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7 Sep 2011 : Column GC59

Grand Committee

Wednesday, 7 September 2011.

Arrangement of Business

Announcement

3.45 pm

The Deputy Chairman of Committees (Lord Haskel): My Lords, before the Minister moves that the first statutory instrument be considered, I remind noble Lords that in the case of each statutory instrument, the Motion before the Committee will be that the Committee do consider the statutory instrument in question. I should make it clear that the Motions to approve the statutory instruments will subsequently be moved in the Chamber in the usual way. Should there be a Division in the House, the Committee will adjourn for 10 minutes.

I must also inform the Committee that at some point between 4 pm and 5 pm the Leaders and the Whips have arranged that the Information Office will bring a photographer to the Moses Room to take photographs of this Committee in action.

Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

3.46 pm

Moved By Lord De Mauley

Lord De Mauley: My Lords, the purpose of this order is to ensure that the regulation of the sale and rent-back market will operate as originally intended and deliver appropriate consumer protections. To set it in context, I hope that your Lordships will allow me to give a little background on the sale and rent-back market.

These schemes allow consumers to sell their property to a public or private sector organisation and then rent it back. This allows a consumer to stay in his or her own home and avoid the distress and expense of repossession. In 2008, the Office of Fair Trading published a study of the market. It found that it was not working well for consumers and recommended that the Treasury should introduce regulation by the Financial Services Authority. This was deemed necessary because the sale and rent-back market suffers from an imbalance in the relationship between those consumers considering taking up a sale and rent-back agreement and those selling the schemes.



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Sale and rent-back agreements are extremely complex contracts. The OFT study showed that consumers entering into these agreements are often vulnerable people with low levels of financial understanding. They are often already in debt and believe that their financial situation is out of control. They are unlikely to seek independent financial advice, probably because they do not know where to go. Conversely, the sellers of sale and rent-back agreements are professional salespeople, who in some cases may also play on the emotional aspects of a sale and rent-back agreement-for example, the consumer's attachment to the family home. This results in two significant impacts on the consumer. First, there is financial loss to the consumer through a distressed sale. Evidence suggests that most sale and rent-back providers pay between 70 per cent and 90 per cent of the market value of the property. Secondly, there is a lack of security over tenure for the consumer, who may believe that they cannot ever be evicted from their home, whereas in reality, many consumers suffer rising rents or, indeed, eviction.

Following the OFT study, an interim system of FSA regulation was introduced in July 2009. This was replaced by a full regime in June 2010. Today's order amends the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 to make clear that any provider of a sale and rent-back agreement, unless they are closely related to the consumer, will be regarded as doing so by way of business and will therefore need to be FSA-regulated.

Currently, the FSA's regulation captures only those firms that meet the strict "by way of business" test. That test is intended to include firms who carry out the specified activity as a business arrangement but exclude those who carry it out for other purposes, such as arrangements with immediate family members. However, some providers have misunderstood whether they are entering into a regulated activity, while others, dare I say it, have chosen to interpret the rules such that they are not acting by way of business and thereby have avoided FSA regulation

The order clarifies the position. Everyone who enters into a sale and rent-back agreement, unless they are closely related to the consumer, will be regarded as doing so by way of business and will therefore need to be FSA-regulated. About 80 per cent of sale and rent-back transactions are still taking place outside regulation, despite the intention of the original regime, so the sale and rent-back market continues to generate a high level of consumer concern. In the 12 months from April 2010 to March 2011, citizens advice bureaux received more than 1,000 inquiries about sale and rent-back providers. In March this year, a report by Which? highlighted cases where a number of firms were acting outside FSA regulation. In July this year, there was an investigation by Channel 4's "Dispatches" into sale and rent-back providers. Citizens Advice, Shelter and Which? have all publicly supported the Government's work to address this genuine gap in the regulatory architecture and make it clear to providers when they are acting by way of business.

The costs and benefits of the order were set out in the impact assessment. The order will ensure that FSA regulation of sale and rent-back agreements operates as originally intended, when the costs were expected to

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be incurred at the time of the original legislation. The benefits of the order will be felt by those individuals who sell and rent back in their houses through fairer sale prices and fairer tenancy agreements. The FSA's regulation of the sale and rent-back market attempts to address those issues through, for example, pre-sales disclosure and rules on terms and conditions of tenancy agreements.

The option for a consumer to avoid repossession and have the choice to enter into a sale and rent-back arrangement, and remain in his home when it is financially viable to do so, is important, but it is equally important that appropriate consumer protection is in place. The order is scheduled for debate in another place next week.

I hope that I have reassured your Lordships that the order merely clarifies the intent of previous efforts to address issues in that market and that the Committee will therefore give its support.

Lord Newby: My Lords, in view of the statement by the Deputy Chairman at the start of our proceedings about about the photographer, I am now tempted to give a 45-minute speech just to make sure that I get my picture taken in action to prove that I do things in your Lordships' House other than turn up. However, I probably will not.

I am extremely grateful to the Minister for his introduction to the order, because it filled out the information in the Explanatory Memorandum. The phrase "sale and rent-back" is new to me; I am used to the phrase "sale and lease-back". My first question relates to that terminology: is there a difference in law between sale and rent-back and sale and lease-back? When I think of sale and lease-back, I have commercial activity in mind. I remember that Tesco was notoriously involved in sale and lease-back of properties via the Cayman Islands a few years ago. I wondered whether this regulation meant that commercial companies involved in those kinds of deals on commercial properties are now brought into the legislative net, or whether the phrase "sale and lease-back" is already recognised in law. If I decided that I wanted to buy a Tesco store and lease it back to them, would I be covered by something that already exists or would this newly apply to me?

My other questions relates to Article 6 about the sunset clause. Within a year, more or less, of this provision coming into force a report has to be produced on how effective it has been. Presumably, the intention is that between then and 2015, if the report suggests that it has been effective, a subsequent order will be made, which no doubt will cover lots of other things as well but would continue this provision. I cannot remember, from when the Financial Services and Markets Act was going through, how this sunset provisions worked. If, as I suspect, we would expect a successor order to this one to be introduced before 1 January 2015, how long would that last for? Is this a rolling series of orders that have to be renewed every five or 10 years? Subject to that, this seems to be a sensible additional component in the consumer protection framework.

Lord Davies of Oldham: My Lords, I am somewhat shocked that the noble Lord, Lord Newby, feared that our proceedings might be concluded before the

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photographer arrives; I have my customary one-hour speech on a statutory instrument, so there is no call for anxiety on that front.

I thank the Minister for both the clear way in which he presented the issues around the SI, and for the sympathetic way in which he addressed himself to those who may be involved in this exercise by being forced by financial circumstances to engage in this operation. As he rightly says, there is an obvious imbalance between the professional service of those who provide the resources and seek to strike the agreement and the householder who most often is already entering into these arrangements through fairly dire financial circumstances. As the Minister accurately said, they are unlikely to think of recourse to financial advice or even to be able to afford it anyway, even if they thought it was a good idea.

This is consumer protection legislation, after all, and we are at one with the Government in seeking to enhance it, particularly as it is derivative from the 2009 Act passed by the previous Labour Administration. However, I ask the Minister to address himself to several points. First, because the order follows reasonably quickly from its predecessor, it is suggested that there was no need for further consultation. On the whole, all such SIs of this kind, prepared by the Treasury and other government departments, should be subject to consultation beforehand. After all, the previous consultation took place against different terms from this order. I am therefore somewhat surprised that no consultation took place specifically on this order.

Secondly, will the Minister address himself to the important point that the noble Lord, Lord Newby, expressed? I am sure that the Committee will be grateful for the clarification-and, I hope, confirmation-that the Minister will be able to give about the nature of the rent position regarding the law and this order.

4 pm

However, what about agreements already entered into? Is there anything in this order that helps those who may indeed have signed up to such arrangements? They may have done so considerably to their disadvantage. Is it just the fact that caveat emptor applies in these circumstances, or is there any way, given the sympathetic way in which the Government are addressing this matter, that anything can be said about agreements already entered into?

