Committee stage in the Lords
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The Deputy Chairman of Committees (Viscount Ullswater)Conservative- Quote
- If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
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Lord TeversonLiberal Democrat- Quote
- moved Amendment No. 63C:
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Baroness Carnegy of LourConservative- Quote
- The noble Lord has made a number of important points. Energy efficiency is probably the most positive thing of all that one can do; he is absolutely right on that. I have several reservations. First, if the amendment as it stands were accepted, what would it cost? Goodness knows. It is a very ambitious amendment. I do not know how realistic it is, but it aims in the right direction. I have one specific point that applies to the United Kingdom, particularly those areas that have the greatest temperature variations—the parts that are coldest and dampest in the winter. I do not know whether that is just north of the border; it probably applies to Wales as well. If you insulate old houses very well, you can get the most appalling condensation and damage. You cannot talk about insulation in a general way. That applies not only to large houses but particularly to small cottages. I have experience of that, and you have to be very careful about it. The noble Lord has put exceptions to his great idea under proposed new subsection (4): “Buildings may be excluded on grounds including … their historic status … excessive costs of insulation … their short remaining life”. Those are sensible exceptions. It is not practical for many old buildings, where you need to have a draught and a bit of circulation of the air. You do not need windows that are completely sealed. It is striking that for the cold countries of Europe, where the temperature drops and stays low all winter, such as Austria and Germany, total insulation is the correct thing to do, however old the house. You do not have the humidity or changes in temperature. It is an important point for us in this country to consider when talking about insulation. Local authorities probably know that very well in local areas, particularly where the temperatures very much vary. Just as with roads, we have to allow for changing temperatures in this country, and we treat them in winter quite differently to the approach in central Europe, and that applies to housing.
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Lord PalmerCrossbench- Quote
- The noble Lord, Lord Teverson, made many extremely good points. One or two things about the amendment slightly worry me. Having just put in an eco carbon-based system in my house in the Borders of Scotland, I am still slightly fussed about the muddled thinking that there is on what carbon saving is and what the right thing to do is. Perhaps we need a little more explanation on the right thing for the right house. Obviously, on a new build, one would have to go through the pros and cons of a geothermal basis or an air source pump. I am slightly worried that we all should be much better educated on the right thing to do in the right zero-carbon situation. On the whole, this amendment makes enormous sense. I agree with the noble Baroness, Lady Carnegy. Certainly, living in the type of house that I live in, one needs the odd draught to keep the air circulating throughout. By and large, I support this amendment.
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Lord Jenkin of RodingConservative- Quote
- This amendment strikes me as pretty ambitious, if I may put it in that way. One should bear in mind the parallel with the Government’s proposals for eco-towns, which all sounded very splendid when they first came out. However, one now reads reports from planning officers, experts and others, and one headline, for example, states that “An eco-town on a greenfield site is inherently unsustainable”. One has to be extremely careful and think these things through before putting them on the statute book. I suspect that eco-towns will be dealt with in the Planning Bill rather than here. But that is just an example of unintended consequences. While I admire the ambitions of the noble Lord, Lord Teverson, in this regard, perhaps they are a bit unrealistic.
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- 15:45
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Lord BachLabour- Quote
- I congratulate the noble Lord, Lord Teverson, on drafting this very interesting amendment. In many ways, it is extremely tempting, but on behalf of the Government I have to resist that temptation for reasons he may well understand. I thank the noble Baroness, Lady Carnegy, for her comments, particularly those about old houses and condensation. It only goes to show that nothing is simple in this field. Amendment No. 63C seeks to add a new clause to the Bill, introducing very imposing and, as has been rightly described by others, ambitious targets to reduce carbon emissions from any new dwellings to net zero by 2012 and to require the installation of renewable heating systems in all new dwellings built after 2010. On a longer timescale the amendment also seeks to improve the energy efficiency of all existing domestic, commercial, public and industrial buildings. The noble Lord, Lord Teverson, is right. This is a crucial and vital agenda. One can understand absolutely the sense of urgency in his amendment and in the way in which he moved it. The phrase was used that he was aiming in the right direction, and we agree. He mentioned the figure of 27 per cent. It is true that emissions from the domestic housing sector account for around that sum in the UK and emissions from the non-domestic sector are around 18 per cent. The decarbonisation of the built environment is an essential part of the transition to a low-carbon economy, and to meeting the Government’s long-term emissions reductions targets in 2020 and 2050. The noble Lord made the point that energy efficiency is not in this Bill. We, of course, agree that saving energy is critical to the success of climate change policy and energy security policy, but we do not believe that we need new primary legislation to achieve this, which I think he rather anticipated that I would say. If it is not necessary in a Bill, it is right that the Government should not put it in just for the sake of it. We cannot support the amendment for a number of reasons. Before I explain our position, perhaps I may briefly outline what we are already doing to reduce emissions from our homes and buildings. As the Committee will know, in 2006, we set out a 10-year timetable towards a target that all new homes will be built to zero-carbon standards. This will be achieved through a step-by-step tightening of the building regulations in 2010, 2013 and 2016. It is our ambition, too, that all new non-domestic buildings be zero-carbon. Both these issues will be the subject of government consultations soon, and I will come back to that. We recognise that targets are not enough. We have made it mandatory from 1 May, exactly two months ago, for all new homes to be rated against the Code for Sustainable Homes. The Government have also introduced a stamp duty land tax relief scheme available to zero-carbon homes built today. These measures will increase awareness, at least, of the importance of energy efficiency in new homes, and give both developers and buyers the incentives to make the upfront investments in low-carbon homes. We realise that just to focus on new homes is not possible; indeed, the big prize in terms of carbon savings will come from the existing stock. Our estimation or expectation is that by 2050 70 per cent of the housing stock will already be in existence today. That is why we have introduced an ambitious package of measures across all sectors to reduce energy use. We will hear more on this later, of course, but the carbon emissions reduction target between 2008 and 2011 will lead to some £2.8 billion investment by energy suppliers in the energy efficiency of households. But there is still scope to do more across all sectors, hence we will consult later this year on the potential for further energy efficiency measures, especially in the existing housing stock, with our intention to introduce policies so that every sector of the economy benefits from energy efficiency. The noble Lord said that the Government needed to do more to drive household energy efficiency, and we agree with him; we know that we need to do more, both to enhance delivery of existing schemes and to introduce new policies, if we are to meet the challenging energy and climate targets that we have set ourselves. That is why the Prime Minister announced last week, via the renewable energy strategy, a review of energy efficiency, with a public consultation this autumn and a revised energy efficiency strategy to be published in 2009. Why can we not support the amendment? First, accepting the amendment would be premature. We will consult on how to achieve the target for all new homes to be zero-carbon from 2016. This consultation will include a definition of what developers will have to do to build zero-carbon homes, for example, including the extent to which on-site renewable generation will be required. This is a very important issue; the definition must be ambitious but also achievable. For example, some dwellings, such as city infill, have only a limited capacity for on-site generation, so too strict a definition could effectively preclude such developments, which would be undesirable from a social and indeed environmental perspective. To put our target in legislation before we have fully considered the practical implications could lead to unintended consequences and, in fact, a constraint on our actual ability to deliver affordable and sustainable housing. I think that the noble Lord, Lord Jenkin, hinted at that point, although I cannot for a moment accept his comments on the proposed eco-towns. I am extremely disappointed to see that the Opposition—not the noble Lord, but his Front Bench—have just changed completely in their attitude towards such towns. I am interested to know where the Liberal Democrats stand on that issue, too. We believe that the amendment is unnecessary. When I first got to my feet, I said that we saw the zero-carbon homes target being achieved through a progressive tightening of the building regulations. These are made under powers provided by the Building Act 1984. Therefore, the statutory underpinning for this initiative is already in place. Our third reason is that our 2016 target is pretty ambitious and, indeed, world-leading in terms of the pace and scale of the challenge. It is not to be underestimated. Such a revolution in building design requires new mindsets, new technologies, new markets and new supply chains—changes that we are already seeing due to the ambition of that target, but these changes cannot happen overnight. The amendment reduces by nearly half the time that we believe is realistic to allow for such developments to take place. Again, we fear the practical consequences that this may simply increase the costs—a point made by the noble Baroness—and reduce the actual delivery of zero-carbon homes. We must be particularly careful to avoid short-term measures that impose unnecessary costs, particularly in the current economic climate, where the building and housing sectors are already facing significant problems. The construction industry, to its credit, has so far broadly supported the 2016 target and has engaged, pretty actively, in the forthcoming consultation. But we know that they are of course concerned about the additional costs. As the noble Lord, Lord Teverson, might agree, it is indisputable that the upfront costs of zero-carbon buildings are high. It is estimated that a home rated level 6 on the Code for Sustainable Homes could cost as much as 10 to 20 per cent more to build than homes built to the current building regulations standards. When rapidly increasing our policy ambitions, we must not lose sight of this. I move briefly on to the other elements of the amendment. We also have concerns about the mandating of renewable heating systems in all new homes from 2010. This is a pretty restrictive requirement to impose in such a short timeframe. As I have said, the Government set out in the renewables consultation last week measures to promote more renewable heat, but everyone knows that this is a complex issue. Unlike electricity, there is no single market where heat is bought and sold. Indeed, the heat market primarily consists of suppliers of fuels, equipment and services. Different heat technologies, both renewable and low-carbon, carry different practical and cost issues. For example, some renewable heat technologies, such as biomass, come with significant other sustainability considerations in terms of supply and air quality, as the Committee has heard, and are not appropriate in all homes or locations. Consequently, we think that it would be inappropriate to impose such a blanket requirement as this amendment. Finally, I cannot support the requirement to introduce a programme to upgrade existing domestic, commercial, public and industrial buildings to a minimum energy efficiency rating of B within a 10-year period. We know that we need to make substantial reductions in the carbon footprint of existing buildings. We have a series of existing policies to achieve this—I have mentioned CERT and let me mention the carbon reduction commitment too—and we will consult later this year on the potential for further measures. Following that consultation, action in the household sector will be taken forward in a low-carbon homes strategy to be published next year with additional action in other sectors taken forward separately. We think that to set a requirement in the Bill that all buildings should achieve a B rating sets a challenge for which we do not yet have an evidence base, and may be overreaching in terms of ambition, cost and the intrusive policy measures that would be required to reach such a target. The reality is that the options available and the costs are totally dependent on the nature of the buildings in question, so to apply a one-size-fits-all standard in all situations is not appropriate. Before I sit down I refer noble Lords to the report Home Truths: A Low-carbon Strategy to Reduce UK Housing Emissions by 80% by 2050. That report, published by the University of Oxford’s Environmental Change Institute, called for radical action to achieve an 80 per cent reduction in UK housing emissions, but even it only suggested an aim that no house should have an energy rating less than D by 2050. Although I cannot accept the amendment, I am very grateful to the noble Lord for allowing a discussion to take place around this vital subject. I hope that I have been able to explain the importance that the Government attribute to these issues, but equally why we feel that the amendment cannot be supported. Instead, we believe that our targets and consultations are the preferable place and opportunity to take forward this very important debate.
