Steel Industry (Nationalisation) Bill

Committee (1st Day)

Scottish l egislative c onsent granted. Northern Ireland and Welsh l egislative c onsent sought . Relevant documents: 1st Report from the Constitution Committee, 3rd Report from the Delegated Powers Committee .

16:34:00

Clause 1Meaning of “steel undertaking”

Amendment 1

Moved by

1: Clause 1, page 1, line 6, leave out “of or including” and insert “predominantly of” Member’s explanatory statement This amendment seeks to narrow the definition of a steel undertaking so that it had to be a business consisting predominantly of the manufacture or processing of steel, or iron for the purposes or in connection with the manufacture of steel.

Lord Sharpe of Epsom (Con)My Lords, Amendment 1, in my name and that of my noble friend Lord Hunt of Wirral, is very simple. It seeks to confine the powers in this Bill to genuine steel businesses. Those are undertakings consisting predominantly of the manufacture or processing of steel—or iron for the purposes of steel manufacture.

As drafted, the definition catches any business which merely includes steel-making as part of its operations. That is a very broad formulation. It could, in principle, sweep up a diversified business in which steel was only a minor part of what it does. Businesses with a limited connection to steel production should not face uncertainty about whether it falls within the reach of these nationalisation powers.

When this point was pressed in the other place, the Secretary of State was asked whether a business with only 1% of its operations in steel would be caught by Clause 1. He did not say that it would not be. However, a statement of intent is not a limit on the face of the Bill, and future Governments are not bound by the assurances of this one. The Government say that these powers are intended for British Steel, and British Steel is obviously and predominantly a steel business. Therefore, this amendment should create no difficulty for that purpose. If the Government’s intention is genuinely not to use these powers against businesses with only a peripheral connection to steel, they should have no difficulty in accepting this amendment. I beg to move.

Lord Redwood (Con)My Lords, I fully support this amendment and hope that it will tease out from the Minister a little more about what the underlying purpose of the general legislation is, as I am not too enamoured of this becoming a fully nationalised industry with the ability to acquire all sorts of other steel interests.

I felt that the Government’s policy arose out of the circumstances of British Steel at Scunthorpe and the question of blast furnace-produced steel, where we are down to our last two blast furnaces. I did not think that the intention was to build an electric arc furnace set of businesses when progress has already been made in establishing these in the private sector and where there are plans in certain cases for government grant aid to achieve an electric arc steel additional business by that combination of subsidy assistance and private capital.

I hope that the Government will accept this quite substantial narrowing of such a broad piece of legislation, because there are many with general interests in steel whom we would not like to get caught up in this. I would also like clarification on whether there is any possibility that the Government might want to build a nationalised electric arc steel set of businesses. This would be an expensive and difficult proposition.

Lord Fox (LD)My Lords, I thank the Minister, his team, the department and the two experts who came all the way from Coventry in 35-degree temperatures to educate the noble Lord, Lord Hampton, and me on the technology of steel. It has been very co-operative and I thank them.

I am slightly confused by how narrowing these words are“of or including” versus “predominantly”. What is predominantly? Is it 60:40? Is it 55? I do not know. You have to look upon it with the body language of the Government. The Government have shown no tendency to go on a nationalisation rampage through all businesses that have ever touched a piece of steel. It is very clearly focused in one area, as the noble Lord, Lord Redwood, alluded to. Also, I remind noble Lords that there is a sunset clause in here which closes it after two years. So the talk of subsequent Governments does not have particular purchase and I am much more relaxed than the noble Lord, Lord Sharpe, on this.

The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Leong) (Lab): My Lords, I thank all noble Lords for their constructive engagement in advance of Committee, and for all the amendments and valuable contributions that they will make during it.

Amendment 1 in the names of the noble Lords, Lord Sharpe and Lord Hunt, seeks to introduce a narrow definition of a “steel undertaking”. I fully understand the purpose of the amendment, but the Government have no desire for these powers to extend beyond what is necessary. They are exceptional powers for exceptional circumstances and should be exercised only where Parliament intends.

I respectfully suggest that the amendment would not provide greater certainty; instead, it risks introducing greater ambiguity into the Bill. The proposed test, that a business must be “predominantly” involved in steel, immediately raises difficult questions, as alluded to by the noble Lord, Lord Fox, on how “predominantly” is measured. Is it turnover, assets, employees, production, profit or some combination of these? The amendment provides no answer. That uncertainty would inevitably invite legal challenge, precisely when swift and decisive action may be required. Businesses with significant steel operations could argue that they fall outside the definition, because steel is not their primary activity. Equally, complex corporate structures could be organised to make the test easier to avoid altogether. In seeking to narrow the definition, the amendment risks creating loopholes that undermine the legislation’s very purpose. The Government’s drafting avoids these difficulties; it provides a clear and workable definition that gives legal certainty, while ensuring that powers are used only when genuinely needed to protect the public interest.

For those reasons, while I appreciate the spirit in which the amendment was tabled, I cannot agree that it improves the Bill. I know this is not what the noble Lords intended and I can accept that the current drafting is broad, but this definition follows closely that used in the Steel Industry (Special Measures) Act and it ensures that there can be no disputes about its meaning. In practice, we do not expect many companies to fall within the current definition, so the amendment would have minimal effect.

I will repeat the Government’s position expressed throughout the Bill’s passage so far: we are strongly minded to use the powers to acquire British Steel if it is in the public interest to do so, and we do not have any plans to acquire any other steel undertakings. It is therefore very unlikely that this would be used for any other company, let alone one that is engaged primarily in non-steel activity. I hope this helps clarify the matter and respectfully request that the amendment is withdrawn.

Lord Sharpe of Epsom (Con)I am grateful to all noble Lords who have spoken. It was remiss of me not also to thank the Minister and his team for their extensive engagement on the Bill.

This amendment is simple. I am afraid that I do not agree with the Minister’s comments or those from the noble Lord, Lord Fox. This is very straightforward. In fact, I refer noble Lords to the Merriam-Webster dictionary, which says that the word “predominantly”, in formal or technical usage, can denote a precise majority, such as more than 50%, or an even higher threshold, such as 60% to 80%, depending on jurisdiction. I am not an expert on which jurisdiction we are in, but it clearly means north of 50%. The way the Bill is written, as I pointed out, could allow for as little as 1%.

I have listened to the Minister’s objections to the wording of the amendment and am very happy to work on tightening it up, if he thinks that would help. The amendment is simple: it would confine the powers in the Bill to genuine steel businesses—that is, undertakings

“consisting predominantly of the manufacture or processing of steel, or iron for the purposes or in connection with the manufacture of steel”.

I think that answers most of the Minister’s objections, which, frankly, if they are relevant to my wording, are also relevant to the wording currently in the Bill, so I do not really believe in the ambiguity argument.

Businesses with a limited connection to steel production should not face uncertainty about whether they fall within the reach of these nationalisation powers. The present drafting does not provide that reassurance; it permits powers to apply to an undertaking that merely includes steel-making or related iron production, as I have already pointed out. I will not press the amendment for now, but I would like further discussions with the Minister, if he is amenable, to see whether we can find a way to tighten up the language so that it both suits the Government’s purposes and makes it clearer for all those undertakings that we are discussing. For now, I beg leave to withdraw.

Amendment 1 withdrawn.

Clause 1 agreed.

16:45:00

Clause 2Exercise of principal transfer powers in the public interest

Amendment 2

Moved by

2: Clause 2, page 1, line 14, leave out “includes (but is not limited to)” and insert “means” Member’s explanatory statement This amendment seeks to limit the public interest test to the areas set out in subsections (a) to (c).

Lord Hunt of Wirral (Con)My Lords, I speak to Amendments 2, 3 and 8.

Amendment 2 limits the public interest test to the specific factors listed in Clause 2. On first reading, the test looks robust: national security, the economy and

“the construction, maintenance and operation of critical infrastructure”.

These are serious criteria that one might think provide a meaningful check on the exercise of what are very significant powers. However, when one reads on, Clause 2(2) says that the test

“includes (but is not limited to)”

those grounds. I contend that, with those five words, the floor falls away. If the test includes but is not limited to the listed grounds, surely, in practice, there is no test at all. Any Secretary of State of any political persuasion at any time can conjure a reason and call it the public interest.

The amendment in my name and that of my noble friend Lord Sharpe of Epsom would remove those words and make the listed grounds exhaustive. It would ensure that when Ministers say that these are exceptional powers subject to a robust public interest test, it is actually true—not merely true for now with this Secretary of State in these circumstances but true in the legislation for every Secretary of State who follows.

The Government may say that there need to be other grounds, beyond national security, the economy and critical infrastructure. I would genuinely like to know what they are. What situation could possibly arise that those three criteria do not already cover? If the Government can answer that question, let them do so today. Let them set out on the record what additional circumstances they have in mind. If they cannot, these words should not be in the Bill.

We have a Bill that, as we just discussed in the first group, can capture businesses with only a peripheral connection to steel. We now have a public interest test with no effective limit. Will the Minister confirm that the powers in the Bill cannot be triggered simply because of industrial pressure; for example, because a trade union decides that the answer to a dispute is public ownership? Will he rule that out?

On Amendment 3, the Government’s impact assessment describes the difficult environment in which the steel sector operates, including high domestic operating costs and a lack of long-term investment. It recognises that these pressures bear directly on the ability of UK steel producers to compete. Yet Clause 2 refers only in the broadest terms to “supporting the economy”. That phrase could cover almost any intervention; it does not require Ministers to demonstrate that the intervention will leave the United Kingdom with a stronger, more productive or more internationally competitive steel sector.

There is a difference between preserving an undertaking for the moment and putting it on a sustainable footing for the future. Nationalisation may avert an immediate crisis, but it should not become a means simply of transferring losses, risks and difficult decisions from a company to the taxpayer. The question must be whether public ownership can help to secure the investment, modernisation, productivity and commercial resilience needed for this sector to compete successfully.

There is also a point of consistency with the Government’s own drafting. The Bill makes clear that the public interest test is not intended to be limited to the matters specifically listed. It says that the test includes but is not limited to national security, critical infrastructure and the economy, as I said earlier, so the Government have already chosen not to confine the public interest test. In those circumstances, why would they resist including economic growth and international competitiveness expressly within it? Growth is the Government’s stated number one priority. International competitiveness is plainly fundamental to the future of a sector exposed to intense overseas competition and high energy costs. If the Government consider national security and critical infrastructure important enough to name in the Bill, surely growth and competitiveness should also be named. I invite the Minister to explain why those two objectives do not appear in the Bill. How will the Government assess whether an intervention is likely to strengthen competitiveness? Will that assessment include energy costs, investment, productivity, output, technological modernisation, export potential and the undertaking’s ability to operate sustainably without indefinite support from the taxpayer?

On Amendment 8, the Government have confirmed that they have already provided approximately £555 million to British Steel for working capital, including raw materials and salaries. The National Audit Office reported that, as at 31 January this year, the Department for Business and Trade had spent £377 million on its intervention. At the then current rate of spending, total costs were expected to exceed £642 million by the end of this month. More importantly, the National Audit Office warned that if spending continued at the then current rate, costs could exceed £1.5 billion by 2028—and that figure was before any potential transformation of the business, compensation to the current owner or the eventual costs of exit. The NAO also found that the intervention has “no clear end date … has not stabilised the company’s finances”

and began

“without a clear exit strategy”.

