15 Dec 2015 : Column 1959

House of Lords

Tuesday, 15 December 2015.

2.30 pm

Prayers—read by the Lord Bishop of Chester.

Oaths and Affirmations

2.35 pm

Lord Turner of Ecchinswell took the oath, and signed an undertaking to abide by the Code of Conduct.

Schools: Exclusions


2.36 pm

Asked by Lord Lupton

To ask Her Majesty’s Government whether they will consider introducing a higher duty of care on head teachers when excluding children aged under 16 from their schools to ensure that such children are in practice met by a parent, guardian or approved carer.

Baroness Evans of Bowes Park (Con): My Lords, the Government have produced statutory guidance which stresses that head teachers must take account of their legal duty of care when sending a pupil home following an exclusion. Head teachers will use their own judgment when sending pupils home, depending on the child’s age, specific needs and ability to understand the situation. The Government believe it is right that such judgments should be made by head teachers.

Lord Lupton (Con): My Lords, given this Government’s strong commitment to child protection and the support network which we often assume exists for very troubled children when there is no such network, as there may be no real families or functioning parents as we understand them, does my noble friend agree that the Government should revise regulations so as to require head teachers to ensure that they release excluded children to a responsible adult and, where necessary, notify the social services or the troubled families workers?

Baroness Evans of Bowes Park: My noble friend will know that head teachers do not take lightly decisions to exclude pupils. He will also be aware that school staff have an ongoing responsibility for safeguarding pupils, whether at home or at school. Where a head teacher has concerns about the welfare of a pupil, they will be working with a range of local services, such as social services and safeguarding teams or local alternative providers, to make sure that there is a safe environment for them.

Baroness Whitaker (Lab): My Lords, what are the Government going to do about the disproportionate number of Traveller boys excluded from school?

15 Dec 2015 : Column 1960

Baroness Evans of Bowes Park: We take this issue seriously; that is why we are putting a lot of work and effort at a local level into things such as the troubled families programme to help provide integrated family support. A lot of these families have complex needs, which need integrated support on the ground, and that is how we can help them ensure that their children get the education they deserve.

Lord Storey (LD): My Lords, there is extensive research which shows that suspension often makes it worse for the child, the family and indeed the teacher. Suspension and exclusion alone will not solve that child’s problems. Will the Minister consider holding a round-table discussion with the relevant people to look at practices that we could evolve to help children who are suspended and excluded from school?

Baroness Evans of Bowes Park: The most important thing is ensuring that any child who has been excluded or suspended returns to a school where they have a high-quality place, be that in a mainstream school to which they may have been moved or, equally, in an alternative provision setting. That is why we have taken great steps to improve alternative provision, both by improving the governance of existing PRUs and by allowing academies and free schools to open new provision. That is performing well and ensures that these vulnerable young people get the kind of education that will re-engage them.

Lord Elton (Con): My Lords, exclusion from school is one of the most reliable predictors of criminality in young people, if they fall outside the provisions that my noble friend has just referred to. What can the Government do to establish a wider net so that fewer people fall through this, predictably, into prison?

Baroness Evans of Bowes Park: As I mentioned, one of the main initiatives is the troubled families programme. It originally helped 116,000 families, but it will be expanded over the course of this Parliament to help up to 400,000 families. Its aim is to bring together local authorities, police, housing, employment advisers, schools, health and children’s social services to deliver integrated, whole-family support. That is what needs to happen to make sure that families do not go through a continuing cycle of deprivation.

Lord Ramsbotham (CB): My Lords, can the Minister tell the House what has happened to the zero exclusion project, which was introduced by the previous Secretary of State?

Baroness Evans of Bowes Park: I am afraid I will have to write to the noble Lord.

Baroness Howells of St Davids (Lab): My Lords, I would impress upon the Minister that something has to be done. I am often called by parents whose children have been wandering the streets, as when the child is excluded, they are either angry or frustrated and there is often no one to take them home or look after them. Heads of schools should realise that they are in loco

15 Dec 2015 : Column 1961

parentis and that they ought to ensure the safety of the children. It creates a downward spiral when the adult who is in charge at the time ceases to look after the child in their care. Can the Minister at least try to see how this can be avoided? I spend most of my time reading letters from people whose children have been left wandering, which can cause the prisons to be full of disillusioned children. I would like the Minister’s help with this, and thank the noble Lord for asking the Question.

Baroness Evans of Bowes Park: The noble Baroness is absolutely right. As I said previously, school staff have a duty of care to pupils, whether they are at school or at home. Many head teachers do not exclude people even when they legally could, because they understand the home situation. That is why we are also looking to improve alternative provision and other, more local initiatives around family support, to help make sure that we can help these young people and that they get out of the cycle that they may be in.

Lord Watson of Invergowrie (Lab): My Lords, would the noble Baroness accept that, although the DfE guidelines could be amended—perhaps better to reflect best practice on exclusions currently followed by head teachers—to add a further statutory duty, as suggested by the noble Lord, Lord Lupton, would not be appropriate given all the other duties added to those of school teachers? It would be neither necessary nor appropriate.

Baroness Evans of Bowes Park: As I have said, head teachers do not take these decisions lightly and they have a duty of care. We believe that the overwhelming majority of schools and head teachers work very well and closely with local services in order to make sure that there is provision to support both these young people and their families, who often have many complex needs and need broad help from local services.

Planning Permission


2.43 pm

Asked by Lord Borwick

To ask Her Majesty’s Government what assessment they have made of the current time delay between a council’s resolution to grant planning permission and the issue of implementable planning permission on housing sites of 50 houses or more; and what steps they plan to take to reduce that delay.

Lord Borwick (Con): Declaring my interests in the register, I beg leave to ask the Question standing in my name on the Order Paper.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con): My Lords, our reforms are driving up performance on deciding applications for major development. In spring 2015, 78% of major applications were decided on time,

15 Dec 2015 : Column 1962

compared to 57% in summer 2012. We are taking steps to drive further improvement, including introducing a dispute resolution process for Section 106 agreements. The time between resolution to grant and full planning permission is not monitored.

Lord Borwick: I thank my noble friend for those figures, which show that the speed of processing applications is indeed accelerating. However, I am told that the number of applications that are still outstanding after one year is at present around 13% and growing, and these are the big schemes with lots of social housing in them. Can the Minister tell us of any plans to accelerate the big schemes?

Baroness Williams of Trafford: My Lords, I do not recognise the 13% figure cited by my noble friend, because we do not publish national statistics on the percentage of decisions outstanding after a year. We publish figures on the periods within which a decision has been made. For major developments, in the most recent quarter, 10% of applications took more than a year to decide, or were decided after the end of an agreed extended time period, as set out in the planning performance agreement or extension of time, which could be anything over 13 or 16 weeks.

Lord Hain (Lab): If Schengen was suspended, why would the French Government—

Noble Lords: Wrong Question!

Lord Clark of Windermere (Lab): My Lords, it is very welcome that we have seen an increase in earlier decisions being made, but, given the Government’s commitment to localism, is the Minister content that this is because more and more decisions are being made under delegated council decisions where the planning decisions are made by local government officials? In sensitive issues, that really should be the decision of elected councillors.

Baroness Williams of Trafford: I am very glad that the Question is not about Schengen, by the way; I would have struggled.

On planning decisions being made by officials, provisions have always been in place that officials can take certain decisions, particularly where they are uncontentious. However, the localising of planning decision-making through neighbourhood plans and local plans has made for happier communities that are far more likely to go along with planning decisions when they are made.

Baroness Pinnock (LD): My Lords, in my small town in West Yorkshire, there are four planning consents for more than 500 houses awaiting development. In some cases, they have been awaiting development for more than two years. Does the Minister agree that because they are on brownfield sites, which are clearly more expensive to develop, the Government’s apparent commitment to developing brownfield sites first is barely credible when developers can wait for green land relief, where the profit margins are greater?

15 Dec 2015 : Column 1963

Baroness Williams of Trafford: My Lords, it is absolutely right to develop brownfield sites first. We want to avoid development of greenfield land and build on brownfield land first. That is why we have designated brownfield sites as a priority for our housebuilding.

Lord Beecham (Lab): My Lords, delays in planning matters are of course to be regretted, but it is very likely that there will be more delays in future, given the reductions in planning staff across many authorities of all political colours as a result of the Government’s cuts. However, in Newcastle, in a ward which the Minister had the pleasure of visiting recently, there are two housing schemes which the council wished to promote with housing associations. The fact is that two of the potentially interested bodies withdrew because of concerns about the impact of the Government’s policies on housing association rents and the right to buy on their capacity to enter into the development. The third organisation is yet to make its mind up. Will the Government not recognise that they need to take into account the role of housing associations, and look again at the proposals which will make it more difficult for them to engage in housebuilding?

Baroness Williams of Trafford: My Lords, perhaps I can answer the second part of the question of the noble Baroness, Lady Pinnock, as well as this one. In terms of the role of housing associations and reluctance to build, 96% of housing association stock providers have signed up to the right-to-buy deal with the Government. In Scotswood, where I saw the Rise development, which is incredibly impressive, they are building ahead of time. In terms of speeding up the process, we will be bringing forward measures to drive up performance within planning authorities. In terms of capacity to deliver, which we discussed only yesterday evening, there are funds to enable local planning authorities to build in capacity to enable them to deliver some of the Government’s new priorities.

Lord Burnett (LD): My Lords, I draw the House’s attention to my entries in the register of interests. The planning process must be profitable for local planning authorities. In the West Country, many local planning authorities have insufficient qualified planning officers. Is there anything that the Minister can do to encourage local planning authorities to recruit more qualified planning officers?

Baroness Williams of Trafford: My Lords, I think that I partly answered that in answer to the noble Lord, Lord Beecham. In small planning authorities, particularly in district authorities, there is every reason why authorities should share functions, if the authorities are particularly small.

Lord Harris of Haringey (Lab): My Lords, I do not think that, in answering the question asked by my noble friend Lord Beecham, the Minister really addressed the central issue. My noble friend gave two examples of housing associations that have withdrawn from schemes because they do not think that they are now

15 Dec 2015 : Column 1964

viable, given government policies. What evidence do the Government have that their policies towards housing associations are not going to choke off new housing development for affordable homes?

Baroness Williams of Trafford: My Lords, I think that our record in the last Parliament is evidence enough.

European Union: Schengen Agreement


2.51 pm

Asked by Lord Forsyth of Drumlean

To ask Her Majesty’s Government whether they will encourage the European Union to suspend the Schengen arrangements and reinstate border controls between member states.

The Minister of State, Home Office (Lord Bates) (Con): My Lords, the reintroduction of border controls within the Schengen area is ultimately a decision for the Schengen states themselves. However, given the possible security threats, the Government have a strong interest in ensuring that Schengen states effectively combat illegal transit into and across their borders.

Lord Forsyth of Drumlean (Con): My Lords, I am grateful for that Answer. Does my noble friend agree that a Government’s first duty is to protect the security and well-being of their people? Given that the European Union has failed to police both its external and internal borders, is it not the duty of the Prime Minister to regain control of Britain’s borders?

Lord Bates: Of course, my noble friend is absolutely right, and we have control of those borders because, in the Maastricht treaty, as he and I know, Sir John Major managed to negotiate an opt-out from the Schengen area. We retain strong control over our borders, which is quite essential. We look at the situation happening in Europe at present and we are not dispassionate, because the issues and security concerns that we have about Europe ultimately come towards us—so we need to work with our EU partners. We believe that the types of discussion that they are now having about strengthening the external border to the EU is absolutely right and timely.

Baroness Ludford (LD): Does the Minister agree that any crowing over Schengen difficulties is misplaced and shooting ourselves in the foot, given the huge benefits to UK citizens and businesses that Schengen confers in the ease of travel and trade? What are the Government doing to help to maintain the integrity and security of Schengen through full participation in the Schengen Information System and helping to reinforce its external borders?

Lord Bates: The noble Baroness is absolutely right, and there is absolutely no crowing whatever. What we want is the security of those internal and external

15 Dec 2015 : Column 1965

borders. We are joining the Schengen Information System II, which is very important for sharing information. We are providing support to FRONTEX and also providing support to the European asylum support officers, who operate in hotspots around Italy, Greece and Bulgaria. So we are not passive or crowing—we are actively working with our EU partners to ensure that this problem is addressed.

Lord Hain (Lab): My Lords, I apologise for my premature enthusiasm earlier—bad habits brought from down the Corridor. If Schengen were suspended, why would the French feel any obligation to maintain our border in Calais?

Lord Bates: That is a good question. I wish the noble Lord had continued a little further in his first intervention and then I might have heard it before. The important point is that the juxtaposed controls which we have with Belgium at Coquelles and also at Calais are essential partnerships. It is very important that they are maintained. We do not believe that Schengen is in danger of suspension at present. There may be members of it, such as Greece, which are causing concern and certain members which are exercising their rights under Article 23 to suspend the operation of those borders for a time. However, it would have implications for us, and that is why we are following it very closely and will offer every support we can to our EU partners.