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- Lord Jenkin of RodingConservative
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- Before the noble Lord, Lord Teverson, responds, perhaps I can ask the Minister a question. He referred to the consultation papers that are coming and also to the fact, which is often omitted, that these things involve costs. Many of these green initiatives make things more expensive. Can he assure us that the consultation papers will do their best—I recognise his argument about the one-size-fits-all concept not being appropriate—to indicate the costs of the measures? How much more expensive will a house be, and how much more expensive will it be for the occupiers of a house who will have to incur the necessary capital expenditure? Without that coming into the equation, it is very difficult to judge the validity of the policy.
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- Lord BachLabour
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- We agree with the noble Lord. I am advised that the consultations will include information on the costs and benefits.
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- Lord TeversonLiberal Democrat
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- I thank the Minister for his reply and other noble Lords who have contributed to this debate. This is a key issue. Perhaps I could respond to a few of the comments. In response to the noble Lord, Lord Jenkin, I say that this amendment tries to do exactly the opposite to what eco-towns are trying to do; it is trying not to apply perfection to a limited number of instances dotted around the country, but to mainstream and roll out these standards within existing and living communities. I see it as the antidote to the eco-town syndrome. That is one of the main reasons for putting it this way. As regards costs, I do not in any way minimise the issue. In Committee, it is probably in order to have an “ambitious” amendment. Through the debate that we have had, one can reconsider how the amendment might be written for a further stage. I point out that, following on from other work, on page 286 of the government White Paper is what is known as the marginal abatement cost curve. It gives all the different technologies and how they are able to help as regards energy, particularly in carbon reduction. A number of them are negative costs: they have positive benefits rather than being costs themselves. Three of those—the largest in terms of savings—happen to be standard insulation, domestic heating measures and solid wall insulation. All those are known as negative costs. It cannot be beyond the wit of the financial community to find ways in which we can financially engineer those to make sense as regards today's capital costs, whether that be through green mortgages, council tax, property tax, benefits or what I want to see in the longer term, which are revenues from carbon auctions. I agree that the costing is an issue, but there are ways around that and the benefits and the paybacks are good. That graph was probably created when oil prices or energy prices were half what they are today. I understand the Minister’s issues around existing and future legislation, but there is no better way of putting your actions where your mouth is than to put them in the Bill. I understand the issue about condensation. In my area of the far south-west we have issues such as radon gas. We have to ensure that properties are well ventilated for all sorts of reasons. Again, the technology allows ventilation as well as thermal efficiency. Through building regulations and technology, I think that can be done. I thank the Minister for his long and quality reply. This is a major area that has to be tackled far more seriously and in a far more focused way by the Government to meet their own targets. I will consider whether a less ambitious amendment might be more suitable for Report but, in the mean time, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. Clause 80 [Energy reports]: [Amendments Nos. 64 to 66 not moved.]
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- Lord Jenkin of RodingConservative
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- moved Amendment No. 67:
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Lord RedesdaleNon-affiliated- Quote
- We on this side of the Committee support the sentiment of the amendment. Why are the Government keen to remove Section 172 of the Energy Act 2004? Are they trying to cut costs by doing so at this stage? The report is extremely valuable. Security of supply has changed year on year, and can change month on month, particularly with gas. I am reminded of a situation two years ago where LNG tankers from Qatar were redirected to America due to contractual obligations; that had a definite effect. Looking at the long term means dealing with short-term fluctuations in the market, which is where the report has been extremely useful. Is the provision just on the basis of cost, or will the information be made as readily available in other formats?
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Lord Davies of OldhamLabour- Quote
- I can be reasonably brief. First, the response to the last question is exactly as the noble Lord suggested—other formats for reporting. We recognise the obligation for a report. I reassure the Committee that there is no intention to renege on that commitment, or to avoid reporting on security of supply. We want to do it another way and, in some respects, are now doing so. As the noble Lord, Lord Jenkin, indicated—and I also recall the heady days of 2004—the European directives which were implemented after Section 172 had been agreed by both Houses. We knew that we would be under the obligations, because the directives had been drafted in 2003 but were not for implementation until later.
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- Lord Jenkin of RodingConservative
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- Perhaps I should have said “the draft directives”; I accept that.
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- Lord Davies of OldhamLabour
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- Yes. The noble Lord will recall that we spent many long hours on the passage of the Energy Bill 2004. As he identified, there was considerable debate about the now Section 172. The Government accepted the need for it, despite knowing that the European directive would need implementation shortly afterwards. Of course, the intention of removing Section 172 is not in any way, shape or form to dilute the Government’s obligation to report on the security of energy supply. We merely seek to simplify and streamline the statutory reporting requirements. There have been a number of developments since Section 172 was created. First, we are now required by Article 5 of the EU gas internal market directive and Article 4 of the EU electricity internal market directive to monitor gas and electricity security of supply issues and publish reports. These reports are required annually for gas, and every two years for electricity. The Section 172 requirement largely duplicates this EU requirement, and we consider it to be overtaken; we are not in any way, shape or form diluting the obligation. We are pleased to see this amendment, because it demonstrates that the information now provided in the Energy Markets Outlook and to other sources is of great interest, relevance and importance to the industry. We are well aware of the industry’s anxieties in these areas, which the noble Lord has reflected. I reassure the Committee that we intend to continue to fulfil the requirement of reporting. Our intention with this clause is simply to streamline statutory reporting requirements, removing unnecessary duplication and creating a framework for reporting that is less prescriptive and more responsive to need. Although I do not think that we need Section 172 of the Energy Act, I have listened to what the noble Lord has said this afternoon with the greatest care. In view of the strength of feeling with which he backed his amendment—and we are aware of concerns in the industry that a statutory requirement should remain—I am prepared to take this amendment away and consider it further. He will recognise, therefore, that we are at one with him on the obligation. It is how we succeed in achieving that obligation that is important.
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- Baroness Carnegy of LourConservative
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- I am sure that my noble friend—but not only him—will be cheered. This is a great relief. The Government seem to have a sort of reflex whereby they never seem to want to report anything to Parliament that we suggest. There is probably no issue about which people are going to be more anxious in the years ahead than whether we have a secure supply at any given moment. Once a year is not too frequent for this. It is a great relief that the Minister is doing this, as I thought for a moment that I was going to have to get up and be very cross indeed, instead of which I am delighted.
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- Lord Davies of OldhamLabour
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- I had anticipated that the noble Baroness might rise and be cross, so I was very eager to try to assuage her before she spoke.
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- Lord Jenkin of RodingConservative
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- The Minister was extremely kind. He said that he would take this away again and look at it. I could not ask for more. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. Clause 80 agreed to. Clause 81 [Power to amend licence conditions etc: smart meters]:
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- Lord RedesdaleNon-affiliated
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- moved Amendment No. 68:
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Lord De MauleyConservative- Quote
- I wish to speak to Amendment No. 69. The virtues of smart meters were well explained by the Minister in the other place. They were manifold: giving consumers better information to help manage their energy use; providing more accurate bills; and wider access to different tariffs. The Minister even noted that: “Smart meters … have the potential to contribute to the future development of the energy services market”.—[Official Report, Commons, 30/4/08; col. 333.] The concession in the other place on smart meters was welcome. However, I want to be very clear on the following point: the government concession on smart meters is welcome only in so far as it goes. It needs a timeframe; without one, there is no imperative for the policy to get off the ground. I am grateful for the comments of the noble Lord, Lord Redesdale. It is typical of Government to seize a good idea, pursue it only up to a point, and then omit the factor that will deliver the goods. Not having a timeframe is a poison pill to these proposals. The fact that the Government have put into law that they will do this eventually is simply not enough. The technology for smart meters has been around for some years. What is needed is a firm directive on a transparent timescale. If the Government expect industry to get on board with rolling out smart meters, it is essential that the industry participants know when they will be expected to act. Clear direction is vital. The Minister will surely appreciate that businesses’ plans will have to be formulated to incorporate the new clauses which the Government have introduced. Yet without knowing when those powers are to be used, businesses will not be able to budget for the future. Without that direction, a smart metering policy is, as I have said, at risk of falling apart. If the Government want to take action, they should be clear about when they will do so. Now that the House is in agreement on the virtues of smart meters, why should there be any delay? We expect that there will need to be further consultation on the exact way in which smart meters will be rolled out. One year should be more than ample to discover such methods. Our Amendment No. 69 would mandate the Secretary of State to use those powers within one year, giving the necessary direction to industry to get the ball rolling towards universal smart meters. I would like to pose the first of two questions to the Minister. Will he give a clear undertaking that these powers will be used within one year, or indeed give a firm commitment to industry and accept our amendment? As I mentioned before, it is satisfying to see the Government beginning to take steps towards a smart-meter policy yet, without clarification and some courage, we fear that those devices might never reach the people who stand to benefit from them.
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Lord O'Neill of ClackmannanLabour- Quote
- I am a little surprised by the promotion of both of these amendments. From what the two opposition parties have said, as yet we do not know how many meters are required. I would have thought that would be the first thing that we should be told. My understanding is that there are something like 24 million domestic households in the United Kingdom—perhaps not; let us say that there are 18 million gas meters and 24 million electric ones. That is what we are talking about. I was working on the basis of 25 million. Let us say it was 25 million: over 10 years that is 2.5 million a year, which is 50,000 a week and 7,000 a day. I am not sure that, at the moment, British industry is geared up to do that kind of work.