My final point is perhaps obvious, but I hope that it gave rise to the Minister's sympathetic approach and a recognition of the brutal economic realities that we all face. I do not want to exaggerate the position. However, I see that the latest figures show that there were 18,100 repossessions in the past six months. That is a large enough number, in all conscience, because it represents people losing their homes and having to make other arrangements through the economic exigencies they face. I do not wish to exaggerate the position, but I could not possibly exaggerate it because I recently returned from Michigan where I visited the city of Detroit. You cannot go to such a city, see the depredation on homeowners there and not appreciate how much more fortunate we are in this country, and how much more successful we are in defending the consumer and

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the householder over what is, after all, their most valued and important possession-their home. Detroit is a clear illustration of the devastation that can be effected upon ordinary people when there is significant economic collapse and they lose their livelihood to the extent that their homes are repossessed.

We are not in that position but we are not in an improving position either. The noble Lord knows already that the economic travails of this country are causing considerable difficulty among our fellow citizens-and the worst is of course yet to come. Those measures that really will bite upon those of limited resources are still very much in the pipeline, in the loss of jobs and the cuts in support for citizens from government or local authority resources. They are still to wreak their considerable damage upon significant numbers of our fellow citizens. That is why this statutory instrument is pertinent and important. I am glad that it has been presented at this stage and that the Minister has done so in such a sympathetic way. However, I hope he will also reply to the discrete points that have been made in this short debate.

Lord De Mauley: My Lords, I thank my noble friend Lord Newby and the noble Lord, Lord Davies, for their helpful and constructive comments and questions. Let me see if I can address them. First, my noble friend asked about the difference in law between a sale and rent-back agreement and a sale and lease-back agreement. Essentially, there is no difference between the two terms, but this order relates to where firms provide sale and rent-back arrangements to individual consumers. Commercial property is thereby not covered; that is the essential distinction.

My noble friend asked about the sunset clause and whether there will be a new order after 2012. It will be for the Treasury to decide whether to renew the order with a further order-with or without a sunset provision-depending on the outcome of the review.

The noble Lord, Lord Davies of Oldham, asked whether consumers who are already involved in an arrangement will gain protection through this order. This order clarifies that all providers entering into sale and rent-back arrangements need to be FSA-authorised. It is a matter for the FSA whether to take enforcement action against those firms who have already entered into existing arrangements outside regulation, and decide whether these have taken place by way of business. That is the key and the defining factor. Where an unregulated sale and rent-back transaction, which should have been FSA-regulated, has taken place, those consumers will still have recourse to the Financial Ombudsman Service.

The noble Lord asked why there had been no further consultation. This order merely clarifies the intention of the original order, which was subject to full consultation by the Treasury and the FSA. Perhaps I could also concur with the noble Lord in being concerned about people facing repossession. The Government are deeply conscious of the effect that this has on people and, as I think he intimated, the purpose of this order is absolutely to prevent exacerbation of the problem. I pay tribute to the work of the previous Government in setting us on this course in the first place.



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This order amends the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 to make clear that any provider of a sale and rent-back agreement, unless closely related to the consumer, will be regarded as doing so by way of business and will therefore need to be FSA-regulated. The order improves outcomes for consumers entering into sale and rent-back arrangement first, by increasing the transparency of information provided by sale and rent-back providers; secondly, by reducing the potential for consumers to enter into unsuitable arrangements; and thirdly, by increasing product quality by driving providers to improve, or exit, the market.

It has been universally welcomed by consumer groups. Citizens Advice welcomed the government commitment to ensure that people with sale and rent-back agreements are protected against bad practices. The order will ensure that FSA regulation of sale and rent-back agreements operates as first intended. I commend this order to the Committee.

Motion agreed.

Weights and Measures (Specified Quantities) (Unwrapped Bread and Intoxicating Liquor) Order 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

4.08 pm

Moved By Baroness Wilcox

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, the order amends the specified quantities which apply to non-prepackaged alcoholic drinks and unwrapped bread. The legislation that is amended by this order comprises Part 4 of Schedule 3 to the Weights and Measures Act 1985, the Weights and Measures (Miscellaneous Foods) Order 1988, the Weights and Measures (Intoxicating Liquor) Order 1988 and the Measuring Instruments (Capacity Serving Measures) Regulations 2006. The order does two things: it removes all restrictions on the sizes of unwrapped loaves and it allows greater flexibility over the sizes available for the sale of alcoholic drinks.

Fixed sizes were introduced in the 1960s. They ensured that consumers could easily compare the quantities and prices of staple foods such as bread and flour. However all fixed sizes for prepackaged foods, apart from wines and spirits, were deregulated in 2009. This followed changes at European level. Once universal quantity labelling and unit pricing were adopted for prepackages, specified quantities became largely unnecessary. Consumers could see for themselves the quantities they were purchasing, so that the restrictions on pack size could go. However, that deregulation

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dealt only with prepackaged goods. Today we are dealing with non-prepackaged products, specifically unwrapped bread, and non-prepackaged alcoholic drinks served on licensed premises.

The results of a public consultation on the future of the remaining specified quantities found strong support for the retention of specified quantities for the sale of alcoholic drinks. Support came from consumers, the enforcement community, business and those in the health field. There was widespread recognition that the sale of alcohol differed from the sale of other foods because of its health effects and connection to anti-social behaviour. As a result, greater care is needed to ensure that consumers are made aware of the quantities being purchased than is needed for other products. However, the consultation identified some demand for specific changes. Some businesses felt that the existing regime stifled a legitimate demand for new sizes or products. The Government have listened to these concerns. The changes that we propose today will allow for innovation but, at the same time, retain necessary protection for the consumer.

Turning to the specifics, today's order introduces a two-thirds of a pint size for the sale of draught beer and cider. This new size will allow licensed premises to satisfy demand for a size between half a pint and a pint. There will be no mandatory requirement for businesses to offer two-thirds of a pint; it will be optional. However, I understand that at least two major breweries have plans to introduce the new size if it becomes a legal measure.

The order also deregulates small glasses of wine-those of less than 75 millilitres-from the requirement to be sold by quantity. Under the current law, the smallest legal serving of wine by the glass is 125 millilitres, so samples may be given away but not sold. There is a demand for samples that cannot be met at present because of this restriction. Therefore, by deregulating very small servings of wine the order will allow businesses the opportunity to innovate and respond to untapped demand for sales of samples, tasters or flights of wine. This proposal was strongly supported by consumers and businesses eager to create a new market for their products.

The order also reduces the existing specified quantities for fortified wines from a minimum of 125 millilitres to the smaller size of 50 millilitres or 70 millilitres, or a multiple of either, This brings the law on fortified wines into line with current trade practice. It will also allow for smaller sizes more appropriate to the sale of fortified wines, which can be significantly stronger than still wines. This proposal has the support of health groups, trading standards authorities and business.

Finally, the order deregulates the specified weights that apply to unwrapped bread. Under current law, unwrapped loaves may be sold only in sizes of 400 grams or a multiple of 400 grams. After deregulation, unwrapped loaves may be sold in any weight, including the traditional sizes. This will give greater freedom to bakers and retailers to make up and sell unwrapped loaves of any weight that they like. It will also bring the sale of unwrapped loaves into line with prepackaged bread,

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for which the specified weights have already been deregulated. However, to ensure that consumers can tell when the sizes have changed, retailers adopting new sizes will be required to display clearly the quantity of any new sizes being offered for sale. There will be no additional burdens on bakers or retailers, since there will be no requirement to offer the new sizes. Information on weight will be required only when new sizes are introduced. For example, bakers who continue to offer only traditional sizes of 400 grams and 800 grams will not have to change their current practice at all. However, for those who want to innovate-for example, makers of artisan loaves, the different densities of which do not easily fit with traditional sizes-these changes will give a new stimulus to the market, allowing for the sale of new loaves in new sizes.