This Bill is not simply emergency legislation to keep the furnaces operating over a weekend. It creates enduring powers to transfer businesses, assets, rights and liabilities into public ownership. Before those powers are exercised, the Government must be able to demonstrate that the proposed course represents value for money.

The facts since the emergency intervention underline why this matters. We are told that the business in its present form is structurally unprofitable. We know that substantial decisions remain to be made on its future, including any transition in production technology, the cost of investment, the length of any transition period and the eventual route to a viable and sustainable business. The taxpayer needs protection against an open-ended commitment.

The Government may argue that the Treasury’s Managing Public Money framework already requires departments to consider value for money. I suppose I could look forward to the day when there is some evidence of the Treasury acting responsibly in this way. Can the Minister tell us what value-for-money assessment will be undertaken before a principal transfer power is exercised? Will it include the expected costs of compensation, operating losses, capital investment, decommissioning, restructuring and any eventual exit?

This amendment would not frustrate the Government’s ability to act where action is genuinely justified. It would simply ensure that before nationalisation takes place, the Secretary of State is satisfied that it is a responsible use of taxpayers’ money. I beg to move.

Lord Sentamu (CB)My Lords, Amendment 2 would replace

“includes (but is not limited to)”

with the word “means” so that we knew what we were describing. The worry is that leaving it as it is could create a public interest so large that there was a mission creep that I do not think should be in the Bill, which is trying to nationalise steel. We need to be slightly more economical in the words we are using, so that we need not fear that on another day, if another public interest was being taken into account, the definition would prove far too loose. The word “means” does the job: we know exactly what one is talking about, and it lists the three elements. The noble Lord, Lord Hunt, wanted to include two other areas but, for me, limiting it to those three objects seems to be where we should stop. The word “means” would stop mission creep.

Lord Redwood (Con)My Lords, I welcome these three amendments. Amendment 2 is a necessary slight curtailment but would still leave the Government with enormous scope, given how wide-ranging the three cited reasons for public interest intervention are. Like my noble friend, I cannot think of any other reason why they might want to do this that could not be adequately covered by the wide-ranging proposals in the existing text.

I agree that it would be a good idea to change the language through Amendment 3 to stress that intervention should, in the longer term, be interested in economic growth, profitability and successful investment. Surely the Government do not want a lame-duck investment that costs a large sum of money for a limited period of time but then they have to disappoint all those people who thought that it was going to be kept going for a rather longer period or that it might break through to profitability and success. If I had to choose between the three amendments, I hope my noble friend would particularly press Amendment 8 on value for money, which sums it all up.

At Second Reading, in looking at the general legislation, we had some discussions asking: what is the medium and longer-term future of blast furnace steel? As I think we have agreed across the House, at Second Reading and now, the main reason for the previous emergency legislation and this legislation is the temporary cessation of closure of two very important blast furnaces, which are our last blast furnace-making capabilities in the country. But I believe—I would love to have the Government either confirm or deny this—that it is still their medium to longer-term intention to close all blast furnaces in this country, as previous Governments have been doing, and to transfer to electric arc steel-making, preferably with private finance and successful competitive private sector businesses doing that work. In the previous exchanges, I think the Minister signalled that the Government do not wish to build a nationalised electric arc business with these powers, although for understandable reasons they have to be general and will most likely be exercised in the case of the blast furnaces. It would be helpful to workers and taxpayers if there were greater clarity over the time period for keeping these blast furnaces open, and whether there are any limits on the costs that the Government are prepared to run, so that people can make proper plans concerning their jobs and their futures in this important steel industry, and so that taxpayers could have some reassurance.

17:00:00

My noble friend rightly quoted from the quite worrying National Audit Office report. I too had the misfortune to have to read it and discover how difficult this problem is and how expensive it is becoming and could become. There surely must be some limits to how much loss the Government will compensate and to how much working capital and maybe additional capital investment they might put into two ageing blast furnaces if their medium to longer-term plan is to close them down anyway. From the Government’s point of view, it obviously would be very bad politics if they paid hundreds of millions or even well over £1 billion to keep the blast furnaces going for another year or two and then had to admit that they had to close just before a possible next election, with the great disappointment of the workforce who, after a year or two, might have thought that they were going to carry on financing these things indefinitely.

I hope the Minister will show some sympathy for this idea of a value-for-money test or audit—there always is in government anyway but, in this case, I think my noble friend is right to ask for a specific one. I would have thought that the Government would want to set out how they are going to report the escalating losses. These will become a very important matter which will get picked up in normal public expenditure reporting, but, given the importance and sensitivity of this policy, it would be good to know that both Houses will be kept informed regularly of the costs and therefore of the impact on public spending. I assume, for the foreseeable future, it will be taken out of the budget heading of £2.5 billion which was available for modernising the steel industry, but you cannot call this modernising expenditure. It is really a virement of money that was there to try to pump-prime a more successful, more modern private sector and this money seems to be being drawn down now to subsidise a couple of ageing blast furnaces where there is still a huge gap between the value of the product they can produce for customers and the costs incurred by manufacturing it.

On top of needing proper financial reporting to see how we are doing, we should surely be due some kind of business plan. Of course, that would be redacted or edited because there may be commercially sensitive issues—and you would not want to share all your details about who you might sell steel to and what prices and so forth—but the general outlines of the business plan should be made available to the public and taxpayers through both Houses so we can see what the intentions are, form our own judgments about whether that plan looks feasible and have some way of testing whether the Government are on track or need some more help or whether things might have gone wrong. That would also be helpful for the Government.

Ministers have placed themselves in a very important but also very difficult position. Because they supervised this emergency intervention under past legislation, they are now, in effect, having to sign off on all the costs, expenses, marketing plans and all the rest of the stuff they have chosen to put into the Chinese-owned plant. They also have to handle successful negotiations with the Chinese owners, who, I think, are demanding unrealistic compensation. This country does not have a tradition of stealing the assets of people who come here from abroad to invest. That would obviously be a very unfortunate precedent because, as a country which depends on a lot of inward investment, we would not attract very much of it if people thought that an Act of Parliament could take their assets away from them—however impaired those assets might be—without any agreement about the basis of that transfer.

I hope the Government will look favourably on the need for some financial reporting, maybe quarterly, and the need to have constructed a business plan for their own concerns and interests. They should be able to share at least the general outline of that plan with the wider public to give some reassurance that the intervention to date was well based and that any successful purchase of the assets or compensated acquisition of the assets from the current owner was also in the best interests and provided value for money.

Lord Fox (LD)My Lords, one of the things that the briefing from the high value catapult team confirmed is the enormous difficulty there will be in creating a viable business from what His Majesty’s Government intend to take control of in Scunthorpe. There is the age of its blast furnace, the potential cost of any replacement of a blast furnace, the expense of conversion to an electric arc furnace—if that is what is intended—and the hugely competitive landscape of the global steel markets. These are just the headlines of the complexity, but the choices go beyond blast furnace or arc furnace.

If investment is found to install a new electric arc furnace, what will it produce? Will it aim to produce the full range of steels that we need—longs, flats, rebar—or will it specialise in particular steels that perhaps are more strategic and less easy to source? If it goes down the specialisation route, the UK will probably need access to much more direct reduced iron, or DRI. It is likely that this would have to be imported, and these would be very high CO 2 emission imports from most countries, because making our own DRI would need a whole new bit of kit which is very pricey. Choices and making the right calls will determine whether Scunthorpe has a long-term future and what that future looks like. It will determine whether it is indeed an investable prospect and whether it can attract the private sector.

When the Government begin—assuming this Bill becomes an Act—to use the terms of the Act to take ownership of this plant, that will change the focus of these choices. Of course, there will be a new board and management to run the plant, but the cost of the choices will rest with UK taxpayers, at least at first. We will be providing the capital. As we have heard, we have already made available £555 million in working capital, but clearly these sums could increase massively at scale. It is the scale of risk that the Government are taking on that is guiding my approach and our approach, because this Bill needs more scrutiny from Parliament at all levels. From these Benches, we will be pushing those buttons.

These three amendments start at least to open up that point around accountability. I am a bit intrigued because while I do not always agree with the noble Lord, Lord Hunt, he is normally internally consistent. However, the noble Lord started out by saying there should be no expansion of the terms of Clause 2 and then put forward two pretty reasonable ones about growth and expanding the economy. I have one that I think the noble Lord, Lord Redwood, would agree with, which is cost. We should have a clear understanding of the cost before the public interest test. I completely disagree with Amendment 2 because there needs to be a broader discussion around “public interest”. We need to understand the numbers around it, otherwise we do not know whether it is interesting to the public. I do not agree with Amendment 2. I have some sympathy with the other two amendments, and I am sure we will talk more about public interest tests as we deal with other groups.

Lord Leong (Lab)My Lords, I thank the noble Lords, Lord Hunt, Lord Redwood and Lord Fox, and the noble and right reverend Lord, Lord Sentamu, for their contributions to this group. There are several amendments to the articulation of the public interest test in Clause 2. This is a key clause in the Bill; it is a necessary safeguard to ensure that the powers are used proportionately in response to a clear need. Amendment 2 would limit the public interest factors that the Secretary of State may consider to those set out in the Bill. The Government agree that the three factors of national security, critical national infrastructure and support for the economy are likely to be the most relevant to the steel sector. Accordingly, the current approach ensures that they are given particular weight when assessing whether to pursue an intervention. However, circumstances may arise in which a case for intervention may not be clearly made on the basis of these three factors, yet it would clearly be in the public interest to take action. It is therefore pragmatic to build some flexibility into the Bill to address this issue.

I turn to Amendment 3. It has been suggested that the third public interest factor should refer specifically to

“economic growth and international competitiveness”,

rather than “supporting the economy”. With respect, this is a distinction without a meaningful difference. It is largely a matter of drafting rather than substance. The phrase “supporting the economy” is deliberately broad. It clearly encompasses economic growth and international competitiveness but also recognises that the economy is more than growth figures alone. It includes strengthening economic resilience, protecting strategically important industries, supporting employment, safeguarding supply chains, encouraging investment and ensuring the long-term productive capacity of the United Kingdom. By contrast, narrowing the text to

“economic growth and international competitiveness”

could unintentionally exclude other legitimate public interest considerations that any responsible Government should be able to take into account.

There may be circumstances where intervention is necessary to preserve critical industrial capability or economic resilience, even where the immediate effect on growth or competitiveness is less direct. The Government’s intention is to provide Ministers with a sufficiently broad framework to consider the full range of economic factors that may arise. The existing wording achieves precisely that: it is flexible, comprehensive and future-proofed, while fully capturing the objectives that the amendment seeks to emphasise. For those reasons, I do not believe that the amendment would improve the Bill. The Government believe that protecting our sovereign capability in what is a foundational sector for the economy will help to underpin our resilience and leave us less exposed to volatile international trading conditions. The Government therefore cannot support the amendment.

I turn to the amendments tabled by the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, and by the noble Lord, Lord Fox. In different ways, all three noble Lords seek to require the Secretary of State to consider value for money or the impact on the public finances before exercising the principal transfer powers.

