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Grand Committee

Monday, 25 March 2013.

3.30 pm

The Deputy Chairman of Committees (Lord Colwyn): My Lords, good afternoon. We are investigating the cold wind that seems to be blowing through the Moses Room, but I am not sure what will happen. If there is a Division in the House, the Committee will adjourn for 10 minutes.

Armed Forces and Reserve Forces (Compensation Scheme) (Consequential Provisions: Primary Legislation) Order 2013

Motion to Approve

3.30 pm

Moved By Lord Astor of Hever

That the Grand Committee do report to the House that is has considered the Armed Forces and Reserve Forces (Compensation Scheme) (Consequential Provisions: Primary Legislation) Order 2013.

Relevant document: 20th Report from the Joint Committee on Statutory Instruments.

The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever): My Lords, I am introducing this legislation, which provides access to additional benefits for service and ex-service personnel who are entitled to a new benefit, to be known as the Armed Forces independence payment, or AFIP, which is to be introduced on 8 April this year. The new benefit is another example of the Government delivering our commitment to uphold the Armed Forces covenant. The Armed Forces covenant has two basic principles: that those who serve in the Armed Forces and their families should face no disadvantage compared with other citizens; and that special consideration is appropriate in some cases, especially for those who have given most, such as the injured and the bereaved.

Only recently the Government announced that they would make £6.5 million available to spend on latest-generation prosthetics. We are also improving rehabilitation services across the country for service personnel and veterans who are amputees. We are putting in place support and help for those who have suffered serious injuries in the line of duty, and AFIP will further enhance that support. It is important that we introduce AFIP and make sure that those most seriously injured receive this support.

In my mind, there are three key features. First, AFIP will provide ongoing financial support for the most severely injured. They will not have to be assessed or reassessed to access these payments. Secondly, this will simplify and streamline the support that service and ex-service personnel receive. It means that additional support can be offered based on an assessment already performed under the Armed Forces Compensation

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Scheme. Thirdly, all recipients will receive £134.40 per week, which will be tax-free and not means-tested. PIP will also be tax-free and not means-tested.

To explain the need for the order, it may be helpful if I provide some background to the new payment. In July 2012, the Prime Minister announced that the Government would simplify and enhance the financial support system for members of the Armed Forces who have been seriously injured, as part of the measures to uphold the Armed Forces covenant. Since that time, my department has been working closely with the Department for Work and Pensions to consider how such support could be designed. This close co-operation resulted in the design of AFIP.

At the initial design stages of AFIP, we sought feedback from ex-service organisations and charities via the Central Advisory Committee on Pensions and Compensation. This was to ensure that we had input from those who represent in-service and ex-service families and the bereaved. Those whom we contacted included the Royal British Legion, the War Widows’ Association, the British Limbless Ex-Servicemen’s Association and Combat Stress, as well as service members. The feedback received was valuable and helped inform the final design of AFIP.

Who will get this new benefit and the additional access to benefits that will accompany it? All service and ex-service personnel seriously injured since 6 April 2005 will be eligible. To clarify, the “seriously injured” are defined as those awarded a guaranteed income payment of 50% or more under the Armed Forces Compensation Scheme. It is important to note that AFIP will cover those with both permanent physical and mental injuries caused by service. It is the level of AFCS award that provides eligibility for AFIP. No additional assessment is undertaken and no further reassessment is required. This will provide ongoing financial security for the most severely injured. All those eligible will receive a flat-rate, ongoing payment of £134.40 per week. This will be tax-free and will not be means-tested. AFIP is to be introduced on 8 April this year. Seriously injured service and ex-service personnel who claim AFIP cannot also claim other disability benefits from the Department for Work and Pensions, including disability living allowance, personal independence payment and attendance allowance, no two of which can be claimed at the same time.

Other disability cost benefits, such as personal independence payment and disability living allowance, are used to provide access to a number of other benefits, schemes and services that are offered by other government departments, devolved Administrations and local authorities. These are often referred to in this context as passports. To ensure that AFIP recipients also have access to these additional benefits, we are bringing forward two packages of consequential amendments. The majority of these consequential amendments are to secondary legislation and so will form a package of regulations that was laid on 18 March this year. As for PIP, these included Motability, jobseeker’s allowance, legal aid, NHS costs, working tax credit, child tax credit, housing benefit and the council tax reduction scheme.

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However, to establish access to three important passports, we are required to amend three other parts of primary legislation. That is what we are here to debate today. These minor but important legislative changes are in respect of carer’s allowance, Christmas bonus and the seatbelt exemption for medical reasons. The legislative change in respect of carer’s allowance will ensure that those who provide valuable support to seriously injured members of the Armed Forces in receipt of AFIP have access to DWP’s carer’s allowance, which will be £59.75 from April 2013. This change will specifically make provision for those who devote their lives to supporting our seriously injured people, providing some financial support for doing so. It is only right that a person caring for an AFIP recipient should have access to carer’s allowance.

As for the Christmas bonus, these provisions will ensure that all recipients of AFIP automatically qualify for the tax-free, lump sum Christmas bonus, which is paid annually by the Department for Work and Pensions. In cases where the injured serviceperson requires, on medical grounds, an exemption from wearing a seatbelt, the individual must hold a valid certificate of exemption from compulsory seatbelt wearing. Only a medical practitioner may issue this certificate. This amendment will enable the medical practitioner to seek reimbursement from the Department for Transport for the cost of medical assessment that is required in these cases. As I have set out today, these three minor, but important, new provisions are designed to ensure that our most seriously injured service and ex-service personnel are able to access the additional benefits and schemes that they deserve.

AFIP is another example of the Government’s commitment to uphold the Armed Forces covenant and deliver tangible benefits for members of the Armed Forces and veterans. AFIP will provide ongoing financial support for the most severely injured service and ex-service personnel on the basis of their Armed Forces Compensation Scheme award without assessment or reassessment. Furthermore, AFIP will provide them with passports to additional benefit schemes and services that are offered by other government departments, devolved Administrations and local authorities. The Government will track the progress of AFIP and will report on its implementation in the Armed Forces covenant report towards the end of 2013.

It is important that we address these issues, meeting the principles at the heart of the covenant, and that is why we propose to bring in AFIP for members of the Armed Forces and veterans who are seriously injured. I hope that the Committee will therefore be happy to consider the order this afternoon.

Lord Rosser: My Lords, I thank the Minister for his comprehensive explanation of the background to, and purpose of, this order. We support the principle of the Armed Forces independence payment, which is to be paid to those who have been most seriously injured, as well as the order that we are now considering and the access to the three important passports, to which the Minister referred. However, there are one or two points on which I should like clarification.

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When the order was discussed in the other place earlier this month, the Minister of State, Mr Mark Francois, said that at the initial design stages of the Armed Forces independence payment, the Government sought feedback from ex-service organisations and charities via the Central Advisory Committee on Pensions and Compensation. He went on to say that the feedback received was valuable and helped to inform the final design of AFIP. However, paragraph 8 of the Explanatory Memorandum, which covers the consultation outcomes section, indicates a degree of division among the key ex-service organisations. It states that, while the organisations recommended change to only the eligibility criteria, they,

“disagreed with each other, some considering the eligibility criteria too narrow, others too broad”.

Therefore, I simply ask whether we are now in a situation where the ex-service organisations and service personnel have agreed on the eligibility criteria for the Armed Forces independence payment.

As the Minister said, the payment will be £134.40 a week, tax-free. As I do not think that it is in the documentation, can the noble Lord indicate how many seriously injured service and former service personnel are expected to receive AFIP, and how much more these personnel will receive each week with AFIP compared with the allowances or payments that they currently receive? Can he also indicate what the total additional cost per annum of AFIP will be compared with the cost per annum of the payments currently being made to the most seriously injured service and former service personnel in question?

However, I conclude by reiterating our support for the principle of the Armed Forces independence payment and for the order that we are now considering.

Lord Addington: My Lords, this is one of those situations where I think we are basically going to say, “We thank the Government for doing this but, there again, they should have done it”. There is a level of agreement flowing among us today from which I will not demur greatly. The only real question that I have is how we can learn from the simplicity and straightforwardness of this measure, and whether this can be borne in mind and fed back into the general benefits system. That would be very beneficial.

Also, as the noble Lord, Lord Rosser, said, a little more elucidation on the disagreement among the veterans and those with an interest in the order would probably help the House and all those outside. Although they come together to speak with one voice, they come from different angles and have a different approach. It would probably be beneficial for everybody who is interested in the covenant if we could have an explanation of how the argument is being constructed. Such an explanation is always useful because there is never one voice, even if we end up with one answer.

3.45 pm

Lord Young of Norwood Green: My Lords, I hesitate to come in on this as it is not normally an area in which I would intervene, but I declare a previous interest as an ex-member of the Armed Forces Pay Review Board. I have a couple of questions to ask the

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Minister. He gave the definition of “seriously injured” and then went on to say, “50% or more”. Did I understand correctly that that is what qualifies someone for this allowance? The thought occurred to me that, inevitably, it is a bit of a cliff-edge assessment. If someone got to 49.9% there could be a problem, although that may not be the case.

The other aspect that I am interested in is the fact that an impact assessment has not been prepared for this instrument. There might be a perfectly rational response to that but, given the complication and the way in which this interacts with other legislation, I should have thought that even if it is not available now, there should be an impact assessment at some time.

Lord Astor of Hever: My Lords, this has been an interesting, short debate on a matter of great importance to the Armed Forces. I have tried to keep up with all the questions but if I cannot answer all of them I will write to noble Lords.

First, I thank the noble Lord, Lord Rosser, for the Opposition’s support for the order. The first question was on eligibility. As far as I am aware, the four charities from which we have had responses still differ with each other on eligibility. I have the issues on which they disagree, which are not very serious. Rather than reading them all out, I am happy to share them with the noble Lord afterwards. There is nothing of major importance. One of the main issues was on the definition of “seriously injured” in relation to the disability.

The noble Lord, Lord Rosser, asked about the net additional cost of AFIP. It is £134.40 per week—the same level as the maximum rate available under the personal independence payment. He asked how many people will benefit from the arrangements. Approximately 700 individuals are currently eligible to claim AFIP and we estimate that approximately 100 service and ex-service personnel each year will become eligible for it.

My noble friend Lord Addington asked whether we will feed what we have learnt from this into the issue of general benefits. I do not have an answer but I will write to him on that. The noble Lord, Lord Young, asked why the figure of 50% was chosen. The Armed Forces Compensation Scheme awards a lifelong income stream of 50% or higher of income pension for serious injury.

Putting in place provision to ensure continued support for those seriously injured while in the Armed Forces remains a key component of the military covenant. AFIP is an important change, showing the Government’s commitment to upholding the Armed Forces covenant. It is only right that we provide financial support for those most seriously injured and AFIP will do that.

Lord Young of Norwood Green: I asked why no impact assessment had been done on this instrument.

Lord Astor of Hever: I do not have an immediate answer but I will write to the noble Lord.

Motion agreed.

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Renewable Heat Incentive Scheme (Amendment) Regulations 2013

Motion to Approve

3.51 pm

Moved By Baroness Verma

That the Grand Committee do report to the House that it has considered the Renewable Heat Incentive Scheme (Amendment) Regulations 2013.

Relevant document: 22nd Report from the Joint Committee on Statutory Instruments.

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma): My Lords, it gives me great pleasure to open the debate on the Renewable Heat Incentive Scheme (Amendment) Regulations 2013.

The renewable heat incentive scheme is a world first, designed to improve the way in which we use energy in the UK. Since the scheme was launched in November 2011, more than 1,700 applications have been received to date, with about £25 million-worth of RHI payments expected to be paid out in this financial year. Installations that have already been accredited into this scheme have generated 118 gigawatt hours of heat.

The RHI is essential if we are to meet the UK’s legally binding target, as set by the renewable energy directive, of 15% of our energy coming from renewables by 2020. Heat has an important part to play in achieving this target and we are aiming for 12% of our total heat demand to come from renewables, increasing from less than 2% before the RHI opened, by this date.

