 2019 and the 2020 reports shortly. It is for the Legal Aid Agency to assess any application for legal aid for a TPIM review and its decisions are made independently of government, in accordance with the legislative framework, but I do not think that that was the noble Lord’s point—I will get on to that. It is right that both means and merits tests are applied to all applicants for TPIM reviews to ensure that the legal aid scheme meets its dual objective of targeting funding at those who need it most and providing value for money for the taxpayer.
To that end, the noble Lord, Lord Anderson, asked a specific question on people who do not know what the case against them is—therefore, how can they respond? The merits test is a key part of the legal aid scheme. The Legal Aid Agency applies the merits criteria on the open evidence alone and there are provisions to help applicants where it is difficult to establish prospects, so closed evidence should not disadvantage applicants from satisfying the merits test.
The Home Office keeps the prospects of prosecution under review and each case is regularly reviewed. TPIMs can be imposed for a set time period only and people are not kept on them indefinitely.
It is quarterly. I turn to the review of Prevent. Sorry, I did not quite finish the previous point. As to the effectiveness of resources, clearly, I cannot comment on individual cases. I can, however, assure the Committee that they have the support of the police and of the Security Service. Successive courts have ruled that TPIMs are lawful and effective tools for managing individuals engaged in terrorism. The Home Office is confident that the TPIM regime is fully resourced to manage any number of TPIMs, although they are few in number. The review of Prevent will be laid in the Houses of Parliament by 31 December.
I thought the question from the noble Lord, Lord Ponsonby, about lone wolf terrorism was very pertinent. We are seeing increasing numbers of lone actors. How can TPIMs help? If a lone actor is not on the radar, it is very difficult to pre-empt what that person will do. The intelligence that our various agencies have is there to help identify people who may be vulnerable to such acts. The TPIM is threat-agnostic, and goes across a range of threats.
How can we best use external experts? I have spoken to a number in the field not just of counterterrorism but of counterextremism. The noble Lord was pointing towards this. Our current independent reviewer of Prevent is clearly an expert in his field. We are lucky to have the experts we do, giving advice to the Home Office and the Government. I think I have answered all questions.
I am grateful to the Minister. The noble Lord, Lord Anderson of Ipswich, raised a couple of issues. He suggested that the Government had justified the TPIM regime on two bases. The first is that reviews take place. Whether this is an independent decision by the Legal Aid Agency or not, we have heard that people are abandoning their reviews because they are not being funded for legal representation. Presumably they feel it is a waste of time unless they have representation. Secondly, they say that these hearings give the subject the opportunity to hear the national security case against them. Clearly, the TPIM subject does not hear the national security case in court. Perhaps there is a hint of what might lie behind it, but they do not hear the case. The Minister did not answer those particular questions. Perhaps she could write to noble Lords.
Coronavirus Act 2020 (Early Expiry) (No. 2) Regulations 2021
Considered in Grand Committee
Before I call the Minister, I must inform the Committee that the noble Baroness, Lady Brinton, will take part remotely so I will call the Lib Dem response at the appropriate time.
My Lords, the Coronavirus Act has been a central part of the Government’s response to Covid-19. It includes powers to bolster the health and social care workforce through the temporary registration of practitioners. More than 13,000 social workers and 28,000 nurses, midwives, paramedics, operating department practitioners, radiographers and other professionals have joined the temporary registers. This continues to provide extra resilience for our health and social care sector during these uncertain times. It also demonstrates the commitment and determination of our fantastic health and social care professionals.
The Act includes powers to ensure that critical functions in society are able to continue throughout the pandemic. For example, it has allowed virtual court hearings to take place in a wider range of circumstances. The Government plan to secure some of these powers in alternative primary legislation. The Act also includes powers that have enabled the Government to provide vital support to people and businesses, including provisions for statutory sick pay for Covid-19-related absences; the Coronavirus Job Retention Scheme, which has supported 11.7 million jobs; and the Self-employment Income Support Scheme, which supported almost 3 million self-employed individuals.
The Coronavirus Act has been a critical part of the Government’s response to the pandemic, but I acknowledge that some noble Lords are concerned about some of the powers in it. I assure them that the Government have sought to use the powers in an appropriate and proportionate way. There are arrangements in place to ensure accountability, including regular opportunities for parliamentary scrutiny; this accountability is vital. I am grateful to noble Lords, my honourable friends in the other place and the Joint Committee on Statutory Instruments, whose welcome review of our draft instruments continues to ensure their accuracy.
We will continue to review the powers in the Act and are committed to ensuring that emergency powers remain in place for only as long as they are necessary. The most recent six-month review of the Act in September identified seven provisions, and parts of an eighth, that could be expired. Once approved, Parliament will have expired half of the original 40 temporary, non-devolved powers in the Act ahead of schedule.
The regulations that we are debating today expire some of the most controversial provisions in the Act, including the powers under Schedule 21, relating to potentially infectious persons, and Schedule 22, giving powers “to issue directions relating to events, gatherings and premises”. The regulations also expire other powers that are no longer needed, such as those under Section 23 enabling the variation of “Time limits in relation to urgent warrants” under the Investigatory Powers Act and Section 56 powers related to “Live links in magistrates’ court appeals” in certain situations, as well as powers under Section 37 and parts of Section 38 relating to the education and childcare sectors. We are also expiring Sections 77 and 78, which were time-limited powers in the Act, and a further provision on behalf of Northern Ireland.
Expiring these provisions is an important milestone. It is possible only because of the significant progress that we have made so far in our fight against the virus, but we have continued to be clear that the pandemic is not yet over. The Government believe that the remaining provisions in the Act are important to continue to support the response to Covid- 19 over the coming months. Everyone should continue to do their bit to keep themselves and others safe as we tackle the winter months ahead, so let us encourage everyone to get their first, second and booster doses, when eligible. It is not too late for those who have not yet received their first or second doses to get them and we urge them to come forward. We also urge everyone to continue to wash their hands, to ventilate indoor spaces, to wear masks where mandated—but even where not mandated, if appropriate—and to stay home when they feel unwell.
We are conscious of how hard the pandemic has been for so many people and we are grateful to everyone who has made sacrifices. We are grateful for the dedication and determination of individuals and communities across our great nation and to all those who have worked so hard in the fight against Covid-19.
My Lords, I welcome the opportunity to debate the provisions in the regulations before us and I congratulate my noble friend on bringing them forward. I thank him for the meeting that I had in the last 10 days with him and his team, which was most useful. I endorse enthusiastically his invitation for those who have not yet been vaccinated to come forward. This would be an opportunity to ask where we are, particularly with those under 18. Have they had their second vaccinations and at what age will the vaccine programme be rolled out?
I remind the Committee of my interest as an adviser to the Dispensing Doctors’ Association, which may or may not pertain to the comments that I make this afternoon. I seek my noble friend’s guidance on whether one area that I am particularly interested in, as I know are all general practitioners, is covered in the provisions before us. If it is not, can he write to me? I understand that one of the reasons why GPs are unable to have as many face-to-face appointments as they would wish is that they have been constrained by the regulations passed by both Houses of Parliament. I cannot remember whether the provision was in the original Act or in supplementary regulations in the form of statutory instruments that we have adopted. However, I understand that specific regulations regarding the square footage or meterage of a waiting room were set out at the beginning of the pandemic, limiting the number of patients who could be accommodated in person in a waiting room during the pandemic. I think that it was the same for dental practices.
Are these provisions still in place? If they are not part of these regulations, I would be grateful if my noble friend could write to me. It could be extremely important to advise the public that that is why doctors are not able to see as many patients physically as they would wish to do. I am sure that the regulations were brought in for good reasons—that we should not be mixing and should be masking and that we should respect the ventilation to which my noble friend referred, while self-distancing—but it is important that patients understand the constraints under which general practitioners have to operate.
To turn to the specific remit of the regulations before us, my noble friend just stated, and I think that it is on page 5 of the Explanatory Memorandum, that the Government are minded to expire and lift the regulations relating to the power in Schedule 22
“to provide powers to issue directions relating to events, gatherings and premises in England and Northern Ireland respectively.”
With the greatest respect, mindful of the fact that we might have difficulties once we know more about the omicron variant, is this the right time to be lifting those restrictions? Can my noble friend put my mind at rest that powers exist elsewhere, either in subsequent regulations or still in the original Act? It seems a little premature to be expiring those provisions at this time.
Regulation 3 is on the operation of the working tax credits, as on page 5 of the EM, and I am delighted that that was addressed by the Chancellor of the Exchequer in the Budget and spending review. However, it would be helpful to know whether the figures that the Chancellor announced then will amount to a similar amount to what would have been received as a £20 top-up to those claimants of universal credit. Is it the same amount that can be claimed? Will they have to apply for it separately? What concerned a lot of colleagues both in your Lordships’ House and the other place was the neatness: that it was universally applied to all those on universal credit whereas, if I understand it correctly, what was announced by the Chancellor has to be applied for separately. Therefore, it is not automatic and not universal to those in receipt of universal credit.
My final point relates to Regulation 5, as on page 6 of the EM, which concerns local authority meetings. I think that it refers to Section 78 in the original Act. It states that the provision
“enabled all local authority meetings held before 7 May”
to be held remotely, but that was time-limited and no longer operable. It has been put to me by a friend who is a councillor in North Yorkshire that there may be instances where councils may wish to continue to meet remotely. I think in particular of the weather conditions —we still have no power in a great many parts of North Yorkshire, which is unbelievable, but obviously due to Storm Arwen. Is my understanding correct that they can continue to meet remotely if they wish and that that power will remain, so I can advise my friend and councillor in North Yorkshire, and others who are concerned, that that is the case? If so, it would be helpful to know under what authority they can continue to meet remotely. It just seems common sense that we keep that power in place. With those few remarks, I welcome the regulations.
My Lords, the noble Baroness, Lady Brinton, is taking part remotely. Can we beam her in?
My Lords, this is beginning to have the feeling of “Star Trek”, which is certainly not my intention. Thank you, Deputy Chairman. I declare my interest as a vice-president of the Local Government Association.
From these Benches, we will not oppose the expiry of these 12 provisions, although we have some comments on them. It was really good to hear the Minister outline the “hands, face, space” guidance, readopted in the past couple of days. Will there be a public communications campaign to reinforce it because, sadly, I suspect that not many people will have heard it in Grand Committee today in Parliament, let alone in the outside world?
Yesterday, in the Statement repeat, we debated masks and self-isolation; we will do so again tomorrow when we look at the SIs. On vaccination, it was good to hear the Prime Minister and the Secretary of State refer to the clinically extremely vulnerable in this afternoon’s press conference. I promise the Minister that I will not repeat all the questions I asked him yesterday, but not one of them has yet been answered. Delivering either the fourth, or a booster, jab for 3.7 million clinically extremely vulnerable people will not work effectively without clearer information systems on exactly who the CEV are and which jab they should get; there is still a lot of uncertainty there. I thank the Minister for his offer of a meeting during yesterday’s Statement. With today’s announcement, vaccination is becoming urgent; I look forward to hearing from him shortly about when it can happen.
From these Benches, we want to make a brief comment on the assessments for local authority care and support. I note that the Explanatory Memorandum says that only
“eight local authorities used these powers between April 2020 and June 2020. No local authorities in England have used them after 29 June 2020.”
That is good to hear, but it is evident that assessments are still happening very slowly. It is one of the problems that hospital trusts across the country are facing, with people in beds awaiting an assessment. Some of that is much more about workforce availability, both in the NHS and in the local authority system, than about the arrangements to reduce these assessments.
Reference has already been made to local authorities having virtual meetings. Members from these Benches and others objected when the Secretary of State decided that all local authority meetings had to cease being virtual in January this year. It has meant that a number of councillors have been unable to attend their council meetings through no fault of their own. If the Lords can have a handful of people contributing virtually, and with cases going up and certain areas having problems, is it possible to return to virtual meetings and leave the matter as a choice for the local authority concerned?
I note that the Explanatory Memorandum says:
“This instrument does not relate to withdrawal from the European Union/trigger the statement requirements under the European Union (Withdrawal) Act 2018.”