Lord Hylton (CB): My Lords, does the Minister agree that fences and border controls provide no solutions? Surely men, women and children already in Europe deserve decent treatment. While camps may sometimes be necessary for purposes of assessment, will the Government ensure that the aim is always settlement or return home so that people do not rot in bad conditions?

Lord Bates: That is a very important point. One of the things that we have done in supporting Greece is to provide DfID aid to ensure that the centres where people’s applications are processed have the type of decent humanitarian care which Europe and this country have a proud record in delivering.

Lord Reid of Cardowan (Lab): My Lords, to get to the crux of the matter, is it not obvious to everyone, including government Ministers, that, given what happened in Paris, the arrests in Belgium, Switzerland and elsewhere and the influx of refugees through the borders of Europe, the ability to move through 26 European countries with no scrutiny at the border is a boon to terrorists? Notwithstanding the fact that we are not in Schengen, the fact that if you come inside the borders of Greece you can travel right across Europe to the coast of Belgium and northern France puts immense pressure on our borders. Should the Government not be doing something to have those borders restored for our own sake, if not for the European Union’s sake?

15 Dec 2015 : Column 1966

Lord Bates: They need to come forward with some answers. The European Commission has today produced some proposals on strengthening the borders. The noble Lord is right to say that this is not something we can walk away from but is something that impacts on us. It is also the reason why we need to tackle the situation at the border, strengthen our EU borders and, given that we know what the cause of this is, take action in Syria with the international community to ensure that this situation is resolved and the cause of this influx is somehow altered.

Lord Lawson of Blaby (Con): My Lords, would my noble friend, whom I greatly respect, like to correct his Answer to my noble friend Lord Forsyth—

Lord Pearson of Rannoch (UKIP): My Lords—

Noble Lords: Order!

The Lord Privy Seal (Baroness Stowell of Beeston) (Con): My Lords, I thought my noble friend had finished asking his question. I suggest that we allow him to finish his question and then go to the noble Lord, Lord Pearson.

Lord Lawson of Blaby: Would my noble friend, whom I greatly respect, like to correct his Answer to my noble friend Lord Forsyth? In answering, he said that we had control of our borders. So far as the European Union is concerned, we do not. Even though we are not in Schengen, we do not have control of our borders.

Lord Bates: I was making the point that our borders are controlled in the sense that the ability to travel freely across borders in the European Union by the production of an ID card does not apply to us. In Schengen, we retain our full checks on people who are coming into this country and, as a result of April this year, on people leaving this country as well. I believe that that means we have control of our borders.

Lord Pearson of Rannoch: My Lords, given that Schengen and the euro have proved such painful failures, what do Her Majesty’s Government see as the point of the European Union itself? Would we miss it if it collapsed and we went back to friendly collaboration and free trade between the democracies of Europe? Has the EU not become just a very expensive emperor without clothes?

Lord Bates: The benefits to this country will be determined by the people in a referendum in due course, but in this respect they are self-evident: we cannot deal with the migrant crisis that is coming into our country without working very closely with our EU partners and, given that seven out of 10 of our principal trading partners are within the EU, we need to be able to exchange goods and services in an efficient way. With regard to the type of model that the noble Lord is perhaps advocating, he should perhaps be aware that while we are not in the Schengen area, Norway,

15 Dec 2015 : Column 1967

Switzerland, Lichtenstein and Iceland, in the European Economic Area, are part of Schengen, and therefore there is free movement.

Down’s Syndrome: Do Not Resuscitate Orders


3 pm

Asked by Lord Alton of Liverpool

To ask Her Majesty’s Government what assessment they have made of East Kent Hospitals University NHS Trust’s decision to list Down’s syndrome as a reason to issue a Do Not Resuscitate order to a patient.

The Parliamentary Under-Secretary of State, Department of Health (Lord Prior of Brampton) (Con): The department expects trusts to have local policies on resuscitation, based on expert professional guidance. Such guidance has been published jointly by the British Medical Association, the Resuscitation Council and the Royal College of Nursing. All resuscitation decisions must be tailored to the individual circumstances of the patient. For patients who lack capacity, the Mental Capacity Act requires a decision in their best interests, taking account of their known wishes, beliefs and values.

Lord Alton of Liverpool (CB): My Lords, in considering Mencap’s estimate that 1,200 people with learning difficulties die needlessly in NHS care every year, will the Minister look at the inspiring work of the Blue Apple Theatre company, which includes actors with Down’s syndrome performing either “Hamlet” or their play “Living Without Fear”, which was staged in Mr Speaker’s House, and then consider how best we can counter a slide into eugenics, discrimination and non-resuscitation orders, as in the case of Andrew Waters, and look for ways to promote positive and life-affirming attitudes towards people with Down’s syndrome?

Lord Prior of Brampton: My Lords, perhaps I could address first the particular issue of Andrew Waters. The doctor who signed the DNR order was a junior doctor who made a mistake. It was a misjudgement, he apologised for that mistake, and he has learnt from it by using his experience to teach other doctors how to deal with similar issues. It is important to make that statement first—the reaction of that junior doctor was the right one, having made that mistake. The noble Lord mentioned the Blue Apple Theatre company. He was kind enough to send me a copy of some of the work that it does, which illustrates that people with Down’s syndrome can have a very full, useful, good and happy life, and their lives should be valued just as highly as the life of any other person.

Baroness Walmsley (LD): My Lords, does the Minister know how widespread such discrimination is against people with learning difficulties? What reassurance can he give to parents such as those I met recently in

15 Dec 2015 : Column 1968

the House of Commons Dining Room, who were terrified to allow their disabled son to go into hospital because they knew they were going to be put under pressure to sign a DNR notice? They were also afraid that, even if they refused but were not at his bedside 24 hours a day, it would happen anyway.

Lord Prior of Brampton: My Lords, the noble Baroness has just made a truly shocking statement. If indeed this practice was systemic and widespread, it would be a matter of huge concern and I think all of us in this House would be appalled by it. I have no evidence that this is a systemic problem, but it is absolutely the case that this group of very vulnerable people have been let down not just by doctors and clinicians but actually by all of us—the whole of society, for ever. The report produced three weeks ago called Building the Right Support recognised that we have let down this group for decades, and I hope that over the next five years we can start to make amends.

Baroness McIntosh of Hudnall (Lab): My Lords, in his original Answer the Minister referred to the Mental Capacity Act, which is widely admired as legislation that is on the whole benign. However, he will be aware that a Select Committee of your Lordships’ House met last year and produced a report that pointed out that the implementation of the Act is not always as effective as it should be, which has a lot to do with the way health professionals understand their duty under the Act in situations such as this. What progress is being made in improving the training of health professionals under the Act?

Lord Prior of Brampton: My Lords, the noble Baroness will be aware that the noble Baroness, Lady Finlay, has become chairman of the National Mental Capacity Forum, which was established in September. She will be looking at all these issues and reporting back in March next year. I entirely agree with the noble Baroness, Lady McIntosh, that the principles in the Act are generally accepted as being the right ones, but their application has not been as consistent as we would like.

The Lord Bishop of Peterborough: My Lords, from these Benches we affirm that those with Down’s syndrome and other learning disabilities and handicaps are fully human and fully made in the image of God. We believe that the chief mark of a civilised society is the way it cares for the most vulnerable. Can the Government, through the Minister, indicate what they can do to change the culture, training and attitudes within the NHS—and perhaps within society more widely—to make sure that mistakes such as the one made by this junior doctor are not made again?

Lord Prior of Brampton: My Lords, the right reverend Prelate makes a number of very important points. This is a society issue as much as a medical issue. Before coming into the Chamber today I discussed with the noble Baroness, Lady Hollis, the importance of teaching students at medical school how to value people with learning difficulties, and the important

15 Dec 2015 : Column 1969

role that people with learning disabilities might play by going to medical schools and directly telling medical students about their lives and concerns.

Baroness Hollins (CB): The assumption that pregnant women who are expecting a baby with Down’s syndrome will abort that child affects public and medical attitudes. As one woman with Down’s syndrome put it when speaking at a conference on prenatal diagnosis, “You want to kill us”, which is a hard perspective for an adult with Down’s syndrome to hear. I am grateful to the Minister for picking up the point that medical nursing students need to learn from people with learning disabilities, so that their attitudes change. That familiarity with and being comfortable with people with learning disabilities will change things. Will the noble Lord commit to asking the General Medical Council, the Nursing and Midwifery Council and the Medical Schools Council to make this a priority and to teach not just knowledge and skills but practical attitudes to people with learning disabilities?

Lord Prior of Brampton: My Lords, the noble Baroness makes a profound point—that medical education and training is not just about passing exams and the technicalities of medicine but about attitudes and how you work and deal with people, particularly people such as those who suffer from learning difficulties. I will certainly do what I can to encourage medical schools and nursing schools to adopt the noble Baroness’s suggestion.

Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015

Motion to Approve

3.07 pm

Moved by Lord Bourne of Aberystwyth

That the draft Regulations laid before the House on 16 July be approved.

Relevant documents: 3rd Report from the Joint Committee on Statutory Instruments, 8th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 24 November.

Motion agreed.

Paris Climate Change Conference


3.08 pm

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con): My Lords, with the leave of the House, I will now repeat a Statement made by my right honourable friend the Secretary of State for Energy and Climate Change in another place. The Statement is as follows.

“Mr Speaker, it gives me great pleasure to report to the House on the United Nations conference of parties in Paris last week. COP 21 has delivered a historic new global climate change agreement that takes a significant

15 Dec 2015 : Column 1970

step forward towards reducing, on a global scale, the emissions that cause climate change. For the first time, nearly 200 countries have made a commitment to act together and to be held accountable. In doing so, this agreement will help protect not just our environment but our national and economic security, now and for generations to come. As the Prime Minister said in his speech at the start of conference,

‘instead of making excuses tomorrow to our children and grandchildren, we should be taking action against climate change today’.

I am proud to say there are no more excuses. With the Paris agreement, we have shown that the world has committed to action.

This deal is unequivocally in Britain’s national interest. It moves us towards a level playing field at a global level within which the United Kingdom’s society and businesses can thrive, as we transition to a low-carbon economy. This is a deal we are wholeheartedly committed to, recognising that action by one state alone cannot and will not solve climate change. It is what we do together that counts.

I would like to say that this is a moment that all parties in this House can take significant credit for. Together, we passed the Climate Change Act 2008, which set an example to the world of what ambitious domestic climate action looks like. Together, since Copenhagen in 2009, we have supported a long, difficult and complex negotiation, which has brought us to this point. I want to pay tribute not just to the Prime Minister and my colleagues across government, but to my predecessors as Secretary of State for Energy and Climate Change for all the hard work they put in to bring us to this point.

As a country, we should be proud of the role we have played, leading in the EU, working closely with major global players, including the United States and China, and leading many of the negotiations. My department, with the FCO and DfID, has worked tirelessly to build the political conditions and the capacity to enable countries to act. The United Kingdom team in Paris last week showed commitment, passion and resilience. When Laurent Fabius asked me to chair the finance session at 4 am on Friday morning, I was well supported, and when I left at 6.30 in the morning, the team stayed to write up the conclusions and send them to the presidency. That, Mr Speaker, is commitment.

The United Kingdom played a key role in building alliances and shared positions, especially with the most vulnerable countries, to ensure that pressure for ambition could be maximised. This deal in Paris was not done to us; it was done by us. Indeed, it reflects many of the elements that we as a country have already committed to as part of the Climate Change Act. Of course, Paris is not the end of the road. We cannot sit back and say, ‘Job done’—far from it. Paris is the beginning. Now, the hard work to implement the agreement begins.

I turn to what the nearly 200 countries have agreed. First, we have set out a clear long-term goal for the world to achieve net zero emissions by the end of the century. That long-term goal sends a strong signal to investors, businesses and policymakers that the shift to

15 Dec 2015 : Column 1971

a global low-carbon economy will happen and it provides the confidence needed to drive the scale of investment required. We have confirmed our collective ambition to limit global temperature rises to below 2 degrees, and we have agreed a further aspiration of 1.5 degrees.

However, the current level of commitments by individual countries will not meet that ambition. So, crucially, countries will come back to the table to assess overall progress towards the 2 degrees goal in 2018 and every five years thereafter. As investment grows and the costs of low-carbon technologies come down, the Paris process will provide not just the opportunity but the political pressure to step up individual countries’ emissions reductions targets. Starting in 2020, countries are expected to update their own plans to cut emissions and will be legally obliged to do so again every five years, thus providing regular political moments to scale up ambition.

This agreement is not only comprehensive in its scope; it also recognises the role of both developed economies and emerging economies in helping the poorest and most vulnerable countries to protect themselves from the effects of climate change as they transition to a low-carbon economy.

Over the last five years, the United Kingdom’s £3.87 billion International Climate Fund has been helping millions of the world’s poor to better withstand weather extremes and rising temperatures. At the United Nations Secretary-General’s summit in September, the Prime Minister announced a significant uplift to increase climate finance by at least 50%, with £5.8 billion of climate finance over the next five years to support poor and vulnerable countries to adapt to climate change and to curb emissions. This is part of a global commitment to mobilise $100 billion per year from both the public and the private sectors to protect the most vulnerable and support economic growth from 2020. Other developed countries, including Germany, France, the United States, Japan and Canada, have all recently announced increases in their climate finance as well.

