The licensing levy: regulations

Energy Bill [Lords] – in a Public Bill Committee at 2:15 pm on 26 January 2016.

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Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss clause 16 stand part.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

I merely wish to ask the Minister to give a little further expatiation on what payments and financial assistance might mean as far as the OGA is concerned. The Bill gives the Secretary of State the power to make payments and provide financial assistance to the OGA. I presume that the payments or financial assistance will be from the public purse and not in the form of additional levies or arrangements that might fall on industry, but that is not entirely clear in the Bill. I assume that payments or financial assistance might be undertaken if the OGA had particular cost circumstances, which could not otherwise be covered by the arrangements we have just talked about: the levy and fees.

There is no clarity in the Bill about what the circumstances might be and how they might be determined before the Secretary of State decides to make those payments or provide financial assistance. It would be helpful if the Minister provided more detail on how and in what circumstances those things might happen. In what form would assistance be granted—I presume, with the agreement of the Treasury to make it available?

Photo of Andrea Leadsom Andrea Leadsom The Minister of State, Department of Energy and Climate Change 2:30, 26 January 2016

As the hon. Gentleman points out, clause 16 provides a general power for the Secretary of State to make payments and provide financial assistance to the OGA. The power is not restricted to specific functions of the OGA and therefore payments may be made at the Secretary of State’s discretion to fund any of the OGA’s functions. As well as covering statutory functions, it will cover functions contracted out.

The OGA will be funded through a levy on holders of certain energy industry licences and fees, for which industry will pay for carrying out particular services. The Secretary of State might need to provide funds to the OGA to cover any unforeseeable events. That is the purpose of the clause.

For reassurance, I can tell the hon. Gentleman that one would not want some unforeseen circumstance to result in the failure of that Government company. Nevertheless, as accounting officer, the chief executive of the OGA is personally responsible and accountable to Parliament for the organisation and quality of management in the OGA, including its use of public money and the stewardship of its assets.

The chief executive has specific responsibility for ensuring that the OGA operates in accordance with the guidance in the Cabinet Office’s “Managing Public Money”. The OGA is also required, promptly and without delay, to disclose to DECC any information regarding the OGA that is likely to have a material, financial, reputational or otherwise adverse effect on the delivery of the OGA’s purposes and duties.

In essence, this is a general permission for the Secretary of State to support the OGA in the event of unforeseen circumstances. While there is a clear intention that that will not be the case—that the industry will pay for the services it uses and so on—nevertheless, because it is a Government company, it must be important that, in the event of something unforeseen, there is the ability to provide emergency financial assistance.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

May I prevail further on the Minister’s good offices on the status of the OGA as a Government company? That company could become insolvent. The point at which the company would have to cease trading on grounds of insolvency could well be before the Secretary of State has been able to exercise these powers. Or can the Minister say that this company could not become insolvent because there would be an automatic infusion of funds to keep it solvent so that it could continue trading?

If that is not the case, due to the unusual structure of the OGA, we could face circumstances where the OGA would be unable to trade but not necessarily have access to funds, grants or assistance to enable it to trade. At that point, we would be in the odd situation, for the first time in the history of regulation in the UK, of having an insolvent regulator. What would regulation consist of at that point, bearing in mind the restrictions on how the funding for the OGA might come about? Where we would stand with the security of the regulator at that point is anybody’s guess. Could the Minister provide reassurance on that point?

Photo of Andrea Leadsom Andrea Leadsom The Minister of State, Department of Energy and Climate Change

The important point is that clause 16 is designed to enable the Secretary of State to avoid exactly the kind of scenario that the hon. Gentleman describes, so I hope that he and his hon. Friends will support it.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16 ordered to stand part of the Bill.

Clause 17