However, it is only fair to point out that Section 25 gives early expiration to the power to require information relating to food supply chains to avoid serious disruption. In principle, we do not have a problem with that as a provision during the pandemic, but I say to the Minister: that statement may be true in treaty and UK legislation terms but, as we face this Christmas, there are increasing concerns about disruption to food supply chains, for three reasons.
One is a direct consequence of Brexit. European providers of food and many other products have significantly reduced or stopped exporting to the UK because of the complex, slow and, for both exporter and importer, expensive costs now that we are outside the European Union. Since Brexit, the reduction in the number of EU abattoir workers—as they leave the UK—has meant, this week and for the past month, thousands of pigs and other livestock being culled but not brought into the food chain. Worse, the increase in avian flu cases and the restrictions placed on all poultry farms mean that there are concerns about the supply of birds for the Christmas dinner table. Thirdly, there is a delay in foods and other goods coming in from around the world as a result of the pandemic. This is what one might describe as a perfect storm. Is the Minister confident that, given all these factors as well as trying to manage omicron in its early stages, it is appropriate to expire this particular provision?
We accept the expiry of emergency volunteering leave and compensation for emergency volunteers, although I do want to comment on the problems with the Bring Back Staff scheme, especially for doctors and some nurses. It was absolutely fine in principle, until it hit human resources in trusts. I know of two doctors who had recently retired and were kept hanging around for five months. One was a doctor teaching trainee doctors; however, she was unable to be used because the system just made it impossible for her. If there is any cause to reintroduce this particular provision, will the Minister ensure that we do not gold-plate the complex HR arrangements, making it impossible for staff, former staff or those who might come back on a temporary basis to do so?
We do not believe that the extension of time limits for retention of fingerprints and DNA should remain. We objected to that a year ago, when it was brought in.
Finally, I wrote to the Minister earlier today with real concerns about the problems that some returning international travellers are facing, following the new regulations that came into force at 4 am today, arising from concern over omicron. This is a logistical problem with the change from lateral flow to PCR tests and the passenger locator form. As of this morning, it was still possible to put only the details of your lateral flow test on to the passenger locator form, not the arrangements for the PCR test. One cruise company has 700 people coming into a UK port tomorrow and, despite talking to officials, it cannot get a sense of how the passengers will be able to get off if their details are not on the passenger locator form. I hope another method has been found, otherwise this may be a bit of a problem.
It is right that the Government made the provisions we face today, even if we do not agree with all of them. But I say to the Minister that, as with other statutory instruments, holding on to some of these provisions for a little longer, even if unused, might be useful in case the pandemic takes us down a course that not one of us wants, as the Government and other public services might need to call on them at short notice.
My Lords, I thank the Minister for his most helpful introduction to these regulations, which we will not be opposing. As he acknowledged, when the original Act came into force, we were in extraordinary times and they required unprecedented legislation. However, as time moves on and experience and circumstances change, it is right that we seek to remove powers that are no longer needed. The move to do so today is welcome because, in those circumstances, such provisions should not remain in statute.
Examples of those include Section 56 and Schedule 26 powers relating to magistrates’ courts; Part 1 of Schedule 16, which provides for the temporary closure of education and childcare settings, and was not used; and Section 78 powers around local authority meetings, which need to go because the provisions are simply out of date. On this, I add my voice to a point I made previously in Grand Committee: as the Minister has heard from noble Lords today, surely how a local authority meeting is conducted must be the responsibility of the local authority itself. In the case of these regulations, I accept that the provision is out of date, but perhaps the Minister will apply his consideration to that more general point. The provision of powers to detain infectious people was particularly controversial and it is right that it is removed, having been used only 10 times, the last being October last year.
I will raise a few points with the Minister and I first emphasise the need for clarity of communication from the Government. With that in mind, I refer to the comments of Dr Jenny Harries, the head of the UK Health Security Agency, which she made on BBC Radio 4’s “Today” programme. She said:
“If we all decrease our social contacts a little bit, actually that helps to keep the variant at bay”.
However, a spokesperson for Prime Minister Boris Johnson said that he does not share her view. I understand that the Government have sought to reassure the public that they have no plans to tell people to limit their social contacts with others, which is in direct contrast to the view of this leading medical expert. I would be extremely grateful if the Minister could clear this up for us today.
Secondly, it does not seem so long ago that we were discussing the very matter of face masks in Grand Committee—I know it has come up many times in the Chamber. From these Benches we have repeatedly said that we are of the view that mask wearing should be continued and enforced, so it is welcome to see changes now in this regard, but why are shops and transport the only areas where we, the public, are required to wear face masks? One can be in a theatre, for example, a conference or some other large social gathering in even greater numbers and closer together than one might ever be in a shop or on transport, so I find myself once again seeking some advice from the Minister. I ask him to review this because, as we know, mask wearing is a major contributor to protecting everybody. Further on this point, how will it be enforced and how will compliance be encouraged?
The third area I would like to raise with the Minister is the end of the uprating of working tax credits and disregards corresponding to the universal credit £20 uplift. Does the Minister appreciate the financial pressures that many households live with, as reflected in the increasing use of food banks? Further to this, I note that there is no impact assessment. What assessment has been made of the number of households that will be affected by taking away the uplift of universal credit? What assessment has been made of the financial extent to which those households will be affected? What effect will that change have on levelling up—or, as appears to be the case here, levelling down?
The Explanatory Note suggests that the uprating of benefits was linked to supporting people at a time of unprecedented circumstances. However, one thing that the pandemic highlighted is that those most in need are struggling with incomes that are simply too low, pandemic or no, and it is this that needs addressing. The regulations may turn off the power to increase levels of benefit payment, but they cannot turn off the reality that many will go back to being unable to make ends meet, with all the inequalities that follow from that. I look forward to the Minister’s response to these points.
I start by thanking all noble Lords for their contributions to this important debate and for continuing to ask questions to hold us to account. The Coronavirus Act has been fundamental to facilitating the Government’s response to the pandemic, supporting individuals, our healthcare, our public services and our businesses. We see expiring a further seven provisions of the Act as a significant milestone towards winding down the emergency powers. To be clear, the Government retain only those powers seen as critical to the ongoing response and recovery, and I thank noble Lords for their general support for that principle, but we will continue to review every aspect of coronavirus legislation.
I now turn to some of the points made by noble Lords this afternoon. First, why are we making some of these changes now, given what happened over the weekend? In reality, a thorough, in-depth review of all the provisions was conducted in September. The provisions we expire today are seen as no longer needed, as we have explained. The provisions that give the Secretary of State the power to prohibit or restrict events and gatherings have been dropped, but most legal restrictions to date have been achieved under the Public Health (Control of Disease) Act 1984. Some of these additional powers are not required because the Government assess them as appropriate to expire, but they can also respond under that Act to increase our vigilance and restrictions in response to coronavirus and any possible variants.
A number of noble Lords raised concerns about the expiry of Section 77 on the uprating of working tax credits. Throughout the crisis, the Government have sought to protect people’s jobs and livelihoods, and to support businesses and public services. The Government have always been clear that the £20 increase was a temporary measure to support the households most affected, that it was time-limited and that it can no longer be used because it related to the 2020-21 tax year.
During the recent Budget, the Chancellor announced that, since the restrictions have been lifted, economic growth has exceeded expectations and the labour market is recovering strongly. The Government are now focusing on supporting people to move into and progress back to work, including the Plan for Jobs to help people move into employment so that they can get a regular wage. Also, workers leaving the furlough scheme and unemployed people over the age of 50 will be helped back into work as part of the more than £500 million expansion of the Government’s Plan for Jobs. Those on the lowest wages will also be helped to progress their careers, and existing schemes targeting young people will be extended into next year. On balance, it was considered appropriate to try to help those who genuinely want to get back to work.
Also, one of the struggles for any temporary government measure is, as I think Ronald Reagan once said, that there is nothing more permanent than a temporary government measure. We have to be aware that, whatever you do temporarily, there will be concerns when a temporary measure comes to an end. Frankly, I expect we will see that in a couple of years’ time when we reassign the uplift back to social care, given that we have given it to the NHS temporarily to help tackle the backlog. I imagine that in a few years’ time the Government will be accused of making cuts, even though we made it clear that it was temporary to help the backlog. We want to focus it mostly on social care.
A number of noble Lords raised points about Covid-19 vaccines. As many noble Lords will recognise, we stepped up yesterday in response to the variant. So far, the NHS has administered more than 17.5 million booster or third doses in the UK. Almost 51 million over-12s in the UK have now received at least one vaccine dose and 46 million have had at least two doses. The line that we continue to say is that it is important that people get jabbed.
Yesterday, the Joint Committee on Vaccination and Immunisation updated its guidance, which the Government accepted, that booster vaccination eligibility should be extended to all adults aged 18 to 39 years, as well as to severely immunosuppressed individuals who have received three primary doses. We will continue to ask and to campaign. The general campaign reaches lots of the people who have already had their vaccines, but we are looking at more targeted ways to make sure that people recognise that it is never too late. If you have not had your first or second jab, do not think that it is too late. You can still do so. There is plenty of opportunity to do so. Do not feel that you have been ignored. We are also working with a number of civil society organisations at a local community level. I thank noble Lords across the Committee who have given advice on how we can reach some of those hard- to-reach demographics. In some ways, it is a more targeted approach to spend that effort making sure that people are vaccinated, rather than on a message that reaches lots of people, many of whom say, “Why is that aimed at me? I’ve already been vaccinated and I’ve told my family”.
Local authority meetings were raised by a number of noble Lords. The Department for Levelling Up, Housing and Communities launched a call for evidence on 25 March to gather views and inform a longer-term decision about whether to make express provision for councils to meet remotely on a permanent basis. That consultation has closed and the department is considering responses to it. I hear and understand the point very strongly that these decisions really should be left to local authorities. I will definitely take that back, because it is important when we are talking about devolving power to the most local level. I hear that message strongly and understand the concerns.
There are many other meetings which are not main meetings where councillors have been able to participate virtually as well as in person. Not all decisions are taken in full council or in local authority committees. A lot are delegated. The problem is that any permanent change would require primary legislation. The Department for Levelling Up, Housing and Communities is looking at this.
I was asked why the changes are expiring now, given what happened over the weekend. We think that the powers that have been retained are sufficient to ensure that we can respond, for example, to omicron and other variants. Some civil libertarians would say that these powers are still too much. The other powers which are expiring are not necessary for us to be able to continue to respond.
I thank the noble Baroness, Lady Brinton, for giving me notice of her question about people who are waiting for lateral flow tests to come back. I immediately raised that in my department. I have been trying to get an answer as quickly as possible. I had hoped to have it in time for this afternoon’s debate. I apologise that I do not have it yet. I will write to the noble Baroness on that specific issue. As she said, it is urgent to get this information as quickly as possible. I have impressed that on my department.
The noble Baroness also raised the issue of doctors who are kept hanging around for months. I note what she said and will raise it within my department. It is always helpful when noble Lords raise issues with me. They enable me to take them back to the department. If noble Lords raise an issue that has previously been raised, it emphasises its importance.
There were a number of questions about face coverings. Many noble Lords clearly feel that they make a difference. I wear one, partly because I think we should be sending this message anyway, but also because it is not too much of an imposition. It is not too much to ask. I do not see that my individual liberties are being impinged or affected by wearing a face mask in public. The advice we receive from a range of scientists balances political, social and economic needs with health care. With some of the restrictions we introduced previously, there have been concerns about their impact on mental health. We always try to keep a balance. We listen to a range of experts. I have listed a number of them in the past, including the UKHSA and others. Some have chosen to express their own view, but we have always been clear that we listen to a range of views.