Lord Fox (LD)My amendment?

Lord Leong (Lab)I am referring to the noble Lord’s later amendment.

I fully agree with the principle that taxpayers’ money must be spent wisely. Any decision to bring a steel undertaking into public ownership would be among the most significant interventions that a Government could make. Such a decision should never be taken lightly, and it would not be. However, these amendments seek to place into statute an obligation that already exists as a fundamental principle of government. Every significant spending decision is subject to the rigorous disciplines of managing public money—as stated by the noble Lord, Lord Hunt—Treasury approval where appropriate, and the established accounting officer framework. Ministers are already required to demonstrate that public money is being used properly, proportionately and with due regard to value for money.

The question, therefore, is not whether value for money should be considered—it absolutely should—but whether it is necessary to restate an existing, well-established constitutional obligation in the Bill. I do not believe it is. Doing so would add no new safeguard, create no new accountability and impose no duty that does not already exist. More importantly, this legislation is intended to ensure that, where a vital national interest is at stake, the Government can act decisively. Decisions of this nature will always involve weighing immediate fiscal costs against the far greater economic and strategic costs of inaction. The loss of sovereign steel-making capability, thousands of skilled jobs and critical supply chains, and industrial resilience could ultimately impose a far greater burden on the taxpayer than timely intervention would. The Government will continue to ensure that every decision made under the Bill is subject to the highest standards of financial discipline and accountability. Those safeguards already exist; they are robust and will continue to apply.

17:15:00

I turn to the point made by the noble Lords, Lord Redwood and Lord Fox, about turning British Steel around. Should we decide in the public interest to transfer British Steel into public ownership, we will act swiftly to put in place a new board to provide leadership to the organisation and to be responsible for continuing work to drive improvements in health and safety performance and to stabilise operations and manage costs. The board would explore the options for the long-term viability of decarbonised steel-making at Scunthorpe and develop transformation plans in a way that manages the impact of that transition of the workforce in the local area. We will be debating this more in groups 10 and 13 in day 2 of Committee. For those reasons, I respectfully request that the amendment be withdrawn.

Lord Hunt of Wirral (Con)My Lords, I am grateful to all noble Lords who have contributed to this debate and to the Minister for his response. I reiterate what the noble Lord, Lord Fox, said earlier about the way in which the Minister has given us every opportunity to think ahead into the future and to receive expert advice as to the way ahead.

To summarise these three amendments, they do not sit easily together, as has been pointed out, but they have provoked a widespread debate. The noble and right reverend Lord, Lord Sentamu, was absolutely right to point out that mission creep should stop here. There should not be ways that the Minister could include all sorts of other reasons. In Amendment 3, I suggested two reasons, but the Minister carefully responded by not ruling them out and not ruling anything else in. It seems that either the noble and right reverend Lord, Lord Sentamu, is right, or the noble Lord, Lord Fox, is right or the Committee is confused. It has considered all the various options, but it would be useful, as my noble friend Lord Redwood said, to have greater clarity in the form of some draft business plan that could look to the future and work out the way ahead. Value for money, as my noble friend said, sums it all up. Although the Minister thought that the noble Lord, Lord Fox, had signed Amendment 8, either it has not come to my attention that he has or he has not signed it. It may be a later amendment which suggests that value for money is required.

I remain far from convinced by the Government’s case. These amendments address three basic questions which ought to be answered before the state is given a power of this significance. First, in what circumstances will the power be used? Secondly, what is it intended to achieve? Thirdly, as my noble friend Lord Redwood pointed out, how will the taxpayer be protected? The Government’s response seems to be that Ministers will behave reasonably, that the powers will be used sparingly and that the existing public interest test provides sufficient protection.

As my noble friend Lord Sharpe of Epsom said in the previous group, this Bill sends a message well beyond the immediate circumstances of British steel. Investors considering whether to commit capital to the United Kingdom will examine not simply what Ministers say today but what the legislation permits tomorrow. The Government say those risks are mitigated by a clear public interest test. But the reality is there is no actual test. There is much in this debate for the Government to consider, but for now I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

Amendment 3 not moved.

Amendment 4

Moved by

4: Clause 2, page 1, line 20, at end insert— “(d) supporting the local economy of any steel-making location which may be adversely affected by this Act.”Member's explanatory statement This amendment seeks to ensure that consideration is given to the impact on the local economy arising from decisions made under this legislation.

Lord Wigley (PC)My Lords, I beg to move Amendment 4 standing in my name and to speak to Amendment 36, which is also in my name and which is grouped with it—as is Amendment 29 in the name of the noble lord, Lord Fox, and Amendments 30, 31, 43, 44 and 46 in the names of the noble Lords, Lord Sharpe and Lord Hunt.

I quote Amendment 4, just to bring it to everyone's mind. It would add, at the end of line 20 on page 1, a new subsection: “(d) supporting the local economy of any steel-making location which may be adversely affected by this Act”.

I would have thought that those words would commend themselves very much to this House. All these amendments have to do with the impact of the Bill when enacted—an impact which may be so significant to various aspects of the economy, and indeed on the communities which may benefit or may suffer directly or indirectly from this legislation. I shall look forward to hearing the Opposition Front Bench when they speak, particularly on Amendment 43, on the possible impact of this Bill when enacted on inward investment—a subject close to my heart, as the noble Lord, Lord Hunt, will recall, from prior incarnations. But I digress. Amendment 4 in my name would specifically impose a duty on the Secretary of State, in relation to his responsibilities regarding the public interest, to broaden that responsibility to include, via the proposed new subsection (d),

“supporting the local economy of any steel-making location which may be adversely affected by this Act”.

I have deliberately drawn this new subsection widely and not confined it to Wales, as I know from our experiences in Wales how badly steel-making communities across these islands can be hit when steel-making is ended or run down, wherever those communities may be located. I saw this with my own eyes when I was living in Merthyr Tydfil in the 1970s, at the time of the rundown of the steel manufacturing in nearby Ebbw Vale. The economic decline of the Blaenau Gwent area has been staggering, as the noble Lord, Lord Murphy, mentioned in the Second Reading debate of this Bill. It is now amongst the poorest areas, economically speaking, not only in Wales but throughout Britain. Decisions arising from the operation of this Bill, when enacted, could have far-reaching consequences for communities that have depended on steel in the past, and which may be facing dire consequences of specific and deliberate action undertaken by the Government through this Act. A duty surely lies on us to help safeguard those communities.

There will inevitably be winners and losers as a result of actions taken under this legislation. Hard-working, skilled industrial communities may be undermined through no fault of their own. Indeed, the decisions taken by the UK Government may be, in some regards, for the good of the industrial base of these islands, but do not tell me that, to an unemployed skilled steel-worker in Margam or Shotton or Llanwern—or, for that matter, in Teesside or Sheffield or Doncaster—this does not matter. If the actions of the Government in consolidating steel-making in a limited number of locations has that knock-on effect, then the Government surely have a responsibility to support those local economies hard hit. I cannot believe that a Labour Government will not readily acknowledge this. I invite them to accept Amendment 4 or at least to undertake to return with their own amendment on Report to secure the objectives I have outlined.

Amendment 36 in my name is also in this group. It would provide a vehicle, via Clause 58, whereby the financial aid outlined in Amendment 4 could be channelled through local authorities in steel-making areas hard hit by this Bill so that they were compensated for the adverse effects on local communities arising from the exercise of the powers in the Bill relating to steel-making in their area. As I stated at Second Reading, I support the objectives of this Bill but, with all the good will in the world, there will inevitably be losers as well as winners. As such far-reaching changes will be triggered by Act of Parliament, surely it behoves Parliament to safeguard those who may be adversely hit as a direct consequence. I beg to move.

Lord Fox (LD)My Lords, this is a mixed bag of amendments. I will speak primarily to Amendment 29 in my name but also to some of the others.

Amendment 29 highlights the potentially distorting effects that CBAM—the carbon border adjustment mechanism—would have on various elements of the steel industry, from supplier to steel user. On the one hand, if applied fairly, CBAM could and should deal with the currently distorting global steel market, whereby Chinese steel, with a high carbon investment, is competing unfairly with greener steel in Europe and the United Kingdom. So far, so good, but the effects of CBAM on other steel users and manufacturers could, if applied wrongly, be very detrimental. That is why the international picture, particularly our future agreement with the EU, will be so important in ensuring that manufacturers do not have one hand tied behind their back.

The way that CBAM interacts with tariffs, which has not been discussed terribly much, is important and issues around energy costs have been put in this group, but in truth CBAM, the EU and energy costs fall outside—or at least at the very edges of—the scope of this Bill. However, Amendments 4 and 36 in the name of the noble Lord, Lord Wigley, and Amendment 44 from the noble Lords, Lord Sharpe and Lord Hunt, are front and centre within it. Tata, for example, is making considerable investments on its own account and should not be disadvantaged by any publicly owned business. Similarly, the communities in which the industry is located are vital and must be a key part of decision-making.

The nature of the amendments in this group is almost a snapshot, whereas in reality it will be a long-term issue. That is why, later in Committee, I have proposed a stakeholder advisory committee in Amendment 22 and an explicit role for Select Committees in Amendment 38. This will be an ongoing issue and we will need ongoing parliamentary review of it. While I support elements of this group and the intentions within it, I think the heavy work will be done in a different way going forward.

17:30:00

Lord Sharpe of Epsom (Con)My Lords, I will speak to Amendments 30, 31, 43, 44 and 46 standing in my name and that of my noble friend Lord Hunt of Wirral. I thank the noble Lords, Lord Wigley—who I thought made a very powerful case—and Lord Fox, for their previous speeches.

Amendment 30 goes to the valuation of a steel undertaking and the need for that valuation to reflect the real commercial environment in which the undertaking will operate. That environment is not fixed; it is being shaped directly by government policy and, in particular, by the new steel trade measure coming into effect from 1 July. Only days ago, the Government changed the detail of that policy, relaxing the original proposals somewhat, with tariff-free quota reductions pulled back from the level first proposed. We will no doubt discuss that in more detail when the Statement is taken tomorrow, and I do not intend to rehearse that debate now.

However, the fact is that the Government’s choices on trade policy will have a material effect on the commercial position, and therefore the value of any steel undertaking. A tighter quota and a higher above-quota tariff will limit import competition. The way quotas are set will affect downstream industries, supply chains, customer relationships and the availability of particular steel products. The Government cannot, on the one hand, present their trade policy as central to the future of UK steel and, on the other hand, resist any requirement for that policy to be factored into what a steel undertaking is actually worth.

The need for clarity is made more acute by the uncertainty of recent weeks. Businesses have been trying to understand what the new quota levels will be, how quickly quotas may be exhausted, which products will be covered and what the practical effect will be for producers and steel-consuming industries alike. Do the Government accept that the new steel trade measure will affect the value of steel undertakings? If so, why should the independent valuer not be required to consider it?

On Amendment 31, electricity costs are among the central determinants of the viability, competitiveness and future value of steel. The position facing British industry is stark. The United Kingdom has had some of the highest industrial electricity prices in the developed world. UK industrial users pay substantially more than competitors in France and Germany, and—on the most widely cited international comparison—around four times as much as businesses in the United States.

