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House of Lords

Thursday, 16 December 2010.

11 am

Prayers-read by the Lord Bishop of Bristol.

Royal Assent

11.07 am

The following Acts were given Royal Assent:

Finance (No. 3) Act,Equitable Life (Payments) Act,Local Government Act,Savings Accounts and Health in Pregnancy Grant Act,Superannuation Act, Terrorist Asset-Freezing etc. Act.

Women: Economic Policies


11.07 am

Asked By Baroness Massey of Darwen

Baroness Verma: My Lords, all departments will assess the impact on gender, race and disability of our economic policies as required by the equality duty laid down in legislation. This is the first time that has been done. The Treasury published an overview of the impact of the spending review on equalities alongside the main spending review announcement.

Baroness Massey of Darwen: I thank the noble Baroness for that response. It is all well and good, but has she read the Women's Budget Group report on the impact of the CSR on women? Will she accept that there are different kinds of fairness and that women often lose out due to their caring responsibilities, among other things? Will she also accept that this impacts on their employment opportunities, and say whether an assessment has been made of that?

Baroness Verma: My Lords, I have read the report. I am very keen to support the fact that this Government are making fairness a key priority. I do not accept that the report sets out exactly what the Government are doing. Therefore, it is only right that noble Lords are informed that we have taken out of income tax 880,000 of the lowest paid workers, who are predominantly women. We are also protecting the lowest paid public sector workers from the pay freeze. Added to that, we are including and increasing flexible working for all people, rather than for just mothers and carers, so that we can enable women to enter a workplace that suits their needs rather than the needs always of employers.

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Baroness Howe of Idlicote: My Lords, earlier this year the Women and Work Commission estimated that improving women's participation in the workforce is worth between £15 billion and £23 billion to the economy each year. With the British economy clearly in need of such extra financial input, what plans do the Government have to ensure that both the private and the public sectors maximise talent at its appropriate qualification level? I ask this not least in light of the drastic cuts being made to government services, which will mean that the major job losses are in fact for women.

Baroness Verma: My Lords, in responding to the noble Baroness, Lady Massey, I pointed out that the Government take seriously the fact that the impact will fall predominantly on the lowest paid workers. That is why the Government have decided it is much better to ensure that flexible working is available to far more people. It means that women who often work in jobs below their potential are able to work at times better suited to them and their families, and that fathers are able to take more responsibility for caring at home.

Baroness Gardner of Parkes: My Lords, will the Minister confirm that the present Government aim to have more women on the boards of major companies? Does she think it is important to have women at that level coming through? If such board representation existed, it might have a filter-down effect that helps women all the way down the scale.

Baroness Verma: My noble friend raises an absolutely crucial point, and it is why we have asked the noble Lord, Lord Davies of Abersoch, to look at how government and business can work together to make sure that the boardrooms of public and private bodies are better represented. It is unacceptable that measurements taken in 2009 show that only 12.5 per cent of the board members of the FTSE 100 companies were women. We need to ensure that we are able to do this by having better arrangements for flexible working and through a culture change within those organisations.

Baroness Hollis of Heigham: My Lords, is the Minister aware that among families with children, those headed by women face double the cuts in benefits and services of other families? Is she further aware that among pensioners, those who are single, female and elderly-mostly widows-face double the cuts of other pensioners? How can it possibly be "fair"-a word the Minister used extensively in response to my noble friend Lady Massey-that those women, who are the poorest, who earn least and who own least, face double the cuts of everyone else?

Baroness Verma: My Lords, the noble Baroness is slightly misinformed.

Baroness Hollis of Heigham: No!

Baroness Verma: We need to take on board that we have introduced the triple guarantee to uprate the basic state pension by the highest of earnings, prices or 2.5 per cent from 2011. This is a difficult time for most people. Unfortunately, it is the result of what we have inherited.

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Noble Lords: Oh!

Baroness Verma: We are in difficult times but we will protect the most vulnerable as best we can.

Lord Lester of Herne Hill: Is the Minister aware that during the passage of the Equality Bill the previous Government completely failed to tackle the problem that the provisions of the laws dealing with unequal pay for work of equal value for women are tortuous and unworkable? Do the Government have any plans to look at those provisions with a view to making the law effective and persuading employers to look at their pay scales and practices to eliminate direct and indirect sex discrimination?

Baroness Verma: My Lords, we are ending the pay secrecy clauses and working with businesses to ensure that they voluntarily work towards ensuring that pay between men and women is far more equalised. The equality duty that we will bring in in April will ensure that organisations are more transparent in how they are engaging across the board, not only on gender issues but on minority and disability issues, to make sure that everyone will be able to access a fair day's pay for a fair day's work.

Baroness Gale: My Lords, why out of the £16 billion being brought back into the Treasury from direct tax benefits will £11 billion come from the tax benefits to which women were entitled?

Baroness Verma: My Lords, I go back my first response. We have taken 880,000 of the lowest paid workers out of income tax. The majority of them will be women.

Public Disorder


11.15 am

Asked by Baroness Miller of Hendon

Lord Wallace of Saltaire: My Lords, the police already have powers under Section 60AA of the Criminal Justice and Public Order Act 1994 to require the removal of face coverings worn for the purpose of concealing identity. The police also have powers to seize such items.

Baroness Miller of Hendon: My Lords, it does not appear so when we have these disturbances. It would be very helpful for the police if potential troublemakers did not wear masks, so enabling the police peacefully to move them on to avoid trouble.

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Lord Wallace of Saltaire: My Lords, the tradition of policing in the United Kingdom is by consent and to maintain as far as possible the trust of the public with whom the police are working. It is therefore a matter of judgment for the police whether someone who puts on a mask during a demonstration in the middle of a very large crowd should immediately be arrested. We have to trust the judgment of the police on that. I am assured that a number of the arrests that took place at the end of and since recent demonstrations were of people who put on masks during part of the demonstrations.

Lord Condon: Does the Minister agree that this issue requires a proportionate and balanced response, and not an overreaction? There is a long history of masks and disguises being used peacefully by protesters as part of their repertoire of raising and ridiculing issues and sometimes individuals. Paradoxically, by donning a mask out of context, protesters can draw attention to themselves as potential troublemakers who are worthy of additional attention.

Lord Wallace of Saltaire: I thank the noble Lord for that question; he has of course great experience in this matter. The definition of a mask worn for the purpose of concealing identity and with the intention to commit acts of violence is tightly drawn. I passed someone at Victoria station this morning whose face was covered, I think, to keep him warm. Two days ago, I passed some Japanese tourists outside here who were wearing gauze face masks which I think were intended to prevent them catching the European version of Asian flu. They would not be caught by the Act.

Baroness McIntosh of Hudnall: Does the noble Lord accept that while one has great sympathy with the reasons behind the Question-I appreciate what has just been said about the necessity of balance in approaching this issue-there is one other balancing issue that should be taken into account: that police should not appear on such demonstrations with their identity numbers concealed or otherwise removed?

Lord Wallace of Saltaire: My Lords, that point is extremely well taken. I know that the police have it very much in mind.

Baroness O'Cathain: My Lords, does my noble friend realise how terrifying it can be when a mass of people are protesting and people come up wearing masks? It might be fine for great strong men like him, but it is not fine for a lot of people. The arguments against banning masks just do not hold water. Surely if there was a rule which stated that masks could not be worn, someone wearing a mask would be arrested. That would be the law. Why cannot we have it?

Lord Wallace of Saltaire: My Lords, Section 60AA is very tightly drawn, requiring police to be authorised in the particular circumstances to require any person to remove any item which the constable reasonably believes that person is wearing wholly or mainly for the purpose of concealing their identity. We have all of us been watching the demonstrations in recent weeks. We know how difficult it has been for the police to maintain the balance for the great majority of demonstrators who wished to undertake peaceful protest.

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I am sure that all of us wish to maintain the right to peaceful protest in this country. How the police deal with the minority of violent protesters is a matter that we must leave to operational judgment on the day and at the time.

Lord Hunt of Kings Heath: My Lords, the noble Lord is surely right to say that this matter has to be left to the judgment of the police. Does he agree that it shows some of the difficulties that the police have and that they need support? Does he really think that the Government are giving the police the necessary support in the light of the drastic cuts in budgets that are going to be made to the Metropolitan Police Force?

Lord Wallace of Saltaire: I might well have anticipated that question, as it comes up on all possible occasions. The Government are giving the police all the support that they can. I am informed that a number of the people arrested after demonstrations are people identified as having been wearing masks, but if they have also been identified as taking part in more serious offences, they will be charged for the more serious offences first.

Lord Trimble: My Lords, will the Minister please think about this point again? The offence as currently on the statute book is very tightly drawn and, consequently, means that policemen engaged in a situation will be very cautious in their approach to things. We might like to take into account the experience in Northern Ireland, where, for decades, it was an offence simply to wear a mask in public, and it did not cause any of the difficulties alluded to earlier.

Lord Wallace of Saltaire: My Lords, one simply has to ask whether it helps when police are attempting to control a very large demonstration to ask for police snatch squads to try to go in to the middle of a demonstration to seize particular demonstrators, which is in effect what the noble Lord is asking for. We have to leave this to the judgment of the police on the day. I am assured that a number of those who were wearing masks and, for example, in the 24 November demonstration, vandalising a police van in the middle of Whitehall were identified afterwards and some of them have been arrested.

Lord Pearson of Rannoch: Do the powers extend to the removal of a burka that might have been donned during a demonstration?

Lord Wallace of Saltaire: My Lords, I have already quoted Section 60AA of the 1994 Act, which says,

I have also said that there are plenty of other reasons, not simply including religious identity, for which people may indeed wear masks. If it gets colder in the next few days, we can expect to see many more white Christian Englishmen, perhaps even including the noble Lord-I am not sure whether he is a Christian or not, but that is up to him-wearing masks that keep their faces warm.

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11.22 am

Asked By Lord Harries of Pentregarth

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, the UK remains committed to the territorial integrity of Indonesia. We will do all we can in support of measures to address the widespread poverty in the area in question, and to raise our concerns about human rights abuses wherever they occur. We encourage, along with other international partners, a meaningful dialogue which would be of assistance in finding an acceptable solution.

Lord Harries of Pentregarth: I thank the Minister for his reply, but would he urge on the Indonesian Government the sheer seriousness of the present situation? He will not need to be reminded of the statement of the Foreign Secretary in the other place that friendly relationships with states should in no way preclude our raising human rights abuses in the strongest terms. Would he draw the attention of the Indonesian Government to the fact that 10,000 people are assembled in June to reject the so-called special autonomy measures? The West Papuan people do not believe that these are helping them, and a dialogue is needed with their leaders.

Lord Howell of Guildford: I appreciate the very strong feelings on this subject, not only of the noble and right reverend Lord but of many people about some of the reports from that area. I fully endorse what my right honourable friend the Foreign Secretary said in another place. Our ambassador raised with the governor authorities only a couple of weeks ago some aspects concerning human rights that clearly concern us greatly. The Deputy Prime Minister raised questions of human rights in the area and of access of journalists, to see just what is going on, when he met senior Indonesian Ministers at the Asia-Europe summit in October. So we certainly have not been silent on this matter, but we do believe that it really is the responsibility of the central, district and provincial Governments and all the parties concerned to work out exactly how a dialogue is going to go forward. There are real restraints on how much we can do from outside, except to keep raising our voice about the clear abuses of human rights that have, sadly, occurred.

Lord Avebury: My Lords, I declare an interest as having been involved for two and a half years in the negotiations between the Indonesian Government and the Acehnese people, which led to a successful conclusion. Has the example of that process, and in particular the use of mediators, been considered by the parties? If not, could it be suggested by the Government to the Indonesians?

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Lord Howell of Guildford: In instances such as the one that my noble friend has mentioned, mediators and facilitators can play a part. We have not been asked to play such a role ourselves, but I would not question the proposition that in very difficult and intense situations of the kind that we are discussing, this kind of mediation can undoubtedly play a part. However, we have not been asked to play that part.

Lord Hannay of Chiswick: Will the Minister confirm that the Indonesian Government are maintaining their ban on foreign journalists going to Papua? If that is so, does he not agree that the ban is entirely counterproductive, because it nurtures the view that there is something going on there that has to be concealed? Will he therefore say whether the Government will follow up the intervention by the Deputy Prime Minister at the Asia-EU summit and press the point on the Indonesian Government in their own best interests?

Lord Howell of Guildford: Certainly what has been raised by the Deputy Prime Minister will be followed up. The noble Lord mentioned concealment. If he has visited websites, as I have, to look at reports of what is going on there, he will have seen enough to realise that horrific and dreadful things have occurred. While the case for greater access for journalists is always strong and we will pursue it, we can already see what is happening there.

Baroness Liddell of Coatdyke: My Lords, the noble Lord will be aware that one of the associated problems in Indonesia is that of people smuggling. In view of the tragedy overnight off Christmas Island, will the Government do everything in their power to raise again in international fora the need for concerted international action against people smuggling?

Lord Howell of Guildford: Yes, of course we will. One has to echo the words of the noble Baroness about the sadness and tragedy so graphically depicted in photographs in our newspapers this morning of these refugees-boat people of a kind-going to a terrible death in the storms off Christmas Island. It is very sad.

