Amendment 3

Subsidy Control Bill - Report – in the House of Lords at 6:30 pm on 22 March 2022.

Alert me about debates like this

Votes in this debate

Lord Whitty:

Moved by Lord Whitty

3: Schedule 1, page 53, line 6, at end insert—“(c) progress towards targets under section 1 of the Climate Change Act 2008 (UK net zeroe emissions target), and section 5 of the Environment Act 2021 (environmental targets).”Member’s explanatory statementThis amendment requires public authorities to consider whether proposed subsidies would have any negative effects on progress towards the UK’s legally binding net zero and environmental targets.

Photo of Lord Whitty Lord Whitty Labour

My Lords, I shall also say a few words about Amendments 51 and 61 in this group. I do so in lieu of the noble Baroness, Lady Boycott, who, unfortunately, has to be at a funeral this afternoon. I declare my interests as set out in the register but in particular a very new one, which is that I have become a director of Peers for the Planet.

This amendment is pretty straightforward. It says that our climate change strategy, our net-zero strategy, about which the Government have been very clear, should be taken into account in their subsidy policy. It is odd that it is not in the Bill, either in Schedule 1, which we are discussing, or virtually anywhere. However, we are lucky tonight because the Minister is of course also Minister for many aspects of net zero. I therefore assume that my amendment will be received with acclaim by the Government Benches. They might think they have a better form of words that they want to bring forward later, but I think my form of words is fairly clear.

We are on Schedule 1 to the Bill, which is headed “The Subsidy Control Principles”. That a flagship policy of the Government which has been said by Ministers time and again should apply across all government policy is not included in that schedule is very odd indeed, and it must surely be an oversight. Even more surprising, it is not referred to in Schedule 2, which relates to energy and efficiency principles, because that is mainly about energy policy. There is a reference which could be said to be relevant, which is to subsidies directed towards the reduction of carbon use and to help decarbonisation, but those are specific subsidies. What my amendment is concerned about is that all subsidy schemes should take into account their implications for our target zero policy and climate change objectives.

I would find it difficult to think the Government could reject that. Ministers have said on many occasions that it is one of our most important policies and strategic commitments. The Public Accounts Committee has recently said that all government departments must take it into account, and that includes new legislation. This is substantial new legislation which may not obviously directly affect climate change, but everything indirectly affects it. Subsidies after all, whatever their form, are about interfering with the market to get a different outcome. It would be odd indeed if the Government did not accept that, if the market was moving in the direction which was more or less in line with our climate change agenda, we should not intervene with a subsidy which reversed it or at least offset it. We are not saying that every subsidy has to be directed at climate change, but the implications have to be taken into account when considering the validity of that subject.

I am expecting a positive response from the Government. I do not think it would cost them a lot in terms of the overall nature of the Bill, but it would give credibility to the overall policy that our net-zero targets should be followed through across the whole of government and all public authorities. If the Government reject it, I will find that very difficult to accept, and I think we would wish to test the opinion of the House. I hope that the Government will be reasonable and either come up with their own wording or just accept the wording which the noble Baroness, Lady Boycott, and I are proposing. I beg to move.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green

My Lords, I rise with great pleasure to follow the noble Lord, Lord Whitty, who has powerfully and clearly introduced this group of amendments. I will offer the Green group’s support for Amendments 3, 51 and 61. Were we not in a state of continual juggling of different Bills, I am sure that we would have attached one of our names to them.

Amendment 3, on which the noble Lord indicated he is likely to test the opinion of the House, is particularly important in considering the negative effects. I am influenced in that view by a visit I made yesterday to a village called North Ferriby and a site threatened with the development of an enormous Amazon warehouse, with significant environmental effects. From those environmental effects flow effects to people’s lives and well-being. It is the absolute reverse of levelling up in that it is making people’s lives much worse. It is clear that, when talking about economic development, there is inadequate consideration of local environmental effects and the broader effects on the state of our world.

However, I rise chiefly to speak to Amendment 5 in my name. Rather than trying to stop damage, this amendment is trying to lead the Government in a positive direction, which could help them deal with some of the issues facing them today and will be tackled by the Chancellor tomorrow.

