Waste and Emissions Trading Bill [Lords]

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Norman Baker: Is the Minister proposing that there should be any restriction on who may qualify as a broker? More specifically, do the Government intend

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to ensure that those who have a commercial interest in the outcome of negotiations cannot act as brokers?

Mr. Meacher: Yes, there will be a requirement to be licensed as a broker in order to perform this particular role. There will be clear rules of engagement, which will be covered in regulations.

The hon. Member for Mid-Bedfordshire (Mr. Sayeed) asked me about profit, but I cannot possibly say what the profit might be in any particular contract. It would depend on the individual arrangements between the broker and the WDA. I repeat, however, that it will be a matter for the authority, and if an authority does not want to be involved with the associated bureaucracy and expense and thinks that it can do the job perfectly well itself, I am sure that it will not engage a broker. That seems to be perfectly satisfactory.

Mr. Hayes: I omitted to welcome you to the Chair, Mr. Griffiths, which was an unforgivable and unpardonable error, so I welcome you now, and hope that you will forgive me none the less.

It seems important to establish what kind of people the brokers might be. It has been suggested—the Minister sensibly referred to the difference between large and small authorities in this respect—that an authority might act as a broker itself or have an in-house service, which it might also offer to others. However, that would seem to be precluded by the idea that anyone who might benefit from the outcome of the negotiations should not be involved in the process. Then again, given that authorities are used to dealing with each other, that would not seem to be unfeasible, especially, as the Minister rightly says, if one takes account of subsection (2)(a).

That provision makes it clear that the private sector cannot acquire landfill allowances, which might act as a disincentive for the private sector to get involved. Some sort of in-house arrangement would help to provide the support for smaller authorities which the Minister rightly identifies as an issue.

The Chairman: Order. I remind hon. Members that interventions should be kept short.

Mr. Meacher: I should say that I, too, failed to welcome you to the Chair, Mr. Griffiths, and I wish to correct that oversight.

I do not believe that WDAs that have a broker operating with them will be precluded from offering that expertise to others, but it is unlikely to happen in most circumstances. Subject to consultation, rules will be introduced and regulations laid before Parliament. We want to keep the arrangements as flexible as possible. Our only purpose is to try not to introduce the unnecessary involvement of brokers—quite the opposite—quite the opposite—but to enable smaller authorities that could use it to do so. There is no requirement and it will not happen often.

If authorities trade—something that is initiated by the Bill and is not a customary exercise for most of them—they should be able to draw on the best expertise available, and that should not be self-regulated. There should be proper regulation; no-one

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will be able to declare himself a broker and make a nice tidy profit.

9.15 am

Mr. Sayeed: My hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) made an interesting observation that the Minister has not fully addressed. We know that local authorities are trying to specialise and are offering other local authorities their expertise. If, under the regulations, an authority sets itself up as a broker, can it offer that expertise to other local authorities?

Mr. Meacher: I am glad to confirm that it can.

Norman Baker: The hon. Member for Mid-Bedfordshire did not say so but implied that I had stolen Lord Dixon-Smith's amendment from the Lords. I can assure him that the amendment originated during a long train journey from Lewes to London. For reasons best known to South Central Trains, that journey took a circuitous route, which gave me the opportunity to read the Bill and to suggest amendments. However, the fact that I reached the same conclusion as the hon. Gentleman's colleague in the Lords would suggest that there is merit in the amendment. Two people think that it is worth pursuing; the Minister, sadly, does not make a third.

The Minister is right to say that the Bill merely allows local authorities to use brokers and does not require them to do so; that is perfectly proper. However, I have a feeling that once one or two local authorities start using brokers—perhaps the larger ones that can afford to do so—they will gain a perceived competitive edge. The consequence will be a cascading process, by the end of which virtually all authorities will have brokers. Once one does it, the others will follow.