Baroness Symons of Vernham Dean: My Lords, the Minister was kind enough to tell us that the ambassador raised these issues, as did the Deputy Prime Minister at the summit a couple of months ago. Will he tell us what the response of the Indonesian Government was to having these matters raised?

Lord Howell of Guildford: Not in detail, except that they recognised we have these concerns. The ambassador was in the West Papua region and talked to the governor and to the police authorities. He made the point very clearly that the reported abuses of human rights are completely unacceptable and that we are very concerned. As far as concerns their response, we must try to look forward to the possibility of getting a dialogue going so that an acceptable solution can be found. However, from outside it is very difficult for us or for any other international partner to define what that solution should be and how it should go forward.

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Extradition: Gary McKinnon


11.29 am

Asked By Lord Maginnis of Drumglass

The Minister of State, Home Office (Baroness Neville-Jones): My Lords, a judicial review of a decision by the previous Home Secretary to uphold an order for Mr McKinnon's extradition stands adjourned. My right honourable friend the Home Secretary is reviewing the case against the sole legal test, which is whether, given Mr McKinnon's medical condition, extradition would breach his human rights. My right honourable friend has sought Mr McKinnon's consent to a psychiatric assessment by clinicians recommended by the Chief Medical Officer. A response is awaited from his solicitors.

Lord Maginnis of Drumglass: I declare an interest in so far as I chaired the independent review of autism services in Northern Ireland and currently chair the Northern Ireland autism regional reference group. I am grateful to the Minister for her Answer, but does she accept that inadequate recognition and the total lack of appropriate interventions for those with an autistic condition, which was first identified and defined by Kanner in 1943, have deprived someone in Gary McKinnon's age group of his human rights and that to extradite him would exacerbate the social neglect that he has suffered? Do we not have a more compelling moral responsibility in this instance than a legal one?

Baroness Neville-Jones: Medical science has advanced through the ages, and we have a better understanding of some of these conditions. With regard to Mr McKinnon's case, it is of course precisely the issue of the state of his medical condition and whether the extradition would breach his human rights that is at issue at the moment. We hope that he will be willing to undertake an examination, with agreed clinicians.

Lord Dholakia: My Lords, many of the judicial avenues open to Mr McKinnon have now been exhausted. The sad part about it is the particular state of disablement that he suffers. A conversation was recorded between the Prime Minister and President Obama in July this year where they said that they were looking for agreeable solutions. Has such a solution been found? Will the Minister confirm that the Extradition Act 2003 does not require contestable evidence? Does it not work to the detriment of British citizens, and should it not be reviewed?

Baroness Neville-Jones: On the first point, as my right honourable friend the Home Secretary has made clear, we have a legal framework within which Mr McKinnon's case is being considered. On the second point, my right honourable friend has asked for a review of extradition provisions, including the US/UK treaty as well as the European extradition warrant. Sir Scott Baker will be considering some of the issues to which she has made reference.

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Baroness Browning: My Lords, having been actively involved in the other place in the Gary McKinnon case, I have read his psychiatric reports that were made available to the Home Secretary before the general election. I understand that the Minister is seeking further medical reports. Does she agree that the evidence already before the Home Office shows overwhelmingly that the threat of self-harm is not an idle threat but is very real? Does she also agree, in the light of the damage that has been caused to the American Government by Wikileaks, that, rather than trying to imprison an autistic savant, the Pentagon would do well to employ Gary McKinnon to sort out the weaknesses in its computer system?

Baroness Neville-Jones: If I might respond to the first part of my noble friend's question, one of the factors that influenced my right honourable friend the Home Secretary to stay the judicial review that was in progress was precisely the desire to take a second look at the question of Gary McKinnon's medical condition. The House will understand that she has asked for a separate and impartial view to be taken of his medical state.

Lord West of Spithead: My Lords, did the Minister or any members of the current Government have discussions with the Americans about this case when they were Opposition, and were they given any indications about how the Americans would behave with regard to it?

Baroness Neville-Jones: I have not had any discussions with the Americans and I cannot, without notice, answer for other members of the Government.

Lord Hodgson of Astley Abbotts: My Lords, I want to ask my noble friend about the timing of the Scott Baker review. Clearly, this is an increasingly urgent matter, given this and other sad cases. The latest parliamentary Answer that the Minister has given is that it will take place in late summer, which is a fairly broad date. Could we have an update on the timing? Does the Minister not share my regret that this unbalanced treaty was slipped-not passed-through by the previous Labour Government without any parliamentary scrutiny at all?

Baroness Neville-Jones: My Lords, I would hope that the legislature had done its proper job. As regards the review being conducted by Sir Scott Baker, he has indeed been asked to report by next summer. The reason for that is to allow him to conduct a proper review. If I might say so, there is a general feeling that some of the provisions need looking at. If they are to be looked at, they need to be looked at thoroughly. They include such matters as the breadth of the Secretary of State's discretion; the operation of the European arrest warrant; whether we should commence the forum bar; whether the UK-US extradition treaty is unbalanced; and the whole question of whether requesting states should be required to provide prima facie evidence. This is a long and substantial list of items. I am sure the House will agree that it is right that those conducting the review should be able to do a thorough job.

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Lord Hunt of Kings Heath: My Lords, we will clearly look forward to the outcome of the review with a great deal of interest. I hope the noble Baroness will agree that there should then be parliamentary debate. However, will the noble Baroness confirm that the 2003 Act, which was debated in Parliament, enabled the UK to align extradition arrangements with EU member states, the US, Canada, Australia and New Zealand, and has been instrumental in bringing back to this country people who have committed crimes against UK citizens?

Baroness Neville-Jones: The noble Lord is correct in saying that the Act has enabled the UK to request the return of citizens to this country for trial. There are some erroneous figures out in the open about the operation of the UK-US treaty. The numbers in each direction are pretty much the same. There have been 25 cases of people returned to the UK and 29 of individuals returned to the US by the UK.

Arrangement of Business


11.37 am

Lord Shutt of Greetland: My Lords, immediately after the conclusion of the debate in the name of the noble Lord, Lord Moynihan, my noble friend Lord Marland will repeat a Statement on electricity market reform.

Loans to Ireland Bill

Business Statement

11.38 am

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, with the leave of the House I will make a Business Statement about the Loans to Ireland Bill, which had its First Reading last night and was printed this morning.

On 22 November, my right honourable friend the Chancellor of the Exchequer announced that the United Kingdom, alongside the International Monetary Fund and the European Union-the eurozone and other member states-will participate in the international financial assistance package for Ireland. The United Kingdom has agreed in principle to make a bilateral loan to Ireland of approximately £3.25 billion, as it is in our national interest that the Irish economy and banking system are stable. The Government have therefore introduced a short Bill, designed to provide the necessary authority for HM Treasury to advance these funds to Ireland.

The intention is to fast-track the Bill. It is important for the Government, the IMF and the other lenders to be sure that the legislation will be passed so that they can assess the adequacy of the whole international support package. The IMF board is meeting to discuss the package today. Noble Lords will appreciate that insuring against further financial market instability is also imperative in the current environment. The Bill was introduced in another place on 9 December. In line with recommendations on fast-track legislation made by the Constitution Committee of this House, the Explanatory Notes to the Bill contain a full explanation

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of the case for fast-tracking and address the key questions set by the committee. In particular, the Explanatory Notes set out that the Bill contains a sunset provision, so that the authority to lend to Ireland and the power to increase the cap lapse after 8 December 2015-five years after the date of introduction in another place.

At the completion of stages in another place yesterday, the Bill was certified as a money Bill by Mr Speaker because its sole purpose is to authorise financial expenditure. The usual channels have agreed that the Second Reading of the Bill will be taken next Tuesday, 21 December, before Committee stage of the Public Bodies Bill resumes, and that remaining stages will be taken formally immediately after Second Reading, as is usual practice for money Bills. This will allow the Bill to receive Royal Assent before both Houses rise for the Christmas break. A list of speakers for Second Reading of the Bill next Tuesday is already open in the Government Whips' Office. This approach has the agreement of the usual channels and I hope that the whole House will support it.

Business of the House

Motion on Standing Orders

11.40 am

Moved By Lord Strathclyde

Motion agreed.

Procedure Committee: Third Report

Motion to Agree

11.41 am

Moved By The Chairman of Committees

The Chairman of Committees (Lord Brabazon of Tara): My Lords, this report covers several matters, some of which are, I hope, self-explanatory. However, I hope it will be helpful if I refer briefly to three of our recommendations.

First, we have considered the proposals of the Leader of the House regarding the future timetabling of Thursday debates, both for the present, two-year Session, and for future Sessions, which will run from spring to spring. We are satisfied, on the basis of figures and projections provided by the Clerk of the Parliaments, that the Leader's proposals will provide the same number of Back-Bench debate days as the current arrangements. We therefore recommend this proposal to the House.

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Secondly, we have endorsed a suggestion by the Leader of the Opposition that the limit on the number of topical Oral Questions allowed per Member should be increased for the duration of the present, long Session. In deciding on an appropriate limit, we have had to balance the length of the Session against the growing number of Members wishing to table Questions. We therefore recommend a one-off increase in the limit from four Oral Questions per Session to five.

Finally, we have considered the conduct of Oral Statements. We recommend that in future Members wishing to ask questions on an Oral Statement should, as a courtesy to other Members, be present to hear the whole Statement read out. This is a modest change, but I hope that the House will welcome it.

Motion agreed.

Gulf of Mexico: Oil Spill


11.42 am

Moved By Lord Moynihan

To call attention to the implications of the Deepwater Horizon oil spill in the Gulf of Mexico; and to move for papers.

Lord Moynihan: My Lords, I declare an interest as one of many long-term investors in BP shares as part of a pension fund and, more important for today's debate, as a director of Rowan Companies. I have had the privilege to sit on Rowan's board for 12 years and have chaired its health, safety and environment committee since its inception. We are a high-spec jack-up rig company with a manufacturing and land drilling business headquartered in Houston, Texas. I should add, in the context of today's debate, that Rowan has no involvement in deep-water drilling activity.

The explosion that we are considering, and its consequences, occurred on the Transocean Deepwater Horizon at 10 pm on 20 April this year. It is known that the crew had been fighting circulation issues on the rig, where the weight of the muds and pressure of oil were not matched. The explosion was a horrific human disaster that rapidly turned into one of the worst environmental catastrophes in the history of the energy business.

In 1990, when I was appointed Minister for Energy with responsibility for implementing the Cullen report, a different approach was followed by the British Government from that energetically pursued by the Obama Administration before the mid-term elections. Back then, on 6 July 1988, the Piper Alpha rig, a North Sea oil production platform, was the subject of a tragic explosion and the resulting fire destroyed the rig and killed 167 men, with only 59 survivors. The Government of the day, with the support of the Opposition, responded calmly and worked with the industry on both sides of the Atlantic-indeed, with the US company Conoco leading-to implement a new safety regime, which currently leads the world.

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Deep-water drilling is the future of the industry. Such drilling characteristically takes place in hostile conditions and is at the leading edge of drilling technology. Deep water is where the world's hydrocarbon growth market exists and is the main area for offshore production growth, with deep-water discoveries accounting for 50 per cent of world discoveries over the past three years. The deep-water discoveries are significantly larger in size than the new onshore discoveries, with 150 million barrels of oil equivalent being the average size of a deep-water discovery compared with 25 million barrels onshore. Deep-water production has doubled over the past five years and is expected to double again over the next five years. The reality is that, given the annual discoveries required to meet world demand, in 20 years' time we will need to discover and produce as much from deep-water drilling as we do in total world wide today. However, as we have seen, deep-water exploration and production are still in their infancy, and the focus has been on exploratory wells. A backlog of needed development drilling may indeed be building.

Against that background, we need to consider not only what is happening in the offshore oil and gas drilling business but the relevance of this morning's announcement that the US intends to take legal action, as was expected. It would be inappropriate to comment on the legal implications of that, but equally the announcement was part of due process and those who follow the industry recognised it as such. What is relevant is that the decision has formally spread the net much wider; many counterparties have been added, and I anticipate that more will be added. The announcement underlines the fact that Deepwater Horizon was a major industrial accident, but I have to say that the approach being taken is in stark contrast to the total focus on BP by the Obama Administration before the mid-term elections.

That point about BP brings me to my remarks on governance. The British, much more than the Americans, favour the separation of powers between the chairman and the CEO. This is not just for good governance, as the role of the chair is to provide air cover for the CEO. In the case of BP, the chair should have been available to cover while his CEO focused on the operational issues, for the only person who can provide such cover is the chairman. Regrettably, Tony Hayward had no port of call, as he had no effective chairman. As a result, he had become too close to the action. When the chairman finally appeared, to the embarrassment of many his reference to "the little people" on the lawn of the White House achieved the unthinkable by yet further damaging the reputation of the company. As a result, BP presented a soft public-relations target.

Interestingly, BP is in the interesting position that there may be a silver lining for the company in this tragedy. The real problem facing the major oil companies is growth. Many are simply too big. BP has been forced to shrink substantially, to a level from where it can begin to grow again. I believe that the very size of the behemoths in the industry will lead to potential safety incidents in the future, unless these issues are addressed very seriously world wide today. Over time, the reaction will be for these very large companies to break themselves up into refining, marketing, midstream

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and downstream businesses. I sensed that the noble Lord, Lord Browne-an eminent former CEO of BP-came very close to this point.

