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22 Nov 2011 : Column GC375

22 Nov 2011 : Column GC375

Grand Committee

Tuesday, 22 November 2011.

Arrangement of Business


3.30 pm

The Deputy Chairman of Committees (Lord Faulkner of Worcester): 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 statutory instruments will subsequently be moved in the Chamber in the usual way. If there is a Division in the House, the Committee will adjourn for 10 minutes.

London Olympic Games and Paralympic Games (Advertising and Trading) (England) Regulations 2011

Copy of the SI
Copy of the Report

Considered in Grand Committee

3.31 pm

Moved By Baroness Garden of Frognal

Baroness Garden of Frognal: My Lords, in 2006, Parliament passed the London Olympic Games and Paralympic Games Act, which provided a number of powers, including the power to regulate advertising and trading in the vicinity of Olympic and Paralympic venues. It was recognised by Parliament that tailored provision was needed for the Games to act as a stronger deterrent to ambush marketing and illegal trading, and because existing powers alone are not adequate for a major, time-critical event like the Games. We need these regulations to protect against ambush marketing as well as ensuring that spectators can access venues safely.

With an expected global audience of up to 4 billion, there is no doubt that there will be concerted attempts to ambush the Games, but in drafting these regulations we have recognised that we need to strike a balance between our objectives and ensuring that regular business can carry on to the greatest extent possible. These regulations must go no further than is necessary.

To ensure that we have got the balance right, we have sent the draft regulations to those who will be affected and we have listened carefully and amended the regulations in light of their views. The Department for Culture, Media and Sport launched a wide-scale consultation in March of this year. More than 600 people or agencies were directly contacted about the consultation

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and a leaflet was delivered to every letterbox within the proposed regulated zones. In addition, officials have spent the last few years meeting representatives of the advertising and trading sectors. In total, 51 written responses to the consultation were received from a range of stakeholders. The small response is, I believe, a reflection of the extensive informal consultation since 2006. Those who replied generally supported the approach, and any suggestions tended to be technical in nature.

In drafting the regulations, consideration has been given to the fact that ambush marketers will look to find new and innovative ways to associate brands with high-profile events. Accordingly, broad definitions of advertising and trading activity have been crafted, with a number of specific exceptions. Many of those exceptions allow for existing business or activities to continue; so, for example, public protest activity is specifically exempt under these regulations. Advertising or trading activity that is not exempt, and so could present a risk to our objectives, may still be undertaken if it is authorised by the ODA, for trading, or LOCOG, for advertising.

Unlike previous host cities, some of which have regulated a kilometre outside of venues, these regulations apply only to event zones comprising, in most cases, the venue and the area a few hundred metres around it. In a few cases, the event zone goes slightly further so that we can protect key places, primarily for when spectators walk from a major transport hub.

Like the event zones, the event periods are tailored to each Games event, "switching on" the day before and lasting only for the period of an event. The longest the regulations will apply to any one place is 35 days in the areas around the Olympic Park, and that period is not in one block, as the regulations switch off for the period between the Olympic and Paralympic Games.

Under the 2006 Act, the regulations may be enforced by the police or by enforcement officers designated by the ODA. With the police's agreement the ODA will take the lead on enforcement, freeing up the police to focus on safety and security. Police will of course provide back-up as necessary. The ODA is looking to designate enforcement officers from local authorities. They undertake the enforcement of existing laws on street trading and advertising, so the ODA is utilising a knowledgeable and experienced resource. Local authorities will get funding for this resource, which will enable them to backfill their current roles through overtime and cancelled leave. Officers will be trained to take a light-touch approach to most infringements but persistent offenders could face having offending items seized or destroyed. To reassure your Lordships, the ODA's enforcement strategy has been seen and approved by the Sports Minister, who is keen to ensure that proportionality is the touchstone.

The ODA has recently published detailed guidance on the regulations. This provides simple information about the regulations to ensure that those affected understand what is expected at Games time. Local authorities and advertising and trading bodies are all engaged in the process of reaching those individuals and businesses affected. The IOC requires all bidding cities to commit to take steps to prevent ambush

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marketing around Games venues. Sydney 2000 was the test case; since then, other host cities have taken similar steps. I believe that the regulations we are debating provide a robust yet proportionate framework for dealing with ambush marketing as well as ensuring safe access to Games venues. I beg to move.

Baroness Billingham: My Lords, I thank the Minister for her clear presentation, reminding us of the background to this SI and the justification of the measures contained in it. As ever she is accurate and persuasive, leaving little room for objection from this side of the Committee. While there are one or two matters which I will raise later, in essence this SI is the completion of the London Olympic Games and Paralympic Games Act 2006. As such, it is a key factor in ensuring the smooth and safe running of the Games.

The scope of the SI encompasses the need for the 2012 Games to be a joyful event-a shop window for the UK of which we can be proud. It is also essential to prevent ambush marketing around the various venues and it has to ensure easy access to those venues. I very much hope, in relation to that last point, that both LOCOG and the ODA will take note of the lessons from the catastrophic shambles at the end of the Nadal match at the O2 on Sunday night. The three-set match, which was begun at 8 pm, finished at 11.30 pm. As a result, 2,000 people were left stranded at the North Greenwich tube station, with the last train leaving before midnight. I am told by friends that the dash for that last train had the potential for disaster and one has to ask whether Boris Johnson could not have foreseen the need to supply later trains. If such a predictable shambles can ensue from one match at one venue, the need for forensic planning could not be clearer.

Part 2 of the regulations deals with advertising activity in the event zones. A light touch is crucial, so the clear guidelines ensuring that legitimate businesses can continue their day-to-day advertising and activities are very welcome. The trading activities parts of the regulation are sensible and, indeed, essential. Enforcement of advertising and trading regulations will require a high level of experience and qualification. LOCOG is approaching local authorities to lease experienced officers to work during the Games.

Despite the Minister's assurances, some concerns remain. Given the economic climate, with local authority budgets being slashed by the Government, is there now a potential problem that there will be a shortfall of the officers required? We also debated long and hard the effect on travel to and from the Olympic sites. We were assured that the adverse effects would be kept to a minimum, but we on this side are still concerned that local companies unable to trade are being made to close down for that two-week period. Surely this would put their viability at risk, and we hope that LOCOG will come up with some more consensual proposals. With these concerns, I again thank the Minister and the Bill team, which gave us an excellent briefing, and pledge full support from this side of the Committee for an SI which will complete the original aspirations of the 2006 Act for a wonderful and successful Olympic Games.

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Lord Addington: My Lords, I have very few words to say on this order. First, it seems to be in line with what we were expecting. Anybody who has been involved in this knows that a great part of the Olympic movement has been the defence of the brand to allow sufficient funds to be raised to enable everything to go ahead. This was always going to inconvenience people to a degree. The question here is whether the Government and the entire Olympic movement have done enough to ensure that that minimal level of interference with ordinary life has been achieved. I suspect that they have taken some very good steps towards it.

When it comes to ambush marketing, everybody raised a smile at the thought of the last World Cup when all the, shall we say, very presentable young ladies in orange skirts were seen dancing around. The fact of the matter is, however, that the way these events are financed is by making sure that sponsors get in and get a reason to carry on sponsoring them, which is the most important factor. I thus suggest that the Government should be intelligently vigorous in enforcing this, because if they are not-and this is the important factor-future events will be threatened. This will be part of one of the legacy issues: do sponsors of major sporting events have sufficient backing to make sure that they get enough bang for their bucks to come back next time? I hope my noble friend will be able to assure us that this will be looked at in the overall review at the end of the Games process to make sure that sponsors are looked after in an intelligent way that does not stop all life during the Games.

Lord Higgins: My Lords, I understand that the point raised by the Delegated Powers and Regulatory Reform Committee on this order-namely, that it would not be appropriate to have an order approved by negative resolution unless the Minister had given an assurance that it was necessary to proceed in this way for reasons of urgency-has already been met in the legislation which we have amended. I think that is a satisfactory situation.

I apologise, since I entirely share the enthusiasm of other noble Lords for the entire success of the Games, for raising just one point which I had not previously noticed. It relates to Regulations 6 and 7 of the order on page 4. Regulation 6 is concerned with the control of advertising activity, and we all understand the reasons for that, as has just been mentioned by my noble friend when discussing the whole question of sponsorship. However, I am concerned about Regulation 7(1), which says:

"Regulation 6 does not apply to advertising activity intended to-

(a) demonstrate support for or opposition to the views or actions of any person or body of persons,

(b) publicise a belief, cause or campaign, or

(c) mark or commemorate an event".