For steel-makers, the gap remains significant. That is particularly serious as the sector moves towards more electricity-intensive production methods, including electric arc furnaces. A business may have the workforce, the plant, the orders and the ambition to modernise, but it cannot compete indefinitely if one of its principal inputs costs materially more than it does for its overseas competitors. These costs, I am afraid, reflect recent policy choices by the Government. The fact that the Government provided some limited relief from network charges to eligible energy-intensive industries rather demonstrates the point.

The Government now say that further measures will bring prices closer to those in competitor countries, but closer is not the same as competitive—and nor is a future scheme with questions of timing and eligibility still to be resolved an adequate basis on which to value a business today. This amendment would require the valuer to consider the prices paid by UK steel producers, the disparity with comparator countries and the effect of any support intended to reduce energy costs, including both the costs after existing reliefs and the risk that relief may be time-limited, incomplete or dependent on eligibility. It should also include a clear comparison with major competitor countries. Is the Government’s objective genuine parity in industrial electricity prices with our principal competitors? If not, what continuing cost disadvantage do the Government consider acceptable for a strategic trade-exposed industry? How will the valuer assess the effect of support, which is prospective rather than guaranteed, particularly where broader measures are not expected to operate fully until 2027? The Government’s own impact assessment accepts the seriousness of this problem. It states that energy costs threaten the sector’s long-term viability and its ability to compete. It also acknowledges that UK steel producers face higher electricity prices than comparable countries, and that contributes to the uncompetitive production costs and pressure on margins.

On Amendment 43, as we raised at Second Reading, the Government’s impact assessment recognises the risk of a chilling effect on investment if businesses and investors perceive a greater risk of state intervention—a point very well made by my noble friend Lord Redwood in the last group. The United Kingdom has long depended on its reputation as a stable, predictable and rules-based place in which to invest. The risk is greater in the current climate. Steel businesses are already dealing with high electricity costs, rapidly changing trade policy and significant regulatory burdens. Adding an open-ended power of nationalisation can only increase the sense of risk for those considering whether to invest in the United Kingdom. If the Government are confident that their actions will strengthen confidence and attract private capital, they should have nothing to fear from transparency.

Amendment 44 addresses a basic point of fairness. If the Government take a steel undertaking into public ownership, that business must not receive selective advantages which place comparable privately owned steel businesses at an artificial disadvantage. Without this safeguard, there is a clear risk of distortion through subsidies, preferential access to public contracts, more favourable regulatory treatment or other support unavailable to private companies. The Minister in the other place stressed the need for flexibility and for the Government to act quickly, but flexibility need not mean unfairness. It is entirely possible to support a strategic undertaking in exceptional circumstances while maintaining a level playing field for the wider sector.

On Amendment 46, if we accept the Government’s central argument that British Steel is critical national infrastructure and that domestic steel production is essential to our national security and without it we cannot build our Navy, jets or submarines, they must accept the logic of what follows from that argument: you cannot declare something critical to national security then leave it defenceless. Amendment 46 states that, where the Secretary of State has exercised a principal transfer power where steel has been brought into public ownership precisely because it is in the public interest, the Secretary of State must have the power to prevent industrial action destroying the very thing that public ownership was meant to protect.

We have seen what happens when Governments are all too timid to act. We have watched the railways held to ransom by the RMT, and we have seen it in healthcare where the former Health Secretary himself felt compelled to call out what he described as “cartel-like behaviour”. The Government have made themselves more vulnerable still. The Employment Rights Act 2025 stripped away strike safeguards that existed for a good reason. The ballot thresholds are gone: the Government unlocked the door and then expressed surprise when it was pushed open.

If a steel undertaking is nationalised in the name of national security and a trade union then calls a strike that shuts down production, what will the Secretary of State do? Will he stand at the Dispatch Box and explain that our defence supply chains have been severed because he did not want to upset the unions? Do the Government seriously want domestic steel production halted because a union decides the moment of public ownership is the moment to press its advantage?

The Government cannot have it both waysthey cannot argue that steel is so vital to this country that it must be brought into public ownership and simultaneously argue that, once it is in public ownership, it should be just as exposed to industrial disruption as any other business. The whole point of this public interest test, if it means anything at all, is that some things matter too much to be left to the ordinary run of commercial risk. Industrial action that threatens critical national infrastructure is precisely such a risk.

I invite the Minister to tell the House that the Government have considered the risk. I invite him to explain what powers the Secretary of State would have on the day a strike is called at a nationalised British Steel to keep the blast furnaces lit. If he cannot answer that question satisfactorily, this amendment provides exactly the answer that is needed.

Lord Redwood (Con)My Lords, I am grateful to my noble friend for raising the crucial issue of electricity prices. As the strategy is to convert more and more to electric arc furnaces, the price of electricity becomes the critical variant in determining how successful those businesses will be, how competitive their prices will be and whether they will generate cash and profit to reward those who ventured in them, or whether there will be problems for those businesses, just as there are problems in the British Steel carbon-based system through its blast furnaces. I hope the Minister can give us a little more background by way of reassurance, given that the steel strategy has been, and is still to be, based on electricity as the prime source of energy. There needs to be a policy that will consistently deliver competitive electricity prices because the current prices, without specific and targeted subsidy intervention, are way out of sync with the electricity prices in the more competitive world of our major competitor countries.

It is very important that this group of amendments raises the issue of tariffs. Of course, anybody valuing the assets that might be acquired under this legislation, or valuing what we already have by way of control and operating responsibility, will need to look at the impact of tariffs. It is a good idea to stress this because these are a very major change to the background for the conduct of steel businesses in this country, and we cannot be sure exactly what the impact is going to be. We have two types of impact arriving around the same time. There is the carbon border adjustment mechanism, which is, in effect, a fairly universal tariff based on the carbon content of imported material, which is clearly going to apply substantially to this industry. Then there are the specific tariffs which the Government have announced to come shortly, which target competitive steel coming into Britain with a very large increase in tariff and a rather low protected quota so that there will definitely be a substantial increase in cost for import.

You could argue, as I presume the Government do, that this is completely benign for our steel industry because it means that the combination of the immediate tariff and the soon to come CBAM tariff will make imported steel so much less competitive, and will therefore help reduce the pressures on our existing electric arc furnaces in the private sector and the two blast furnaces now, in effect, under the control—but not in the ownership—of the public sector. There will be some relief, as the policy intends. However, there can be other consequences which a valuer would have to take into account.

For example, the higher the cost of imported steel, the more difficult it will be for those many companies and industries that use and add value to steel in our wider steel-using industry. There will be limited scope for all users of imported steel to find exactly the right specifications of steel, and the right availability and pricing, from the rather limited-scale industry that the United Kingdom now has as a steel producer. There could well be financial difficulties, reductions in turnover and activity, or the collapse of steel-using businesses in the United Kingdom that face these very high tariff impositions on their main raw material. If they acquire more by way of import than at home and they cannot immediately substitute, you could have the paradoxical effect that the tariff designed to protect the British industry lost orders to the British industry as well as to the exporting industry from abroad. You could well have businesses here collapse—those that are substantial steel users but can no longer carry on the business efficiently to sustain their limited purchases from the UK, because of the cost of the expensive imports.

This needs careful policy examination. I am glad that the Government had one rethink about the tariff quota arrangements for this, but they probably need to do a bit more homework about the balance between the rather larger turnover at risk in steel-using businesses in the United Kingdom and the rather too small turnover available in steel production. They therefore probably need to consult a bit more widely over the medium- to longer-term impact on steel demand from domestic as well as imported sources.

I am interested in the proposals on impact on the economies, but I am not quite sure what is in mind and how it would work out. It is quite right, as the noble Lord, Lord Wigley, said, that there will have been impacts from previous closures or redundancies, and there could be future bad impacts as steel plants become more productive and need less labour, or as the final conversion is made from blast furnaces to electric arc, when there would clearly be a substantial loss of employment. There will need to be assistance and help for those who lose their jobs or have lost them in the past but still have not been able to retrain or find good alternative employment. One needs rather more by way of detail, and I am not quite sure that this Bill is the right place to do that, because it relates to a series of other government initiatives, funds and programmes that are more generally available. However, the noble Lord, Lord Wigley, might be right that they need to be improved. That is a subject for another conversation on another day.

17:45:00

Lord Leong (Lab)My Lords, noble Lords have raised a number of amendments to ensure that there is a level playing field across the steel industry. I thank noble Lords for their commitment to ensuring that the Bill positively impacts the UK steel industry. A number of amendments have been tabled on this topic so, with this in mind, I will address those before turning to the new clauses proposed for the Bill. I will consider Amendments 29 to 31 together, as I believe they are intended to have the same effect.

Amendment 29 seeks to specify that compensation regulations under Clause 54(4)(b) allow the independent valuer to take into account external tariffs, as mentioned by the noble Lord, Lord Redwood, and the carbon border adjustment mechanism when valuing the steel undertaking, as mentioned by the noble Lord, Lord Fox. Meanwhile, Amendment 30 seeks to require that any valuation of a steel undertaking takes into account the steel import quota and tariff measure that is due to take effect from 1 July 2026. Amendment 31 would require any valuation to consider the anticipated effects of electricity prices.

I am sympathetic to concerns about the impact that these trade-related measures and electricity costs may have on steel undertakings, and therefore on any compensation determinations made by an independent valuer in relation to them under any compensation scheme regulations. However, I emphasise that the Government consider it unnecessary to add these amendments to the non-exhaustive list of examples of matters for a valuer to take into account under any compensation regulations. Any valuation would reflect the wider economic and market context, including the trading environment in which the steel undertaking operates, with or without tariffs, without the need to single out specific factors in primary legislation. This means that the valuer will ultimately have discretion to determine what they consider to be the relevant factors in making their determination.

Valuing a steel undertaking would be complex. The independent valuer would necessarily have, or be advised by those who have, expertise and experience in this area and would be well equipped to make informed decisions on their approach to valuation. For this reason, the Government do not consider these amendments necessary.

I turn to Amendment 43, which would place a duty on the Secretary of State to report to Parliament on the impact that any nationalisation of a steel undertaking would have on inward investment in the UK. I emphasise the commitments the Government have already made to support investment in the steel sector. The Government’s steel strategy set out commitments to removing barriers to investment and creating a more supportive business environment so that steel companies are better able to compete, are protected from carbon leakage and unfair trading practices, and have greater security and certainty. The Government welcome new entrants to the UK steel industry, which would foster a more competitive business environment. Government funding is available to support this.

I reassure noble Lords that the impact of nationalisation would be taken into account in any impact assessment on the use of transfer powers. This is the most appropriate mechanism for reporting on any expected impact on the economy. Given the complexity, interlinking and scale of investment trends, it would be difficult to report further on the exact impact of a single intervention. It is for this reason that we ask for this amendment not to be pressed.

Amendment 44 seeks to ensure that the powers in the Bill do not confer any advantage on publicly-owned steel undertakings which could distort competition and trade. I understand the concerns from the noble Lord, Lord Sharpe, that the Bill may unfairly distort competition and investment across the steel sector. However, I reassure your Lordships that this is not the Government’s intention. Any financial assistance provided to publicly-owned steel undertakings will be time-limited, targeted and proportionate. Furthermore, we will continue to comply with domestic and international subsidy control obligations to avoid market distortions. I hope this clarifies that the Government are committed to ensuring a level playing field between state and privately-owned steel companies. This amendment is therefore not required.