A second issue, which is well known to the Minister from his previous professional life, results from insufficient capacity in the insurance market. The liabilities are now too big for few except the majors to deal with. The question that I pose is whether the insurance market can be encouraged to provide more cover and, if so, how. Most available capacity is about £2 billion yet, post the Deepwater Horizon disaster, capacity needs to be of the order of £20 billion or more.

The nature of deep-water drilling-indeed, the nature of our offshore licensing regime-requires work in partnerships. On many occasions in the North Sea, BP has benefited from working with small independents, which often have the ability to show more ingenuity, more innovation, more responsiveness and more fleetness of foot. Small independents can be more focused on the success of an individual well, which can have a major impact on an independent's balance sheet, whereas the majors can sometimes lose sight of the detail within a wider portfolio of assets and innumerable drilling activities, which dilutes the focus of the senior management. Put simply, on many occasions independents have brought a more user-friendly approach to drilling activity. I am a believer in diversity in the industry, as you get the most out of any situation from having a range of players involved in an activity. However, the disaster in the Gulf of Mexico has pushed back deep-water exploration to the big battalions, in an unseemly battle between a major oil company and a sovereign Government.

If I were running an independent today, the first question that I would ask my management team is, "Are we engaged in operations anywhere in the world that could bring down the company?". If so, deep-water drilling is not a risk that I would be prepared to take. However, there is little evidence that the independents can receive protection from the insurance market. I put it to the Minister that this is potentially a huge loss to an industry that is focused on the deep-water exploration that, as I outlined earlier, is so essential to the future of oil and gas production. We must avoid a scenario in which the independents are precluded from deep water.

I turn to the implications that I believe will follow. The first and most important issue for any oil and gas company-indeed, for any company-is safety. Safety is everything. Safety cases need to be in place on oil rigs, not gathering dust. Active, live safety regimes are critical to the safe performance of activities in very hostile conditions. Nothing is more important than a strong safety culture. There needs to be more on-board safety exercise, with all persons on rigs required to participate.

I propose for the consideration of the industry that, in each country world wide, a single entity should have broad safety and pollution prevention responsibility to avoid the gaps, overlap and confusion that exist in some safety and regulatory regimes. The regulator's core responsibilities and objectives must be clearly identified. Safety management and regulatory priorities should also be identified through a comprehensive risk assessment programme.

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At the heart of safety is training. Training and competency programmes must take account of new risk information. Contracting strategies need to take account of safety and risk implications.

I have always believed that government and industry should promote an improvement mentality, not a compliance mentality. Continuous communication is essential-communication among regulators, operators, contractors, workers, industry associations and public interest groups-if we are to achieve that objective of a continuous improvement in safety. Operators and contractors must manage their companies to achieve safety objectives and must continually assess the effectiveness of their management programmes. I believe that regulators world wide should seek not to resolve problems but to serve the industry by distributing information by, for example, hosting workshops so that the industry itself can solve the problems.

Wherever possible, the best standards should be identified and applied internationally. The industry should not have different standards in different countries. Accident investigations should always be conducted independently, and findings should be promptly and broadly distributed and discussed with all personnel.

Industry and government cannot rely solely on incident data to identify risks. New indicators must be explored and assessed, particularly for major hazards and safety culture. Worker input into safety culture is absolutely essential-you are as strong in safety as your weakest link. Peer-based audit programmes should be considered for both regulators and operators. I hope that the Minister will agree that all personnel should be trained to be safety leaders and should be empowered to stop work on a rig without blame. In the context of the disaster in the Gulf of Mexico, inspection of life capsules also needs to be reviewed. Why were two life capsules not deployed on the Transocean rig?

As I mentioned, training is critical. Back on land, training to plan for managing disasters offshore-from media training and helicopter co-ordinator training to incident command training-needs to be reviewed in order to understand better how to handle an incident.

A final point on the implications of those safety considerations is the importance of a clearer definition of the respective roles of the drillers and operators. While the operator is the overall supervisor and co-ordinator of the project, the processes and the people lie within the control of the driller.

Against that background, I congratulate the Government on their measured response to the incident. However grave the human and environmental disaster-and there is no denying the scale of severity of both-this was not the time for the fury of a nation to be turned on a major drilling accident. The aftermath became grossly political and over-reactive, from the press coverage to the McCarthyesque attempt at character assassination by some at the congressional hearings. Both of those damaged American national interest and were in stark contrast to our reaction to the Piper Alpha disaster, with its huge loss of life.

The Secretary of State, Chris Huhne, was right to state that the Deepwater Horizon gives us pause for thought and, given the beginning of exploration in

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deeper waters west of Shetland, there is every reason to increase our vigilance. DECC has increased the oversight of drilling operations by requiring additional inspectors in its Aberdeen office. Can the Minister confirm that the number of annual inspections of drilling rigs will double? If that is the case, do the Government feel that there should be further changes to the inspections, both in content and frequency?

I understand that DECC is also reviewing the indemnity and insurance requirements for operating on the UK continental shelf. Can the Government respond to my earlier observations on the cost of cover and exposure, which will be prohibitive for many of the independents on which the success of North Sea exploration and production has been built? Does my noble friend agree that this could seriously damage future activity in deep-water, high-pressure fields to the detriment of activity in UKCS waters? If so, what action do the Government intend to take in this context? Have the Government asked the insurers to work with a new group of regulators and oil companies-the oil spill prevention and response advisory group, or OSPRAG-to study this issue and come forward with solutions? If action is not taken, only the very few, strongest self-insured operators will, as I have argued, be able to participate.

Having made some observations earlier on the chairman of BP, I hope that the House will allow me to end by paying tribute to the substantial contribution that Tony Hayward made to the company throughout his lifetime of service. His knowledge base and talent were identified, recognised and nurtured by the noble Lords, Lord Simon and Lord Browne, who as his predecessors encouraged his exceptional talents. On the occasion of the explosion of the Macondo well, in terms of the safety culture that he had rigorously sought to implement since first setting foot in the CEO's office, Tony Hayward's instincts, initial judgments and strategy were sound in the immediate aftermath of that crisis and helped to pave the way to assist many thousands of people affected by the tragedy. The problem grew into an issue of how those judgments and strategy were put into effect and how to handle the media and inevitable US pre-election political assault. History will show that it can never be said that Tony Hayward did not recognise the incident's heavy toll on the Gulf, its inhabitants and the workers on the rig. Nor can anyone doubt his total commitment in seeking to address the nightmare that was engulfing the industry, BP, his colleagues, his family and himself on the very subject to which he was committed-the safety of his workforce in the world's most hostile yet necessary industry. That industry will fuel much of the world's economy in the 21st century through deep-water offshore oil provinces, in which so much of the industry's future will be based.

11.58 am

Lord Grantchester: While the rhetoric has subsided to a large extent on the oil spill disaster, nevertheless the reality of the event has to be recognised and recent events taken into account. For BP, the event was a near-death experience. It appeared that BP did not know what was happening as it seriously underestimated

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the flow-rate discharge. It appeared not to know how to stop the flow, as three attempts to stem the well failed. It appeared unappreciative of the depth of the concern regarding the effect of the spill on the environment and the impact on other businesses in the gulf.

The Macondo spill resulted at one stage in a 50 per cent fall in BP's share price, while the stock market had concerns about whether the asset base of the company was deep enough to meet its ultimate liabilities. BP's stock briefly rallied following the initial disaster but this morning it fell again as the US Government announced their plan to take legal action against BP for the disaster in the Gulf of Mexico. They are planning to sue BP, in addition to Anadarko of the US and Mitsui of Japan, its partners in the disastrous Macondo well; Transocean, the owner of the Deepwater Horizon drilling rig; and the QBE syndicate 1036 at Lloyd's of London, which insured the rig. The claim is for $21 billion.

Following extensive political debate and government discussion undertaken in the full glare of publicity, BP has responded to stabilise the situation. Among the measures taken, it has set aside $20 billion in an escrow account under third-party control with no cap on its liabilities and excluding potential penalties. BP is perhaps grateful for the political pressure to withhold two quarters' dividend payments, with the challenge to resume but not restore dividend payments in 2011. It must be borne in mind that this affected the pension funds of many people on both sides of the Atlantic. In addition, BP has cut its capital expenditure and, since the disaster, has now disposed of $43 billion value of assets to increase liquidity. The spill over the 87 days before the capping stack attempt succeeded in stemming the leak is estimated at 4.9 million barrels and resulted in a record $17 billion second-quarter loss to the company.

The company has made its internal inquiry extensively available. The internal inquiry did not identify any single action or inaction that caused the accident. Rather, a complex and interlinked series of mechanical failures, human judgments, engineering design, operational procedures and contractor interfaces allowed an escalation of errors. The report presented eight key findings related to the causal chain of events and recommendations that have been examined throughout the industry and between national regulatory regimes.

The UK already has a robust regulatory regime introduced following the Piper Alpha disaster of 1988. For deep-water drilling, operators are being required to demonstrate that the factors identified in the BP report have been satisfactorily addressed-that there is effective co-ordination between all the companies involved and between companies and relevant government agencies. In this light, it is correct that the UK Government do not see a case for any ban on deep-water drilling. The strength of the UK regulatory regime was recognised in the initial report from the US Department of the Interior, which identified that elements of our regime should be implemented there, in particular a case-by-case safety appraisal, independent verification of the design of wells and, most important, the separation of the health and safety function from the licensing function within government.

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The Macondo incident has shown that co-ordination between all the companies involved and between companies and relevant agencies is an essential part of safe operations and will be a requirement to be demonstrated. The industry needs an environment where best practice is shared and lessons are learnt. The UK regulations also contain a range of additional safeguards, statutory requirements, checks and verifications. While it is impossible to say that such a blow-out as occurred in the Gulf of Mexico could never happen in UK waters, our regulations provide a reduced probability of such an event.

The US has separated health and safety from licensing in two different agencies and has implemented two new rules to improve safety. First, there is the drilling safety rule to make mandatory several requirements for the drilling process and, secondly, there is the workplace safety rule to make programmes to identify potential hazards and to introduce risk reduction protocols.

Since the capping of the well on 15 July, BP has had to revise its business to ensure that safety is placed at the heart of its operations. Finance and reputation have been further strengthened through structural and personnel changes. Under the guidance of a new chief executive, Bob Dudley, the exploration division has now been split between exploration, production and development, each with separate leaders reporting to the chief executive. In addition, BP has re-examined the low-probability, high-impact quartile of its risk register and introduced a new executive role with powers to intervene, also reporting to the chief executive. These changes help to ensure that a greater emphasis is placed on risk management.

Furthermore, BP has examined its relationships with contractors to review the balance between, on the one hand, its incentives and reward structures, with the corporate emphasis on operational objectives such as timely fulfilment, and, on the other hand, the emphasis on safe operations. It needs to introduce further measures to incentivise safety. BP has identified improvements to its response capability in operations made complex by the very nature of deep-water drilling.

I am informed that BP, with the rest of the industry, is examining best practice in communication and sharing of experiences. In hindsight, it is examining the disincentive to share near-miss experiences, such as the one that happened in the Shell Sedco 711 platform in the North Sea in December 2009, when a blow-out preventer worked and shut down operations, in contrast to what happened in the Gulf of Mexico.

I am grateful to the Minister for making his contacts in BP available to outline their changes to business practice. Not only is it necessary to focus on preventing major oil disasters and disastrous events, but examination of all leaks, spills and seepages in operations must also take place, with the necessary reporting structures to build up a culture of continuous improvement within the industry and with the emphasis on safety and the minimisation of environmental degradation.

In response to the gulf inquiry, an industry-led initiative has set up the Oil Spill Prevention and Response Advisory Group-OSPRAG-to liaise with industry and government. I would like to ask the Minister what

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discussions have taken place with this group. What areas of concern are being addressed? Will it continue to meet to a regular timetable?

In light of the huge amounts of dispersant that have been used in the gulf, can the Minister tell us what monitoring and research is happening and being shared with Her Majesty's Government concerning dispersant effects on the environment? I understand that no advances in dispersant technology have occurred since the 1989 Exxon "Valdez" spill.

I am grateful to the department for making available the shareholder map of responsibilities in respect of the regulatory framework. Action 9 of the department's annual energy statement makes a commitment,

Can the Minister advise the House when that review will be finalised and whether it will include a best-practice review by the Better Regulation Task Force or the Risk and Regulation Advisory Council?

Finally, I ask the Minister whether the Government are setting up any formal structures to improve dialogue internationally between Governments, especially with the United States, to monitor exploration as it takes place in ever more remote and potentially hazardous environments as the search for oil reserves continues.