There are issues about masks in indoor spaces. It is quite right that they should be worn on public transport and in shops. I asked a few experts today about why they should not be worn in restaurants. The answer was that, in a restaurant, you are continually taking off and putting on your mask. There was a concern that, touching it and having breathed on it, it could lead to a greater chance of transmission. In a shop, the situation is fairly constant. You go in with the mask on, keep it on and come out. In a restaurant, you are taking it off and putting it on. One of the other concerns was about balancing social mixing and economic impact. It is still up to individual establishments. Noble Lords will be aware that some establishments have decided that they will continue to insist that their customers wear masks. Frankly, in some ways, that is an appropriate level. It is about property rights. It is up to them whom they let in. It is a difficult balance. Given that some people think that continually taking a mask on and off and walking around may make things worse, on balance, it has been decided not to extend mask-wearing to restaurants. We continue to review all the advice.
I know noble Lords were asking for more restrictions and for face masks to be used more earlier on. We never ruled that out; what we said was that there was sufficient evidence to suggest it, or there was sufficient consensus among all our advisers, we would move that way. There is clearly quite a lot of consensus on face masks in shops and on public transport, but not yet in other places. This is why we have been clear.
I am trying to think if I have missed any of the questions. If I have, I apologise to noble Lords. I will make sure that we go through the transcript—
Before we go off the issue of face masks, I appreciate the explanation about restaurants, but my question was about large gatherings—for example, cinemas, theatres and conferences, to name but a few. The explanation about restaurants does not apply there. I hope the Minister will take this back as it is simply a question of where is the logic regarding the venue. It seems to make no difference; it is about the fact of there being a number of people.
The real point I would re-put to the Minister, which links with that, is my question about the comments of Dr Jenny Harries on Radio 4. She said that we should decrease our social contacts, whereas the spokesperson for the Prime Minister says that we will not be doing that. I am very concerned about mixed messaging, as I am sure the Minister is—I know he is from what he has said. It would be extremely helpful to put on the record where we are on whether decreasing social contact makes a difference.
I apologise if I was not clearer before. I thank the noble Baroness for taking advantage of the opportunity to ask that question and finding the urge to do so irresistible. On theatres and cinemas, one of the things that was put to us was that in a restaurant, you are constantly taking a mask on and off, whereas in a cinema or theatre you are not really eating that much. Okay, you might well go to buy your ice cream—I do not know whether they still sell ice cream and jelly babies in theatres, or whatever it used to be; this will look very odd in Hansard when someone reads it—but you are not constantly doing and you are more or less constantly wearing your mask. However, I will take that back. It is a fair point, and one thing that I do when I am being briefed is to challenge because I know that noble Lords will rightly challenge me on this issue.
In response to the comments by Jenny Harries, I hope I have been clear that we take advice from a range of advisers and there is not yet consensus, but we have been relying not just on making mask mandatory when necessary as a precaution, but at the same time on people’s individual behaviour and them acting responsibly. It is about getting that balance right. We listen to Dr Jenny Harries, but she is one of a number of experts whom we listen to. We weigh up the different views; it is as simple as that. As we have been clear, there is no one trigger for any of these measures. We always consider a range of measures, including capacity in the NHS, the trends et cetera. I have listed them in previous debates. It is not one person whom we listen to. We listen to a range of experts.
Will my noble friend undertake to write to me about waiting facilities in GP waiting rooms? That would be helpful. I am also prompted by a question that I do not think he responded to from the noble Baroness, Lady Brinton, on the welfare aspects of staff shortages in meat-processing plants and the massive cull of pigs. While I appreciate it might not be the direct responsibility of his department, this is an animal welfare disaster about to happen.
One thing that I did not like to raise—I am sure it will go no further than the Grand Committee, which is why I feel confident to raise it now—is that my noble friend will be aware that there is PPE equipment which was deemed not fit for use, but it is in the system and is, to a certain extent, clogging up the supply chain by taking space which should be used for other goods. Will he undertake to use his good offices to look into this? Perhaps we could have a word about it afterwards because it is contributing to shortages and delays in the supply chain, particularly in storage terms.
First, I apologise for missing that point earlier. Regarding the supply chain provision, an SI was laid under the draft affirmative procedure on 21 April 2021. It was debated and approved by both Houses, came into force on 16 July and expired the provision. As the noble Baroness rightly acknowledged, some of her questioning was not within the scope of these regulations. However, given that she has asked a question, I will endeavour to find out the answer. Clearly, that will include going across departments, so I hope that she will be patient as I try to get that answer as quickly as possible.
On GP access, we recognise the pressure that general practitioners are under, especially in the upcoming and challenging winter period. We are investing £250 million in the winter access fund to improve GPs’ practice capacity. I will take the noble Baroness’s specific question about square metres and areas back to be answered; I hope she understands that I do not have those facts to mind.
The issue of measures was also raised. We must remember that one of the counterpoints put is that the country is in a very different position to the one it was in last year, due to the vaccination programme. Some of the restrictions that might have seemed appropriate last year are not as appropriate this year because we have reduced the link between cases and hospitalisations, as well as between hospitalisations and deaths. Clearly, we have the vaccine. I am sorry if I sound like a broken record but we continue to push the vaccine because it helps to break that link; it is part of the reason why we will not have to go back to some of the restrictions—those similar to last year’s—that many noble Lords are pushing for.
All I will say is that the Government’s autumn and winter plan set out how we will sustain and strengthen some of the progress made so far. We all know that winter will be a challenging period, but more so over the next few months. We all have a role to play in fighting the virus. There is much that government can do but sometimes, even when we mandate things, we know that there will be people who do not obey, so we must get the balance right and decide how to get the appropriate enforcement. Together, we believe that we can protect the progress that we have made, protect the NHS in the months ahead and help friends, loved ones and ourselves by being vaccinated against Covid-19, getting a flu jab if eligible and sticking to the advice on how to keep safe.
I thank noble Lords for their contributions to this debate and previous ones on the Coronavirus Act; I also thank them in advance for future contributions. I welcome noble Lords’ expertise and contributions, and I commend the regulations to the Committee.
Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021
Considered in Grand Committee
My Lords, I beg to move that these draft regulations, which were laid before the House on 28 October 2021, be approved. These regulations will amend the Companies Act 2006 to require certain publicly quoted and large private companies to include disclosures in their annual reports of climate change-related risks and opportunities material to them, aligned with the international framework of the Task Force on Climate-related Financial Disclosures; I shall refer to it as the TCFD in future.
This TCFD SI will help to deliver on the Government’s commitment to make climate-related financial disclosures mandatory across the economy by 2025, with a significant portion of those mandatory requirements in place by 2023. This commitment was set out in the Government’s paper, A Roadmap towards Mandatory Climate-Related Disclosures, published in November last year. The Government have made it clear that we view action to address climate change as a priority. Internationally, we are taking a leading role to promote action through our presidency of the Conference of the Parties to the UN Framework Convention on Climate Change— or COP.
Domestically, we are working to ensure that the UK achieves net-zero greenhouse gas emissions by 2050. The Government have published our net-zero strategy, setting out the measures to transition to a green and sustainable future. Transparency from businesses about climate risks and opportunities is key to delivering our net-zero ambition. Without an accurate assessment of climate risk by companies, it will be impossible for them to assess what action is needed to address this. That is why this instrument will require the UK’s largest companies to assess, disclose and take actions to manage climate-related risks and opportunities. This information should be a key part of all investment decisions and be taken into account in the strategy of every business.
Some large UK companies are, of course, already reporting on climate risks. However, to date, these disclosures have been variable in quality and quantity. This inconsistency makes it incredibly difficult for investors to compare investment opportunities and risks across companies, let alone across different markets. Many organisations are also not making the fuller disclosures needed to inform business risk and investment decisions.
The Government have already introduced regulations to require climate disclosures from occupational pension schemes through the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021, which were approved by both Houses and entered into force on 1 October this year. The Financial Conduct Authority has introduced TCFD-aligned disclosures for premium listed companies and recently conducted a consultation on extending this to standard listed companies.
Let me take a moment to talk through what these regulations actually do. The instrument will require companies in scope to assess and make specific climate-related disclosures in respect of governance, strategy, risk management, and metrics and targets. These headings broadly reflect the TCFD’s four-pillar approach to reporting. These requirements will apply to all PIEs—public interest entities—and companies traded on the Alternative Investment Market of the London Stock Exchange with over 500 employees. They will also apply to private companies with over 500 employees and over £500 million of turnover. The disclosure requirements will commence for accounting periods starting on or after 6 April 2022. My department will prepare non-binding guidance to help companies that fall into scope. This will provide additional information to help companies understand the requirements and improve disclosures.
The Government consulted on the policy in these regulations between March and May this year. The consultation generated 137 responses from a range of companies, financial institutions, civil society organisations, trade associations and accountancy firms. Officials also participated in three online events to try to engage wider audiences. Overall, the policy proposals received wide support.
The consultation led to two policy changes in response to the feedback that was received. First, to simplify reporting for those companies that are also subject to FCA rules, the regulations’ wording is now more closely aligned to that of the climate-related financial disclosures within the TCFD’s framework. Secondly, respondents to the consultation called for companies to be required to analyse their risks against specific climate-change scenarios. As such, these regulations include the requirement for companies to assess their climate risks against different scenarios and report this on a qualitative basis.
The draft regulations will require climate disclosures in the annual reports from just over 1,300 of the largest companies in the United Kingdom. Companies are of course at different stages of their journey towards net zero and producing robust climate-related disclosures. Our guidance will help companies in that journey and signpost some further sources of information, which can be drawn on according to their particular needs. In parallel, we also encourage the market-led evolution of good practices on disclosures.
The Government want to ensure that companies and investors can make the most of the opportunities created as we transition the economy to net zero and sustainability. To do this, we need companies to understand the risks and opportunities and to report transparently on them. I therefore commend these regulations to the House.
My Lords, I understand and welcome the principle of the regulations—to ensure that large companies state what they are doing about climate risks and opportunities—but I have one concern. Companies’ financial statements are becoming ever fuller of environmental, social and governance information. There is a danger that, in doing this, we render the accounts more difficult to follow. It becomes hard to see the wood from the trees.
We have only to look at US listed company financial statements to see how that can go. You have to wade through hundreds of pages of risk and other ESG analysis. Most of it consists of standard-form, boilerplate statements that do not change year to year and, in reality, add little or nothing to the understanding of the reader. Indeed, it can make the accounts almost unreadable and very hard to make an informed decision about the position of the company.
I fear there is a danger that we may be starting to follow that trend, so I am very pleased that Part 3 of the regulations requires a review to be carried out, but that is not until 6 April 2027. I suspect that it will become clear much more quickly than that whether they are having the desired effect or are just adding more meaningless boilerplate to the accounts. I urge the Minister to keep that under constant review, rather than waiting until 2027, and to take action much more quickly if it becomes clear that the regulations are really not doing what is intended.
We shall see, my Lords. We debate these regulations on the back of the most important summit the UK has ever held—a summit which future generations will look back on as when we either met the moment or missed the opportunity. It is increasingly clear that progress at COP 26 was modest and, too often, action will come too late. The Climate Action Tracker has stated that Glasgow commitments mean that, rather than limiting warming to the target 1.5 degrees, we are on track for a devastating 2.4-degree rise.
This is the backdrop to which we debate these regulations, which I hope have not come too late, as they will play an essential part in reaching net zero by 2050, as well as ensuring businesses both mitigate the risks of climate change and seize opportunities.
Today’s instrument introduces new reporting obligations for certain UK registered companies, as the Minister explained, including certain listed companies and companies with more than 500 employees and a turnover of more than £500 million, which require them to report climate-related financial information as part of their strategic report. This is in line with the recommendations of the task force on climate-related financial disclosures—a framework which includes 11 recommendations forming, as we have heard, four pillars: governance, strategy, risk management, and metrics and targets.
Support has been coalescing around these recommendations. The TCFD’s latest annual status report states that the number of organisations endorsing the task force’s recommendations has increased to more than 2,600—an annual increase of 70%.
We should remember that, regardless of the serious impact on migration, security and hunger, climate chaos is also costly. The Intergovernmental Panel on Climate Change estimates $69 trillion in global financial losses by 2100 from a 2-degree warming scenario.