As important as the Paris agreement is, we will achieve our ultimate ambition only if it acts as a catalyst for transformational action from all parts of society. That is why it has been so important to see real action over the last month from business and civil society. For example, a new international initiative, ‘Mission Innovation’, will see some of the biggest global economies, including the United Kingdom, the United States and India, doubling their investments in clean energy research and development. Crucially, private investors will join us in this endeavour to bring down the costs of low-carbon technologies.

Here in the United Kingdom, we have committed to double spending in clean energy research and development, so that by 2020 we will be spending in excess of £400 million. This pledge has been matched by 19 other countries worldwide. This is in recognition of the fact that we will tackle climate change only if we find technologies that are both clean and cheap. Let me tell you that the announcement I made last month—that I would set out proposals to close coal by 2025 and restrict its use from 2023—added to the momentum in Paris.

15 Dec 2015 : Column 1972

The Paris agreement truly marks a historic turning-point. It builds on the Kyoto Protocol and, for the first time ever, provides the comprehensive framework in which not just developed countries but almost every country of the world has committed to take the global action needed to solve a global problem. Of course it was hard fought; of course it required compromise to bring everyone with us; of course it has not solved every problem in one go.

Now, we have to set about implementing the commitments made, but we should not underestimate the significance of what has been achieved. All parties have recognised that economic and global security requires us to tackle climate change. All have come together to commit to a single goal: net zero carbon emissions by the end of the century. All have agreed to set out plans to curb emissions and be held accountable for their actions. We have made a huge step forward in meeting our responsibilities to this and future generations. As the excellent executive secretary to the UNFCCC, Christiana Figueres, said, ‘I used to say we can, we must, we will. Now I can say we did’”.

3.17 pm

Lord Grantchester (Lab): I thank the Minister for repeating the Statement today. He is quite right to celebrate the agreement’s achievement and the role that all recent UK Governments have played to bring this about.

All Governments have agreed to the common goal to decarbonise their economies within one generation, to limit increases in global temperatures to below 2 degrees and to target 1.5 degrees. All Governments have agreed to achieve net zero emissions before 2050 and the end of the century to cut pollution and curb carbon emissions. All Governments have agreed to review progress and raise ambitions every five years to make sure that the job gets done. Developed nations have agreed to help fund the developing nations’ transition to clean energy with a flow of $100 billion a year beyond 2020.

The commitment achieved by consensus is immense. The Paris conference witnessed the greatest get-together of world leaders, with 50,000 people in attendance and the dedications of scientists, campaign groups and interest organisations in mobilising public support to insist on an agreement being achieved. This historic achievement was won in a forum of one country, one voice; unlike other intergovernment forums dominated by richer countries, as in the G7, G20, OECD and OPEC. China, the US, the EU and India are responsible for 61% of global emissions but other nations have an equal voice at the UNFCCC. The French must be congratulated for facilitating the conference, working tirelessly to resolve disputes.

The Minister is right to highlight the role played by successive UK Governments and the British Parliament. Now that this Government are the first Conservative Government for 18 years, this is not the time to abandon that consensus. It must be recognised that scientists still point to the dangers that even a rise of 2 degrees will bring and the trajectory that the world is on.

15 Dec 2015 : Column 1973

This agreement needs to be followed up by outcomes. In this respect, I congratulate the Government on the decision to phase out coal-powered generation by 2025. Last week, the Minister stated that domestic policies do not resonate on an international stage. His Government cannot think that fine words need not be matched by deeds.

In the Energy Bill 2013, the Government refused to set a 2030 decarbonisation target. There has followed a litany of reversals to important schemes designed to put the UK on track to a low-carbon economy. The UK’s commitment to reach renewable energy targets of 2015 by 2020 is in jeopardy. PWC estimates that if the renewables contributions from heat and transport remain at their present levels, the UK will need to generate 52% of electricity from renewables to meet that target.

The Government have attacked the cheapest options for achieving these targets, such as onshore wind, meaning that energy bills will increase by more than they need to. The Green Deal efficiency measures have been abandoned. Carbon capture and storage projects in Yorkshire and Scotland have been axed. Polluting diesel generators have been rewarded with 15-year contracts totalling more than £150 million in the latest capacity auctions.

The UK still requires significant investment in low-carbon technologies. Investor confidence is now undermined by continual sharp policy shifts such as are proposed in the latest Energy Bill. Friends of the Earth states:

“It will be outstanding hypocrisy for the government to trumpet the new climate change agreement unless it does a U-turn on energy policy”.

Will these green policy reversals now be reviewed in the context of the commitments given at Paris? Will the Minister ask the independent Committee on Climate Change to review the progress towards and likely achievement of the UK’s renewable generation target, and whether there should be further policy initiatives to get the UK back to achieving 50% of energy from renewables by 2020?

In Paris, the global ambition has been set to reduce temperature rises from 2 degrees to 1.5 degrees. What further measures does the Minister’s department now consider are necessary?

Lord Teverson (LD): My Lords, what a great result for all sides of this House, for the nation and for the international community. I do not think that we can say more strongly than has the Minister how great this result is. After the pessimism—the omnishambles, we could say—of Copenhagen in 2009, this is truly a good and remarkable result. We should certainly congratulate the French Government, and Laurent Fabius in particular, on their stewardship and their achievement at this conference.

The great thing is that those of us who believe that climate change really is one of the greatest issues facing this planet can be positive again, since for the past six years we have been rather on the defensive and pessimistic about outcomes. What we have here is an agreement not just between 196 nations but an agreement

15 Dec 2015 : Column 1974

particularly that China, the United States, India and Europe have agreed to. That is quite something and it would have been unbelievable just a few years ago.

We also have something else to celebrate. In 2014, the globe’s emissions were roughly the same—they levelled out for the first time during a period when there was global economic growth—and, this year, we hope that there will be something like a 1% reduction in carbon emissions. So we can move forward with confidence that we are achieving something and perhaps prove wrong the pessimists or disbelievers among us, not just through the science but by showing that real-world Governments, including in the developing world, are taking notice that this is a problem that needs to be solved.

I welcome particularly in this agreement the integration between developed and developing nations—there is not the big divide that there was under Kyoto and China’s emissions this year are falling by some 3% to 4%. I welcome, too, that we will have a proper review programme every five years, starting in 2018—we are not waiting for five years until we start that process—and that we realise that, for those island states in the Pacific and elsewhere, the real challenge should be 1.5 degrees and not 2 degrees, difficult though that will be. Those are great achievements and I welcome the Secretary of State’s Statement, and in particular her thanks to previous Secretaries of State—I think of my former right honourable colleague Ed Davey in that regard.

But we have a problem here: we need those nations to move forward on those agendas, and that includes the United Kingdom. While I agree with the Minister entirely that we have had a positive reaction in ridding ourselves of coal emissions within the next 10 years and increased investment in technology around the green agenda, so far this year we have had a reversal of a number of policies that are really important for driving our commitments forward in this area. The House does not have to believe me because the chief executives of companies such as Panasonic, BT, M&S, Tesco, Vodafone, Ikea and many others have written to the Government saying that this policy change has been in the wrong direction and needs to change. Those are real challenges.

We will come to the fifth carbon budget and I hope that the Government will move forward positively when it comes to decisions, unlike with the difficulties that there were— particularly from the Treasury—when we looked at the fourth carbon budget in the past.

On behalf of my Benches, I welcome this agreement. As the Minister said, it is not the end but it is the beginning of reaching a solution to climate change on this planet. It is the most important way of going forward. Of all the policies that are most important for implementing this agreement, perhaps the cheapest and most effective is the one of energy efficiency. The Government’s move away from zero-carbon homes for 2016 and commercial buildings for 2019 was one of the most negative policies that they could have implemented. My challenge to the Minister is to ask the Secretary of State to reverse at least that one policy so that we can start on the road to fulfilling this agreement.

15 Dec 2015 : Column 1975

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord, Lord Grantchester, for his comments and welcome him for the first time to the Front Bench in this House in his new role. I wish him well.

The noble Lord is right to talk about the significance of Paris. It is crucially important. He is also right to talk about the importance of small states. All nations came together and during the debates and negotiations there was as much, if not more, mention of the Maldives, Tuvalu and the Seychelles as of many larger states—and quite right, too, as they are very vulnerable countries that should touch the conscience of the world. The United Kingdom had a particular interest in guarding their interests, as the Prime Minister set out at the start of the conference.

The noble Lord is right also to say that we should pay tribute to France for what it did, not only for its diplomacy, which was extraordinary, but for managing the conference, particularly given the particular security and terrorist problems that it faced. It was an outstanding achievement. I thank him also for what he rightly said about the consensus around this issue among the parties here. That was right.

On domestic policies, I can say with all honesty that, as far as I am aware, the only time at any of the meetings I attended when domestic policies were mentioned was in the context of the closure of coal. This was borne out by our negotiators to whom I spoke. It certainly captured the world’s imagination. That is not to say that other issues are unimportant, but it was significant and a key moment when this country moved first on that issue.

The other important point in relation to what happened in Paris is that it gives a clear investment signal to the whole world which will help reduce costs still further. They are on a cheap spiral and are coming down anyway and no one wants to see subsidies for a long period. There may be disagreement about when they are phased out, but a clear message was sent out. I note what the noble Lord said about Friends of the Earth—they have never been particular friends of any Government—but I stress more the importance of the strong welcome given by the CBI to what was agreed.

We were fully signed up to and pressing for the 1.5% goal to which the noble referred. It did not come as something that we did not want; it was good news. Not all countries were pressing for it and I can certainly remember attending meetings where I spoke up in favour of it, as did many other EU countries and progressive allies. We certainly wanted it and we will now develop policies in the light of the challenges that we face. However, they are already on course to deliver this sort of change.

Moving on to the contribution of the noble Lord, Lord Teverson, I thank him for his kind words and the warm welcome he has given to the conference; it was very gracious and generous. He mentioned the role of France, and both Laurent Fabius and Ségolène Royal played an enormous role in organising this agreement so successfully. He mentioned global emissions peaking in the near distance moving forward, which is absolutely true, as well as the slight blurring of the issue between developed and developing countries. That is right and

15 Dec 2015 : Column 1976

it is something that the EU and the UK were pushing hard for because many states are developing quickly, and, without the invidious dimension, some do not look like developing countries any longer, thank goodness.

He also mentioned domestic policy. I can only refer him to what I said earlier, but I can reassure him on the two issues he finished on. First, Paris is not an end in itself: that is true. It is the road through Paris that is important, hence the five-yearly stock-take that will start in 2018 when we will assess how much progress we have made in relation to reducing emissions on a global basis, as well as the other five-year cycle when we will come back and, it is hoped, ratchet up our ambitions—or, in the case of some states, perhaps restate their ambitions.

The noble Lord made a point about energy efficiency, and I agree totally that it is the energy we do not use which is important. As a country, we probably need to do more on demand management. There is a manifesto commitment to insulate or improve 1 million homes in terms of their energy efficiency, and we are certainly committed to that. The smart meter programme, which I was looking at this morning, will help deliver energy reductions, as will our work on boilers and cars. All this continues.

3.51 pm

Lord Stern of Brentford (CB): Does the noble Lord agree that the UK delegation, including himself and the Secretary of State, played a strong role in what happened in Paris? They were everywhere and the UK’s position was largely respected. I was fortunate enough to be badged with the French delegation, and they were enormously appreciative of the work done by the UK. That appreciation is founded on two things. One is respect for our climate legislation and the great institutional strength that that gives to this country in its clear commitment to bring down emissions. I hope that the noble Lord will also agree that it is founded on our commitment to 0.7% of GDP being spent on overseas aid. That puts us in a stronger position than some other countries and allows us to contribute very powerfully.

I hope that the noble Lord will agree that the private sector contribution to the Paris meeting was very strong, and that private sector leadership is the growth story of the future in terms of the transition to a low carbon economy, as it will be at the top of the agenda at the World Economic Forum to be held in Davos in January. Again, I thank the noble Lord for the part he has personally played in that outcome.

Lord Bourne of Aberystwyth: I thank the noble Lord, Lord Stern, for his kind words, and I am certainly happy to accept the compliment. I welcome very much the role he has played. Indeed, when I last saw him on the television, he was featured not only with the French delegation but also with the former Vice-President of the United States, Al Gore. The noble Lord has done seminal work which demonstrates that we can have falling emissions and economic growth, and I think that that is now widely accepted. It was an absolutely prescient report.

15 Dec 2015 : Column 1977

It is true that the position we play in relation to overseas aid is crucial. It gives us a powerful means of talking to many other countries and seeking to be as helpful as possible. I mentioned earlier the small island developing states and the particular challenges they face. The legal framework we work within is also important. Finally, the last point he made about private sector leadership is vitally important. The Governor of the Bank of England spoke powerfully at the Paris conference, which is not something that has happened previously. The private sector demonstrated leadership, particularly when Michael Bloomberg, Paul Polman and many others said that this is an agreement which they warmly welcome. It is not just about non-governmental organisations and politicians, it is very much about the business world as well. Again, I thank the noble Lord for the role he played at the conference, which I know was considerable.