The North Sea remains an extremely important resource to the UK: the UK's oil and gas resource is estimated to be up to 24 billion barrels equivalent. The sector at present provides about 60 per cent of the country's energy and benefits the balance of trade to the tune of some £30 billion a year. This disaster highlights the challenge to move decisively towards a low-carbon economy. Recently a report from a group of business leaders drew attention to what it called the peak oil debate and urged an added emphasis behind renewable energy that green campaigners have been longing for. Meanwhile, BP announced yesterday a significant discovery in the deep-water west Nile delta in Egypt. It cannot be a return to status quo practices. We must press on and continue in the transition to safer, more sustainable energy. I look forward not only to the Minister's reply but to his Statement later today.

12.08 pm

Baroness Falkner of Margravine: My Lords, the BP oil spill in the Gulf of Mexico was the biggest oil catastrophe in American history and possibly in peacetime history overall. Eleven people died; numerous others suffered injuries as a result of the explosion on the Deepwater Horizon platform; an estimated 5 million barrels of oil escaped into the sea; and we will never know how much oil ended up in the deeper ocean. There was considerable damage to people's livelihoods, and to marine and wildlife, as well as to the reputation of a distinguished multinational connected to this country.

While my noble friend Lord Moynihan and the noble Lord, Lord Grantchester, have greater expertise on the technical aspects of this catastrophe and what it means for safety regulation for oil rigs in the deep seas, I shall concentrate on the unsustainable and

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insatiable American appetite, and that of the developed world, for fossil fuel in non-renewables. The implications for the UK are equally profound.

I merely note that the debate about the technical failures of BP and the other companies involved is of great significance because we must learn the lessons from it. As a recent report on the "Today" programme revealed, a Shell platform only narrowly avoided a similar incident in December 2007. The safety review discovered a series of misinterpretations and mistakes by the crew operating the platform, which was very similar to what happened in the BP case. Fortunately, as the noble Lord, Lord Grantchester, said, the blow-out preventer worked and a major oil catastrophe was averted in the North Sea. While the risks of deep-sea drilling are thus evident and widespread, I want to focus on some of the bigger lessons on which we need to draw for a British policy on energy and oil, and on climate change and the environment.

The BP oil spill is not an isolated case with tragic outcomes. It is in fact symptomatic of the larger risks that we are forced to take as the world reaches the point where our demand for petroleum outstrips our capacity to find and produce it. It is a simple geological truth that the world's oil reserves are limited. What is not known is the amount of oil that is still available to us for commercial exploitation. For decades, the international oil companies and the Governments in oil-rich countries have assured us that there was no danger that we would soon come close to exhausting world oil reserves. They told us that the doomsday scenario of a so-called "peak oil" was misguided. This optimistic outlook seemed justified over the past several decades as new oilfields were discovered and technological innovation allowed us to dig for ever more remote reserves. But in recent years peak oil theory has gained traction in international energy debates and can no longer be dismissed as scaremongering or out of hand.

In 2009, the UK Energy Research Council carried out a major review of about 500 studies of future oil reserves. It concluded that,

Other bodies, such as the respected International Energy Agency, have also begun to change their forecasts for oil reserves. In 2007, the US Department of Energy warned that,

We in the UK should be particularly receptive to these warnings, for our own experience with oil production provides a classic illustration of what an oil peak looks like, albeit in a regional context. Oil production in the North Sea peaked in 1999 and is now on a declining path. Britain has been a net importer of oil since 2005-something we did not anticipate and plan for quite well enough.

As other oilfields are becoming unavailable, either because they have reached the end of their lifetime or because they are in the hands of state oil companies, we need to search for oil in ever more inaccessible parts of the world. As the BP oil spill demonstrated, the scramble for unconventional oil comes with growing safety and environmental risks. They are also likely to

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lead us into civil war and conflict-not least if you look at countries as far apart as Equatorial Guinea, Nigeria or Saudi-to doing business with those we may not wish to be so dependent on.

What are the answers? A tightening of safety standards and regulatory oversight of the oil industry will be an important answer to the BP issue. But if we focus solely on this aspect, then we miss the bigger threat of our continued dependence on oil, which is fuelling the search for unconventional oil reserves deeper and deeper in inhospitable waters, literally. In fact, given current trends in road and air transport in the UK, our oil dependence is set to grow even more. We may be able to replace coal and oil-based energy production with renewable energy sources and nuclear energy, but oil remains an irreplaceable fuel for the transport sector. Although households and industry have been able to reduce their dependence on oil since the 1970s oil crisis, the transport sector's share of oil consumption has steadily risen. Cars, trucks and airplanes now consume about 50 per cent of oil in the United Kingdom.

There are compelling reasons for reducing our dependence on oil. The fight against climate change requires us to reduce greenhouse gas emissions, chiefly those from the burning of fossil fuels. A shift away from oil would also be beneficial for the UK's foreign policy, which I have already touched on. As more and more oil reserves are controlled by Governments that are neither liberal nor democratic, we would do well to reduce our addiction to oil and our dependence on the good will and co-operation of often unpalatable and unpredictable regimes in oil-rich regions.

The BP oil catastrophe should thus be seen as a wake-up call. It brought to light extraordinary failings in safety procedures and management structures by, as I have said, a proud international oil company. It is also shone a light on how our dangerous dependence on oil is forcing us into ever riskier forms of oil exploration. We cannot address the former problem without dealing with the latter as well. It is for these sound environmental reasons that this Government have embarked on a radical overhaul, and we will hear today about the electricity market reforms. We look forward to my noble friend's Statement in a short while and the consultation process that is to follow.

12.17 pm

Lord Selsdon: My Lords, I should declare a number of interests that may confuse your Lordships as much as they do me. I am grateful to my noble friend Lord Moynihan. My first interest lies in my great aunt Jenny Mitchell-Thomson, a canny Scot from the east coast who, 50 years ago, left to the nephews and nieces, of whom I was one, £500 in British Petroleum shares with instructions that they should never be sold except in dire emergency. I did actually sell some of those shares briefly to help pay for the education of my son, Calum Mitchell-Thomson-the same name as my own-who has a degree in marine economics and is the managing director of one of the larger investment banks dealing with energy. He is my specialist adviser from time to time.

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I declare another interest in that 20 years ago Earl Jellicoe, a mentor of mine as he was of the noble Lord, Lord Moynihan, appointed me at a young age to serve on one of the EU committees, together with the noble Lord, Lord Stoddart of Swindon, and other great names. We were to determine where our future would lie, including what would happen when North Sea oil ran out. We said that it would be a worrying time, but that the technology that we would have gained from those developments in the North Sea would benefit us worldwide.

I then asked myself who owns the oil under the sea, and remembered the old Scottish definition of freehold, "All from heaven above to hell beneath", with a few extra territorial rights in that you controlled the foreshore or the sea as far as you could ride a horse and throw a javelin. Looking out at the North Sea one day, I wondered whether I could design a form of cannon or weapon that would give control of that sea. I looked up Big Bertha, the gun used during the war. I found that no one had yet worked out who owned those areas of the North Sea beyond the 200-mile limits.

I scratched my head and asked what would happen when the oil runs out. Our oil did run out, as the noble Baroness mentioned just now. We had a sudden change from a surplus to a deficit. We have a deficit in manufactured goods of £100 billion a year and in foreign trade of £45 billion, and the decline in revenues from North Sea oil is having an impact. The only conclusion is that the economy of the United Kingdom has to be worldwide. Within that, our expertise in oil and gas in the energy sector is quite significant. My son was briefing me last night and said that I should think of six things-high, high, high; low, low, low. Low-low depth, low pressure, low temperature-exploration that is not complicated. High-high depth, high pressure, high temperature-exploration that is complicated and technically difficult.

I then set out to evaluate this issue, as I tend to do from time to time, and said, "Goodness me, 71 per cent of the earth's surface is covered by sea. Who owns and controls the sea? Who has, or should have, those rights?". Not so long ago I suggested in your Lordships' House that perhaps the 200-mile limit should be extended to 500 miles or something of that sort because the law of the sea is quite complex. I found in my evaluations that the United Kingdom coastline is longer than that of India. Noble Lords might say that that has no relevance, but it has some small relevance because it is full of creeks and inlets that go in and out, and these provide an opportunity for shellfish.

The pollution of our inland and coastal waterways could have a major impact upon shellfish production and £45 million a year of exports. That is only a small amount but a study of the seas of the world-the Pacific Ocean, the Arctic, the Mediterranean, the southern seas-will disclose vast coastlines. Where are these coastlines and to whom do they relate? Some 44,000 kilometres of them relate to the British Commonwealth, including overseas territories, dependent territories, bailiwicks and others. It is the same length of coastline as that of the former Soviet Union. Of course, the Americans' is much smaller. So we have coastlines to consider within our Commonwealth relationships. Among other former empires and territories, the French and

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their francophone territories have 34,000 kilometres of coastline. This may or may not be relevant but we need to consider the sea and look not only at the opportunities within in it but at the pollution dangers that can befall us again from an explosion related to oil or to anything else.

We all remember the tsunami, but what few of us knew at the time the first buoy triggered an alarm in the Pacific was that if the telecommunications world had been sufficiently switched on, someone with a mobile telephone could have sent a signal to almost everyone in Indonesia and elsewhere saying, "Get off the beach". We have to consider the question of communication, including satellite communication.

We already accept that 91,000 vessels sail upon the oceans of the earth, ignoring, of course, the vast numbers of British private yachtsman-I declare an interest as secretary and treasurer of the House of Lords Yacht Club-sailing under 147,000 different flags and ensigns, which is almost as much as anyone else in the world does; and, of course, we are sea-related.

One of the worries is how we can patrol and control the seas when we have lost much of our Navy. However, on the merchant shipping side, as I have pointed out, there are 91,000 vessels. The biggest individual fleet is that of the Japanese, but the Commonwealth has 21,000 vessels. So there again is a relationship, and, perhaps multilaterally with our Commonwealth friends, we should give some thought to the oceans of the world.

As I went down this route I asked myself what technological advantages we have that can determine when disasters, oil-related and others, are picked up. We have satellite technology-I declare an interest as having been secretary of the Parliamentary Space Committee for some years. The new satellites, most of which contain British technology, are the size of a washing machine. I was a director of an Italian washing machine company for a while so I know the size of washing machines. I have mentioned before that these satellites can scour from a relatively low earth orbit the oceans of the world and can pick up oil spills, the migration of fish and almost anything else. They are surveillance satellites, and are within our own capabilities.

The point I am trying to make is that although there may be an oil disaster-and we all worry about health and safety-we must accept that, at the end of the day, there will be many developments under the earth and under the sea. I pause for a moment to express my regrets for the two recent mining disasters. We do not know how or why the earth suddenly decides to tremble. We know well how tsunamis arrive. We also know that HMS "Scott", our survey vessel, is the only vessel that can carry out underground surveillance of tectonic plates and, if it had been surveying before, might well have determined the causes or the potential for tsunamis.

Here in this country, with our international relations, we have certain resources and technical capabilities, although we may now lack the financial muscle. We have a lot going for us. The implications of the spill are not just for health and safety; they are for where and how we exploit the underground resources of the world or even space resources.

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I feel very worried about the balance of trade and our current difficulties. I do not mind so much about the decline in the value of the pound, because I have to declare an interest in that my great uncle, Stafford Cripps, had the job of devaluing it for the first time. It is within the family. We all talk about these things over Christmas lunches or dinners. I am not optimistic, but what my noble friend has done today is open a door for wider debate. I congratulate him on his own know-how-and know-how, I was once told, is a magic word for turning common sense into cash.

12.27 pm

Baroness Smith of Basildon: My Lords, I doubt that the noble Lord, Lord Moynihan, could have foreseen quite how topical his debate would become today, with the news coming through late last night that the US Government are to take legal action against BP and eight other firms following the Deepwater Horizon oil spill. The noble Lord clearly highlighted the challenges facing the industry. I found very interesting his assessment of the levels and elements of risk involved.

As we have heard, this catastrophic incident on 20 April this year created explosions and fire on the rig, causing the rig to collapse and leading to the deaths of 11 people with 17 others being injured. The oil spill continued until 15 July, when it was temporarily closed by a cap, and was then declared "effectively dead" on 19 September.

Initially, it was estimated that around 1,000 barrels of oil a day were being released from the well; that estimate was later increased to 5,000 barrels a day. In the largest ever accidental leak in the ocean, millions of barrels of oil were spilled over five months. It can be quite hard to comprehend the scale of such a disaster, the scale of the exercise undertaken to stop the oil spill and the scale of the clean-up operation, let alone the ongoing issue of whether there is adequate research and investment into spill response technology.

It is hard also to comprehend the social and environmental impact. The spill was in an area where 71 per cent of employment came from tourism and recreation. A further 200,000 jobs were in recreational fishing. It is an area on which the nation relied for commercial fishing stocks. It was hugely important also for bird and wildlife watchers.

It may take many years, particularly with the legal action that is now under way, for the financial implications fully to be understood. There is and, as we have seen, will continue to be considerable litigation. As was reported in the Financial Times, there is,

We know from the speeches that we have heard today that the ramifications are likely to be long lasting, not just for the Gulf of Mexico, which has been hit environmentally and economically, but for BP and the other companies involved. As the noble Lord, Lord Moynihan, outlined, there are implications for the future of offshore drilling across the world.

