Instruments drawn to the special attention of the House
Draft Renewable Transport Fuels and Greenhouse Gas Emissions Regulations 2018
Date laid: 25 January 2018
Parliamentary procedure: affirmative
Summary: These Regulations amend the targets to reduce greenhouse gas emissions from fuels supplied in transport, thereby supporting the delivery of savings to meet UK carbon budgets. While the end targets set are simply in line with two 2015 Directives, the interim stages proposed were subject to consultation. We received a letter from Vivergo Fuels Ltd, a producer of crop-derived biofuels, which supports the obligation to increase the overall amount of renewable fuels used, but expresses unhappiness with the proposed decreasing limit on their crop-derived component (“the crop cap”). The Department for Transport’s (DfT) additional explanations show that considerable thought has been put into formulating a comprehensive policy on biofuels and the decision to promote the production of waste-derived biofuels. While giving an indication of the direction of travel, DfT’s responses also make clear that many of the decisions about the composition are commercial and up to the producer, and that the Department is facilitating those decisions but not taking responsibility for them, leaving the market to find its own level.
These Regulations are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest.
1.These Regulations have been laid by the Department for Transport (DfT) under provisions of the Energy Act 2004, the Pollution Prevention and Control Act 1999, and section 2(2) of the European Communities Act 1972. They are accompanied by an Explanatory Memorandum (EM).
Background
2.These Regulations aim to reduce greenhouse gas emissions from fuels supplied in transport, thereby supporting the delivery of savings to meet UK carbon budgets. They amend the existing UK schemes to align with requirements in EU legislation which were updated in 2015:
- EU Directive 2009/28/EC, referred to as the Renewable Energy Directive, requires that 10% of energy used in transport is renewable by 2020.
- EU Directive 1998/70/EC, referred to as the Fuel Quality Directive, requires suppliers to reduce the greenhouse gas intensity of the fuels used in vehicles by 6% by 2020, when measured against a baseline representing typical greenhouse gas emissions of fossil fuel consumed in the EU in 2010.
The Targets
3.While the end targets set are simply in line with the two 2015 Directives, the interim stages proposed were subject to consultation. However, some clarification may be useful because, although paragraph 4.2 of the EM says “The Renewable Energy Directive requires that 10% of energy used in transport is renewable by 2020”, paragraph 7.2 says the SI will “increase the targets for renewable fuels to 9.75% of fuel supplied in 2020”. DfT officials explained:
“Direct comparison between the Renewable Energy Directive (RED) target for transport of 10% and Renewable Transport Fuel Obligations (RTFO) can be misleading as the RED target is set by energy whereas RTFO obligation levels are set by volume. The obligation level proposed for 2020, 9.75%, actually equates to around 5-6% by energy. However, under the RED the energy content of certain fuels, such as those made from wastes and residues, are considered to count twice towards the 10% target. As such, we expect renewable transport fuels under the RTFO to contribute just over 9% of the 10% target. Renewable electricity used in transport, though it is not part of the RTFO, is also allowed to contribute to the RED 10% target and we estimate that this will account for around 1.1% of transport energy demand in 2020 (after multiple counting). We therefore expect the 9.75% obligation level in 2020, together with renewable electricity used in transport, to be sufficient to meet the RED 10% transport target.”
4.Some of the calculations above rely on double counting because there are higher incentives for wastes that would be disposed of, than for those with other uses. The Committee asked DfT for an example of each type and to state what the difference in incentive actually is:
“Renewable fuels derived from certain wastes and residues will be awarded double renewable transport fuel certificates (RTFCs) per litre supplied. Renewable transport fuels ordinarily receive one RTFC per litre. As RTFC prices tend to be roughly around 20p according to recent media reports and our modelling (though many are traded privately), the difference in incentive may therefore be around 20p per litre. (NB certain gaseous fuels receive an uplift to compensate for their higher energy content relative to liquid fuels).
Examples of waste feedstocks which we consider suitable for double RTFCs include used cooking oil and tallow category 1, which do not have any other uses (particularly as their use as animal feed is prohibited in the EU) and would otherwise be disposed of. Feedstocks which might be considered as waste but that have higher value end uses, such as those that can be used in chemicals or industry, will only receive one RTFC per litre. An example is crude tall oil, which arises from the process of pulping coniferous wood.”
Representations on the crop cap
5.We received a letter from Vivergo Fuels Ltd, a producer of crop-derived biofuels (the letter is published in full on our website),1 which supports the obligation to increase the overall amount of renewable fuels used, but expresses unhappiness with the proposed decreasing limit on their crop-derived component (“the crop cap”).