Amendment 5 is all about helping small-scale community energy projects to make a big impact in the energy system. In Committee, the Minister suggested that community energy is not within the scope of the Bill, but I hope we might see a broader response today, and at least a positive response and acknowledgement from the Minister that this is a huge lacuna in government policy that desperately needs to be filled.

This amendment adds community energy to the list of circumstances that may be used to determine a subsidy, where the generator is a community energy project. What we see is that the rural community energy fund is soon winding down, despite its success. The Minister and I have, in another context, discussed the lack of any other community energy schemes, despite the Government’s promises to deliver them.

You might ask, “Why would subsidies be needed?” The fact is that community schemes often need early-stage seed funding to get them to the stage where they can seek investment. Without that, many communities, desperately keen to set up their own scheme, are never able to get one off the ground. What we are talking about is perhaps something like an electric car club, where a community can generate its own energy. I saw this in Stroud a few years ago: solar panels on the roof of a doctor’s surgery powered an electric car club car. This had all been supported by community investment and was run by the community, with the nature of the project being chosen by the community.

It is clear that this can unlock more than £64 million in private capital investment. It is an incredible opportunity for public money to kick-start a community-led green revolution. Importantly, thinking about the levelling-up agenda, this means that communities with money can put it into their local community and get the money circulating around that community. This is a cost-effective way of unleashing the possibility of many new green jobs.

I am not expecting the amendment to pass today, but there is a huge opportunity here. The crisis the Government are facing is clear: the cost of living crisis and concern, particularly in the context of the tragic situation in Ukraine, about energy self-sufficiency. But there is energy all around us: energy from the sun, the wind and people within communities desperate to help tackle the climate crisis and meet the needs of their own communities. Let us make sure that we have a subsidy scheme that can support all that physical and human energy and put it to good purposes to improve the lives of us all and our environment.

Photo of Baroness Sheehan Baroness Sheehan Liberal Democrat

My Lords, I rise to speak to Amendments 3, 51 and 61, to which I have added my name. I have checked with the Public Bill Office that my name is on those amendments—it is online but it has not made it to the printed copy. I should also add that I am a director of Peers for the Planet.

The reason I have added my name to these amendments is that I feel strongly about this. I hope that the noble Lord, Lord Whitty, will be press Amendment 3 to a Division if the Minister is unable to meet us half way or come some way towards what we are looking for, which is some recognition of an alignment with our climate change and natural environment concerns.

Just last month the IPCC published its sixth report, which is full of dire warnings about the climate. Time is running out and we are fast approaching a 1.5-degree rise. The raw science tells us that we really have to act now. The concentration of carbon dioxide in the atmosphere is at an unprecedented 419 parts per million; it has never been at that level, records show, in the last 800,000 years. It is going up in a straight-line vertical trajectory at the moment, so we really need to act as quickly as we can. The NASA website shows that many other of the planet’s vital signs are moving in the wrong direction and those adverse changes are accelerating.

A Bill laying out a new subsidy regime is an important policy lever to meet our climate ambitions. However, as things stand, there is a deafening silence on climate and nature alignment in the Bill. Amendments 3, 51 and 61 seek to fill that void, not in a prescriptive manner but by allowing the Government to determine how the aims should be achieved. Notwithstanding what the Minister’s response will be to the amendments, I hope that nevertheless he will confirm from the Dispatch Box that the guidance to the Bill will specifically include how public authorities should approach climate and wider environmental considerations with respect to subsidies. The Minister said as much in his letter to my noble friend Lord Purvis but it would be good to have it reiterated on this occasion.

Photo of Baroness Hayman Baroness Hayman Crossbench

My Lords, I support Amendments 3, 51 and 61. I declare my interests as set out in the register.

The amendments seek to ensure that considerations around net zero and the environment are embedded in the legislation at the stage of principles, at the stage of guidance and at the stage of reporting. They are very similar to amendments well discussed in Committee. I have to say that when responding to those amendments the Minister did not show even a modicum of delight; he said that we were banging on—although he did not use that term—about our favourite topics, a term he did use, and said he had a sense of déjà vu. I am afraid it is déjà vu all over again, because these issues are too important for us not to return to them.