The changes set out in this order will give consumers more choice and provide greater freedom for bakers, retailers and licensed premises to offer new sizes and products. A full impact assessment has been completed and there are no new burdens on business or trading standards as a result of this order. These changes will support business growth through innovation and the creation of new markets. I therefore commend the order to the Committee.

4.15 pm

Lord Young of Norwood Green: My Lords, what a pleasure it is to be back dealing with the wonderfully random nature of statutory instruments. I could not help reflecting: where do the two items, bread and liquor, come together? I thought of the religious context, but then I thought: no, there is another place where the two come together-and I could not resist the lure of this quote for those of you who are familiar with the work of Edward Fitzgerald in his translation of the Rubaiyat of Omar Khayyam. He said,

"A Book of Verses underneath the Bough,

A Jug of Wine, a Loaf of Bread-and ThouBeside me singing in the Wilderness-Oh, Wilderness were Paradise enow!"

It is probably the first time that that has been quoted here.

Lord Razzall: You were talking about the noble Baroness.

Lord Young of Norwood Green: I digress only slightly. The statutory instrument before us proposes to amend the legislation whereby it will no longer be necessary for unwrapped bread to be sold in quantities of 400 grams, as the Minister told us. We welcome that and I will not go into any more detail. It brings us into line with European directives and, as she said, follows similar amendments, made in April 2009 when Labour was in government, regarding prepackaged loaves. The only reassurance that the public will require is that loaves should be clearly marked. One can see opportunities for mis-selling or, perhaps, confusion. I should welcome some comment on that.

As to wine, there was a word that the noble Baroness struggled with, if she does not mind me saying so. I was not sure exactly what it meant. She referred to a "flight". I thought, "I can think of 'flute'"; so I should

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welcome some clarification on that. I do not say that in any way other than to ensure that we get it right. Perhaps I misheard-in which case, I apologise. As to selling samples of wine, I read through the explanations in the impact assessment. Again, I should welcome some assurance. What are described as "samples" and "tasters" are allowed to be sold, without there being any specifics as to what they may be. What protection will there be for consumers in knowing exactly how much they will be purchasing. I am talking about only the wine, not fortified wine.

When I was reflecting about beer, I thought that when we now go to the pub the position is quite obvious. I ask my noble colleagues what they are having, and it will be either a half or a pint. Could it be: "No, I will have a two-thirds"? I could not get my head around this and I should welcome any suggestions as to a handy description of what that would be. I am sure that it will find a ready market.

We understand the purpose of these measures, which we generally accept the need for and are ready to support, subject to the clarifications that I look forward to hearing.

Lord Razzall: My Lords, of course I will not oppose these measures, but I have significant reservations as to whether they represent the real world. Leaving aside the provisions on bread, which I of course fully support, I am concerned that the consultation exercise seems to have involved organisations relating to wine, beer and spirits rather than relating to what happens in the real world in wine bars and pubs. Until I read all this material, I had not appreciated-of course, I should have done-that there was any restriction on what a publican could sell. I had assumed that the fact that you ordered either a half or a pint of beer was simply tradition, because that is the way that it had always happened. I had not realised that it was a mandatory requirement.

Of course, in the real world of pubs, they vary. In many village pubs when your pint of beer goes down to a quarter and you ask for a half they will pull the pump so many times you almost end up with another pint. The fact that they have charged you only for a half is not material to the measure that you have actually been served. As far as wine is concerned, at the moment as I understand it, you can have only a small or a large glass if you go into a pub or wine bar. Those are the required measures, but there is nothing to stop six of you ordering a bottle of wine and serving it to yourselves in whatever proportions you want; and if you want more, you have another bottle of wine.

I find the regulation of this rather strange and not necessarily representative of what actually happens in the pubs and wine bars of our country-those that remain open. Had I started with a clean piece of legislation, I would have gone for option two and deregulated the whole lot, but I recognise that the consultation makes that rather difficult.

I also wonder whether there has been proper consultation with the people at the sharp end. Will those who run my local village pub have to spend a fortune buying two-third pint glasses which they do

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not have? If so, are they in favour of this, or would they rather stay with the existing requirements? I would have assumed that, were the Tory element of our Government-and, I suspect, the Liberal Democrat element too-starting from scratch, they would think you should simply say, "Here are the products we sell, whether it is two pints, one pint, three-quarters of a pint, two-thirds of a pint, half a pint and here is the price," rather than saying, "You cannot sell anything unless it is one pint, half a pint or two-thirds of a pint." So I have reservations about the order, as I have expressed, but of course I am not going to oppose it.

Baroness Wilcox: My Lords, I thank the noble Lords, Lord Young and Lord Razzall, for their questions, which allow me to clarify some points and-as the noble Lord, Lord Young points out-maybe even clarify to myself what a "flight" is.

On whether bread will be clearly marked, I can reassure the noble Lord that the answer is yes. Any new sizes will have to be labelled with the weight clearly shown so people can see exactly what they are buying. What is a wine flight? We are both happy to learn the answer to this. It is a selection of different samples served with a meal. There we are. We are both ready to use this word again. I can see both of us rushing out soon asking for a flight.

I was asked how, if small glasses of wine are deregulated, drinkers can keep track of their consumption if they do not know how much they are being served. This deregulation is aimed at a specific market, that of samples and wine tasters served in small volumes of below 75 millilitres. It will not affect the vast majority of wine sales, which will continue to be regulated. There is nothing to stop drinkers asking for information on the quantity of wine samples or tasters in the same way that they would ask for information on alcohol by volume, to work out the units and ensure that they keep within the daily guidelines. I hope that the noble Lord finds those answers helpful.

I have already had exchanges with the noble Lord, Lord Razzall, today on a very different subject-nuclear power stations. I hope I can satisfy him on this more technically than I did with my earlier answer. I am very impressed with his experience of pubs and wine bars. A bit of research had to be done on this job and I am grateful to him for doing so. It must have taken time, effort and expense. He is quite happy with the bread, it seems, but with beer and wine, he did not realise that there is a mandatory restriction. There we are.

The noble Lord made an interesting point about how things vary in real pubs. He talked about something that we all know when we go to local pubs: you do not ask for another pint in your pint glass-you drink a bit and then ask for another half in that glass, because it is impossible to get it right. In fact, you usually end up a winner, so I am with him on this.

On why we do not simply get rid of specified quantities and allow pubs to sell any size, alcohol is a regulated product and the consultation found widespread support for the retention of specified quantities for the sale of alcoholic drinks. In any case, there are unlikely to be any significant savings for business from full

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deregulation, and there is very little support for it. There is, however, significant support for the continued use of specified quantities of alcohol from consumer groups such as CAMRA, trading standards departments, health agencies and charities including Alcohol Concern and Alcohol Focus Scotland, as well as from businesses.

Finally, the noble Lord asked about the cost of introducing a two-third pint. The answer is that a two-third pint is optional and will be introduced only if there is a business case for it. We know of at least two major brewers which are planning to use it, so I shall be most interested to see what it looks like. When I came here, I thought it might be a good idea to line up a few glasses so that we could actually see what we are talking about, but my Private Secretary decided that that was a bit risqué.

I thank noble Lords for their consideration of the order. The policy objective underpinning it is to free the market from unnecessary regulation while ensuring that the market works effectively. The order delivers greater freedom to business over the sizes that can be sold, while ensuring that consumers will continue to be able to judge the best deal and, we hope, keep track of their alcohol intake. Pubs, bars and restaurants will have more choice over the sizes they serve; bakers and retailers of unwrapped bread will be able to sell loaves in any shape and size, and consumers will have greater choice. The order will ensure that consumers continue to be empowered but will also help to create a more positive environment for business by allowing for greater innovation and growth. I commend the order to the Committee.

Motion agreed.