The Lord Bishop of Salisbury: My Lords, I, too, congratulate the Minister on the achievements in Paris and the part that the UK Government played. The faith communities organised, among those from the wider public sphere, to gather in Paris. Forty-four pilgrims walked from London; seven walked from the Danish-German border; and 22 cycled from Copenhagen. As they travelled on the journey to Paris, they gathered with them the support of the communities through which they travelled and in which meetings were held. This culminated last week with the presentation of a petition, with signatures from 1.83 million people, to Christiana Figueres and President Hollande by 20 of us in the faith communities. This is a deal that many people wanted. Ban Ki-moon, Secretary-General of the UN, said that it was the most complex and largest talks he had ever been part of. The sense of achievement is therefore very great in having pulled off the Paris agreement. The UK’s contribution through climate finance was particularly significant.

However, over these last months, the Government have given mixed signals about the commitment to renewable energy. Therefore, there is a question about how the Paris agreement will be implemented domestically. That which was hard fought and hard won now needs to be hard wired. I would like to ask the Minister how, over these next few months, he sees the Government acting across the areas of public policy in order to make sure that this agreement is hard wired into all our thinking and acting across the whole area, not just within DECC and those involved in the environment and climate change. What steps will be taken to ratchet up the UK’s ambition in the way that the Paris agreement envisages so that we become more ambitious about what we are trying to achieve?

Lord Bourne of Aberystwyth: I thank the right reverend Prelate very much for his kind words and note, in particular, the lead that he has given through the Lambeth declaration and the fact that that pulled together people of many faiths. There was also a massive role of the Muslim climate group in supporting this. The participation of faith in all this, not least from His Holiness the Pope, was significant. I thank him also for what he said about climate finance. The

15 Dec 2015 : Column 1978

contribution that this was able to make to the debate, and speaking to people, certainly was significant. Obviously, it is important for developing countries, particularly the most vulnerable countries, because there are degrees, as we are all aware, of poverty. Some small island states in particular need an awful lot of assistance on adaptation as well as mitigation.

The right reverend Prelate asked about the domestic agenda. Again, I refer him to what I said previously about falling costs, which is certainly true. The costs, particularly of solar, are spiralling down very quickly. Given the very clear signal that has been sent out worldwide, we can expect that to continue. The Paris agreement is significant in many respects. It is significant that the world has come together in the positive way in which it did but, on the specific, it is very important that it signals the end of the carbon economy. It is only a question of when. That message going out worldwide to business and being welcomed by business will mean that costs fall.

What are we doing within DECC? First, many DECC officials are taking a little bit of a break, having been up around the clock for the past couple of weeks. That said, work is already going on to see how this is delivered but, of course, the work had started before. We are already looking across government at what we need to do on cars and housing to meet our carbon targets. That work will continue but it is important that this is not just a one-nation issue; this is across the whole world. Hence, the importance of the five-year stock takes and the five-year reviews.

Viscount Ridley (Con): My Lords, I hate to pour cold water on this love-in but perhaps I may remind the Minister that the only thing legally binding on countries which are increasing their emissions in this agreement is that they must produce voluntary plans. Paris therefore represents the end of a 20-year attempt to get agreement to legally binding emissions targets. Will he confirm that this leaves the UK as the only country with a legally binding target on emissions? Will he remember the Chancellor of the Exchequer’s pledge that this country should go no faster in this respect than other countries? Will he therefore consider adjusting our policies to fulfil that pledge in the interests of those working in the industry and those struggling to heat their homes this winter and in future winters?

Lord Bourne of Aberystwyth: My Lords, I am also disappointed that my noble friend has ended the “love-in”, as he calls it. If this is regarded as something that states will just cast away, it is significant that it was such a hard agreement to drive and achieve—if it really was, as he perhaps implies, just a piece of paper and not worth the paper it is written on, why was it so hard an agreement to reach? Only one state stood apart from this process and that is North Korea. I suggest that this is no time for strategic alliances with North Korea. This is a world problem that needs a world solution. The agreement is a step on that road.

Baroness Worthington (Lab): My Lords, I congratulate the Minister on the role he played in Paris, alongside the right honourable Amber Rudd and her team.

15 Dec 2015 : Column 1979

I also pay particular tribute to Pete Betts, who was the lead negotiator of the DECC team and, indeed, represented the entire EU in the negotiations. He has been an amazing builder and crafter of consensus on this issue.

It is clear that Paris marks a watershed and a new beginning because it is the first time that 190 countries have said that they are all on the same page and they all will take action on this. The noble Viscount pointed out that this is a different deal, and it is for a reason. It is a fantastic example of catching the exact balance between ambition and flexibility to allow maximum participation. We would have achieved nothing in Paris if we had gone trying a top-down, dictatorial approach to bringing emissions down. It is only by building consensus in the way that Paris did so successfully that we have managed to achieve this deal.

I will touch on one issue relating to the implications of this for the UK and, indeed, for the EU. It cannot be the case that Paris is such a significant moment, yet we say that there is nothing more to be done here and that we are already doing everything that we can. Indeed, the text in Paris is quite clear: all countries that can reduce emissions must do so, including before 2020. My question to the Minister is: will you instruct the Committee on Climate Change to look again at our framework to see whether we can do more? I am certain that we can; we have certainly been overachieving our targets in the first of our budgets, carrying a lot of hot air forward. Let us take that hot air out, increase our ambition and continue to lead. It is only through leadership that we can show the rest of the world that this is possible, as we have been doing to date and continue to do.

Once again, I congratulate everyone involved on achieving such a huge and monumental result, including the noble Lord, Lord Stern, who was one of the great architects of this approach, which has delivered a fantastic result.

Lord Bourne of Aberystwyth: I thank the noble Baroness very much indeed for her typically generous comments and associate myself with what she said relating to the noble Lord, Lord Stern, and the entire team in DECC. She rightly mentioned Pete Betts. I spoke to him today; he is up and fighting the case, even given the massive involvement that he had. I also mention in that context Ben Lyon, who was also a key negotiator. They and the entire team worked incredibly hard.

The noble Baroness is right that this process at Paris represents a bottom-up approach, rather than the top-down one that we had in Kyoto. I therefore think that it is entirely the right approach. It is not right to say that this is not legally binding. Finance is obviously connected with performance. This is a treaty that we have every reason to believe will be adhered to. As she says, it is important that the United Kingdom steps up to the plate. We have provided strong leadership and we will continue to do so. We in the department are looking at ways to reduce demand on electricity, as we always do: we are looking at the cars issue across government, at what we can do through DCLG and so on.

15 Dec 2015 : Column 1980

The noble Baroness mentioned the Committee on Climate Change. My noble friend Lord Deben is in his place. As I understand it, the committee previously wrote to us and indicated that if it needed to reassess in the light of Paris it would do so and come back to us in the new year. I presume that that is still the position. Again, I pay tribute to what he did out in Paris because I know that he was also very strong there in supporting what was happening.

Lord Deben (Con): Would my noble friend accept that the Paris result was remarkable and unprecedented, and that those who would cast doubt upon it are only undermining the way private industries know that they will have to change if they are to meet the world in which they will have to compete? The Climate Change Committee will give advice to the Government on what changes need to be made but, in the mean time, I hope my noble friend will accept that the fifth carbon budget is a crucial part of this continuum and that we need to have legislation on it as rapidly as possible. Does he also accept that he has promised that we will look again at the way we insulate homes and deal with energy efficiency? Will he also make sure that it is part of the policy that no new houses are built which have to be retrofitted very soon because they do not meet the sensible requirements of the Paris commitment?

The Minister ought to be congratulating himself. It is not a love-in to say that Britain has played a very important part in an unprecedented decision. The whole world has said that we know we have to act and those who refuse to know are undermining the future of our children and grandchildren. I say that particularly to those of my colleagues who continually undermine the duty we have.

Lord Bourne of Aberystwyth: My Lords, nobody should doubt the commitment of the Prime Minister and the Government to this agreement. The Prime Minister was out there at the start, clearly underlining support and the importance of protecting the small island developing states. He has welcomed this strong agreement. There is no shame attached to this country giving a lead on these issues, as we have on many others over the ages: we should be proud of it. I note what the noble Lord said about the fifth carbon budget. We will be looking at that and responding to it in the first half of 2016, according to the deadline which is set out. There was a commitment to insulation in the manifesto and there are ongoing developments in energy efficiency. The smart meter programme, which is coming on and will be delivered in totality by 2020, will be a strong driver of that policy.

Baroness Liddell of Coatdyke (Lab): My Lords, this is a very considerable achievement. I have been haunted by the image of being at a meeting of the Pacific Island forum and a Minister having to leave suddenly, her parents’ house having been inundated because sea levels have risen much more rapidly than anticipated. The small islands in the Pacific have been on edge about the consequences. The Minister referred to the need for investment. What measures are the Government

15 Dec 2015 : Column 1981

prepared to take to restore the confidence of the investment community in this country? Just three or four weeks ago, a major investment in carbon capture and storage was pulled out from under their feet. A member of a board which has proper respect for due governance and risk analysis would have to take into account the uncertainty there is now about energy investment decisions. What measures are the Government prepared to take to restore that confidence?

Lord Bourne of Aberystwyth: My Lords, the noble Baroness is quite right about the importance of the small islands in the Pacific and elsewhere, such as the Seychelles and the Maldives. It was brought home graphically to me when I met representatives from Tuvalu in the House of Lords during the summer. They said that two degrees was not going to be enough to save them from total obliteration. Although there is a measure of self-interest, it is to the credit of the world that there was a sense of international responsibility for these issues when they came up in Paris.

On the investment issues which the noble Baroness rightly raised, £122 billion is spent annually in the UK on the low carbon economy. It is of extreme and growing significance and we are well aware of it. I repeat that this global agreement has been much welcomed. It gives certainty and sense of direction worldwide, not just in the UK. We have significant investments in the UK which have taken heart from the Government’s decision. An example is Siemens in relation to offshore wind. The point is well made that economic leaders need certainty. I would not disagree with that and it will, obviously, inform our policy.

Lord Lawson of Blaby (Con): My Lords, the problem is that the Statement that my noble friend read out bears only the most tenuous relationship to what is actually happening in the real world. Is he not aware, for example, that back in the real world India has just announced plans to double its coal production by 2020? Is he not aware that in the real world, more than 2,500 coal-fired power stations are under construction, particularly in India and China but elsewhere around the world? Whether he wants to see decarbonisation or not, does he agree that, bearing in mind the effect on fuel prices, which affect fuel poverty and the competitiveness of British industry—one thinks of the recent closures in the steel industry in this country—it makes no sense whatever for us to decarbonise faster than the rest of the world?

Lord Bourne of Aberystwyth: My Lords, I am very well aware of the massive deployment of coal. That is one reason why the world needed to come together to see how it will address that issue. It is also true to say that in both India and China there is massive deployment of renewables. I think that the deployment of solar is about to overtake coal in India, so I recognise the issue. That is why we need to address it. I hope the noble Lord agrees that we do need to address it; I was not sure whether that was the inference of his question. I understand the particular problems with steel, for example, that he mentioned, but this issue is not related simply to energy but also to overproduction.

15 Dec 2015 : Column 1982

I also recognise that every country has to protect its own patch and its own interests. As I said, there is an element of self-interest in different countries coming to this agreement in different ways, but there is a real sense of international responsibility and a real sense that if we had not acted in the way we did in Paris, we would face very serious problems in the future. There are still challenges but this was a very important milestone, and a very important milestone for the United Kingdom in the role it played.

Enterprise Bill [HL]

Enterprise Bill [HL]

Third Reading

3.52 pm

Relevant document: 15th Report from the Delegated Powers Committee (Northern Irish Legislative Consent Motion rejected)

Lord Taylor of Holbeach (Con): My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Enterprise Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Lord Berkeley (Lab): My Lords, before the noble Baroness, Lady Neville-Rolfe, moves Amendment 1, will she, or the Chief Whip, explain in more detail what prerogatives and interests the Queen has put at the disposal of Parliament for the purposes of this Bill? The statement that has been made does not come with every Bill, but could the Queen have just bought some pubs, which formed part of the discussions we had on Clauses 32 and 33, or will the non-domestic rates be affected? It would be very helpful to the House if we knew what interests Her Majesty was putting at the disposal of the House, and whether they are her public interests or her private ones.

Lord Taylor of Holbeach: My Lords, the notice I read is a courtesy which Her Majesty extends to the House before we consider the Third Reading of a Bill. It is not normal to discuss in detail what the interests are. They arise from the fact that the Bill addresses the rating of property, and Her Majesty is the owner of such property. In that respect, she has placed her prerogative at the disposal of the House.

Amendment 1

Moved by Baroness Neville-Rolfe

1: After Clause 23, insert the following new Clause—

“Additional time limit for actions for damages for late payment of insurance claims

After section 5 of the Limitation Act 1980 insert—

“5A Additional time limit for actions for damages for late payment of insurance claims

(1) An action in respect of breach of the term implied into a contract of insurance by section 13A of the Insurance Act 2015 (late payment of claims) may not be brought after the expiration of one year from the date on which the insurer has paid all the sums referred to in subsection (1) of that section.