Amendments 4 and 36 were tabled by the noble Lord, Lord Wigley, who has raised concerns about what he considers to be the potential adverse impact of the Bill on local communities in steel-making areas. Amendment 4 would create an additional public interest factor for a Secretary of State to consider ahead of exercising the principal transfer power. This would be to support the local economy of any steel-making location adversely affected by the Bill.

The Government have introduced the Bill to support domestic steel-making, not to threaten it. Additionally, one of the three factors set out under the public interest test in Clause 2 is supporting the economy, including any part of the UK economy. The same applies to Amendment 36, which would allow financial assistance to be provided to compensate communities adversely affected by the Bill. I do not expect the Bill to have any adverse impacts on local communities, so I do not consider this amendment appropriate.

I emphasise to the noble Lord that the steel industry in Wales is the only part of the industry with a ring-fenced fund: £500 million for Port Talbot to transform the steelworks and secure steel production at that site and to secure the future of the south Wales steel industry. This is a significant investment that will benefit the local community in that area for years to come. This demonstrates the Government’s confidence in the Welsh steel community and the crucial role that Tata plays in it.

I understand the objective of Amendment 46, tabled by the noble Lord, Lord Sharpe. We all want to ensure that any publicly owned steel undertaking can operate effectively, maintain production and continue to serve the national interest. On that objective I do not believe there is any disagreement within the Committee; where we differ is on the means of achieving it. The amendment would give the Secretary of State the power to prohibit or restrict industrial action where it is considered to pose a sufficient risk to the public interest.

The Government do not believe that curtailing workforce rights is either necessary or the right way to secure a successful and resilient steel industry. The people who work in our steel plants are not an obstacle to operational success; they are the reason it is possible. Their skills, commitment and professionalism keep furnaces running, fulfil customer orders and sustain a strategic industry on which our economy and national security depend. The long-term success of a publicly owned steel undertaking will be built on partnership with this workforce, not on restricting their rights.

Moreover, good industrial relations are an asset in themselves. Constructive engagement with employees and their trade unions is far more likely to ensure stable operations than legislation that risks damaging trust and co-operation. Indeed, imposing additional restrictions could prove counterproductive, making disputes harder rather than easier to resolve. The Government have established constructive relationships with the trade unions representing workers at British Steel and across the wider steel sector. We value the role they play in representing their members and in helping secure the future for this vital industry.

Existing industrial relations legislation already provides the legal framework for industrial action. The Government see no justification for establishing a separate and more restrictive regime merely because an undertaking has entered public ownership. Public ownership should not mean fewer workers’ rights; it should mean responsible stewardship of a strategically important industry, working with the skilled men and women whose expertise will determine its success.

I thank all noble Lords for their amendments, which aim to ensure that the Bill does not distort the market to create inequality between public and private sector steel companies. I hope I have reassured noble Lords that the Government remain committed to revitalising the steel sector, which should be achieved through co-investment from the private and public sectors. I respectfully ask that the amendment be withdrawn.

Lord Wigley (PC)My Lords, I am grateful to the Minister for his response on the whole range of diverse amendments we have before us. No doubt the Opposition Front Bench will have their own opinion on which ones of these they may want to return to on Report, because there are important issues that undoubtedly have arisen from those amendments.

Amendment 4 seeks to support

“the local economy of any steel-making location which may be adversely affected by this Act”.

I noted the Minister’s response, that this may be taken to be covered by other words in this subsection and in other parts of the Bill. But, with respect, words such as

“supporting the economy of the United Kingdom or any part of the United Kingdom”,

are so general that they do not actually address the point we are specifically addressing in Amendment 4, which is the impact on local communities of steel-making locations which may be adversely affected by the Act. It may well be that some such locations are not adversely affected by the Act—they may not be helped by the Act, but they may be able to get on with it—but some almost certainly will be, and there should be express and specific provision to ensure that the needs of those areas are on the face of the Bill.

In Committee, we are quite clearly only probing these matters. But I ask the Minister whether, between now and Report, he will come back and consider that. This is because the reaction against the Act will not be from the generality of the UK economy, or regional economies; it will be from specific places that are in danger of losing out because of the changes, some of which are perhaps inevitable, but which need to take place in order to facilitate the general objective of the legislation. Therefore, in begging the leave of the House to withdraw Amendment 4, I ask the Minister to consider that specific aspect between now and Report.

Amendment 4 withdrawn.

Amendment 5

Moved by

5: Clause 2, page 1, line 20, at end insert— “(2A) The Secretary of State may not exercise a principal transfer power unless the Secretary of State has commissioned an independent assessment of whether the exercise of the power is in the public interest, and that assessment has demonstrated that it is in the public interest.(2B) The Secretary of State may appoint such independent person as the Secretary of State thinks fit to carry out an independent assessment under subsection (2A), and may pay remuneration and allowances to that person.”Member’s explanatory statement This amendment would require an independent assessment of whether the public interest test had been met before the Secretary of State could exercise the principal transfer powers.

Lord Hunt of Wirral (Con)My Lords, Amendments 5, 6 and 42, standing in my name and that of my noble friend Lord Sharpe of Epsom, go to three basic questions which ought to be answered before the Government exercise powers of this scale. They are: on what evidence is nationalisation justified, by what criteria will Ministers make that judgment, and what will be the financial and economic consequences?

Amendment 5 would require an independent assessment before a principal transfer power is exercised, establishing that the proposed transfer is in the public interest. That is not an attempt to prevent the Government acting in a genuine emergency. It is an attempt to ensure that before private assets are transferred into public ownership, there is an objective check that the case has been made.

The sums involved may be very substantial. Once the state acquires a business, it may assume not only its assets but its liabilities, its working capital requirements, its investment needs, and the risks of continuing operating losses. These may be decisions with billions of pounds at stake. They should be based on evidence, not merely urgency or political pressure. Amendment 6 is the natural counterpart. It would require the Secretary of State to lay before Parliament the full criteria by which the public interest test has been judged. The Bill currently gives Ministers a broad discretion. I believe that Parliament is entitled to know how that discretion has been exercised before a transfer takes place. What precisely has been considered? How have national security, economic consequences, competition, costs to the taxpayer and the future viability of the undertaking been weighed? Those are not matters which should be left to assertion after the event.

18:00:00

Amendment 42 would complete that framework by requiring a published impact assessment before the Secretary of State exercises a power under the Act. A proper assessment should set out the financial costs, economic implications and risks. It should address the expected need for public funding, the consequences for competitors and supply chains, the effect on investment and the realistic alternatives available to the Government.

The Government may say that they will act responsibly. I hope that they will. But the Bill will create lasting powers, and ministerial assurances are just not a substitute for statutory safeguards. The Bill, as we have said before, risks leaving taxpayers with an open-ended bill, and that is most unsatisfactory. I beg to move.

Lord Redwood (Con)I am very glad that my noble friend raised the issue of an impact assessment, because if the Government press ahead with the acquisition of British Steel under the legislation, that could be the first opportunity we have for a realistic impact assessment. Yet, the taxpayer has been responsible for the losses in working capital and investment funds for over a year now, with the lack of clear reporting that we have commented on before.

We have an impact assessment for this piece of legislation. Understandably, it says that there are not any costs or benefits to report, because there is not a transaction. These are enabling powers, which would enable the Government to undertake and complete a transaction. But it would only be at that point that officials tasked with the difficult question “What is the impact?” would be able to come up with some numbers, because we would then presumably have some visibility on the cost of acquisition, if any, the operating costs and working capital costs that will go forward. That would be very helpful, in connection with the difficult investment at Scunthorpe, where, as we heard earlier, the NAO reported that there has already probably been £642 million of taxpayer expenditure up to the current month, with a very high run rate going forwards. So, I hope that the Government will offer us reassurance—if not a new clause in the Bill—to say that there will have to be a proper and timely impact assessment.

That, too, would clearly require proper due diligence, which I trust has been under way, now that the Government are responsible for the business. We would need to know that there had been a proper study of Anne and Bess, the two blast furnaces, which were either built or last substantially modified in the early 1950s. These are ageing assets. They have had deep maintenance in this century, but we would need a condition statement on that, so that the Government are reassured that however long they think they can run these blast furnaces for is feasible in terms of the condition of the plant. In order to sustain the employment for the next month, year or whatever it may be, we would need to know that there will not be major maintenance required or no question of having to cool the furnaces down, because that is a dangerous and expensive process and would raise issues about how easy it would be to spend enough money to reinstate these particular assets.

Of course, it would also require proper reporting to the Government—not supplying all the detail to us, but proper reporting on market prospects and how the steel product produced at Scunthorpe is perceived, and what the market opportunities, in general terms, might be and other supporting documents. It will require a serious impact statement, for the benefit of democratic accountability. More importantly, that would prove that the Government have done their homework, because the Government should not be taking on a plant like this unless they have a condition report, a marketing report, a proper cost examination and so forth, which I and my noble friends have been referring to.

Lord Fox (LD)My Lords, I do not want to be the bringer of bad news to the noble Lord, Lord Redwood, but I suspect that it is pretty clear that the condition of the blast furnaces is poor and whatever happens, either to reinstate them to the level that would take them forward or to invest in electric arc, will take a lot of money. That is the point that we are focusing in on, and that is why we are focusing in on the public interest test. We have not yet gotten past Clause 2 yet, because this is the crunch.

I have a group of amendments in the next group, so I will reserve almost everything I have to say. The noble Lord, Lord Hunt, has already disobeyed his Amendment 2, because we are seeking to broaden the scope of the public interest test. With respect to the noble and right reverend Lord, Lord Sentamu, there is such a number of issues that have to be addressed within the particular field of potential investment that the public interest really requires focus. I will leave it at that for this group and then come back to these in the next group.

Lord Leong (Lab)My Lords, I thank the noble Lords, Lord Redwood, Lord Fox and Lord Hunt, for their contributions.

The noble Lords, Lord Hunt and Lord Sharpe, tabled Amendments 5, 6, and 42 to provide for an independent person to assess the public interest. Further amendments tabled by the noble Lords would require the Government to publish both the criteria used to assess the public interest and their assessment on how those criteria are met, before exercising the principal transfer power. Amendment 42 would require an impact assessment to be published before any intervention or the exercise of any power under the Bill. As these amendments deal with similar issues, I will address them together. I start by saying that I understand and sympathise with the desire for the greatest parliamentary and stakeholder scrutiny of a decision to intervene under the powers in the Bill. Stakeholder engagement is a key part of the Government’s policy approach to the sector, with Ministers regularly meeting key industry groups and representatives through the steel council and other forums. The Government have published an impact assessment alongside the Bill, explaining how the public interest test will be considered. A further impact assessment will be published alongside any secondary legislation exercising the transfer of power.

The framework for decisions to intervene will stem from what has been included in Clause 2, with regard to the three public interest factors. There is no attempt on our part to obfuscate or hide the criteria that will be applied in practice. The Government will not only consider whether a steel undertaking is engaged in activity that serves the public interest; they will also consider whether the activity is at risk of not receiving government intervention.