Getting to this point has taken a while, and climate delay has been a repeated issue with this Government. The task force on climate-related financial disclosures published its recommendations back in 2017. Then the UK Government’s green finance strategy set out an expectation that all listed companies and large asset owners should disclose in line with the TCFD’s recommendations back in 2019, but did not hold a consultation on the proposals until earlier this year. As we have heard, these new requirements are to come into force next April, 2022—five years after the task force on climate-related financial disclosures published its recommendations.
According to BEIS, regulatory action is necessary because the current voluntary approach
“is unlikely to be effective … current levels of disclosure across the economy are low and reporting quality varies significantly.”
If we look in detail at the impact assessment, this is clear. Looking at the central scenario for additional groups having to comply with reporting requirements, it reveals that only 34% of the 1,350 companies in scope have already aligned with governance, 24% with risk management and only 14% with scenario analysis. The impact assessment estimates that 1,350 companies are in scope of the regulations. Can the Minister tell us what percentage of the UK economy this covers?
The impact assessment states that
“When a UK group is in scope, all the subsidiaries (UK and overseas) belonging to the same UK group, would be expected to hold some degree of reporting burden.”
What does “some degree” mean? These regulations also focus on companies producing mandatory qualitative scenario analysis. The impact assessment states that the Government
“understand that while some companies might decide to go beyond these requirements … there will be some companies that lack the expertise, resources and capabilities to undertake quantitative scenario analysis by the time these regulations come into force.”
How many companies are predicted to produce quantitative analysis as well? What will be done to encourage both qualitative and quantitative analysis to be produced? When does the Minister expect quantification to be phased in?
It is regrettable that, first, we are unable to study the non-binding guidance alongside these regulations and, secondly, that the LLPs regulations have not been laid at the same time as this SI, due to their interlinking nature. The Secondary Legislation Scrutiny Committee flagged this SI as an instrument of interest:
“We note that the Department will produce guidance on the new reporting requirements which, according to the Impact Assessment, will be around 125 pages long. This suggests a considerable degree of complexity. In the absence of the actual guidance, it is difficult to form a view of the nature and extent of the new reporting requirements, and how robust the Department’s assessment of the impact on businesses is.”
Does the Minister agree that there will be a “considerable degree of complexity”? Why is the guidance not ready for today’s debate? In the consultation stage impact assessment, the Government had assumed that guidance would be about 75 pages long. Why has this increased by 50 pages according to the Secondary Legislation Scrutiny Committee’s report?
The Government state that the combined impact on business of these regulations and those which apply to LLPs is £145.3 million. The impact assessment states that costs result from companies needing
“to get familiar with BEIS Guidance, TCFD Guidance and other companies’ disclosures before producing their own report”,
as well as ongoing costs which include collecting and processing information, strategy and risk management. How are the Government communicating to and supporting businesses with this additional cost?
I would like some clarification from the Minister on enforcement. The impact assessment states that:
“We also expect there to be an additional ongoing cost of monitoring, supervision and enforcement to the Financial Reporting Council (FRC) as the appropriate regulating body for disclosures”,
but is the FRC properly resourced to take on this additional burden? Can the Minister explain how the Government will work closely with the Financial Conduct Authority and the Financial Reporting Council to ensure monitoring and enforcement frameworks operate in a coherent and complementary way? What happens if these companies fail to follow these obligations or publish substandard information? Will there be fines? The impact assessment states that “reporting quality varies significantly”, as the Minister said, so can these regulations ensure that this does not continue to be the case? A review before 6 April 2027 is welcome, but the impact assessment states that there will be “a light touch review” in 2023. What will this consist of?
I end by speaking about small and medium-sized enterprises. As the impact assessment states,
“Climate change poses significant risks to businesses,”
and we have to include SMEs within that statement. The cost implication of these risks means that SMEs can be even more exposed to the risks and to being squeezed out of the opportunities of climate change. Does the Minister see these obligations being extended to SMEs soon? The impact assessment states,
“disclosure can have cascade effects through the supply chain”.
Can the Minister confirm they are not just relying on trickle-down climate economics to see a change in reporting behaviour for SMEs? The cost implications for SMEs make it essential that the Government have a strategy to support them.
To conclude, these regulations are welcome, but they represent only a small part of the picture of how the Government need to help businesses respond to the risks and opportunities of climate change.
I thank both noble Lords. I know that they had some questions, which I will come on to shortly, but both their contributions emphasised how much support there is for these regulations. Although people have concerns about the detail, I think that we are at one in terms of general principles. That reflects the fairly broad support we have for introducing them.
The Government appreciate that these regulations will entail some additional costs to the UK’s largest companies, but we think that the legal targets we have make it essential for us to act if we are to achieve net-zero greenhouse gas emissions by 2050. The process of preparing the disclosures required by these regulations will help businesses to understand their climate-related risks and opportunities, and will bring a greater focus on how to manage them. The increased transparency will enable investors to make better-informed decisions about where to allocate capital in a consistent and climate-positive manner.
The proposals take account of business capabilities and business readiness. For instance, the introduction of qualitative scenario analysis allows companies to use this important tool to manage climate risks in a way that encourages capabilities to grow over time.
The noble Lord, Lord Vaux, raised the concern that annual reports and accounts are becoming more and more full of ESG information, such that it is sometimes hard to see the wood from the trees. He asked whether my department could commit to keeping the regulations under review in the interim. I can tell him that the Government will indeed review the effectiveness of these provisions. If we see that they are not working, we will certainly look at taking further measures. We will conduct a statutory review of the regulations after five years, as is normal.
In response to the noble Lord, Lord Lennie, I can tell him that we are publishing non-binding Q&A style guidance targeted to help companies making the disclosures. It provides clarification on the disclosures against each of these specific requirements. There is, in fact, already significant background material on how to disclose according to TCFD, which itself has recommendations and guidance available online. There is also, by way of background material, the existing guidance from the Financial Conduct Authority on the climate-disclosure provisions in the UK listing rules, and indeed from the Department for Work and Pensions on the disclosure requirements that exist for pension funds.
The department assumed to model costs that companies might read 125 pages for familiarisation before making the appropriate climate disclosures. We hope and anticipate that BEIS’s Q&A guidance on the regulations, which explains their legal requirements and desirable outcomes, will be well short of that page total. However, companies might want to consult wider background material and information to familiarise themselves with the disclosures. Accordingly, we made that assumption in our cost modelling to ensure that our impact assessment did not underestimate the true cost of these regulations to business. As I said, we appreciate that there will be a cost to implementing them.
On the point the noble Lord raised about monitoring and enforcement, the FRC will take on the monitoring of the climate-related disclosures alongside the other contents of the strategic report. The Government consulted earlier this year on reforms to the FRC. We will publish a response to that White Paper and our plans to create ARGA very shortly.
The responses to the consultation showed that many respondents considered that scenario analysis is important for meaningful climate disclosures. However, they also recognised that it is one of the most challenging and costly aspects of the TCFD to implement. We believe that requiring qualitative disclosures strikes an appropriate balance between, on the one hand, requiring companies to consider this important element in business planning, and, on the other, recognising that this is an emerging area of competence and one that will be new to many businesses and companies. So, although some companies are already doing quantitative scenario analysis to produce excellent disclosures, we did not believe that all companies within scope would be able to produce such analysis at this time; therefore, the regulations take a proportionate approach to enable businesses to grow their capabilities.
On extending the regime to SMEs, we will of course keep this matter under review once the largest companies in the UK have become familiar with the disclosure and capabilities in this area have increased. However, in my view, we need to be extremely careful before we impose undue burdens on SMEs in this country. We have a very good, vibrant and active SME sector that employs many hundreds of thousands of people; we do not want to overburden it with regulations.
The Government are intent on delivering a UK economy that is greener, more sustainable and more resilient. In my view, the implementation of the TCFD, aligned to disclosures across our economy, will support those aims. I therefore commend this draft instrument to the Committee.
Regulatory Enforcement and Sanctions Act 2008 (Amendment to Schedule 3) (England) Order 2021
Considered in Grand Committee
My Lords, I beg to move that the draft Regulatory Enforcement and Sanctions Act 2008 (Amendment to Schedule 3) (England) Order 2021, which was laid before the House on 1 November 2021, be approved.
This instrument will add Part 2A of the of the Public Health (Control of Disease) Act 1984, as it applies to England, to Schedule 3 to the Regulatory Enforcement and Sanctions Act 2008. The reason for adding Part 2A to Schedule 3 to RESA is that it brings Part 2A and regulations made under it within the scope of the primary authority scheme as it applies in England. From now on, I will refer to Part 2A of the Public Health (Control of Disease) Act 1984 simply as “Part 2A”. I will also refer to the Regulatory Enforcement and Sanctions Act 2008 as “RESA”, and to the primary authority scheme as “the scheme”.
As I am sure noble Lords will recognise, businesses operating in the UK need to comply with a wide range of legislation, much of which is enforced by local authorities. The scheme has been developed to assist businesses and allow them to receive tailored support in relation to one or more specific areas of law. With a dedicated team, a primary authority partnership makes it easier for businesses to comply with the law, reducing the costs of compliance without reducing regulatory protections. Businesses can invest in products, practices and procedures, knowing that the resources they devote to compliance are recognisable throughout the country across local authority boundaries, resulting in a consistent approach.
Advice provided by the primary authority carries legal weight and provides assurance for the business when dealing with other local authorities that regulate it. The area of law that we are concerned with today is public health regulation. Bringing Part 2A within the scheme will ensure that businesses in England can received assured advice, referred to as “primary authority advice”, on complying with public health regulations made under Part 2A, including in the context of a future pandemic.
Let me now address each of these areas in more detail. I will start with an explanation of Part 2A and its addition to Schedule 3 of RESA, before providing more detail about the scheme. I will also briefly outline the support that the order has already received.
First, Part 2A enables action to be taken to deal with cases of infection or contamination presenting significant harm to human health, if and when they arise. Under Part 2A, a local authority can, where necessary, apply to a magistrate for a range of orders to reduce or remove risks arising from persons, things or premises that are or may be infectious or contaminated and which could present significant harm to health and a risk that others might be infected or contaminated. This is known as a Part 2A order. It is intended to be used as a last resort when other interventions by the local authority have either failed or are not suitable. A magistrate may grant a Part 2A order to a local authority if they are satisfied that the criteria set out in the Health Protection Regulations 2010 are met. Part 2A also provides powers for regulations to be made in an emergency to address a serious and imminent threat to public health.
Secondly, I will explain why Part 2A, as it applies in England, needs to be added to Schedule 3 to RESA. As noble Lords have heard, the order effects the inclusion of Part 2A in the primary authority scheme. To be within scope of the scheme, legislation must be listed in Schedule 3 to RESA, or be made under legislation listed in Schedule 3, or under Section 2(2) of the European Communities Act 1972. It must relate to certain specified matters and be enforced by local authorities. RESA requires any amendments to Schedule 3 to be made using the draft affirmative procedure for statutory instruments.
If Part 2A is not added to Schedule 3 of RESA, it would be necessary to amend Schedule 3 on an individual basis to bring each regulation made under Part 2A within scope of the scheme. This would delay the provision of primary authority advice at the time of a public health emergency. In contrast, by bringing Part 2A and regulations made under it within the scope of the scheme, businesses in England will be able to obtain primary authority advice on compliance with public health regulations from the outset of a public health emergency.
Thirdly, I will briefly describe the primary authority scheme. This was established under RESA and has been in operation since 2009. It was created in response to the Hampton report of 2005, which noted widespread inconsistencies of regulatory interpretation between different local authorities. RESA establishes a statutory framework for a business to form a partnership with a local authority—which becomes the primary authority—for it to receive support from that primary authority in respect of complying with regulations introduced under a relevant enactment. Once a partnership has been nominated by the Secretary of State, the primary authority can issue tailored advice to the business on compliance with legislation in scope of the scheme. The receipt of primary authority advice enables businesses to avoid the cost and regulatory burden associated with inconsistent interpretation and application of the law by different local authorities in respect of the same regulatory requirements.