It is really sub-paragraphs (a) and (b) which give me some cause for concern, given the recent protests which we have had outside St Paul's. I am not at all clear why we want to make this exception in Regulation 7. On the contrary, I would have thought there was some case for strengthening the proposals for that. Indeed, we may want to make absolutely sure that provision is made to prevent demonstrations. As was pointed out in previous remarks, in the course of the

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Games it may be very easy to get enormous publicity for a particular cause, whatever it may be. Therefore, I would be grateful if my noble friend could tell us to what extent this has been considered and whether there is some argument in favour of strengthening or amending the order; or in favour of producing an alternative that makes it absolutely clear that demonstrations of the sort that I have described are prevented from getting advertising as a result of taking place, perhaps to the considerable disruption of those wishing to watch the Games, which we hope will be a great success.

3.45 pm

Baroness Garden of Frognal: My Lords, I am extremely grateful to the noble Baroness, Lady Billingham, and my noble friends Lord Addington and Lord Higgins for their contributions to the debate and their customary attention to detail in the matters that we are discussing today. We appreciate that these regulations may raise concerns but we believe that they strike the right balance, allowing business as usual to continue wherever possible. That point was raised by noble Lords in today's discussion. Detailed measures have been put in place to ensure that businesses will be able to continue to run as usual in the course of the Games.

I shall just deal with some of the issues that have been raised. The noble Baroness, Lady Billingham, raised concerns following the tennis match that finished after the Tube had stopped running, leading to crowds appearing on stations. This is a very important issue. All the Olympic events will finish well before the last Tube trains leave. The ODA and LOCOG are looking carefully at access to and egress from each venue individually to make sure that there is sufficient transport for people to be able to get home at the end of events.

The noble Baroness asked how much the enforcement would cost, who will pay for it and whether there are enough people to do it. The ODA, as the responsible and accountable agency has budgeted for this work. It is estimated that £868,000 will cover the full range of costs associated with enforcement. Within this budget, the ODA will pay a fixed hourly rate per designated enforcement officer to the employing local authority. That hourly rate is sufficient to cover salary costs, expenses, travel and subsistence, storage costs for seized articles, administration and the gathering of intelligence data-all the aspects that will need to be replaced.

The noble Baroness asked whether the ODA officers would be trained. Indeed, a programme of training has already begun. Officers have already taken part in mock enforcement trials at a London 2012 test event. This will continue next year. The training integrates practical knowledge of the Act and regulations with a detailed understanding of the ODA's enforcement policy. It includes practical examples of likely situations that may arise based on past learning, test events and hypothetical situations that have been highlighted as potential areas of concern during the passage of the Act and the regulations.

My noble friend Lord Addington asked whether there will be vigorous enforcement. Indeed, in looking at the Games, we will examine how the regulations were enforced and come up with lessons learnt. He is

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quite right in assuming that all the regulations before us have been previously agreed, and that we are finally putting the seal on them in advance of the Games.

My noble friend Lord Higgins asked about the exemption for demonstrations publicising a belief, cause or campaign and so on. Protest and other activity intended to demonstrate support for or opposition to a person's view or actions is specifically exempt. The exemption covers advertising a belief or cause, or marking or commemorating an event. That would include charities. However, discussions with Liberty prior to the consultation were useful in ensuring that this category was soundly drafted. Indeed, no human rights groups responded to the consultation. Therefore, advertising that promotes a local non-commercial event of a religious, educational, cultural, political, social or recreational character is allowed unless it is sponsored by a private company. This allows for general non-commercial activity but protects against a large company using the exception to get its name plastered over local events and consequently ambushing the Games. However, I stress that these regulations are not about stifling political speech. Protest activity is specifically exempt and will not be restricted by these laws.

I hope that I have responded to most of the points raised today. It is a great relief to be working on a Bill where there is cross-party consensus and that we all have a common aim in ensuring that the Olympic and Paralympic Games next year are a resounding success. I thank opposition noble Lords and my noble friends for the discussions that have taken place over this instrument and the Games legislation. I know we all want to ensure that the Games are a magnificent success. With these regulations, we hope that we have mitigated the risks in a proportionate manner which recognises that London and the UK need to continue operating at Games time.

Motion agreed.

Parliamentary Constituencies and Assembly Electoral Regions (Wales) (Amendment) Order 2011

Parliamentary Constituencies and Assembly Electoral Regions (Wales) (Amendment) Order 2011
31st Report from the Joint Committee on Statutory Instruments.

Considered in Grand Committee

3.52 pm

Moved By Lord Wallace of Tankerness:

The Advocate-General for Scotland (Lord Wallace of Tankerness): My Lords, the purpose of this draft order is to implement the recommendations made by the Boundary Commission for Wales in four interim review reports in relation to the boundaries of certain constituencies and electoral regions of the National Assembly for Wales. If approved, these changes will alter seven of the existing 40 constituencies for the next Welsh Assembly elections, which are scheduled to take place in 2016. This is, however, subject to the

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commitment that my right honourable friend the Secretary of State for Wales has given to look carefully at the implications of having different boundaries for Assembly constituencies and parliamentary constituencies in Wales.

I should perhaps clarify at the outset that the order affects Welsh Assembly boundaries only and has no impact on the boundaries of any Welsh parliamentary constituencies at Westminster.

I wish to put on the record thanks to the Boundary Commission for Wales and its secretariat for its work in carrying out these reviews. As always, the commission has carried out its duties thoroughly and conscientiously. I particularly thank the deputy chair of the commission, Mr Justice Lloyd Jones, for overseeing this work.

Lord Rowlands: I apologise for interrupting the Minister but he said that this order did not have anything to do with the parliamentary boundaries, so why does it have the words "Parliamentary Constituencies and Assembly Electoral Regions" in its title?

Lord Wallace of Tankerness: That is a very good question and I hope that the answer I give will satisfy the noble Lord. He will know that this is an amendment order and it is amending the Parliamentary Constituencies and Assembly Electoral Regions (Wales) Order 2006. However, I think we are clear that it will affect only the Assembly constituencies. A smaller number of people are affected. Nevertheless, for the electors and the relevant Assembly Members concerned, these are important. I am sure that MPs in the other place whose constituencies cover the areas affected will have been interested in the changes; indeed, they were debated there yesterday.

Lord Roberts of Conwy: Would my noble friend give way?

Earl Attlee: My Lords, may I suggest that we allow the Minister to lay out his stall, as it were? It may well be that he covers noble Lords' points in his opening remarks.

Lord Roberts of Conwy: I was intervening simply because my noble and learned friend referred to the small number of people affected, and indeed the Explanatory Memorandum to the order refers to the first report dealing with Brecon and Radnorshire, and Merthyr Tydfil and Rhymney, as affecting only 18 electors. Could he say how many people in total are affected by the order?

4 pm

Lord Wallace of Tankerness: If I am right, I have those details and will come to them in my remarks. The position is that the Boundary Commission for Wales is an independent body that is responsible for reviewing parliamentary constituency boundaries in Wales. Prior to the Parliamentary Voting System and Constituencies Act 2011, Welsh Assembly constituencies were coterminous with United Kingdom parliamentary

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constituency boundaries. Formerly, as well as carrying out general reviews of all parliamentary constituencies every eight to 12 years, each of the four boundary commissions in the UK was empowered to carry out interim reviews of particular constituencies in between those general reviews, if that was thought necessary. Such reviews could, for example, take account of changes to local government boundaries that affected the boundaries of parliamentary constituencies.

The 2011 Act provides for more frequent general boundary reviews-they will now take place every five years-which will help to ensure that general reviews are better able to take account of changes in the electorate or changes in local government boundaries. This makes it less important and less practicable to have interim reviews, and the Act removes the provision for the boundary commissions to undertake interim reviews in between general reviews.

The Boundary Commission for Wales was the only boundary commission to be engaged in interim reviews while the PVSC Act was going through Parliament. That Act provides for any interim reviews of parliamentary constituencies by the Boundary Commission for Wales that were pending at the time of the passing of the 2011 Act to be completed and implemented, though the recommendations arising from the reviews will apply only to Welsh Assembly purposes. As the 2011 Act requires the Boundary Commission for Wales to carry out a general review of all Welsh parliamentary constituencies by October 2013, there is no need for the recommendations arising from the interim reviews to be applied to Welsh parliamentary constituencies as they will soon be overtaken by the general review.

The draft order implements the recommendations of four such pending reviews by the Boundary Commission for Wales. The reviews make recommendations regarding the boundaries between the following constituencies: Brecon and Radnorshire, and Merthyr Tydfil and Rhymney; Ogmore and Pontypridd; Cardiff North, and Cardiff South and Penarth; Cardiff South and Penarth, and Vale of Glamorgan. The Boundary Commission for Wales carried out the reviews as a result of four orders made by Welsh Ministers during the period 2008 to 2010 that made changes to the boundaries to local government areas in Wales. As a result, the boundaries between certain parliamentary constituencies in the areas covered by the local government boundary changes no longer followed the new local government boundaries.