Do we know what exactly went wrong? The Minerals Management Service, which has since been renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, is the regulatory and inspection

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body for offshore oil drilling and rigs in the USA. An investigation by the Associated Press claimed that such examination as was performed was in the most part brief, perfunctory, extremely lax and with poor record-keeping. Crucial safety and emergency procedure information, including documentation for the precise incident that later occurred, was not available. The investigation by AP claimed that after just over the first three years around 25 per cent of inspections were omitted, although that could be explained by weather and other factors, which could mean that an inspection was not possible. However, the last three inspections took two hours or less. Nevertheless, the rig was regarded as having a strong safety record and was never on the informal watch list for problem rigs.

The question is whether we in the UK should take comfort from the difference in our regulations from those in the US. There are key differences. Mr Steve Walker, the head of the Health and Safety Executive's offshore division, described it as,

with a system of independent verification enshrined in law, which the US does not have. In his evidence to the Select Committee in the other place, he also considered that our performance-based legislation was more sophisticated than the US checklist of inspection. When asked whether the Deepwater Horizon would have been allowed to operate in the UK, given that it had,

he informed the members that in the UK the HSE would have seen the design 21 days before drilling began, asked questions about the design and would have assessed the answers before deciding whether to take any action. Also, in the UK we have a separation of licensing from health and safety oversight, which helps to ensure the appropriate distance between the interests of the industry and the health and safety of those involved. I welcome the fact that the HSE has made its own response to this incident and will undertake a further examination of the regulation and the record of the UK industry.

BP has undertaken its own investigation and, as we have heard from the noble Lord, Lord Grantchester, made significant and welcome changes to its own organisation to improve safety, becoming more risk-averse as a result. There are lessons to be learnt for the whole industry. The development of North Sea oil fields has been subject to considerable debate, controversy and conflicting views over many years. Numerous oil and gas companies, including BP and Chevron, which was granted a licence for deepwater drilling in the North Sea on 1 October, are looking to expand their operations and to go forward and deeper to more remote areas than previously. The debate between those who argue that such drilling is necessary for energy security and those who feel that the environmental costs are too high has been intensified by the Deepwater Horizon spill. The comments of the noble Lord, Lord Selsdon, highlighted his concerns about coastline pollution and the impact on the UK. Given his obvious love of the oceans, I am sure that he shares my concern at the news today that so many coastguard stations are to be closed around the coast of the UK.

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Drilling for oil has continued; record numbers of bids for new offshore oil and gas licences were submitted in 2010 and, in October, 144 new licences were issued, including more than 20 for drilling in deep sea areas. Greenpeace has now issued a legal challenge against the Government to stop the 22 new deepwater drilling licences until the causes of the Deepwater Horizon explosion have been properly established. The arguments advanced by the lawyers are that the licences are close to environmentally sensitive areas which support legally protected species such as whales and dolphins. I am aware that the Minister can say very little about this issue because it is subject to legal action, but I seek his views on the department's confidence in the UK regulatory regime. The noble Lord, Lord Moynihan, was right in highlighting that safety has been of particular concern on this issue.

Following President Obama's review, the US Government have announced additional rules. Before drilling takes place, stronger environmental and safety standards are to be in place, working on the principle that the Administration should proceed with caution and create a more stringent regulatory regime. Does the Minister consider that the differences in the two countries' regimes offer greater protection in the UK? What ongoing discussions is the department engaged in with the HSE? Is the Minister satisfied that all the current deep-drilling rigs in the UK fully comply with emergency policies and ongoing training on how to respond in event of an incident? How often does he consider that deepwater drilling rig inspections should take place to be confident of safety procedures, and what lessons have been learnt in the UK from this incident?

The noble Baroness, Lady Falkner, rightly highlighted her concern, shared by many, about the sustainability of the ever-increasing demand for oil and the ongoing quest for new reserves because of this demand. The Minister will be aware of the report last month from a group of business leaders, including Richard Branson, about UK dependence on oil and their concerns about this. What consideration has the department given to this report? With business, there is always the relationship between risk and money. How much will it cost when things go wrong? As we have heard, BP has footed a hugely significant bill for the beach clean-up and may, in addition, become liable to additional financial loss depending on the US Government's litigation. The Department of Energy and Climate Change has reported that licensees operating under the Petroleum Act 1998 are required to have sufficient funds available to discharge any liability for damage attributable to any oil pollution incident. The licence does not set a limit to the licensee's liability and licence applicants must demonstrate that at all times they have sufficient funds to meet expected commitments, liabilities and obligations. Further to the event in the Gulf of Mexico, I understand that the department has asked the Offshore Pollution Liability Association, or OPAL, immediately to revisit its risk modelling for worst case scenarios. Can the Minister provide any information about how this review is progressing and when we can expect to hear results? I appreciate that the news of the US legal action is very new and clearly carries the possibility of profound implications. It may be too early for the Minister to have reflected on these points but, if he is able to say

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anything further, particularly if there have been discussions between the Attorney-General in this country and the Attorney-General in the US, it would be helpful.

Finally, I thank the noble Lord, Lord Moynihan, for bringing this issue before us today, topical as it turned out to be. This debate should be seen in the wider context of ongoing debates that we are having and the Statement that we will shortly hear from the Minister on the ongoing Energy Bill. This is a huge issue for this country with huge implications. Our role as an Opposition is to work with him to deal with these hugely important and crucial issues. When we are able to support, help and advise, we will want to do so, playing a constructive and helpful role in securing the security for life of this nation.

12.36 pm

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, I thank my noble friend Lord Moynihan for bringing this to the House and his invaluable insight and very measured speech on this matter. I hope that my own speech will cover a number of the issues raised by noble Lords in what I think has been an excellent and very informative debate. I think that the Opposition have set out very clearly the state of the nation as regards the oil industry. My noble friend Lady Falkner made very clear the long-term problems for the nation, and I shall deal with some of those points later. Noble Lords must forgive me if I repeat in my speech some of the things that have already been said, but they are worth repeating.

The Deepwater Horizon accident was a most serious and tragic event in recent years. We must not forget that 11 people died, which was a terrible loss of life, harrowing for the families and friends of all those involved in the industry. There were very serious consequences: the resulting oil spill and its after effects caused untold stress and heartache for local communities, with widespread disturbance of fishing, tourism and other activities in the region, which is still recovering from the horrendous Katrina hurricane. But in considering all this, let us keep it in a degree of context and recognise the vital contribution that oil and gas exploration has made to the world economy.

We have all noticed that lawsuits are back in the newspapers today. It is clear that the legal process has had some time to run. We should wait for the due process of the presidential and the Marine Board and other investigations to shed light on where responsibility lies and the action that could be taken. It would be wrong to suggest that there have been extensive cross-Atlantic discussions at this point between legal departments but, obviously, there is an ongoing process that started when the incident happened because BP, among others, is a transatlantic company. Both departments have been talking for a long time, to answer one of the questions asked by the noble Baroness.

We should not forget that BP is a great British company, creating not just wealth and jobs here in the UK but also in the US and many other parts of the world. Millions of pensioners benefit and this Government have been right to stand behind it during this time of crisis.

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Ultimately, BP has suffered badly. This was manifested in its stock market value and in the eventual resignation of its CEO, Tony Hayward, to whom my noble friend Lord Moynihan paid tribute. BP is of course working hard to complete remedial actions stemming from the incident, and to learn from it. It is restructuring its safety culture and has reviewed its operations around the world. It has sold some of its assets to provide assurance that it can meet all legitimate liabilities arising from the disaster.

In the UK, while we are working hard to move towards a less carbon-intensive future, we cannot overnight remove our need for hydrocarbons. We will be dependent on oil and gas for several years to come. We have a choice of either producing oil and gas in UK waters, where we are recognised as having one of the most robust safety and environmental regulatory regimes in the world, with all the economic benefits that that will bring, or paying to import oil and gas from elsewhere.

The oil and gas industry, which has been operating here for more than four decades, is a fantastic success story. Its innovation and verve have ensured that we have been able to produce 40 billion barrels of oil and gas in the UK. We should not forget that UK oil and gas still provide around two-thirds of the UK's primary energy needs. However, the contribution is not just to our security of supply, but to our economy. The industry supports around 350,000 jobs directly and indirectly, and another 100,000 people are involved in exporting goods and services. Annually the industry spends around £12 billion in the UK and provides around £10 billion to the Treasury in taxation. The good news is that we still have the equivalent of some 20 billion barrels of oil-perhaps more-left to produce. To realise this potential, we need continued investment and new exploration, and we want to support the industry in every possible way to achieve this.

My department is working closely with the oil industry on a number of fronts to ensure that the right incentives remain to bring the required level of investment and exploration, and that the legislative framework facilitates new developments, for instance by securing third-party access to existing pipelines and facilities. I will bring new provisions in this area in the forthcoming Energy Bill. My department was pleased to offer 144 new licences recently in our 26th offshore round. This shows the continuing confidence in the future of the UK continental shelf and provides a strong basis for continuing exploration and development activity.

We have an innovative and productive industry. The UK was one of the first areas worldwide in which offshore exploration and production took off, and we now have more than four decades of experience. More than 10,000 wells have been drilled in UK waters, including more than 300 in depths of more than 300 metres. This means that the risks associated with drilling wells on the UK continental shelf are well understood. Our regulatory system has been developed to meet the evolving challenges. Following Piper Alpha, safety regulation was brought under the Health and Safety Executive umbrella to get the benefit of its expertise, not least in regulating major hazards.

The recommendations after the Piper Alpha inquiry of the noble and learned Lord, Lord Cullen, shaped the North Sea safety regime that the UK industry has

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been successfully operating under for the past 20 years. It was a step change, and it was recognised at the time that a more comprehensive approach to regulating safety in the industry was required, with a change of culture that put more responsibility on duty holders to manage risks across the range of their activities. The concept of goal setting was introduced, with duty holders required to identify their hazards, assess the risks they posed and put controls in place to minimise those risks. For high-risk offshore activities it was necessary to formalise the process into a permissioning regime, with the industry required to show in writing, via a safety case, that the health and safety risks were "as low as reasonably practicable". The regulator's role is to assess the safety case, accept it when appropriate and initiate inspections to ensure that it is being implemented. Other legislation on evacuation, escape and rescue, management and administration, design and construction, was revised in a less prescriptive style to complement the new safety case regime. I could go on. The key point is that we have a tough and effective regime in the UK that is considered a benchmark around the world, and particularly in Europe.

DECC plays a vital role in overseeing the exploration, development, production and environmental performance of the offshore industry. Following the US incident, an internal review was conducted by senior officers on the basis of the information available immediately after the accident, looking at the implications for DECC's offshore regulatory regime. Both current and expected future drilling operations were considered. I am glad to report that the review did not uncover any gaps in the regulatory controls, or any reason to doubt their effectiveness. I pay tribute to the previous Government, too, for their activity in this regard. However, it was recognised that, with the prospect of more activity in deep waters, it is increasingly important to be assured that operators are doing what they should be doing. We have taken a number of steps to further strengthen our regime. We have increased the number of environmental inspectors and doubled the number of environmental inspections of mobile drilling rigs. The requirements for OPEPs were revised. All OPEPs submitted for exploration, appraisal and development drilling must now assess the worst-case scenario where all containment barriers have failed, resulting in a well blowout. Pre-drilling inspections are now carried out on deepwater mobile rigs before any final drilling permit can be issued. Containment devices are now available in the UK, and the industry is working on a capping device that we expect will be ready for deployment in the North Sea before the end of next year. I hope that that answers one of my noble friend's questions.

The ceiling on the industry insurance liability scheme, Oil Pollution Liability Ltd, which the noble Lord also asked about, was increased from $120 million to $250 million, and the industry is looking at liability issues in general to see if anything more is required. I am aware that the European Commission wishes to look at the way in which deepwater drilling activities are regulated across Europe, with the aim of ensuring consistent standards. While we will continue to work on this with our European counterparts and the Commission, everyone should be clear that we will

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strongly defend the UK's ability independently to regulate its oil and gas industry, because we have been shown in the past to have a strong regulatory regime. If the exercise is focused on raising standards in other member states' territories, the UK can provide a strong contribution, given our substantial experience in this world.

Before summarising, I will answer a few specific questions that I have not yet covered, and perhaps amplify my noble friend Lord Moynihan's question about insurance. I spoke to insurance industry leaders this morning and I do not believe that there is no market available for an increase in liability protection. However, we should recognise that BP was not a great purchaser of insurance and elected to run potential liabilities against its balance sheet. Of course, insurance should not be a substitute for a balance sheet. People should not carry out work unless their balance sheet can cope with the inevitable potential liabilities that manifest themselves.

The noble Lord, Lord Grantchester, asked whether we were in contact with OSPRAG. We are in regular contact and, as I indicated earlier, we are looking for technological advancement. Huge lessons have been learnt from this disaster. We must look at the US review when it comes out; we await it with great interest. We will consider its implications for our own regime and will implement any changes that we think should be made. However, I point out that we suggested to the US regime that they follow our regime, which separates health and safety from departmental issues. The US regime chose not to, but I understand that it is now about to do so. On the wider issue, the G20 has initiated a best practice dissemination work group for deepwater drilling as part of a global marine environmental initiative, and of course we strongly support that.