Where a local authority is proposing to take enforcement action against a business, the primary authority will review the proposed action and consider whether it is consistent with previous primary authority advice. In the event of any disagreement between the primary authority and a local authority over whether the proposed enforcement action is consistent with the original primary authority advice, the Secretary of State is empowered to make a determination.
There are many benefits to the scheme. Primary authority partnerships facilitate a more productive and proactive regulatory relationship between businesses and local authorities. The public also benefit when businesses properly comply with regulations. There are benefits for local authorities as well. If one local authority—the primary authority—provides a business with robust, reliable and consistent advice, it will allow other local authorities to target their resources more effectively, thereby avoiding duplication. Transparency is maintained via a central register through which local authorities can search for primary authority advice. Finally, the scheme gives regulators greater clarity as to where responsibility lies. It improves the consistency of local regulation and supports local economic growth through stronger business relationships.
Finally, let me highlight that there has been strong support among business stakeholders, local authorities and trade associations for the addition of Part 2A to Schedule 3 to RESA. The challenges that local authorities recently experienced in interpreting, at pace, regulations made under Part 2A to reduce the impact of the Covid-19 pandemic, and the associated burdens experienced by businesses in trying to comply with these differing interpretations, led to calls for Part 2A to be brought within scope of the scheme. For example, in November 2020 the British Retail Consortium, which represents over 170 major retailers, wrote to the then Business Secretary, Alok Sharma, requesting that Part 2A be brought within scope. This was in the context that in 2020 approximately 46,000 businesses with an existing primary authority partnership received informal advice on coronavirus regulations made under Part 2A.
In conclusion, we are introducing this order to bring Part 2A, as it applies in England, within scope of the scheme. As I have said, the aim is to ensure that businesses in England will be able to obtain primary authority advice on compliance with regulations made under Part 2A from the outset of any future public health emergency. Due to the Covid-19 pandemic, which is unfortunately unlikely to be the last public health emergency this country will face, there is strong recognition among business stakeholders, local authorities and trade associations of the benefit of bringing Part 2A within scope of the scheme. I therefore commend this order to the Committee.
My Lords, as we have heard, these regulations extend the scope of the primary authority scheme, as provided under the Regulatory Enforcement and Sanctions Act 2008, to include regulations made under the Public Health (Control of Disease) Act 1984 that deal with public health protection. The Government have said that this will have the effect of enabling businesses to form primary authority partnerships with local authorities in England in relation to public health protection, including in the context of a future pandemic.
The Explanatory Memorandum reveals quite a startling statistic: there is a 5% likelihood, in any given year, of a pandemic. It also states that it is estimated that a severe pandemic, of high mortality, will occur at a 2% rate per year and a less severe pandemic, of low mortality, will occur at a 3% rate per year. Can the Minister explain whether this likelihood has increased due to the Covid pandemic we are experiencing? With the knowledge of the 5% figure, can he also explain why the Government are dragging their feet over launching the public inquiry into Covid-19?
We must surely learn the lessons of this pandemic as soon as possible, given the scenario predicting a 5% likelihood of pandemics in any future year. This change is clearly taking place in response to the role that business and the private sector have played during the Covid pandemic. What the Government have asked from business and the wider private sector during it is unprecedented in peacetime. We must thank businesses for stepping up when we needed them to do so most.
The Explanatory Memorandum reveals that in 2020, approximately 46,000 businesses with an existing partnership under the primary authority scheme were receiving informal advice on regulations made under the Public Health (Control of Disease) Act 1984. The Government have stated that this change will enable these businesses to access consistent and reliable advice on compliance and that business stakeholders, local authorities and trade associations in England have requested this change. Can the Minister repeat how many there were—I am not sure that he told us—and did they include organisations representing small and medium-sized enterprises? Can he also confirm that businesses have struggled to get any reliable advice during the pandemic, and whether there have been any serious consequences from not being able to do so?
The Welsh Government have apparently decided not to apply this statutory instrument to Wales. The First Minister of Wales declined to consent to the amendment in July 2021. Can the Minister explain why, and what type of engagement took place with the Welsh Minister?
The Explanatory Memorandum revealed this:
“The impact on business, charities or voluntary bodies is an expected net benefit to business in England of approximately £20.9 m over 2021 to 2030.”
Can the Minister provide some clarity on how that benefit is expected to be shared between large businesses, SMEs and charities? I look forward to his reply.
I thank the noble Lord, Lord Lennie, for his contribution. As I said initially, the order will ensure that businesses can receive consistent and reliable advice in respect of regulations brought in to deal with the public health emergency, thereby reducing the burdens on businesses and providing benefits more widely to local authorities and the public. It does that by adding Part 2A to Schedule 3 to RESA, thereby bringing Part 2A and any regulations made under it within the scope of the scheme as it applies in England.
Our experience of the coronavirus pandemic has shown how important it is for businesses to receive clear regulatory guidance. With another pandemic likely to happen—possibly—in our lifetime, it is important to be well prepared. So, in response to the questions asked by the noble Lord, Lord Lennie, the 5% that he mentioned includes the current pandemic and is based on the outbreak of pandemics over the past 100 years. However, as I am sure he appreciates, the provision of the new Covid regulations and any inquiry into the Government’s response to the Covid-19 pandemic are outside the scope of this statutory instrument debate. As soon as I have more information on those points, I will be sure to share it with the noble Lord.
The noble Lord also asked how many businesses are in the scheme. The de minimis self-certification assessment noted that, in December 2020, there were around 106,000 businesses in the primary authority scheme. Based on an estimated annual flat and natural growth rate of 2,500, this means that, between 2021 and 2030, approximately 109,000 to 131,000 businesses will be in the primary authority scheme.
The noble Lord made an important point about why Welsh Ministers did not consent to the order applying in Wales. The UK Government believe that there are benefits to businesses in England from receiving consistent public authority advice on legislation brought in during a public health emergency, and that the order should be brought in so that those benefits are realised. My understanding is that the position of the Welsh First Minister, Mark Drakeford, is that the context is different in Wales. His view is that local authorities already can and do capitalise on close working relationships to reach a common approach to guidance and enforcement of health protection regulations, and therefore do not need to provide for this formally. It is of course within his lawful discretion to decline consent to this order as this is a devolved matter; as always, we will continue to engage with Welsh Ministers on devolved matters within the scope of the primary authority regime.
The noble Lord asked for clarity on the benefit between large and small businesses. All businesses receive consistent, assured advice, and SMEs do not have to pay for costly legal interpretations. Small businesses may also join a co-ordinated partnership and receive the benefits of primary authority advice in that way. The primary authority scheme is voluntary; obviously, businesses will participate only if they consider that doing so will benefit them.
In supporting this order, we support businesses being in a better position to understand and comply with regulations enacted during a public health emergency. With thanks to the noble Lord, Lord Lennie, for the sole contribution, I commend this order to the Committee.
Electric Vehicles (Smart Charge Points) Regulations 2021
Considered in Grand Committee
My Lords, these draft regulations will be made under the powers provided by the Automated and Electric Vehicles Act 2018. They will mandate that most new private electric vehicle charge points sold in Great Britain be capable of smart charging and meet minimum device-level requirements. They will play an important role in helping us meet our transport decarbonisation targets.
As announced by the Prime Minister as part of the world-leading 10-point plan for a green industrial revolution, the Government are going further and faster to decarbonise transport by phasing out the sale of new petrol and diesel cars and vans by 2030, and, from 2035, all new cars and vans must be 100% zero emission at the tailpipe. Cars and vans represent one-fifth of UK domestic carbon dioxide emissions and accounted for 71% of domestic UK transport emissions in 2019. Ending the sale of new conventional petrol and diesel cars and vans is a key part of the answer to our long- term transport air quality and greenhouse gas emissions.
Electric vehicles present not only a huge opportunity to decarbonise transport but an important opportunity for consumers to contribute to the efficient management of electricity and to share the benefits of doing so. Smart charging will enable this. It enables consumers to shift their electric vehicle charging to times when electricity is cheaper and demand is low. It is a win-win, both reducing the need for costly network reinforcement and saving consumers money on their energy bills.
These regulations are essential to drive the uptake of this important technology and to enable the transition to electric vehicles while minimising cost to consumers. This instrument could deliver up to £1.1 billion of savings to the power system by 2050. Through it, the Government will deliver four key objectives for smart charging policy by driving consumer uptake, delivering consumer protections, helping ensure the stability of the electricity grid and supporting innovation.
The key provisions in the instrument are as follows. First, these regulations mandate that most domestic and workplace charge points sold in Great Britain will have the capability to smart charge, so that consumers can benefit from the savings this offers. Many home charge points already have smart functionality, so this instrument will work with the grain of the market and consumer behaviour to drive significant uptake of this technology and reduce the cost of the electric vehicle transition.
It is important to note that the instrument maintains consumer choice. It mandates that charge points must have the functionality to support smart charging, but consumers will still be in control of when they charge. They will continue to be able to choose the energy tariff that suits their needs and decide whether to subscribe to smart charging services. Some consumers may not engage with smart charging so, to encourage them to charge at times of low electricity demand, the instrument ensures that charge points are preset not to charge at peak times. However, and importantly, the instrument mandates that consumers must be informed and asked to confirm this setting during first use, and they must be able to edit it at any point in the future.
Secondly, these regulations establish new cybersecurity and grid protection requirements. The instrument embeds new and more robust cyber hygiene standards into smart charge points to help mitigate the risk that charge points are hacked and controlled to the detriment of individual consumers and the electricity system. It also requires a randomised delay function to prevent the synchronised switching on or off of large numbers of charge points—for example, in response to a drop in electricity prices. This will help ensure that smart charge points support the integration of electric vehicles into the electricity system and do not destabilise it.
Thirdly, the regulations set new requirements on how charge points monitor and record electricity consumption. This will help consumers to engage with their energy bills and usage, and ensure that a charge point is capable of supporting smart services. Many requirements, such as cybersecurity, electricity monitoring and the randomised delay function, align with standards developed with industry, mainly the British Standard for energy smart appliances, PAS 1878.
Finally, we are mandating that, in the event that a consumer switches their electricity supplier, their charge point must retain its smart functionality. This will ensure that consumers are not locked into a specific electricity supplier by their choice of charge point.
Noble Lords will note that the Government take an outcome-focused approach throughout the instrument and do not prescribe specific technical implementations. This approach will support ongoing innovation within the charge point market and help to maintain our position as world leaders in smart technology.
These regulations are essential to ensuring the successful uptake of smart charging technology to support the electricity grid and consumers in the transition to electric vehicles. I commend the regulations to the Committee.
My Lords, I support these regulations. As my noble friend the Minister explained, they apply to charge points intended for use by vans and cars in a domestic or workplace setting. When will we get charge points at our workplace setting, the Palace of Westminster? It would be good for us to lead by example. I looked at electric cars a few months ago but, when fully charged, it might have got me here—just—but not home again, so I had to buy a hybrid car, which was a pity.
I thank the Minister for her explanation. This SI certainly concentrates on one part of the EV charging market—the issue of smart charging and its interface with grid capacity—but there are considerable questions about the picture as a whole. I shall raise the issues of vans and of long journeys.
First, why does the SI exclude rapid charging points? They would be a reasonable investment for companies with small fleets of vans, for example, and those that come in at various times of the day needing to recharge. As the noble Earl pointed out, there is not a very long range on all the vehicles concerned. Recharging during the day in a half-hour window is therefore essential for many companies. I have sat in a queue at a motorway services where a van has used a rapid charging point. That was obviously essential to that person’s working day; he was using a van because that was his business—it was clearly a small company.
There is a lot of detail in this instrument on how exactly the provisions will operate. I was pleased to hear the noble Baroness talk about being able to change the settings and so on. I would like her assurance that it will be simple to change the settings, because it does not take too much thought to imagine a household where, for example, a district nurse works a day shift one weekend and a nightshift the next, so obviously in one week she will charge at night and the next she will charge during the day—and, on some of those shifts, she cannot pay attention to the cheapest rate for electricity.