Construction Contracts (England) Exclusion Order 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

4.27 pm

Moved By Baroness Wilcox

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): This instrument and the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011 are being made using powers in the Housing Grants, Construction and Regeneration Act 1996. I should like to set out the context for these instruments.

Part 2 of the 1996 Act regulates construction contracts and has two key aims: to improve cash flow and to facilitate the quick resolution of disputes through

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adjudication. The 1996 Act has played an important role in improving payment practices in the construction industry. It works by requiring contracts to make certain provisions on payment and on adjudication. Where a contract fails to meet an effective provision, a safeguard is needed. The Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011 provide that safeguard.

The Department for Business has engaged in an extensive review of the construction legislation with the industry. This identifies a number of weaknesses and regulatory burdens in the 1996 Act. After two formal consultations with the industry and a further consultation on draft Bill clauses, a package of measures was introduced to reduce these burdens and fix weaknesses. These measures were included in Part 8 of the Local Democracy, Economic Development and Construction Act 2009. The measures improve access to adjudication and reduce costs, and improve the exchange of information relating to payment to enable better cash flow management and remove administrative burdens. We now need to mirror these changes by amending the scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations.

There are three main areas of change: adjudication costs, the slip rule-that is, the adjudicator's ability to correct simple errors or slips-and payment notices. The 1996 Act was silent on the cost of adjudication. Some in the industry have chosen to exploit this by drafting contract clauses that use the cost of the adjudication process as a barrier to adjudication. Such clauses, which are commonly referred to as Tolent clauses, can require one party to bear all the costs, including both parties' legal costs, irrespective of who initiated the process and regardless of the outcome. To prevent such onerous contract terms the 2009 Act will make agreements on adjudication costs ineffective, except in two cases. These are: where it is an agreement in writing in the contract that allows the adjudicator to allocate his fees and expenses between the parties; and where it is an agreement, whether concerning the adjudicator's or the parties' costs, made in writing after the notice of intention to adjudicate had been issued.

As a consequence, it is necessary to amend the scheme. The consultation exercise showed strong support for this amendment. The 2009 Act will require construction contracts to provide that the adjudicator has the power to correct a clerical or typographical error in his decision-the so-called slip rule. The scheme currently contains no such provision. It is therefore being amended so that the adjudicator has the power to make such a correction within five days. The consultation exercise showed unanimous support for this approach.

The 2009 Act will make changes to the statutory payment notice framework. In particular, it will remove restrictions on who can issue a payment notice, which removes a burden, and require it to be issued even when the amount owed is zero, which will improve communication. As a consequence, amendments to paragraphs 9 and 10 of part 2 of the scheme are

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required. Most respondents to the consultation agreed that no further amendments were required to the payment schedule. Apart from a minor change to cure an ambiguity, no further changes are being made.

I turn now to the Construction Contracts (England) Exclusion Order. The 1996 Act prevents the use of "pay when paid" clauses. A practice has emerged whereby some contracts make payment-its timing, amount or both-dependent on the issue of a certificate, such as a valuation of the work by the client's agent, under the superior contract. In effect, this creates the same effect as a "pay when paid" clause. The Local Democracy, Economic Development and Construction Act 2009 therefore closes this loophole. It states that the requirement for a contract to have an adequate mechanism for determining what will be paid and when is not met if it makes payment conditional on obligations being performed under another contract. This provision, contained in what will become Section 110(1A) of the Act, will adversely affect PFI projects to an unwarranted degree.

Different circumstances apply in PFI contracts from those that exist in traditional contracting. For instance, it is frequently a feature of PFIs that the construction contractor has a shareholding in the special purpose company. It will therefore be intimately aware of the project agreement and the terms of funding. Even where the construction contractor does not have a shareholding in the special purpose company, it will be a term of its first-tier subcontract that it has full knowledge of the project and funding structure. The first-tier contractor will invariably take legal advice when agreeing its contract, unlike more traditional contracts. The construction contractor will therefore have full knowledge of the funding arrangements and project contract. Further, in PFI projects it is, in practice, the construction contractor itself that performs the construction obligations contained in the head contract with the authority. This means that it is in a good position to assess and price the risk, in contrast to the general position with more traditional construction projects. Recognising these important differences, the exclusion order will mean that the special purpose company can continue to make payment to the first-tier PFI subcontractor, conditional on obligations, although not payment obligations, being performed under another contract-the head contract. The exclusion extends no further than the specific contractual relationship. That is, it will not affect any contracts that the construction contractor has with its supply chain.

The various consultation exercises have demonstrated significant support in the industry for the 1996 Act. Almost everyone believes that its adjudication provisions have played an important role in improving contractual relations, although it is fair to say that sentiment about the payment provisions is more mixed, with views largely determined by where firms sit in the supply chain. The Local Democracy, Economic Development and Construction Act 2009 made some important amendments to the 1996 Act to ensure its more effective operation. Before those changes begin to bite, they need to be reflected in the mirroring secondary legislation, the scheme for construction contracts. I commend these orders to the Committee.



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Lord Razzall: The two orders are being taken together. I am entirely happy with the first one, which seems to be a very sensible tidying-up of the situation. On the second one, which basically deals with PFI, I am sure that the Minister will be aware that PFI is a highly controversial topic at the moment, not only with Private Eye but with House of Commons committees. It would not be beyond the wit of man if, as we speak, HM Treasury was looking at the details of PFI to see how it could be improved.

PFI contracts normally contain three elements: the management of the project, the finance and the construction. One of the issues here is that the construction element is to some extent being brought into the financing, and the arguments for this order go to how PFI contracts are financed. I am happy to support the order, but it would be helpful if the Minister could assure us that when HM Treasury completes its review of existing PFI contracts and the future procedures for PFI, this will be on the table again so that, if it is necessary as a result of that exercise to look again at this issue, that will be done. This does not have to be the end of the story. It may well be that that is not necessary, but if there is currently a review-not only by Private Eye, as I say, but by a more salubrious body-this should still be on the agenda if necessary.

Lord Young of Norwood Green: My Lords, I welcome the comprehensive statement read by the Minister. We do not see this as a matter of controversy; its origins lie before the 1997 election and it continued until the 2009 legislation. We do not see the proposals as controversial and we do not intend to oppose them. I tend to agree with the noble Lord, Lord Razzall, on PFI contracts. If I had one other comment to make, it would be to ask whether there would be an impact regarding the participation of SMEs in these contracts, something that I know the Government see as desirable. With those comments, I await the Minister's response.

Baroness Wilcox: I thank noble Lords for their patience in listening to the great amount that I had to say on the order, but I felt that we could not cut it shorter because it is important stuff. Clearly, the private finance initiative is something that generates strong feelings. I have experience myself in business of a PFI contract. The noble Lords, Lord Razzall and Lord Young, have referred to PFI, but the exclusion order that we are debating today is simply a technical exercise to acknowledge the fundamental differences between private finance construction contracts and traditional construction contracts. It does not concern the wider policy landscape. I asked the same questions myself, and it does not, so I can reassure noble Lords on that. Of course, we will look at it again if circumstances change.

The noble Lord, Lord Young, mentioned SMEs. Measures to help SMEs by promoting cash and simplifying dispute resolution are under consideration anyway, as the noble Lord would have expected. As he rightly said, the Government are very concerned about SMEs and their future. I thank both noble Lords very

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much for their interventions; I am grateful. I hope that I have dealt with the key points that they made and I commend the order to the Committee.

Motion agreed.

Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

4.41 pm

Moved By Baroness Wilcox

Motion agreed.

Criminal Justice and Licensing (Scotland) Act 2010 (Consequential Provisions and Modifications) Order 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

4.42 pm

Moved By Lord Wallace of Tankerness

The Advocate-General for Scotland (Lord Wallace of Tankerness): My Lords, I beg to move that the draft order laid before the House on 22 June 2011 be considered. Perhaps I may provide the Committee with a brief explanation of what the order is intended to achieve. It is made under Section 104 of the Scotland Act 1998, which allows for necessary or expedient changes to UK legislation in consequence of an Act of the Scottish Parliament.