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- Lord RedesdaleNon-affiliated
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- We have—
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- Lord O'Neill of ClackmannanLabour
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- I would like to finish the point. If the noble Lord wanted to make an adequate speech, he had the chance. My point is that, at the moment, the Energy Retail Association members have been arm-wrestling among themselves for the best part of about nine months and have failed to come up with a scheme to which all their members will sign up. The utilities do not really know what they are doing and at the same time are continuing to install the old meters because they need to be put in for safety purposes and other reasons. We have a problem but it is rather complex. Do we start at the end we have just arrived at where there are new meters, do we go to the oldest ones, or do we go to the ones in between which are just about to be done? Each company has a different set of priorities; each has a different set of ambitions about where they want to start and how they want to do it. Therefore, at the moment, it is very dangerous—
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- Lord RedesdaleNon-affiliated
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- All sides of the House have been lobbied on this by the major retailers and suppliers. They cannot decide what to put in until the government consultation, which will decide what type of meters are to be put in, has taken place. Nobody would risk putting in meters that might not meet whatever is set out in the government consultation. The noble Lord made a point about 7,000 units being put in a day. The industry does not think there is a problem with installing all the meters; it is a question of when it is going to be given the go-ahead to start that installation.
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- Lord O'Neill of ClackmannanLabour
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- I still come back to the point that I made earlier: noble Lords may have been lobbied, but they should ask the people doing the lobbying how they want to do things. We no longer live in a state-capitalist society where the Government lay down doctrines. They may lay down doctrines about safety and supply, but not about detailed issues of the kind suggested. At the moment, as far as I understand it, the Energy Retail Association is at sixes and sevens on this, not because the Government have not told it what to do, but because the individual utilities cannot decide on the priorities or the kit, and at this stage they cannot make a unified expression of opinion to the Government about what they recognise as the best kit. I have been extremely inadequately lobbied by some of these people. The Government may well have to grab them by the scruff of the neck, but plucking figures out of the air at this stage is very dangerous. Equally, we have to have an idea of whether we are doing gas and electricity and whether people want workmen traipsing through their homes to do both at one time, which will have to be the case in a number of houses. If we are enjoying the benefits and discounts of dual billing, I imagine people would like to have both meters smart simultaneously, but I am not sure whether gas is as easy to be smart with as electricity. This subject is a lot more complicated than this rather simplistic amendment suggests, particularly when neither opposition party has taken the trouble to try to give us any quantification of the scale of the exercise. We have been told that 7,000 may be possible a day. That is fine, but it is incumbent on them to deal with the quantum of this problem in a rather better organised way than they did in support of an amendment of this kind. In itself, it may be desirable, but in its present form it is not nearly well enough argued and does not have the specifics that we require.
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- Lord Jenkin of RodingConservative
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- It may be some time since the noble Lord, Lord O’Neill of Clackmannan, was in opposition, but he deludes himself if he imagines that an opposition party, with whatever advice it may get from experts, could conceivably commit itself to the details of a programme of this sort. What it can commit itself to is to saying that the most speedy advance of smart meters is something that should have a high policy priority. In government, it would rely on the advice that would be available from the department and the officials it would inherit to decide the best way. A great deal of work has been done. I thought that the consultation paper published in August last year was extremely good. It was immensely thorough and went into a great many of the issues. It is not surprising that as a result, the Government are taking a bit of time to decide what to do. There have been a number of things since then. The Minister, Malcolm Wicks, said: “I should say that our intention is to report our work on these analyses to the House by the end of the year”.—[Official Report, Commons, 30/4/08; col. 335.] If that is the Government’s intention, what is wrong with having 12 months from the passing of the Bill? If anything, that is a rather less stringent obligation. The noble Lord, Lord O’Neill, knows that. On talking to the experts, I was intrigued to find that the latest models can do both gas and electricity in the same meter. My immediate reaction was to ask, “What happens if there is a spark in one?”. “They can look after that”, they said. For those of us who have both gas and electricity, such a meter would obviously be an advantage.
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- Lord O'Neill of ClackmannanLabour
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- I am told that they can even do water as well. The problem is that it is too complicated. Too many things can go wrong. That is why people are very cautious about advocating even a dual-fuel meter.
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- Lord Jenkin of RodingConservative
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- I am perfectly happy to leave my water meter where it can be read by the people who come in. Whether eventually it could be read remotely is another question. There are huge advantages if we can move to this. I am impressed by the case made by the Energy Retail Association that this really is one of its highest priorities. It needs a mandate from the Government. That word is increasingly used and I suspect that the Government will eventually want to give one. It is not a question of detailing what should be done; there are arguments about whether each region should have a monopoly supplier. I would be opposed to that, but let us hear all the arguments. Certainly there should not be single designs and that sort of thing because the market is very capable of producing innovative designs, as indeed it currently is. Before anybody can move ahead, a mandate that this has a priority is needed from the Government. The letter I had from Ofgem talks about managing trials of smart meters in more than 15,000 households. My electricity supplier asked if I would join such a trial. Do you know what happened? Because my electricity meter is available for the meter reader in a cupboard on my porch I was told that I could not take part. I wrote back and said, “Why on earth not?”. I think they probably thought their meter was going to be too valuable and might be nicked. I am not sure that I would want to try to nick somebody else’s electricity meter; it might be rather dangerous. I was disappointed not to be able to take part in the trial that had been offered. These things are happening. If the Government give a mandate and there is a swift advance in the introduction of smart meters, that that will have enormous advantages for consumers, and not just through having an instant reading and a dial which can tell them what is happening. It is far more than that; it is being able to have a lot more sophisticated supply arrangements, remote readings and a whole range of things like that—I will not go into all the details. But it does seem to me that, putting it rather crudely, the Government have got to get on with it. That is what my noble friend on the Front Bench is asking for in the amendment, to which I put my name. We must have the Government’s response to this within 12 months of the Bill becoming an Act. Given what Mr Wicks said on Report in another place, I should have thought that this was something the Government would be perfectly prepared to accept. It may not be properly drafted, but it seems to me that it is perfectly proper for Parliament to ask for this. I support the amendment.
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Lord OxburghCrossbench- Quote
- I, too, support the amendment, primarily for the reason I gave at Second Reading that I feel that one of the major criticisms of the Bill is the lack of a sense of urgency. I take the point of the noble Lord, Lord O’Neill, about the precise date of what can be done by a particular time. If the amendment is carried and if it is necessary at a later stage to put in a different date, so be it. It is worth bearing in mind that the new smart meters are likely to be significantly less expensive and faster to fit than the conventional meters we know and love. Finally, it is worth pointing out that the provision of smart meters has an important bearing on another part of the Government’s, and I hope the country’s, agenda—identifying fuel poverty. One can see in real time what is not happening and take action.
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- Lord TeversonLiberal Democrat
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- The prepayment issue in Northern Ireland has been largely solved with regard to the excess charged to prepayment consumers, most of whom are the least well-off in society. That is one of the most important issues.
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- Lord Davies of OldhamLabour
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- I am grateful to all noble Lords who have spoken on this important issue. We recognise that the Government are under pressure to get on with it, but getting on with it is part of this legislation. If the noble Lord, Lord Jenkin, will forgive me, there is a difference between getting on with it and the Government’s ability to progress with this as rapidly as we are able, bearing in mind the difficulty of the task, and writing into the Bill time constraints that may not be entirely realistic. What my noble friend Lord O’Neill, said is absolutely right. There are real complexities and massive costs involved in this issue. I want to identify that the Government are at one with those who emphasise the potential gains from smart metering. We are able in certain instances to identify those gains and we intend to act on them forthwith. But we are less certain about some aspects of the wider propositions involved in these amendments, and we are asking the Committee to recognise the Government’s inevitable caution around some aspects that the Committee is asking us to consider under the amendments. The amendments specify in legislation a 10-year period for a smart meter rollout, including domestic customers—and of course this is a crucial issue. From the many contributions on the issue during Second Reading, we were clear that there was agreement about the potential benefits of smart meters for both consumers and energy suppliers. Of course, the government response indicated our awareness of that fact, which is why we set out our expectations in relation to smart meters in the energy White Paper last year. We have worked since towards a decision point. I am responding to those who in their contributions this afternoon have stressed the issue of urgency and that a decision is necessary. Later this year we will look at the issues of full rollout, including the domestic sector. But I hope that the Committee, following the speech of my noble friend and bearing in mind the points that I shall now make, will not underestimate just how complex, challenging and costly a rollout of smart meters to all energy consumers would be. Before I turn to the specific amendments, which I shall deal with in some detail, I shall respond to the point that the noble Lord, Lord Redesdale, made—that it is about time that the Government set out their position on the question of smart meters. As the noble Lord, Lord Jenkin, said, we have all been involved in some very intensive analysis ever since the consultation paper, to which he kindly referred in generous terms, was presented last year. Our analysis has confirmed that there is a positive business case for proceeding with smart metering for the medium-sized business sector. Of course, we made provision with reference to that in the 2008 Budget—that we would mandate the rollout over the next five years. We will consult on the draft modified licence conditions shortly. Once that process is complete, the Bill will underpin that rollout. That is action this year, taken on the basis of the budgetary position that we established for the medium-sized business sector. That involves 210,000 meters—a sizeable number. But the commitment is there.
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- Lord RedesdaleNon-affiliated
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- I take on board what the Minister is saying about the commitment. That commitment was given, but it is not a statutory commitment in the Bill. Clause 81(5) states: “The power conferred by subsection (1) may not be exercised after the end of a period of 5 years beginning with the day on which that subsection comes into force”. If you read the analysis of the Bill, which is the statutory requirement, it means that the whole process might not start for five years from the enactment of the Bill, and that is a considerable worry. Perhaps the Minister can say that it is not the intention of the Government to use that entire five years but, in the statutory provision, five years is what the Government are giving themselves.