I also want reassurance about the circumstances in which people find themselves. I have an electric vehicle, as the noble Baroness knows. I have solar panels. I have virtually no mobile phone signal in my house and very poor wi-fi on occasions—although they were digging up the road this week, so I have hope for an improvement there. My point is that we charge during the day, when the sun is out—or is at least up in the sky behind the clouds. It is easy for people to adjust in the light of their personal circumstances.
Paragraph 7.12 in the Explanatory Memorandum refers to cybersecurity, which clearly worries the Government, although I have not thought too much about it myself in this context, so I should be grateful for some more detail there. Paragraph 7.14 refers to Regulation 5, which invests the Secretary of State with enforcement powers and investigatory powers, including powers of entry and inspection. I welcome clarification. Is this only for companies selling and installing charging points, or is it something to which companies that have installed charging points may find themselves subject? It occurs to me that the technology of charging points is probably beyond many who have them installed, and therefore one could find oneself with a charging point that is not acting as it should without being at all aware of it. I am concerned about that.
Fundamental to all of this is the issue of grid capacity. National Grid came up some years ago with the figure of aiming that one should never be more than 25 miles from a charge point. Is that still its aim, because, if so, it is woefully inadequate? I invite your Lordships to substitute in your mind the idea that we should never be more than 25 miles from a fuel station for you to see that it is not sensible in anything other than, perhaps, the Highlands of Scotland. Clearly, we need far more charge points than that. That is the background to the current set of regulations.
The SI excludes public charging, as well as rapid charging. Because of the crossover between private households, small businesses and the need for access to public charging, I am interested in why they are excluded. The importance of having adequate numbers of specific charge points for commercial vans is something that the Government need to look at. Unless we enlist the positive support and co-operation of the commercial sector, both large and small, none of this will work as intended.
Finally, I turn to the next steps. We need something equally detailed for all the rest of the charge points which have been excluded from the SI. There are key issues, especially for people on long-distance routes. Are the Government convinced that the grid capacity at our motorway service stations is adequate to have banks of charging points? Motorway service stations are often in rural or semirural areas, where grid capacity is low.
The issue of disabled access has not been raised. The current design of charging points in public places is absolutely woeful for people with disabilities, either physical ones in terms of movement or visual disability.
When can we expect there to be more electric charge points? The latest figures from the SMMT show that just one EV charging point is being installed for every 52 new EVs registered. That is completely inadequate and there will not be the expansion of the sector we need unless that improves.
London has as many charging points as the whole of the rest of the UK. This really requires a strong steer from the Government if we are to get over the psychological problem that the noble Lord exemplified perfectly just before I spoke. We find where our local charge points are and very quickly work out how to use them. We work how our own vehicles operate and how best to maximise the range. We manage all that, but you talk to any EV owner and the first thing they mention is the range for long journeys. Until we can be comfortable with that, we are not going to encourage people to go for EVs in the large numbers that we need to.
As background, the impact assessment states in paragraph 1 that:
“In 2019, road transport accounted for 24% of all UK”
“emissions with cars and light commercial vehicles … accounting for 79% of this total,”
and that greenhouse gas
“emissions from transport have remained largely unchanged since 1990.”
The impact assessment then says in paragraph 1, as it does on a number of occasions elsewhere, “Error! Bookmark not defined” in bold letters. I would just like to ask what that means in paragraph 1 of the impact assessment I have and, indeed, in other parts of it. I take it that is an error but I would like to check what it means. Does it mean anything I need to be aware of or is it just a mistake?
With the ending of the sale of new petrol and diesel cars in the UK scheduled for 2030, the Department for Transport regards the transition to electric vehicles as crucial to achieving net-zero greenhouse gas emissions by 2050, with the electricity system having to be able to meet the increased demand that that will generate. Can the Minister say what the Government estimate the additional greenhouse emissions will be that will be generated by the increased demand for electricity arising from the transition to electric vehicles? This will have to be set against the reduction in such emissions arising from the phasing out of petrol and diesel vehicles?
As has already been said—and indeed is in the Explanatory Memorandum—most electric vehicles are expected to be charged at home, but the Department for Transport expects that without smart charging, this is most likely to happen during electricity system peak times when people arrive home from work. This would require, the EM says, “significant … additional investment” in the electricity networks and electricity generation capacity. Smart charging is intended to address this issue. Can the Government say in their response what the saving will be in these additional investment costs if there is a successful move to smart charging and what percentage of investment each year in electricity networks and electricity generation capacity that savings figure in additional investment represents?
With smart motorways and now smart charging, it is clear the Department for Transport has taken a fancy to the use of the word “smart”, but I would have to say that it did not figure greatly in the recent announcement on the backtracking on the northern powerhouse rail and eastern leg of HS2 commitments. As well as introducing a requirement for all domestic and workplace charging points to include smart functionality or charging, the regulations set out certain standards and requirements that smart charging points must meet. They also require a statement of compliance to go with every smart charging point sold, with penalties for selling a non-compliant charging point.
The Government estimate that 87% of private charging points sold or installed in this country currently have smart functionality. There is, however, the issue of accessibility of charging points for those who are unable to install a private charging point, not least those who do not have their own dedicated parking space at their place of residence. Could the Minister say how the Government intend to address this aspect of the issue of accessibility, and within what timescale?
Paragraph 7.6 of the Explanatory Memorandum says on interoperability that:
“The ability of consumers to freely switch energy supplier is a fundamental principle in the energy market. This instrument makes clear that a charge point should not introduce a new barrier to switching by being designed to lose its smart functionality when its owner changes supplier.”
What does not appear in the Explanatory Memorandum, as far as I can see, is an unambiguous statement that the instrument includes a requirement for all charging points to be interoperable. Could the Minister say in her response whether the wording in the Explanatory Memorandum to which I referred constitutes in reality a requirement for all charging points to be interoperable? I think the answer is that it does not, but I should be grateful for clarification on that point.
Paragraph 10.6 of the Explanatory Memorandum says that the Government have
“chosen not to mandate device-level requirements”
relating to demand side response interoperability
“at this time … because the smart charging market remains nascent, and because delivering interoperability would require broader powers than those set out in the AEVA”—
the Automated and Electric Vehicle Act 2018. That is despite the fact the Explanatory Memorandum states that:
“The ability of consumers to freely switch energy supplier is a fundamental principle in the energy market.”
The Government also say in paragraph 10.6 that:
“The Department intend instead to consider how best to deliver interoperability as part of a second phase of legislation, by looking at placing wider requirements on the entities … which could deliver DSR through charge points. Government aims to consult on this second phase of policy measures in 2022.”
That is a somewhat vague timescale, which contains no target date for actually legislating. Could the Government be more specific in their response today?
I also have a comment on the benefits and costs. Paragraph 12.3 of the Explanatory Memorandum says on impact that:
“The overall monetised benefits are estimated at £300m - £1.1bn up to 2050, primarily derived from reduced electricity system costs. The cost to industry of this instrument is estimated at £10 - £260m up to 2050”—
is that figure of £10 right, or is there an “m” missing after the 10? It continues that the cost is
“primarily related to product development costs to meet the requirements. The costs to industry are significantly outweighed by the benefits to the energy system and consumers, and this instrument has a Net Present Value of £0 - £1.1bn up to 2050, with a central estimate of £500m.”
As I understand it from these figures, there is in reality a very little gap between the highest cost figure to industry and the lowest monetised benefit figure. Perhaps the Minister could say whether she agrees or disagrees with that statement, but it seems to me to be the difference between £260 million and £300 million, looking at those two figures.
Paragraph 10 of the EM, on consultation, also says:
“The majority of respondents supported the Government’s overall aims and objectives for EV smart charging”.
Of course, it is not clear what “the majority of respondents” means. What did the minority—it could be up to 49%, by the way—say did not constitute support for “the Government’s overall aims and objectives”, bearing in mind that paragraph 10 says:
“Three material changes have been made to the original proposals as a result of the consultation”?
Finally, I want to comment on reviews. Paragraph 14.2 of the EM says:
“An interim process evaluation … will establish if these regulations are being implemented as intended followed by a separate impact evaluation in 2024-5 to assess how effectively the policy is meeting its objectives.”
When will that interim process evaluation be undertaken? Will it be published? Apparently, there is also a statutory review clause, with the first report being published by the Secretary of State before five years are up from the date these regulations come into force, which, as I understand it, is at the end of June next year. The Automated and Electric Vehicles Act 2018 also requires the Secretary of State to prepare a report every 12 months. That is quite a few reports; at least, it appears to be quite a few. Who will actually produce these various reports? Will their work be co-ordinated or conducted in separate silos?
My Lords, I thank the noble Baroness, Lady Randerson, for her consideration and the noble Lord, Lord Rosser, for his thoughts on the statutory instrument before the Committee. First, I apologise wholeheartedly for what was clearly an error in the IA, where it says, “Error! Bookmark not defined”. This should not happen; it will not happen again. It is deeply disappointing and I regret it enormously.
It is always good to be on the receiving end of some excellent questions from both noble Lords. I know now that I cannot possibly answer some of them, but I will write to answer all questions asked today.
We know that there could be a potentially significant impact on the grid. Current estimates are that, by 2030, EVs could account for approximately 10% of total electricity consumption, up from less than 1% today—so, well over 10 times where we are at the moment. This could increase the total energy demand by 2030 by 30 terawatt hours and by between 65 and 100 terawatt hours in 2050. So we know that there is a significant electricity requirement coming down the track. What this SI does, by introducing the smart charging concept and legislating for it, is enable the demand to be managed in a much better way.
Obviously, we need to ensure that electricity networks have sufficient capacity. This is the responsibility of the electricity network operators; they are incentivised to do so through the regulatory framework set out by Ofgem. However, let us be frank: if they need more capacity, it will end up being the citizen who somehow pays for it. Therefore, the extent to which we can manage demand is hugely beneficial. The noble Lord noted some of the savings that could be coming down the track.
The noble Lord, Lord Rosser, also asked about the impact of energy generation from non-renewable sources. I do not have those figures to hand but I will write to him. The Government have been quite successful in shifting our energy generation to renewable sources, which is a bonus and, indeed, a prerequisite of what we are trying to do to decarbonise our transport system.
We should be able to get some very significant benefits from smart charging by shifting demand. We estimate that we would need 60 gigawatts of flexible capacity to enable the net-zero electricity system. This could include more than 30 gigawatts of either short-term storage or appliances such as electric vehicles using energy in a smart way. So smart-charging EVs will likely play a very integral role in the future.
The noble Lord, Lord Rosser, mentioned consultation. I do not have the details about why people were unhappy, but it is the case that we have been working very closely with the industry and consumer groups as we have brought forward these regulations, so it does not surprise me at all that they have changed. We will continue to work with them as we continue to introduce regulations, particularly around interoperability.
Looking at the costs and benefits of these regulations, the noble Lord has pointed out that the range is wide, but I believe that we can safely say that this is a very beneficial piece of legislation. The impact on industry is a £130-million cost up to 2050; that is primarily related to product development costs to meet the requirements.
We are very much working with the grain with industry at the moment, so we expect that the cost of complying will vary depending on whether a manufacturer already offers smart devices or needs to upgrade non-smart models. However, given the rate of change, significant developments are expected to come down the track, allowing charge points to be produced on a far more economic basis.
Turning to the actual amenity and the people who will install these charge points in either their homes or their workplaces, I take the noble Baroness’s point about district nurses and different people with different shift patterns; they would need to understand this fully. Let me be absolutely clear: we are committed to educating consumers to make sure that they remain in control. As with anything, when you get a sophisticated piece of technology, you must read the instructions—unless you are a man—so she and I would clearly read the instructions and would know what to do. Of course we want to make it as easy as possible; there should be no barriers between setting up charge points exactly as they need to be set up, depending on your work or lifestyle. This is really important, and it is top of mind for us.
The noble Baroness, Lady Randerson, asked about cybersecurity. Right now, charge points are subject to general product safety requirements, but government does not regulate the cybersecurity requirements. We are aware that some charge points have cybersecurity vulnerabilities, so these regulations will improve the standard of the security of private charge points to give confidence to consumers that their charge points follow current cybersecurity best practice. These requirements align with the best-practice requirements set out in a globally applicable cybersecurity standard and DCMS’s code of practice for “internet of things” devices. However, we also know that cybersecurity risks will continue to evolve; we will of course monitor them and think about how we can intervene in the longer term.