In each review, the boundary commission proposed that the boundary between the parliamentary constituencies covered by the review should be altered to conform to the new local government boundaries. It also proposed that there should be a corresponding change to the boundary between the Assembly electoral regions in the areas concerned, where this was affected by the new local government boundaries. As I have said, these changes involve relatively small changes on the map and relatively few electors-approximately 900 in total; in answer to my noble friend's question, I will shortly come on to a breakdown of some of those figures-but obviously they are significant for electors locally. For example, with regard to Brecon and Radnorshire, and Merthyr Tydfil and Rhymney, a number of electors have been transferred to a local

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authority since the review transfers the constituency, and indeed the region, for the purposes of elections to the Welsh Assembly. The order addresses misalignments between Assembly and local authority boundaries.

As I said, in total four representations were received on the proposals in the four reviews. They included one from Mr Owen Smith, the honourable Member for Pontypridd, who I understand wrote to support the recommendations in relation to the Ogmore and Pontypridd seats. In each review, no objections were received and the commission therefore confirmed its recommendations in its final report to the Deputy Prime Minister.

As I said, the draft order gives effect to the recommendations made in the four Boundary Commission reviews without modifications by amending the earlier Parliamentary Constituencies and Assembly Electoral Regions (Wales) Order 2006. The core of the order is Articles 3 and 4, which implement the recommendations by inserting new provisions into the 2006 order which will fix the Assembly constituencies by reference to local government areas as they stood on 1 December 2010.

Eighteen electors move from the Brecon and Radnorshire constituency to the Merthyr Tydfil and Rhymney constituency and, in doing so, they move from the Mid and West Wales Assembly regions to the South Wales East region. In the review concerning the Ogmore and Pontypridd constituencies, 733 electors move from parts of the Ogmore constituency to the Pontypridd constituency, while 96 move in the opposite direction, meaning that a net total of 637 electors move to the Pontypridd constituency. Again, that is a net figure of those who move from the South Wales West Assembly region to the South Wales Central region. Forty-six electors move from Cardiff South and Penarth constituency to the Cardiff North constituency, and, as they are both in the same South Wales Central region, that does not make any difference to the regions. Three electors are transferred from Cardiff South and Penarth to the Vale of Glamorgan constituency, and, again, both seats fall within the South Wales Central electoral region. I hope that that answers the detailed question posed by my noble friend.

Articles 5 and 6 make consequential changes to other provisions in the 2006 order, and Article 7 requires the relevant electoral registration officers for the affected areas to make the necessary alterations to their electoral registers. These are standard provisions in orders about boundary changes.

It is perhaps important to point out that the draft order will have no practical effect until the next Welsh Assembly general election scheduled for 2016. In the mean time, any by-elections for the Assembly which might occur in the areas affected will take place on the existing boundaries.

These changes are relatively small updates to the existing boundaries. The Government recognise that a wider debate has begun in Wales about future arrangements for the Assembly in the light of the forthcoming reduction in the number of UK parliamentary seats in Wales. We are looking at the implications of this reduction on the Assembly, and I

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can assure noble Lords that any decision in favour of change would be taken only following thorough public consultation.

I hope that that has given an explanation of the draft order. I commend it to the Committee and hope that we will be able to agree that this order should proceed. I beg to move.

Baroness Gale: My Lords, I thank the Minister for giving his explanation of the order. He said that the numbers were small and that it was more or less a tidying-up operation in terms of the boundaries.

In October 2010, the Boundary Commission for Wales submitted a report that affected the constituencies of Brecon and Radnorshire, where 18 electors were affected. In January 2011, the Boundary Commission submitted a further three reports. Those affected the boundaries of Ogmore, Pontypridd, Cardiff North, Cardiff South and Penarth, and the Vale of Glamorgan. Again, small numbers are affected, except in Pontypridd, where the number is 600-odd. By that time, we were in the run-up to the Assembly elections, so there was no time to implement the changes, but we hope that the changes in the order before us today will be ready for the 2016 Welsh Assembly elections.

Paragraph 7.3 of the Explanatory Notes says that,

Paragraph 9.1 says:

"The changes being made ... will be applicable for the next elections for the National Assembly for Wales, currently scheduled for 2016".

Although this all seems very straightforward, I am sure the Minister, who mentioned it briefly, is aware that there is a big row brewing over this. We need clarification.

As I say, it seems straightforward enough but I need to ask whether the Minister is aware of the differences between this order and what the Secretary of State for Wales said, on record in the House of Commons, in answer to a question on 11 May 2011 from the Member of Parliament for Carmarthen East and Dynevor. He asked:

"Given the Labour party's opposition to decoupling Westminster and National Assembly constituency boundaries, would it not make sense to base the make-up of the fifth National Assembly on 30 regional and 30 constituency Assembly Members?".

The Secretary of State's response was:

"That is a very interesting thought. Hon. Members are well aware that the Parliamentary Voting System and Constituencies Act 2011 broke the link between Assembly constituencies and parliamentary constituencies. I have agreed that we need to look carefully at the implications of having constituency boundaries relating to different areas and regions for UK and Assembly elections ... I am taking the hon. Gentleman's question as a recommendation that we have 30 first-past-the-post seats and 30 elected on a list system".-[Official Report, Commons, 11/5/11; col. 1148.]

She said that she is looking at that suggestion. That response is a little different from what we have before us today.

On 30 July the Secretary of State, again answering questions relating to the boundaries, had a meeting with the Welsh Affairs Committee, at which my honourable friend Owen Smith asked her whether it was true that Welsh officials had,

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In her reply the Secretary of State said:

"As far as I am concerned, we will have to look at that".

This is very confusing. I do not know whether the Minister has had time to look at the Western Mail this morning. I am glad to see that he has. He will have read the headline:

"First Minister's startling appeal to David Cameron bypasses Cheryl Gillan".

The Western Mail says:

"First Minister Carwyn Jones has bypassed Welsh Secretary Cheryl Gillan and gone directly to the Prime Minister in a bid to defuse an explosive row over how AMs are elected".

The Minister mentioned that briefly at the end of his speech. What we need in Wales is clarification that the order before us will be used for the election in 2016, and for the Minister to confirm that any changes to any of the systems in Wales will be as a result of the wishes of the Welsh people. This is a big row in Wales. I hope that the Minister appreciates how important these issues are, and that he will confirm that our arrangements today will be met in the 2016 elections.

Baroness Randerson: Noble Lords will forgive me if my comments are very brief, for obvious reasons; it is not easy for me to project my voice today. In my first points I will concentrate on what is in this order, not on what is not. Having read it, I confirm-and agree with the Minister-that the order appears to affect very few people and does not make significant changes. There were no representations against it to the Boundary Commission. It decouples the Westminster and Assembly seats. I ask the Minister to confirm that such decoupling exists satisfactorily in Scotland and is a workable solution.

I know that the Labour Party is concerned about the reduction in the number of constituencies for the general election. We should all welcome the fact that the number of constituencies is maintained in this order, which will not affect Assembly elections and, therefore, the total number of Assembly Members. I am aware of the First Minister's letter to the Prime Minister asking that there should be no change to the system, and it is clear that this is the default position that is put in place by this order. The noble Baroness has referred to exchanges in the House of Commons; Peter Hain MP has made it clear that he would like Wales to move to a situation where each constituency is represented by two Assembly Members, which would do away with the proportionality of the system in Wales. That is something which would case a great deal of concern across other parties and the electorate, because that was the settlement that was put to the electorate at the time when the Assembly was established. It is therefore very useful for us to have a clear default option that-whatever the discussions that are going on or the thoughts of the Secretary of State for Wales, and whatever the thoughts of the First Minister of Wales might be-it is important that we acknowledge that this is a settled situation ready for the next Assembly elections in 2016.

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Lord Rowlands: My Lords, I wish to speak briefly, partly because one of these orders amends the constituency which I had the privilege of serving. I, too, am somewhat puzzled by the point made by my noble friend-in particular, not on the rights and wrongs of the argument, but on the wording of the Explanatory Memorandum under the title "Guidance". It says:

"The changes being made by the Order will be applicable for the next elections for the National Assembly for Wales, currently scheduled for 2016".

It does not say "may be" or "could be" or "subject to further possible change"; it is an absolute statement meaning that when we approve this order, it will establish the constituency boundary for Merthyr Tydfil and Rhymney in the 2016 Assembly elections. I am puzzled by the conflicting guidance that we are getting from the clear explanatory note and other statements that have been made. I speak as the former Member for this constituency and am a great believer in expansion and all 18 new electors who are added to it.

The Merthyr/Brecon boundary has a wonderful chequered history. The enfranchisement of Merthyr in the first place, which was the very last amendment to the then Reform Bill 1832, included in the constituency at the very last minute Cefn Coed-y-Cymer, which is in the Vaynor area. Some time later it went out and then it came back in, and I had the privilege of serving the Vaynor ward as a part of the Merthyr Tydfil and Rhymney constituency. There is a bit of a history to this Brecon/Merthyr boundary discussion.