I believe there is a disjuncture in the Government’s attitude. When responding, the Minister made absolutely clear the Government’s view that

“net zero is of critical importance.”—[GC 159.]">Official Report, 31/1/22; col. GC 159.]

That is not something between us. He also recognised the relevance of the subsidy regime that we are discussing in achieving the Government’s aims, and pointed out that environmental and net-zero schemes had already been agreed under the interim subsidy control mechanism. So we have a situation where the Government recognise the severity of the climate crisis, the fact that economically we need to shift the economy and growth into a sustainable pattern and into areas that will be productive in terms of jobs—and, indeed, will create the sorts of jobs that support the levelling-up agenda we were just talking about, because they are the sort of infrastructure jobs that go across the country—and that we need to support jobs that will provide energy security in future.

All those point to the importance and relevance of making sure that the regime we are setting up—not for the crisis we are in at the moment but for the long-term interests of our economy and people—should recognise the importance of statutory climate and environmental obligations that the Government have accepted.

I am profoundly disappointed that the Government have not been able to move or even have serious discussions on these issues in the way they have on other areas of the Bill. They have not put forward suggestions so that we could meet in the centre in a way that both sides would feel was productive. There is now nothing in this Bill to guarantee that an issue that is of supreme importance to the Government is carried through into legislation. I am afraid that we are in another area where the policies sound great but the delivery and coherence are not—an area of fine words and unbuttered parsnips. I therefore support these amendments.

Photo of Lord Hope of Craighead Lord Hope of Craighead Judge 6:45, 22 March 2022

My Lords, I will say a word in support of Amendment 5 in the name of the noble Baroness, Lady Bennett of Manor Castle. Her list of small projects reminds me of the position of the many small islands around the coast of Scotland, in the Northern Isles, the Western Isles and the Inner Hebrides.

About 15 years ago I spent a week on the island of Fair Isle, which lies midway between Shetland and Orkney. It is too far away from the mainland and from those islands to have any electricity supply provided from outside; when I went there it was largely reliant on diesel generators, which were expensive and wasteful and could not run all the time. People had been relying on the diesel generator coming on at, say, six in the evening to fire up their cooking utensils and so on, but just before we got there someone with funding had been able to put up a wind turbine. It was there, and I remember the thrill of the islanders when it was put into operation and provided a reliable source of electricity which was available all day because it did not involve wasteful use of diesel oil.

That would fall well within the small projects in proposed new sub-paragraph (2)(d)(v); it is just one example of the value of these small projects to small islands such as that. I do not know how many like Fair Isle there are still relying on diesel generators, but anything that can be done by introducing and supporting projects of this kind to stop them using carbon fuels and relying instead on the renewables listed here would be of great value. Of course there is a climate change aspect to it, but it also has a real practical value for the communities themselves—otherwise, they are driven to spending money on carbon fuels, which we would all like to stop having to use.

Subsidy schemes for small projects have a real value in these remoter communities that cannot be linked into the grid around the mainland or some of the larger islands which can have their own generating facilities. The list is very interesting and valuable, and I hope the Minister will pay attention to it.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy)

I rise to support briefly Amendments 3, 51 and 61. On the point made by the noble and learned Lord, Lord Hope, and our Green friend, I was not aware that this scheme excluded small projects. What it will exclude is us finding out about them as they will all come in under the threshold and will not be reported. I hope that the Minister can perhaps come back and report on them; we will not find them in the database.

We have heard fantastic speeches on Amendments 3, 51 and 61. I will not repeat them but want to pre-empt a little what the Minister’s response might be. I have a hint of that; I suspect that he is guided by his feelings about Ukraine. Since its invasion, the mood will have changed, and that will be his line. The Russians are indeed committing atrocities in Europe as we speak, and it is terrible, but the climate crisis is not standing back while this happens. With this amendment, we are asking the Government to walk and chew gum at the same time. Yes, we have to deal with the consequences of the war and we understand how hard that is, but we have to do that within the context of attacking the net-zero challenge. Unless the Minister can officially announce that global warming is performing a ceasefire, this amendment has to be there for us to meet both the important things that this country has to face right now.