I turn briefly to the intervention from my noble friend Lord Cathcart. My department is in dialogue with the Palace of Westminster about access to charge points. I have written letters to the powers that be in the Palace about them. I am reassured that, apparently, they are coming, but of course this is not a government decision. I agree with my noble friend that we should set an example, and I will continue to press for charge points in the Palace of Westminster.
Moving on, assurance is essential for enforcement and consumer confidence. These regulations require that a statement of compliance and a technical file be available to explain how charge points meet these requirements. They must be provided to the enforcement authority and the consumer upon request. These requirements are intended to deliver appropriate assurance without imposing unnecessary or disproportionate burdens on businesses. The Government have appointed the Office for Product Safety & Standards as the enforcement authority, and will ensure that it has the funding to promote and ensure compliance with the regulations. The OPSS is an established regulator with significant expertise as a national product regulator. The legislation includes a range of proportionate enforcement tools to support effective compliance, including civil penalties.
The noble Lord, Lord Rosser, made an important point about public charging points and accessibility. We are absolutely committed to ensuring that we have an accessible electric vehicle charging network and that inclusively designed charge points are available for all consumers. Obviously, work continues: we are working closely with the national disability charity Motability to commission the British Standards Institution to develop accessibility standards for public EV charge points.
I turn briefly to what is included and excluded. The regulations exclude public charge points. Domestic and workplace charge points account for the highest proportion of EV charging by far, and smart charging works best in those settings due to their long plug-in times. You therefore get flexibility in making use of the smartness of the charging point. However, we are separately exploring the potential for smart charging at public charge points—particularly, for example, where vehicles might be parked on the street overnight.
We have excluded rapid charge points because this is about shifting demand and making sure that electricity can be drawn down at cheaper times and when there is less demand on the grid. Of course, as the noble Baroness pointed out regarding her friend in a van, if you use a rapid charge point then you need to be charged right there, right now. You cannot be messing around. Having smartness attached to rapid charge points has potentially limited benefits because what you really need to do at them is turn up, plug in and, after 15 minutes, go. Any smart additions probably would not add anything to that.
There are many next steps because there is lots to do in this area and the Government are very ambitious. Phase 1 refers to the regulations that we have discussed today to establish baseline device-level requirements for smart charge points; phase 2 will look beyond charge points themselves and be concerned primarily with placing security and interoperability requirements on the systems and entities that control charge points, as well as on other smart systems and devices. At that point, we will look much more broadly: beyond the devices in people’s homes and into the system itself. We will consult on some more proposals in due course in 2022.
Renewable Transport Fuel Obligations (Amendment) Order 2021
Considered in Grand Committee
My Lords, this instrument makes several important changes to the Renewable Transport Fuel Obligations Order 2007, which established a certificate trading scheme known as the renewable transport fuel obligation, or RTFO. This draft instrument would improve the RTFO scheme, ensuring that renewable fuels continue to play a key role in reducing emissions from road transport and, in the longer term, from transport modes with more limited decarbonisation options, such as aviation and maritime.
While the instrument relies on powers contained within the Energy Act 2004, parts of the 2007 order were previously amended by instruments made under Section 2(2) of the European Communities Act 1972. Accordingly, Schedule 8 to the European Union (Withdrawal) Act 2018 applies. The Secondary Legislation Scrutiny Committee’s report of 25 November acknowledges that the committee has no specific comments on the instrument and notes that during the enhanced scrutiny process, and in response to industry comments, the instrument has been somewhat amended and improved. The instrument was also considered by the Joint Committee on Statutory Instruments on 17 November, and that committee identified no matters requiring report.
The RTFO scheme, changed by this instrument, promotes a market for renewable fuels used in transport. The scheme places obligations on larger suppliers of fossil fuel to ensure the supply of renewable fuels which reduce carbon emissions. These obligations are calculated as a percentage of the volume of fossil fuel supplied over a calendar year. They are met by acquiring certificates which are issued for the supply of sustainable renewable fuels. The trade of these certificates provides a revenue stream for suppliers of renewable fuels.
This instrument delivers several commitments made in our transport decarbonisation plan to upgrade the RTFO. It increases the main RTFO obligation level from 9.6% to 14.6% by 2032, continuing at that level in subsequent years, with 1.5% of this RTFO target increase being made in 2022, to maximise the carbon savings from the introduction of greener E10 petrol this September. The instrument also improves RTFO support for suppliers of renewable hydrogen by extending certificate eligibility to renewable hydrogen used in maritime vessels, and in fuel cell-powered rail and non-road vehicles. As targets for the supply of renewable vehicles increase and new end uses are included in the RTFO, the instrument strengthens the sustainability and greenhouse gas emissions savings criteria that renewable fuels must meet.
In addition, the instrument replaces references to various EU enactments with equivalent criteria. It replaces these references through changes made to the 2007 order itself, and by using technical guidance issued by the administrator. Technical guidance on sustainability reporting covers the values, formulas, and methodologies used to calculate carbon savings. To reflect changing international standards and evolving fuel production processes, and to ensure no obstacles to trade, the RTFO administrator proactively updates its technical guidance, a draft of which was published alongside this instrument.
Renewable fuels supplied under the RTFO scheme currently deliver about a third of all domestic transport carbon savings under current carbon budgets. They will also make an important contribution to future UK carbon budgets. I commend this instrument to the Committee.
I thank the Minister for her introduction. This is a complex but very important order. The sixth carbon budget requires reductions in emissions of 78% by 2035, and low-carbon fuels supported via the RTFO have been an important part of that process for the last decade. This SI extends the renewable transport fuel incentive to suppliers of renewable hydrogen used in fuel cell rail and non-road transport, and to renewable non-biological fuels for the maritime industries. It also increases the RTFO obligation by 5% until 2032, and updates emissions criteria.
This is an affirmative instrument which comes into force on 1 January 2022 which, as the Explanatory Memorandum points out, is less than 21 days. Clearly, that is less than the traditional amount of time. Some error has occurred somewhere down the line because while this is important, it is not a piece of emergency legislation. Therefore, it is regrettable that there is not the usual time limit.
Something to welcome strongly is that Articles 13 and 14 of this order strengthen the sustainability criteria. That thread runs through all of this. Are biofuels really sustainable? Are they really being produced in a fully sustainable manner? When you get down to the fundamentals, any land that you are using to produce biofuels is land that you could use to grow crops for food and so on. I therefore strongly welcome, for example, the criteria that would prevent biodiverse woodland being degraded for biofuel production.
As I said, it is a very complex area, because renewable fuels and feedstock originate from across the world. It is possible—indeed probable—that producers would be eligible for multiple incentives, which the UK provides, but are incentives where the fuel and crops originate from. What steps are being taken and what steps will the Government take to ensure that this is not exploited such that there are multiple payouts on one batch of fuel, if I can put it that way?
These detailed plans and arrangements were clearly devised prior to COP 26. How have they been affected, if at all, by the results of those discussions? Where do we go next, Minister?
Paragraph 7.12 of the Explanatory Memorandum refers to the increase in 2020 in the buy-out price from 30p to 50p. Can the Minister tell us whether this has been effective in stimulating the market?
The part of this we will all have noticed was the increase from E5 to E10 in September for bioethanol in petrol. I recall that, when we discussed the regulations on that, there were some areas where there were exceptions, such as the coast of Scotland, I believe. Were those exceptions envisaged to be temporary, perhaps to let the more distant parts of the UK improve their access to the most modern fuels, or is it envisaged that they will be permanent for those areas?
It is important to note that, despite government targets to phase out the sale of new internal combustion engine vehicles, raise the main RTFO target and so on, there remains a fatal flaw in government policy. Emissions from transport are not declining. Cars and vehicles are becoming more efficient, but the emissions are not declining because of the increase in road traffic. That has been made worse because many people have rejected public transport as a result of their fear of Covid. The Government have a major task to get us back on to public transport. I notice that the bus strategy, which has excellent aims, has a huge funding gap; four local authorities have made bids which are equal to the total amount of money available, and there are over 70 local authorities which could bid for it. Clearly there is a funding gap there.
I do not want to dwell on private grief for the Government, but last week was not an easy week for them in the north of England because of the rail announcement. Even with electric vehicles, the Government have a mountain to climb to gain public confidence. I am pleased to see these improvements, but there is still a vast amount of work for the Government to do, and unfortunately some of it involves additional funding.
My Lords, the order, as has been said, amends the Renewable Transport (Fuel Obligations) Order 2007 to increase targets for fuel suppliers, thus driving the supply of renewable fuel in transport and delivering further greenhouse gas reductions. It amends Article 4 of the RTFO order so that the main obligation on renewable fuel targets increases by five percentage points, from 9.6% to 14.6%, between 2022 and 2032.
Those suppliers that meet or exceed the obligations already acquire renewable transport fuel certificates, the training of which provides a financial incentive. The order extends that financial incentive to suppliers of renewable hydrogen, used in fuel cell rail and non-road transport, and of renewable fuels of nonbiological origin used in maritime transport.
The Government have said that the RTFO delivers about a third of the savings required for the UK’s current transport budget, and that last year the RTFO scheme saved carbon emissions equivalent to taking 2.5 million combustion engine-powered cars off the road. They have also said that the changes made by this order are estimated to deliver the equivalent of an additional 1.5 million cars by 2032. As we know, in 2019, road transport accounted for 24% of all greenhouse gas emissions and greenhouse gas emissions from transport have remained largely unchanged since 1990, as the noble Baroness, Lady Randerson, just reminded us.
How did the Government finally come to the conclusion that a five percentage point increase in the renewable fuel target between 2022 and 2032 would be sufficient in the transport sector to meet our greenhouse gas emission and climate change goals? What, if anything, happens after 2032?
The Government consulted on only three options: increasing the main obligation by 1.5, 2.5 or 5 percentage points, with the Department for Transport backing a 2.5 percentage point increase in the renewable fuel target. Paragraph 10.3 of the Explanatory Memorandum states:
“Of the 77 respondents that expressed a preference on the amount by which this target should increase, 61 supported an increase to the RTFO main obligation of 5 percentage points or more. These respondents included suppliers of renewable fuel who benefit from support under the certificate trading scheme, and suppliers of fossil fuel who must meet the targets. Those in support of an increase of 5 percentage points or more suggested this could provide long term certainty to industry and would provide a further contribution to the government’s commitment to net zero greenhouse gas emissions by 2050. Accordingly, the government has decided to increase the RTFO main obligation by a further 5 percentage points between 2022 and 2032.”
There appears to have been a greater commitment to the Government’s net-zero greenhouse gas emissions target by 2050 from the respondents to the consultation than there was from the Government themselves, which begs the question: does the order go far enough? Why did the order reject going beyond 5 percentage points, as some respondents clearly proposed, despite that not even being one of the three options the Government had offered?
The Government have announced a date for a ban on the sale of new petrol and diesel vehicles. For how many years will a new petrol or diesel vehicle purchased the day before the ban comes into effect be allowed to be driven on our roads? What is the position on a ban on the sale of second-hand petrol and diesel cars?
Aviation and shipping are important parts of the transport sector. How are these two domestic and international sectors to be decarbonised, and from when?
While this instrument is welcome, does it go far enough and fast enough towards decarbonising the transport sector by reducing emissions? Bear in mind that the Government have said, at paragraph 7.1 of the Explanatory Memorandum, that
“Renewable fuels can deliver emissions reductions quickly.”
What has led the Government to believe that what is or is not covered within the provisions of this order represents the fastest that renewable fuels can deliver a reduction in emissions? I hope the Minister will address this point in her response.
I hope the Minister will also comment on the issue raised by the noble Baroness, Lady Randerson, about the 21 days between the making of the instrument and it coming into force. Why, on this occasion, does this accepted period appear to have not been achieved?