The point I find comforting about this order is the way in which it powerfully reaffirms a very good principle that I fundamentally support, that there should be a clear correlation between community boundaries and Assembly and parliamentary constituency boundaries. The Boundary Commissioner and we have all agreed that what we are doing here is altering boundaries, albeit in small measure, to ensure that we confirm and conform to the principle that there is an excellent correlation between community boundaries and parliamentary and Assembly boundaries. Therefore I find it richly ironic that this order is made under the Parliamentary Voting System and Constituencies Act, the very Act which most of us fear is going to destroy and undermine that close relationship. We cannot see how, in pursuit of this holy grail of equalisation, we will actually be able to maintain and sustain the close correlation between local community boundaries and parliamentary constituency boundaries. I find it richly ironic that this order is being used to confirm a great principle, while the Act itself, we fear-and the Boundary Commission's report is coming out-will undermine that very principle. Therefore, I fear I must tell the Minister that, while there is consensus on this order, I doubt if there is going to be consensus on any future orders.

4.15 pm

Lord Wigley:My Lords,I apologise for arriving a few minutes late, but I mistimed the matter. I agree very warmly indeed with the remarks made by the noble Lord, Lord Rowlands, on having communities coterminous with seats. I believe that that should be fundamental to our approach.

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I, too, share some of the mystery that was expressed by the noble Baroness from the Opposition Front Bench with regard to exactly where we are going over the next two or three years with this matter. I noted that the Secretary of State for Wales said in a Written Statement on 11 October that the Silk commission, which is looking into many aspects of these matters in Wales-the Minister will be well familiar with that-will explicitly not be examining,

We know that Silk is not looking at it and that an issue is arising. If this unfortunate legislation which has just been passed regarding the Westminster boundaries will be in place, what therefore will be the process for reviewing-if review is needed-the National Assembly, to try and make sure that there is some coterminosity to the extent that it is possible? I do not think that it is possible to get anything like the coterminosity that I ideally wish to see, but at least there should be some review.

It is therefore right to say that if there is a review, these will not necessarily be the basis for the 2016 election. Some clarification is needed about the future role of the Boundary Commission for Wales which, if we continue with the present system, will be preparing different reports for Westminster and for the Assembly elections. There is a question as to whether there will be an increase in the number of commissioners and in the funding that they will have in order to undertake those dual roles, running in parallel with each other and causing some confusion.

4.17 pm

Sitting suspended for a Division in the House.

4.27 pm

Lord Wigley: As I was saying before we were interrupted, a question remains about the mechanics for sorting out any changes in Wales and whether the Boundary Commission is going to do this itself. Will decisions about National Assembly constituencies be taken solely in Wales or debated in a forum at Westminster? What will the timescale be for this? There needs to be some clarification, because from the media reports in Wales it is clear that there is considerable uncertainty about this. I personally regard 30 Westminster seats for Wales as ridiculous, particularly if they have to be the same size, but that is an issue for another piece of legislation. None the less, that impinges on what we are debating today, as other noble Lords have mentioned, and I hope that the Minister might be in a position to give some clarification. If he is not, perhaps he could find a vehicle by which we could be informed of the Government's thinking on this matter.

Lord Jones: My Lords, I thank the Minister for his exposition and the noble Baroness, Lady Gale, for hers and for the information that she gave to your Lordships. I heard the Minister's stentorian Scottish brogue as he outlined his Welsh intentions, so I drew the appropriate conclusions.

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As the draft SI says, the Boundary Commission for Wales has submitted to the Lord President of the Council, Mr Clegg, reports recommending alterations to the boundaries of the parliamentary constituencies into which Wales is divided and of the constituencies of the National Assembly for Wales. Paragraph 4.3 of the Explanatory Memorandum to the order states baldly that,

In some respects, it is not an exaggeration to say that in stating that fact in these papers, some history is being made. There is to be a disjoint between the boundaries of the Assembly and of the mother of Parliaments where Wales is concerned. I do not see in the Explanatory Memorandum or in the draft order any explanation as to the intent of the Government with regard to the parliamentary boundaries.

I am not qualified to pronounce upon details concerning Brecon and Radnor, Rhymney, Ogmore, Cardiff, Merthyr Tydfil, the vale and Penarth, but I presume that the consultations were scrupulous and that, in terms of these being ward boundaries for the Assembly, things went reasonably well. The order mentions parliamentary boundaries, and although the Minister mentioned them he does not appear to know about the extreme disquiet about the details of the proposed boundaries, which mean that there will be 10 fewer Members of Parliament in Wales. To cut away 10 parliamentary seats from Wales is unjust; Wales's MPs now are serving their constituents extremely well, and MPs of all parties have never worked so hard, so effectively and so visibly. Their constituents get a fine service, and MPs make their offices and staff readily available throughout Wales to give that excellent service. That service is of more than high quality, and I regret the coalition's decision to expunge 10 seats. The reasons for this are not given in the draft or the Explanatory Memorandum.

This is a historic blunder, against the grain of public opinion. Are Westminster MPs expected to wither on the vine in the years ahead? Why does the coalition hugely increase, by over 100, the membership of an overcrowded House of Lords when it proposes to cut severely the number of MPs? Ten parliamentary seats are to go in Wales in the coalition's approach. Even at this late stage, I would hope that Downing Street will decide that it is going too far and will dump such a measure. It seems that we will have more and more Barons and Baronesses and fewer MPs in Wales, but we are not told in the papers before this Committee the reasons why. I do not think that this is the time to denude Wales of its Westminster champions-champions of reform, of the underprivileged and, increasingly, of the unemployed.

There is a birthright here, a parliamentary birthright, and the Government of the day are taking much of it away from the people of Wales. The Government promulgate the merits of what you may call community and yet are hacking away at an established value and historic provision in Wales. So far we have not heard why the Government intend this.

Lord Wallace of Tankerness: My Lords, first, I thank all noble Lords who took part in this debate. I think it is fair to say that there is very little contention

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over the detail of the order, and indeed I think that was the response to the recommendations of the Boundary Commission for Wales when it produced its preliminary findings. As I indicated in my opening remarks, we are not aware of anyone objecting to these provisions.

Perhaps I may start with the points made by the noble Lord, Lord Jones. The reason why there is nothing about the reduction in the number of Members of Parliament in Wales in either the order or the Explanatory Memorandum is that that is not what the order is about. It is about boundaries which will be relevant to the Welsh Assembly. I say to the noble Lord that I certainly am aware of the furore that this has caused. It was not for nothing that I dealt with the relevant parts in the amendments both in Committee and on Report when the Parliamentary Voting System and Constituencies Bill went through your Lordships' House.

Lord Jones: The Minister is helpful and kindly, notwithstanding his brief, but the draft order contains the words "Representation of the People, Wales" and "Parliamentary Constituencies". There it is. There is no answer from the Government as to why Wales must suffer this huge penalty. One hopes that one day a Minister who represents the coalition will tell us why.

Lord Wallace of Tankerness: My Lords, as I explained to the noble Lord's noble friend Lord Rowlands, the words "Parliamentary Constituencies" appear in the order because they are in the name of the order being amended by this order. However, the detail of the order affects only boundaries for constituencies for the Welsh Assembly and the regions for which additional Members are elected.

I absolutely share the noble Lord's view; I would hate to see Welsh MPs wither on the vine. As someone who believes in the integrity of our United Kingdom, I hope that for generations to come there will be Members of Parliament from Wales, Scotland, England and Northern Ireland. If the noble Lord is looking for an explanation, the reason why I am not going to rehearse all the arguments that we had in the Chamber during the Committee and Report stages of the Parliamentary Voting System and Constituencies Bill is that in these elections Members will be elected by equal numbers in Scotland, Wales, England and Northern Ireland. That was the goal of the provisions in the 2011 legislation.

Lord Jones: The noble and learned Lord knows that Scotland has taken a hit but he has not given the reason why Wales should take a hit.

Lord Wallace of Tankerness: The reason is that, following the proposals by the Boundary Commission for Scotland, the Boundary Commission for Wales, the Boundary Commission for Northern Ireland and the Boundary Commission for England, there will roughly be equality, within 5 per cent, in the number of electors per constituency. That does not exist at the moment, and the intention is to achieve that equality so that a vote in Cardiff has the same value as a vote in Coleraine, Edinburgh and Manchester. The intention

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is to ensure that throughout our United Kingdom votes are of equal value, and nothing in that minimises or detracts from the value of a vote in Wales.

We have been through the arguments and I do not think that we are going to advance much further. I suspect that this argument is going to come around again when the Boundary Commission for Wales publishes its provisional proposals for the Westminster seats. As I indicated to the noble Baroness, Lady Gale, I was aware of the interview with the First Minister in today's Western Mail. I think that it was also on WalesOnline. Very early in my remarks in moving the order, I said that the Explanatory Memorandum says, as a matter of legal explanation of what the order is about, that these changes will come into effect for the election to the Assembly in 2016. However, I did say that that was subject to the commitment given by the Secretary of State for Wales to look carefully at the implications of having different boundaries for Assembly constituencies and parliamentary constituencies in Wales.