Photo of Baroness Blake of Leeds Baroness Blake of Leeds Opposition Whip (Lords), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade)

My Lords, I am grateful to the noble Baroness, Lady Boycott, for tabling her amendments and sorry that she cannot be here to move them today; I am grateful that my noble friend Lord Whitty stepped into the breach much more than adequately. I want also to recognise the contribution of the debate and the importance of getting on to the front foot with its urgency on such a range of different issues. Obviously we have the climate emergency, but we have to mention Russia’s illegal invasion of Ukraine and the West’s urgent discussions about how to lower its dependence on Russian oil and gas.

These discussions are happening at the highest possible level. For some, I fear that they will give a convenient excuse to promote activities that will cause significant environmental damage if unchecked, whether that is firing up coal-fired power stations, resuming fracking, or indeed Shell’s announcement just this morning that it will look again at the Cambo field. For many, the focus is on the acuteness of the energy security issues that we are facing, which have come to the forefront, and the ever greater need to develop energy self-sufficiency; that means focusing on the climate imperative together with security issues, regeneration and the new green jobs that will come along.

Following COP 26, the UK remains a key player in driving implementation of the various agreements reached. What hope do we have of ensuring that other countries follow through on their commitments if we do not play our leading role in this global fight? Another aspect is that we know the Government want a degree of flexibility for public authorities at every level, but we do not see anything in Amendment 3 that takes that flexibility away. The Minister has been keen to use the example of Welsh steel during our discussions on this matter. If, when conducting the so-called balance test, the Welsh Government decide that the short-term economic benefits outweigh the costs of emissions, they will be able to award the subsidy. However, as a general principle, public money should be used for public good, and what greater public good can there be than preserving our planet for future generations?

Now is the time for us to double down on our commitments to renewables and nuclear rather than being swayed by those who are seeking to turn back the clock. I finish by picking up on the comments of my noble friend Lord Whitty about pressing Amendment 3 to a vote. If he does indeed decide to do so, we will support him.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, first, I thank all noble Lords who have spoken on these amendments, which were introduced so ably, as always, by the noble Lord, Lord Whitty. I will respond to them all together since they all relate to climate change and energy matters.

Amendment 3, tabled by the noble Baroness, Lady Boycott, and the noble Lord, Lord Whitty, seeks to include specific mention of our “net zero emissions target” and “environmental targets”. It would require public authorities to consider the negative impacts, with respect to our Climate Change Act and Environment Act targets, when making a balancing test under principle G of Schedule 1. Amendment 61 would allow the Secretary of State to issue guidance to support public authorities with this assessment.

I understand noble Lords’ keen interest in ensuring that subsidies and schemes granted within the UK further our climate change and environmental targets, wherever practical, and that public authorities should be supported by the Government in making robust assessments of the impacts that their subsidies or schemes may have on these targets. The Government share this objective, and our record in office demonstrates that. I make it clear that this applies to some of the other amendments to which I will be coming later: the UK’s net zero target is, and remains, the law of the land. Nothing in this Bill changes or undermines that fact. The Government remain resolutely committed to net zero by 2050. At this point, I welcome the addition of the noble Lord, Lord Fox, to my speechwriting team. However, it is right and proper, particularly in the current crisis, that we keep in mind that our energy transition to net zero is an issue not only of decarbonisation but of national security and—especially at the moment—national importance.

In response to the noble Lord, Lord Whitty, I make it clear that the balancing test in principle G already requires public authorities to take into account all relevant “negative effects”, which would include negative effects in relation to climate change and the environment. Similarly, subsidies that support our net zero and environmental targets should also take those positive impacts into account in the balancing tests. Principle G emphasises particularly “competition”, “trade” and “investment” effects because minimising harmful distortions in these areas is the primary purpose of a system of subsidy control. However, it is not intended to suggest that these factors should override all other policy-making considerations. There is no implication that public authorities should set their climate and environmental obligations—or, indeed, any other duties or objectives—to one side.