The noble Baroness, Lady Falkner of Margravine, has told us, rightly, that we cannot continue to depend on oil. I welcome her encouragement of the development of renewables, which we will doubtless be discussing in a few minutes' time.

The noble Lord, Lord Selsdon, made a most engaging speech. Earlier, I looked up what his interests may be in this field and I was glad that he came out with about 30 or 40 of them in a very short time to demonstrate that he has a close association with the oil industry. I look forward to hearing about his discussions at the Christmas table as much as he looks forward to hearing about ours.

I am grateful to the noble Baroness, Lady Smith of Basildon, for giving me prior notice of one or two of her questions, because that meant that I could do the requisite research to respond to them in a way that I hope she feels is adequate for her needs.

One of the questions was, "Do you consider that the difference in the two countries' regimes offers greater protection in the UK?", which was a further amplification of things that I had discussed. The straight answer is that, as I said earlier, we have in place a number of safeguards that offer the UK greater protection. The requirement for a safety case ensures that risks are identified and suitable controls are selected. HSE reviews, well design and procedures are fundamental,

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while a schedule of well examination by independent and competent persons is an addition to the HSE review. A scheme for the verification of safety-critical equipment, including blow-out preventers, is in place and the HSE monitors well operations on a weekly basis. These are critical issues.

Our department has a close working relationship with the HSE and has accepted safety cases of the current deep-water drilling activities that include the emergency procedures required to ensure safety. After the HSE has accepted the safety case for an installation, it produces an inspection plan and inspects the installation at least once a year-sometimes three times a year, depending on the type of installation and activities being undertaken.

The noble Baroness rightly brought ITPOES, the UK Industry Taskforce on Peak Oil and Energy Security, to our attention and she mentioned that Sir Richard Branson was a member. Of course we welcome any outside suggestions and contributions to this debate. It is not as if we are not carrying out such work ourselves; our chief scientist is permanently in discussion with stakeholders about the threats to oil supply. We started an initiative in that regard in August and we intend to review that and work within its results.

In summary, the Deepwater Horizon accident was a most serious and tragic event, causing 11 deaths and, subsequently, environmental and unprecedented economic consequences. I am sure that the knock-on effects will be felt by local people and businesses in the region for years to come. It was also viewed as a wake-up call for the industry and regulators worldwide.

The oil industry is fundamental to Britain. We will be reviewing the US report once those investigations are complete to see whether there is anything more that we need to do on top of our own significant regulatory scheme. Deep-water drilling in the UK is not a new concept; the industry has been conducting such activities here since 1974. However, we must not be complacent. We have to remain extremely vigilant. I thank noble Lords for their excellent contributions to this debate and I look forward to further discussions as the years go by.

12.54 pm

Lord Moynihan: My Lords, I am most grateful to the Minister and to noble Lords for participating in this debate. Over the past 10 years, I have learnt much about the family history of my noble friend Lord Selsdon. Once again, the House enjoyed his contribution, expertise and family insights. May he speak on any subject on which I am fortunate enough to win the ballot in future.

If American politicians were listening, they would have been impressed by the noble Lord, Lord Grantchester, because of his well researched speech and his calm, professional, all-party approach, which has also characterised the approaches of this House and another place to oil disasters, both within the UKCS and beyond our shores. It was echoed in content, delivery and expertise by the noble Baroness, Lady Smith of Basildon, as well as in her welcome focus on the changes that BP has made in the light of the disaster.

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I thank my noble friend Lady Falkner for widening the debate to the challenge of macro-energy policy. As the Minister states, the truth is that, whatever steps we take-and we are about to hear about more welcome ones-the global demand for oil and gas will continue to grow over the next 30 years and we had better be prepared for the technical challenges, the political issues and the high prices that will accompany the world's insatiable demand for hydrocarbons.

I particularly thank the Minister for his speech, for the work undertaken by his excellent officials, some of whom I recognise from over 20 years ago when I was in the department, for his answers to noble Lords' questions and, above all, for focusing, as indeed has the House, on safety. An unremitting focus on safety is essential and is the most important implication that we should draw from the Deepwater Horizon oil tragedy. I thank noble Lords for their contributions to this debate and I beg leave to withdraw the Motion.

Motion withdrawn.

Electricity Market Reform


12.56 pm

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, with the leave of the House, I should like to repeat a Statement made by my right honourable friend Christopher Huhne in the other place.

"Mr Speaker, today we begin consulting on the reform of the electricity market. This programme sits at the heart of my department's mission to deliver secure, affordable and low-carbon energy.

The case for reform is clear. We need significant investment in our energy infrastructure. As old coal and nuclear plants shut down and demand for electricity grows, we must build the next generation of power stations. The electricity that they deliver must be both affordable and sustainable, helping us to meet our emissions reduction targets and to keep the lights on. The current energy market has served us well but it cannot deliver long-term investment on the scale that we need, nor can it give consumers the best deal. Left untouched, it would lock carbon emissions into the system for decades to come.

Investors and boardrooms around the world want to know whether the UK is a good place to do energy business. Today, we are setting out our plans to make it one of the best places to do energy business. The challenges, and the opportunities, are huge. Put simply, we face growing demand, shrinking supply and ambitious emissions reductions. The demand for electricity could double by 2050 as we decarbonise the economy. Thirty per cent of our electricity must come from renewables by 2020, up from 7 per cent today, to meet our contribution to the EU renewable energy target. In the next 10 years, one-quarter of our existing power plants will need to be replaced as nuclear and coal plants reach the end of their lives.

Without action, we will face a real and growing threat to the security of our supply. The reserve margin

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of spare generating capacity will fall over the next decade and the risk of interruptions to our energy supplies will rise, so we must build the next generation of power stations and act to ensure that there will be enough reserve capacity to meet our needs. We will need, together with renewables, new gas-fired power stations and new nuclear plant. We must attract more than £100 billion of investment in new power stations and grid connections by 2020-double the investment rate of the last decade.

We must rebalance our market framework to attract investment in the right technologies. At the moment, there is a bias towards low-cost, low-risk fossil fuel generation. Renewables, nuclear and carbon capture and storage all have relatively high upfront capital costs, but a more diverse, lower-carbon energy mix is better for our energy security, our economy and our planet.

Some measures have already delivered investment in new low-carbon generation, such as the renewables obligation and the EU Emissions Trading Scheme, but we must go further and faster. To secure reliable, affordable low-carbon electricity, we must change the market structure. We must create the right framework to ramp up our power generation and secure our supply. We must also deliver cleaner, greener electricity for the 2020s and beyond. Today, we are proposing new incentives to drive our investment while protecting the rules for investment already made. The focus will shift permanently from conventional fossil fuel-fired electricity to low-carbon technologies: renewables, nuclear and cleaner fossil fuels. Our preferred package of reforms is designed to strike a balance between the best possible deal for consumers and giving existing players and new entrants in the energy sector the certainty that they need to raise investment.

Reform will be gradual. We want to reassure industry that rules for existing investments will be protected. By consulting on a process and principles for the transition to the new market arrangement we aim to minimise uncertainty. The competitive market will remain at the centre of our energy policy, but the four elements of the reform package announced today will change incentives in the market and ensure both the security and decarbonisation of our power supply system, while minimising costs to consumers.

First, there will be greater long-term certainty about the additional costs of running polluting plant to make lower-carbon investment more attractive. Proposals set out in HM Treasury's consultation to support the carbon price directly tackle the core problem-putting a better price on emissions, increasing the cost of fossil fuel-backed generation and strengthening the carbon price for UK electricity generators.

Secondly, greater revenue certainty for low-carbon generation will make clean energy investment still more attractive. Through the proposed 'contract for difference' feed-in tariffs, the Government will guarantee greater revenue certainty for low carbon in the form of top-up payments if the wholesale price is below the feed-in tariff and a potential clawback for consumers if wholesale prices are above the contracted tariff.

Thirdly, there will be additional payments to encourage the construction of reserve plants or demand-reduction

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measures to ensure that the lights stay on. Capacity payments will create an adequate safety cushion of capacity as the amount of intermittent and inflexible low-carbon generation increases.

Fourthly, there will be a back-stop to limit how much carbon any new coal-fired power station emits. An emissions performance standard will reinforce the existing requirement that no new coal is built without carbon capture and storage.

Together, these four reforms make good on our commitments in the coalition's programme for government. They will make the UK a prime location for low-carbon energy investment. They will ensure that our energy supply is cleaner and more secure. They will protect the consumer as, while prices will rise in the medium term, the additional impact of the reform packages will be small. By 2030, consumer bills will be lower than if we did not reform the market now. The reforms will also lay the foundations for the sustainable economy of the future, bringing jobs up and down the supply chain.

The consultation that opens today invites everyone to tell us whether they think that the preferred package of reforms is the right one and to provide the evidence to support their views. Final recommendations will be published in a White Paper in late spring 2011 and the reforms will be introduced before the end of this Parliament. We are also reviewing the role of Ofgem and the energy regulatory framework and today we are publishing the Government's response to the call for evidence on the terms of the review. We have a once-in-a-generation chance to rebuild our electricity market, our investor confidence and our power stations. Like privatisation before it, this will be a seismic shift securing investment in cleaner, greener power and delivering secure, affordable and low-carbon energy for decades to come".

1.04 pm

Baroness Smith of Basildon: My Lords, I thank the Minister and his departmental colleagues for giving us early sight of today's Statement. Given the other business before the House, it was helpful to have that advance notice. We certainly welcome the Statement and the high-level recognition of the issues that we as a nation have to tackle.

I want to highlight four key issues that come across in the consultation document: first, security of supply; secondly, the ability to achieve our green targets in the longer term as well as through short-term measures; thirdly, securing the investment of around £200 billion that is needed in order to grow those businesses that will help us to achieve those targets and energy security; finally and crucially, keeping energy prices reasonable. The Minister will be aware of the press speculation today, which has already caused great concern. We face a huge challenge, but the consumer must not bear the whole or too great a burden.

I make it clear that we on this side of the House believe that the programme is absolutely necessary to support security in energy for the future and that we will support sensible, fair mechanisms for reform. Today, we welcome the publication of the paper and the consultation, because it is crucial that the Government

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put in place the mechanisms to make new low-carbon investment attractive. They also have to bridge the looming energy gap that we face without a rush for unabated fossil fuel generation. The Government also have to provide energy security across a balanced and diverse energy portfolio while considering, at all stages, fairness and affordability for the customer. Although increased energy bills have become a reality, we cannot ask consumers to accept ever increasing bills. We must be able to give them genuine assurances that we are doing all that we can to protect them.

I shall ask the Minister a few questions. The paper is an electricity market reform proposal but, given that we enter this winter with the worst gas storage, do the Government also intend to bring forward some proposals for gas security? Can the Minister also assure us that the Government are committed to low-carbon growth and stimulating investment? Given the welcome announcement today that the green investment bank is to go ahead, what role is the bank likely to play in that?

There are a number of challenges and the Government have to seize this opportunity, which is why we welcome today's Statement. However, investment and certainty are paramount. The energy security of the nation means that we cannot allow any delays. We have to act, and act fast. The noble Lord knows that the industry needs certainty if it is to invest at the scale needed. Are the Government able to provide certainty to the industry and to people who are already paying inflated energy bills? Will the programme being put forward today be enough to encourage energy companies to invest in the UK, to create the jobs that this country needs-and the skills to fill them-and to protect customers from unaffordable energy bills?

A number of issues are before your Lordships' House at present. We have had this consultation; we have the Second Reading of the Energy Bill next week; we have the announcement today of the green investment bank; and we have the Treasury consultation on carbon prices. It is all part of a bigger picture, along with the review of Ofgem. Noble Lords will be aware that the Energy Bill has been introduced and is being debated next week. We certainly welcome the Bill and the opportunity to work with the Government on it, but it presents as many questions as it answers about the Government's intention on energy policy while, as we can see, much of the detail of the green deal is intended to be included in regulations. I look forward to the Delegated Powers and Regulatory Reform Committee's analysis of the Bill and to debating the substance of the policies as the Bill goes through the House, so that we can play our part in working with the Government to address these issues.

Finally, we entirely agree with the Minister and the Government about the importance of this Statement and the consultation. This is the once-in-a-generation opportunity that he referred to. As always, we are prepared to work with him and his Government constructively to ensure that we achieve the triple goals of fairness for consumers, a better environment and energy security.

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1.09 pm

Lord Marland: I thank the noble Baroness, as I always do, for her constructive contribution and for being very clear that we are working closely on this, as we have so far with pre-briefings and such things. I do not want to get into the detail of the Energy Bill because we are going to exhaust ourselves over the next few months on that subject, so let us keep our energy pent up and ready for that.

I will deal quickly with the two substantive questions which the noble Baroness asked. We recently agreed to planning permission for a 15 per cent increase in storage for gas. Gas storage is fundamental but not critical because, from the previous Government's activities, we now have the most flexible gas refinery and ports to import gas. We are in a pretty unrivalled position to import. We have 50 per cent of our own gas supply and a secure supply from Norway of 20 per cent. We are in quite good shape at the moment but we cannot be complacent. As the noble Baroness said, the green investment bank has been given the go-ahead, which is good news. It will be fundamental to pump-priming many of the activities that will be fundamental to the capital investment that is required.