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- Lord Davies of OldhamLabour
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- Five years is not a constraint; it is a period within which action will be taken. I am indicating to the noble Lord the steps that we are taking regarding the medium-sized business sector, so that we can be in a position to progress quickly, as the Committee is suggesting. I emphasise that the issues are infinitely greater than that, particularly when it comes to the domestic sector. There is a case for a rollout of smart meters to small business. This is a complex area, and it is necessary that the Government do the analysis thoroughly because, as the noble Lord was generous enough to recognise when he proposed the amendment, there are substantial costs involved. I will indicate our version of those costs, which I assure the noble Lord is not to minimise the problem. Our initial analysis of the costs and benefits, which is in the process of being tested, includes further work with stakeholders to ensure that it is robust, before making final policy decisions. Again, the powers in this Bill would underpin this rollout, should we proceed. Regarding small business, we are talking about 2.4 million meters, and 210,000 meters for medium-sized business. In answer to the estimates that my noble friend Lord O’Neill gave when he was identifying the dimensions for the domestic sector, we consider that there would be 47 million meters involved, affecting every home in the United Kingdom. The difference between that and the 170,000 electricity meters and 40,000 gas meters that are needed for medium-sized business are obviously enormous. On our present analysis, there is not a positive business case for proceeding with a domestic rollout. The current estimated costs for domestic rollout are in the range of £8 billion to £14 billion over 20 years, and there is uncertainty about the expected benefits. By any stretch of the imagination, those are very substantial sums of money indeed. That is why the Government are right to proceed with that necessary caution, which involves us in doing a full cost-benefit analysis of those concepts.
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Lord Campbell-SavoursLabour- Quote
- There might be a counterargument that if the cost falls to the consumer, they might well reduce consumption because the meter helps them manage their energy consumption more efficiently. Costs falling on the consumer might be offset by the savings that they make on energy; it could be cost neutral.
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- Lord Davies of OldhamLabour
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- Of course. We hope that full analysis proves that that is so, so that substantial sums of investment may be called forth to meet the objective. However, with such substantial sums involved, and my noble friend’s contribution being a hypothesis rather than a taken fact, it is only right that the Government subject it to serious analysis. When we talk of the benefits of any rollout and the meters, we are taking his point into account: there may be greater energy efficiency because individuals becoming more aware of the costs will moderate their use accordingly.
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- Lord TeversonLiberal Democrat
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- Page 286 of the Minister’s own White Paper has a marginal abatement cost curve, which specifically points out real-time displays in households. I presume that they are smart meters. I cannot show it here, but abatement costs are below the line: the Government declare it to be a positive return in this paper, whereas offshore wind is hugely more expensive per ton of carbon. Again, however, this is all against the energy crisis of a year ago—but from what I can see of it, the Government have already argued our case.
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- Baroness Carnegy of LourConservative
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- Has it occurred to the Government that there will be a different view from consumers as the high cost of energy continues? Companies may well find that consumers want to buy these meters because they will save money and will find it enormously helpful. The noble Lord, Lord Campbell-Savours, is absolutely right: this will be a big issue and the Government are not up to speed on it at all. We are getting a very laid-back reply. There may be an argument against 10 years; I am not in a position to know that. However, the companies will be alert to this and want to do it as quickly as possible. They are also less likely to have bad debts with smart meters; they will get their money more easily, which would be another imperative.
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- Lord Davies of OldhamLabour
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- The noble Baroness must accept that if I have a little difficulty in accepting my noble friend’s hypothesis in its entirely, I am saying that it must be tested. That is the work that the Government have done. By extension, we are bound to have even greater necessity for analysing whether some of the costs might be paid by the householder, who would see the benefits of paying for the meter. That would be an additional step in the analysis of the economic case. I say to the noble Baroness that we have not completed all this work. The Committee must recognise that this is an exceedingly complex area, which the Government must get right. We are persuaded of the cost-benefit analysis for medium-sized business and intend to proceed on that as quickly as possible. I have indicated that small-sized business is a much bigger problem, and we have further work to do there. The costs involved for the domestic user, however, are enormous. Before the Government can commit to a programme of billions of pounds, we must be as certain as possible of the proposal’s cost-benefit analysis. That is why intensive work has to be done, particularly against the background of high energy prices. It is right that, with the costs involved, the Government should ensure that they have the nation’s confidence in rolling out this programme, rather than back-of-the-envelope calculations.
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- Lord RedesdaleNon-affiliated
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- The Minister makes a reasoned case. However, we are not just talking about the costs to the consumer. One great benefit of smart meters—and of course it is an issue about the type of smart meter that has caused such controversy—is that there is enormous benefit to the supplier in producing them. All those people who knock on your door on a regular basis at inconvenient times because they know you are going to be in at that point—it always happens when I am bathing the kids—will no longer have to go from door to door. That is a massive saving and cost benefit to the companies. But it is not just a cost benefit to the companies. As the Minister says, there is then a value in that, if they are taking that cost base out of the equation, the cost is not then passed on to the consumer who buys the electricity supplies.
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- Lord Davies of OldhamLabour
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- The noble Lord is right. He will forgive me if I do not try to reply to the debate by listing the potential benefits that the Government have analysed so far. Without figures that would be meaningless. Any lists that I provide to the Committee would not be exhaustive, such are the fertile minds of a number of noble Lords. I am bound to be open to that challenge. I merely say to the noble Lord that surely he can recognise that with the magnitude of necessary investment regarding the domestic rollout, the Government have to ensure that their cost-benefit analysis on the potential product is as adequate as possible, given all the uncertainties involved. We have initiatives which are helping us. The Energy Demand Research Project will complete its work in November of this year. We would not conceive of being able to reach a decision on these issues until that report has been considered. I owe both noble Lords the courtesy of addressing their specific amendments. There was bound to be a contextual debate about this very difficult issue. I hope that I have clarified some of those issues, while indicating that the Government are considering these matters as the Committee in broad terms suggests, although the amendments are rather more ambitious and contain dimensions which I am not prepared to accept. Amendment No. 68 seeks to ensure that licence modifications must take effect within 10 years of the Act being passed. Amendment No. 69 seeks to specify a 12-month period within which regulations must be made and to ensure that a domestic rollout of smart meters takes place over 10 years. As I have indicated in my earlier remarks, I am not unsympathetic—far from it—to the objectives. The Government share the broad proposition that, if we can introduce smart meters, there are potentially considerable gains. We have a large programme of work under way to examine exactly the kinds of issues raised by the amendments. I hope that the Committee will agree that we cannot proceed on just the belief that the benefits are bound to outweigh the costs. We must have more than just a belief; we must make this decision based on real evidence.
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- Lord RedesdaleNon-affiliated
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- The Minister said “later this year”. Does he have a timeframe for that? We will be in the autumn before we come back to some of the issues, and it may be that these decisions will have been taken by that time.
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- Lord Davies of OldhamLabour
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- From all the discussions I have had with officials, I think that that is somewhat unlikely. Some of the studies will not be completed until the autumn, so when I say the end of this year, the noble Lord had better think a little bit beyond the end of the passage of the Bill.
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- Lord RedesdaleNon-affiliated
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- I thank the Minister for his response—but maybe I should qualify that, because I thought that smart metering was a foregone conclusion and we were moving forward. I believe that it will be, because the opposition parties have signed up to it and it will be in the manifestos for the next election—although it would take a crystal ball to see the result of that. The Minister pointed out the difficulties associated with the consultation process, which we do not underestimate. The noble Lord, Lord O’Neill, gave the impression that we somehow thought that this is a very easy matter of just taking the meter out of the box and installing it. I have been to a vast number of meetings, as the noble Lord probably has, looking at all the different options for what might be available within the cost ratio being looked at for smart meters. We believe that a timescale is important because it will have a massive effect on the cost implications and the cost benefits, which should not be underestimated, not just in cost to the consumer but in carbon saving, which was a major part of the Climate Change Bill and is another strand of government policy. I plan to come back to this issue at a later stage of the Bill. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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- Lord RedesdaleNon-affiliated
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- moved Amendment No. 68A:
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- Lord Jenkin of RodingConservative
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- I certainly see the case for the first paragraph of the amendment. There is clearly an anomaly. As the noble Lord, Lord Redesdale, has said, if gas suppliers and shippers can be compensated for stranded assets—that is, those that must be replaced before their life has expired—that would be something. However, the people who will do this are described as the “transporters”: those who transport the gas from the suppliers to the consumers. If the clause is to have the effect that the Government intend, that is an important amendment. While I understand the case made for the second paragraph, I have already indicated that I dislike the regional franchise model on the whole. There may be some initial cost savings, but anything that smacks of a regional monopoly—which it would—would be a recipe for increasing slackness and a lack of proper competitive pressures. I accept that it may still be a model, in which case a paragraph is probably necessary in order not to rule it out. In suggesting, therefore, that the Government might be wise to accept the second paragraph, I would not like it to be thought that I am automatically supporting a regional franchise model. There may be some difficulties with that.
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- Lord BachLabour
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- I am grateful to the noble Lord for his amendment, which touches on what I agree are two important areas for any future rollout of smart meters: stranding and the choice of market model for a rollout. The first part of the amendment deals with stranding, which will occur in any smart meters rollout that is taken forward faster than on a new-and-replacement basis. As has been said, it would mean that existing meters would need to be removed before the end of their usual life cycle. There would be costs to both suppliers and meter providers. The wording of the first part of the amendment makes explicit provision for the Secretary of State to amend licence conditions to raise a levy from gas transporters or electricity distributors which can then be paid to other licensees to compensate them for the cost of stranded assets in the event of an accelerated smart-meter rollout. It goes almost without saying that this is a complex issue, which we are closely examining with industry. As we discussed during the previous debate and as the Committee knows, we have not taken final decisions on whether to roll out smart meters to the domestic sector, and if so at what speed that rollout should happen. It is therefore not clear at this stage what the potential value of those stranded assets may be, as they will vary according to the specific details of any rollout and, in particular, the speed of the rollout.
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- Lord O'Neill of ClackmannanLabour
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- Perhaps not today, but before we return to the topic, will my noble friend try to find out what the European experience is with this? Northern Ireland has been mentioned, but I am not necessarily saying that that is the best area to choose, because it has historically had high domestic energy prices. My understanding is that the Italian electricity system has gone through this process comparatively recently. There seems to be a sense being conveyed that the UK is trying to start from first principles and go through this in a painfully slow fashion, whereas we may be able to stand on the shoulders of others, see what they have done and perhaps save a bit of time. Maybe by the time we get to Third Reading, when I am sure that there will be debates of this nature, we could, either through the Library or by a letter in advance, have some indication of what other European countries of a similar size and economic development to our own have gone through to secure a system of smarter metering than we currently have.