In this case, the order is laid in consequence of the Criminal Justice and Licensing (Scotland) Act 2010, which I shall refer to as the 2010 Act. The Merits Committee of your Lordships' House has reviewed the order and has not noted it as of special interest. The 2010 Act makes a number of changes to the law, and the order relates to some of the changes made to sentencing, criminal procedure, criminal law and criminal justice. The 2010 Act introduced a new community sentence in Scotland, known as the community payback order. This order will enable the transfer of community

7 Sep 2011 : Column GC74

payback orders imposed by a court in Scotland to England and Wales or Northern Ireland where an offender resides or intends to reside there. For an offender who subsequently proposes to move or has moved to England and Wales where an order is already in place, this order provides for the transfer of community payback orders and allows the court to impose a community payback order on an offender who resides or will reside in England and Wales. In both scenarios, the court must not impose the order unless the offender is aged 16 or older. In addition, the court must be satisfied that arrangements had been made or can be made for the offender to comply with the requirements imposed by the order in accordance with arrangements that exist in the relevant area for offenders. The court must also be satisfied that either a responsible officer will be appointed or that the offender will be supervised by a relevant probation service.

The analogous order to a Scottish community payback order in England and Wales is a community order-or, for offenders aged between 16 and 18, the youth rehabilitation order. When transferred, the community payback order has effect in England and Wales as if it were a community order made by a court there.

The order we are considering today contains almost identical provision for cross-border transfer of the community payback order in relation to offenders who reside or will reside in Northern Ireland, with a number of necessary modifications. In Northern Ireland, the corresponding order to the Scottish community payback order will be a probation or community service order under the Criminal Justice (Northern Ireland) Order 1996.

The 2010 Act also sets out what use can be made of various sources of forensic data about individuals who are arrested or detained under suspicion of having committed an offence. The order will allow forensic data, as well as data taken from terrorist suspects, to be used for the reserved purpose of national security and for the purposes of a terrorist investigation. The provisions clarify that forensic data taken for reserved purposes can also be used for specific devolved purposes. The provisions are a valuable tool for the prevention and detection of crime in Scotland.

The 2010 Act also ensures that a person will be made subject to the sex offender notification requirements when they are convicted of the offence of possession of extreme pornography. The order extends that as a matter of law in England and Wales and Northern Ireland. That ensures that a person made subject to the notification requirements as a result of a conviction for possession of extreme pornography in Scotland cannot evade the requirement to register by moving elsewhere in the United Kingdom.

Finally, the 2010 Act makes a number of improvements to the operation of the foreign travel orders. The order extends the Scottish offence of breaching the requirement to surrender passports under the foreign travel order to England and Wales and Northern Ireland. We believe that it is a sensible measure given the increased mobility of offenders, who try to avoid their obligations by leaving one jurisdiction for another, and it also addresses a growing international concern about sex tourism.



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The order demonstrates the Government's commitment to working with the Scottish Government to make the devolution settlement work. I hope that the Committee will agree that the order is a sensible use of the powers in the Scotland Act and that the practical results are to be welcomed. I therefore commend the order to the Committee.

Lord McAvoy: My Lords, this is the second time that I have responded to a statutory instrument on behalf of the Opposition. For the second time, I place on record my appreciation for the co-operation and understanding of the noble and learned Lord, Lord Wallace of Tankerness, in offering me assistance in dealing with this. The behaviour of the noble and learned Lord is always an example to me of how I should aspire to be in this House, but that may take some time.

I place on record my appreciation for the contact from the Minister's office offering that help. I can assure the young lady who contacted me that although I may not have needed assistance this time, I am sure that at some point I shall be knocking on her door instead of her coming to me first.

The order is sensible. Following last night's deliberation on the Scotland Bill, it shows the sensible co-operation that can and does take place since devolution has been brought to Scotland. I am quite impressed by how the two systems can work together to ensure that there is no avoidance of the community payback scheme. That is first class.

The Minister has explained the order well. However, in the other place, the honourable Member who has the honour to represent the Royal Borough of Rutherglen, Mr Tom Greatrex, asked some questions for clarification about the guidance, the collection and use of the forensic data that will be transferred between the north and the south and how the arrangements would work. The Minister undertook to write to the Members of that Committee. Can we have an update on that? Can the noble and learned Lord, Lord Wallace of Tankerness, clarify that for the Committee?

Lord Wallace of Tankerness: First, I thank the noble Lord, Lord McAvoy, for his generous remarks. Indeed, it helps the Committee's consideration of these orders to work if there is an exchange of information.

The noble Lord asked about guidance, picking up the points made by his illustrious successor representing the Royal Borough of Rutherglen, Mr Greatrex. The position is that the Scottish Government have published guidance on all the forensic data provisions of the 2010 Act, including Section 82, which is the section that gives rise to this part of the order.

The Home Office and the Government are in the early stages of working with the relevant law enforcement authorities to develop specific guidance in the forensic data matters arising from the Protection of Freedoms Bill and indeed the wider use of forensic data. My right honourable friend the Parliamentary Under-Secretary of State in the Scotland Office, Mr Mundell, has written to Mr Greatrex confirming that,

which is currently before the other place-

Criminal Procedure (Scotland) Act 1995 in Scotland,

The Protection of Freedoms Bill will also impact on this area because of the,

as amended by the Act that triggers this order.

The other point that Mr Greatrex raised related to the foreign travel orders. My right honourable friend's letter says:

My right honourable friend is advised that,

"This guidance is currently being amended to take account of the amendments made to the ... regime",

as a result of the primary legislation this order. I understand that the guidance will be made available to the police in good time. I hope that that gives an explanation to the points raised by the noble Lord, and I commend the order to the Committee.

Motion agreed.

Landfill (Maximum Landfill Amount) Regulations 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

4.53 pm

Moved By Lord Henley

Lord Henley: My Lords, the purpose of the instrument is to set new maximum amounts of biodegradable municipal waste that can be sent to landfill. They apply to England, Scotland, Wales, Northern Ireland and, obviously, the United Kingdom as a whole. The new amounts replace the maximum amounts set out in the previous set of regulations, the Landfill (Scheme Year and Maximum Landfill Amount) Regulations 2004, with which noble Lords will no doubt be familiar.

The EU landfill directive sets challenging targets for diverting waste from landfill. That is in line with its overall objective of reducing the negative effects of landfilling on the environment, including reducing the production of methane gas from landfills. This fits with the Government's view, as stated in the recently published waste review, that landfill should be the last resort for biodegradable waste.



7 Sep 2011 : Column GC77

The new targets and the definition of municipal waste set out in the directive were transposed into UK legislation by the Waste and Emissions Trading Act 2003-the WET Act. The Act also set up the landfill allowance schemes to deliver this reduction. At the time, the schemes and the definition of municipal waste applied only to waste collected by local authorities. However, discussions with the European Commission have led us to agree that the UK's existing approach was too narrowly focused. Our environmental objectives would be far better addressed by a broader interpretation. The United Kingdom has changed its interpretation of municipal waste so that more commercial waste collected by the private sector is subject to the diversion targets.

The revised targets reflected in the instrument have been agreed by the European Commission and the devolved Administrations. The reclassification of municipal waste and the revised targets are not expected significantly to change the amount of waste dealt with by local authorities and the private sector respectively. Furthermore, it is not necessary to introduce new measures to meet the new targets. Continued increases to the level of landfill tax and other policies to encourage the prevention, recycling and recovery of waste are sufficient. In fact, as announced in the waste review, the targets will be met while removing a burden on local authorities, as England's Landfill Allowance Trading Scheme will be ended after the 2012-13 scheme year. I commend the draft regulations to the Grand Committee.