15 Dec 2015 : Column 1983

(2) Any payment which extinguishes an insurer’s liability to pay a sum referred to in section 13A of the Insurance Act 2015 is to be treated for the purposes of this section as payment of that sum.””

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con): My Lords, Clauses 22 and 23 bring in reforms to address late payment in the insurance sector, which we believe to be overdue. The overarching policy objective of these provisions is to provide a strong incentive for insurers to pay on time. It is hoped that the provisions will speed up settlement of insurance claims generally, with day-to-day benefits for policyholders.

Amendment 1 affects the limitation period in which a policyholder must bring any claim for late payment of an insurance claim. It addresses concerns expressed on Report that the late payment provisions would force insurers to keep open their books and hold reserves in respect of possible late payment claims for an uncertain length of time, potentially impacting on policyholders through premiums. We have now had the opportunity to consider the policy arguments put forward by the noble Earl, Lord Kinnoull, and my noble friend Lord Flight, and to prepare the amendments needed to make a targeted change to the limitation period for late payment claims. The Government consider that these produce a better balance of policyholder and insurer interests. Due to the volume of claims which insurers deal with, and the capital requirements to which they are subject, insurers have a rather unique need for certainty in knowing when they have satisfied all their liabilities in respect of a certain claim.

The amendment adds a new provision to the Limitation Act 1980, which applies in England and Wales. It means that a policyholder must bring any late payment claim within one year of the insurer having paid all sums due in respect of the initial insurance claim. This may include sums paid under a binding settlement contract between the insurer and the policyholder, or paid as a result of a court award against the insurer. Until the underlying insurance claim has been paid, the usual limitation period of six years from the breach of contract would continue to apply.

It is reasonable to expect a policyholder to bring a claim for late payment within a year of receiving payment of the insurance claim, so the amendment does not prejudice them unduly. It also has the potential to protect the vast majority of policyholders, who will never need to bring a late payment claim, from any premium increases that may result as a consequence of insurers’ increased costs. Amendment 2 provides for the commencement of this amendment. I beg to move Amendment 1.

Baroness Hayter of Kentish Town (Lab): My Lords, I want to take a moment to say that we welcome this clause. We always thought it was important and I thank the Minister for facilitating the meeting that we had with her and officials, and with the Law Commission, which has given careful thought to this—as have we. In fact, we rather hope that the 12-month limit might

15 Dec 2015 : Column 1984

even help get some of those payments made rapidly, so we are very happy with this amendment and give it our full support.

Baroness Neville-Rolfe: My Lords, I thank the noble Baroness for her support. I trust that the amendment will receive the same support when the Bill proceeds to the other place in its amended form.

Amendment 1 agreed.

Clause 37: Commencement

Amendment 2

Moved by Baroness Neville-Rolfe

2: Clause 37, page 54, line 38, leave out “and 23” and insert “to (Additional time limit for actions for damages for late payment of insurance claims)”

Amendment 2 agreed.

Clause 38: Extent

Amendment 3

Moved by Baroness Neville-Rolfe

3: Clause 38, page 55, line 12, at end insert—

“( ) section 28 (UK Government Investments Limited);

( ) section 30 (UK Green Investment Bank: transitional provision);”

Baroness Neville-Rolfe: My Lords, Clause 38 sets the territorial extent of the provisions in the Bill. This amendment makes minor and technical changes to the clause to make clear that the territorial extent of the clauses relating to UK Government Investments Ltd and the transitional provision in respect of the UK’s Green Investment Bank is UK-wide, and to ensure consistency in the drafting of the clause. The effect of the clause is unchanged.

I should clarify that although I mentioned on Report some possible amendments on pensions provision for Small Business Commissioner staff, on reflection, the Government consider that no amendments are needed at this point. I can also confirm that I have written to noble Lords on the issues raised on Report on which I promised further information, and have placed a copy of those letters in the House Libraries. I beg to move.

Amendment 3 agreed.

A privilege amendment was made.

3.59 pm


Moved by Baroness Neville-Rolfe

That the Bill do now pass.

15 Dec 2015 : Column 1985

Baroness Neville-Rolfe: My Lords, I put on record my thanks to all those who supported the rapid passage of the Bill through our House. I begin by thanking the Lord Speaker and all Deputy Speakers, as well as the clerks, the doorkeepers and our skilful reporters in Hansard. I thank the hard-working members of the Bill team, helped by our able apprentice, and the officials from the four departments and from the Law Commission who assisted our debates.

The Bill covers a lot of ground. We have jointly crossed a varied and complex landscape—some parts verdant and others rather rocky. Our travels have taken us from the Small Business Commissioner, via the Primary Authority and the Green Investment Bank, to the exit payment cap. Thanks to the noble Lord, Lord Whitty, we even ventured on to the cricket field, and although I was rather disappointed with the noble Lord’s assessment of my batting, I am holding on to the fact that he credited me with a strong defensive game.

I thank all noble Lords for their contributions. We have heard a range of expert voices from the opposition Benches. I am grateful particularly to the noble Lord, Lord Mendelsohn, and to the noble Lord, Lord Stevenson, who I am pleased to see looking so well again. I am grateful to the noble Baroness, Lady Hayter, as well as the noble Lords, Lord Stoneham and Lord Teverson, and the noble Baronesses, Lady Burt and Lady Sharp, as well as the noble Earl, Lord Lytton. I thank them all for their always constructive—and always challenging—approach and for working with me and my officials outside the Chamber. I thank the noble Lords, Lord Smith and Lord Curry, who gave us the invaluable benefit of their experience in chairing the Green Investment Bank and the Better Regulation Executive respectively. It is always good to have people who are engaged in matters contributing in the House.

Finally, I thank my noble friends Lord Younger, Lord Gardiner and Lord Sherbourne, who have so expertly assisted me at the Dispatch Box, as well as my many noble friends who have supported the Bill from the government Benches, especially my noble friends Lady Wheatcroft, Lord Hodgson, Lord Borwick, Lady Brady, Lady Harding, Lady Noakes, Lord Leigh, Lord Flight, Lord Cope and Lord Baker—a cornucopia of talent. I thank all your Lordships

Lord Mendelsohn (Lab): My Lords, I also place on record our thanks to all noble Lords for their contributions. The Bill that now passes to another place is certainly a better Bill than the one that arrived, which reflects the role of your Lordships’ House and the constructive discussions that we have had with the Government and others. On behalf of these Benches, I thank the Bill team for its hard work and its readiness to engage in detailed discussion. I thank in particular a member of the small business team, who made a welcome return to finally sort out a few issues that we had with pubs. Our Benches have been very ably supported by the quite outstanding Nicola Jayawickreme, and I put on record my thanks to her.

Our debates have certainly been wide ranging, covering many detailed issues. Of course on our Benches, my formidable noble friends Lord Stevenson and Lady Hayter

15 Dec 2015 : Column 1986

have made quite outstanding contributions and taught me everything that I know. It has been exceptionally helpful to have many colleagues from outside add some quite outstanding contributions and raise issues which have helped our discussions—including my noble friends Lady Donaghy, Lord Snape, Lord Whitty and Lord Wills. I also pay tribute to the noble Lords, Lord Stoneham and Lord Teverson, and the noble Baroness, Lady Burt, on the Liberal Democrat Benches. We found a very good way of working with them and with the Government to improve the Bill in relation to a number of measures.

Across the House, the noble Earl, Lord Lindsay, has always been an expert on regulation; the noble Earl, Lord Lytton, made some outstanding contributions on non-domestic rates; the noble Lord, Lord Aberdare, raised retentions very ably; the noble Lord, Lord Low, dealt with public sector exit payments and matters relating to whistleblowing. Many other noble Lords contributed, too. I place on record my deep thanks to the noble Lord, Lord Hodgson, for at least agreeing with me once during the course of our discussions.

Finally, I pay tribute to and thank the noble Baroness, Lady Neville-Rolfe. It is always a pleasure to engage constructively with her. She is someone with whom you can always find at least some ground to work with, even when her hands are tied firmly behind her back by those in the Treasury and elsewhere. She is extremely inventive and courteous, and we thank her for the way in which she has handled this measure.

Lord Stoneham of Droxford (LD): My Lords, I do not wish to detain the House, but I must join in the thanks to those on the Bill team for their patience, particularly on the Green Investment Bank, and all colleagues who have taken part on the Bill. I also join in thanking the Minister for her understanding, diligence, very good communications and patience throughout our proceedings.

Lord O'Neill of Clackmannan (Lab): I thank the noble Baroness for not putting something in the Bill. At one stage, the noble Lord, Lord Aberdare, and I supported an amendment concerning the issue of retention and the means of dealing with it. She told us that, if it were withdrawn, she would undertake to establish a review. The manner in which the review has been set up gives us great confidence that it will be conducted in a rigorous and fair way, and we look forward to it proceeding in due course. I thank the noble Baroness not for putting something in the Bill, but for giving us what I hope will be an adequate substitute as a means to address one of the most vexed issues of payment. It was not covered by the Bill, but will now be within sight of being properly and speedily remedied—many years too late, sadly, but now ready to be dealt with in an effective manner.

Lord Wills (Lab): My Lords, my contribution to the Bill was restricted to its very end and the clauses relating to public sector exit payments and what are, I hope, the unintended consequences of protection for whistleblowers. Throughout the discussion of the clauses—and, indeed, of the Bill—the Minister

15 Dec 2015 : Column 1987

demonstrated her characteristically firm grasp of the issues, constructive approach to the amendments and courteous and considered approach to your Lordships’ House. I am grateful to her and all her officials for the meetings and conversations that we have had on my amendments, and congratulate them on shepherding the Bill successfully to this stage.

Commanding, constructive, courteous and considerate the Minister may be, but I fear that she is not convinced by the arguments that I and others have put forward for the need to improve the legislation better to protect whistleblowers. I fear that the public and Ministers will come in time to regret that. It is common ground that the public interest is best served by creating an environment which encourages genuine whistleblowers to come forward—and to do so in a timely manner. Such whistleblowers often take considerable risks with their careers and livelihoods to come forward in that way. It is in the public interest to provide robust legal protection for those courageous individuals, and uncapped damages are an important part of such protection, because they reassure whistleblowers that they will not be bereft of adequate means to support themselves and their families if they make a disclosure in the public interest.

We did not table an amendment at this stage because we know that the Government believe that regulations will offer sufficient protection to whistleblowers—but that this should, in some way not yet clear, be restricted by the need to protect the public purse from claims made on it by those falsely claiming the protection of public interest disclosures. The Government’s approach appears to be that whistleblowers will not be able to breach the cap unless they can demonstrate that they have made disclosures genuinely in the public interest, and the Treasury will be the judge and jury of that

How many of those considering making disclosures in the public interest will feel reassured that their ability to support their families will be protected by a judgment by the Treasury that they deserve more money? How many Secretaries of State would be reassured by a plea to trust the Treasury that it will be all right on the night, they need not worry about their department’s budget, because if the Treasury judges, in time, that their case is meritorious, they will, in the end, get the money they need? How many have been reassured by that prospect? Paying out as little money as it possibly can get away with is what the Treasury does, and relying on a judgment by the Treasury or any Minister after a whistleblower has already risked their career and livelihood to make a public interest disclosure is never going to be reassuring to someone taking such risks. Daniel Kahneman, the Nobel laureate, once said:

“To be useful, your beliefs should be constrained by the logic of probability”.

The probability in this case is that, in the foreseeable future, there will be terrible abuses of power and catastrophic cases of maladministration and corruption, just as there have always been in the past, and that these could all have been prevented or at least mitigated, as many could have been in the past. Hillsborough and the abuse of MPs’ expenses, as well as far too many cases of child abuse and failures in the NHS, for example, all bear witness to that.

15 Dec 2015 : Column 1988

The public need these courageous individuals to reveal wrongdoing by their employers, in the public interest, and the Government need to persuade them that they are going to be so protected. The Government could have taken the opportunity given by this Bill to provide better protection for such courageous whistleblowers. Instead, they have weakened it through the confusion we talked about in Committee and on Report about how the public sector exit payments cap will apply to whistleblowers. There needs to be greater clarity, and the burden of proof should be reversed so that it is clear that all public interest disclosures will merit breaching the cap on public sector exit payments, unless it can be shown that disclosures were not in the public interest.

The Minister and her officials have kindly agreed to meet me, my noble friend Lady Hayter and the noble Lord, Lord Low, whom I also regard as my noble friend, to discuss these issues. I hope that they can provide us with greater reassurance then. Otherwise, I fear that when the next scandal happens over a failure to protect the public—as, sadly, it is bound to do—and the resulting inquiry finds that inadequate protection for whistleblowers is part of the reason for that failure, as it probably will, we may all regret that we did not seize this opportunity to do more to protect whistleblowers.

Bill passed and sent to the Commons with amendments.