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- Lord BachLabour
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- I am grateful to my noble friend. As always, his suggestion is very helpful. I will write to him and to other Members of the Committee with some analysis of what has happened elsewhere in Europe, so that our opinions can be changed, if necessary, by what we read. I hope that might be ready by Report, let alone Third Reading.
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- Lord Jenkin of RodingConservative
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- Before the noble Lord withdraws the amendment, I have a question for the Minister. The people I have spoken to about this seem fairly clear that there is a legal problem. The noble Lord said in his reply that the Government are satisfied that there is not a problem and that it is covered by Clause 81(3)(k). Will he give an undertaking that he and his officials will once again go over the ground and make sure that there is not a gap here? I am thinking particularly of stranding and of the question of gas transporters. People seem to think that there is a gap.
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- Lord BachLabour
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- I hope that my response did not indicate that we were absolutely satisfied about the legal position. We are still examining it, so the noble Lord need not fear. We are not there yet. We will share with the Committee and the House what conclusion we come to. There are still further examinations to be done across the whole field.
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- Lord RedesdaleNon-affiliated
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- The purpose of the amendment was to bring up the issues, and the Minister has said that he will look at them again. Due to the rather extended gap between Committee and Report, it might become clear at that point whether this is an issue. If it is, I might return to it. On that basis, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. [Amendment No. 69 not moved.]
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- Lord RedesdaleNon-affiliated
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- moved Amendment No. 70:
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- Lord Jenkin of RodingConservative
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- There is something to be said for the case made by the noble Lord, Lord Redesdale. Perhaps I can compare it with what happens now. I get electricity bills which cover a period in which there has been a change in the price of the electricity and I have yet to discover how on earth the company apportions my supply which covers a three-month period when there is a change of price half way. I have tried sitting down with a towel round my head to work it out. Not being a mathematician, I gave up. My wife positively refused to allow me to take it up with the company. I believe a smart meter would be able to answer that sort of thing at once. You would see exactly when the rate changed and what your reading was at that time. I quiver at “must”. I find that slightly difficult. As the Minister said, there is still a great deal of work to be done to be able to have an effective rollout of smart meters. Although I understand the case made by the noble Lord, Lord Redesdale, “must” brings a slight doubt into my mind.
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- Lord O'Neill of ClackmannanLabour
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- I almost have some sympathy with this amendment. We have to guard against overselling smart meters, particularly in relation to fuel poverty. Many people who find it hard to pay their bills find it hard to do many things, and putting them in charge of a mini-power station in their house might be a little more than some of them are capable of. The majority of people in fuel poverty are there because they do not have enough money, but there are some who just have difficulty managing their affairs. When we start to be too specific and use “must”, we are getting into dangerous waters. We need to be able to help people who have difficulty. It is like us trying to work things like video recorders without children or grandchildren about—I hasten to add that I do not have any grandchildren. Such things can be rather difficult. I can imagine the smart meter in the kitchen cupboard assuming the proportions of the remote control of the video recorder, or whatever. We have to be a wee bit careful about imposing too many “musts”. There has to be a bit of conditionality in this. That is not to say that we should not move quickly or that we should not make this as comprehensive as possible, but we have to take account of the difficulties that some of our fellow citizens might incur.
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- Lord Jenkin of RodingConservative
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- If the noble Lord acquires some grandchildren, he will find that they are the people who can really put him right on all this.
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- Lord OxburghCrossbench
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- The relevance of smart meters to fuel poverty is the alerting of the supply company to the fact that there is something anomalous there. The supply company now has the responsibility to look after this problem. One of their main concerns—and this is something that the noble Lord, Lord Jenkin, has drawn attention to on a number of occasions—is with identifying those in difficulty. I do not think that there is significant intent that the fuel-poverty family themselves have to do anything.
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- Lord Davies of OldhamLabour
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- I am grateful to noble Lords. I usually express gratitude at this point for the contribution of my noble friend Lord O’Neill, who is often extremely helpful. Let me just say that I was rather shocked by his suggestion that we would need our grandchildren to show us how to use our video recorders. I find that quite challenging; I am still teaching my grandchildren how to do it, so there is a reverse of that situation. But, as the noble Lord, Lord Jenkin, indicated, calculating the bills is a different matter altogether. We should address ourselves to that point. There is no question of the consumer’s rights being fulfilled if they cannot follow the position of caveat emptor because what is in front of them is incomprehensible. I am grateful to the noble Lord for eschewing the opportunity to discuss the wider issues of smart meterage again. I shall therefore concentrate on his amendment. Of course, we are in favour of supporting consumers to use the energy market to their advantage and switch to the best energy tariffs but, as the noble Lord, Lord Jenkin, said, that requires that they can identify those opportunities without excessive amounts of hard calculation. Of course, as we know, many consumers are already doing this; you have only to switch between energy companies at present to see that that occurs. There is no doubt that a smart meter can play a role in adding to the information and the readiness of the information for the consumer, which is a good thing. I am in favour of the principle, but I am against the technical function of the meter itself being placed in primary legislation. That seems a circumscription too far. As I indicated earlier, I seek to preserve some flexibility with regard to that, which is why I shall ask the noble Lord to withdraw his amendment. However, I reassure the Committee that in the event of a rollout of smart meters to domestic customers the intention would certainly be for each household to receive a visual display device. The display will provide the customer with the information about their energy use, enabling them to manage their energy consumption better. Customers will be able to use the information on the display to help to identify the appropriate tariff; it will indicate, too, what the noble Lord often emphasises—the amount of energy consumption. We are committed to the principle. What I am really not prepared to accept is this degree of technical detail in the Bill. I hope that the noble Lord will accept that response.
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- Lord RedesdaleNon-affiliated
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- The purpose of the amendment was to get the response the Minister made, because one of the problems is that we could end up with smart meters being rolled out in the locations where meters are at present, so people could not access them. That would completely negate any value that could accrue to people who wanted to use smart meters. I hope that in the consultation the cost-benefit analysis will take on board as a priority the positive benefits to the consumer as opposed to cost considerations about the unit, because without the information being available the meters lose many of their advantages. I love the asides in debates in this place. The Minister said that he is quite adept at using the video recorder. Perhaps I should mention that I recently gave a children’s party. We have a video recorder, but one of the young children had no idea what it was because the technology has moved on and it is not possible to buy them. We are dealing with the antiquated, which reminds me of the joke about the gramophone. I raised that because I thought it might strike people further down the line as quite amusing. The Minister made a serious point about the benefits of VDU displays being available and showing information so that people can switch between suppliers. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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The Deputy Chairman of Committees (Lord Haskel)Labour- Quote
- The Committee will adjourn for 10 minutes. [The Sitting was suspended from 5.37 to 5.47 pm.]
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- Lord RedesdaleNon-affiliated
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- moved Amendment No. 71:
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- Lord Davies of OldhamLabour
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- The noble Lord has anticipated almost everything that I have to say; I am going to ask him to withdraw his amendment. Simply, we must preserve flexibility. We do not know whether a medium-sized business might want a different specification from a small-sized business or from the domestic consumer. It may be, as the noble Lord says, that one size fits all, but we see no point in pre-empting that position. We want to maintain the necessary degree of flexibility, so I ask him to withdraw his amendment.
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- Lord RedesdaleNon-affiliated
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- I expected that response and, on that basis, I withdraw the amendment. Amendment, by leave, withdrawn. [Amendments Nos. 72 and 73 not moved.] Clause 81 agreed to. Clauses 82 and 83 agreed to.
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- Lord Campbell-SavoursLabour
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- moved Amendment No. 74A:
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- Baroness Carnegy of LourConservative
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- On the face of it, I like this amendment very much. It does a minimal amount in assisting the process by giving a timetable which is entirely reasonable, I should have thought, and almost necessary in view of the discussion that we have had. It is also saying what the minimum capabilities are that smart meters should have. It is not saying all the things that they should do, but saying what people will really want from the meters. If they can get the daily usage of energy, the total cost in the billing period and the cost per unit, that will help them very much indeed. There will doubtless be leaflets accompanying the companies to help them, but anybody can use a meter that does those things to tell them what they need to know clearly. I should have thought that even I could use such a meter, and I am not terribly bright with that kind of electronic device. I hope that the Government are interested in the amendment.
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- Lord PalmerCrossbench
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- I, too, support the amendment. The noble Lord, Lord Campbell-Savours, made a particularly good point. In this frightening period we are living in, energy prices are utterly out of control. Last night I looked it up and our own electricity charges went up from 5.9p per unit last September to very nearly 10p. That is a huge difference. I cannot help but think that these smart meters will benefit those particularly who are less well off than others, so I give the amendment my wholehearted support.
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- Lord Davies of OldhamLabour
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- I am grateful to all noble Lords who spoke to the amendment and to my noble friend for introducing it. I reassure the noble Baroness, Lady Carnegy, that the Government are interested in the amendment. We take all amendments seriously. Certainly my noble friend, as he has said, does not think that he is stretching the envelope too far for Government and thinks that there may be a basis for compromise. There may be, but let me reiterate the fact that we are concerned about fixing the details in primary legislation now. We regard that as somewhat premature; in the final analysis, it might bind us in such a way as to have negative implications for the very objectives that we share. We are looking at ways to get the rollout for domestic consumers. The Bill provides the necessary flexibility while also ensuring that Parliament scrutinises the licence conditions that are eventually established. I reassure my noble friend in that respect that there is full parliamentary scrutiny of what the Government will do in this area, and I assure him that we will of course set out a timetable. If we decide by the end of this year—and that is the decision framework to which we are committing ourselves—that we wish to proceed with the smart meter rollout to domestic consumers, we understand entirely that we will not be able to do that without a timetable. That is necessary for the wider public and for the industry, which has to gear itself up for the necessary structures and investment decisions to make it possible. I am giving him the commitment that that is our intention. He will recognise that his amendment falls into the same category. It is much closer to the Government’s thinking than one or two earlier amendments which sought to put in the Bill, and therefore in primary legislation, a commitment on a matter on which the Government need to preserve some flexibility. We do not doubt that the benefits of smart metering are potentially significant.