If the noble Baroness had not done so, I would have quoted the reply that my right honourable friend the Secretary of State for Wales gave in the House of Commons back in May, when she gave that commitment seriously to consider the implications. However, I assure noble Lords here today that nothing will be done without full and proper consultation. It would have been improper if, having brought forward the recommendations on these interim changes, we had not moved to implement them. I think that it would have been very presumptuous on our part not to have done so, given that we knew that the Boundary Commission for Wales had the proposals under consideration when we passed the 2011 legislation.

Baroness Gale: Is the Minister saying that there could be changes before 2016? That is the concern in Wales and what the row is about at the moment-that the order is saying that this will happen in 2016. However, the Minister is now saying that there could be changes before 2016. Will he please clarify that for me?

Lord Wallace of Tankerness: Perhaps I could just repeat what the noble Baroness quoted to me: my right honourable friend the Secretary of State for Wales said at Oral Questions that she would seriously consider the point that was made. It would be wrong for us to prejudge the outcome of any consultation that could take place, but I assure the noble Baroness and the Committee that no change will be made without proper consultation. The Secretary of State has given a commitment to consider the point that was made to her in exchanges in the Commons, and that consideration is what she is currently doing.

Lord Rowlands: Why, therefore, is no such qualification included in the Explanatory Memorandum to the order? Why is there nothing saying, "Oh yes, but there may now be changes of the kind that the Minister is saying might happen"?

Lord Wallace of Tankerness: Quite simply because the Explanatory Memorandum is a statement of the effect of the order as the law currently stands, not a statement of policy. I hope that in presenting the order

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I made it very clear-I think I have repeated it twice now-that that is subject to the commitment that my right honourable friend has made. Just to be clear, the Explanatory Memorandum is a statement of what the effect of the order would be as a matter of law; it is not intended to be a statement of policy. I hope that clarifies the position. The Secretary of State is doing what she said in that exchange that she would do and considering what the effect is of the fact that there are implications of the disjunction.

My noble friend Lady Randerson asked me to confirm that that was the case in Scotland. It is indeed the position that the UK parliamentary constituencies do not match the Scottish parliamentary constituencies. I would be brave to say that the political parties necessarily find it easy but I rather suspect that individual members of the public, who at the end of the day matter most, have little difficulty in identifying their Member of the Scottish Parliament and their Member of the UK Parliament.

Perhaps for clarity, I should say that there is nothing at the moment in law or in any arrangements that would look at how Welsh Assembly constituencies would change. I say purely as a matter of fact that when the disjunction took place in Scotland, primary legislation was brought in in Scotland to make provision for a separate boundary review of the Scottish parliamentary constituencies. Let us not interpret that as in any way a commitment that we are about to bring forward legislation, but that is factually how that position has been addressed in the longer term in Scotland.

Lord Wigley: I am grateful to the noble and learned Lord, Lord Wallace. The question that arises is how we ensure a mechanism for setting the constituency boundaries for the Assembly within the context of the rules and values on which they are based, which are more community values, in that there are more individual seats and they are geared to the old communities that they used to represent. At the same time, the boundaries for Westminster are based on the totally different principle-what might be called a republican principle-that it is from the people up that the rights and legitimacy of Parliament come. That is an old established principle; whether it works well in other countries is another question. Those two sets of values and analysis are totally different.

What I am really asking is: are we going to have two boundary commissions to do this or different people in the same commission? Are we going to have more resources to enable us to do it?

Lord Wallace of Tankerness: My Lords, I cannot answer that question because there is no answer to it at the moment, other than that, having established boundaries, clearly they cannot go on for ever. The very nature of our system is that the boundaries should be regularly updated. We now say that UK boundaries should be done on a regular basis every five years; previously, as I have indicated, it was done every eight to 12 years. It is clear that at some stage some mechanism will need to be put in place to allow an update of the boundaries, but it would be presumptuous and premature of me to speculate now

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on when that would be, and indeed on whether we will use the same people to do it and what the criteria would be for these boundaries. That is a debate for another day. There are no proposals. However, the noble Lord was right to identify the fact that, as there is a disjunction, there has to be a mechanism at some point for updating the boundaries for the Assembly.

Lord Rowlands: I apologise, but if there are changes of the kind that are being foreshadowed, would they require legislation and where would that legislation take place?

Lord Wallace of Tankerness: I am almost certain that it would require legislation and it would be Westminster legislation, just as with Scotland when as a result of a disjunction there was primary legislation in 2004. I am as certain as I can be that that is what the position would be.

This debate has been useful because it has brought out a number of important issues, and I am sure that there will be further discussions when the Boundary Commission for Wales produces its proposals for the Welsh parliamentary constituencies. I very much valued the historic insight into the boundaries between Merthyr Tydfil and Rhymney, where the noble Lord served with distinction when he and I were colleagues in the Commons. Since then, people have come and gone over a number of years, and this is perhaps just the latest instalment; I am sure that there will be many in years to come when our successors are sitting here or in the other place-with whatever role this place has in a century's time. On the basis that in the terms of the order there does not need to be any dispute, I commend the order to the Committee.

Motion agreed.

Water Supply (Amendment to the Threshold Requirement) Regulations 2011

Water Supply (Amendment to the Threshold Requirement) Regulations 2011
32nd Report from the Joint Committee on Statutory Instruments.

Considered in Grand Committee

4.47 pm

Moved By Lord Taylor of Holbeach

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Taylor of Holbeach): My Lords, we cannot perhaps expect quite the passion in this debate that we had with the previous statutory instrument, but I do not wish to pour cold water on contributions that noble Lords may make.

The water supply licensing regime introduced by the Water Act 2003 was an attempt to introduce limited retail competition into the water sector. It permits new entrants known as licensed water suppliers to enter the market and enables non- household customers

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using at least 50 megalitres of water a year to switch from their existing monopoly supplier to an alternative water supplier. To give some idea of scale, an Olympic-sized swimming pool contains approximately 2.5 megalitres of water.

There are currently seven licensed water suppliers that eligible non-household customers can switch to. A licensed water supplier is permitted to purchase water from the incumbent water company and supply those customers who are eligible to switch away from their existing supplier. The size of the non-household market is approximately 1.1 million customers and, of those, an estimated 2,200 are currently eligible to switch their water supplier. However, since the introduction of the WSL regime in 2005 it has become increasingly more apparent that the WSL is not working effectively; only one non-household customer has managed to switch its supplier.

The Independent Review of Competition and Innovation in Water Markets, carried out by Professor Martin Cave and published in 2009, considered that better value for water and sewerage services could be obtained through enabling greater competition. The report identified a number of reasons why the WSL regime had been ineffective and made a number of recommendations for a step-by-step approach towards the introduction of competition. Professor Cave recommended increasing the size of the contestable market as the first step. This would be achieved through a reduction in the threshold at which non-household customers could switch suppliers.

These regulations amend the Water Industry Act 1991 by reducing the customer eligibility threshold from 50 megalitres to five megalitres. This will significantly increase the size of the contestable market from 2,200 to 26,000 non-household customers in the area of those water companies that are wholly or mainly in England. The regulations represent a low-risk way of extending the market without the need for further investment. Further market reform changes as identified by Professor Cave will be considered in the water White Paper, which will be published by December. At this stage, we are expecting that lowering the threshold will stimulate interest in the market, reinvigorate new entrants' efforts to gain market share and incentivise existing water companies to improve services or risk losing customers. The potential benefits associated with lowering the threshold could take the form of lower bills through keener prices, improved customer service and lower consumption due to increased water efficiency. The regulations will not impose any costs on business and do not have an impact on micro-businesses. I commend the regulations to the Grand Committee.

Baroness Parminter: I think it is right that the Government are accepting the recommendations of the Cave report, but it is very disappointing that the impact assessment makes it clear that no guaranteed or quantifiable environmental benefits in terms of reducing water use will result from there regulations. It is all about "could" and "might be"; nothing is guaranteed and there are no quantifiables in that.

The impact assessment also makes it quite clear that, without further reforms to the water supply

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licensing regime, the uptake on supply switching is going to be very limited. The Minister pointed out that there is a market of 26,000, but the assessment makes it clear that, without further reform, the potential is just two or three companies per annum. It strikes me that this statutory instrument on its own is pretty unimpressive and I wonder why it has been brought forward before the White Paper, given that the White Paper is going to be coming forward fairly shortly. I am sure that some form of further legislative reform will take place following that. I should like to know why these regulations-and the cost of bringing them to this House and into the market-has been brought forward on their own, given its limited potential.