Through the scheme we will continue to reduce our greenhouse gas emissions and begin the journey that we need to make towards our goal of eliminating greenhouse gas emissions from our buildings by 2050. Renewable energy generation is essential to our economic growth and energy security. It reduces our reliance on imported fossil fuels and helps keep the lights on and our energy bills down.

The RHI scheme is administered by Ofgem and provides financial tariff-based support for commercial, public sector, industrial and community renewable heating installations for 20 years. It has already supported technologies and fuel uses, including solid biomass, solar thermal, ground and water source heat pumps, biogas combustion, energy from waste and the injection of biomethane into the grid.

We have seen participation in the scheme across small businesses, industry, the public sector and community projects. RHI support is being given to the Meikleour Trust, a Scottish estate that installed a 500-kilowatt thermal biomass boiler to supply heat via a district heating system to a range of buildings. In addition, the RHI is expected to generate £300,000 per year in support for Overbrook Farm in Derbyshire as it replaces its old petroleum gas systems with biomass boilers. However, the RHI goes wider than this and is supporting installations in schools, dairy farms and other major retail outlets across Great Britain such as Sainsbury’s, which has invested extensively in renewable heat, including biomass and ground source heat pumps.

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The RHI is funded by the taxpayer and must be financially sustainable. It must help to deliver renewable heat in the most cost-effective way. It must do so by avoiding rapid reductions to tariff levels, which can create market uncertainty and instability, neither of which will help us to achieve the goals that I have just outlined. We have learnt lessons from the feed-in tariff scheme in developing this current mechanism. It introduces flexible controls which will provide certainty to investors and, through it, we will see continued growth in renewable technologies, helping us to meet our renewables and carbon targets.

These regulations amend the Renewable Heat Incentive Scheme Regulations 2011. They will implement the outcome of a consultation, published last July, which sought views on the best way to control spending under the scheme until March 2015. The consultation attracted 100 responses from a wide range of stakeholders. The results are set out in the government response published on 27 February. More than 70% of respondents supported the proposed degression mechanism. The feedback on the design of the proposed degression has resulted in adjustments to the proposals that were set out, although the broad principles remain the same.

The regulations build on the foundations laid down for controlling spending introduced under the feed-in tariffs scheme, following the consultations that took place on that scheme in 2012. The framework for financial control of the renewable heat incentive scheme will therefore also be based on a system of degression. Degression is not a new word: it is used in economics to define a system which gradually reduces, by stages, a rate or specified sum. A system that sets out clearly how and when tariff levels may be reduced, and by how much, will undoubtedly provide greater certainty to the industry—and certainty is what industry tells us that it wants.

Let us also not underestimate the current level of public interest in how taxpayers’ money is spent. More than ever, we need to constrain spending within budgetary limits, and the regulations aim to do that. Simply put, degression will reduce existing tariff levels if uptake of renewable heat technologies is greater than we require to meet our renewables target. They will help to safeguard against the possibility of overspend and against the detrimental impact on the supply chain of a reduced budget next year that would be caused if we spent more than expected.

Last July, the Government introduced an interim, or stand-by, mechanism of budget control for the RHI while we developed a longer-term approach. Under the interim mechanism, the scheme would have been suspended had spending levels reached 97% of the budget limit, which in real terms meant if we had forecast spending to reach £67.9 million in 2012-13, against a budget of £70 million. The interim mechanism would therefore have temporarily closed the scheme’s doors to potential investors.

As it happens, the scheme was not suspended, with spending levels expected to reach £25 million during this financial year. Nevertheless, a more sustainable approach is needed to deliver the certainty to industry that I mentioned earlier.

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I will gladly hold up my hands and accept that the regulations are not at first glance simple to understand. If I may, I will therefore attempt to summarise the main features of the degression scheme. At its simplest, degression will mean that tariffs available to new applicants may be gradually reduced, but only if uptake of the various technologies supported under the RHI is greater than has been forecast. This will be done by monitoring uptake on a quarterly basis against a series of expenditure limits, listed in the schedule to the regulations, to which I will refer as triggers. The reason why I use this term is that if those limits are hit, they will trigger a fixed reduction to tariff levels. Monthly updates on progress towards all triggers will be published online so that stakeholders can readily access them, and one month’s notice will be given before any reductions are made to the tariffs for new applicants.

The key aspects of degression of which noble Lords should be aware are as follows. Those who are already in receipt of RHI support will not be affected by any future reduction to the tariff levels taking place as a result of degression. Applicants to the RHI scheme will receive existing, that is non-degressed, tariffs, if the date of accreditation for their installation, or date of registration for a biomethane producer, is before any new tariffs came into effect for the full 20 years.

The system includes a rule which means that degression will not be activated for a particular quarter—so tariffs will not be reduced—if total expenditure in any quarter is estimated to be equal to or lower than 50% of what we expected it to be at that point. In that way, the Government intend to avoid reducing tariff levels if only a few technologies are performing well and contributing towards heat targets. Where total expenditure is more than 50%, the regulations prescribe the assessment that government must make to determine whether degression has been activated, and whether any tariffs should be reduced and by how much.

4 pm

There are two types of trigger which apply: a total trigger and triggers for each technology supported by the scheme. All triggers are measured in pounds spent, as this goes to the very heart of what budget management looks to control.

The total trigger ensures that overall spending levels for the non-domestic scheme are protected. Fixed annual budgets, which cannot be exceeded, have already been set for the four years of this spending review period. The total trigger has been set based on the combined estimated uptake of all of the technologies supported by the non-domestic RHI scheme. It is the estimated cost of support needed for that part of the scheme’s contribution to the heat portion of the Government’s 2020 renewables target as set by the renewables directive. Monitoring uptake will take place on a quarterly basis, and the annual total trigger has been split into quarterly amounts which are shown in the schedule to these regulations.

The reason for having separate technology-specific triggers is to prevent one technology dominating the RHI market. If there were only a total trigger in place, market forces would ultimately determine which technology deployed well, which could easily force out

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technologies which have a role to play in the UK in the longer term. The Government wish to encourage uptake across all the technologies supported by the scheme, hence the need for technology triggers. Once again, these triggers, which are based on projected market uptake, have also been split into quarterly amounts as shown in the schedule to the regulations.

The tariff triggers—tariffs are for each technology and, in some cases, different sizes of the same technology—are based on the deployment levels that we were expecting when the scheme was launched, but have been increased by a proportionate amount above these levels. The Government’s intention is to build greater flexibility into the system, and this approach recognises that what happens in practice may differ from projections. This flexibility is possible because we also have the total trigger. The precise level of scaling for tariff triggers depends on expected levels of uptake. For most of the technologies where forecasts indicate good levels of potential uptake, triggers have been at levels that are 50% higher than these. Conversely, where uptake forecasts are low, triggers have been set at 5% of the value of the total trigger to ensure plenty of scope for deployment to increase without triggering degression.

It is vital that we avoid overreduction of tariffs, as this could easily undermine the renewable heat market. The level of reductions to individual tariffs will commence at a rate of 5% initially if the triggers are hit. However, the regulations allow reductions to increase by up to 20%. These higher levels would be needed only if any earlier reductions had not been successful in bringing deployment levels back into line with estimates. If the total trigger is also hit, tariffs for all technologies that are exceeding their estimated deployment levels will be reduced by a further 5%—I am sure noble Lords are all keeping up.

I should like to address other issues, which may go some way to answering some of the questions which noble Lords may have on aspects of the RHI scheme. I trust that this will smooth the way for a focused debate on the changes that the regulations introduce.

At the same time as consulting on proposals for budget management, the Government sought evidence on the link between uncertainty and deployment of renewable heat. They suggested a possible solution through enhanced preliminary accreditation, which is in essence a form of tariff guarantee. We have subsequently announced that we will not implement this proposal at this time but will continue to work with stakeholders to determine how greater certainty can be provided. The Government recognise that projects with long lead-in times will have greater uncertainty as to future tariff levels when investment decisions are taken, which in turn can affect the cost of project finance and viability of schemes. However, we have not yet identified cost-effective ways of managing the risks associated with tariff guarantees, which can be gamed, encouraging speculative applications and significantly increasing the cost of the scheme. We need to find ways of unlocking the investment needed at an acceptable cost to the public and we will therefore continue to work with industry throughout 2013 to achieve this.

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The Government have recently announced measures in two key areas: sustainability requirements for the use of solid biomass and biogas for heating, including air quality controls; and simplification of the current metering requirements.

On biomass sustainability, we will improve performance by introducing sustainability requirements for all existing and new installations using solid biomass as a feedstock. This means that to be eligible for the RHI, biomass installations of all sizes will be required to demonstrate, either through reporting or sourcing from an approved supplier, that their biomass meets greenhouse gas emissions criteria from April 2014 and land criteria from no later than April 2015. The standards will apply to existing RHI biomass installations and new applicants to the scheme. We have already announced this policy and intend to bring forward the regulatory amendments later in the year.

As well as ensuring that biomass fuel is sustainable, the Government want to ensure that the by-products of its combustion are controlled. Good air quality is vital to human health and the Government are committed to controlling emissions throughout the UK. Emissions limits will therefore apply to solid biomass installations, including combined heat and power installations which burn biomass. The limits will apply to all new installations accredited from the date the regulations come into force. Before these limits can be introduced, European state aid approval is required and the policy and compliance regime have to be published for a minimum period as part of the technical standards directive. Subject to approval, these requirements will be brought forward as draft regulations for debate by this House and in the other place as soon as the processes permit.

The Government will simplify metering requirements to introduce more flexibility and to avoid redundant meters being installed. This is designed to reduce costs to applicants and Ofgem without compromising on the accuracy of measuring heat. It is expected that the changes will come into force in autumn 2013.

It is important to improve and develop the RHI policy and its evidence base, learning from earlier implementation to keep delivery focused. The Government have therefore rightly consulted on expanding the non-domestic scheme and on introducing a domestic RHI to ensure that the market for renewable heat can grow further.

The Government will publish their response to earlier September consultations, Renewable Heat Incentive: Air to Water Heat Pumps and Energy from Waste and Renewable Heat Incentive: Expanding the Non Domestic Scheme, later this year and will be providing confirmation shortly about exactly when this will happen. The Government continue to welcome evidence on other suitable technologies which could be supported under the RHI.

Noble Lords may be aware that the Government announced earlier this year that they will be reviewing tariff levels across all technologies and plan to publish proposals in spring this year. This is in part due to calls received from stakeholders that the time may be right for such a review.

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The renewables market remains in its infancy and, since the Government launched the RHI scheme, fresh evidence continues to become available which rightly needs to be taken into account. In addition to the review of tariffs that will take place this year, the Government will also review the non-domestic RHI scheme and its tariffs in 2014 and 2017. Early parameters for these reviews were set out in the Government’s February response to the July 2012 consultation. The exact scope of this year’s review of tariffs will be refined in due course. Any changes to tariffs as a result of the review will be subject to Parliament and state aid approval, but it is the Government’s intention that, where tariffs increase as a result of this year’s review, installations accredited from 21 January 2013 will benefit from any increase once the new tariffs come into force.

I know that some noble Lords will have significant interest in the timetable for introducing a domestic RHI scheme. The Government published a detailed and wide-ranging consultation, which closed last December, and will make an announcement as soon as possible. It is imperative that the final proposals deliver cost-effective and sustainable support for a scheme that is, above all, operable. I am sure noble Lords can appreciate that, with more than 400 responses received, there have been a number of challenging and complex questions.

Lastly, but certainly not least, I wish to address an issue that may be on the minds of some noble Lords: that is, the scheme delivering on its intended aims. Let us not pretend for a moment that the targets we must achieve are anything but challenging, but it is right to challenge ourselves on such an important issue. The scheme itself is 16 months old and still in its infancy. Since November 2011, the application rate has been relatively steady and we are seeing accreditations across all technologies. Interest in the scheme is extensive, with Ofgem receiving more than 2,000 calls per month on average and more accreditations taking place than ever before.