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- Lord Campbell-SavoursLabour
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- My noble friend will know that his words will be pored over by elected Members in the other place. He used the words “there may be room” in reference to compromise—I usually write down what Ministers say. Is there any possibility that we might be able to consider, let us say, 18 months or 21 months, and that that might be the nature of any compromise, or are we ruling that out right now?
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- Lord Davies of OldhamLabour
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- My noble friend presses me with too much precision and detail for me to commit myself on my feet in those terms. I was merely indicating that I understand that what he is driving at has a fair amount of parliamentary support behind it. We are aware that my noble friend has a reputation for some degree of persistence, so it is highly unlikely that even when I get him to withdraw his amendment today—if I am successful in that limited objective—I will have seen the end of the matter, even if there are not further discussions. I was merely indicating to him that I am open-minded about those further discussions. I am not prepared be to pinned down the details at the moment. Let me once again make the obvious point: noble Lords have articulated these issues well enough in the Committee and we, of course, see the potential benefits of smart meters for domestic households. How could one gainsay those benefits and a number of other significant benefits? The noble Lord, Lord Redesdale, raised the issue first in terms of the battle against climate change and the impact on the carbon count. The benefits are readily identified, but the Committee has not been quite so assiduous—and why should noble Lords concern themselves with such matters?—about the potential costs. The Government have to look at costs because they are borne not by the Government but by the people whom the Government represent. He will recognise that we have to do this analysis thoroughly, otherwise we would not be serving the community that we seek to serve.
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- Lord RedesdaleNon-affiliated
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- We shall be leaving the issue of smart metering soon. I was interested to hear the Minister say that we have not analysed the costs, but I have been trying to work out the figures he gave me for smart meters, and I get the impression that he is talking about them costing about £200 each, whereas we have always been given the impression that they would be between £95 and £140 each. That would make the figures he gave to the Committee somewhat on the high side.
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- Lord Davies of OldhamLabour
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- The noble Lord has a narrower concept than the Government of where costs lie. To place them on the meter only will not do. There are other costs involved in restructuring and an obligation on society. I congratulate him on his ready calculation, but it is not just the meter. I again say to my noble friend that we do not see that there is a gain from placing in legislation this degree of restriction, but I recognise that he has support for his position. We will be prepared to discuss this matter further, but I want him to withdraw his amendment today.
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- Lord Campbell-SavoursLabour
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- I shall rest on my noble friend’s words—that in relation to compromise there may be room. Like Camembert cheese, ideas mature. We have the Summer Recess. Over that period no doubt departmental officials will be very busy developing ideas with a view to taking the whole project forward. With that in mind, I refer to the intervention of my noble friend Lord O’Neill about doing this work during the summer months and the issue raised by the noble Lord, Lord Redesdale. When that work is done on what people do abroad, can we also have some idea on costs? What are the Italians actually paying for their meters? Where are the meters manufactured? We need information about not just what is available but what the costs are and where meters are manufactured. Is there the potential for manufacture within the United Kingdom? I spoke to a company this morning called bglobal, of Darwen in Lancashire, which provides meters. It tells me that its meters come from Singapore and are fitted in Australia. The Australians have a fairly major programme. When this research is done, following the amendment of my noble friend Lord O’Neill, we might well be able to collect a lot of data prior to the Report debate. I am sure that we would all find that very helpful. On the basis of the Minister’s assurance that these things are being considered, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. Clauses 84 to 89 agreed to.
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- Lord Jenkin of RodingConservative
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- moved Amendment No. 75:
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Baroness WilcoxConservative- Quote
- I am very pleased that my noble friend Lord Jenkin has tabled the amendment, which poses an interesting question about what steps need to be taken to ensure that fuel poverty targets are met. As the noble Lord, Lord Jenkin, said, on the Pensions Bill currently making its way through your Lordships’ House, the Government have tabled an amendment to allow the information of those on state pension credits to be used to better target fuel poverty. As he said, this amendment would extend the access to the information of other groups. While the Government’s track record on data protection is not enviable, this might be a necessary way of tackling fuel poverty. Businesses are currently spending enormous amounts of money trying to find out whom they are supposed to be helping, and it will be very interesting to hear from the Minister whether he thinks that this access to information would be the way forward in addressing the problems of the fuel poor.
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- Lord TeversonLiberal Democrat
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- There is a very good case for the amendment. Clearly, the area that we are all concerned about is information security. There are issues where, rightly, people do not want too many others to know which benefits they get and which category they are in; we all entirely understand that. I would particularly like to understand, in terms of the Pensions Bill, which the noble Lord, Lord Jenkin, mentioned, what the Government see as the safeguards to the data. In what way are the Government moving forward on data issues in that area? Those have to be robust. As fuel poverty is more and more an issue and a challenge to more people, we need to ensure that the agencies and companies concerned are able to maximise and roll out the programmes that are more desperately needed now than has been the case for some time.
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- Lord PalmerCrossbench
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- I, too, wholeheartedly support this amendment. In my small contribution at Second Reading, I devoted most of my speech to fuel poverty. It is an absolute scandal that, in 2008, anyone should have to live in fuel poverty. The noble Lord, Lord Jenkin, mentioned targeting. He emphasised the fact that this is covered by several different government departments, which is often the same with alternative energy, in which I have also been involved. One used to have to get involved with Defra, the Department for Transport, the old Department of Trade and Industry and with the Treasury. There is a great complication as regards subsection (4) in this amendment. I feel incredibly strongly about the geographic difference. The noble Lord, Lord Bach, will realise that I have a meeting with him after Questions on Tuesday to discuss this very issue. It is absolute madness that, for example, someone on fuel poverty payments who lives on the south coast of England receives the same amount as someone living on the north coast of Scotland. Last weekend at home in the Scottish Borders, it was 52 degrees and we very nearly lit a fire. It was not that temperature on the south coast of England. We should seriously consider that there should be some geographic difference. This will not be the last that the noble Lord, Lord Bach, will hear from me on this subject. I look forward to talking to him. However, I wholeheartedly support this amendment. I reiterate that it is an absolute scandal for anyone to suffer fuel poverty today. It is interesting that a former Conservative Minister responsible for energy has to bring forward this amendment rather than the Government.
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- Lord BachLabour
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- I look forward very much to meeting the noble Lord, Lord Palmer, for further discussions on this subject. However, before we debate this issue, I have to point out that in 1996 there were 6.5 million households in fuel poverty and there are now 2.5 million. Of course, that is 2.5 million too many, but the fact that we have reduced the number should be put on the record and taken into account, although we all know that in the past year the number has increased. That is why I slightly resent—but no more than that—the comment of the noble Lord, Lord Palmer, in relation to a previous Conservative Secretary of State responsible for energy having to tell this Government something. I think our record on this is pretty good—not perfect, but pretty good.
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- Lord PalmerCrossbench
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- I did not mean to be offensive in the slightest. Because of the horrible escalation of fuel prices, the figures which the Minister has just quoted will not be correct by the end of this current financial year. In the Times last week, it was estimated that 6.5 million people will be in fuel poverty by the end of next year. The noble Lord said that 2.4 million people is indeed too many, but that is almost a trebling of the actual number. It is very worrying. I apologise most sincerely if he thought I was being offensive. I did not mean to be offensive in the slightest.
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- Lord BachLabour
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- The noble Lord was not being offensive. I have never known him to be offensive and I am sure he never would be. I just slightly resented the comment. That was all. I make it clear that it is a real problem and an existing problem. It was a problem when the last Government were in power and it is a problem for us now. It is important to say that the figures, which I thought were agreed, are as I have stated them. I congratulate the noble Lord, Lord Jenkin, because it is an achievement to have got this amendment on to the Marshalled List at all. No doubt, it is absolutely rightly on the Marshalled List and it gives us a chance to discuss what is clearly a very important subject, which becomes more important for exactly the reason mentioned by the noble Lord, Lord Palmer—that this is a time of rising prices and global financial uncertainty. The impact of those factors on the most vulnerable in society is clear. This is an interesting amendment. I think the second part, rather than the first, concerns the noble Lord, but I shall deal with both parts. The amendment appears to seek to add an additional consumer protection element to the Secretary of State’s existing powers to impose carbon reduction obligations on energy suppliers. It also provides for a duty on the Secretary of State to make regulations enabling the provision of information to help suppliers identify particular consumers. It is that last point about which the noble Lord, Lord Jenkin, is most concerned.
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- Lord TeversonLiberal Democrat
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- In order to put this in context and understand the scale of the issue, do the Government have an estimate of the proportion of the target population that is known to have benefited from the schemes directed at them?
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- Lord BachLabour
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- Perhaps I can come back to that point before I sit down. The Pensions Bill amendment is an important step forward on data sharing. Moreover, because of the more limited focus of this amendment on a particular group of vulnerable consumers, some of the issues of proportionality and data protection I have just outlined can be better managed. Briefly, on non-legislative steps, all eligible households that come forward to the Warm Front scheme—which, as the Committee will know, offers grants to help pay for heating and insulation improvements in the home—are now also offered further assistance to ensure that they are aware of all the benefits to which they are entitled. Last year, Warm Front performed approximately 50,000 benefit-entitlement checks, which helped locate additional benefits for over 18,000 people with an average value of over £28 per week, or £1,500 per year. Working with the energy suppliers, the departments referred to have already undertaken two small winter mail-outs based on DWP data, which the noble Lord referred to. In the past two winters 350,000 customers on pension credit have been sent information to tell them about the Warm Front initiatives, the CERT measures and to offer advice on reducing their energy bills. Following the fuel poverty summit, suppliers have committed themselves to improving the transparency of the support that they can offer vulnerable customers. This includes ensuring that websites to help you switch energy supplier, agencies such as Citizens Advice and consumers have clear, accessible, information on what support is available. Suppliers will also be reviewing the effectiveness of the Home Heat Helpline, which is run by the Energy Retail Association, to ensure that it functions effectively as a central point of contact for help and advice on paying fuel bills. I end my list of examples with experience from regional programmes, such as the Warm Zones scheme, which has shown that an area-based approach can be one of the most efficient and cost-effective ways of identifying and helping the fuel poor. As part of the drive to better target the most vulnerable consumers, local and central government and suppliers will work together to build on this approach and explore if an area-by-area approach could have benefits for the delivery of other programmes such as CERT. I hope that we have understood the question of the noble Lord, Lord Teverson, correctly. Analysis indicates that suppliers would need to target around 2.4 million households to meet their CERT obligations. Ofgem will report a little later in the year on how many have received assistance so far. I hope that I have provided some reassurance to the noble Lord; I am sure that I have not told him anything that he does not already know better than me. However, we recognise that this is a major issue, and I emphasise the wide range of work that is under way. We will review progress from the Ofgem summit in autumn 2008. The amendment to the Pensions Bill is an important start, and we will learn lessons from it to help inform further work on other legislative data-sharing options. I assure the noble Lord that we will keep the case for further legislation under review in the context of our ongoing commitment, shared by everyone in the Committee, to address fuel poverty. At this stage, it is not a simple matter of adding further legislation. However, I again thank the noble Lord for introducing the topic to the Committee this afternoon.