I reassure the noble Baronesses, Lady Sheehan and Lady Hayman, and others, that the Secretary of State will issue guidance on the practical application of the subsidy control principles, and regarding the energy and environment principles. This guidance will include instructions on how to take into account, where relevant, any impacts the subsidy or scheme may have on targets under the Climate Change Act or the Environment Act—or, indeed, signpost the public authority to existing guidance to this effect.

It is also worth pointing out that environmental policy is a devolved matter. This regime is designed to empower public authorities with democratic mandates to use subsidies in pursuit of their own policy objectives—within certain bounds which merely protect UK competition and investment—and safeguard our international obligations. It is not seeking to direct the devolved Administrations, or any other public authority, to spend on one specific policy objective, however important and worthwhile that policy objective may be. For that reason, I am highly reluctant to impose any additional constraints on other public authorities which are fundamental neither to subsidy control policy nor to implementing our international obligations. There are later amendments in which noble Lords will seek to persuade me to do the opposite in respect of the devolved Administrations, so I hope that noble Lords will not be so hypocritical as to repeat those arguments back to me then. I believe that these amendments are therefore unnecessary, and I ask the noble Lord, Lord Whitty, to withdraw Amendment 3.

I turn to Amendment 51, tabled by the noble Baronesses, Lady Boycott, Lady Sheehan and Lady Altmann. Clause 65 specifies that the Competition and Markets Authority will periodically undertake a review of the operation of the subsidy control regime. This amendment would require that review to include an assessment of the impact of the operation of the Act on progress towards the target under Section 1 of the Climate Change Act 2008 and the targets under Section 5 of the Environment Act 2021.

I thank the noble Baronesses for tabling this amendment and assure them that the aims of the Government are entirely in line with the spirit of it. However, we do not believe that it is necessary to include these additional reporting requirements, not only because the report will, as the Bill currently stands, provide an appropriate level of scrutiny of the impact of the energy and environment principles, but because the appropriate monitoring and reporting mechanisms for the Government’s net-zero and environmental targets are already set up and have much wider scope than the subsidy control regime.

The new subsidy control regime will support environmental goals by allowing public authorities to make subsidies that address a market failure or equity rationale in relation to environmental and net-zero objectives with minimal delay. The Bill also sets out common-sense principles that promote energy efficiency, sustainable energy and environmental protection through the energy and environment principles set out in Schedule 2. The subsidy advice unit’s report will cover all aspects of the regime, including the operation of Schedule 2. These provisions provide an appropriate level of detail to enable the subsidy advice unit to fulfil its reporting function under Clause 65, and we believe that this strikes the right balance for monitoring the environmental and climate aspects of the regime.

I highlight that the Government already have robust reporting requirements on the meeting of net-zero and environmental targets. We have debated them extensively in this House. The Climate Change Act 2008 sets out monitoring and reporting requirements regarding compliance with the 2050 net-zero target and our carbon budgets. This includes laying before Parliament a report setting out current proposals and policies for meeting the UK’s carbon budgets, most recently the net-zero strategy; the UK’s energy and emissions projections, a world-leading approach to projecting the UK’s future emissions; and scrutiny by the independent Climate Change Committee, including an annual report by it to which the Government already must respond. We have also committed to update annually on progress on the net-zero strategy, and we comply with the UNFCCC’s emissions reporting obligations via annual submissions of the UK greenhouse gas inventory. Under the Environment Act the Government must report regularly on the progress made towards improving the environment.

The Climate Change Committee and the Office for Environmental Protection also have a function in holding the Government to account for progress towards climate targets and improving the environment respectively. Unlike the subsidy advice unit, these bodies specialise in climate and environmental matters respectively and can bring that expertise to bear on all the Government’s activities in that respect, including the subsidies they give. Furthermore, the Climate Change Act 2008 provides for parliamentary scrutiny. It is therefore our position that these are the sufficient and proper channels to ensure that these goals are being met and it is unnecessary to duplicate this work at the SAU. I therefore hope that this amendment will not be moved.