I have already outlined how we strive continually to improve the scheme and how we have consulted on improvements and extensions. We are working towards achieving a significant increase in uptake to ensure that we remain firmly committed to meeting our 2020 target for renewable heat. The changes that I have set out apply to England, Wales and Scotland. There are complementary measures in place for Northern Ireland, which has its own RHI scheme. As required by the Energy Act 2008, consent to the regulations has been obtained from Scottish Ministers.

In concluding, the measures contained in these regulations are good for taxpayers—who pay for the RHI—and for investors in renewable heat technologies. The RHI must deliver renewable heat in the most cost-effective manner and the mechanism being introduced through these regulations will ensure that we have long-term budget management mechanisms in place which will provide clarity and assurance about how we will manage the budget. As I have said, the renewables market is in its infancy, and there is uncertainty about how it will develop and respond to the RHI. With improvements and extensions now under way, we plan

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to achieve a significant increase in uptake to ensure that we are on track to meet our 2020 target for renewable heat. I firmly believe that the RHI scheme will deliver on its objectives and I commend these regulations to the Committee.

Baroness Worthington: My Lords, in this freezing cold, it is nice to talk about heat being released. As for these regulations, if there was a competition for the most inscrutable, least easy-to-follow set of regulations, these would surely be a contender. Can anyone honestly say they have read all these documents and fully understood them? I have spoken to the trade association, the Renewable Energy Association, and its expert who tracks this in great detail said he finds it almost impossible to follow. What hope do the rest of us have? I shall endeavour to work out what is happening here.

The bigger picture is that these regulations broadly aim to introduce a system for what to do in the event of overspend, so that the department can manage its budgets. The RHI as a policy differs from the electricity market because funds made available for this support mechanism come from the public purse—the taxpayer—not via the market. Therefore, the Treasury takes a keen interest. I can understand that, and the desire to stay within budget is of course laudable. However, to what extent is this really necessary? These are hugely complicated regulations, which, I am afraid, potentially undermine investor certainty, despite what the Minister has said. How needed are they?

In reality, as the noble Baroness has indicated, this policy remains drastically underspent. If anything, we should concentrate on how to boost uptake, not worry about paranoid penny-pinching in the event of overspend. The operational budget under the cost control mechanism is around £70 million for the current financial year and estimates of committed spend are only around £25 million. That is slightly more than a third of the budget spent, so two-thirds are unspent. The curious fact about this policy is that any underspend simply returns to the Treasury. It is not carried over to help the industry, but simply disappears into the Treasury. It is not even clear if it will come back to the taxpayer; it is not good for the taxpayer, but good for the Treasury.

That £70 million is already a reduction on the estimated budget of £133 million that was first put forward, so this policy is not in danger of overdelivering and overspending, but of underdelivering. Our target for renewable heat is around 12% of heat. This, it is said, can make a contribution to our legally binding 15% renewable energy target in 2020. We are currently at only a few percentage points and starting from a very low base. Where do we currently stand on the percentage of heat coming from renewable sources, and are we getting any more on track? The last data that I saw for 2011 showed that we were already off our proposed trajectory.

4.15 pm

I am very pleased to hear about proposed reviews of the tariff levels, because it is only in those reviews that we can make adjustments to increase the tariffs.

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This statutory instrument is all about degression and reducing the tariff rates, but if we see that the policy as a whole is underdelivering, what are we going to do? How are we going to introduce more incentives or better target them? I should like some words of assurance that it will be through the review process that we address the current underdelivery.

The reason for degression is to prevent a stop-start market—again, a laudable aim—but the bigger picture is that the whole policy is stop-start. It runs out in 2015. Under the comprehensive spending review, the budget has been made available only until 1 April 2015. What happens after that? I should like reassurance that the scheme will continue and be open to new applicants. Otherwise, we are in danger of all this time and effort being spent on something that is completely stop-start and provides no certainty for investors. The proposals will introduce no fewer than eight degressionary reviews in the coming two years, but post-2015 there is no certainty about what happens next.

That is particularly important because it disadvantages larger projects, which have longer time horizons and planning periods. Those projects are the most cost-effective. I am thinking here of the larger-scale biomass schemes, which are much more cost-effective than some of the smaller ones, but they need time to plan. We already have only two years of visibility and certainty for the scheme. That must be addressed. The noble Baroness made some comments about being open to talk to the industry about that. I urge her to do that because it makes no sense to disadvantage the most cost-effective projects.

As the noble Baroness will know, the industry has proposed a solution of tariff guarantees, whereby you book your place on a tariff ahead and then have two years in which to get your scheme up and running. The industry feels that that is a fair system. It notes that it is already in use in the small-scale feed-in tariffs, so the Government have used that mechanism before. It is being considered for the CFD—the contracts for difference. Are the Government still considering that? The noble Baroness mentioned that she is talking to stakeholders, but could we have a little more detail on that proposal?

The SI contains two annexes which, compared to the rest of the document, are quite easy to understand, but are nevertheless very complicated. Annexe B sets out technology-specific budgets for when a degression trigger will be reached. Those are separate pots of cash for different types of technology but also for different scales of project.

I keep asking myself whether this level of disaggregation and micromanagement is necessary. I can understand why certain technology purveyors might want protection for their industry, but is it really necessary to separate biomass tariffs into two or three different levels? Once you get above a scale of, say, 100 kilowatts, and into the 100 kilowatt to 1 megawatt band, the same suppliers are involved. Can we have less micromanagement and slightly more aggregation, please? It always makes me smile when I hear a Conservative Minister talking about how market-led forces are not a good thing. We

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should be embracing the market and listening to what it tells us. That is a way to get to a good, cost-competitive system.

I am especially concerned about the splitting up of cash, because it is all based on models. We all know that models cannot predict the future; they are at best a guess of what will happen. Already, we have evidence that those models are out of step with reality. It was predicted that biomass would take up to half of the budget but so far it has taken 92%. Heat pumps were predicted to take up to one-third of the budget; they have taken only 1% of it. The modelling was an attempt to guess what would happen with very little information, starting with almost nothing, and obviously got it wrong. The way in which people are responding to the system is not as predicted. Yet we have rigid budgets—per technology, per scale of technology—that seem to be out of step with reality.

I should like some reassurances that we will perhaps move away from this micromanagement and heavy-handed, very complicated regulatory process to something more akin to a market-based system. That has to be the future and I want to hear more about how we will get there. Some concessions have been made on the workability of the proposals. An important one is that if the overall market is underperforming by more than a half it will not be degressed. If we carry on with the woeful underspend that we have at the moment there will be no degressions. That is welcome but the 50% cut-off is probably too low. I say that because there is a plausible scenario in which a certain technology could be degressed even with a very large underspend. I can give an example of small biomass. Small-scale biomass has been more successful than we thought; it has taken up more of the budget to date. If the same number of new small biomass boilers as we accredited this year are accredited next year, that new money, plus the legacy money, will exceed its degressionary trigger. That will be a success and will just about take the underspend over the 50% threshold. There is the situation in which one very successful deployment seems to make the whole scheme succeed, even though it is just over half in terms of spending, and then it has a degression. That is crazy; we are capping the one thing that is helping to deliver on targets at a point when we need to be boosting uptakes. I want to hear more from the Minister about how to prevent these perverse effects.

I shall say a few words on the RHI in general. It is a good scheme and we support it. There is no doubt that it could provide credibly cost-efficient sources of carbon reduction and boost jobs and investment into the UK which are much needed. I was going to talk a little about trying to compare the costs of the RHI with other support mechanisms because it bears good comparison. On offshore wind, we are preparing to spend in excess of £150 or £180 per tonne of carbon abated. That seems a lot but it is a very important industry. I mention that very high number because when we look at the costs per CO2 tonne abated in the RHI, it compares incredibly favourably. When looking at large biomass projects of more than a megawatt, the costs per tonne abated—this is based on assumptions that it is displacing gas—are as low as £30 per tonne of CO2. That is to be celebrated. We should be putting

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more money into that. Even when we reduce to medium-scale biomass projects, it comes in at around £120 per tonne of CO2. That is pretty comparable to the cost of carbon abated by offshore wind.

Those are the sorts of things that we should be celebrating, which raises an important question. When we focus on the minutiae of this statutory instrument and the cost savings and penny-pinching, are we missing the bigger picture? We have a fledgling industry showing that it can start to make progress. It needs support but it will not need support for ever. Carbon prices will eventually mean that it can stand on its own two feet, but at the moment it needs support. Where is the flexibility in the Government’s thinking, by saying, “Hey, you know what, this is a winner? These technologies are delivering and we need to be thinking about giving them more money, not trying to penny-pinch and pulling money away from them, because they are succeeding”? I know that everyone has had their fingers burned with PV. Everyone knows that by the time it was introduced things had moved on and prices had crashed. We do not want a repeat of that, but are we now in danger of overkill in the sense of overreaction to an industry that will deliver good benefits into the future?

I shall not delay the Committee for too long but I have a couple of points to end on. I am encouraged to hear that we are to get some clarity on the domestic scheme. That is very important. The Minister said that it would happen “as soon as possible” but if we could have a more exact timeline, that would be helpful.

In all this, we need to look again at liquid biofuels. I know that they are currently excluded but I see no reason why they should be. Displacing oil with liquid biofuels would be very good and cost-effective, especially if you could simply reuse the existing infrastructure, displacing oil with oil. That has to be cost-effective and the carbon intensity gain would be so much better. Therefore, I should like to hear something about that.

I shall leave matters there and simply say that the Treasury is obviously very keen to make sure that we do not overspend. However, in this case, it seems that it is making quite a bit of money out of this system, and this SI seems to focus on entirely the wrong end of the problem. We have an underspend, not an overspend, problem and I should like the great minds of the Treasury to be applied to how we can hit our targets rather than constantly fretting about what, in the grand scheme of things, is a very small amount of money.

Baroness Verma: My Lords, I am pleased that the noble Baroness was able to follow very closely what I must admit was a very complex issue. She has raised a number of questions. I shall attempt to answer as many as I can but, if I fail to answer them all, we will write to her.

The noble Baroness must accept that this Government have been prepared to look at what is good for both consumers and the industry. That is why these reviews are important. I make no apologies for the fact that if in my own role in the department I feel that something

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needs to be revisited, I am very happy to do so. With these technologies being in their infancy, it is only right that we go over the issues. I am not dogmatic in my approach and would rather review a matter several times to get it right.

Perhaps the noble Baroness slightly missed the point that this Government are incredibly supportive of renewables being part of our energy mix. I have stood at the Dispatch Box on several occasions and have said that it is very important for our energy security that we have a range of energy mixes.

I shall attempt to respond to some of the questions that the noble Baroness raised. She must recognise that when we are using taxpayers’ money, we need the right balance between certainty, value for money and clarity for investment, and we need to respond to the market. We do not want to disadvantage any technology in the scheme of things, so when the noble Baroness says that we have many triggers for degression, it is also important to see that some technologies have reached a further stage of development than others. We do not want to exclude or disadvantage some of those that will have a longer lead time. Therefore, it may well be that there are a lot of triggers for a range of technologies, but I would rather be in that position at the moment than to disadvantage any technology that may need a longer lead time.

The noble Baroness asked why the number of applications was so low. I think that is an unfair comment. By and large, take-up has been relatively steady. Applications for non-domestic RHI may appear low but a greater interest is beginning to be shown. It is right that we address the issues behind the low take-up, and therefore this engagement with industry and other stakeholders is really important. I absolutely agree with the noble Baroness that that is crucial to the debate but she also asked whether degression would put investors off. I absolutely think that it will not. Adopting such measures places much greater certainty in the hands of investors. We have learnt from other schemes not to repeat those mistakes again. We have tried to put mechanisms into place that support the longer-term aim of what we are trying to deliver. Of course, we still have plenty of learning to do. There is no doubt that we have to put our hands up to the fact that we may not have got it exactly right, but at least we are going in the right direction.