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- Baroness Carnegy of LourConservative
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- Perhaps unkindly, I cannot help thinking that a large part of the Minister’s speech was strongly against the identity cards scheme. If he reads it, he will find that it does not fit in well with the case for identity cards.
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- Lord Jenkin of RodingConservative
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- First, I thank everybody who has taken part in this. Secondly, in the light of the position that the Minister outlined to the Committee this afternoon, I recognise that there has been a sea-change in the Government’s position since as recently as last January, and I welcome that. I claim no credit for having stimulated it, although the noble Lord was kind enough to indicate that perhaps I might have helped. The important thing is that there now seems to be a way forward by building on what has been put forward for the Pensions Bill and the other non-legislative methods.
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- Lord Jenkin of RodingConservative
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- moved Amendment No. 76:
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- Lord Davies of OldhamLabour
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- I am grateful to the noble Lord for this amendment, which gives us a chance to air an important topic. I must declare a direct interest. This year, my grandson suffered from leukaemia and to see an eight year-old go through the agonies of the necessary treatment fixes the issue very firmly indeed in one’s mind. I was very grateful for the way in which the noble Lord, Lord Jenkin, approached the whole issue and for how constructive he has been. I regret that I do not have a great deal to add to his extremely comprehensive analysis because he was so fair in identifying the nature of the problem and in indicating the difficulties of the potential solutions. He is right about the fundamental position that we do not know enough about leukaemia to identify its causes and, as regards power lines, he also showed statistically how limited any effect is but, however small the number of cases, every child affected is a grievous concern to us all. As he said, we have to have proportionality in developing a strategy for the grid that relates to what still would be just a potential factor with regard to the illness and to children. That shows how problematic the whole issue is. Certainly, the industry and the Government have taken the Draper report very seriously, as they have any issue of public health. What constructively can we do to advance understanding of the issue and what action needs to be taken? I was extremely grateful to the noble Lord for the way in which he spoke about the work of SAGE, the Stakeholder Advisory Group on ELF EMFs. It certainly brought everyone together on a remit to identify and explore the implications of the issues. It reported last year and made a number of recommendations in relation to power lines and property, and, as the noble Lord also added, to wiring in homes and electrical equipment. SAGE set out a range of precautionary options to reduce exposures significantly, involving the physical separation of buildings from power lines. It identified the best-available option for obtaining significant exposure reduction; namely, a combination of no new power lines and no new developments too close to residential developments and schools. It also undertook a cost-benefit analysis of this precautionary option and found that, because of the difficulty of cause and effect and the small numbers involved, it was difficult to reach a positive cost-benefit analysis on any action, which is what the noble Lord very fairly reflected in his speech. We are currently considering the report very seriously. The noble Lord mentioned that my noble friend Lady Andrews has already commented on it. The work is ongoing and we are considering the Health Protection Agency’s advice. It will also take into account the cross-party inquiry into childhood leukaemia and the advice of the World Health Organisation which was published last year.
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- Baroness Carnegy of LourConservative
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- Can the Minister say whether the anxieties are being at all reflected in the many inquiries that are going on about the criss-cross of high voltage lines that are designed to feed energy from wind farms into the grid? I think particularly of Scotland, where there are a great many planning inquiries going on in a number of directions. Is that a consideration?
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- Lord Davies of OldhamLabour
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- All issues with regard to the construction of new lines are of consideration. That has all got to be taken into account. Obviously, we are expecting, and are due to have, a substantial extension of power generation to the grid from such a large number of sources, and the noble Baroness is right to say that we need to take into account how and where those lines are constructed. That is all part of the work that is being done, and I give her that assurance at least.
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- Lord Jenkin of RodingConservative
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- I would not have expected the noble Lord to say more than he did, and I was grateful for what he did say. Clearly, the Government are seized of the problem. Whether we can get their response to the report in time for the last days of Report stage of the Bill, we shall have to wait and see. It would be very helpful if they could manage to achieve that. I recognise that there is another important group of amendments to come, and the noble Lord, Lord Puttnam, has been waiting very patiently. I will just add one point. The first thing that I ever did for my constituents, very soon after I was elected, was to persuade the London Electricity Board to bury a distribution cable that was going straight through a housing estate in my constituency on pylons. I am told that that makes no difference to the ELF/EMF problem, unless you are a little bit away from it. One has lived with this problem, which was some 46 years ago. I—
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- Lord Davies of OldhamLabour
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- Just before the noble Lord withdraws the amendment, I have a note to confirm for the noble Baroness that, in relation to the inquiry into the Beauly to Denny line, the issue was taken into account by the inspectors.
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- Lord Jenkin of RodingConservative
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- I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. Clause 91 agreed to.
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Lord PuttnamLabour- Quote
- moved Amendment No. 76A:
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- Lord TeversonLiberal Democrat
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- I thank the noble Lord, Lord Puttnam, for tabling the amendment, to which I was pleased to be a signatory. The issues are simple. Our nation is international and operates effectively in a global economy. We are proud of that, and lead many parts of the world, including Europe, in that sense. However, that leadership and globalisation—that openness—requires certain standards for businesses and business ownership. They consist of the classic capital model of decisions being made on the commercial and financial basis of a return to shareholders, whoever they may be, and on a degree of transparency in the whole area of company and corporate reporting. However, there are good reasons to look at that more closely in certain sectors. The defence sector is clearly one and so, increasingly, is the energy sector. Over the past few years, energy security has rightly become a more important and highly regarded area, which we understand better than ever before is important to our national security. I am the last person who would want a clause that could be used for a nationalist, protectionist reason; that is always an issue with this type of clause. It is a question of balance. I will be particularly interested to hear the Government’s response to the possibility of organisations taking over strategic sectors of our energy industry where there is a political rather than commercial objective. Where there is a politically driven agenda, or a sovereign wealth fund whose shareholding and strategic company aims have no transparency whatsoever, there must be a balance between energy security and the open market capitalism and globalisation that this country would generally be proud of. That balance is important in this area, and I welcome this amendment.
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- Lord Jenkin of RodingConservative
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- I never thought that I would agree with the noble Lord, Lord Redesdale, as much as I just have. We must set our face firmly against commercial protectionism, but where the objective is a political one it must be resisted. Noble Lords may be aware that when we debated these subjects a little over a year ago, the noble Lord, Lord Truscott, was replying for the Government. There were rumours in the press that Gazprom was threatening to bid for Centrica, which includes British Gas, among other things. I am not sure that I got a clear enough answer, but I made it clear to the Government that that would be totally unacceptable. There could be no reciprocity or transparency of any kind; that must be firmly resisted. That is quite different from the proposals of the noble Lord, Lord Puttnam. Mischievously, I ask him what his view was when the Government chose to sell Westinghouse to the Japanese.
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- Lord RedesdaleNon-affiliated
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- The noble Lord, Lord Jenkin, is in agreement with me as well as with the noble Lord, Lord Teverson, although I said nothing. Another point that underlines the importance of this amendment is that over recent years, instead of competition proliferating on the European stage, the number of large energy suppliers has shrunk as large corporations have merged for reasons of size or marketplace. Indeed, we are looking at a situation where very few players in the market are dealing with interests within countries. I recently had a meeting with most of the large energy suppliers on a carbon labelling scheme. It was amazing to have the five or six people in the room representing such a large tranche of the market. If some of the deals that have been speculated about go through, that number will shrink. It is therefore important that we look carefully at companies that will be moving into the field, especially with the gas pipelines and the situation about gas supply. As the noble Lord, Lord Puttnam, pointed out, this amendment is at the tail end of the Bill, but I believe it is an issue that, as an amendment, is intrinsically important to the basis of the Bill, and I hope that the Minister comes forward with a positive response to the amendment.