Bank of England and Financial Services Bill [HL]

Bank of England and Financial Services Bill [HL]


4.12 pm

Relevant documents: 11th, 12th and 16th Reports from the Delegated Powers Committee

Clause 3: Abolition of Oversight Committee

Amendment 1

Moved by Lord Bridges of Headley

1: Clause 3, page 4, line 6, at end insert—

“( ) In section 3C (reviews) after subsection (1) insert—

“(1A) Where they consider that to do so would contribute to the discharge by the court of directors of any of its oversight functions, the non-executive directors of the Bank (or a majority of them) may arrange—

(a) for a review to be conducted under this section in relation to any matter by a person appointed by those directors, and

(b) for the person conducting the review to make one or more reports to the court of directors.””

The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con): My Lords, I am grateful for the discussions we have had on Bank governance to date. In this group, I would like to bring forward three amendments that respond to these debates: first, to ensure that the non-executives on the court can always initiate performance reviews; secondly, to prevent

15 Dec 2015 : Column 1989

the court from delegating oversight functions to a sub-set of its members; and, thirdly, to provide clarity on responsibility for the financial stability strategy.

The noble Baroness, Lady Kramer, and the noble Lords, Lord Sharkey, Lord Tunnicliffe, and Lord Eatwell, have raised concerns that the transfer of the oversight functions to the court could unintentionally weaken the non-executive majority. Noble Lords have argued that a majority of non-executives might be blocked from initiating a review if the executive was united in opposition and enlisted one or two non-executives to their cause. The first amendment laid by the Government addresses these concerns. The government amendment to Clause 3 ensures that a majority of non-execs can always initiate performance reviews without needing to secure the agreement of a majority of the whole court. If just four non-executive directors want a review, they will be able to initiate it. This will reinforce oversight of the Bank’s activities and provide additional protection against groupthink. The initiators of a review would determine who should carry it out. This could be someone external, or internal, including the Bank’s new Independent Evaluation Office.

At this point, it is worth pointing out a related change that the Bill makes. The 2012 Act required that:

“If the person to be appointed to conduct a performance review is an officer or employee of the Bank, the appointment requires the consent of the Governor of the Bank”.

The Bill removes that condition, so that a majority of the court or a majority of non-executives will be able to appoint an officer or employee of the Bank without needing to secure the Governor’s consent.

4.15 pm

The noble Lord, Lord Eatwell, has suggested an addition to my amendment. Although I do not feel his text is necessary, I am grateful to him for proposing it today because it reminds us of a very important aspect of the Bank’s accountability, a point I will come back to in a moment. We have provided only one condition that must be met if the non-executives wish to initiate a review, which is that they should,

“consider that to do so would contribute to the discharge by the court of directors of any of its oversight functions”.

This is rightly a low bar since the purpose of our amendment is to ensure that the non-executives have unfettered power to launch reviews into the Bank.

The noble Lord, Lord Eatwell, has suggested that we widen the reasons the non-executives might choose to initiate a review to include a request from the Treasury Select Committee in the other place. For the avoidance of doubt, this amendment would not mean that the TSC may initiate reviews; it only makes a request by the TSC a reason the non-executives might choose to start a review. However, the TSC is already fully able, and will remain fully able, to ask the non-executives to commission a review of interest. It will be up to the non-executives to decide whether they want to follow through on that request.

Although I hope that the noble Lord, Lord Eatwell, will not press his amendment, it is an important addition to this debate because it reminds us of an

15 Dec 2015 : Column 1990

important element of the Bank’s accountability to Parliament and specifically to the Treasury Select Committee. As noble Lords will know, the Treasury Select Committee is a fierce scrutiniser of the Bank’s work. Since this Bill was introduced, that committee has questioned Governor Carney twice, PRA CEO Andrew Bailey twice, Chief Economist Andy Haldane, MPC members Kristin Forbes and Jan Vlieghe and PRA members David Belsham and Mark Yallop. It has also published appointment reports for Jan Vlieghe and Ian McCafferty and questioned the Chancellor on the changes to the Bank of England we are making through this Bill. The Treasury Select Committee will continue to hold the Bank to account after this Bill is passed, just as it has before, calling both executive and non-executive members before its scrutiny.

I turn now to Clause 4. In Committee, the noble Baroness, Lady Kramer, was concerned that Clause 4 enables the court to delegate the oversight functions to,

“2 or more non-executives of the Bank”.

The existing arrangements provide flexibility for the oversight committee by allowing it to,

“delegate any of its functions to two or more of its members”.

We drafted Clause 4 simply to maintain this provision, but limited it to the non-executive members of the court to prevent any of the oversight functions being delegated purely to the executive. The amendment to Clause 4 would remove this provision. The court would no longer be able to delegate oversight functions. I hope that this addresses the noble Baroness’s concerns and reinforces that the oversight functions are the responsibility of every single member of the court.

Clause 4 also requires the court to establish a sub-committee of at least two non-executives to determine executive remuneration. Clearly, we would not want the executive setting its own pay. This replicates a power currently used to form a remuneration committee. Through this amendment, we propose to increase the minimum size of the remuneration committee from two to three. This ensures that a larger number of non-executives are responsible for setting executive pay and also brings the legislative basis of the Bank’s remuneration committee in line with The UK Corporate Governance Code.

The aims of Clause 5 were quite modest. Moving responsibility for the financial stability strategy from the court to the Bank would have maintained the court’s ultimate responsibility but would have enabled it to delegate the strategy’s production within the Bank. The policy intention was that expertise from across the broad range of policy areas covered by the financial stability strategy could feed into the final document. Today’s amendment maintains the original policy intent but responds to the demand for clarity voiced in our debates.

The amendment restores responsibility for the financial stability strategy under the legislation to the court. To provide the flexibility needed to delegate elements of its production within the Bank, the amendment provides for an express power of delegation. The amendment also clarifies that the court remains responsible for any duty or power it delegates, addressing concerns raised during our debates and providing clarity on the scope

15 Dec 2015 : Column 1991

of the court’s responsibilities. Under either our initial proposal or this amendment, the court is responsible for the production of the strategy and able to delegate work within the organisation. However, I hope noble Lords will agree that this amendment has the significant advantage of clarity, and I thank the noble Lords and the noble Baroness, Lady Kramer, for bringing this to our attention.

Through our amendments today, we are ensuring that the non-executives on the board can always initiate performance reviews, preventing the court from delegating oversight functions to a subset of its members and providing clarity on responsibility for the financial stability strategy. I thank those who spoke with me, wrote to me and met me to make the case for these improvements. I hope that noble Lords will agree to our amendments. I beg to move.

Amendment 2 (to Amendment 1)

Moved by Lord Eatwell

2: Clause 3, line 3, at beginning insert “At the request of the Treasury Select Committee of the House of Commons, or”

Lord Eatwell (Non-Afl): My Lords, this amendment seeks to provide the Treasury Select Committee of another place with the ability to stimulate the oversight function of the Court of the Bank of England. It may be helpful to provide some context for this proposal. The measures in the Bill, in so far as they refer to the Bank of England, return the regulatory scope and powers of the Bank to roughly the same position that they were in in 1997. From 1997 onwards there was, first, the transfer of many, though not all, of the Bank’s regulatory powers to the FSA, then the abolition of the FSA and the transfer of prudential regulation to the PRA, and now the subsidiary status of the PRA is to be abolished and its activities fully reincorporated within the Bank, so we have come full circle. After major institutional reforms, we are back where we started, with all the powers of prudential regulation being exercised by the Bank. Conduct of business regulation, amalgamated in the FSA from various sources, now resides with the FCA, but it should be noted that few of these powers were originally exercised by the Bank of England.

It is worth recalling that the Bank of England that we began with, prior to the creation of the FSA, was not a successful regulator. The Bank failed in the case of the Johnson Matthey bank and over BCCI, and so glaring was its failure with respect to Barings that the then Board of Banking Supervision commented acerbically that the Bank of England should try to understand the institutions that it purports to regulate. Regulation was taken away from the Bank because it had failed as a regulator. Then, of course, the new tripartite regulatory structuring of the FSA, the Bank and the Treasury failed dramatically in the financial crisis of 2007-08, so the FSA was abolished. At least the PRA can hold its head up and declare that its position as an independent subsidiary is being abolished in this merry-go-round not because it has failed but because of a desire to restore the unitary power of the Bank of England. It is neater that way.

What this tale of circular institutional reform should teach us is that there is no specific institutional structure that can guarantee to deliver regulatory competence.

15 Dec 2015 : Column 1992

The all-powerful Bank that we are now recreating has proved in the past to be a regulatory failure, while the tripartite structure of the FSA, the Bank and the Treasury failed even more spectacularly. Given that institutional reform will not be a panacea, there is a powerful case for thorough parliamentary scrutiny to at least attempt to identify the failings when they occur, as we can be sure that they will. Moreover, I remind noble Lords of the words of the Treasury Select Committee of another place with regard to the original proposal that a supervisory board be established at the Bank. The committee said:

“The Bank is a democratically accountable institution, and it is inevitable that Parliament will wish to express views and, on occasion, concerns about its decisions. Our recommendation that the new Supervisory Board have the authority to conduct retrospective reviews of the … prudential performance of the Bank, should, if operated successfully, provide the tools for proper scrutiny”.

In Committee I asked the Minister if he agreed with the proposition that the Bank should be a democratically accountable institution. He failed to reply. I will happily give way now if he wishes to comment. Apparently he does not.

Therefore, the Treasury Select Committee argued, correctly, that proper parliamentary scrutiny depends on internal reviews of the Bank, not just on the external inquiries of parliamentary committees. Internal review provides Parliament with the “tools for proper scrutiny”. The reason is obvious. The court that as a consequence of the Bill will be invested with the oversight function has full information about the operations and policies of the Bank—a level of information that even the most assiduous Treasury Select Committee could never have. Indeed, the court has information which is not, and sometimes should not be, in the public domain.

My amendment would allow the Treasury Select Committee of another place to request that the court exercise its oversight function. Note, as the Minister said, that the court is not compelled to comply. The wording of the noble Lord’s amendment, to which my amendment refers, states that the non-executive members of the court “may”—not must—“arrange for a review”.

Let us suppose that the Treasury Select Committee’s request stimulates a review. What happens then? First, as the noble Lord’s amendment requires, a report or reports will be made to the court. To discover what happens next we turn to Sections 3C, 3D and 3E of the Bank of England Act 1998, as amended. There we find that the Bank must give the Treasury a copy of the report and that the report must be published, unless the court of directors decides that publication is not in the public interest. Finally, in exercising its oversight function the court must monitor the response of the Bank—including the court itself—to any recommendations made in a report.

I have detailed the path that any report stimulated by a Treasury Select Committee request might take in order to reassure the House that safeguards are already built into the structure of the legislation before us that will ensure that information which it is not in the public interest to publish at a particular time will indeed not be published. Yet even without publication, a request by the Treasury Select Committee may well stimulate an important investigation that results in valuable internal reform at the Bank.

15 Dec 2015 : Column 1993

The government amendment makes a valuable addition to the powers of the non-executive members of the court in the exercise of their oversight function. However, the procedure envisaged by the government amendment is such that investigations can only be stimulated by insiders—not what might be considered proper democratic accountability. My amendment will at least provide a pathway along which proper democratic accountability may be exercised: not will be, but may be. The Treasury Select Committee will be able to request that the court institute a review. That is just a small increase in democratic accountability but one that may well avert future regulatory failings. I beg to move.

Lord Turnbull (CB): My Lords, I am somewhat puzzled by the amendment, because it seems to be a power which the Treasury Select Committee already has and already exercises. I will give noble Lords three examples. It called for a report from the Bank into Northern Rock, another one into RBS, and then—with some delay, appearing only three days ago—finally into HBOS. Therefore the Treasury Select Committee, led by the people who lead it now, does not need this power. It is perfectly capable of forcing the Bank to undertake a review and to reveal the contents to that committee.

Baroness Kramer (LD): My Lords, I have no wish to detain the House. The Government have listened to the concerns that we raised at previous stages of the Bill and in the discussions that the Minister generously agreed to. The amendment that the Government have brought forward does not go as far as we would like but we feel that it addresses the most essential issue, which is the independence of the non-executive directors of the court, and that it provides a mechanism so that they can resist capture by officials of the court. For that reason, we are satisfied.

4.30 pm

Baroness Wheatcroft (Con): My Lords, I echo the words of the noble Baroness, Lady Kramer. It seems that the Government have now moved to strengthen the role of the non-executives. That four of them should be able to call for a review answers many of the queries that have been raised. I completely agree with the noble Lord, Lord Turnbull, that nobody in the past accused the Treasury Select Committee of being a toothless body.

Lord Myners (CB): My Lords, I declare an interest as a former member of the Court of the Bank of England. I support the amendment proposed by the Minister and I do not support the amendment to it proposed by the noble Lord, Lord Eatwell, largely for the reasons identified by my noble friend Lord Turnbull.

The functionality of the court has improved markedly since I was a member—no doubt the two are directly related. There was a dominance of the court by the executive, and the non-executives were, quite frankly, confused about their role. They did not manage to organise themselves in a manner that effectively challenged the Chancellor. I and one or two members of the court became so concerned that we felt the need to report that the court was not working effectively—but we

15 Dec 2015 : Column 1994

then struggled to find out to whom we should report it. I remember going to see the Permanent Secretary to the Treasury and then the Chancellor of the Exchequer and saying, “The Bank of England is not working well because it is too detached from the real world of what is happening in banking, and it acts as the sole voice of one person—namely, the governor”. I believe that it is now a far more democratic institution.