The Government cannot support these amendments as each would create additional hurdles and process pre-intervention. In the kinds of situations that the Bill envisages, speed will be crucial. Likewise, commercial and market sensitivities mean that swift action will, in most circumstances, be necessary to avoid uncertainty.

None the less, I am aware that there are strongly held concerns about this issue, and I can confirm that the Government will consider options for Parliament to scrutinise decisions taken either at the time of or after the exercise of the transfer of powers ahead of Report stage. I hope that this offers some reassurance to noble Lords, and I look forward to continuing further conversations with the noble Lord, Lord Fox, ahead of Report. With that, I ask that the amendment be withdrawn.

Lord Hunt of Wirral (Con)My Lords, I am very grateful to the Minister for his response, particularly his closing words. My hopes were raised when he started by saying that he understood everything that I had said and was sympathetic. Then the situation clouded a little as he said that these amendments would present additional hurdles at a time when speed would be essential, but then he said that the Government would consider options between now and Report—and that is what I was seeking to hear.

I am very grateful to my noble friend Lord Redwood for putting it all in the historical context. It is easy to forget the pace at which we entered this debate, by being summoned to Parliament in April of last year. As the noble Lord, Lord Fox, reminded us, Clause 2 is the crunch. It is a key part of this Bill. To remind colleagues, Amendment 5 would require an independent assessment confirming that nationalisation is in the public interest before transfer powers could be used. Therefore, as we approach that amendment, I obviously cannot press the Minister on the options that the Government will consider, but it would be a way forward if we could find a solution comparable to that in Amendment 6, requiring the Secretary of State to lay before Parliament the criteria used to assess the public interest before using transfer powers—and then Amendment 42, which would require an impact assessment. I recognise the point that the Minister has made about the practical difficulty of preparing a full assessment before the exercise of emergency powers—particularly, as he explained, where Ministers may need to act quickly to prevent serious harm. However, that cannot mean, as I believe the Minister accepts, that the financial consequences are treated lightly. The cost to the taxpayer of taking on a steel undertaking—its liabilities, its working capital needs and its future investment requirements—may be substantial. As my noble friend Lord Redwood pointed out, Parliament has a proper understanding and an interest in understanding those costs, the risks assumed and the basis on which the decisions have been made. Parliamentary scrutiny should not be seen as an obstacle to action. It is surely a necessary part of ensuring that exceptional powers are used responsibly and transparently.

We await the decision of the Government. I had hoped that the Minister would commit to publishing an impact assessment alongside the exercise of the power. I will examine his words carefully, because that assessment is the key. It should set out the costs incurred, the economic implications, the liabilities assumed, the anticipated future costs and the risks to the taxpayer. There is much for the Government to reflect on. I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

Amendment 6 not moved.

Amendment 7

Moved by

7: Clause 2, page 1, line 20, at end insert— “(2A) The Secretary of State may not exercise a principal transfer power unless they have laid a statement before both Houses of Parliament explaining their reasons for concluding that it is necessary to exercise the power in the public interest.”Member's explanatory statement This amendment would require the Secretary of State to lay a statement before Parliament explaining their reasons for concluding that it is necessary to exercise a principal transfer power in the national interest, before exercising that power.

Lord Fox (LD)My Lords, I shall speak also to Amendments 10 and 11 in my name.

Agreement appears to have broken out. The noble Lord, Lord Hunt, the Minister and I all agree that the wording of Clause 2 is central to how we move forward. I always suspected that the public interest test element would be the hardest bit to resolve in this Bill. We are beginning to see that this might be true.

18:15:00

Following discussions, my understanding of how things would go with the Bill as currently formed is that the Government would publish a public interest test immediately after the use of its transfer powers under this Bill. To their mind, this would focus on the underlying rationale for intervention in a particular steel undertaking and to some extent show how it would be determined to be in the public interest. However, as things stand, it would not address the cost of taking any asset into public ownership. The Government will say to Parliament that it is in the public interest to nationalise asset X, Y or Z but, in essence, “at any cost or no cost or at a cost that we are not going to tell you what it is”. That self-evidently cannot be true. There is a value to any asset which any acquirer must not pay. I have sat around executive boards where potential acquisitions that are strategically perfect fits turn out to be too expensive. The board cannot sanction the acquisition of those assets. The same must be true here to some extent. The weighing is a different weighing, but the principle is exactly the same. Furthermore, the idea that there is a price strengthens the hand of the government negotiators to the counter parties. They will be able to say, “Parliament will not wear this number; we need a better number”. Therefore, it strengthens negotiation.

The Minister talked about the need for speed but there is “repent at leisure” if you move too quickly. There is an element of speed. Parliament has demonstrated that it can move at speed. Just before Easter 2025, we did important things on behalf of the steel industry in a day. Both Houses can move at speed, but they need the information to make those decisions. The Minister will say that it is a matter of sequencing—establish the public interest first and then negotiate the cost. He will say more generally, as he already has, that any acquisition under the Bill will be subject to the usual M anaging P ublic M oney principles—I would ask him how those principles differ from those that were used to safeguard the investment in HS2. Moreover, the Government have been clear that the modernisation of the steel sector is dependent on both public and private investment. How will that play into the decision-making?

This approach has made me more adamant that there need to be changes to Clause 2 to take this into account. The amendments in this group start to address the fundamental point. While I acknowledge and welcome the reporting provisions in the Bill, these would take place post hoc. It is not right to expect the Houses of Parliament to vote on regulations regarding nationalisation without any indication of the cost attached to that nationalisation.

In a later group, I will propose a role for Select Committees on this by amending Clause 58. However, these three amendments focus on Clause 2. Amendment 7 is quite similar to Amendment 6 tabled by the noble Lord, Lord Sharpe, and would require the Secretary of State to lay a statement before Parliament explaining the reasons for concluding that it is necessary to exercise the principal transfer power in the national interest before exercising that power. Amendment 10 would require the public interest test to consider the impact of nationalisation on the public finances. In other words, how much does it cost? Amendment 11 would require the public interest test to consider the investability of the steel undertaking. In other words, how does the private sector get involved in this, as that is the stated government aim for this legislation?

We must find a way of ensuring that the anticipated cost of any nationalisation is an integral part of a public interest test and one that Parliament can influence rather than debate post hoc. I am very happy to discuss ways of doing this with the Minister and his team. In the meantime, I beg to move.

Lord Sharpe of Epsom (Con)My Lords, I am very grateful to the noble Lord, Lord Fox, for bringing forward these amendments. As he has observed, there are similarities with some amendments of ours and we are happy to work together to clarify them. He could also have said that Parliament will be acting at speed tomorrow on the National Security (State Threats) Bill from the noble Lord, Lord Hanson—so it can be done.

We have already raised significant concerns about the breadth of the public interest test in Clause 2. The amendments in this group go directly to those concerns. The noble Lord is quite right that, before such exceptional powers are used, Parliament should be told why nationalisation is considered necessary. It is also right that the Government should have to consider the effect on the public finances and whether the undertaking has any credible short-term and long-term prospect of being investable. A business may be capable of being kept open in the short term, but that is not the same as being viable, competitive or capable of attracting the investment needed for its future. The public interest also cannot be assessed without proper regard to the liabilities and continuing costs that may fall on taxpayers.

The Government’s approach so far has relied heavily on broad discretion and ministerial assurance. These noble Lord’s amendments would introduce greater transparency, discipline and realism into that process. For those reasons, we support them.

Lord Leong (Lab)My Lords, I thank the noble Lords, Lord Fox and Lord Sharpe, for their contributions. I also thank the noble Lord, Lord Fox, for his constructive engagement over the past few weeks. I understand that he is trying to support the steel sector and the Bill while ensuring value for money, which is the Government’s objective as well.

Amendment 10 would require the Secretary of State to take into account the impact on the public finances when applying the public interest test. Of course, any decision to nationalise a steel undertaking should not be taken lightly, given the significant costs that could be incurred. However, the principle of securing value for money for the taxpayer is already well established and embedded in government decision-making, as I said on an earlier group. Any decision to exercise the powers in the Bill is subject to the usual Managing Public Money governance and the framework of accounting officer checks, which includes consideration of the impact on the public finances. I therefore respectfully suggest that incorporating the amendment into statute would not serve any particular purpose, but we are mindful of ensuring that costs associated with the Bill are well managed.

The noble Lord, Lord Fox, also proposes, in Amendment 11, that the Secretary of State should take into account the short-term and long-term investability of a steel undertaking when considering whether to intervene in the public interest. I understand the sentiment behind the amendment, but I do not think that investability should directly inform the public interest test.

If a steel undertaking is an investible prospect in the short term, it is unlikely that there would be a case for government intervention, as the need could be met by the private sector. The intention behind the Bill is not to crowd out private investment but to act where private ownership has failed. Whether a steel undertaking is investible in the longer term is highly speculative, so I do not think it would be particularly helpful for it to form part of the statutory framework for the decision. By intervening, the Government would hope to turn a steel undertaking that is not investible into something that may become investible. To the extent that this is what the noble Lord hopes to achieve, we share his ambition, but I do not think that the amendment is workable.

Amendment 7 would prevent the Secretary of State exercising the principal transfer powers until a statement explaining how the public interest test is met has been provided to Parliament. I am sympathetic to the desire for greater parliamentary and stakeholder scrutiny of any decision to intervene under the powers in the Bill.

As I said previously, the Government have published an impact assessment alongside the Bill, explaining how the public interest test will be considered. Any further impact assessment would be published alongside any secondary legislation exercising the transfer powers. The framework for the decision to intervene will stem from the three public interest factors included in Clause 2. The Government will consider not only whether a steel undertaking is engaged in activity that serves the public interest but whether that activity is at risk without government intervention.

The Government cannot support this amendment, as it would create additional hurdles and processes pre-intervention. In the kinds of situations that the Bill envisages, speed will be crucial, as I said previously. Likewise, commercial and market sensitivities mean that swift action will, in most circumstances, be necessary to avoid uncertainty; I take note of what noble Lords said about speed. None the less, I am aware that there are strongly held concerns about this issue and I confirm that, ahead of Report, the Government will consider options for Parliament to scrutinise decisions taken either at the time of or after the exercise of the transfer powers. I hope that this of some reassurance to the noble Lord and ask that his amendment be withdrawn.

Lord Fox (LD)My Lords, I thank the noble Lord, Lord Sharpe, for his support for these amendments and I was pleased to hear the closing part of the Minister’s statement. We all want the costs of any nationalisation to be well managed; we are looking for those costs to be well understood in advance of any commitment by the Government on behalf of the people of this country. We look forward to those discussions and I beg leave to withdraw Amendment 7.

Amendment 7 withdrawn.

Amendment 8 not moved.

Amendment 9

Moved by

9: Clause 2, page 1, line 20, at end insert— “(2A) In assessing the “public interest” in regard to the exercise of transfer powers relating to a steel undertaking located in Wales, the Secretary of State must consult the First Minister of Wales before exercising such principal transfer powers.”Member’s explanatory statement This amendment is to ensure that the UK Minister and the First Minister of Wales work together in taking forward transfer powers which involve a steel undertaking in Wales.