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- Lord BachLabour
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- I thank my noble friend for his patience in sitting through this afternoon’s events and for the way in which he moved his important amendment. It deserves a full answer, so I do not apologise for the fact that, even though we are close to the time limit, I shall not shorten my answer but will try to give a full answer, whether satisfactory or not, to the Committee. Everyone shares the noble Lord’s desire to ensure that our regulatory framework has robust powers to address takeovers of UK energy assets where they may operate against the public interest and, in particular, to address any concerns arising from energy mergers. Maintaining the security of our energy supplies as we, as a country, make the difficult transition from being a net exporter of energy to being a net importer brings new and difficult challenges. As part of the Government’s response to those challenges, much of the Bill, which we have now been debating for five days, is about ensuring that we have the right legislative environment to support the investment in the new kinds of infrastructure and technologies that we will need to cut carbon emissions and ensure security of supply. Much of this will involve foreign direct investment. Maintaining the UK’s long-standing policy—a policy that we should defend—of being open to inward investment, while also ensuring that, where necessary, action can be taken to protect legitimate public interests requires a careful balance to be struck in the formulation of our regulatory framework; that goes almost without saying. It is also agreed that we need certain standards in ownership takeovers, and I hope that my response may go some way to persuading the Committee that the right safeguards already exist within the Enterprise Act and within European law. Why we allow foreign companies to invest in our economy is sometimes asked. The answer is, in short, that we are open to foreign investment in our economy for the obvious benefits that it brings in capital and expertise. As long as there are appropriate protections, it is the Government’s firm view that we should remain open to foreign investment and resist protectionism, which is a disease that many countries find themselves prey to, particularly when economic circumstances are difficult. We have resisted it over many decades, and we should continue to do so. It has always been in our interest as a country to be free-traders. The aim of Amendment No. 76A is to insert into the Enterprise Act 2002 a new public interest consideration in relation to energy security. My noble friend’s Amendment No. 76B would see the plurality of persons controlling energy enterprises become specified grounds on which the Secretary of State may intervene in mergers. We agree that we must ensure that the UK has robust powers to address takeovers in this sector. However, I assure the Committee that we do not believe that these amendments are either necessary or appropriate. Two concerns are key to energy in this concept. One is ensuring a competitive market and choice for the consumer. The other is ensuring a secure and dependable energy supply. Under UK and European merger laws, independent competition authorities are responsible for ensuring the protection of competition, while our Enterprise Act also addresses wider issues of public interest. Currently, through the powers in the Act, there are two specified public interest considerations. One is national security and the second is plurality in the media. The national security provision references the definition of public security in the European merger regulation. Recent case law of the European Court of Justice—the ECJ—confirms that the public security or public interest consideration includes energy security in cases where there is a genuine and serious threat to what is described as societal needs, such as energy supply. Let me put it another way. It is fair to say—I have to concede this—that there are not a great many ECJ cases on the issue, but our view is that, having considered what case law there is, it is highly likely that energy security would be within the ambit of public security. In particular, that view is supported by paragraphs 43 and 46 in the Commission of the European Communities v Kingdom of Belgium case regarding Distrigas. In that case, the Court indicated in paragraph 47 of its judgment that exemptions to general principles must be “interpreted strictly” and that “public security” could only be invoked if the threat was genuine and sufficiently serious, affecting a fundamental societal need. In paragraph 48, the ECJ further indicated that the restriction must be the minimum necessary to meet that need. In the earlier case of Campus Oil, which is also relevant to the meaning of the expression “public security”, the European Court found in favour of the Irish Government. It was accepted that their concern about energy supplies could transcend matters of purely economic interest and intrude on the security of the nation. So we are of the view that recent case law confirms that the public security or public interest consideration includes energy security. If that is right, it means that, should the acquisition of a UK energy company or assets raise a genuine and serious public interest concern about the lasting security of energy supply in the UK, the Secretary of State will be able to have those concerns examined by the OFT, and, if appropriate, the Competition Commission, and he can ultimately intervene in the merger if he considers it necessary. I add one final but extremely important point. Since public security is a term which appears in the European merger regulation, which has been held by the ECJ to include the security of energy supply, we think it inappropriate for the UK to introduce its own national provision. To do so would cast doubt on the breadth of the term “public security” as it appears in the European merger regulation. If I am asked, “Why do you not want an energy security public interest consideration for the UK?”, let me try to answer like this. First, seeking an energy security public interest consideration would indicate that we do not believe that it falls within the ambit of the existing national security consideration. That would have obvious implications for other sectors, such as telecommunications, which are not specified in the legislation, but which, like energy security, we believe fall under the wider concept of national security. Secondly, there is the open markets issue, which would indicate that we believe that it is legitimate for Governments to consider mergers in the energy sector differently from any other mergers. Thirdly, we could not rely on it to intervene in larger mergers that fell to the European Commission to review unless it—the European Commission—approved the new consideration, which is far from certain. The second amendment relates to the need to ensure plurality of ownership of energy assets and companies. I again suggest that the existing provisions, which are designed to prevent excessive concentration of ownership, are sufficient. Where a merger raises concerns around the possibility of an insufficient number of enterprises operating in the market, such concerns would be addressed by the competition assessment of the merger. In relation to the energy sector, these provisions would prevent any one company from dominating our energy market and as a result creating risks of disruption to supply. The arguments which were made to support a separate power for the Secretary of State to intervene in media mergers—I pay great tribute to my noble friend for the part he played in that legislation—on grounds of plurality cannot be transferred directly to this energy sector. Energy is different in this context. The key concern beyond the economic one of maintaining competition is ensuring security of supply. As distinct from the issue of media plurality before 2003 and the Enterprise Act, a serious threat to energy supply is covered by national security considerations as set out in that Act. In considering the proposals, it may assist if I briefly outline how the present regulatory process works. Mergers in the UK and the EU are regulated by the relevant independent competition authorities, whether it is the Office of Fair Trading and the Competition Commission in the case of a UK merger, or the European Commission in the case of a merger involving large enterprises. Mergers are considered by the competition authorities on the basis of their impact on competition in the relevant market, but, in addition, I emphasise that, on the announcement of a proposed merger or takeover, the Secretary of State has the power to issue an intervention notice for any such merger if he considers that it may raise particular non-competition-related concerns falling within the scope of a public interest consideration that has been specified in the Enterprise Act 2002. Following a Secretary of State’s intervention on public interest grounds, the OFT is under an obligation to investigate and report on the issues that have been raised. The details of this OFT report may also include representations from other organisations with an interest in the specific sector—in this case, Ofgem. This provides these organisations with the opportunity to provide information and advice regarding the energy market. If on receipt of the OFT report and the other advice that the OFT has received, the Secretary of State decides to refer the merger to the Competition Commission, the commission has 24 weeks to make its recommendations to government on the relevant non-competition, public interest considerations. This would be in addition to any competition issues that it was already looking at. The Secretary of State must then decide whether to make an adverse public interest finding and, if so, whether to allow the merger to proceed, to impose conditions or to block it altogether. Even if the parallel competition investigation by the authorities does not find against the merger, the Secretary of State may none the less decide to act on public interest grounds. However, of course, any remedies imposed following such an intervention would have to be reasonable and proportionate. For example, depending on the case, this could include a requirement to hold an asset separately or to divest certain interests, such as an interconnector, a storage facility or generation capacity. A decision by the Secretary of State on whether to intervene in any merger would have to be considered on a case-by- case basis.
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- Baroness Carnegy of LourConservative
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- I tried to follow that argument as carefully as I could. The noble Lord said that the Secretary of State could intervene on public interest grounds. Suppose that the two companies that decide to merge are, because of previous takeovers, abroad and are not in Europe, but are somewhere else. What can he intervene on? Can he prevent the merger just because they happen to have contracts in this country to supply energy? Or is he saying that they can be told that they cannot continue to supply energy, in which case what happens? Perhaps that is a stupid question, but it struck me that it might happen.
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- Lord BachLabour
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- No question from the noble Baroness is stupid, and that one certainly is not. I will be very careful in the answer that I give. Because this is such a delicate and important point, I wonder whether instead of just telling the noble Baroness what I think the answer is, it would be better if I wrote to her with an answer. As I understand it, there would, of course, be a look by the competition authorities to see whether this was competitively a good thing, but the Secretary of State could invite the competition authorities—the OFT—to look at the non-competition issues as well and report. Ultimately, it would be for the Secretary of State to decide whether—even if the competition side of it was okay, if the non-competition side was not, regarding national security—it would be within his power to take action. He would have to do it in a proportionate and reasonable way. That is probably an accurate answer, but the noble Baroness deserves more than that, which is why I intend to write to her if she will allow me to do so.
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- Baroness Carnegy of LourConservative
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- It is just a point of clarification. The Committee will be familiar with the European law in relation to big mergers in Europe, and we are familiar with legislation in this country. Where it falls between is where it is a world issue. Companies can have ownership anywhere in the world, and it is really about whether there is a loophole.
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- Lord BachLabour
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- I am advised that what I have said would apply to companies that operate in the United Kingdom. I will detail what I have said in the letter.
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- Baroness Carnegy of LourConservative
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- Yes, but I am referring to the ownership.
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- Lord PuttnamLabour
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- I thank everyone who has been involved in this brief debate, particularly—I sincerely mean this—the Minister for his full and helpful answer. I will make two or three things clear. First, the noble Lord, Lord Jenkin, possibly felt that I sounded like a protectionist, a little Englander or maybe both. I am a businessman. I have earned my living as a businessman for 50 years; there is not a protectionist bone in my body, but I am a realist. I am a realist who has worked in the global environment, and I have no doubt whatsoever about what a tough old world it is out there. The noble Lord, Lord Redesdale, rightly talked about sovereign wealth funds. Any nation, particularly ours, should make itself fully aware of the implications of the new global environment in which sovereign wealth funds, and many other forms of investor that do not conform to our notion of transparency or good governance, are predators; the noble Lord, Lord Jenkin, mentioned one possible predator. To pretend that that is not the case, or that if you allow some of these people a glimmer of an opportunity they will not leap through that gap, is naïve in the extreme. I am very reassured. It is certainly the first time I have heard any government Minister lay out the procedures. They sound pretty robust. I referred to other western European democracies and the United States. All of them are rapidly moving towards a point where they can look through deals and ownerships to see the real owners and the real purpose behind deals. We have been laggards on this, and have almost begun to make ourselves a lone voice in saying that you can go too far in looking through deals. I am not sure that that is the case. In that sense, perhaps I do sound like a protectionist—for which I do not apologise because mine is a real-world view. I suspect that I will not come back with the amendment as it is, but I would like to think about taking the Ofgem components and eliding them with the general amendments of the noble Lord, Lord Oxburgh, on Ofgem’s remit to see if we cannot get into the Bill many of the things that the Minister made clear. There is a win here for all of us, which will not be this amendment. Frankly, I am very grateful. Lastly, I am a disciple of John Kenneth Galbraith; it may be my age. Many of my views on the new global environment are shared by extremely reputable and recognised economists. I am not alone in this. The world is changing rapidly, and it is time for us to look more closely at whether we are semi-consciously drifting into the type of economy that the United States became in the late 19th and early 20th century, from which it eventually had to jolt itself and resile. I hope that that will not be the case in this country, but I am concerned about this drift. I am sure that I will return to this issue in other places at other times. For the time being, however, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. [Amendment No. 76B not moved.] Clauses 92 and 93 agreed to. Clause 94 [Parliamentary control of subordinate legislation]:
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- Lord BachLabour
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- moved Amendment No. 77:
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- Lord BachLabour
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- moved Amendment No. 78:
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