On Amendment 5 to Schedule 2, tabled by the noble Baroness, Lady Bennett, as noble Lords will know, Schedule 2 relates to subsidies and schemes in relation to energy and the environment. Under the terms of the Bill, principle C in Schedule 2 enables a non-competitive process to be utilised for the award of subsidies in relation to renewable energy or co-generation in limited and specific circumstances. These are where: first, projects are operating in a market with insufficient supply to ensure a competitive process; secondly, the project in question is a demonstration project; or, thirdly, the eligible capacity is unlikely to have a material effect on competition and investment within the United Kingdom or on international trade and investment. In any of these cases measures must also be in place to prevent overcompensation.

This amendment lists additional criteria for a number of small renewable energy or cogeneration projects that, under the terms of the amendment, could be granted without being subject to a competitive process, provided the other conditions in principle C are met. I understand the noble Baroness’s ongoing interest in this issue. It is important to note that the terms of Schedule 2 implement the UK’s international obligations under the trade and co-operation agreement with the European Union. Changing the terms of that schedule, as the noble Baroness’s amendment would do, would jeopardise the implementation of the UK’s international obligations and for that reason I cannot support the amendment. Furthermore, the Government understand the importance of supporting small-scale renewable energy projects of the kind set out in the noble Baroness’s amendment.

I point out that under the terms of principle C(2)(b), a non-competitive process may be used to determine a subsidy for renewable energy or cogeneration if appropriate measures are put in place to prevent overcompensation and if the subsidy is not likely to have a material effect on competition or investment within the UK or trade and investment between the UK and its trading partners. It is very likely that many of the projects caught within the terms of the noble Baroness’s amendment would already be included within these exemptions. Therefore, I believe that the noble Baroness’s amendment is unnecessary and I hope that, given the reassurance I have been able to give her, she will feel able not to press it.

With respect to energy and environment objectives, Schedule 2 of the Bill establishes a clear and flexible framework for the awarding of subsidies in relation to energy and the environment. This reflects the Government’s ongoing priorities on net zero and protecting the environment, while also ensuring that the UK complies with its various international obligations. All subsidies to which the subsidy control requirements apply, including small projects of the kind set out in the noble Baroness’s amendment in relation to energy and environment, should comply with these principles, not least of which is good value for taxpayers’ money.

I stress to noble Lords that the UK’s existing commitments and practices in relation to this critical priority are extensive and world leading, including, for instance, the various principles set out in the Environment Act which Ministers must give regard to when making policy. I believe, therefore, that we already have the right framework in place. For the reasons that I have set out, I hope that the amendment can be withdrawn.

Photo of Lord Whitty Lord Whitty Labour 7:00, 22 March 2022

My Lords, I cannot really hide that I am deeply disappointed by the Minister’s response. One modicum of comfort, if that is the phrase, is that he did say that guidance to public authorities would include a reference to the climate change objectives. I therefore can see no possible reason for him rejecting Amendment 61 on that basis.

On the central issue, the Minister referred to all the existing mechanisms, and there are important existing mechanisms and commitments, but the Climate Change Committee has said to the Government time and again that every new policy ought to include a cross-reference to climate change targets. This is an enormous area of new policy that, rightly or wrongly, we have taken back from the European Union so that we control the levers of power for a new era. Yet the Government stumble at the first hurdle and do not put it in this very important legislation. I do not understand the logic.

To be fair to the Minister, he wants all these things delivered, as the Government appear to do. This is not to say that they override all other policies and objectives, but they should be part of the balance when these things are being considered. There is a danger, in rejecting such amendments to this important legislation, that the interpretation out there—which in a sense has been fed by the media over the last few days—will be of a backing off from commitments to climate change within government circles.

The Government are missing the point and missing a trick here. If they want to reassert that they are still on schedule to deliver the government commitments and the net-zero strategy to which the Minister is committed, that should be in this important legislation. I hope I am wrong, but in order to ensure that this House at least has a chance to give its view on these matters, I am prepared to put this issue to the vote tonight. I beg to move.

Ayes 133, Noes 139.

Division number 5 Subsidy Control Bill - Report — Amendment 3

Aye: 133 Members of the House of Lords

No: 139 Members of the House of Lords

Aye: A-Z by last name

No: A-Z by last name

Amendment 3 disagreed.