Lord Knight of Weymouth: My Lords, I am grateful to the Minister for setting out so clearly what the statutory instrument does and to the noble Baroness for making some useful comments, with which I agree, about the impact assessment. This is a perfectly harmless statutory instrument, so I am very content with it. Like the noble Baroness, I am not sure that it is going to have a massive impact but, given that the Cave review recommended that this should happen, that the Cave review did a good job and that we look forward to the Government's comments in the White Paper, I am certainly happy to give this statutory instrument my blessing.

I would not want to burden anybody with having to work out any more impacts but, especially given that this is a Defra statutory instrument, the rural impact would be particularly interesting. It would be interesting to know whether any thought has been given to including rural impacts in general. When I was reading through the impact assessment, I thought that it might make a difference in some urban areas because in urban areas the market is more likely to be active. In the rural parts, however, if it makes any difference at all or if there is enough of a market operating, I shall be quite surprised. If the Minister has any comments on that, I shall be delighted, but this is a pretty straightforward statutory instrument. We welcome competition in the water industry; we hope that it benefits consumers and that the department and the regulator will make sure that that happens. I am happy to give it a positive nod.

Lord Taylor of Holbeach: I thank noble Lords for their contributions. I am particularly grateful to my noble friend Lady Parminter for pointing out that she felt that the environmental potential of changes in the market had not been properly stated in the impact assessment. Impact assessments are of course designed to report on measurable impacts. One of the difficulties in this case is that we cannot predict the impact of a reform of this nature. I can say that since non-household competition was introduced in Scotland in April 2008, more than 45,000 customers have renegotiated the terms of their supply, enjoying the range of benefits that come from a competitive market.

One element to which I tried to draw the Grand Committee's attention was that among the services that can be offered to companies in this category is advice on reducing water consumption. It is not very easy to quantify and you cannot rely on it in an impact assessment. However, I should have thought that it

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would be one of the strongest reasons why some companies would look to change supplier. The reason will probably not be price. In some ways it is more difficult to compete on price in water than it is in almost any other area. However, there could well be competition on service. Water efficiency is a big gain from a freer market.

The noble Lord is absolutely right to say that we need a White Paper and that this is only a beginning. I cannot pretend that it is only the beginning of a reshaping of the water market in the UK along the lines of the review that Professor Cave produced. However, we are right to introduce this statutory instrument at this stage. I hope that we will learn from the way that the market improves through this statutory instrument things that we can then include in the legislation that will follow the White Paper.

It is difficult to quantify the impact on rural areas. The impact assessment does not have a special chapter just because it comes from Defra. We might consider that. It is something of which the noble Lord, Lord Knight, might try to persuade us. If the process allowed us to flag up our own special interests, it would be very good to do so. There are one or two large consumers of water in rural areas who might well benefit from this proposal. There could then be an assessment of the impact on rural areas and rural businesses; I should like to think so.

I thank my noble friends. I think we have pointed out areas that we will probably debate in greater detail and with, I have little doubt, somewhat more vigour when we come to consider other aspects. Meanwhile, I commend these regulations to the Committee.

Motion agreed.

Renewable Heat Incentive Scheme Regulations 2011

Renewable Heat Incentive Scheme Regulations 2011
31st Report from the Joint Committee on Statutory Instruments.

Considered in Grand Committee

5 pm

Moved By Baroness Stowell of Beeston

Baroness Stowell of Beeston: My Lords, climate change is one of the defining challenges of our generation. At a time when we are trying to reduce our energy consumption but still need to heat our homes, renewable energy must and will play a part in managing this situation. This is why we want to introduce the renewable heat incentive, or RHI, to support renewable heat generation and to complement the renewables obligation and feed-in tariff schemes which support the generation of renewable electricity.

Previous draft regulations for the renewable heat incentive were debated by both Houses. While both Houses passed those regulations at the time, they were subject to state aid approval being received from the European Commission for the scheme. In the event,

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the European Commission decided to approve the scheme, on the condition that the tariff for large biomass installations was reduced. The reason the Commission was concerned with the large-scale biomass tariff was because the tariff-setting methodology used for it differed from that applied to other technology bands. The Commission believed that this could result in overcompensation for some biomass installations.

The proposed large biomass tariff was set to incentivise 100 per cent of potential large biomass installations, allowing us to maximise the level of biomass take-up at this scale. This approach differed from that taken to other technologies supported under the scheme. We had decided on this approach because large-scale biomass represents the most cost-effective way of meeting our EU renewables targets. As the tariff levels were set out in the previously debated regulations, we have revised the draft regulations to include the new tariff level for large-scale biomass.

The new set of draft regulations is available to your Lordships today and sets out the details for the renewable heat incentive under which this scheme will operate. There are two changes to those previously debated in the Committee on 12 July. The tariff for large biomass installations-those of over 1 megawatt capacity-has been reduced from 2.7p per kilowatt hour to 1p per kilowatt hour, and the dates on which Ofgem is required to first report to the department on the administration of the scheme have been altered to reflect the delay in launching the scheme.

These regulations provide the basis for 20 years of financial support for a range of renewable heat technologies such as solar thermal, biomass boilers and ground source heat pumps. Support levels are intended to bridge the financial gap between the cost of conventional and renewable heat systems. Once in the scheme, the level of support for participants will be fixed and will change each year only with inflation. The Government have committed £864 million in funding for the scheme up to the end of 2014-15. This funding will come from general taxation rather than the proposed levy suggested by the previous Government, which was found to be unworkable. Support under these regulations will be available for renewable heat installations in England, Wales and Scotland. The Northern Ireland Executive, who are developing their own scheme under powers provided by the Energy Act 2011, have consulted on their proposals and are now analysing responses to that consultation.

The RHI will provide the right framework to enable a rapid transformation of the way heat is generated. We expect it to provide carbon savings between now and 2020 of 44 million tonnes-equivalent to all the carbon emitted by 19 typical new gas power stations operating at full load in one year. The RHI will be available to generators of renewable heat in the industrial, commercial, public, not-for-profit and community sectors in the first instance. We want to incentivise a wide range of businesses and organisations to realise the opportunity provided by the RHI and start generating heat from renewable sources.

The domestic sector is currently being supported by the renewable heat premium payment scheme, which provides a one-off payment to households that have

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installed an eligible renewable heat plant. We are working on proposals for an ongoing domestic scheme as part of phase 2 of that scheme. However, in the light of the later than expected launch of phase 1 as a result of the changes required by the European Commission, we are reviewing the timetable for the introduction of phase 2. We will be in a position to confirm the exact timing early in the new year.

The RHI will be delivered by Ofgem on behalf of DECC. I am pleased to confirm that the delay to the scheme has not impacted on its readiness to administer the RHI and, subject to parliamentary approval, it will be in a position to start accepting applications once these regulations have been approved and made. Ofgem has significant experience in delivering financial support schemes to renewable energy generators, and already delivers the renewables obligation and feed-in-tariff. Because Ofgem has experience in delivering similar schemes, it will be able to build on this experience and existing structures such as IT systems to ensure that the RHI operates as effectively as possible. Generators will need to apply to Ofgem to be accredited under the scheme, and the processes that they need to undertake are set out in guidance recently published on the Ofgem website.

In order to be able to participate in the scheme, applicants will need to meet a range of eligibility criteria intended to ensure the integrity of the scheme. This includes the requirement that, for small and medium plants, installers and equipment need to be certified under the microgeneration certification scheme or an equivalent scheme. Generators will also need to commit to undertake certain ongoing obligations to receive payments under the scheme-for example, providing meter readings so Ofgem can calculate their quarterly RHI payments, maintain their equipment and, in the case of biomass installations, provide information on a number of sustainability issues.

It is worth spending a little time considering bioenergy, which is a key element in allowing us to achieve our renewable energy targets. The amendments to Section 100 of the Energy Act 2008 that were approved in the summer went some way towards achieving this by enabling biogas to play a much more significant role in the RHI. We are still aware of the concerns surrounding the increased use of biomass as an energy source, particularly with regard to sustainability of the fuel sourced and air quality. Those concerns are addressed in the regulations by including sustainability reporting criteria from the outset. Air quality will be addressed through existing legislation for large-scale biomass, and we will introduce emission limits for all other biomass installations in phase 2 of the scheme.

Rising energy prices, an increased dependence on imported energy and the impact of climate change all mean that we need to change how we use and generate energy. Energy used to generate heat is a key aspect of this, as heat energy contributes half of the UK's carbon emissions. We are also no longer able to rely on cheap fossil fuel gas, which historically has supplied 70 per cent of our heat. It is time to address this situation. By introducing the RHI we are taking a first step towards a radically new approach to how we generate heat in this country. I beg to move.

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Lord Grantchester: I thank the noble Baroness for her exposition and welcome her to her new role in the department. I apologise to the committee for my cold, and hope and trust that my splutterings will not make some of my remarks incoherent.