I just want to raise a question with my noble friend, and it has been outlined. While I generally support the push for bio and alternative fuels, I cannot do so at any price given the whole food for fuel argument, particularly when food is needed to sustain populations. While it is quite easy for us in the United Kingdom, and probably those in some other countries, to look at how the programme is working and what we are doing, the same cannot be said for some third countries. For example, in Brazil and some other countries in the great continents of the world, we see great destruction of wildlife, fauna and flora. Can my noble friend explain the measures that our Government are taking to police this?
My Lords, I thank all noble Lords for their interventions and contributions to this debate.
I start by addressing the concern of the noble Baroness, Lady Randerson, about the 21-day rule. There is an explanation in the Explanatory Memorandum —which I probably will not read out now, because it is written there—for why we felt it was right to not abide by this rule, but I will say that I am less than happy about it. I think I will make a new year’s resolution to have an SI debate in your Lordships’ House or Grand Committee without somebody pointing to a mistake in a document or the fact that we have not been able to comply with a rule when, quite frankly, we really should have been able to do so.
Noble Lords have gone a little beyond the SI into the Government’s broader policy on transport decarbonisation. I will write with a fuller answer on that, because there is a lot happening at the moment and it goes far beyond what is in front of your Lordships today.
The noble Lord, Lord Rosser, as ever, raised a very important point about the consultation and the responses from various people. As is always the case with a consultation, certain people will respond. We had 120 responses and the majority of those agreed with our proposals, including trade associations and fuel suppliers, which was great. But the Government have another responsibility: to make sure that it is fair on the general public—the people who have to buy the fuels. There was always going to be a balance between the cost that will potentially be added to the fuel at the pump versus how ambitious we would like to be. If the public had the deepest of pockets, we could be far more ambitious, but we always have to think about the cost.
I note the noble Lord’s suggestions, such as banning the sale of a second-hand internal combustion engine vehicle, but I think that would be really harsh on somebody for whom it may be the biggest asset they own in the world. I would find it very difficult to do that without an enormous amount of fair warning. We do accept that there is never a good time to add cost to fuel consumers’ bills, and this policy is expected to marginally increase fuel costs—but we believe that those costs are, on balance, manageable. We are looking at something like 0.5p per litre in 2022, rising to 1.6p per litre in 2032, which is a little over 1% of current petrol and diesel prices. But it is not nothing—it is not insignificant—so we do always have to think about the balance with these things.
The noble Baroness, Lady Randerson, asked about the exceptions in the rollout of E10. Those were the days—those heady days when we were upstairs in the committee room talking about E10 implementation. I cannot remember whether those exceptions are permanent or temporary; I will certainly write on that, as I will on whether the increase of the buyout price to 50p has been successful. We will be able to look at that.
If I may, I will talk very briefly about sustainability, because it is absolutely critical that we do not ride a coach and horses through very good-quality agricultural land to produce these fuels. All biofuels supported under the RTFO need to comply with strict sustainability criteria. My noble friend has pointed out some of the challenges with certain countries in the world. There are protections for biodiversity and against land use changes such as deforestation. These regulations have improved the sustainability criteria, and I am very happy to write to the noble Baroness, and, indeed, to other noble Lords who contributed, to set out exactly where the changes have been made and the benefits that we expect to get from them.
I appreciate that there are a few unanswered questions, but I will be writing. I think we have reached the right balance by increasing by 5%; it will make a difference to our carbon emissions. We accept that there is more to be done in transport, but we are on that case and are doing as much as we can as quickly as we can.
Network and Information Systems (EU Exit) (Amendment) Regulations 2021
Considered in Grand Committee
My Lords, these regulations were laid in draft before the House on 26 October. They will make important rectifications to the UK’s network and information systems legislation, which helps maintain the security of key digital services on which British people and businesses rely. Their purpose is to ensure that the Information Commissioner’s Office, in its role as competent authority for digital service providers, is kept informed of serious cyber events that affect digital service providers, comprising online marketplaces, online search engines and cloud computing services.
Before I turn to the provisions set out in this instrument, I will set the scene for the proposals it contains. The Network and Information Systems Regulations implemented the European Union’s security of network and information systems directive of 2016. As a result of our departure from the European Union, certain deficiencies have arisen in the relevant legislation retained under the provision of the European Union (Withdrawal) Act 2018, which this instrument seeks to rectify.
The purpose of the Network and Information Systems Regulations, or NIS regulations for short, is to improve and maintain the security and resilience of essential services, such as transport or energy, within the UK, as well as certain digital service providers. The NIS regulations work by compelling operators of essential services and digital service providers to undertake measures to protect the network and information systems on which their essential or digital services rely from failure through either cyberattack or physical faults.
The NIS regulations are overseen by 12 competent authorities, which act as regulators for essential and digital services across six sectors. Organisations in scope of the NIS regulations must fulfil certain duties, such as having appropriate measures to protect their services and, critically, reporting cybersecurity incidents that have a substantial impact on their services to their competent authority.
Digital service providers, which form one of these six sectors, are regulated by the Information Commissioner, who acts as the competent authority. In other sectors, the factors and incident reporting thresholds, which determine what constitutes a “substantial impact” for the purposes of reporting, are set out in guidance published by the relevant competent authority.
Under the original EU directive and the UK’s subsequent implementation, digital services are treated differently from essential services. They were regulated at an EU level, with one country taking responsibility for the activities of an individual digital service provider across the whole of the European Union. For this reason, the factors to be taken into account when determining whether an incident had a substantial impact for the purpose of reporting were not left to member states but set out in the Commission’s implementing regulation, which applied across the EU market. When an incident reaches this threshold, it must be reported to the relevant competent authority, which regulates that provider on behalf of the European Union.
When the UK left the EU, the Commission implementing regulation remained embedded in UK law by virtue of the European Union (Withdrawal) Act 2018. However, the parameters and thresholds for reporting incidents set by that Commission regulation are no longer appropriate for the UK as an independent state. The most significant issue relating to reporting thresholds is that they were set by reference to the number of users affected or user hours lost. As these had been set with the EU market in mind, they were set at a level that is too high for the smaller UK market. As a result, the Information Commissioner has received only one report of a cyber incident affecting digital service providers since our departure from the European Union.
Under the current scenario, an incident needs to have a noticeable impact on an economy the size of the EU to be reportable in the UK. If the Information Commissioner is not receiving reports of incidents within the UK because the thresholds are too high, they will not have an accurate picture of what is happening in their sector. They will be unable to identify the threat, provide guidance or take necessary enforcement action if the provider is found to have breached its duties to protect its services. It is important, if the legislation is to remain effective, that the Information Commissioner is afforded the ability to set the reporting thresholds at a level appropriate for the UK.
I will now set out in a little more detail how the instrument before us seeks to resolve this deficiency. The key proposed amendment will remove the defective reporting thresholds from the UK version of the Commission implementing regulation. The NIS regulations already allow the Information Commissioner to issue guidance and the Information Commissioner has already carried out a consultation on these thresholds in parallel to the instrument being developed.
The instrument before the Committee strengthens the role of that guidance by adding a provision to the NIS regulations ensuring that digital service providers have regard to that guidance when considering whether an incident has substantial impact and is therefore reportable. The practice of setting these reporting thresholds in guidance is common among all other NIS competent authorities in the country; it is only by virtue of how digital services were supervised across the EU that their reporting requirements were set by an EU regulation.
The approach of using guidance to set the thresholds affords far greater agility to the regulator, allowing the Information Commissioner to respond to new developments and to set levels that are proportionate and not burdensome on the providers or, indeed, her own office. This amendment would bring digital service providers in line with operators of essential services in all other sectors across the NIS framework, ensuring that regulators are able to identify significant incidents affecting key services across the economy and act accordingly.
There are also other minor textual amendments to the NIS legislation resulting from our departure from the EU, such as those that require digital service providers to consider the geographical impact of an incident across the UK, rather than across the EU. The amendments in the instrument are made using the power in Section 8 of the EU withdrawal Act. As the Committee will be aware, such provisions allow only for changes to be made to rectify EU-related deficiencies and not to implement policy changes.
I am content that these changes do not implement a new policy; rather, they make good on a requirement that is already in place—to notify substantial cyber incidents—by ensuring that the thresholds for reporting can be set at a level sustainable for the UK market. The changes do not introduce any new elements to the NIS legislation or make changes to the nature of the duties imposed on digital service providers.
I am certain that the Committee will recognise the significance of supporting the security of digital services for our society—from ensuring that people are able to use the internet securely to protecting the critical digital services that underpin the functioning of our economy.
Having the right legislative framework for deterring those who aim to compromise our systems and providing the necessary tools to help those who become victims of such compromises is vital. Without knowledge of such incidents, we cannot act: regulators and experts cannot provide much-needed support and guidance and we cannot inform others of impending threats.
In summary, the primary purpose of this instrument is to remove the incident reporting thresholds for digital service providers operating in the UK from legislation, allowing the thresholds instead to be set by the Information Commissioner in guidance at a level suitable for the UK economy.
The amendments are small, but nonetheless important to the functioning of our legislative framework. They ensure that the intended objective is achieved, that the policy is better implemented and that regulators have the tools to protect key digital services across our economy. As a result of these changes, the effectiveness of the network and information systems legislation to protect digital service providers will be retained. I commend these regulations to the Grand Committee.
My Lords—well, my Lord—the Minister will be pleased to know that I do not have a lot that I want to say. As I understand it, this SI makes a couple of small changes, as the Minister has said, to retained EU law regulating the security of network and information systems of core UK service providers to reflect that fact that we are no longer part of the pan-EU regulatory regime.
I have just one or two questions. Why, given that the transition period ended almost a year ago, are we debating these changes only at the end of November 2021? While this may not have been day-one critical, one would have hoped that these kinds of cybersecurity issues would have been a priority for the DCMS.
The Government are lowering the reporting thresholds when relevant cyber incidents occur in an attempt to ensure that the Information Commissioner is sighted on them. Can the Minister confirm whether DCMS knows of any incidents occurring earlier in the year that did not meet the current threshold that would have met the revised one had it been in place?
When we discussed amendments to EU-derived regulations for video-on-demand providers in the past, the department conceded that our departure from the EU meant that we had no formal jurisdiction over most of the main players, which were generally registered on the continent. Is there a similar situation with some of the digital service providers or is this not a concern currently?
The Explanatory Memorandum, which I found very clear and helpful, shows that most of the costs associated with the change will fall on the Information Commissioner’s Office. Our understanding is that the Information Commissioner is working well as a regulator, but of course with expanded responsibilities comes the need for greater resourcing. Is DCMS comfortable that the commissioner has enough staff and wider resource to complete these duties?
I turn to my final point. Is alignment with EU practices an issue at all, and do we have a continuing relationship with the EU regulator and regulation? Do we have to work within a commonly accepted framework, even though we are now outside the EU and obviously have to have our own system for regulation, appropriate to the size of our market?
My Lords, I am grateful to the noble Lord for his questions and helpful comments on the impact assessment. He asked why we are doing this now and not sooner. The issue that I outlined at the beginning was not identified as a deficiency until last year, when the Information Commissioner raised concerns over incident thresholds with DCMS—that is why we have brought forward the statutory instrument at her recommendation and in consultation with the ICO.
The noble Lord asked about the ICO’s resources. We are confident that it has the resources, but we will maintain close dialogue with her to keep that under review. We have a continuing relationship with the EU. The matters here obviously cross international boundaries and, despite leaving the European Union, we continue to work with our European neighbours and other international partners on issues such as this. But obviously we have no obligation to implement the new directive that the EU is bringing forward. We are monitoring developments in the EU to assess any impacts that those changes might have.
I am afraid I missed the noble Lord’s second question, but the note I have been handed reminds me that it was on digital service providers. There is now a requirement for non-UK digital service providers to register with the Information Commissioner. As I say, there will be a divergence from EU regulations, but we will continue to follow a similar approach. I hope that answers the questions that he outlined and, on that basis, I commend the regulations to the Committee.
Committee adjourned at 7.37 pm.