Lord Knight of Weymouth: My Lords, these regulations are straightforward and well explained in the Explanatory Notes. Clearly, we need to do this. I am happy with the timetable, it all seems very sensible and if we do not do it, there will be infraction proceedings against us anyway. The Explanatory Note states at paragraph 8.1 says that consultation on the regulations did not ask for views on the interpretation or revised target, but on the policies needed to meet the targets. I do not wish to delay the Committee for very long, so my limited comments will be on the policy rather than on the new interpretation or revised targets, because those are straightforward.

Before I get into detail, could the Minister let us know what proportion of waste going to landfill is food waste? There is a question on the Order Paper tomorrow where these issues are pertinent to food waste fed to chickens and in pig swill.

As for policy, I know from the Minister's comments during the Question in the main Chamber today that he is not a fan of targets. I understand that philosophical view. None of us is a great enthusiast for imposing targets on people, but if we are not going to use recycling targets to minimise the amount of waste going into landfill, I would be grateful if the Minister could set out what leverage he is going to use to ensure that it happens. I have heard, for example, stories about local authorities who, faced with funding constraints, are having to close recycling centres. What leverage is he going to have over local authorities to ensure that they meet their obligations so that England can play its part?



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As he knows, because this was pointed out earlier in the main Chamber, other devolved Administrations are retaining targets and indeed setting more ambitious targets than those set out in the regulations. It would be interesting to know whether Scotland, Wales and Northern Ireland overshoot their targets-which should be applauded-England could get away with undershooting, given that these are UK-wide regulations? Could it benefit from the more aggressive stance of the devolved Administrations?

I turn to my final question, and I apologise that I am not completely clear in my research on this. It has been suggested to me that it is possible to export material that would otherwise go to landfill without paying any kind of tax, despite a landfill tax being levied in this country. If that is the case, are any conversations going on between Defra and the Treasury to ensure that there is no incentive for local authorities to export their waste to avoid paying tax?

5 pm

Baroness Miller of Chilthorne Domer: My Lords, I am pleased that the Government have met the previous targets. Although I do not want to take issue with the noble Lord, Lord Knight, I understand that this is all about targets and that they are driven from the EU-the final target, of course, being zero waste to landfill-so we are tied in. One of the benefits of the EU is that it keeps us to targets, however unpopular they may be; it forces us to take action, and the effectiveness of that is shown by the continuing progress here.

I am particularly pleased that the noble Lord, Lord Henley, was able to explain to us that municipal waste now includes commercial waste collected from, for example, catering outlets, restaurants and so on. Under this statutory instrument we are discussing biodegradable waste. It was difficult when there was one set of biodegradable waste collected from households and another stream that was regarded as commercial. The fact that those can now be regarded as one is a good step forward.

I am looking forward as well to the Question tomorrow. That is particularly pertinent when we are looking, for example, at traditionally fed pigs. Although we learnt a hard lesson through the BSE crisis, we need to move on and look at a much more constructive approach to what we do with what we may regard as waste-used vegetable matter, waste from the production of cheese and so on-and ensure that we are not importing, for example, soya that has forced further rainforest destruction, when we could have been using our waste to feed our own livestock that we then eat. That is the traditional way that it was done; people liked the taste of pork in those days, and there is no reason why we cannot go back to that.

Given the limited nature of the statutory instrument, those are my only comments. Were it any wider, I would ask the Minister what further responsibility the Government intend to give to producers, because producer responsibility is also an important way to reduce overall landfill. However, I see this SI as a good step on the way to zero waste, and I welcome it.

Lord Henley: My Lords, I am grateful to both noble Lords for their comments. I hope to answer some of them. First, let us deal with the Question on pigswill

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tomorrow. Let us hope that we can have a rational discussion on it and that it will not turn into one of those Parliamentary Questions that appear on Radio 4 the next day where they try to mock this House. This House can discuss these things properly, and let us hope that we can.

Secondly, moving on to the comments made by the noble Lord, Lord Knight, about targets, I gave my views earlier. In general, I am not a great fan of targets because they have a danger of distorting how people behave. Targets can play a part, though, and they appear here. We have to live with targets sometimes because they are imposed upon us, but I think we all accept that targets do not always work in exactly the way that we would like.

Thirdly, the noble Lord asked how much organic waste, food waste and all that went to landfill. Obviously, we would like to put somewhere else all of what we call in crude terms "smelly waste", and get it out of the black bag. It is not good that it goes there; that is a bad thing; it creates methane that seeps out; and there are better ways to dispose of it. How that should be done is a matter that, in the main, is best left to local authorities to decide in their local areas, because different areas have different ways of collecting refuse and different priorities.

Fourthly, the noble Lord, Lord Knight, asked for my general view on the waste review. It is rather difficult to give a complete summary at this stage of what we are trying to do. Subject to the usual channels, we might have a debate on it. Perhaps I may put it in very simple terms: our view is that we want to make it easy for people to do the right thing because we believe that people want to do the right thing. We believe that institutions and local authorities want to do the right thing, but we want to make that easy for them, rather than regulating and forcing them into line. We will have to pursue that and see how it goes. The noble Lord can propose a debate on this subject in future, when we can consider it at greater length.

Fifthly, the noble Lord asked about local authorities closing recycling centres. I have seen comments about this in the press. Local authorities, as noble Lords will know, have a duty to provide the appropriate amount of recycling centres for their areas. As I understand it, those local authorities have been closing sites that they felt were superfluous. Obviously, it is a question of fact and the degree to which they are still meeting their obligations. We and others will look at that issue. It is important that local authorities continue to provide appropriate cover, as they are obliged to by statute.

The noble Lord asked whether it would be sufficient if Wales and Scotland did better than us and we did slightly less well, but overall the UK was within EU targets. I had better take advice on that before I properly respond, but one has to accept that England represents about 85 per cent of the UK and it is therefore unlikely that super performance by the three devolved Administrations would be sufficient to get us across any boundaries. We will see about that and I will write to the noble Lord, if appropriate.

The same is also true of the Treasury-that dread word that the noble Lord mentioned. I am always very wary when anyone mentions the Treasury. He mentioned

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exports of landfill. We will have a look at that point and I will respond in due course, if necessary.

I hope that I have dealt with most of the noble Lord's questions. If I have not done so, I shall write further. I congratulate him because his colleague in the Commons took up all of seven lines on this subject and the debate was completed in seven minutes. We have now reached 15 minutes, which shows that the greater scrutiny of this House is, as always, working as it should be.

Motion agreed.

International Renewable Energy Agency (Legal Capacities) Order 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

5.09 pm

Moved By Lord Wallace of Saltaire:

Lord Wallace of Saltaire: I beg to move that draft Order in Council be approved together with an Explanatory Memorandum, as required for all affirmative statutory instruments. This Order in Council confers, in the UK, the legal capacities of a body corporate on the International Renewable Energy Agency, IRENA. It is a new international organisation that will work to increase the deployment of renewable energy technologies globally. It has been established by a treaty, the IRENA statute. This Order in Council was approved by the House of Commons Committee on 14 July 2011 this year.

The UK signed the IRENA statute in 2009. The Government believe that the UK should now ratify the statute. To that end, a copy of the statute was laid before Parliament on 7 June, together with an Explanatory Memorandum, in accordance with the Constitutional Reform and Governance Act 2010. The statute requires that all members of IRENA should confer legal capacity on IRENA in their territories. We therefore need to make this order to enable the UK to ratify the IRENA statute and become a full member of the organisation.

Let me explain the background to IRENA in a little more detail. This was a German initiative. The statute was agreed in Bonn in January 2009 and subsequently signed by the UK on 26 June 2009. The treaty entered into force in July 2010, after the deposit of the 25th instrument of ratification in Bonn. The statute establishes an international renewable energy agency to promote the widespread use and increased adoption of renewable energy technologies. The principal effect of the order is to enable the UK to become a full member of the agency.