4.30 pm

Baroness Worthington: I do not dispute that. Having some clarity is important for investors, but these are incredibly complicated proposals. Investors are simple folk. They want a clear plan and to know how much money they will get in return. In this system quite a lot of risks are involved. They have to carry the costs of all the preparatory work before they receive their money from Ofgem and if a policy cannot be explained in a few minutes, investors will get bored and go elsewhere. That is my concern.

Baroness Verma: I very much take that point on board. Much of where we have reached has come from talking to industry and stakeholders, so they are part of the journey towards making these recommendations.

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So, point taken, but some of these things are incredibly complicated. However one tries to simplify them, they will still have a degree of complexity about them.

The noble Baroness asked why budget management was necessary. There is a degree of uncertainty about how the market will respond over time, so it is right to be prepared for unexpected changes in the uptake that may arise. The noble Baroness also raised the point that budgets are not flexible, and spending less than the allocated budget in one year does not permit that underspend to be transferred to future years. It is about balancing what we need to do—which is in line with what the Treasury expects us to do—with ensuring that, as we hope, the uptake will not lead to as big an underspend as in the past, given that we are putting in place these mechanisms to encourage better uptake.

The noble Baroness asked what will happen after 2015. The Government’s policy on this was published in February in response to the July consultation and was cleared across all government departments. It will remain open to new applicants until 2020. The spending review commencing in June will provide a chance to set the scheme’s budget beyond 2014-15. The noble Baroness asked about booking tariffs and guarantees and referred to the EPA. We do not propose to bring forward the EPA at this time, but recognise that there are arguments for introducing measures to improve certainty, even though these can be difficult to evidence. We intend to monitor the introduction of degression and other planned improvements to the scheme. We will continue to work with industry and stakeholders to improve our evidence base, then see what other options may be available to us.

The noble Baroness asked about biomass. It is true that biomass accounts for the majority of the applications and accreditations on this scheme. However, we want to see more deployment across a fuller range of technologies supported by the scheme. This is why we continually review the scope, so that—as I said before—we do not exclude some of the technologies that have longer lead-in times or are still at early development stages.

I must respond to two more questions. The noble Baroness asked why the mechanism was necessary. It has been supported by 77% of the respondents we spoke to as being the most appropriate mechanism. As I said, they are on side with us. I completely understand the complexity of it, but we need to be able to provide them with clarity and they are supportive, so I think we are in the right space. Needless to say, that does not mean there is no room for improvement.

The noble Baroness also asked why it is necessary to separate the tariffs. I touched on that. There are different technologies and different tariffs. That is important and it is to ensure that one technology does not have an undue advantage over other technologies.

The noble Baroness rightly asked questions about the complexity of the scheme; we do not underestimate that. However, I hope that the regulations debated today will ensure that RHI continues to drive forward renewable heat deployment, which is what we all want, and is the most cost-effective way of doing so for the taxpayer. I have taken on board many of the points

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made by the noble Baroness; I shall read

Hansard

carefully to see whether there are any that I have missed. None the less, I hope that I have her support in commending the regulations to the Committee.

Baroness Worthington: My Lords, I thank the Minister for her responses. I am very impressed. I asked a lot of questions and I think she covered most of them, although there are a few outstanding, particularly on liquid biofuels and associated things. However, she acknowledged the complexity of the main matter before us and argued the need to provide certainty around the technologies. That is fine in the early stages but at some point we have to start backing winners. The targets that have been set for us are challenging. There is only so long that you can flog a dead horse. There are some technologies which, for whatever reason it may be—be it non-market barriers or there being no appetite for them—you just cannot get deployed, whereas there are others which seem to hit a sweet spot, where there are lots of reasons why people like them and, suddenly, off they go. Those are the things that you can build a business around. They can give you great potential for investment and, one hopes, lead to exports. It is great that we are trying to nurture as many technologies as possible, but that cannot be the case for ever. These reviews are important but, please, let us not have too many of them. A good, solid review after a certain time is the right way forward. Let us try to get back on track.

Perhaps the Minister could write to me on how we are doing in terms of our trajectory. I worry that, while we have this very slow start, we will have to go into a very steep curve to reach that 12% target and that discussions with the Treasury will become ever more difficult. If the Minister could let us know how we are doing, that would be great.

Motion agreed.

CRC Energy Efficiency Scheme Order 2013

Motion to Approve

4.38 pm

Moved By Baroness Verma

That the Grand Committee do report to the House that it has considered the CRC Energy Efficiency Scheme Order 2013.

Relevant document: 22nd Report from the Joint Committee on Statutory Instruments.

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma): My Lords, the coalition Government are committed to improving the take-up of energy efficiency measures across the economy. It is a truism that the cheapest energy is the energy that we do not need to use. Energy efficiency improves our energy security, reduces carbon emissions and improves UK competitiveness.

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The CRC energy efficiency scheme, formerly known as the carbon reduction commitment, was one of the few energy efficiency policies put in place by the previous Administration. The aspiration of incentivising large users of energy across the public and private sectors to be more energy-efficient is one that we share, but we inherited an overly complex regulatory system.

The regulations before the Committee today are the product of an extensive dialogue with CRC participants on how best to retain the key drivers of the scheme while making it less of a bureaucratic burden. I am pleased that we have managed to more than halve the bureaucracy in the scheme. The CRC is a mandatory UK-wide trading scheme introduced in April 2010. The 2,700 large businesses and public sector organisations in the scheme represent around 10% of the UK’s total greenhouse emissions and typically spend more than £500,000 a year on electricity.

We listened to the concerns set out for us by CRC participants. Those concerns fell into three broad categories: that the rules of the CRC were too complex, difficult to understand and costly for participants to administer; that the CRC overlapped with other policies and, in particular, with the EU emissions trading system and climate change agreements; and that the CRC forced organisations to participate in ways which did not accommodate their natural business energy management structures and processes.

Having listened to those representations, we acted, and in July 2010 committed to simplify the scheme. We swiftly introduced a first round of legislative simplification, which came into force in April 2011, and committed to consult thoroughly on how to improve the scheme. The extensive formal and informal consultation by Ministers and officials has led to the order before your Lordships today. The Government set out their policy conclusions, which will be enacted by this order, in their response to the consultation published on 10 December 2012.

Our changes to the CRC address concerns about complexity and associated administrative costs, enable greater business planning by introducing two fixed-price sales of allowances each year, one forecast and one retrospective, and allow greater flexibility for organisations to participate in natural business units—that is, to reflect the way they choose to organise themselves. They also reduce the reporting burden by reducing the number of fuels reported, using only electricity measured by settled half-hourly meters for qualification purposes, and ending the requirement for footprint reports. They reduce scheme complexity by removing the residual percentage rule and climate change agreement exemption rules, and they reduce the overlap with other schemes so that input fuels to CCA facilities and EU emissions trading system installations are outside the scope of the CRC.

It is also important to note that maintaining the qualification threshold at 6,000 megawatt hours of settled half-hourly metered electricity only, instead of all half-hourly meters under the current scheme, will see the number of participants reduce by around 1,000

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to 1,700. However, the overall impact of the simplification changes is only a small decrease—less than 5% of emissions coverage within the CRC scheme.

The majority of our changes will be introduced at the start of phase 2 of the CRC in April 2014. However, the Government are keen to maximise the potential benefit to participants and have concluded that it would be desirable to bring forward certain simplifications in advance of the beginning of phase 2, where the benefits of early introduction for participants will outweigh any difficulty in adapting to the new rules.

The Government have therefore decided that a number of simplifications will have effect from May 2013 and will apply for the last two years of the first phase of the CRC—that is, 2012-13 and 2013-14. These include a reduction in fuels from 29 to two. The CRC will now cover only emissions generated from the consumption of electricity and gas, the latter only when used for heating purposes. They also include the introduction of an organisation-wide 2% de mimimis, or minimum reportable percentage, threshold for gas. Therefore, if from 2012-13 a participant’s gas consumption is below 2% of their overall electricity consumption figure, that participant will no longer have to report on that gas or purchase allowances to cover its use. Also included is a meter-based exclusion for domestic gas supplies which have an annual quantity of 73,200 kilowatt hours or less, and an extension of the CRC allowance surrender deadline from the end of July to the end of October. The changes also include the abolition of the performance league table with the CRC administrator, the Environment Agency, and publishing participants’ aggregated energy use and emissions data instead.

Our assessment is that all these simplifications will radically reduce the administrative costs of participants by more than half, which equates to savings of around £272 million for CRC participants up to 2030. The Government are therefore satisfied that this order meets our objectives for simplification—namely, to optimise the projected energy efficiency improvements delivered by the CRC and to reduce its overall complexity. The simplified CRC will continue to deliver energy efficiency and carbon savings but at a significantly reduced administrative cost.

The Government have already committed to keep a close eye on the operation of the CRC and will review it in 2016. We will continue to monitor both its impact and the compliance costs of CRC participants so that our 2016 review is fully informed on both its impact and costs.

As the CRC is a UK-wide energy efficiency scheme, in addition to this order being laid before the UK Parliament it is also being laid and debated in the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. If the order is approved by your Lordships’ House and the other place, the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly, a recommendation will be made to Her Majesty in Council to make the order in a subsequent meeting of the Privy Council. We envisage this being completed before the summer. I commend the order to the Committee.

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Lord Grantchester: My Lords, I thank the Minister for her introduction to the order. I am glad that I am speaking to the simplified order in contrast to the prior order, and I hope that the Committee will not be detained very long.

The order coincides with the retirement of the government Chief Scientific Adviser, Professor Beddington. He argues that the evidence for climate change is unequivocal. The order implements the regulations to improve energy efficiency in organisations that are consumers of large amounts of electricity and, by improving energy efficiency, to reduce carbon emissions. The carbon reduction commitment scheme is the key driver for the UK to meet its domestic and international greenhouse emissions reduction targets. The climate change levy part of the policy instrument is levied on nearly all businesses that use electricity and gas.

The Minister has explained the over-burdensome nature of the original CRC order.

4.47 pm

Sitting suspended for a Division in the House.

4.57 pm

Lord Grantchester: The Minister explained the over-burdensome nature of the original CRC order and we agree with her. This simplified scheme is to be applauded, although there are a few concerns about the reduction of benefits as a consequence. Nevertheless, it is right that the Government proceed with the scheme. Despite cost-effective energy efficiency savings being available, the Carbon Trust reported as far back as 2005 that organisations’ emissions were not being reduced. Indeed, they have remained constant for the past 20 years, due to a lack of awareness at board and senior management level, a lack of financial incentives to reduce emissions and a lack of prestige associated with efficiency activity.

Generally, energy costs tend to be only 1% or 2% of operating costs for business. While I can confirm acceptance of the order today, I want to ask the Minister about one or two concerns arising from this simplified scheme. Since the scheme began in 2010, it has drawn considerable criticism for being too complex, burdensome, difficult to understand and costly to administer. It is good that the Government are bringing in a more practical scheme, but has something been lost in the translation?

While the memorandum explains that considerable savings will be made—a 55% reduction in overall administrative costs—it does not explain what percentage reduction in efficiency improvements and carbon emission reductions may result from the simplification. For example, it says that there is a reduction in fuels from 29 to two and that the scheme will cover only emissions generated from the consumption of electricity and gas. This is still important, but will the Minister confirm that the scheme will still capture a major percentage of the efficiency improvements targeted by the original scheme?

On this benefits side of the equation, there is a loss from the original scope of the order. The impact assessment puts this at around £183 million. The Secondary Legislation

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Scrutiny Committee also commented on this in its 33rd report. It is not clear from the Minister’s department’s reply to the questioning on the validity of the order, when set against such loss of benefits, whether this is due to double counting of benefits as a result of reducing the overlaps between CCL, CCA and EU ETS instruments. Will the noble Baroness explain whether this loss of benefit is per phase or a loss for the total scheme to 2039?