6.The DfT’s analysis of consultation responses indicates that the amount of crop-derived biofuel to be allowed has been a divisive issue. As a result, although DfT consulted on up to the maximum of 7% allowed under the Directive, in the legislation this ceiling has been reduced to 4% and falling. We asked DfT for more information on the reasoning that led it to this policy decision:
“The RED requires Member States to set a limit on the amount which crop-derived biofuels can contribute to targets at a maximum of 7% of energy used in relevant transport. To clarify, the Government did not propose a 7% limit but consulted on a range of levels from 0-7% whilst suggesting a preferred option of a 2% limit in 2020.2 In the consultation we asked “For both 2020 and 2030 at what level should the supply of crop derived fuels be set? a) 0% b) 2% c) 7% d) another percentage”, to which we received the following responses:
Total |
0% |
2% |
7% |
Other |
|
576 |
6 |
20 |
537 |
13 |
The bulk of responses (including campaign responses) supporting the highest possible limit, 7%, came from bioethanol suppliers, their business partners (including in the agricultural sector) and their employees. Some fossil fuel suppliers and local authorities also supported a 7% cap. A range of respondents were in favour of a 2% cap including biodiesel suppliers, whilst the environmental NGOs supported a 0% cap meaning that crop based biofuels wouldn’t count towards UK targets.
Those pressing for a lower cap argued that this would better mitigate the effects of indirect land use change (ILUC). ILUC means that on a lifecycle basis some biofuels made from crops can produce greater greenhouse gas emissions than the fossil fuels they are replacing, when the indirect impacts of food crops being displaced by crops grown for biofuels are taken into account. It was also argued that a lower cap would further support the supply of waste-based biofuels which tend to have greater greenhouse gas emissions savings.
Those pressing for a higher cap argued that a cap of 0% or 2% would not sustain the UK’s existing bioethanol plants, and highlighted the positive impact the industry has had, not only in terms of jobs, but in reducing the UK’s reliance on imported animal feed. After considering the evidence and balancing these sectorial interests, the Government proposes through this instrument, to cap the contribution that crop-based biofuels can make towards renewable targets at 4% in 2018, reducing from 2021 onwards to 3% in 2026 and 2% in 2032. The gradual tightening of the limit will provide a clear signal as to where future investments in the biofuel industry should be directed as we transition to the most sustainable renewable fuels, whilst maintaining an important market for existing UK bioethanol production.”
7.The Vivergo letter also states that 4% would be the lowest crop cap in Europe, and that others including the NFU, are concerned about the lowering of the limit. Although the NFU has not made direct representations, material on their website supports the 7% cap arguing that 40% of UK produced oilseed rape is currently exported for biofuel production in other Member States, and that production of bioethanol in the UK uses 2.2 million tonnes of wheat (that is 13% of the UK wheat harvest in 2014).
8.DfT explained why it favoured the lower limit:
“The RED leaves it open to respective Member States to determine their own level for a crop cap. The majority of other Member States already have a higher proportion of crops being used for biofuels than in the UK, whereas we have provided additional incentive for waste derived biofuels for several years. Whilst recognising the importance of UK bioethanol production and its wider economic benefits, our policy on biofuels is to ensure that their supply delivers genuine reductions in greenhouse gas emissions. The sliding crop cap and proposed increase in the obligation provides space and a market for the UK ethanol industry, a possible introduction of E10, flexibility for obligated suppliers in how they meet their targets and mitigates the risk that biofuels with negative indirect land use change impacts will be supplied in the UK.”
Higher levels of ethanol
9.The Vivergo letter also suggests that many improvements to transport emissions would be gained by switching from E5 fuels (containing 5% bioethanol), to the E10 fuels (containing 10% bioethanol) used elsewhere. The Committee therefore asked DfT to explain it’s policy on increasing the bioethanol percentage in fuels. It replied:
“It is recognised that increasing the renewable content of petrol by moving to E10 fuel should make achieving our renewable energy targets easier and potentially more cost effective, as well as providing an economic boost to domestic producers of bioethanol and UK farmers in the supply chain. Bioethanol offers greenhouse gas savings compared to fossil fuels, even when taking other factors such as indirect land use change into account. A vehicle using E10 would emit around 2% less CO2 than one using E5 for the same distance travelled. Effects on other emissions are limited.