So far, IRENA has 149 signatories. To date, 82 of these signatories have ratified the statute, including the United States, Japan, 18 EU member states, the European Union itself and 49 developing countries. With such a

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wide membership, IRENA will be the first truly global organisation devoted solely to renewable energy technologies. This is a young organisation, with its first assembly taking place in April this year. However, it has high ambition and is seeking to become an international centre of excellence for renewable energy technologies, with a specific focus on the developing world. IRENA will be able to bring together renewable energy experts from across the world to develop best-practice technical and policy examples. It will also be able to produce objective reports on the renewable energy market to help inform regional development across the world.

Renewable energy needs to play a key role in meeting global energy demand. Deployment has been increasing rapidly in recent years. Of the approximate 300 gigawatts of new electricity-generating capacity added globally during 2008-09, 140 gigawatts, nearly half, came from renewables. Global co-operation, through an organisation like IRENA, will be essential to ensuring that renewable energy deployment continues to increase.

The use of renewable energy has great potential to tackle climate change. The Intergovernmental Panel on Climate Change estimates that between 2010 and 2050, renewables can make CO2 savings of between 15 per cent and 37 per cent against the world economic outlook 2009 reference scenario. There is also a role for renewables in increasing global and domestic energy security. The greater the deployment of renewable technologies internationally, the less pressure there will be on traditional energy sources such as oil and gas.

The deployment of renewable energy technologies can also support greater energy access, particularly in rural communities. IRENA will mean that the UK and others will have a framework within which to share technical and policy expertise with those most in need of securing innovative energy solutions.

The UK has a strong reputation internationally in the deployment of clean energy technologies. We are world leaders when it comes to offshore wind and have just introduced the world's first financial incentive for increasing levels of renewable heat. In the future, renewable energy will play an increasingly important role in the UK's energy mix. The renewable energy road map, published in July, sets out the Government's vision for meeting our domestic renewable energy target for 2020. Increasing our domestic renewables capacity will mean that we can decrease our reliance on fossil fuels. Greater deployment of renewables globally will also mean that costs for these technologies will fall, making fulfilment of our domestic renewable energy ambitions more cost-effective. We want to remain at the forefront of this growing industry and ensure that UK interests are represented in what will be such a landmark global organisation.

The UK Government have made a commitment to push for greater efforts to tackle climate change internationally and to deliver investment to increase deployment of renewable energy technologies. We will thus be acting in accordance with this commitment by becoming full members of an organisation whose activities will help to make this happen. This is an

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important order, which reflects cross-party commitment to reducing global greenhouse gas emissions. I therefore commend it to the Committee and hope that it will receive the Committee's full support.

5.15 pm

Lord Liddle: My Lords, on behalf of the Opposition, I offer our support for this order, which is quite a significant positive step for mankind. It is a multilateral agreement in an area where multilateral agreement has been extremely difficult to achieve. Until relatively recently, the United States did not accept that climate change was a problem of any kind, yet it is signing up to this international agency to spread best practice in renewables. That is extremely welcome. We hope that Britain will try to play a leading role in IRENA.

It has a clear purpose, which is set out in paragraph 7.2 of the Explanatory Memorandum. Technology in this area is changing rapidly. There is a need for knowledge dissemination and not only competition but co-operation to make sure that technological advances spread at the most rapid rate throughout the year. There are well known market failures in applying renewable technologies, which means that there is a role for public intervention. As we know, the carbon price today does not reflect what it will be in the future as a result of the growing problem of climate change. Therefore, there is a problem about market incentives. In the developing world, where this type of organisation can play an important role, there are problems of governing capacity, project management capacity and access to finance. An organisation such as this, working in co-operation with bodies such as the World Bank and the world's regional development agencies, can play an important role. Therefore, the UK should look at this positively as an opportunity for leadership.

I should like to probe the Minister on what kind of agenda Britain intends to pursue in this agency. If I may, I should like to indulge in a flight of fancy of my own about the kind of agenda that I would like to see explored. This is in line with the economic thinking of the Opposition. One of the risks that we face, and one of the reasons why it is important to have these multilateral institutions, is that climate change is falling down the political agenda as economic problems climb up it. That is a real problem; we saw it in the European Parliament vote on the 30 per cent target, and it is a worrying theme. This is precisely the moment, at a time when interest rates are very low and according to many experts a great depression is looming-we are facing a kind of Japanese decade in the West-when we ought to be thinking about the long-term investments that will pay off richly regarding renewable energy.

I should like to repeat an idea that I heard an eminent and far more distinguished person who is far more knowledgeable on these subjects, the noble Lord, Lord Rees, talking about at a conference on this subject. He thought that the kind of visionary project that we ought to be thinking about in Europe now is the use of solar renewables in the Sahara and wind renewables in the Aegean to power the industries of northern Europe, building grids from Africa, helping the Arab spring to have some kind of economic future and building networks to bring renewable energy to

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northern Europe. This is more important when countries such as Germany have announced that they are gong to abandon nuclear power.

Not only could this be a way of tackling the development problems of those countries that we so much want to help, particularly in north Africa, it could also help to revive the European economy in a major way at a time of crisis in the eurozone. However, it needs a mix of public and private finance. We must not be myopic about public deficits if we are going to be able to finance these types of very long-term projects, which could really pay off.

That is just an example, but there is huge potential for renewables, not just to solve the problems of climate change several decades hence but to help solve our economic problems in the coming decade. I would like to think that Her Majesty's Government shared that view and would be using organisations such as this excellent IRENA to explore how such radical possibilities could be developed.

Lord Reay: My Lords, it is an agreeable irony that the headquarters of this fledgling international organisation that we are in the process of legitimising, and which is supposed to spearhead the dissemination of renewable energy technology throughout the developing world, as the Explanatory Memorandum tells us, is situated in the city of Abu Dhabi, one of the hydrocarbon capitals of the world. If the Government of that state seriously believed that renewable energy was likely to replace fossil fuels in whole or substantial part as a source of power throughout the world, one wonders if they would be quite so happy to be the host to such a threatening body.

However, nothing is quite as it first seems in the wonderful world of renewable energy. In fact, developing countries have not the slightest interest in adopting renewable energy policies. Their interest, quite rightly, is in economic growth. Under present technologies, that is best provided-because most cheaply provided-by fossil fuels, chiefly coal. That was the lesson of Copenhagen, and it is why China and India abruptly refused to sign up to any global agreement to cut carbon emissions. That, though, does not suit the western developed countries, which have all foolishly signed up to cripplingly expensive renewable energy policies to leave developing countries to go their own way. That is because it is a manifest absurdity for developed countries to set out to reduce global carbon emissions on their own. To give an example of how absurd that would be, China's annual increase in carbon emissions in recent years has been roughly equivalent to the UK's total emissions. Those countries that have adopted these ruinous renewable energy policies, therefore, have to lay claim to be leading the rest of the world. For this claim not to look absurd, developing countries-or some of them-must be made to look as if they were co-operating in the pursuit of these policies.

This, of course, can be done if the West puts enough money on the table. Hence the extraordinary commitment undertaken at Copenhagen to provide immediately $10 billion a year to developing countries for climate change purposes with the aim of increasing this eventually to $100 billion a year.



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There is also the lamentable so-called clean development mechanism. This is a mechanism to pay developing countries for projects that are supposed to reduce emissions instead of cutting our own emissions. Needless to say, this has developed into a complete scam riddled with conflicts of interest and dubious validations. I would refer noble Lords interested in further details to a marvellous new book, Let them Eat Carbon, by Matthew Sinclair, director of the TaxPayers' Alliance, which dissects brilliantly most of the ramifications of renewable energy policies. Readers will find in it most of the points I am making and many other revealing ones besides.