1.11 pm

Lord Jenkin of Roding: My Lords, while warmly welcoming my noble friend's Statement, it gives rise to several questions. I have one in particular. Is it part of the purpose of the proposals to provide a longer-term level playing field across the different low-carbon generating technologies? That seemed to be inherent in the Statement last November of his right honourable friend Mr Huhne. However, my noble friend's department has recognised that the lifetime carbon footprint of nuclear power is roughly equal to that of wind power. For how long will it be justifiable for the consumer to have to pay a substantial subsidy to generate more wind power when you could get a more reliable source of energy at a lower cost from a larger nuclear programme? I would be most grateful for the answer to that question.

Lord Marland: There is no greater expert than the noble Lord on these matters. I can assure him that this electricity market reform is to establish a level playing field for renewables and to get a clearer line of benefits and support for it. As to his point about nuclear power, we have cleared the decks for the start of new nuclear. His experience would concur that, unfortunately, the period for establishing a new nuclear power station is a minimum of eight years. Then there are all the other regulatory issues that we must go through in getting to there alone. My noble friend will know-because he is so knowledgeable on all these matters-that the 2050 pathway, which will incur a doubling of electricity demand, means that we will have to obtain electricity from virtually every source we can get our hands on.

Lord Knight of Weymouth: My Lords, it looks as though we are in for another cold weekend. As the weather gets colder, the confidence of consumers in being able to turn on the heating without worrying too much about price needs to be reinforced. To do that, we need to have confidence in our supply. Building on

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the last question, can the Minister give some assurance about developing nuclear to help fill the energy gap, and developing it on time, particularly given the Health and Safety Executive's decision not to issue final certificates to new forms of nuclear technology? Similarly, can he give some assurance that the Government will invest in skills so that we can grow such skills in the eight-to-10-year window? Will we develop those skills domestically in areas such as Somerset, down the road from where I live, where we want to see the nuclear skills academy going ahead with confidence?

Lord Marland: The noble Lord makes an extremely good point on skills. There has been inertia in nuclear. I pay credit to the previous Government for reversing public opinion on nuclear, but not for the fact that there has been no activity. We have created much activity. Nine months ago, or when we got into power, people would have asked what was going to happen on nuclear. SIs have now created the opportunity for new nuclear. It has become a fundamental part of our programme. There is a serious task in obtaining the skills to satisfy that programme. I welcome the noble Lord's support for that. It is fundamental because we have lost those skills in the past 20 years and it will be no small task to regain them. Therefore, we must have a programme that runs concurrently with the development to make sure that they both happen, and that we can cope with the eight or nine power stations that will, we hope, be built in the next few years.

Lord Greaves: My Lords, I join noble Lords who have thanked the Minister for repeating the Statement, which was made in the House of Commons by the Secretary of State, my right honourable friend Chris Huhne. It gives noble Lords in this part of the House great confidence that this important area is in the hands of Chris Huhne, our Liberal Democrat Secretary of State, and his team of Ministers in both Houses.

In view of the importance of making sure that consumers get a fair deal, does the Minister have confidence that this package will deliver more decarbonisation and low carbon for less cost? Is it true that this package shows that we can reach half the level of carbon in the electricity system at a lower cost than that which was planned by the previous Government?

Lord Marland: I am grateful that my noble friend champions my boss, Chris Huhne, who has been excellent to work with. I compliment my fellow Ministers on the Conservative Benches for their excellent work on this matter. The key to this reform package is to ensure that we have a pricing structure-which would otherwise be going out of control through the uncertainty of fossil fuel prices in the future-that gives us electricity security through our own supply of electricity from renewables. We have no alternative but to achieve our targets because they are set down in European law.

Lord Lea of Crondall: My Lords, as an aside, I hope the noble Lord, who is normally very courteous about all these matters, will not repeat the canard that the Labour Party was uniquely responsible for not getting nuclear to be more advanced than it already is. After

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Chernobyl in 1986, all western Governments got cold feet about nuclear; it took an awfully long time to bring the world around to the reasoning for going forward, which has several elements, as we all know. The Labour Government got us to the starting gate more or less before the election.

I come to three questions about this announcement. First, I particularly welcome the fact that the Treasury, as far as I know, has for the first time produced a consultative document that will lead to a Statement in the new year about a carbon price floor. That is the Treasury's phrase. However, in not revealing what the carbon price floor might be in pounds, dollars or euros, the Treasury only lifts its petticoat as far its ankle. There is no further gleam as to where it might wind up. For 20 years, ever since Rio, we have known that-

Noble Lords: Question!

Lord Lea of Crondall: The second question is coming up, if noble Lords would mind not interrupting. Secondly, how does the Minister reconcile this Statement with the Energy Bill, the Second Reading of which we will debate in this House next Wednesday? This is a rather important Statement, but the government decisions announced in it were not available when the Energy Bill was published. Does he agree that it is rather surprising-if you take a half-interest in these matters-that he has not said anything about the implications of our now having to table a considerable number of amendments to the Energy Bill? Finally, on the European aspect of the carbon regime, we are now talking as if we are acting on our own. I cannot believe this is the case. Will he comment on that as well?

Lord Marland: Clearly the noble Lord was not listening when I gave credit to the previous Government for reversing public opinion. I thought that I gave fulsome praise in that regard. As for the carbon floor price, as the noble Lord rightly says, the Treasury has lifted its skirt and has said that it will publish the results of its consultation by 2011. It hopes to have the new carbon price support in place by 2013. The Treasury is carrying that matter forward now.

I am not sure what point the noble Lord makes about the EU. He may be suggesting that we are the only people who have signed up to our renewables target. However, this is a mandated, cross-European target, to which we are signatories.

Baroness O'Cathain: My Lords, I have a simple question for my noble friend on the Statement. He mentioned that energy prices could well decrease. Will he assure me that, in any format or framework that will be produced by him and my noble friends, the consumer will benefit as soon as the price goes down, rather than the usual practice at the moment whereby as soon as the price goes up the consumer is hammered and eight, nine or 10 months pass before any adjustment is made? It ought to be very easy to adjust the rate automatically by computer. I suggest that he deals with this matter through Ofgem and the investment criteria for investing companies.

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Lord Marland: I thank my noble friend for her excellent point. I do not want anyone to go away thinking that electricity prices are going to go down in the foreseeable future. The whole point about this programme is that they will go up less if we do not have to rely on the unpredictable price of gas, which went up by some 80 per cent in four years and which is very volatile at the moment. The department predicts that by 2020 electricity prices will have gone up 33 per cent. This is of course very unsatisfactory, but results from the fact that as a nation we have underinvested in our electricity generation infrastructure for years. We have sat back and relied on North Sea oil and that is now no longer available in the same quantity. However, I assure my noble friend that if electricity prices do go down, they must be passed on to the consumer. This is fundamental to Ofgem's monitoring of it. Ofgem will be subject to a review, and during that process we will ensure that we take on board her very valuable comments.

Lord Maclennan of Rogart: My Lords, I declare an interest as the chairman of a company that is endeavouring to promote renewable marine energy. What limits are there on the additional payments to help to construct reserve plants to cushion the capacity of intermittent providers of electricity-presumably principally wind power-and what calculations have been made as to the possible cost of that to the Exchequer, bearing in mind that many wind farms are in remote areas that do not require energy in the vicinity and that the National Grid indicated in May that it was not prepared to improve the grid in such areas? This problem could be exacerbated by the development of offshore wind. What economic projections have been made by the Government in offering to make these additional payments?

Lord Marland: On the last point, the Energy Bill clears the way for offshore wind to link into the grid and to facilitate that. I shall comment on that further when we discuss the Energy Bill. The noble Lord is right that it is fundamental that we have the reserve capacity to cope with peaks, such as the well-known "Coronation Street" kettle peak, or with very cold periods. Therefore, we are developing a capacity payment to encourage people to create facilities for providing capacity at peak storage times. The development of storage technology for wind farms is also fundamental. We will drive forward very hard to ensure that that technology advances quickly.

Lord Moynihan: My Lords, in declaring an interest as chair of Pelamis Wave Power, I welcome the Statement. I join noble Lords who have underscored the importance that the Government attach to the all-important issue of creating greater investor certainty in the electricity market. Can the Minister comment on the importance of consulting on the construction of the necessary electricity upgrades and new infrastructure to bring offshore gas and renewables onshore at increasingly competitive prices, including third-party access to pipelines in the gas market? Will he confirm that his department still believes that security of supply is best achieved through diversity of supply?

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Lord Marland: I assure the noble Lord that, as I think I referenced earlier, third-party access is a fundamental part of the Energy Bill, the Second Reading of which we will debate next week, and we will welcome his contributions, given his knowledge platform. Clearly, this whole EMR seeks to encourage a broad spread portfolio of electricity supply, whether it be renewables, nuclear or clean fossil fuel. As my right honourable friend Chris Huhne said on the radio today, it is rather like having a share portfolio-we cannot rely on one and not the other; we need all of them and a balance of them.

NHS: Reorganisation


1.28 pm

Moved By Lord Touhig

Lord Touhig: My Lords, it is a privilege to open this debate on a matter as important as the National Health Service. The NHS was the subject of my maiden speech in the other place more than 15 years ago and, like many noble Lords on all sides of the House, I feel very passionate about the service. It is easy to take this great service for granted, but we should never forget how fortunate we are to live in a country that has such high-quality healthcare available for each and every citizen, free at the point of use.

I pay particular tribute to those who work in the National Health Service. Their commitment to their patients and to ensuring the best outcomes for those whom they treat is the bedrock of the NHS. Without their dedication, the NHS would be nothing. The fact that the service provides some of the best healthcare in the world is a reflection on their professionalism and hard work. We should never lose sight of that.

We have a health service that we can be proud of and that has certainly improved over the past 12 or 13 years, but we now have a new Government who seem determined to impose their own vision on the National Health Service-a vision which, perhaps not surprisingly, is riddled with inconsistencies and risks having a negative impact on patient care. It is notable that the British Medical Association has reacted in a decidedly mixed way to the Government's proposals. In response to the White Paper, Equity and Excellence: Liberating the NHS, which was published in July, the BMA reacted most strongly against the increased commercialisation and competition that the Government seem determined to foist upon the service. I am sure that I am not alone in sharing those worries.

Most concerning is that, despite the increased emphasis on competition in the recent past, there is still little evidence that such measures have any benefits for the patient. The Government came to power promising to make policy that was evidence based, yet expanding competition in the NHS flies in the face of that pledge. Indeed, increasing competition seems to have more to do with ideology rather than the welfare of the patient.

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I share the BMA's view that high-quality care can be delivered in the most cost-effective way by encouraging co-operation across primary and secondary care.

I fear that, rather than encouraging co-operation and collaboration between care providers, the Government's policy risks discouraging the sharing of information and good working practices. Such discouragement, it seems to me, is the logical consequence of forcing care providers into competition. It is normal commercial practice for competing service providers to keep new information or successful developments to themselves so that they can exploit them and improve their market position. Obviously, such providers do not share information that gives them an advantage over their competitors. That makes perfect sense in the commercial private sector, yet in the NHS such an approach would massively undermine the ability of care providers to adapt to changing circumstances and ensure best practice. Decreasing co-operation and collaboration would, I fear, be the natural consequence of further increasing competition in the NHS-a view that is shared by the BMA. Therefore, I hope that the Government will put patients' interests and the views of professionals before their ideological agenda.

I am also concerned by the Government's "any willing provider" policy, which risks exacerbating the difficulties with increased competition. The policy has the capacity to undermine local health economies by replacing existing multiservice natural monopolies with a plethora of smaller units that provide more limited services. As well as radically undermining the efficiency and value for money achieved by the NHS, that risks creating obstacles to the NHS working co-operatively for patients as a public service.

The concept of competition and of the "any willing provider" policy is supposed to allow patients to make meaningful choices about their care, but in my experience-which I am sure is shared on all sides of the House-what most patients want is high-quality providers close to where they live that offer timely and competent diagnosis, treatment and support. I fear that the Government's policy risks undermining this central patient wish. It risks turning care providers into nothing more than businesses which, rather than supporting each other and striving for better provision of healthcare across the whole NHS, seek only to improve their own market position. If the outcome of increasing competition is to undermine the central priority of patients, I have to question the benefit of increasing competition.

The Government have also decided that they want all NHS trusts to obtain foundation status within three years. That undermines the whole rationale of the concept of foundation trusts, which was that foundation trust status was supposed to be a mark of quality and achievement. Evidently, if all trusts become foundation trusts almost overnight, foundation status will cease to be a mark of quality and in some regards will become meaningless as a concept.

The White Paper signals the Government's intention to return to the GP fundholding scheme that we had under a previous Tory Government. The noble Lord, Lord Walton, who is held in high regard by noble

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Lords on all sides of the House, spoke about this in July. He said to the Minister who made the Statement on the White Paper,

"Many of those who are so proud of the NHS have major concerns about the GP-commissioning element of the White Paper".

The noble Lord continued:

"No doubt the Minister will remember GP fund-holding under the previous Conservative Government, which was not a great success and had to be withdrawn in the end because it failed to fulfil the objectives".-[Official Report, 12/7/10; col. 537.]