5 pm

This also seems to contradict another assessment in the memorandum that there is no significant change in the impact on simplification measures. I should be grateful if the Minister could clarify the impact of the loss of benefits and the effect that that will have on our carbon emission reductions. The memorandum also explained that in December 2010, when the impact assessment was published, the devolved Administrations’ decision to retain the schools CRC scheme participation was still pending. In February this year—last month—all devolved Administrations confirmed that their schools would continue to participate in the CRC scheme and that only English schools would be withdrawn from it. Will the Minister explain the rationale behind this decision to withdraw English schools, and the difference or added benefits that that will bring? I understand that the memorandum talks of it having an effect on the revision of the baseline of the CRC. That I well understand, but will it lead to any difference between the energy efficiency of English and devolved Administration schools?

Overall, the necessity and benefits of the CRC scheme are well recognised and supported by respondents to the consultations. I confirm agreement to the order and look forward to its start in May this year.

Lord Deben: My Lords, I declare an interest as chairman of the Climate Change Committee. I am pleased that we are looking to make such arrangements as simple as they can be. One of the most important things that we have to do is ensure that this very important business of making Britain able to meet the statutory target of an 80% reduction in emissions by 2050 is accomplished with as little harassment and difficulty as possible. When the original scheme was introduced, I criticised it because of its complication. We now all agree that it would have been better to make it less complex, but it was an important step that I am not undermining in any way.

I have a particular question for the Minister, the answer to which I found hard to discover in the documentation. It is about the half-hour meter. This is a boring technicality but it is very important. For reasons that no one has ever understood, the original system depended not just on the amount of energy used but also on whether one had a half-hour meter. The difficulty is that many firms with a half-hour meter use less energy than firms without a half-hour meter. More importantly, there is a competitive problem. Some companies that have them—restaurants, for example—are competing with other companies that do not. One is paying and the other is not. It may be my own ignorance and inability, but I have been

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unable to discover whether the new CRC Energy Efficiency Scheme Order will overcome this problem. I was promised by the then Minister in the House of Commons that this would be put right “when the opportunity arose”, which I think was the phrase used. I should very much like to understand whether that comes into the purview of this order, and if not, why not. Will we now put this right? With a Government who are very committed to competitiveness, it would be sad if this quirk in the system should continue to make things difficult.

Let me explain why I feel strongly about this. There are many organisations which, in the aggregate, meet the requirements of the CRC. It was very important to have an aggregated system, because, if we had not, we would not have reached out. I congratulate the former Government on recognising that, for example, franchisees had to be part of the system, otherwise there would have been a major disadvantage for other companies which were not so organised. However, the difficulty is that some franchised organisations have a clear advantage over others because of the half-hourly meter arrangement. I shall say something that I hope the Minister will not be upset about. When I inquired into this matter previously, it became quite clear that the only reason for it was none of the reasons which Ministers of both sides have proposed; it was just administrative convenience. It happens to be true that people think that this is a convenient way of doing it rather than the right way of doing it. I do not want to make it more complicated—nor do I want to get into names of particular companies—but I can think of two restaurant chains, one of which pays the CRC and the other does not, yet their customers and turnover in many of their individual restaurants are very similar. That does not seem to me something that we should allow in this structure. Therefore, I hope that the Minister will be able to reassure me that, under these arrangements, the half-hourly meter element will be removed and that we will go to a much more sensible system, which is a proper, basic amount of energy used on this narrower basis of gas and electricity. It would be de minimis arrangement, but one which did not discriminate between organisations.

Baroness Verma: My Lords, I welcome noble Lords’ support for the order. Whereas the previous order was very complex, I am pleased to say that I am bringing balance to the debate by trying to make this measure simpler. We have tried, through engagement with stakeholders, to ensure that we have much better informed and not excessively burdensome regulation for industry. We are trying to make sure that there is a reason to use CRC as a means of reducing carbon emissions.

The noble Lord, Lord Grantchester, asked a couple of very poignant questions, so I shall respond first to those and then go to those of my noble friend. The noble Lord asked why schools in England had been removed from the CRC. Due to the continued growth of academies and their independence from local government, the CRC is not the best mechanism to achieve energy efficiency across the English schools estate. The Government therefore decided to withdraw all state-funded schools in England from CRC participation and implement alternative measures to incentivise and support those schools in obtaining

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both energy cost and emission savings. However, that does not mean that schools will not partake; it just means that they will take a different route.

The noble Lord asked whether the benefits of the scheme would be reduced. The loss of emissions coverage is very small, being less than 5%. The key drivers—awareness, publication of data and the financial incentives arising from needing to buy allowances—will still be part of the scheme. As I said in the previous debate, we want continually to review what we are doing so that we get the best outcomes from these measures.

My noble friend Lord Deben asked about half-hourly metering. I welcome his support for the order and thank him for it. If the Committee will allow me, I shall take away my noble friend’s question and perhaps give him a much more detailed response—I shall ensure that the opposition Benches also have a copy. If I was to give him a half-hearted response now, it would not satisfy the Committee and certainly not my noble friend.

Overall, I am pleased that noble Lords have seen the benefits of simplification and the fact that it will reduce administrative costs to industry by quite a large sum. It also allows greater flexibility for industry to organise its own businesses as it sees fit. I welcome the support of noble Lords and commend the order to the Committee.

Motion agreed.

Companies Act 2006 (Amendment of Part 18) Regulations 2013

Motion to Approve

5.11 pm

Moved by Viscount Younger of Leckie

That the Grand Committee do report to the House that it has considered the Companies Act 2006 (Amendment of Part 18) Regulations 2013.

Relevant document: 22nd Report from the Joint Committee on Statutory Instruments

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie): My Lords, the purpose of the regulations is to facilitate employee ownership by simplifying company law in the area of share buy-backs.

The independent Nuttall review of July last year set out the economic and social benefits of employee ownership, including improved business performance, increased economic resilience and greater employee engagement and commitment. The review also made a series of recommendations to the Government about how to increase the uptake of employee ownership in the private sector and what barriers needed to be removed to enable that.

One of Graeme Nuttall’s conclusions was that the company law provisions on share buy-backs are overly burdensome. The Nuttall review recommended that the Government consult on improving the operation of internal share markets to support companies with

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direct share ownership models. Companies that wish to encourage their employees to hold shares directly—that is, without the use of a trust—will often seek to buy back shares from employees who are leaving, or have left, the company to redistribute them to new employees. That allows the company to avoid the risks that, over time, shares earmarked for allocation to employees become predominately owned by former employees or others outside the company. Buy-back arrangements will depend on the departing shareholder, the seller, and the company, the buyer, mutually agreeing a price, inter alia. Once a buy-back is agreed, companies must comply with a number of company law provisions that regulate the process.

Having accepted this recommendation to examine company law about buy-backs, the Government held a consultation to obtain views and evidence on: the extent to which company law rules on buy-backs are an impediment to employee ownership; changes to the rules on the authorisation and financing of share buy- backs; the holding of shares in treasury; and potential problems or unintended consequences.

The regulations for the Committee’s consideration contain provisions that address the concerns raised in the consultation by reducing the administrative burden faced by companies when administering share buy-backs; increasing the flexibility available to companies in how they fund share buy-backs; and allowing companies to select the most suitable arrangements for their particular needs. Specifically, the proposals will, first, allow shareholders in any company to approve off-market share buy-backs by an ordinary resolution—that is, by a simple majority vote—and, where such buy-backs are connected with an employee share scheme, allow for approval to be granted in advance. This will reduce the need for multiple resolutions, saving companies both time and money.

5.15 pm

Secondly, the proposals will give greater freedom for private limited companies, so that they can, if the seller agrees, pay in instalments for the shares that they buy back in connection with an employee share scheme, but we do not foresee that that option will be used frequently.

Thirdly, the proposals will make it simpler for private limited companies to finance share buy-backs for employee share schemes out of capital, using a solvency statement and a special resolution. That removes onerous requirements such as an auditor’s report and for a notice to be placed in the London Gazette. Experience elsewhere in company law has shown that that works well.

Fourthly, the proposals will enable shareholders to authorise directors of private limited companies to pay for shares out of cash without having to identify it as distributable reserves. That will allow small share purchases of less than £15,000, or equivalent to less than 5% of share capital, whichever is lower, each year. That will give private companies greater flexibility in how they fund buy-backs.

Lastly, the proposals allow all companies limited by shares to be able to hold them in treasury so that they may be issued to new employees or share scheme

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joiners. At the moment when a private limited company or unlisted public company buys back shares, the shares have to be cancelled. The company must then get shareholder approval if it wants to create new shares to issue to new employees.

Let me remind the Committee of the key benefits of the regulations. Reducing administrative burdens and increasing flexibility as to how share buy-backs may be conducted will reduce the disincentives to adopting employee ownership and ultimately contribute towards making employee ownership more attractive and thus more widespread in the economy. This in turn will help growth.

Given the economic and social benefits of employee ownership, such as a happier workforce, less staff turnover and higher productivity and profitability, that is something that we should all welcome.

The proposals are purely enabling and impose no costs on business, and the familiarisation costs are likely to be small. There are no legal pitfalls associated with the measures. Key regulatory protections will remain. Those include directors’ duties and the ability of shareholders to alter a company’s articles of association to prevent or set conditions on share buy-backs. In addition, most of the changes require specific shareholder approval. I commend the regulations to the Committee.

Lord Stevenson of Balmacara: My Lords, how we are changed from the heady days of only a few days ago when we were in the Chamber debating the ERR Bill and voting on this and that, to be reduced to only three people here for this purpose, although two seem to have drifted in for other reasons, and we are outnumbered by those in the Box. That is the reality of so much of the work that we do here, which is of course of very good quality and great importance but does not reach the heights of some of the other things that we do.

The Nuttall report is interesting. As the Minister said, it argues forcefully for an increase in the employee share ownership arrangements and makes its case with some verve. It is, however, short on detail on costs. The Minister kindly said that he thought that the outcome of what is in this modest proposal, to which I do not object, by the way, is that administrative burdens would be reduced, there would be more flexibility inside companies to provide shares for employees and that it would help growth.

Can the Minister explain how he arrives at that conclusion, because the impact assessment statement which accompanied the measure, which I have read, contains remarkably little about the costs? The assertion made early on is that there is simply no way to identify the various costs one way or the other. I do not disagree that it would be difficult, but it does seems rather odd to base an argument on the benefits that will flow to businesses if you cannot identify them in cash terms. Perhaps the Minister can reflect on that point and give me any update that he may have received.

Secondly, I note that the intention is that there will be a post-implementation review three years after enactment. Paragraph 56 of the government response to consultation, on pages 15 and 16, covers the issues

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and explains what areas will be looked at. Once again, it does not come up with anything tangible in cash terms. It just states that the review,

“will also look at any available evidence of monetised or non-monetised costs or benefits from the changes that have been made”.

Again, I would be grateful if the Minister would reflect on whether the post-implementation review goes far enough. It would be helpful, when government measures of this nature are being brought forward which strike at the heart of the legal structure within which companies operate, if some cost consequences were provided.

My third point is on whether this will achieve any lasting value. The general view that I have read in the comments about the Nuttall review is that it may have some effect but, as the impact assessment states, there are unlikely to be many benefits from employee ownership if it is not combined with enhanced engagement practices to reap the full benefits. There is a lot of literature that says that this should do a lot. The Minister said that he thought that staff would be happier, that turnover might be up and profitability greater. I am not saying that I am sceptical, but it would be interesting to know on what he bases that argument. Clearly, none of that will happen if more work is not done to introduce the benefits of employee ownership. Can the Minister explain what the department and the Government are doing to promote employee share ownership more widely so that people are happier, that turnover goes up and profitability is increased?

My final point is that employee share ownership affects significant tax issues. The Minister did not mention that, partly because it is obviously not for his department. However, for example, tax rules say that where a company buys back shares from a former employee within five years of that employee leaving, all the income paid to the person who is leaving has to be taxed as though it is a dividend. Is that to continue? If it does not change, it does not seem that there is much benefit in making sure that the shares of a former employee are bought back, whether or not it is done with sequential permissions under the articles. If the tax is going to be so great that no one is interested in doing it, it seems that that will vitiate what is being applied. However, there are ways around that in the sense that the scheme that seems to apply most to companies in this area is the creation of employee share ownership trusts, because sales to the trusts are taxed only as capital gains and, in the present environment, that is quite reasonable.