Lord Wigley (PC)My Lords, the amendment proposes inserting a new subsection (2A), which provides that:

“In assessing the ‘public interest’”—

which is the whole dimension underpinning the Bill—

“in regard to the exercise of transfer powers relating to a steel undertaking located in Wales, the Secretary of State must consult the First Minister of Wales before exercising such principal transfer powers”.

This is surely basic common sense, since many, if not most, of the responsibilities impacted by such transfers in Wales rest with Senedd Cymru. These powers include economic development, town and country planning, roads, education and training, and the environment. Each one of these may, and almost certainly will, be impacted by the consequences of transfer decisions.

To those who argue that responsibility to co-operate already exists, I say that, if that responsibility is spelled out in the Bill, it would trigger an earlier and more thorough approach. Otherwise, it would be so easy to treat such dialogue and mutual action as an afterthought when it should be a cast-iron statutory requirement.

This brings me to the associated Amendment 19. Clause 50 provides powers to the Secretary of State

“to modify law in connection with … property transfers”.

Clause 50(3) is very serious as it provides for retrospective legislation. This should always trigger alarm bells, in whatever context it arises. As many of the legislative responsibilities that might be impacted by this are fully devolved to Senedd Cymru, any such regulations must be made only with the prior agreement of Senedd Cymru. This must be included in the Bill, otherwise it would be open to a Pandora’s box of utter chaos.

Amendment 19 specifically provides a route to avoid such consequences by requiring the prior agreement of Senedd Cymru to any such regulations that involve devolved powers. Including this in the Bill would avoid misunderstanding and unhelpful polarisation, so I beg to move Amendment 9 and would like to hear the Minister’s response to both it and Amendment 19.

Lord Fox (LD)I will be very brief and speak with some support for the noble Lord, Lord Wigley. As far as I can tell, the Bill does not require legislative consent from either Cardiff or Edinburgh. Perhaps the Minister could confirm that. If it does not, the principle set out by the noble Lord, for both Wales and Scotland—I know that there may be industrial differences, but the two things apply—would be very important. I look forward to hearing what the Minister says in that regard.

Lord Hunt of Wirral (Con)My Lords, I very much echo what the noble Lord, Lord Fox, has just said, and I thank the noble Lord, Lord Wigley, for his amendments, which raise very important points. There are considerable concerns about what is happening at steel plants in Wales and the consequences for the workers, their families and the much wider community. It is right that, where these powers may affect a Welsh steel undertaking or devolved responsibilities, Wales should be properly involved. I urge the Minister to respond positively to the concerns so rightly raised by the noble Lord.

18:30:00

Lord Leong (Lab)My Lords, in this group of amendments, the noble Lord, Lord Wigley, has raised important concerns about the ways in which the Bill includes the Welsh Government and legislature in decision making. Amendment 9 would amend Clause 2 on the public interest so that the Secretary of State would be required to consult the First Minister of Wales before exercising the principal transfer power in relation to an undertaking located in Wales.

The Government have been keen to engage closely with the devolved Governments throughout the passage of the Bill, and I am grateful for the approach taken by all parties in that engagement. I am delighted to inform your Lordships that the Scottish Parliament granted its legislative consent to the Bill on 23 June. I record my thanks to Ministers and officials who worked swiftly to complete the legislative consent process ahead of the Scottish Parliament’s Summer Recess.

I am happy to confirm that the Government will ordinarily consult the relevant devolved Ministers if it is likely that the principal transfer power will be used in relation to a steel undertaking with its principal place of business in Scotland, Wales or Northern Ireland. If this is not possible because swift action in the public interest is required, Ministers will engage with their ministerial counterparts at the earliest opportunity following the exercise of the principal transfer power. I also understand that my colleagues, Ministers and the Secretary of State for Wales will meet their counterparts in the Welsh Government tomorrow to discuss the Bill further.

Amendment 19 would require the Senedd to give approval to any proposed use of the modification power that would relate to devolved regulations. Again, I am sympathetic to the sentiment of this amendment and reassure the noble Lord that the modification power in Clause 50 is targeted and limited to applications necessary to ensure that transfer powers can be exercised effectively. It is not a general power to amend legislation. The drafting does not permit any changes to other laws unless they are for the purpose of ensuring that the powers in the Bill can be exercised effectively.

Although I cannot agree with these amendments, I reiterate the Government’s desire to continue engaging closely with our partners in the devolved Governments. In particular, the Government are continuing to discuss the Bill with the Welsh Government, and I hope to be able to provide noble Lords with further updates later in the Bill’s passage. However, I ask the noble Lord to withdraw his amendment.

Lord Wigley (PC)Well, well, well—I thank noble Lords for their positive responses. I thank the noble Lords, Lord Fox and Lord Hunt, and indeed the Minister, for the tone and content of their support for the principles here, if not the exact wording on the Order Paper. I noted with interest the ongoing discussions with colleagues in Cardiff and that there are further discussions about to take place. If, arising from those discussions, the Government feel it is appropriate to tweak the Bill to cover those points, I am sure that would be widely welcomed all round. On the basis of this general positive approach, I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

Amendments 10 and 11 not moved.

Clause 2 agreed.

Clause 3Sunset for exercise of principal transfer powers

Amendment 12

Moved by

12: Clause 3, page 2, line 10, leave out subsections (3) to (5) Member’s explanatory statement This amendment seeks to prevent the Secretary of State extending the sunset of the principal transfer powers.

Lord Sharpe of Epsom (Con)My Lords, I hope that this outbreak of agreement means that the Government will accept my Amendment 12. The Government have repeatedly spoken of a long-term plan for steel—securing private investment, increasing domestic production, safeguarding jobs and creating a viable future for the industry. Against that background, Clause 3 comes as something of a surprise. Earlier, the noble Lord, Lord Fox, indicated that he was somewhat reassured by its presence, but I suspect that its actual terms have escaped his usual vulpine scrutiny. A sunset clause is intended to place a clear limit on exceptional powers, but the Bill allows the Secretary of State to substitute, by regulations, a different period for the two-year limit.

Subsection (4) makes it clear that this can be done more than once. Therefore, in practice, the powers could be extended again and again, which gives no reassurance at all. Two years could become five years, 10 years or longer. That is not a meaningful sunset clause; it is a potentially perpetual sunset clause. It is an indefinitely renewable power.

What does that say about the Government’s confidence in their own ability to secure a viable private sector-led future for British Steel? If Ministers genuinely expect these powers to be exceptional and temporary, why do they require the ability to extend them without any stated final limit? This goes directly to the concerns raised throughout our debates—the risk of open-ended liabilities for taxpayers, uncertainty for investors and a lack of clarity about the Government’s intended endpoint.

The Constitution Committee of your Lordships’ House has considered this point and has been unequivocal. It said:

“The use of delegated powers to bypass sunset clauses undermines their purpose, and sets an unusual and unwelcome precedent”.

It recommended either that the final period of extension be set out in the Bill or that there should be a statutory time limit each time the power is used. This would not prevent the Government seeking additional time when there is a compelling case, but it would require Ministers to return to Parliament with a clear final boundary rather than retaining power capable of perpetual renewal. Will the Minister accept the Constitution Committee’s recommendations and bring forward amendments before Report? Will the Government set a final limit on these powers and demonstrate that they have genuine confidence in securing a thriving, investible and private sector-led future for British Steel? I beg to move.

Lord Fox (LD)My Lords, I see the point that the noble Lord, Lord Sharpe, has made, and I commend him for getting past this amendment before 9.21 pm, which is of course sunset.

Lord Leong (Lab)I thank the noble Lord, Lord Sharpe, for his contribution. I note the Constitution Committee’s comments on this clause in its recently published report on the Bill. The inclusion of the sunset provision demonstrates the Government’s commitment to ensuring that powers remain on the statute book for as long as necessary to serve their purpose. Ultimately, we want to see the domestic steel sector return to a more sustainable and stable state in which government intervention is unnecessary.

As we have said, we do not currently see another use case beyond the possibility of British Steel. Therefore, we hope that noble Lords get their wish and there is no need to extend the sunset period. However, the current geopolitical landscape creates a volatile backdrop for this sector, making it difficult to anticipate what may transpire in the coming months and years. We have therefore built in some flexibility to extend or shorten the two-year sunset timetable if circumstances change. We consider this a reasonable precaution to take.

The drafting ensures that there will be full parliamentary scrutiny of any change to the sunset period through the affirmative procedure, meaning that parliamentarians will be able to test and debate any regulations brought by the Government to extend the sunset period. We anticipate needing to use this extension power only in extenuating circumstances. I therefore request that the amendment be withdrawn.

Lord Sharpe of Epsom (Con)My Lords, that was a very brief debate, and I am grateful to the Minister for his response, but I am afraid I remain unconvinced. The Government say they want to secure a sustainable private sector-led future for British Steel. But a power capable of being extended repeatedly without any final statutory limit sends exactly the opposite signal. It risks making investors more, not less, cautious about committing capital to the sector. There must be a reasonable period that the Minister can identify and put in the Bill. If the Government genuinely regard these as exceptional and temporary powers, they should be willing to set out a clear limit.

The noble Lord cannot realistically blame external circumstances. There are always external circumstances. This has fallen foul of the Constitution Committee for very clear reasons, which it has set out. Speaking personally and from experience, I think it is unwise to fall foul of the Constitution Committee.

We urge the Government to take seriously the recommendation of the committee and either specify the final extension period in the Bill or impose a statutory limit on each extension. I think we will have to return to this matter at a later stage, but for now I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

Clause 3 agreed.

Clause 4Share transfer regulations

Amendment 13

Moved by

13: Clause 4, page 2, line 30, leave out “negative” and insert “affirmative” Member’s explanatory statement This amendment seeks to require regulations transferring securities of a steel undertaking to be subject to the affirmative procedure.

Lord Hunt of Wirral (Con)My Lords, Amendment 13 makes regulations transferring securities in a steel undertaking subject to the affirmative procedure. Amendment 14 makes regulations transferring the property rights or liabilities of a steel undertaking subject to the affirmative procedure. Amendment 15 makes regulations on continuity obligations subject to the affirmative procedure. Amendment 18 in this group makes enforcement regulations subject to the affirmative procedure. I will begin by referring to those amendments but speaking to the question of whether Clause 50 should stand part of the Bill.

This clause gives the Secretary of State a very broad power to modify primary legislation, secondary legislation and common law in connection with a share or property transfer. It may be used retrospectively and, in some circumstances, before Parliament has had the opportunity to approve the regulations. These are considerable powers, particularly when we are discussing property rights, contractual rights and the compulsory transfer of businesses and their assets. My noble friend Lord Sharpe of Epsom has already referred to the report of the Constitution Committee, and he speaks from personal experience of knowing the dangers of ignoring the recommendations of that committee. The committee is pretty clear about Clause 50, and I will quote from its report:

“We recommend that the broad power granted to the Secretary of State in Clause 50(1) to modify the law in relation to share or property transfer by regulations should either be removed or significantly tightened to specify the circumstances in which such law may be modified”.

I believe that the Government should take that recommendation seriously.

The Government’s delegated powers memorandum sets out at some length why Ministers believe that a broad power may be needed. It refers to the complexities of company law, insolvency law, commercial law and supply chains, and the possibility that an obstacle to a transfer may emerge unexpectedly. A compulsory transfer may well give rise to legal complications, but the memorandum does not provide concrete examples of the circumstances in which primary legislation would need to be disapplied or modified. If those circumstances can be identified, they should be placed in the Bill, or at least the power should be more tightly defined.