The Minister rightly referred to the good partnerships between waste disposal authorities—we heard about them in an earlier sitting. Those will be put in jeopardy by arrangements with a jarring third party that will gain influence from one over the other. After all, the point for a WDA of employing a broker will be to maximise its benefit, probably at the expense of another authority. It will be in the broker's interest to reach an agreement on transfer that will be beneficial to one authority and detrimental to another. If the broker is not to gain the edge for the authority, what is he or she there for? The situation will cause disharmony between WDAs.

I am grateful to the Minister for saying that the regulations will ensure that there are restrictions on the types of person who can be licensed. I hope that he means, by implication, to exclude those who have a direct commercial interest. Employees of companies such as Biffa—I am not picking on it, merely using it as an example—would, therefore, be excluded. That is important, because they might have an interest in not following the process properly.

Let us say that authority A employs as a broker a company involved in waste disposal. If that company has a contract with authority B it might not wish to comply with the wishes of authority A; it may be in its interest to keep up the contract volume with

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authority B. The situation would be unclear due to the conflict of interest between the broker and the WDAs.

The hon. Member for South Holland and The Deepings made an astute point about the potential role of WDAs in the brokering process. Local authorities are developing in-house specialities and seek to market those to neighbouring authorities. There is nothing new about that; for example, the district council of which I was a leader some years ago did the same thing with waste collection, street cleaning and grass cutting. Establishing a speciality and selling it to other local authorities is standard practice in local government. The Bill makes it possible for waste disposal authorities to set up their own brokerage and to market services to others. The Minister said that that is not precluded. Those services could even be marketed so as to benefit the originating authority, thereby creating a conflict of interest. The system that the Minister is setting up is not clean.

Mr. Hayes: That is true, but if the amendment were accepted, and lines 40 and 41 of page 5 were deleted, the process that the hon. Gentleman describes, whereby a larger authority provides a service, would be precluded. I asked the Minister whether that would be precluded under existing arrangements or other provisions in the Bill and he assured me that it would not. It would not be unhealthy for local authorities to co-operate in that way, but, even though I do not make a definitive judgment on the matter, that route would be closed if the amendment were accepted.

Norman Baker: I can tell the Minister that I shall not press the amendment, because it is a probing amendment. Also, I accept that its effect would be to weaken the structure that I wish for, because it would remove the licensing arrangements, which, under the circumstances, it is better to have than not. The amendment's purpose is to raise the issue, which we have done successfully. However, at the end of this short debate, I am more convinced than ever that brokers should not have a role.

Mr. Meacher: I understand that the hon. Gentleman will not press the amendment, so I shall not detain the Committee. However, I should like to comment briefly on some of the remarks he made in his second contribution which are additional to what he said at the outset. He believes that the provision could undermine partnerships between waste disposal authorities, although in my view it certainly would not. There is no obligation on authorities; they will engage in the process only if they believe that doing so is additional to the expertise that they have from those partnerships. He is right that there is specialisation among local authorities and WDAs. There is no reason why the provisions should interfere with that specialisation and its availability to another WDA.

The hon. Gentleman says that once the larger authorities start to use brokers there will be a cascade effect throughout all WDAs. I do not believe that that will happen, and there is no reason why it should. It is a matter not of giving a competitive edge, but of providing expertise in trading to an authority that does not yet have it. Once the authority has that expertise it

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will stop using a broker. The provisions are for authorities that are starting on a process that they are very unused to.

Lastly, conflicts of interest from brokers will be covered in regulation and subject to consultation. I appreciate that the hon. Gentleman will not press the amendment, but I hope that he will take on board my belief that his fears and apprehensions are not grounded.

Norman Baker: Of course I accept that the Minister honestly holds the view that my fears and apprehensions are not grounded. I think that the matter might turn out quite differently, but history will be the judge of that. However, I disagree that the use of brokers will merely bring expertise rather than provide a competitive edge—expertise brings about a competitive edge.

 
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