All those issues are ignored in this report. Therefore, as I said, my final point concerning tax is that it would be helpful if, in carrying out the post-implementation review, an additional point could be made that the taxation implications should be considered, perhaps with a view to looking again more widely at the whole way in which employee share ownership taxation takes place. If one could correct that, I think that there would be more take-up of the scheme and it would have an impact. However, until that time, it will not have much effect.

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Viscount Younger of Leckie: My Lords, first, I thank the noble Lord, Lord Stevenson, for his earlier comments. I hope that this will be a short sitting, in marked contrast to the rather livelier sittings that we experienced in the main Chamber together last week. I also thank him for his comments and questions about this issue. Just to reassure him, where concerns have been expressed, we will keep matters under review and evaluate them at the time of the post-implementation review. This will include implications for taxation, which is an important point raised by the noble Lord, Lord Stevenson.

While the regulations have merit in themselves, they are part of a wider package of measures that implement the recommendations of the Nuttall review of employee share ownership. They simplify the company law provisions on the buy-back of a company’s own shares in a manner which reduces administrative burdens and increases the flexibility available to companies to administer and finance buy-backs in a way that best suits their needs. The proposals in the regulations were endorsed and enhanced by the consultation process, and, as I mentioned earlier, are mainly targeted at private limited companies that undertake buy-backs pursuant to, or for the purposes of, an employee share scheme. The measures are not only deregulatory but enabling.

Picking up the point about costs raised by the noble Lord, Lord Stevenson, he may be reassured that the independent Regulatory Policy Committee, the RPC, confirmed that these changes are deregulatory and impose little or no cost to business. Having said that there are no costs to Government from the measures, I can make no other substantive comments on costs, but it may help the noble Lord if I also mention the question of savings. It is not possible to quantify the potential savings to business, as these will vary greatly depending on a range of factors, including the size of the business, the scale of the share scheme and the quantity of the shares bought back over a given period of time.

For example, a company which has several buy-backs during the course of a year could benefit from being able to approve these buy-backs in advance, rather than having to focus on approval each time the buy-back is effected individually. I regret that it is not as yet possible to quantify this.

Lord Viscount Stevenson of Balmacara: I am sorry to press the noble Viscount on this, but I remind him that paragraph 18 of the impact assessment states:

“In the current consultation … an attempt has not been made to monetise any of the costs and benefits associated with the policy”.

This is an alarming point. If this is going to be standard practice for the department, what is the department there for? These are not major changes. I accept the Minister’s point that everybody seems to welcome them, but some evaluation of what they cost and of the benefits would have been helpful. The impact assessment goes on to state:

“The intention is to utilise the consultation period as an opportunity to obtain further information from stakeholders”.

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However, the report from the consultation states that it was not possible to obtain any information on costs or benefits from the consultation. One has to ask: what sort of consultation was that?

Viscount Younger of Leckie: The noble Lord makes a fair point, but it remains the fact that there are no costs to define or describe. It was looked at in great detail. However, given that the noble Lord has raised the issue twice, if I can produce further information to satisfy him, I will certainly do so in a letter.

The noble Lord, Lord Stevenson, also asked what else the Department for Business, Innovation and Skills is doing to promote employee ownership. There has been much discussion in the Chamber about this matter. BIS is developing a programme of work, overseen by my honourable friend in the other place, Jo Swinson, including developing model articles for employee ownership of companies. To respond to the question raised by the noble Lord, Lord Stevenson, about the tax implications, I can also confirm that work is ongoing on capital gains tax relief. I will be pleased to write to him with further details—in the same letter, I hope, rather than in a separate one. Further questions were raised and I will be more than delighted to round them up afterwards and be sure that there is a full response to the noble Lord, Lord Stevenson.

In conclusion, the Government state that these regulations meet the requirements of the Act and I commend them to the Committee.

Motion agreed.

Global Health

Question for Short Debate

5.30 pm

Asked By Lord Crisp

To ask Her Majesty’s Government what action they will take to promote skills mix changes and task sharing in low- and middle-income countries in order to improve quality, access and cost in health services in line with the report of the All Party Parliamentary Group on Global Health All the Talents.

Lord Crisp: My Lords, I very much welcome the opportunity for this debate on what action the Government are going to take to promote skills-mix changes and task-sharing in low and middle-income countries to improve quality, access and costs in health services.

I am very grateful to the noble Lords who are taking part in this debate and to the many others who contributed to the report on which this Question is based. I shall explain in a little more detail what I mean by task-sharing and skills-mix changes to make sure that we are all in the same position on that but, first, perhaps I may say a few words on the background.

Health and health services are very much about people and knowledge. The Department for International Development has a good record on both but on people,

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in particular, I think there is more that DfID could do, and I shall make that point here in relation to this issue.

There are four key points relating to the background. The first is that there is a pressing need in the world for more health workers. The best estimates I have seen are that there are about 1 billion people in the world who do not have access to a health worker. In Africa, it is estimated that there need to be about 1.5 million more health workers in order that 80% of the women who want to can have access to a skilled health worker when they are in labour. That is not even a high standard; it is not what we expect, which is 100%. Therefore, there is a massive shortage of health workers, and people die or are damaged or diseased for lack of access to a health worker who has some knowledge and who can help them.

The second point of background is that if, through the efforts of DfID, national Governments and everybody else, there is to be a real improvement in health in, for example, India’s million villages, then the staffing structure for looking after people in those villages will not be the same as it is in the UK. There will not be a GP in every one of those villages or, indeed, in Africa’s million villages. People will have to do things differently and there will have to be a different range of skills mix. Nurses will perhaps be doing what doctors are doing, and other people will perhaps be doing what nurses are doing, all enabled by technology. That is the real theme that we are talking about.

My third point is that we actually know what to do. The report demonstrates how a skills mix can be changed successfully to reach more people. Finally, the UK has a particular role that it can play in this, and I shall deal first with this final point.

I know that other noble Lords are going to speak about education and training and about the role of British institutions. In this country we have a fantastic track record of educating and training health workers and, indeed, others, and there is a part that we can play in that. However, I also suggest that we have an important role in training and educating more health workers, not least because of our history and links with so many of the countries that we are talking about—the low and middle-income countries—through the Commonwealth and through our history of education. We know that many people from those countries have emigrated to our country and have become health workers here, and we know that emigration is part of the problem faced by other countries. I make it clear that it is not the whole story. The best estimates I have seen are that 135,000 health workers from Africa have moved to other, richer countries over the past 35 years. That is a very big number but it should be compared with the 1.5 million that are needed in Africa. If everyone went home, the problem would not be solved. The bigger issue is getting more people on to the pitch to provide more education and training.

Those are the issues that we set out to address in the report, All the Talents. We undertook a review and were joined by expert witnesses. We had a group of parliamentarians who quizzed those witnesses, and we came up with four or five clear recommendations, which are the ones that I want to put to the Government.

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Let me say a little more about what we mean by changed skills mix and better teamwork. We looked at examples from about 20 countries where access was improved because of using staff members to do different things from what would happen traditionally. The example we give in the brief version of the report is in Malawi, where some 135,000 manipulations of bones have been undertaken by technically trained people, not by doctors. As a result there has been improved access. Incidentally, they were trained by British doctors in this particular case in Malawi. So, we have seen improved access by changing the skills mix and allowing different members of staff to do work that others had previously done.

We have seen improvements in quality. The example given in the report is in the UK, where nurse practitioners doing more prescribing has improved quality as perceived by the patient. It is just as safe as it being done by doctors but it has improved quality, as perceived by the patient. Finally, there are examples of improving cost. The example that we use here is that in Mozambique for the past 25 years almost all the caesarean sections outside the capital have been done by nurses with additional training at a third of the cost of using doctors in that country.

These issues of changing skills mix, task-sharing and changing what professionals do can have profound effects on access, quality and costs. We looked at the success factors because we know that many such examples have failed. We identified some very clear success factors that are obviously spelt out in the report. They are about leadership, planning, training, supervision, ability to refer and teamwork. They are about some very obvious ways of doing things. We also identified failure in the absence of those things. It was also interesting for our all-party group to notice that a lot of the most innovative and interesting examples were happening in low and middle-income countries that did not have our resources and, to some extent, our baggage and vested interests. Here, we saw a compelling story.

We also decided that we would want to phrase the report in positive terms, in part thanks to the noble Viscount, Lord Eccles, and call it All the Talents. It is about how to bring all the talents of all the health workforce together to have the biggest impact on the biggest health problems in the world—those in low and middle-income countries. We think that it is a compelling story. If DfID and other organisations are to help national Governments to deliver healthcare in the million villages in India or the million villages in Africa we need this sort of change in how services are delivered to be effective. How can DfID act? We know that it is always difficult for Governments and international development agencies to deal with staffing issues. The argument is: if we train more people, will they not just migrate? How will we handle the professions and the recurring costs? Our four recommendations to DfID are clear. The first is to assist national Governments to develop their human resources and workforce planning. We must help them to make those changes. Secondly, we want to ensure that workforce innovations are mapped and shared. We need to collect and capture the innovation, then share it. Thirdly, together with

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others, we need to invest more in workforce research and develop better metrics. Fourthly, we should undertake systematic analysis of the effectiveness of role and skills-mix change. Changes can fail as well as succeed.

We are not the only people making similar proposals. As the Minister will know, Jeff Sachs, in a recent meeting in Parliament which we both attended, pointed out strongly that if we had a million more community health workers—the lowest trained group of health workers in the world—we would have a much better chance of delivering the millennium development goals. It will be interesting to hear the Government’s response to that as well. We argue in the report that professionals need to lead the changes but Governments, international agencies and DfID, with its very high standing—the highest standing of any development agency in the world—need to lead and to stress the importance of these sorts of issues.

People will be the biggest part of the solution in healthcare. They are not the only one—knowledge, science and technology are important—but caring hands, the knowledgeable helper, the professional and the well-trained non-professional are the biggest need and the biggest deficit in healthcare. That means investing in education and training, setting examples, supporting organisations such as the Global Health Workforce Alliance and promoting the needed solutions. I ask the Minister three questions. How does she respond to those four recommendations? How do she and the Government respond to the million community health workers campaign? Will DfID give people and health workers even higher prominence in policy?

5.40 pm

Viscount Eccles: My Lords, the noble Lord, Lord Crisp, is a tireless worker in the cause of global health, including, as we know on this occasion, through the development of a mix of appropriate and innovative skills in many places—here and elsewhere, but predominately in countries less fortunate than ours. He referred to the UK resource, and I want to go down a rather narrow path, talking about the UK’s capability to assist in the campaigns on tropical medicine and the contribution that we can make.

I should briefly declare my interests. I am involved with development at UCLH. I am also involved with the Hospital for Tropical Diseases and have on a number of occasions been involved with the London School of Hygiene and Tropical Medicine. It is usual for us in this House to discuss malaria and parasites, of which there are many different types which can lead to all sorts of very nasty results, and, lately, neglected tropical diseases. I am slightly less certain about our debating neglected tropical diseases. As a matter of fact, if you take the total UK capability, I am not sure that much is being neglected. As we know, ever since Manson and Ross connected the mosquito to malaria and the schools in London and Liverpool were founded, we have made an important contribution to fighting tropical diseases. Indeed, the Hospital for Tropical Diseases itself was founded nearly 200 years ago.

First, I want to talk briefly about London as a centre for excellence. It could perhaps be entitled “The Bloomsbury Campus”. The London School of Hygiene

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and Tropical Medicine in Keppel Street and the hospital, with its beds in Gower Street and outpatients and diagnostic laboratories in Mortimer Market, off Tottenham Court Road, are a real centre. Of course, we need to add the Wellcome Foundation, which is very close by. All those institutions are within walking distance and work very closely together. In particular, if a tricky case comes into the hospital, the conversations that go on between those institutions are close and entirely relevant. The people who practise in the hospital are also teachers and lecturers at the school, so there is a close combination of skills.