The RTFO provides suppliers with the flexibility to choose which fuels to supply to meet their obligation, and E10 is one option. It is more likely to be released onto the market following the increase in the RTFO targets, but the decision of whether to supply E10 is a commercial decision for fuel suppliers.
The Government is committed to working with industry to ensure any future introduction is managed carefully with appropriate information provided to consumers. The Department has convened a working group with the relevant industry representatives to discuss how this can be best achieved so as to ensure that any E10 roll out in the UK is handled carefully and fuel suitable for older (pre-2000) petrol vehicles, which may not be compatible with E10, remains available.”
Conclusion
10.The DfT’s additional explanations show that considerable thought has been put into formulating a comprehensive policy on biofuels and to promote the production of waste-derived biofuels. While giving an indication of the direction of travel, DfT’s responses also make clear that many of the decisions about the composition are commercial and up to the producer, and that the Department is facilitating those decisions but not taking responsibility for them, leaving the market to find its own level. We note Vivergo’s concerns but the firm is just one player in a complex market.
Homes and Communities Agency (Transfer of Property etc.) Regulations 2018 (SI 2018/8)
Date laid: 10 January 2018
Parliamentary procedure: negative
Summary: These Regulations specify 16 NHS Trusts which are being designated for the purpose of transferring surplus land to the Homes and Communities Agency: the Agency will in turn prepare the land for release to market, in order to promote housing development. The Government have said that they want to use the sale of surplus NHS land to deliver more homes specifically for nurses and similar professionals. The information which the Government have provided to us is replete with good intentions, but short on hard evidence that nurses are benefiting from the creation of affordable housing on surplus NHS land. In the absence of such evidence, we conclude that these Regulations may not deliver the objectives of the “Homes for Nurses” scheme.
We draw these Regulations to the special attention of the House on the ground that they may imperfectly achieve their policy objectives.
11.The Ministry of Housing, Communities and Local Government (MHCLG) has laid these Regulations with an Explanatory Memorandum (EM). In the EM, MHCLG explains that in 2015 the Government appointed the Homes and Communities Agency (HCA)3 as its land disposal agency in England (outside London). The land disposal process involves transferring a significant amount of land from Government Departments and their arm’s-length bodies to the HCA, so that it is able to prepare that land for release to market, promoting housing development and boosting economic growth.
Previous Regulations on transfer of surplus land
12.SI 2018/8 is the fourth set of Regulations laid by the Government since 2015, specifying bodies from which land may be transferred to the HCA. We drew the Regulations laid in 20154 and 20165 to the special attention of the House, not least because of a National Audit Office (NAO) report of June 2015 on the disposal of public land for new homes.6 We published information about the 2017 Regulations,7 noting that the Department had highlighted the relevance of the announcement in the 2016 Autumn Statement of £1.7 billion of investment for Accelerated Construction to speed up house-building on surplus public sector land. MHCLG refers to these earlier instruments, and to the NAO report and its consideration by the House of Commons Public Accounts Committee, in the EM to SI 2018/8.
Latest Regulations: NHS Trusts
13.The Schedule to the latest set of Regulations specifies 16 NHS Trusts for the purpose of transfer of surplus land to the HCA to prepare for release to market. In February 2017, the Ministry published the first annual report on the “Public Land for Housing programme 2015–20”.8 This showed that, overall, in the period from May 2015 to September 2016, Departments participating in the programme had sold land with capacity for 13,817 homes. In relation to the Department of Health (DH), the report said that the “majority of the Health estate is owned by individual NHS and Foundation Trusts” and that DH’s role was “to provide leadership to NHS bodies, acting as a source of challenge and support” (paragraph 3.13). It added that, since mid-2015, land transferred from the NHS with capacity for 3,516 homes had been sold, and that DH had identified potential sites with capacity for nearly 4,000 homes, forecast for sale in 2016–17 and 2017–18. The February 2017 document contained an undertaking that a further report would be published in July 2017, covering the period from October 2016 to March 2017. By January 2018, however, no further report had appeared.
Government statements on “Homes for Nurses”
14.On 3 October 2017, the Secretary of State for Health announced a set of nursing workforce reforms, which included a “Homes for Nurses” scheme to give 3,000 NHS workers first refusal on affordable housing generated through the sale of surplus NHS land.9 On 17 January 2018, in answering a Private Notice Question on “NHS: Nurse Retention”,10 Lord O’Shaughnessy, Parliamentary Under-Secretary of State at the Department of Health (now called the Department of Health and Social Care (DHSC)), said: “We know that housing costs are an issue, particularly in the south of England and cities, which is why we want to use the sale of surplus NHS land to deliver more homes specifically for nurses and other similar professionals.”