However, I struggle to understand why this power requires to be reflected in law. I would have thought that the effective functioning of a board of directors, on which we have based the court, would allow the court to establish a sub-committee to do anything that it chose to do and that it did not need specific authorisation in law to do so. If the Government’s view is that that power does not exist for the court, we need to be very clear that the Government are telling us that the court should in no circumstances be considered to be on a par with the board of directors of a company in terms of holding the executives to account.

Lord Davies of Oldham (Lab): My Lords, I am grateful to the Minister for his introduction to this debate. He will not have been at all surprised that one or two penetrating questions have been put forward. I put on the record the assiduous way in which he set out to make changes to the Bill in response to our debates at Second Reading and in Committee. In doing so, he greatly assisted those of us who were able to negotiate with him to see the advantages that could be obtained by moving some way back to the future, as it were, and re-establishing the bank as it was.

I think that lessons have been learned over recent years. My noble friend will appreciate that the original Bill that came before this House effectively ended the oversight committee and reduced the power of the non-executive directors. The Minister has taken steps to respond to the great concern expressed on all sides of the House on these issues and has brought the non-executives into a position of considerable significance, not least in determining the remuneration of executives’ pay, in which it is important that the non-executives should be in a substantial majority. Also, they have the right to carry out the oversight functions on which we pin such a great deal of emphasis. Therefore, we are grateful to the Minister for the extent to which he has moved.

I am grateful to my noble friend Lord Eatwell for his insightful contribution. He will know that this is only the first shot at this Bill as far as Parliament is concerned in this noble House. But it will certainly be taken on board in the other place, and it may be thought that it is the other place that ought to deliberate quite significantly on the role and position of the Treasury Select Committee in relationship to the Bank of England. I do not think any of us have thought that either the chairman of the Treasury Select Committee or the committee itself have been backward in coming forward when issues have presented themselves that needed inquiry. Therefore, I think that my noble friend Lord Eatwell can derive from this debate some satisfaction from the fact that there will be an opportunity for that to be debated further.

The House has concentrated on the question of the role of the non-executives. I am grateful to the Minister for having responded to those anxieties and presented

15 Dec 2015 : Column 1995

amendments that have, to a very large extent, brought the situation back to a position of some significance. However, it was the case that, at Second Reading in particular, there were very great anxieties about the extent to which the government proposals significantly reduced the power of the non-executives, and that we were faced with a Bank in which their role was nothing like the role that they had played in the more recent past. I think that we have, through these amendments, met the wishes of the House. I am grateful to the Minister for having listened to the House and to several representations that we have been able to make. I am also grateful that he has been able to meet significant figures from the Bank—the chairman of the court and the chief executive—to understand the nature of the issues before us. So these amendments are to be commended and we support them.

Lord Bridges of Headley: I begin by thanking the noble Lord, Lord Davies, for his kind words. Let me reciprocate by saying that it has been a pleasure having discussions with him, and with the noble Baroness, Lady Kramer. I hope that this constructive spirit is retained all afternoon.

The noble Lord, Lord Myners, made a good point: why are we bothering and why do we need to do this? The point that the noble Lord, Lord Davies, made answered that in large part: it is because there was concern. But specifically, the court’s powers of delegation are limited by paragraph 11 of Schedule 1, and it may not delegate duties and powers that are expressly imposed on the court in legislation unless it has express permission to do so.

This has been a good debate, and I return briefly to the points made by the noble Lord, Lord Eatwell. He asserted that we have gone back to 1997. I would dispute that that is the case. The Government have given the Bank the tools and powers that it needs to deliver its financial stability mandate. In particular, the Bank is now the statutory resolution authority with primary operational responsibility for financial crisis management. On top of that, we have created the FPC as a statutory committee of the Bank with the responsibility for monitoring and mitigating systemic risks for financial stability.

As to why prudential regulations should reside with the Bank, one of the key weaknesses of the tripartite system was a failure of co-ordination between those responsible for overseeing the financial system. We do not want to return to that. As the Chancellor said during the passage of the 2012 Financial Services Act, the Bank of England is the natural home for the microprudential, macroprudential and monetary policy functions because the interconnections are so great between these three critical functions. Having the PRA as part of the Bank also reduces underlap that could be harmful in the event of a crisis.

I turn to the issue of democratic accountability of the Bank. Since 2012, a number of measures have been introduced that have significantly enhanced the transparency of the Bank, and I will briefly recount some of these. For example, the court is now required to publish minutes of every meeting within six weeks. It has also voluntarily published historical records of court minutes, including those during the financial

15 Dec 2015 : Column 1996

crisis, and, through this, Parliament and the public now have greater insight into the governance of the Bank and the key decisions made. Similarly, the Bank has introduced measures to enhance the transparency of the Monetary Policy Committee following the recommendations of the Warsh review. Clearly, therefore, the Bank is a more transparent institution than it was in 2012. However, there obviously remains room for further improvements. This Bill builds on those reforms through changes to the Bank’s governance, to its policy committees and to its accountability. However, as I argued previously—and as the noble Lord, Lord Turnbull, has argued—this amendment is not necessary.

Lord Eatwell: My Lords, I am impressed by the extensive lack of support for this amendment throughout the House. I say in response to what the Minister has said that, of course, the powers have developed and lessons have been learnt since the financial crisis, but I was referring to the recentralisation of powers rather than some of the extra powers that have resulted from the lessons learnt.

The main argument made against my amendment was that the power exists already. If the power exists already, the amendment does no harm—I have not heard anyone express the view that it does. However, the key reason for the need for my amendment was expressed clearly by the noble Lord, Lord Myners, who asked why conditions requiring members of a board to act were in the Bill at all. They are in the Bill because the action has not been present in the past. It is because of this lack of action that Parliament has lost a degree of confidence in relying just on the actions of the court and has decided that, to ensure appropriate transparency and efficiency in the operations of the court, it may be required to do certain things. That is why the Government have put into the Bill measures instructing the court to behave in particular way and why my amendment is there—because the court has not always responded to the requests of the Treasury Select Committee. It has not, for example, responded to repeated requests to publish a detailed review of its own actions during the financial crisis. My amendment, small in terms of changing circumstances though it might be, would have assisted the development of the democratic accountability of the Bank. However, in the circumstances, given the widespread lack of support around the House, I beg leave to withdraw the amendment.

Amendment 2 (to Amendment 1) withdrawn.

Amendment 1 agreed.

Clause 4: Functions of non-executive directors

Amendments 3 and 4

Moved by Lord Bridges of Headley

3: Clause 4, page 4, line 10, leave out subsection (2)

4: Clause 4, page 4, line 22, leave out “2” and insert “3”

Amendments 3 and 4 agreed.

15 Dec 2015 : Column 1997

Clause 5: Financial stability strategy

Amendment 5

Moved by Lord Bridges of Headley

5: Clause 5, page 4, line 27, leave out subsections (1) to (7) and insert—

“( ) Paragraph 11 of Schedule 1 to the Bank of England Act 1998 (matters which may be delegated by court of directors) is amended as follows.

( ) In sub-paragraph (2) after “paragraph” insert—

“(a) include duties and powers conferred on the court of directors by section 9A (financial stability strategy), but

(b) except as mentioned in paragraph (a),”

( ) After sub-paragraph (2) insert—

“(3) The court of directors retains responsibility for a duty or power which it delegates under this paragraph.””

Amendment 5 agreed.

Clause 11: Examinations and reviews

Amendment 6

Moved by Lord Bridges of Headley

6: Clause 11, page 9, line 28, leave out “general policy in pursuing the Bank’s” and insert “policy”

Lord Bridges of Headley: My Lords, I turn to amendments on NAO reviews, which concern Clause 11. One of the objectives of the Bill is to enhance the accountability of the Bank of England, and these clauses, which allow the NAO to conduct value-for-money examinations of the Bank for the first time, are key in that respect.

We have debated these clauses at great length. That is only right, as we set out to define the respective roles of two vital public bodies. I thank those of your Lordships who contributed in Committee and earlier. Although it is invidious to name names, I thank in particular the noble Lords, Lord Bichard, Lord McFall, Lord Davies, Lord Higgins and Lord Young, and the noble Baronesses, Lady Noakes and Lady Kramer.

Since Committee, officials from the National Audit Office, the Bank of England and the Treasury have been working closely together to reach an agreement on how to address the concerns raised in debate so far.

4.45 pm

I am pleased to tell noble Lords that the amendments before us today reflect the outcome of those discussions and have been agreed by Sir Amyas Morse and Mark Carney. I thank both the Bank and the NAO for working constructively together. Both organisations have had to make compromises to reach an outcome that represents an important step forward in public accountability while protecting the Bank’s independent status.

There are three key features of the amendment that I should like to explain in detail. First, as your Lordships will recall, to protect the Bank’s independent status the Bill provides for a policy carve-out from the scope of NAO value-for-money reviews. The NAO’s main concern with the Bill as originally presented to Parliament was that in the event of a disagreement over what

15 Dec 2015 : Column 1998

constitutes policy, the Bill gave the Bank’s court the final say. To address these concerns, the existing new Section 7E will be removed from the Bill and the court will no longer have a veto over the scope of the NAO value-for-money reviews.

Secondly, we have made changes to the carve-out for the Bank’s policy functions. The NAO is typically precluded by the National Audit Act 1983 from carrying out reviews that are concerned with the merits of a public body’s policy objectives. As introduced, the wording in new Section 7D(3) of the Bill differed from the National Audit Act provision. We are introducing an amendment to ensure that the wording in this revision reflects Section 6 of the National Audit Act 1983 more closely, addressing a concern rightly raised by the noble Lord, Lord McFall.

Alongside that, the amendment provides more detail on how the policy carve-out will operate. It sets out a number of areas where the NAO will not be able to question the merits of the Bank’s policy decisions but, crucially, it has been agreed that even in these areas the NAO will, for example, be able to examine the economy, efficiency or effectiveness of the implementation of policy decisions and of the resources underpinning those decisions. This will mean that the NAO will, under these new arrangements, still be able to carry out reviews of the PRA, like the one it did of the new financial services regulators, the PRA and the FCA, last year, which was entitled Regulating Financial Services.

The areas covered by the carve-out are as follows. First, it covers the merits of policy decisions taken by the Monetary Policy Committee, the Financial Policy Committee and the Prudential Regulation Committee. Secondly, it covers the merits of policy decisions taken by the body within the Bank responsible for the supervision of financial market infrastructures. Thirdly, it covers the merits of policy decisions taken by the body within the Bank responsible for the exercise of its resolution functions. However, where the Bank has used its statutory resolution powers in relation to a financial institution in difficulty, the NAO would be able to consider any resolution policy decisions relating to the institution concerned. This is particularly important given that the Bank is now the resolution authority for the United Kingdom and has primary operational responsibility for financial crisis management. In future, therefore, the NAO will be able to examine the role of the Bank in interventions such as Northern Rock.

This is a bespoke arrangement that recognises the unique and crucial role that the Bank plays in UK economic policy. We do not consider that this sets a precedent for any other public body.

Arrangements between other international central banks and their public auditors allow for similar exemptions of certain activities. For example, the Government Accountability Office in the United States is precluded from looking at a number of aspects of monetary policy, such as Federal Reserve open market or discount window operations. Moreover, the Bank and its policy committees already have strong lines of accountability to Parliament. These include the governor and deputy governors, and external members of the MPC, FPC and PRC regularly giving evidence in the other place at Treasury Select Committee hearings, as well as statutory transparency requirements.

15 Dec 2015 : Column 1999

Lastly, the Bill will require that a memorandum of understanding is agreed and maintained between the Bank of England and the NAO. This MoU will contain the finer points of detail on how the two organisations will work together. That will allow for the precise nature of the relationship between these two institutions to develop over time without requiring frequent legislative change. Discussions on the MoU have already begun and it will be published in due course.

The legislation will require the MoU to cover three specific things. First, it will set out any other functions of the Bank that the Comptroller and Auditor-General would not normally consider it appropriate to examine. Secondly, it will set out a process for resolving disputes in the event that there is a disagreement between the NAO and the Bank. There was extensive discussion of the topic in Committee. As I have mentioned, we have responded to this by removing the court’s veto. We will also require the Bank and the NAO to agree a process for resolving disputes as part of the MoU. Thirdly, the MoU must set out which bodies are responsible for taking policy decisions in relation to resolution and the supervision on financial market infrastructure.

To conclude, in Committee we were rightly asked to find a compromise that is acceptable to the NAO and the Bank. This amendment does that. It strikes the right balance to protect the independence of two vital public bodies. It has been agreed by the NAO and the Bank, and I hope noble Lords will support it. I beg to move.