They have two agendas. The first is the domestic agenda, given the amount of travel and immigration. I expect that some noble Lords will know Dr Paul Clarke, who founded a tropical disease clinic called MASTA. Paul said to me one day, “John, you know that there are people who have come into Southwark”—he lived in Southwark—“from some strange places and have brought things that I have never seen before”. That is the domestic agenda. There is the rapid diagnosis of malaria and the concentration of quite rare diseases going on in the Hospital of Tropical Diseases. There is still some leprosy in this country, and it has often been misdiagnosed, and therefore having that capability is extremely important. Also important is the service whereby all GPs in the country can go on line or ring up for rapid advice if they are faced with a patient who they think may have returned from a foreign part quite recently.

On the overseas challenge, training, study and research are enormously endorsed by the Wellcome Trust, which makes large grants every year to both the London and Liverpool schools, as do Bill and Melinda Gates. It is an extraordinary amount of money, in one sense, and a great endorsement of the contribution of the Bloomsbury campus in London. Other institutions also make a contribution. DfID, as has been mentioned, is a strong supporter of this endeavour, as, indeed, is HEFCE, because they are either connected to or counted as higher education institutions.

This proliferation of support and the institutions involved bring challenges. Several departments of government are involved, and government departments are not always brilliant at talking to each other and providing a co-ordinated response. I wonder whether there is co-ordination.

Notably, the NHS, which is under pressure, changing configuration and always under some reorganisation, does not have the same agenda as DfID or the charitable institutions. I should like reassurance that DfID fully endorses this Bloomsbury campus and its contribution to those countries overseas which need that contribution, and that it will continue to give the participants enthusiastic support. Given that several departments are involved—notably the Department of Health and the NHS, with the ever present problems that they have to face—I ask the Government to make sure that nothing slips between the cracks.

Do the Government agree that the UK’s leading position in study, research, teaching and tropical disease clinical practice can continue to be a growth point for the economy? This endeavour has grown over the years and I see no reason why it should not grow

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further. Enormously satisfying careers are available in this activity and there is a huge job to be done overseas. If we can continue to get international support, surely this is an opportunity—and we are looking for such opportunities wherever we can.

5.48 pm

Baroness Warwick of Undercliffe: My Lords, All the Talents is an excellent report from the two All-Party Parliamentary Groups on Global Health and Africa. It gets straight to the point—that there is a critical shortage of healthcare workers in many countries—and it sets out clearly what can be done to tackle the problem. Crucially, it also provides us with the evidence that global health services can be improved by giving people extra skills and changing their roles to enable them to expand their capability. I congratulate the groups on their work in bringing the evidence together in this report. I also take the opportunity to thank the noble Lord, Lord Crisp, for his tireless commitment and great contribution to international development.

I was particularly struck by the example of the creation of orthopaedic clinical officers, or OCOs as they are called in the report, in Malawi. Currently—this is an astonishing statistic—there are only seven orthopaedic surgeons for Malawi’s 14 million people. Here in the UK we have roughly one per 30,000 people. It is an astonishing contrast. These OCOs were once local medical assistants, people who left school at around GCSE level and, after a two-year course in basic clinical care, ran the country’s small health centres. An 18-month training course in orthopaedics has enabled these medical assistants to develop sufficient skills to give good-quality care to around 90% of all injuries. They are expected to be competent to treat burns, septic joints, osteomyelitis and Malawi’s high incidence of club foot deformities. They can provide casts for the most common fractures and emergency resuscitation in the case of severe injuries. Every district hospital in Malawi now has at least one OCO and they are estimated to treat more than 30,000 fractures a year. What a great example of task-shifting that is, and there are others throughout this report that are similarly inspiring.

Of course, task-shifting, or task-sharing, is not a new concept. We have been reminded by the noble Lord, Lord Crisp, that there is a shortage of 4.2 million health workers world wide, with 1.5 million needed in Africa alone. Therefore, in many countries with severe shortages of trained professionals, health workers often have no choice but to get stuck in and carry out tasks which are not in their job title.

This makes the words of warning contained in the report all the more important. If changes to a health workforce are managed badly, they can lead to poor-quality and unsafe services. We must not risk more burden being placed on poorly trained, poorly paid workers who are expected to deliver an increasing range of priorities. But done well, as this report shows us, giving people new skills can improve access to services, improve quality and possibly reduce costs. The report’s list of recommendations forms a sensible checklist of what will make the difference between success and poor-quality, even dangerous, care. When

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a health worker takes on a new task or responsibility, it is essential that they are effectively trained, supervised and supported.

The report emphasises that successful skills-mixing starts with health professionals and local health organisations leading the changes, with Governments and national health systems enabling them to do so. We need more evidence of the effectiveness of skills-mixing to help support further development. I was struck by the point made in the report that significantly more investment is made in drug research than in human resources research, even though health workers account for a much greater proportion of costs. This was reinforced for me by OECD Health Working Paper No.54, helpfully provided by the Library, which emphasised the many barriers to be overcome and how Governments have to support the process to overcome them. In her response to this debate, will the Minister tell us what measures the Department for International Development is taking to assist Governments to develop their HR and workforce planning capacity?

The real benefit of skills-mixing is that experiences can be shared between countries. That is where international and national volunteering can play an important role. International development agencies such as VSO can assist national Governments to train medical staff and draw up sustainable plans for skill-mix changes. I declare an interest as a life vice-president of VSO and draw your Lordships’ attention to the work that VSO is doing with regard to task-shifting, or skills-mixing.

VSO sees these as positive ways of getting skills and health services to the grassroots, and as close as possible to those who need access to services and education. Skills-mixing also supports VSO’s belief that citizens are active agents of change and that communities will prosper if people are given the skills and opportunities to develop. But—and there is always a but—for this approach to be successful and sustainable, it must receive continuous investment. If community health workers and volunteers are to be given increased skills, responsibility and tasks, they must have the equivalent increase in support. They need the professional training and management that will ensure that they are able to deliver this work effectively, and their increased responsibility must be reflected in their remuneration.

In every situation, in every country, ongoing training and support are vital in health services. Health workers should be supported to learn continuously, and to be trained in the latest medical developments, healthcare approaches and effective techniques.

VSO makes this happen whenever it can. I will give just one example, still in Malawi, where VSO volunteers are training health workers because, again, the country has a critical shortage. VSO is pushing for improved supervision and management of these health workers. The Malawian Government are listening and making a concentrated effort to tackle the shortage through recruitment, training and retraining. I hope the common sense approach contained in All the Talents will give extra support to VSO's representations in Malawi. I know VSO will make some of these points tomorrow

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to the APPG's review on overseas volunteering, which itself acknowledges the importance of the direct exchange of knowledge and skills between people.

The UK has taken some positive steps in this area. DfID's £20 million four-year health partnership scheme enables volunteer British doctors, nurses and midwives to train overseas healthcare workers across many disciplines. These skilled health professionals offer practical assistance to their counterparts in the developing world, including one-to-one mentoring and developing guidelines to ensure that clinics run more effectively. Will the Minister give us any assurances that opportunities for skills mix changes and task-sharing are being promoted as part of the health partnership scheme?

Health workers—midwives, clinical officers, community workers, nurses and doctors—provide healthcare in many of the world's hardest to reach areas. They face daily challenges and do amazing work, but there are not enough of them to get the job done properly. They often lack support and supervision, the right training and equipment. In the best possible way, All the Talents states the obvious when it addresses these points. It makes sense to develop the talents of everyone working in healthcare, so that money is not wasted, quality can continue to improve, and above all, so that more people can access the health services that they need.

5.56 pm

Baroness Flather: My Lords, I have just had tea with a friend from Nigeria. She said that she spoke to her mother over the weekend. Her mother told her about her cousin, who had come home from having a baby and had blown up because part of the placenta had been left inside her. Nobody could give her antibiotics—no antibiotics were available—so she died. This is what we are talking about today. I unashamedly say that I am passionate about women’s issues and how women in Africa and India suffer the most. I know because I have had opportunities to visit and see for myself what goes on for women. Nobody really cares: “A woman dies, so what? There are so many others”. That is why this debate and the report of the noble Lord, Lord Crisp, are so valuable. Everything the noble Lord said is absolutely correct. Any support that can be given for what he wants done would be wonderfully valuable.

We have talked about birth attendance, village women helping and so on, but it has never been done in a proper way. The noble Lord is so right to say that if things are not done properly, it is better not to do them at all. My friend also told me that in her village, the woman with the smallest hands pulls the baby out and the mother usually ends up with a fistula. Things are not getting better; they are getting worse in the developing countries and we have to recognise that. Why are they getting worse? Because the population is increasing by a very large number and more people need help.

We know that family planning is absolutely essential. We have a shortage of nurses, skilled midwives and obstetricians and an increase in population to more than 7 billion people. Every day, 800 women die from easily preventable pregnancy or childbirth-related complications. There are 215 million women in urgent need of family planning services.

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Current health systems cannot meet these demands. Mix changes could increase women’s access to services, which is exactly what the noble Lord, Lord Crisp, is saying. We need access at least to the most basic of services because sometimes basic services can change a woman’s life. They can make the difference between life and death, or a woman being inflicted with a lifelong problem.

I am an active member of the APPG on Population, Development and Reproductive Health. We produced a report some years ago about maternal morbidity. No one knows the figures because we just cannot get them. However, we took a figure of 25%. The report was called Better Off Dead because, in many cases, the women would be better off dead than suffering through a lifetime of problems due to pregnancy and childbirth.

In India there were a lot of not quite hospitals but places where there were doctors and nurses. The problem has always been that doctors and nurses do not want to work in rural areas because they can earn more money in the towns. They would go to work in the towns and when people arrived at those rural centres there would be no one there. The idea was that either the nurse or the doctor would be there at all times, but this was not always the case.

While I have sympathy for the view of the noble Viscount, Lord Eccles, on tropical disease, the Gates Foundation has really taken that on board and has certainly done a lot in regard to African diseases. As the noble Lord, Lord Crisp, has mentioned, Mozambique, Tanzania and Malawi have seen success in the strategy of people being trained to do something. There are quite a lot of things that semi-trained people can do, such as giving antibiotics. In some places they perform surgery and it has been found that their obstetric operations are no worse than those of the doctors. If you have no one else, it is absolutely amazing that someone can do that.

I hope that this will become an issue with DfID, which has put girls and women at the top of its agenda for almost the first time. However, to be fair, Andrew Mitchell also put girls and women at the top of the agenda. We need to remember that the value of girls and women in African countries is pretty well zero. If women die or are sick, it is of no importance. If children die, it is of very little importance—perhaps a tiny bit more, but not much. It is there for us all to know and all to see.

We held a family planning summit last year. It was a wonderful thing for us to have done and I am very proud of the fact that our Government initiated it. Family planning by itself saves lives and money. One pound spent on family planning can save lives and many pounds if it is available. I hope that we will keep in mind that it is cost-effective and necessary.

I hope the Government will promote skills-mix changes and task-sharing in low and middle-income countries where family planning programmes are now being rolled out. That will improve access to family planning for the hardest to reach. They are the ones who will probably respond more to someone who is familiar with them than to someone who is from elsewhere.

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Nothing can be more effective than this initiative, and I hope that the Minister will take that on board. I am not sure how much our Government can do, but perhaps the Governments in those countries could be involved. A lot of money was promised at the family planning summit, but the problem is always to get the Government of the country to support the programme. If the Government of the country do not support the programme, no matter what outside Governments do, it will never work as well as it should.

6.05 pm

Lord Collins of Highbury: My Lords, I, too, thank the noble Lord, Lord Crisp, for initiating this debate. In particular, I thank him and the all-party groups for their excellent report. Its evidence-based approach with best practice case studies not only makes fascinating reading but shows how capturing people’s aspiration can be a positive force in meeting the healthcare challenges that we face both here and globally. As we have heard today, health is global and interdependent. It is no longer possible to separate health issues between countries. We increasingly face the same global threats and rely on the same people and technologies for solutions.