The Minister is correct that this is essentially a replay of the regulations debated in July, with two key alterations. While we will get to these in a moment, I also think it worth while to state at the outset that the Opposition continue in our broad support for the renewable heat incentive, continuing as it does the groundbreaking nature of the scheme set up in the previous Labour Administration. However, there have been delays of over a year, a dissipation of momentum and a reduction in ambition, with the two-tier introduction for businesses and households and changes to the technologies and tariffs eligible under the scheme. While adjustments must be made as there is a certain amount of learning on the job with such a new scheme, it is nevertheless important to provide continuity and schemes if investor confidence is to be maintained-a point sadly lacking regarding solar power and the feed-in tariff scheme, whereby the rate of return was cut from 12 per cent to 6 per cent at a stroke.

On that point, I shall ask the Minister the first of my queries today. Of the two changes made to the July regulations, the first involves a reduction in the tariff for large-scale biomass installations of more than 1 megawatt from 2.7 pence per kilowatt hour to 1.1 pence per kilowatt hour. This is a huge reduction, made in response to the European Commission, which judged that the tariff was too high and might lead to overcompensation for some installations in the technology band which would threaten the EU internal market level playing field. The Minister in the other place stated that this came as a considerable surprise to the department's officials-as a bolt from the blue. Given that the subsidy has as one of its three main aims the payment of a rate of return of upfront investment of 12 per cent, where does that leave the return on a large biomass? Surely it is no longer 12 per cent. Is that 12 per cent return a level playing field across Europe, except of course solar, as stated earlier? How could the department have got it so wrong? Given that the department is in constant contact with stakeholders, can the Minister give the Committee an assessment from those conversations of the impact of this change? What effect will this have on our renewable targets?

That last question leads to some general remarks to which I hope that the Minister may be able to respond. At present, I understand that the current level of renewable heat is at 1.5 per cent; this instrument aims to increase it to 12 per cent by 2020. This is, indeed, some dramatic increase, more than has been experienced elsewhere in Europe. It demands leadership and commitment from the Government, not meddling and tinkering. Can the Minister confirm that the target will be met and that budgetary constraints do not overrule the 12 per cent rate of return policy?

In annex 1 to the memorandum, the department laid out the post-implementation review plan, which is scheduled to start in January 2014. The annex lists seven criteria to which the review will have regard

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when considering changes. My honourable colleague, Luciana Berger, MP for Liverpool, Wavertree, asked yesterday what criteria would trigger an early review. Is it satisfactory that the Minister in the other place responded that the answer would be provided in phase 2? Surely that needs to be stated with certainty upfront to investors if they are to have confidence that schemes will not be changed out of the blue. When affordability within the Government's overall deficit reduction plans is stated in the annex as one of the criteria to which a review must have regard, is it not that the scheme will be under constant review? Could there be an addition of a further two criteria to this list-that the Government will have regard to, first, the employment impact and effect on growth of the industry impacted by any changes and, secondly, the effect on investors' confidence when considering any changes brought about in consideration of other criteria? Does the Minister agree that good governance requires consistency of approach and responsible lead-in times to scheme changes?

The renewables sector is being challenged ever more critically in these times to have regard to value-for-money concerns, environmental impacts, sustainability, carbon emissions and so on. For example, there is no precondition that buildings or equipment be made energy-efficient first. Given that the Energy Bill has been enacted, could the Minister give the Committee any information on whether the review will be informed on the implementation from energy efficiency measures and what outcomes could be achieved?

It is applauded that the funding for this renewable heat-incentive scheme is to come through general taxation, which avoids the impact on consumers through increased prices, generally has regressive impacts on fuel policy and creates a better balance between energy use, climate change targets and emission reduction targets. It complements the commitment to promote the huge increase in the amount of energy that could be produced from food waste through anaerobic digestion. If this is to be the case regarding renewable heat, why could the same funding approach not also apply to feed-in tariffs, which were drastically curtailed because of the contribution that it required from consumers? Would general taxation not better match the big ambitions for the green sector?

While the concerns that I have outlined show that we wish to see improvements and an increase in momentum, I agree to the approval of the regulations.

5.15 pm

Lord Teverson: My Lords, as a proud owner of two wood-burning stoves, what could I do but welcome this piece of administration to the legislation? I was going to congratulate the previous Government on having introduced this but of course it was neither them nor the present Government who did so; it was a rather anarchic band of Back-Benchers in both Houses who insisted that this was one of the ways forward. It was one of the few occasions on which Parliament overcame Government when feed-in tariffs and the renewable heat initiative came about. Maybe we all ought to pat our own backs when we look back at history, but the question here is what will happen in the future.

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As we have been reminded, we have a big target here-to move from 1.5 per cent of renewable energy through heat to 12 per cent and, ultimately, to the 15 per cent target. We concentrate a lot on electricity generation and not so much on this other half of the sector. I welcome the fact that this will be paid for by general taxation. That £865 million is a big victory for DECC regarding the Treasury. Maybe we are not meant to talk about arguments between friends, but that seems to have been a good negotiation in these times of economic and budgetary stringency. That means that where we have fuel poverty, particularly around heat-that is not helped by electricity generation for heat-then the majority of people not getting their heat from electricity means that we are not adding to those bills.

The other exciting thing about this, although this is also why it is dangerous, is that this is something new and different and has not really been tried before. We have seen feed-in tariffs elsewhere in Europe and have, I hope, learnt from that experience. Here we are going to create the learning curve ourselves-we are the guinea pigs. That has dangers in its own right. We have to ensure that we do not have unexpected short-term tariff changes because we find it difficult to predict how these installations are going to take place, what the demand is and how much of that money is going to be used. That will be difficult but it is important that we get it right regarding investor incentives, particularly in the corporates and the small business sector that we are talking about.

I was interested in what the impact assessment said about perverse incentives. I can see the problem where the tariff rate is greater than the marginal cost of producing electricity. I went through all those arguments in the impact assessment, and would be interested to be clear that the Government are now certain that we will not be burning heat just for the incentives and that we have got around that problem. Perverse incentives are important in all legislation.

I very much regret that the European Commission got involved in terms of state aid. I would have thought that that was inappropriate in this sector, and I am with the Government in being surprised that the Commission made that intervention. One of the problems with that has been that, as so often in these cases, where there is subsidy of any kind, the industry stops while we wait for these schemes to start. There have already been a number of casualties in the heat pump industry and in this sector because people hold off from making investments until the subsidies are available.

We are now moving ahead on the business and industrial side, and I welcome that, but I should be very interested to hear when the Minister expects the domestic side of this to come in. I may have missed it in her opening remarks but I did not catch a specific date. It is very important for the industry, for social housing and for this other area where investment is taking place that that moves forward rather than people holding off until the renewable heat initiative comes into being.

I am very pleased to see these regulations come before us. This is an exciting scheme. There are all sorts of challenges surrounding it but let us go ahead and reach for that 12 per cent and beyond.

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Baroness Worthington: I, too, am very pleased to be here. I am sorry that I missed the debate earlier in the year, as I was still on maternity leave. I want to open with some general remarks. It was possibly more than 10 years ago, while I was working at Friends of the Earth, that the suggestion of an incentive for renewable heat was first put forward by the NGOs. Part of the motivation for that was that it is much more efficient to take biomass energy and convert it directly into heat. If you use it to generate electricity, about two-thirds of the energy goes up cooling towers. Therefore, it is very welcome, if a little late, that this initiative is now being introduced.

I shall try to keep my comments brief as I do not want to delay approval of the regulations any further. It is very important that the initiative starts as quickly as possible. I echo the noble Lord's comments about the need for clarity at the domestic level of the scheme. I hope that there will be great interest in the scheme from house owners, because we are all faced with high energy prices as a result of higher oil and gas prices. Therefore, I think that the update will be good and I hope that we will have clarity over the date of introduction.

One consequence of the delay is that the Government are now introducing this instrument in the eye of the storm around the solar FITs debate. I hope that we will take some lessons from that debate. Perhaps most pressing is that, if reviews are undertaken, a minimum notice period should be given to the industry before such changes are introduced. Six weeks' notice is simply not acceptable for an industry that has to plan for the longer term. We expect there to be reviews of this instrument but the industry must be given fair notice of the changes, and I ask whether that is being considered.

I also echo my noble friend's comments about the principle of how this is being paid for. It is significant that it is coming out of general taxation. I think that that helps to avoid the kind of furore that we are seeing over consumer bills. Let us be honest about the fact that general taxation is currently being boosted by various revenues from the European Emissions Trading Scheme. Therefore, this money is being generated from the climate change initiative and is being recycled on other work to further our aims on climate change. That is a very good principle and I should like to see more such measures being brought out of general taxation, given that we now have this big input of money from the ETS auctions.

Finally, I hope that this initiative will be very successful. I hope that we will have sufficient flexibility so as not to be hidebound by our modelling. All modelling is vulnerable-it is very hard to predict the future-but if this should turn out to be a very successful initiative and we end up getting through the budget more quickly, let us not pull the rug out from under an industry that is successful but look to spend more. We should have flexibility in how we reach our ultimate goals, which is to achieve 20 per cent of all energy from renewable sources. If renewable heat turns out to be a great success, let us have the flexibility to keep backing winners and not keep pulling the rug out from under an industry that starts to produce good results.