He was right. The House will not need reminding that GP fundholding, which was first trialled the last time that the Conservatives were in Government, did not work.

There are many other lessons that the Government must learn from pushing ahead with such a policy. In 1992-93, 5 per cent of GP fundholders overspent their budgets by more than £100,000. In the same year, 21 per cent-one in five-underspent their budgets by more than £100,000. Across the NHS last year, the underspend was almost £32 million-millions of pounds that Parliament voted for the health service but were not used.

There is now another worry concerning funding. In an analysis of the comprehensive spending review and of the White Paper that the Nuffield Trust published in October, the trust points out a little-noticed proposal in the spending review that would make a major change to the rules governing underspends across government and would have a profound impact for health. The NHS had a £5.5 billion cumulative underspend at the start of the financial year and plans to have a further underspend of around £l billion in 2010-11. The CSR announcement will mean that none of that money will be returned to the NHS. The Nuffield Trust said that, in effect, that amounts to a retrospective cut in health spending.

There is more. It is important in the context of GP-led commissioning that GPs are properly accountable for the decisions that they take. The big concern must be that GP commissioning will be less transparent and less accountable. Inadequate experience of commissioning a range of treatments will lead to a postcode lottery in NHS provision. For example, it would be possible for a group of GPs with a specialist interest who know where to obtain the best treatment to provide high-quality care for cancer patients. Another GP commissioning practice may have no such knowledge or specialist interest so its patients would might not be so well provided and cared for.

The Secretary of State this week attended the Britain against cancer conference hosted by the All-Party Parliamentary Group on Cancer. When the audience of health professionals, doctors, patients and politicians was asked whether GP commissioning would improve or worsen cancer care, the conference voted unanimously for the proposition that care would worsen. With great respect to the Secretary of State, he seemed not to pay much attention to that. He went on to say that GP commissioning was a chance to improve GPs' knowledge. Turning the National Health Service upside down to improve GPs' knowledge is one hell of a risk to take. The Secretary of State left the conference with the

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message that he wanted GPs to be thinking new thoughts. What in God's name is that supposed to mean? I have no idea whatever.

So far, some 52 GP practices have signed up to become pathfinders for GP commissioning. That number could increase to 500, and those commissioning consortia would replace 150 primary care trusts. However, that leads to further problems. The NHS relies on data collection to improve healthcare. How will that be done, when some 500 consortia are doing the job of collecting the data that are currently collected by 150 PCTs?

The National Audit Office and the Public Accounts Committee in the other place have done excellent work in establishing best practices to achieve value for money across public spending. In achieving value for money, will GP commissioning consortia be incentivised to save money? Perhaps the Minister can tell us. If that is the case, what will the Government do to ensure that the NHS does not drown in a sea of medical negligence claims? If a GP consortium is incentivised to save money, there is a danger that patient care will suffer and that someone will then rush off to the lawyers-it will be a litigant's paradise-in order to get some redress.

There is a common GP contract in England and Wales. How will the new arrangement in England intersect with what is happening in Wales? Will it mean separate GP contracts? How much will that cost and who will pay? It is clear from the response to the White Paper that many GPs lack the experience to run a commissioning service and many do not want to do so. Will they be encouraged to buy in solutions from private healthcare providers, such as the American-owned UnitedHealth or Humana, which on its website describes itself as the "Human Face of Healthcare"? Those companies are already touting for business and advertising their ability to manage GP consortia on their websites. Does the Minister agree that outsourcing the management and commissioning of health provision can, and probably will, lead to conflicts of interest? What steps will be taken to ensure that a healthcare company brought in to manage a GP consortium will not place work with itself as a healthcare provider?

Many noble Lords want to speak so I shall bring my remarks to a conclusion, but there is one further point that I should like to make. Much has been said in recent times about the enhanced role of the third sector in providing services. Earlier this week, together with a number of noble Lords whom I see in the House today, I attended a meeting of the All-Party Parliamentary Group on Stroke-stroke is the second major contributor to dementia-where we had a general discussion about the planned changes for the National Health Service. Some of the comments that were made at that meeting are worth repeating. "Left entirely to market forces, stroke will slip down the agenda", was one view. Talking about top-down targets, another contributor commented, "If not targets, we certainly need objectives". Another asked, "What is the future for the stroke impairment network?". A final comment was that, "PCTs are at last understanding stroke. If we have to start from scratch again, let's not lose the gains

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we have made in transition". Those remarks will, I am sure, be repeated right across the health-supporting third sector.

The White Paper risks undermining the very fabric of our National Health Service; it risks reducing co-operation within the NHS; and it risks undermining the progress that has been made in improving patient care and outcomes. Most important, the proposals risk moving us away from a National Health Service that works co-operatively for patients as a public service-a move that I think would deeply harm patient care. Those outcomes would be disastrous for patients, doctors and the country as a whole. I hope that the Government will think again about their proposals.

1.42 pm

Lord Colwyn: My Lords, I thank the noble Lord, Lord Touhig, for introducing the debate today, and I welcome him to the list of the usual suspects who discuss health matters in the Chamber. I have been discussing these matters here for more than 40 years. I cannot say that he made any constructive criticism at all. I remind the noble Lord that the Government are committed to protecting NHS funding and to increasing that funding every year.

I am aware, of course, that the BMA feels that the Government have not listened to constructive criticism of the plans, and it believes that the changes will be difficult to implement effectively. However, I welcome the reorganisation and look forward to hearing the views of other speakers, as it is my intention to concentrate on the issues that affect dentistry. I declare an interest, as I have been a practising dentist for more than 40 years. I am still on the register and am an officer of the All-Party Parliamentary Group for Dentistry.

NHS dentistry in England is undergoing a major overhaul. Three separate changes-shifting responsibility for commissioning dental care from primary care trusts to a new national commissioning board, the creation of new contractual arrangements for primary care dentistry, and the changes to public health-will all impact on the delivery of primary dental care.

I welcome today's announcement and publication of the plans for pilots for a new, more preventive contract for NHS dentistry based on registration, capitation and quality, and I hope that the Government will ensure that the pilots are fully evaluated in consultation with the profession. These will begin in 2011. They will test new models that focus on providing continuing care for registered patients and they will improve access. The new dental contract will replace the 2006 Labour contract, which unfortunately continued the "drill and fill" treadmill. Plans to increase access to NHS dentistry and improve oral health include a capitation and registration system. This should bring back the real sense of having your own dentist.

We know that the commissioning of dentistry will change as part of the reorganisation of the National Health Service. The White Paper, Equity and Excellence: Liberating the NHS, outlines that dentistry will be commissioned by the NHS commissioning board. This decision has been broadly welcomed by the British Dental Association. We know that in the past local commissioning has been fraught with difficulties. There

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are significant advantages in the central commissioning of dental services by the NHS commissioning board, but it is important to emphasise that there will be a delicate balance to be struck between central determination and local flexibility.

Local expertise will continue to be vital in understanding and satisfying local needs. There needs to be a strong channel of communication between those tasked with understanding local needs and those responsible for national commissioning. For example, consultants in dental public health play a pivotal role in identifying need and balancing the provision of services to provide the maximum health benefits to diverse populations. It is central to the long-term efficacy of NHS dental services that the expertise of consultants in dental public health is fully utilised in any new system. Therefore, what plans do the Government have to utilise those local dental experts, including consultants in dental public health, dental practice advisers and local dental committees, in the new commissioning arrangements? In addition, we need to be careful that the Government's positive work towards a new contract is not inhibited by the simultaneous reorganisation of the NHS.

We know that under the Labour Administration, in 2006, a new dental contract was introduced at the same time as PCTs were reorganised, merging them from 303 to 152. During the restructuring, many dental leads and commissioners were not in post to oversee the implementation of the new contract. This caused a number of problems, with many general dental practitioners being offered a contract in the days and weeks before they were expected to deliver it. As a result, a number of practitioners moved away from NHS dentistry.

At a time when growing bureaucracy, red-tape burden and increasing administration are eroding the morale of high-street dentists-and I do believe that this is a serious problem-what assurances can the Government give that we have learnt from the problems of the past, thereby ensuring that another cohort of practitioners is not lost?

1.48 pm

Lord Alderdice: My Lords, the noble Lord, Lord Touhig, in his introduction to the debate talked about a sense of passion for the National Health Service-a passion which I think all of us in this Chamber share. However, it is not the only emotion that is connected with healthcare. One thing that struck me when President Obama embarked on his programme to improve the quality and breadth of healthcare in the United States was the profound emotional reaction against it. I was astonished, when talking to friends and colleagues who are genuine people, to find that they were frightened that any change would lead to disadvantage, when manifestly for many people in the United States such change would open up new possibilities of healthcare.

I think there is a danger that a similar thing could happen to us, and I certainly understand why. It is not just that people are generally frightened when healthcare is touched but in a time of austerity-something we are all very clear about-there is a fear that any change will be primarily financially driven, the purpose being to cut the amount of money going into healthcare.

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Even when the Government say something different, it is not really believed. That is a sad legacy of how things have been for a time. It is particularly unfortunate because the previous Government increased the resource available. For a long time, we said to ourselves and to each other, "We're not spending as much per capita as other European countries", and the previous Government tried to increase it, with considerable success. But it did not lead in all areas in the health service to a better sense of morale that things were improving. On the contrary, many general practitioners and hospital consultants, who are now paid more and do not have to produce more, have a lower sense of morale and a lower sense of empowerment in running the service. They have felt that their concerns as clinicians-this is not just true of doctors, but is true of social workers, psychologists and all sorts of other professions within healthcare-and decisions about the health service have moved away from them towards what I call managerialism. I have had that expressed to me, which is why I am not at all surprised by the BMA's approach that any new approach to the health service inevitably means fewer resources available-contrary to historic evidence-and moving away from decisions by clinicians to decisions by managers.

When management was introduced increasingly to the health service it was not a bad thing in itself. It was necessary. The world was becoming more complex but there were seeds of difficulty within it. It became apparent, for example, that when nurses, social workers and others were going to be promoted, they were always promoted out of clinical work and they lost touch with what was happening clinically. Doctors tended not to be, at least in the early days, but their priority was always attending to their clinical work and they found that they did not-or would not-attend meetings; they got more and more frustrated and deskilled, and removed themselves from management. Increasingly, management became managerialism so that the driver was not to ensure that the outcomes of the service were clinical and patient-driven outcomes but, rather, management driven.

We want to see increased numbers of things. For example, when the problem of cancer care was addressed, GPs were told that they could flag up cases that should take priority over any other case. What did that mean? GPs quickly discovered that if they stuck a red flag on a case it would get attention above all the rest, which perversely meant that many of the real risk cases in the pathologist's waiting list did not get attention, whereas the red flagged one did, not necessarily because it was more important but because there was a perverse incentive to the general practitioner to mark it up in that way. That is what I mean by managerialism as distinct from management, which is necessary and essential.

It is also important to understand that when we look at the need for diversity the phrase "postcode lottery" is used. That can happen but there have to be differences in services. In my professional background of psychiatry everyone knows that there is an urban drift. People with chronic psychotic illnesses, alcoholism, and so on, drift to the centres of large cities, so the kind of service you need to provide is different in a city than in a rural area. To say that it is different does not

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mean it is worse; it may mean that it is more appropriate. But it means that local people-not just clinicians, but local representatives, patient groups and others with a real concern, and, importantly, those involved in social services-need to be involved in the construction of the services that are available.

In looking at the proposals that are coming out, I started from a position where I was becoming increasingly depressed about whether the health service could ever be fixed. When I retired as a doctor earlier this year I felt extremely depressed about the health service. I genuinely think that there is a chance for things to be better if we can ensure that the resources are sustained, which is an important question at this difficult time. We must ensure that all clinicians-not just doctors or GPs-are involved in the commissioning process and that local people, including elected representatives, patients and those who run other third-sector services are involved in that commissioning process, and can hold those principally involved to account. If that can help us to move to greater integration of health and social care, which is already provided by local authorities and is key in so many of our services for the elderly, as well as maternity and psychiatric services, we can put aside our fear that we are moving to some kind of American system-which we are not, and frankly do not want to see-or a completely commercial service. That is the direction we have been moving towards under previous Governments for quite some time, and it is not the direction of travel that we want.

We need to release the creativity and sense of empowerment of those involved in the service, particularly clinicians of all kinds, along with a sense for patients and others that their concerns matter and their ideas can be transformational. Those at the centre should be prepared not just to let go and give them encouragement but to provide the resources and support to make a health service fit for all of us in a variegated pattern that is appropriate across our country.

1.55 pm

Lord Kakkar: My Lords, I, too, thank the noble Lord, Lord Touhig, for having secured this important debate and I declare my interest as a practising surgeon, clinical academic and chairman for clinical quality at University College London Partners Academic Health Science Centre.

The purpose of the White Paper and the health and social care Bill that will follow is good. It will ensure that the focus for the delivery of healthcare is very much on patients and on improving clinical outcomes. Those important principles are shared widely throughout the world and the proposals in the White Paper will ensure that the NHS gets to a position globally where it shows leadership in the quality movement, improved clinical outcomes and the efficient and effective use of resources, providing the very best healthcare for the people of our country.

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