Lord Higgins (Con): My Lords, it was clear in the earlier stages of the Bill that there was significant conflict between on the one hand the NAO, feeling that its independence had been jeopardised, and on the other the Bank of the England, wishing for greater independence than is enjoyed by other bodies being investigated by the NAO. Clearly a great deal of work has been done behind the scenes and all those concerned are to be congratulated on coming up with a compromise which ought to be satisfactory from both points of view.

I have just two points which I would be grateful if the Minister could clarify. First, is the memorandum of understanding referred to in Amendment 9 going to be published? That would be an advantage. Secondly, in relation to proposed new subsection (2)(d), I am not absolutely clear what happens if in fact there is a dispute which “cannot be resolved”. I am not clear on precisely how the matter would then be resolved.

There is one other point which is not absolutely clear. The NAO was very concerned that it would not be able to publish information it obtains, something which previously has been at the discretion of the NAO. Is that point going to be resolved?

Perhaps I may raise one final point. Under government Amendment 7, a number of things are now specifically mentioned as being things that the examination will not be concerned with. I shall take a specific example; namely, the issue of quantitative easing and how that is being implemented. Will the NAO be able to look into whether it regards the way in which that is being dealt with as satisfactory? But, overall, this is a very satisfactory outcome from what was an extremely difficult and perhaps rather tense situation.

15 Dec 2015 : Column 2000

Lord Bichard (CB): My Lords, in declaring my interest as chairman of the National Audit Office Board I hope that I will not be precluded on this occasion from thanking the Minister for bringing forward the amendments to Clause 11, which I am happy to support. In large part, the amendments deal with the concerns which the NAO had with the original draft, in particular by deleting the Bank’s power of veto over NAO value-for-money studies. As a result, these amendments protect the independence of the NAO and necessarily enhance the accountability of the Bank. I am grateful to the noble Lord and Members across the House who have helped to achieve a very happy outcome.

Lord Young of Cookham (Con): My Lords, I also welcome the progress that my noble friend has made since we discussed this matter on 9 November, when concern was expressed that we had not got the interface between these two independent institutions in the right place. I was delighted to hear that peace has broken out between these two institutions. My noble friend said that the memorandum of understanding would be published in due course. My noble friend Lord Higgins pressed him a little further. Will it be available during the passage of the Bill, which started in this House and will go to another place, because I am sure that it would be of interest? Finally, does one really need proposed new paragraph (d) in Amendment 9 in the memorandum of understanding? If under proposed new paragraph (c) a procedure has been established,

“for resolving in a timely fashion any dispute”,

why does one need paragraph (d), which asks for a procedure where the dispute has not been resolved?

Baroness Kramer: My Lords, I will not detain the House very long. The National Audit Office and the Bank of England are crucial institutions. It is absolutely necessary that both are not only independent but perceived to be independent. In earlier stages of this Bill, we asked that those two organisations should be brought together to come to a common understanding and agreement of how we could go forward. That has been achieved and, with that, we are pleased that “peace has broken out”—to quote what has just been said. It was essential that that should be done and I congratulate the Minister on the role that he played in this.

Lord McFall of Alcluith (Lab): My Lords, I add my thanks to the Minister and others on this issue. I have had a letter from the Comptroller and Auditor-General, who clearly says that the Government listened to many of the concerns at Second Reading and that the threat to his role as Parliament’s auditor has been reduced. That aspect is very important.

The power of veto was one of the first things on which people came to their senses. It was explained to me that the Bank would publish its view when it refused the NAO, to which I said, “Well, it means that it would go before the Treasury Committee, and the NAO would probably go before the Public Accounts Committee”. If the Treasury Committee and the Public Accounts Committee felt that that was not very good, they would probably have a Joint Committee. I think they thought that it was the best idea to drop the power of veto, which was a good outcome.

15 Dec 2015 : Column 2001

I accept that the Bank of England’s independence is essential, particularly in the former role I had as chair of the Treasury Committee. That was very important, particularly during the financial crisis. But the democratic accountability element is important. I see this memorandum of understanding not as something set in stone but as something that can adapt to time as we go along. The noble Lord, Lord Higgins, made a point about whether it would be public. I am sure that it has to be public if there is to be credibility. If there is no intention to have it be public, that would be a backwards step on that issue. If it is not going to be public, the Treasury Committee and the Public Accounts Committee need to have sight of this as it goes along. Let us hope that we do not have that second aspect and that the memorandum of understanding is a public document. As the noble Lord, Lord Young, said, it should be here before we finish the passage of the Bill.

Lord Lester of Herne Hill (LD): My Lords, I have not taken any previous part in the debates on this Bill. I intervene only to explain why I fully support these amendments and the Minister’s statement. Many years ago I represented clients in the Crown Agents inquiry, which was concerned with how millions of pounds came to be lost in an unwise investment in Australia. The Bank of England’s role in that inquiry was important. It turned out that there was no legal adviser within the Bank at all. It seemed to me and many that the amateur system that then prevailed was quite bizarre. I very much welcome the fact that this Bill moves the Bank of England from the dark ages to an enlightened situation.

5 pm

Lord Myners: My Lords, I also congratulate the Minister and the parties involved on finding a pragmatic and workable solution to a problem identified in earlier discussion in this House. I also echo the point made by the noble Lords, Lord Higgins and Lord McFall. Proposed new Section 7E starts:

“The Bank and the Comptroller must prepare and maintain a memorandum of understanding”.

There is no mention of the word “publication”, yet in proposed new subsection (2)(d) “publication” is used. On the face of it, the absence of “publication” from the beginning of the section is intentional. As such, that surely should be unacceptable. I therefore urge the Minister at some later stage to persuade his colleagues in the other place that “publication” should be included, and to give this House some reassurance now that it is his intention that the memorandum of understanding should be published. Otherwise, the public will not have the confidence that they seek in clarifying this issue.

Baroness Noakes (Con): My Lords, the Comptroller and Auditor-General and the National Audit Office are in agreement with this, but I would like to clarify the effect of proposed new Section 7E(2)(d). It allows for the publication of views where a matter in dispute cannot be resolved. That implies that there would be no agreement as to whether a particular audit could take place. That allows the Bank of England a backdoor power of veto if the arrangements are such that there is a possibility that even a dispute resolution procedure,

15 Dec 2015 : Column 2002

as provided for under proposed new paragraph (c), results in there not being agreement. Therefore, is it possible that the Bank could de facto operate a veto?

Lord Davies of Oldham: My Lords, the Opposition are of course glad that peace has broken out. As a token of that peace, I say how much I agree with the question asked by the noble Baroness, Lady Noakes, which I hope the Minister will address. Both at Second Reading and in Committee, the House was greatly exercised by the potential disagreement and difficulties that attended on the formulation of the Bill at that time, with these two tremendously significant institutions at loggerheads. The situation was not helped by the fact that the noble Lord, Lord Bichard, felt unable to contribute to our debate at that stage. We were all very anxious indeed about the position.

I hope that the Minister will answer quite straightforwardly the question asked by the noble Lord, Lord Higgins. I do not think that it is a question of whether there will be a publication, but of when. Whether it could be done in time for the process being considered while the Bill goes through the other place is a different matter. That certainly would be a great advantage and it ought to put pressure on the two bodies concerned to ensure that this memorandum of understanding is complete and published in short time.

On the more general issues, all parts of the House were greatly exercised by the position that developed as a result of the publication of the Bill. I am very glad to endorse the fact that peace has broken out, although on this occasion the Opposition did not have much to do with it.

Lord Bridges of Headley: My Lords, I thank all those who have offered me congratulations, which really should be to those in the Bank, the NAO and the Treasury who have been labouring long and hard on this. I have just been trying to oil the wheels as they go along. I am very nervous about the phrase “Peace in our time”, which one of your Lordships used. I get very nervous when that phrase is used, but I am very pleased with where we got to.

My noble friends Lord Higgins and Lord Young, and the noble Lord, Lord Myners, rightly pressed on the publication of the MoU. I can assure the House that the Government will provide an update on progress as the document develops, before the Bill has passed. Once complete, the MoU will be published and laid in the House Library. I do not want to tempt fate regarding the timing of this. However, as I said in my opening remarks, the process of drafting the MoU has only recently begun. I am sorry to say that I am not, therefore, in a position to share more details on this right now.

My noble friends Lord Higgins and Lady Noakes also raised the issue of what happens if the Bank and the NAO disagree. This amendment removes the court veto over what constitutes policy—the main concern of the House in Committee—and, instead, there is a requirement in the MoU for the NAO and the Bank to agree the process for resolving disputes. I will point out a few things here. It is important to note that much of the work which the NAO carries out across the public sector is governed by the National Audit Act 1983,

15 Dec 2015 : Column 2003

which does not contain a statutory mechanism for resolving disagreements between the NAO and the number of public bodies it oversees about the scope of its reviews. The NAO works constructively with those bodies to define the scope of its work without the need for codified dispute resolution processes. I therefore hope that, in the vast majority of cases, issues arising between the NAO and the Bank will be resolved without needing recourse to a formal process. However, in the unlikely event that a matter cannot be resolved, the amendment goes further than the National Audit Act by requiring that a formal dispute resolution process is set out as part of the memorandum of understanding. As I said, this will set out in more detail how the NAO and the Bank will act to settle disagreements and how those will be recorded and published, where appropriate.

My noble friend Lord Higgins also wisely raised the subject of quantitative easing. In the case of companies of the Bank which are carrying out indemnified activities, such as the asset purchase facility—the Bank’s QE vehicle—new Section 7C, inserted by Clause 10, will apply. In those circumstances, the Treasury has the power to direct the company of the Bank to send its accounts to the Comptroller and Auditor-General, who would then be required to conduct a financial audit of the accounts and issue an accompanying report.

I thank all noble Lords who have contributed to this and to making this process and the agreement possible.

Amendment 6 agreed.

Amendments 7 to 9

Moved by Lord Bridges of Headley

7: Clause 11, page 9, line 28, at end insert—

“(3A) An examination under this section is not to be concerned with the merits of—

(a) policy decisions taken by the Financial Policy Committee, the Monetary Policy Committee or the Prudential Regulation Committee;

(b) policy decisions taken by a committee or other body within the Bank for the time being having responsibilities for the supervision of payment systems, settlement systems or clearing houses, so far as the decisions relate to that supervision.

“(3B) Subject to subsection (3C), an examination under this section is not to be concerned with the merits of policy decisions taken by a committee or other body within the Bank for the time being having responsibilities for the exercise of any of the Bank’s resolution functions, so far as the decisions relate to those functions.

(3C) Where the Bank has exercised relevant resolution functions in relation to a financial institution, subsection (3B) does not prevent an examination under this section being concerned with the merits of policy decisions within that subsection which are relevant to the Bank’s exercise of its resolution functions in relation to that institution (whether or not those policy decisions are also relevant to other financial institutions).

(3D) “Relevant resolution functions” are—

(a) any of the stabilisation powers;

(b) any of the Bank’s functions (other than its functions as the Prudential Regulation Authority) under or by virtue of—

(i) Part 2 or 3, or section 233, of the Banking Act 2009,

(ii) Part 6 of the Financial Services (Banking Reform) Act 2013.”

15 Dec 2015 : Column 2004

8: Clause 11, page 9, line 32, at end insert—

“( ) For the purposes of this section—

“resolution functions” means the Bank’s functions (other than its functions as the Prudential Regulation Authority) under or by virtue of—

(a) Parts 1 to 3, and section 233, of the Banking Act 2009,

(b) Part 6 of the Financial Services (Banking Reform) Act 2013,

(c) the Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348);

“stabilisation powers” has the same meaning as in the Banking Act 2009 (see section 1(4) of that Act).”

9: Clause 11, page 9, line 36, leave out from beginning to end of line 23 on page 10 and insert—

“7E Memorandum of understanding

(1) The Bank and the Comptroller must prepare and maintain a memorandum of understanding about examinations under section 7D.

(2) The memorandum must in particular include provision—

(a) as to functions of the Bank in respect of which the Comptroller will not usually consider it appropriate to carry out an examination;

(b) identifying the committees or other bodies referred to in section 7D(3A)(b) and (3B);

(c) establishing a procedure for resolving in a timely fashion any dispute between the Bank and the Comptroller as to whether a matter is (under section 7D(3) to (3C)) a matter with which an examination under section 7D is not to be concerned;

(d) for the publication of the views of the Bank and the Comptroller as to whether a matter is such a matter, in cases where a dispute between them cannot be resolved.”

Amendments 7 to 9 agreed.

Schedule 2: Amendments relating to Part 1

Amendments 10 and 11

Moved by Lord Bridges of Headley

10: Schedule 2, page 37, line 6, leave out ““Committee” substitute “court of directors”” and insert ““by the Committee in the discharge of any of its” substitute “in relation to the discharge of any of the court’s””

11: Schedule 2, page 37, line 8, leave out ““Committee” substitute “court of directors”” and insert ““the Committee must have regard” substitute “regard must be had””

Amendments 10 and 11 agreed.

Schedule 3: Saving and transitional provision relating to Part 1

Amendment 12

Moved by Lord Bridges of Headley

12: Schedule 3, page 48, line 28, leave out paragraph 2

Amendment 12 agreed.

Amendment 13

Moved by Lord Ashton of Hyde