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The Duke of Montrose: My Lords, I, too, thank the noble Baroness for her explanation of this measure, which takes up many pages, and congratulate her on taking up the cudgels for the Department of Energy and Climate Change. I have a mild interest since I have a farm, where there is obviously scope for generating various kinds of renewable energy. I was interested to hear the noble Baroness say that the plan was to reduce the periodic support payments for large biomass operations, which reminded me of something that I saw recently on a BBC web page. Perhaps the Minister can write to me if she does not have a ready answer for this. The Scottish Government have devolved powers for renewable energy, and seem to be holding a consultation on reducing the ROCs on large biomass generation because they want to devote them to marine energy. However, does large-scale biomass qualify for ROCs as well as periodic support payments? What power do the Scottish Executive have over renewables obligation certificates? Can they allocate them up and down at their own will, or is the allocation of ROCs still a UK power?

Baroness Stowell of Beeston: My Lords, I thank all noble Lords for contributing to this debate. Quite a few issues have been raised and I will do my best to cover most of them in as much detail as is sensible on such a complex matter. I welcome not only everybody's contributions today but the support that this initiative has received from the Opposition and my noble friends in all parts of the Committee. As someone who is new to this brief, it was interesting for me to learn that the scheme was first mooted by NGOs 10 years ago and that the Back Benches, rather than previous Governments, were behind this move, although it obviously now benefits from the decision of this Government.

I will go through the issues that were raised, some of them by several noble Lords. A number of noble Lords sought to draw comparisons between this scheme and the feed-in tariffs scheme for solar panels. I understand why some people might be concerned that issues will arise from this scheme similar to those which arose from the feed-in tariff scheme. The key thing is that this Government are learning lessons from how the feed-in tariff scheme was set up by the previous Government. There has been a much higher level of collaboration with the industry and stakeholders in setting up this scheme. We have tried to build in the flexibility that is not there in the feed-in tariff scheme. I point out, as I did in the Chamber earlier today, that the changes that we are making to the feed-in tariff scheme are to ensure that the industry is sustainable in the future. It is an important industry and we want it to be part of the future.

The noble Lord, Lord Grantchester, my noble friend Lord Teverson and the noble Baroness, Lady Worthington, raised the issue of why the RHI is being funded by general taxation, whereas the feed-in tariff scheme is funded by a subsidy, or a levy on consumer bills. The difference is that feed-in tariffs are paid to consumers by electricity suppliers. That is, there is a tariff for the energy that is generated by people through the solar panels on their roofs. To fund feed-in tariffs from general taxation would require the scheme to be restructured or the Government having to pass money

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to the electricity suppliers to pay to the solar panel participants. It is a different scheme altogether; that is the main reason why it is funded differently.

5.30 pm

Let me move on now to some other issues that were raised. The noble Lord, Lord Grantchester, perhaps in the same vein, asked about the reduction in tariff. The answer is that the rate of return remains at 12 per cent, so that rate has not changed. We expect that to be the rate required to incentivise installers to adopt renewable heating. The change is that we expect fewer installers to adopt large biomass. However, given supply chain constraints we expect there to be greater uptake of small and medium-sized biomass than of the other types of technology.

As for the process for reviewing the scheme and ensuring that sufficient notice and planning time is given to the industry, we are putting in place a cost-control mechanism which will alleviate the need for early and emergency reviews. There may still be a requirement for early reviews and we will consult on the criteria for this, such as significant changes in the costs of technologies, as part of our proposals for phase 2 of the scheme. We will ensure that this process is transparent and predictable in order to provide the certainty that the markets need. In addition, we expect to introduce a policy to control cost as an integral part of the scheme, which should reduce the need for reviews. The point for me to emphasise here is that-learning from previous schemes-we are ensuring that in monitoring how this is operating, it should prevent the need for significant reviews of that kind.

Several noble Lords sought the Government's confirmation that we are committed to the renewables targets. My answer to noble Lords on that is that, yes, we are absolutely committed to meeting them and that renewable heat is a vital pillar of that commitment-both the wider one and, indeed, the specific target.

There were so many different issues raised. Let me rattle through some of them now. As to the effect on investors and whether there would be confidence in this scheme, which again links to the issue of review, we would expect the criteria for early review-as I mentioned, we will consult on those-to focus on issues such as rates of deployment. I think that the noble Lord, Lord Grantchester, asked whether part of the review would be about the level of jobs created. However, investor confidence is of critical importance in delivering our renewables targets. This is why we intend to be transparent about the process and criteria, as I have said before. Being transparent in the way we operate this should provide the confidence that the industry is looking for-and is right to require from us as part of this. He also asked about interaction with the Green Deal. In answer, I can briefly and confidently say: yes, we are looking to ensure that when phase 2 comes into operation, there will be ways in which that can operate in line with the Green Deal.

My noble friend Lord Teverson, and perhaps others, asked about the timing of the expected launch of phase 1. As I said earlier on, as a result of the changes required by the European Commission, we are reviewing the timetable for introducing phase 2. We will be in a position to confirm the exact timing early in the new

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year but I cannot give it to him now. He also sought an assurance that we would not create a situation in which people were burning heat in order to receive incentives. We believe that the tariff structure and the eligibility requirements prevent people from generating heat just for incentives. Once the scheme begins, of course, we will monitor it closely for any signs of such behaviour.

Baroness Worthington: Could I ask specifically about the notice period, which has been such an issue with the solar feed-in tariffs? The Minister mentioned it but I am seeking an assurance that any changes are not introduced with too short a time period for the industry. A minimum of three to four months is necessary for the industry to adjust its order books and supply chain. Can the Minister assure me that there will not be changes posted that will be enacted within six weeks? That is a significant issue for investor confidence.

Baroness Stowell of Beeston: I understand the point that the noble Baroness makes. However, the way in which we have constructed the scheme means that I would not expect the sort of change that we have experienced with the feed-in tariffs for solar PVs to be repeated in this context. We would ensure, through our mechanisms for cost control within the department, that we are monitoring progress very transparently and that we would avoid that kind of emergency change that she refers to. It is unnecessary to give a specific commitment on a timetable as such because of what I have said, but I absolutely understand and appreciate her point.

Turning to the points raised by my noble friend the Duke of Montrose about large-scale biomass, the renewables obligation certificates and RHI, it is possible for new projects to receive the renewables obligation for the electricity generated in a CHP plant and the RHI for heat generated by that plant. A plant cannot claim the higher awards for CHP under the RO and the RHI. Does that make sense to my noble friend? I am glad if it does. My noble friend also asked whether the Scottish Government could award ROCs. The decisions regarding the details of renewables obligations, including the setting of banding levels, are for the Scottish Government. A separate consultation on their support of renewables obligation certificates was published on 21 October.

Lord Grantchester: Perhaps I might detain the Committee for one extra moment. Could the noble Baroness consider the question of affordability? While understanding the situation that we are in-especially in the wider European context at the moment-nevertheless, I am concerned that affordability is put up as a criterion that may overrule all other aspects. Could she comment on the relative importance of affordability and say whether her department is moving in any way at all to pick winners and losers? Winners such as PV might provide more affordable success stories than other technologies that might, in terms of their overall rate of return, be worthy of being equally treated. Nevertheless, because of the extra costs involved in their technologies, they are unlikely to be as affordable as others. Can she comment more widely on the affordability criteria in the memorandum?

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Baroness Stowell of Beeston: One thing that I would like to make clearer-and remind the Committee about, as well as the noble Lord-is that the department and the Government have three clear strategic aims in this area. One is to ensure we have security of supply so that we keep the lights on. The next is to make sure that we play our part in safeguarding the future of the planet for future generations. The third is to make sure that we do both of those things in the most cost-effective way possible. By that, we want to make sure that, in all the things we are trying to do, we do them in a way that is at the lowest possible cost to those who pay. Obviously, people who pay are having to do so either through their bills or through public money via taxation. Affordability, therefore, is a key issue for us.

I cannot comment specifically on each emerging technology, but obviously there will be a situation where some things are more successful, some more attractive and some more likely to be taken up than

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others. These incentives are there to help industry get something off the ground which is very powerful in meeting those objectives. I hope, at some point, that they will not need incentives at all but will work in their own right.

In conclusion, the RHI is a departure from our conventional approach to generating heat. This is a new market for the UK and our introduction of long-term financial support for heat generators under the RHI, alongside existing renewable financial incentive schemes, the renewables obligation and the feed-in tariffs, sends a strong signal to the renewables sector that the Government are committed to supporting renewable energy in this country. I hope we can all agree that this is a sector that should be supported. I commend these regulations to the Committee.

Motion agreed.

Committee adjourned at 5.42 pm.

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