15.In January 2018, the New Economics Foundation published a report entitled “No Homes for Nurses”.11 Among its key findings, the report stated: “Of the homes to be built for sale on NHS land, four out of five will be unaffordable to a nurse on an average salary. And where they could afford the mortgage repayments, a nurse would have to save for an average of 53 years to afford the deposit.” The report looked at 59 former NHS sites which were reported to have been sold under the “public land sale programme”, and found that the average price of market-rate housing across the areas in which those sites were located was £315,279–“10 times the annual salary of a nurse”.
16.We obtained additional information from MHCLG (in conjunction with DHSC), which we are publishing at Appendix 1. We have been told that, since the October 2017 announcement on “Homes for Nurses”, DHSC has been working through implementation of the policy. We asked how many nurses had benefited from the offer of a first refusal on affordable housing on surplus NHS land, but have not received an accurate reply to the question.
17.We asked how much affordable housing had been provided on surplus NHS land, and how the cost of such housing related to salaries paid to nurses. We have been told that, at present, there is no easy way to ascertain the level of affordable housing provision on land released through the Public Land for Housing Programme; that the cost of affordable housing depends on the type, tenure and location; and that, while DHSC considers that nurses could afford “a significant number of the housing units in its surplus land pipeline”, it is “likely that rental accommodation will be a more realistic option” in London and other areas with particularly high housing costs.
Conclusions
18.There is no doubt that, following the designation of a range of bodies by these and earlier Regulations, a good deal of surplus public sector land has been transferred to the HCA, and that this has been put into general development or is being prepared for doing so. However, it is also clear that, within this wider programme, the Government have the objective that the sale of surplus NHS land should be used to deliver more homes specifically for nurses and other NHS staff. The information which the Government have provided to us is replete with good intentions, but short on hard evidence that nurses are benefiting from the creation of affordable housing on surplus NHS land. In the absence of such evidence, we conclude that these Regulations may not deliver the objectives of the “Homes for Nurses” scheme.
School and Early Years Finance (England) Regulations 2018 (SI 2018/10)
Date laid: 15 January 2018
Parliamentary procedure: negative
Summary: These Regulations provide for how local authorities are to set their 2018–19 education budgets. When the previous Regulations came forward in 2017, flagging up intended savings of £600 million, there was considerable concern across the education sector about future funding. The 2018 Regulations have been laid against the background of announcements in July 2017 of an additional £1.3 billion, and in September 2017 of the final national funding formula, which have been widely welcomed by the sector. While the Department has provided further information about the source of this additional funding at our request, in our view these details should have been clarified in the Explanatory Memorandum as originally laid.
We draw these Regulations to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.
19.The Department for Education (DfE) has laid these Regulations with an Explanatory Memorandum (EM). In the EM, DfE says that the Regulations provide for how local authorities are to set their 2018–19 education budgets (the non-schools education budget, the schools budget, the central expenditure and the individual schools budget). They also set out how local authorities are to allocate funding from the individual schools budget to maintained schools and private, voluntary and independent providers of free early years provision through a locally determined formula.
2017 Regulations
20.We published information on the equivalent instrument in 2017, the School and Early Years Finance (England) Regulations 2017 (SI 2017/44).12 That instrument pre-figured some of the changes now being made, including the ending from September 2017 of the Education Services Grant (ESG), which DfE had previously provided to local authorities to support their education functions. The decision to remove the ESG was intended to make £600 million of savings. We criticised the fact that the EM to SI 2017/44 contained little detail about this.
2018 Regulations
21.The latest EM is undoubtedly more informative, but we obtained additional material from the Department, which we are publishing as Appendix 2. In particular, DfE has clarified to us that, although the removal of the ESG is generally not now a live issue, there have been disagreements in a small number of local authorities about the amount that the authority is top-slicing from maintained schools’ budgets in order to pay for the statutory duties that were previously funded by the ESG.
22.DfE explains that, by comparison with the 2017 Regulations, SI 2018/10 contains some substantive changes relating to the introduction of the national funding formulae for schools, high needs and central school services, and also how local authorities are to spend the schools, high needs, central school services and early years blocks of the Dedicated Schools Grant (“DSG”). In particular, local authorities will now have the ability to set a minimum per pupil funding level, and to choose the level of the minimum funding guarantee within a specified range.