In previous debates in this House, I have referred to the book of the noble Lord, Lord Crisp, on the search for global health in the 21st century, but it is worth an extra plug. The book gives an excellent analysis of global health and provides a superb description of how richer countries such as ours can learn about health from low and middle-income countries. I note what the noble Viscount said about how proud we can be of our centres of excellence. I certainly also note what my noble friend said about volunteering and how training and support can be vital. We also need to understand how low and middle-income countries, with their innovation with limited resources, can be extremely valuable to us. If we see it as a two-way dialogue, perhaps we can gain public support for positive change.

As we have heard, there is growing interest in exploring how we use all the talent, skills and experience of health workers to their full extent. Developing a team approach so that all members of a team, under direction and leadership and with training, can collectively hold casework and workload can bring huge benefits that we have not been able to garner so far.

However, as the report recognises, attempts to make change without addressing those factors may well fail and can damage existing health services. Alongside the examples of success there are many cases where innovations have failed to achieve positive health outcomes and have not been sustainable because, as the noble Lord, Lord Crisp, said, of poor design and an unsupportive environment.

In the report we are given examples where health workers in Africa have not been trained properly and in the UK where nursing assistants received little or no supervision when taking on new tasks. As the noble Lord said, training programmes must be relevant and lead to some formal qualification necessary for recognition or promotion if they are to be sustainable.

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An interesting quotation was from Dr Peter Carter, chief executive of the Royal College of Nursing. He said:

“You don’t need registered nurses to do all of the tasks that historically have been carried out by qualified nurses. Healthcare assistants can do many of those tasks, perfectly satisfactorily, providing they’ve had the proper induction, training, and education. And where it goes wrong, in some parts (and I do stress some parts of the NHS) is where there has been task shifting onto unqualified people who’ve not been given even the most rudimentary induction into the fundamentals of nursing care”.

The All the Talents report shows us that giving people extra skills, designing jobs that allow them to work to the limit of their capabilities, providing better supervision and creating more effective teams can bring enormous improvements to healthcare. Under the right circumstances—and we have heard examples in today’s debate—nurses can prescribe and take on additional roles. Nursing assistants and community workers can treat common conditions, and we have even had examples of patients supporting each other. Someone who has been diagnosed as a diabetic can self-manage, and non-communicable diseases, which pose the biggest health threat, are good examples.

The report describes where such changes have greatly increased the population’s access to services, improved the quality of a service and reduced costs. The noble Lord, Lord Crisp, gave some extremely good examples of that. However, I repeat that improvements can be achieved only if the changes are planned carefully and are implemented well. This of course is where the Government’s support and role are vital. There have been as many failures as successes, with examples of people taking on tasks beyond their competency without adequate training and support which can result in poor quality and even dangerous care being provided, as the noble Baroness, Lady Flather, indicated.

However, one of the fantastic things about this report is that such failures can be avoided if the lessons highlighted in it are learnt. I, too, should like to ask the Minister how the Government will support research to evaluate and strengthen evidence on best practice and what steps her department will take to ensure that that is shared as widely as possible across all nations. What action will she take to provide more education and training through DfID programmes, and what steps will the department take to assist national Governments to develop their human resource and workplace capacity?

6.12 pm

Baroness Northover: My Lords, I, too, thank the noble Lord, Lord Crisp, for securing this debate. His commitment to improving the health workforce is international and has been internationally valued. This debate on skills-mix changes and task-sharing is very welcome and is derived from the extremely interesting report, All the Talents.

One of the refreshing aspects of the report for me, as spokesperson for both DfID and the Department of Health, is that it applied its analysis and conclusions and took its evidence not only internationally, across a range of both developed and developing countries, but from across the United Kingdom. That meant that

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it brought fresh perspectives in both quarters. Often, the assumption is that in developing countries it would be good if more basically trained personnel undertook more work, whereas in the United Kingdom we need a workforce that is as regulated and as trained as possible. I note the reference made by the noble Lord, Lord Collins, to what Peter Carter of the RCN said in the report and I look forward to discussions in health debates. However, this report challenges us to think again and to look beyond our assumptions to what works and why it works in various settings and what does not work in various settings. The noble Lord, Lord Crisp, emphasised leadership, planning, supervision and teamwork as being essential. The noble Baroness, Lady Warwick, also emphasised how important it is to do this work well, otherwise it will not work at all.

We fully support the principle that a strong health service needs skilled and motivated health workers in the right place at the right time. As the noble Baroness, Lady Flather, knows, we have promised to save the lives of at least 50,000 women during pregnancy and childbirth, and the lives of 250,000 newborn babies by 2015 in developing countries. We have promised to support 2 million women to deliver their babies safely with the support of skilled midwives, nurses and doctors. As the noble Baroness, Lady Flather, made clear, meeting these commitments means improvements across the health systems in developing countries but, above all, demands skilled health workers across all levels of the workforce. We strongly agree with the noble Lord, Lord Crisp. We are supporting the workforce in 28 of the countries in which we work. This includes training new health workers, building skills among existing health workers and supporting government planning.

Even in the wealthiest countries it is not easy to make sure that everyone, rich or poor, living in town or country, can see a health worker when they need to. Many countries, especially in Africa, suffer from a critical shortage of health workers, as we have heard. Tackling this shortage demands creative and innovative approaches. Task-sharing and organising the roles of health workers can be such a creative approach. Around the world, health workers are taking on new responsibilities as countries try new ways of building an effective health workforce in the face of financial constraints and a serious shortage of health professionals.

The excellent report of the All-Party Parliamentary Group on Global Health, of which the noble Lord is co-chair, is a valuable addition to the thinking about the issue. The report pinpoints the factors that create success when reorganising roles and makes practical recommendations on how professionals, Governments and institutions can best support the talents of health workers. With increasing global focus on universal health coverage, the timing of this report is excellent.

I can assure noble Lords that we share their concern about the importance of this area. We agree that task shifting can improve health service access and quality. I can assure the noble Baroness, Lady Warwick, and others that we support partner countries which wish to do this. In Ethiopia, for example, DfID is supporting the Ethiopian Government to expand access to health services through the training and deployment of village health extension workers. With one year of training,

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these workers can take on basic preventive and curative services that would otherwise be seen as the preserve of health officers, nurses and doctors, who remain scarce. UK support means an additional 2,000 community health extension workers will provide a package of basic health services for 5 million people. Other countries, such as Zambia, are looking to learn from Ethiopia’s experience with UK support. It is important to learn from the good and bad examples of where this is happening.

To answer the noble Lord, Lord Crisp, on assisting national Governments with human resource planning, which is a key point, it is very clear that robust health workforce planning is recognised as being critically important. That is why DfID works with Governments, such as the Government of Nepal, to develop such national health workforce strategies.

There are other areas where strengthening the health workforce is key. The noble Baroness, Lady Flather, is right to make reference to the significance of family planning. I thank her for what she said. The UK’s leadership of last year’s family planning summit encouraged new thinking about expanding access to contraception. It was notable that several countries included task-shifting for family planning within their summit commitments, and DfID is working with country partners on implementing these. For example, Zambia has just confirmed its summit commitment to allow community health assistants to provide contraceptive injectables, an excellent development that will expand access to family planning.

A number of organisations are focusing on task-shifting and I hear with interest what the noble Baroness, Lady Warwick, had to say about VSO. In east Africa, a mid-level cadre of ophthalmic clinical officers provides most of the community eye care services. This cadre has only recently been admitted to the professional body for ophthalmologists, the East Africa College of Ophthalmologists. I can assure the noble Baroness, Lady Warwick, that through the United Kingdom Government’s health partnership scheme, about which she asked, the UK’s Royal College of Ophthalmologists will work with its east African counterparts to integrate these clinical officers and boost the quality of their work still further.

Sharing skills beyond those traditionally considered to be the responsibility of the health workforce can also be successful. Again, the Health Partnership Scheme is also supporting the East London NHS Foundation Trust to work with Butabika Hospital in Uganda. In this innovative project, recovered psychiatric patients work alongside community mental health services to provide care—an example of task-shifting.

My noble friend Lord Eccles has spoken compellingly about the UK’s track record on research—in particular, the practice of the London School of Hygiene and Tropical Medicine, the Hospital for Tropical Diseases and other institutions. He is, as are we, rightly proud of the international contribution that our institutions have made, not least in rendering neglected tropical diseases less neglected, as he says. I assure him that UK institutions successfully secure a high proportion of the global funds available for research, including from DfID. The London School of Hygiene and Tropical

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Medicine and the Liverpool School of Tropical Medicine are two among many centres of excellence for health research in the United Kingdom, and we expect UK institutions to continue to compete effectively for funding in the future.

My noble friend also asked about working across government departments. I would point out that the Department of Health, for example, funds the National Institute for Health. The London School of Hygiene and Tropical Medicine and other institutions can and do apply for grants, and there is a lot of discussion between DfID and the Department of Health on this.

As noble Lords will be aware, and as the noble Baroness, Lady Flather, pointed out, DfID puts women and girls front and centre, recognising that they are likely to be the poorest and the most vulnerable in the world. Supporting women and girls brings particular benefits to the individuals themselves, as well as to their families and their communities. Task-shifting can bring particular benefits to women both as employees—many community health worker programmes prioritise women’s training—and as beneficiaries of expanded services. Pakistan’s Lady Health Worker Programme, which we support, makes it easier for women to access healthcare. However, as All the Talents points out, and as noble Lords have emphasised, task-shifting needs to be done well. Fragmented approaches, delivered separately from the wider health system or driven solely by efforts to cut costs, are not the way forward. Crucially, Governments need evidence of what works to be able to design effective programmes. Research and evaluation need to establish best practice and inform policy. The noble Lord, Lord Crisp and the noble Baroness, Lady Warwick, are right in this regard.

The noble Lord, Lord Crisp, asked me, interestingly, about Jeffrey Sach’s campaign to train 1 million community health workers. We believe that the initiative to expand access to good-quality healthcare is welcome. However, we are concerned that the evidence to support such a dramatic scale-up in community health workers is weak. Any such initiative needs in-built evaluation plans to build evidence and understand impact. The noble Lord, Lord Crisp, emphasised that and so do we.

The UK Government support research into task-shifting. DfID has commissioned a cost-effectiveness study on using community health workers to deliver essential health services, and the ReBUILD research programme looks at opportunities to reallocate health worker responsibilities in fragile and post-conflict situations. An overarching policy question for this research is: can they be a cost-effective investment for MDG progress? If so, can a defiaced set of competency-based roles and functions, founded on a strong evidence base, be specified to maximise value for money and health systems requirements for effective scaling-up?

How might things move further forward, given that we are already strongly supporting this in a number of countries? This November, there will be a Global Forum on Human Resources for Health in Brazil, convened by the Global Health Workforce Alliance and hosted by the Government of Brazil. This will be an important opportunity to ensure that the human

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resources for health agenda remains relevant to current global health policy discussions. Task-shifting will undoubtedly form part of this. We are playing our role in the run-up to this conference and looking forward to hearing the evidence brought to it. This will be a chance to map and share, in the way that the noble Lord, Lord Crisp, outlined.

In conclusion, I thank all noble Lords for taking part in this debate, and even more for all the work they are doing, nationally and internationally, to ensure that, wherever people need medical assistance or healthcare of one sort or another, we work across barriers to do everything possible to maximise their chance of receiving

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such support. DfID will continue to work with developing countries, to support them in their efforts to build health service quality and access, including where this means rethinking health worker roles.

Motion agreed.

The Deputy Chairman of Committee (Baroness Harris of Richmond): My Lords, that completes the business before the Grand Committee this afternoon. The Committee stands adjourned. I apologise for the lack of warmth in this room. This has been reported to the authorities.

Committee adjourned at 6.25 pm.