IRENA, I am afraid, is a part of this charade in which developing countries are lured into showing sufficient interest in renewable energy to enable the West to claim that it is leading the world. IRENA, of course, is only a small cog in the machine. Nevertheless, it has its costs. I note from the minutes of the first session of the IRENA assembly in April this year, that it attracted 950 participants, including one head of state-of Tonga I think-30 ministerial-level officials and 670 country delegates. The climate is probably quite agreeable in Abu Dhabi in early April. It would be interesting to know how many carbon emissions such a gathering was responsible for.

I gather from what the Foreign Office Minister said in another place on 14 July that the annual budget to keep this show on the road is $25 million a year. He also said that the United Kingdom contribution is £700,000 per annum. I wonder if the Minister can confirm that figure and say whether the department expects it to remain at that level in future years.

One day in this country we will have to wake up and shed a policy that is quite pointless in the absence of a global agreement and which we certainly cannot afford. In our straitened circumstances, and desperate as we are for economic growth, that day cannot come a moment too soon. When it does, it is us who will be following the lead of the developing countries and not the other way round.

5.30 pm

Lord Teverson: I absolutely agree with the noble Lord, Lord Reay, in his use of the word "crippling". What we have seen over the past few years is a crippling increase in fuel poverty in this country, something like a doubling. I do not know the exact figures, but is up to about 6 million because of the increase in fossil fuel prices that households have to pay. I also agree with that word "crippling" in terms of the increase in energy prices that we have seen. Gas, a well known fossil fuel, has increased by some 30 per cent this year. Those prices are truly crippling. That is the word to use in terms of the repercussions of the fossil-fuel based economy that we have at the moment. I do not want to get into that argument too much.

With regard to renewable energy worldwide, it is tempting to look just at new technologies, but we should remember that, globally, renewable energy was the only energy until the Industrial Revolution; before oil it was a major part. Renewable energy already accounts for about one-sixth of the world's energy production. Of course, that is not wind power or the

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other new technologies; it is largely biomass-I must admit that not all of that was renewable, but, I hope, most of it now is-and hydroelectricity, which is a major proportion of world energy generation even today. Renewables account for about one-fifth of energy production worldwide.

From what I read on the body's website, it is not just about future technologies, which are not greatly applied, but traditional renewables. That is why it is important to bring together the world community on renewable power. I was pleased to see that there are already 149 signatories and 82 members-including, as the Minister said, the European Union. I was disappointed to see that although the United States is a signatory, that is not true for China, Canada, the Russian Federation or Brazil. I do not know whether they are in the queue to join; I very much hope that they are.

Outside the argument of the cost of renewables against that of fossil fuels and technologies such as nuclear power, it is undeniable that renewables are, have been through human history and will be a really important contribution to energy production globally. That is why it is important that IRENA has been founded. I am surprised that it took so long-until 2009-before it was. The noble Lord, Lord Reay, magnifies imperfections that we all see, but I hope that it will be a body that will help the evolution of renewable power more effectively and successfully.

It is easy to set up international organisations and pay for administrations and bureaucracies, but I would be interested to understand what the priorities are in the practical programmes of IRENA in its next time horizon of three years. That is slightly more specific than the question asked by the noble Lord, Lord Liddle, which is important, of how the UK will contribute. I was not clear from the publicity of IRENA exactly what it was trying to do over the next few years in research and co-ordination, because however worthy an international organisation and its cause is, it must be effective. It costs money, so it has to produce results.

I very much welcome the Government's move to complete our signing up to IRENA as this is clearly an important area of technology for our future.

Lord Wallace of Saltaire: I thank noble Lords who have contributed. Perhaps I may answer the question from the noble Lord, Lord Liddle, and then extend it to the question of what IRENA's agenda should be for the next three years.

The United Kingdom has accepted the position of chair of the IRENA policy and strategy committee, so we will be playing a leading part in defining the agenda. British interests are clear. First, we want to support the channelling of investment in energy in the developing world as far as possible towards renewable energy and away from the further consumption of fossil fuels.

Secondly, we wish to promote the full ownership by developing countries of the switch towards renewables. I have to say that the role of Abu Dhabi and the UAE is extremely positive in this. It demonstrates that it is

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not simply the West pushing this agenda on the developing world, but that we have partners in the Arab world who are themselves actively concerned to assist developing countries in investing in renewables. I will come back to the role of Abu Dhabi in a minute. Thirdly, there are opportunities for UK expertise and industry, both in exports and the economies of scale that come from a larger market, which will then drive down the prices we have to pay for renewable technologies at home.

In terms of a practical programme for the next three years or so, I understand that the underlying purpose of IRENA is to encourage co-operation in renewables across the developing world. In the same way that the IPCC at an early stage put a great deal of effort into training experts from developing countries so that it was not simply a western argument about climate change being put across the developing countries, so IRENA will try to encourage the development of expertise and adoption of these technologies in those countries-both at the macro level and very much at the micro level. In a lot of these developing countries where the population is dispersed, micro power, for which renewable schemes are often extremely helpful, will be very much the local example.

The noble Lord, Lord Reay, made a number of points. I should say to him, first, that we face long-term rising demand for fossil fuel, which is, as we already notice, driving up long-term prices for fossil fuel. Further development of and investment in renewable technologies is moving in the opposite direction, driving down the prices and costs of renewables. That is part of the process we of course wish to encourage.

The Matthew Sinclair book has, as the noble Lord will know, very kindly been sent to, I think, all Members of the House of Lords, and I dare say that a number of us may read it. Countries such as Tonga are not just along for the ride. Tonga is, after all, one of those Pacific islands that have very little land way above sea level, and it is thus directly threatened by the impact of climate change. The Pacific islands are therefore among the most active countries in pushing for a switch to renewables and a really serious effort to contain the expansion of CO2 in the atmosphere.

There is also an energy security dimension to this, as I mentioned in my opening remarks. Dependence on a small number of countries for supplies of fossil fuel over the long term is potentially a major source of global insecurity, and the more that we can reduce dependence on imported fossil fuels for all countries, the better we do.

The UK's contribution to IRENA's budget is on the scale provided for in British contributions to the United Nations and other agencies. It is currently £750,000; it will increase to £1 million and, no doubt, in the long run will increase further. The Government's view and that of our predecessors is that this is a worthwhile and modest investment. I should perhaps add that so far the largest contributors by far to IRENA are Germany and Abu Dhabi, which, in addition to the scale of their contributions, are making some substantial and very valuable voluntary contributions. The interests of Abu Dhabi, I understand, are that fossil fuels should not last for ever as the driver of its economy and that it wishes to diversify its economic interests.

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This is very much an enlightened approach. German interests are also mixed. Germany has a highly developed renewable energy industry and its Government certainly see major opportunities for exports as this area expands. That is something that we as a country also need to look at, and that is part of where we hope the future revival of British exports may indeed come from.

On renewable energy, I simply say to the noble Lord, Lord Reay, that I spend my summers walking around the Yorkshire Dales, past weirs that used to produce power and in one or two cases, as in Grassington and Upper Wharfedale, used to produce electricity 60 or 70 years ago. We are now at last, although very slowly, beginning to put some of those weirs back into production, producing electricity. The French have been doing this for 30 or 40 years. There is a great deal that we can still do in this country.

I had an argument with a Conservative MP recently who said that it would deface the southern Yorkshire plain if we were to have windmills on it. There are in fact a number of ruined windmills scattered across the

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plain, but when I drive across it I find that the biggest eyesores that one faces are Drax and the other two big coal-fired stations. If I may say so, I find those who object to switching to renewable energy and wish to go on burning fossil fuels on the scale on that we do, importing coal from Poland, Australia and elsewhere, a little short-sighted in terms of our long-term interests in energy security and the balance between imports and exports.

Having, I hope, answered most of the questions raised, I hope that I may take the Opposition's welcome as being very much cross-party approval.

Motion agreed.

The Deputy Speaker (Baroness Harris of Richmond): My Lords, that completes the business before the Grand Committee this afternoon. The Committee stands adjourned.

Committee adjourned at 5.41 pm.


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