23.The Department says that the national funding formula for schools means that for the first time, school funding will be distributed to local authorities according to a formula based on the individual needs and characteristics of every school in the country; and that this will direct resources where they are needed most, and provide transparency and predictability for schools.
Consultation
24.In the EM, DfE says that two consultations were held on the introduction of the national funding formulae: the first stage, relating to the principles of the schools and high needs formulae, took place between 7 March and 17 April 2016; the second stage, on the details of the formulae, between 14 December 2016 and 22 March 2017. DfE received responses from over 26,000 individual respondents and representative organisations.
25.A Government response to the second stage consultation was published in September 2017.13 This explained that one of the questions posed was whether respondents thought that the Government had struck the right balance between fairness and stability in designing the national funding formula. The document stated that, while there was broad support for the principle of having a formula, “93% of respondents … felt that we had not struck the right balance between fairness and stability in the proposals, largely due to their concerns about the overall amount of funding available for schools. Many respondents felt that rather than redistributing current funding there should be an increase in the overall budget for school funding.”
26.In its published response to these concerns, DfE referred to the July 2017 announcement14 of an additional £1.3 billion in schools and high needs across 2018–19 and 2019–20 to support the introduction of the national funding formulae, commenting that “on top of the existing schools funding settlement from the 2015 Spending Review, this will maintain funding in real terms per pupil to 2019–20”.
27.We asked the Department what relationship there was between the £600 million of savings which was expected to flow from the removal of the ESG and the additional £1.3 billion announced in July 2017. DfE has told us that none of the additional £1.3 billion has come from the £600 million savings from removing the ESG. It expects to release £280 million in savings from the free schools programme, and £420 million through efficiencies and savings from the main capital budget (the majority of which - £315 million - will come from the healthy pupils capital programme). It intends to identify the rest of the savings from efficiencies across the rest of the Department’s budget (for example, £200 million from central programmes that support schools on relatively narrow areas of their work).
Conclusions
28.The education budgets to which these Regulations relate comprise substantial sums of money. In the July 2017 announcement mentioned above, the Secretary of State stated that core funding for schools and high needs would stand at £42.4 billion in 2018–19. When the 2017 Regulations came forward, flagging up the removal of the Education Services Grant and the resultant savings of £600 million, there was considerable concern across the education sector about future funding. The 2018 Regulations have been laid against the background of the announcement of an additional £1.3 billion, and the Department has confirmed that the final national funding formula announced in September has been widely welcomed by the sector. While the Department has provided further information about the source of this additional funding at our request, in our view these details should have been clarified in the Explanatory Memorandum as originally laid.
1 See: http://www.parliament.uk/business/committees/committees-a-z/lords-select/secondary-legislation-scrutiny-committee/publications/ [accessed 31 January 2018]
2 See paragraph 1.75 of the consultation document.
3 In January 2018, the Homes and Community Agency was re-named Homes England; this report refers to the body by its pre-2018 name, in accordance with the title of the Regulations.
4 The Homes and Communities Agency (Transfer of Property etc.) Regulations 2015 (SI 2015/1471), in our 7th Report of Session 2015–16 (HL Paper 28).
5 The Homes and Communities Agency (Transfer of Property etc.) (No. 2) Regulations 2016 (SI 2016/515), in our 35th Report of Session 2015–16 (HL Paper 147).
6 See National Audit Office, Disposal of public land for new homes, June 2015: https://www.nao.org.uk/wp-content/uploads/2015/06/Disposal-of-public-land-for-new-homes.pdf [accessed 29 January 2018].
7 The Homes and Communities Agency (Transfer of Property etc.) Regulations 2017 (SI 2017/199), in our 28th Report of Session 2016–17 (HL Paper 131).
8 See DCLG, Public Land for Housing programme 2015–20, Annual Report, February 2017: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/592919/170124_PSL_Annual_Report_FINAL_for_publication.pdf [accessed 29 January 2018]
10 HL Deb, 17 January 2018, cols 645–649 [Lords Chamber]
11 See New Economics Foundation, No Homes for Nurses, January 2018: http://neweconomics.org/wp-content/uploads/2018/01/nhs-land-briefing.pdf [accessed 29 January 2018]
12 In our 24th Report of Session 2016–17 (HL Paper 110).
13 See Department for Education, Analysis of and response to the schools national funding formula consultation, September 2017: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/648553/Schools_national_funding_formula_consultation-response.pdf [accessed 30 January 2018]
14 See: https://www.gov.uk/government/speeches/justine-greening-statement-to-parliament-on-school-funding [accessed 30 January 2018]