On Amendments 13 and 14, the Government’s own delegated powers memorandum confirms that the transfer powers in Clauses 4 to 29 are subject to the negative procedure. That is a very wide suite of powers. They not only concern the initial transfer of shares or property but include the legal effect of those transfers, continuity arrangements, the conversion and delisting of securities, the position of directors and senior managers, licences, termination rights, foreign property and supplemental onward, reverse and connected transfers. Amendments 13 and 14 focus on the central powers, the compulsory transfer of securities and the compulsory transfer of property rights and liabilities. Those are the acts by which the state takes control of a private business, or part of one.

18:45:00

The Government argue that the negative procedure is necessary because a transfer might be commercially sensitive and fast moving. They point to the risk that assets might be moved or contracts terminated, key personnel might leave or counterparties might take action to frustrate the transfer. We recognise that there may be genuine urgency in particular cases, but we do not accept that this makes affirmative scrutiny inherently obstructive. The Bill already demonstrates that Parliament can accommodate urgency where it is genuinely necessary.

Clause 50 provides for a “made affirmative” procedure. Ministers may act immediately where required, but Parliament must subsequently approve the regulations for them to remain in force. Why should the Government not use a comparable approach for the actual transfer of securities, property rights and liabilities? Indeed, the need for security is greater because, once the principal transfer power has been exercised, the Bill permits a range of supplemental onward, reverse and connected transfers without a new clause covering public-interest determination. Parliament should therefore have a proper opportunity to scrutinise the initial act that unlocks that wider suite of powers. These amendments would not stop Ministers acting swiftly where there is a real emergency. They would ensure that compulsory transfers of private property and liabilities are subject to meaningful parliamentary approval. That is not obstruction; it is surely the minimum level of scrutiny appropriate for powers of this constitutional and commercial significance.

Amendment 15 concerns Clause 39 and continuity obligations. Clause 39 allows the Secretary of State to make regulations specifying matters that are to be taken into account or disregarded when determining reasonable consideration and the terms of arrangements that parties would be expected to make at arm’s length. The Government’s memorandum says that this power may be used to provide detail about how consideration and terms are to be determined and that its purpose is to ensure fair compensation for parties subject to continuity obligations. That raises an obvious question. Why should matters going directly to fair compensation and the terms imposed on affected parties be left to the negative procedure? These regulations may determine what constitutes reasonable consideration and what terms can be expected from parties who may have little practical choice but to continue arrangements after a transfer. It is our view on these Benches that this should surely be done by the affirmative procedure.

Amendment 18 concerns enforcement. Clause 45 permits regulations on the enforcement of obligations under share or property transfer regulations. The regulations may confer jurisdiction on a court or tribunal. Again, the Government say that this is necessary to ensure that obligations can be enforced from the moment of transfer, but the fact that enforcement may involve courts or tribunals makes scrutiny more important, not less, and therefore it should be subject to the affirmative procedure. I beg to move.

Lord Fox (LD)My Lords, I have to say I was a bit grumpy when the Conservative Party tabled these amendments that we had tabled in the Commons, but in retrospect I am very pleased. No joking—that was a tour de force from the noble Lord, Lord Hunt. This is his specialist area, and that was his best speech on Henry VIII that I have heard. All the points were points that I would have made except that I am not good enough to have made them, so in that respect I am glad that he was the person proposing this, rather than I. The only thing that stops the noble Lord from being risen to the pantheon is that, having won affirmative powers, he and his colleagues never actually exercise them through fatal Motions. Frankly, that is the only flaw in what we have just heard.

I countersigned Amendments 13 to 15 and 18 but my pen ran out when we got to Clause 50 stand part. All the points that the noble Lord made are valid. I hope the Government are able to take on board both what he said and what your Lordships’ committees have said about the shortcomings in this draft.

Lord Leong (Lab)My Lords, before I turn to the amendments in this group, I thank the members of the Select Committee on the Constitution for their report on the Bill, which relates to this grouping. The report recommended that in Clause 47 the provisions for dispute settlement should be set out more fully in the Bill. The approach to drafting here is in line with existing precedent under the Banking Act 2009 and reflects the approach taken for similar powers, such as enforcement powers. We think it is appropriate to provide for dispute settlement on a case-by-case basis through regulations.

Noble Lords have tabled a number of amendments relating to parliamentary scrutiny of and procedure on the transfer regulations. In particular, the noble Lords, Lord Sharpe and Lord Hunt, have tabled amendments which would change the parliamentary procedure for the principal share and property transfer powers, continuity obligations and enforcement powers from negative to affirmative. I understand the concern expressed by the noble Lords. From the outset, I reassure all noble Lords that the Government take parliamentary scrutiny extremely seriously. For that reason, we have ensured that a number of substantial powers in the Bill, such as the compensation and tax powers, are subject to the affirmative procedure. However, the Government consider that changes to the procedure for transferring powers would adversely affect the Government’s ability to effect a smooth transfer where necessary in the public interest.

Steel is fundamental to the UK’s industrial base and our national resilience, making it critical to secure supply. Any delays, especially in a non-consensual transfer, would prevent the transfer from taking place, particularly if the transferer was unco-operative. I draw noble Lords’ attention to the recently published report from the Delegated Powers and Regulatory Reform Committee, which did not raise any cause for concern about these powers, including the level of parliamentary scrutiny attached.

To set out the necessity for the negative procedure for these powers, I will discuss them in turn. I will address Amendments 13 and 14 together as they seek to amend the procedures for the share and property transfer powers respectively. It is important that the principal transfer powers can be exercised with speed and operational and legal certainty. The Government expect that, if these powers were exercised, it would be in a fast-moving, commercially sensitive situation. The affirmative procedure would introduce a substantial delay, creating a vacuum in ownership. Such uncertainty would significantly affect the business, particularly the supply chains and third-party contracts.

Amendment 15 seeks to amend the procedure for continuity obligations. The continuity obligations in the Bill are essential to ensure that the company continues to operate as normal following the transfer, minimising disruption and maintaining operations at the steel undertaking. This is achieved by imposing obligations on residual steel undertakings and their group companies to ensure that all services and facilities required by the transferred business continue to operate as normal. Any changes to the procedure would affect the effectiveness of the transfer. The Government’s primary objective with this provision is to ensure a smooth transfer of ownership. As I have set out, it is imperative that there be no delay to any transfer of a steel undertaking into public ownership.

Amendment 18, in the name of the noble Lord, Lord Sharpe, aims to amend the procedure for enforcement regulation. Clause 45 gives the Secretary of State the power to make provision in regulations for the enforcement of obligations under the share and property transfer regulations. As with the other amendments, if the Government consider it necessary to enforce obligations, they must do so at pace. Any delay in using these powers risks interrupting the transfer process and reducing its effectiveness.

For those reasons, the Government do not consider these amendments necessary. However, I have reflected on the argument made by the noble Lord, Lord Hunt. While it is critical that the Government are able to preserve their ability to enforce as necessary, there is a reasonable rationale for further parliamentary scrutiny. I cannot accept this amendment but I will consider this issue further, ahead of Report.

The noble Lords, Lord Sharpe and Lord Hunt, have given notice indicating their intention to oppose Clause 50 standing part of the Bill. That would remove the modification power in Clause 50. This power is not taken lightly, but it is a necessary measure to ensure that the transfer powers under the Bill can be used effectively. The clause has precedent because the same power was used in the Banking Act 2009 to resolve complex companies in the financial sector. Given that the transfer powers would be used only in circumstances where a public interest test was met, it is crucial that the Government have the necessary tools to ensure that any such transfers can be implemented effectively to deliver the intended outcome.

The powers in Part 1 of the Bill interact with commercial, company and insolvency law. This is the law that normally governs the consensual acquisition of companies or of their businesses. The legislative environment is therefore varied and complex and, because general legislation was not designed with compulsory transfers in mind, as the Bill envisages, there will be some tension between applying the Bill’s powers to a steel undertaking and the highly complex private law that it will inevitably cut across. The clause therefore provides a necessary power to modify other laws that may ordinarily interact with a transaction of this nature in order to integrate the Bill’s powers into the existing legislative and commercial landscape.

The use of the modification power is limited to the purpose of enabling the transfer powers to be used effectively. It is not a general power to amend legislation; it is targeted and limited. It cannot be used in isolation from the use of powers in respect of a particular steel undertaking to amend or disapply laws, and it cannot be used to amend the Bill—or Act—itself. In the absence of these powers, there is a real and significant risk that the Secretary of State could not fully and effectively implement a transfer. This could result in an ineffective or incomplete transfer to public ownership, affecting a company’s ability to continue operation. If a smooth transfer is not achieved, the public interest aims could be undermined.

I turn to the potential retrospective effect of the power. The Bill permits it to be applied retrospectively but does not require it. Preserving the possibility of applying this power retrospectively anticipates circumstances in which the transfer powers may need to be exercised at pace and in which there may be limits on the ability to conduct the level of due diligence necessary to support acquisition. Similarly, it may not be possible to identify all legislative interactions in the transfer scenario before making a transfer. This may mean that any secondary legislation made under the transfer powers may not fully affect the transfer that was intended. In such circumstances, it would be necessary to address this through the modification power, with the modification backdated to the time of transfer. The use of the power will be subject to the affirmative procedure unless there are particular circumstances that justify the Secretary of State proceeding on an affirmative basis, likely due to time pressures.

I hope that I have provided some clarity on the need to include the provision, and its retrospective effect. For these reasons, I respectfully ask that the amendment be withdrawn.

Lord Fox (LD)On a number of occasions, the Minister has painted a picture of a breathless process, where all the organs of government have to operate at breakneck speed. Taking the Government at face value, we are talking largely about a particular asset that we have been talking about for around 15 months, since the discussion at Easter last year. At some point, perhaps not at the Dispatch Box but when we are having our meetings, the Minister will explain why there is this predisposition to putting everything in place to have things moving at the speed of light when, in reality, they have been moving relatively slowly.

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Lord Leong (Lab)I am happy to give that commitment in our further conversations.

Lord Hunt of Wirral (Con)My Lords, I am grateful to the noble Lord, Lord Fox, not only for his generous praise, which I felt was completely undeserved, but for his support. At some stage, this great Chamber of ours will consider better ways to deal with secondary legislation. He will know that I gave quite a lot of support, when I chaired the Secondary Legislation Scrutiny Committee, to one of his noble friends who moved that there should be a new Bill—the Statutory Instruments (Amendment) Bill. But that is for another occasion. In the meantime, I thank the noble Lord for his strong support.

There is clearly much now for the Government to consider, in particular in view of the commitments made by the Minister. How do we achieve the right balance between acting swiftly where necessary and, at the same time, ensuring that Parliament has a meaningful role in scrutinising powers, particularly where they affect property rights, liabilities and commercial arrangements? I am sure these issues will merit further discussion as the Bill progresses. For the present, I beg leave to withdraw the amendment.

Amendment 13 withdrawn.

Clause 4 agreed.

Clauses 5 to 14 agreed.

House resumed.

19:03:00

Sitting suspended.