Business, Energy and Industrial Strategy Committee
Oral evidence: Work of the Department and the Government’s response to coronavirus, HC 301
Thursday 9 July 2020
Ordered by the House of Commons to be published on 9 July 2020.
Members present: Darren Jones (Chair); Alan Brown; Judith Cummins; Ms Nusrat Ghani; Paul Howell; Mark Jenkinson; Ruth Jones; Mark Pawsey; Alexander Stafford.
Questions 44 - 122
Witnesses
I: Alok Sharma MP, Secretary of State, Department for Business, Energy and Industrial Strategy; Sam Beckett, Interim Permanent Secretary, Department for Business, Energy and Industrial Strategy; Joanna Whittington, Director-General, Energy and Security, Department for Business, Energy and Industrial Strategy; Jo Shanmugalingam, Director-General, Industrial Strategy, Department for Business, Energy and Industrial Strategy.
Witnesses: Alok Sharma, Sam Beckett, Joanna Whittington and Jo Shanmugalingam.
Q525 Chair: Welcome to this morning’s Business, Energy and Industrial Strategy Committee hearing. We are delighted to welcome you back, Secretary of State. Thank you for coming to see us so quickly since your last appearance so that we could ask some questions of you before the summer recess.
We are also delighted to have your Acting Permanent Secretary Sam Beckett. On Zoom we have Joanna Whittington, Director-General for Energy and Security, and Jo Shanmugalingam. I knew I was going to get that wrong. I am just going to call you Jo, and forgive me deeply for not being able to pronounce your last name. She is the Director-General for the Industrial Strategy.
Secretary of State, we have a lot of questions to get through this morning so we are going to try to keep up the pace. I have encouraged my colleagues to keep their questions focused and tight, and I would be very grateful if you could do the same. We will ask all the questions directly of you of course, Secretary of State. We will try not to get answers from all your civil servants if that is all right; otherwise we will not get through to the end.
Alok Sharma: Would you like any opening remarks or would you rather go straight into questions?
Chair: I would rather we got on with questions, if that is all right.
Alok Sharma: That is absolutely fine, as you wish.
Chair: Thank you so much. Could you give us an update on Project Birch and let the Committee know how many businesses the Government are currently in negotiation with?
Alok Sharma: First, we have made £160 billion of support available to businesses across the economy; you heard that from the Chancellor yesterday as well. We have always said that we will see if we can provide support to viable businesses that have exhausted all other options, where we believe that their failure would have a disproportionate impact and harm the economy.
You asked me about Project Birch. You will appreciate that I cannot give you details of numbers, or indeed the companies in it. That is commercially sensitive; I know you will appreciate that. There is one company that has received support, and I have put a written ministerial statement in the House relating to that. I hope you will have seen from that that we have required the company to fulfil conditions. We have been very clear that we also want to make sure that we are protecting the taxpayer at the same time as we make funds available.
Q526 Chair: Thank you for that, Secretary of State. I understand the point on commercial sensitivity, but it is also important that we understand the framework in which the Government are spending money. Can you confirm whether support under Project Birch could lead to the Government having equity ownership in the companies that they support?
Alok Sharma: As I said, I do not want to get into the details of individual companies.
Q527 Chair: Are the Government going to become a shareholder of the companies that they are supporting through Project Birch?
Alok Sharma: If we take the future fund, which is not the same thing, but we have convertibles that can be taken there. We want to look at this on a case-by-case basis. That is what we are doing. I think the key thing for taxpayers watching this, and indeed for all of us as Members of Parliament, is whether we are protecting the taxpayer. In the WMS on Celsa, I said we have agreed to legally binding contractual conditions with Celsa on employment, climate change, tax, corporate governance, restraints on executive pay and bonuses. I hope that shows that we are doing everything that we can to protect the taxpayer at the same time as supporting businesses that cannot get support elsewhere.
Q528 Chair: That conditionality is important, Secretary of State. Will that be applied across these types of investments through project work? Will there be set conditions, whether on net zero transition or executive pay?
Alok Sharma: I think this gives you a framework, if I can put it like that, for the range of things that we would look at. We will look at every case on an individual basis. The reason I refer you to this is that it gives you a pretty clear idea of what we require in this particular case.
Q529 Chair: That is helpful. I do think the public would like to know whether the Government are going to start owning significant chunks of the British private sector. I will give you one last opportunity before I move on to confirm whether Project Birch will result in the Government owning equity in significant companies in the UK.
Alok Sharma: I will respond by saying that we will look at each case on its own merits. We have set out details on Celsa. If any other companies receive support, of course we will have to put out details on that.
Chair: You are not ruling it out.
Q530 Richard Fuller: Sticking with top principles, if the underlying principle of Project Birch is that this is for businesses that have exhausted all other options, and no other investor is prepared to put in the capital, to what extent can they be described as viable businesses?
Alok Sharma: We have also applied that principle when we looked at giving loans more widely. Look at bounce back loans where the Government are providing a 100% guarantee; look at CBILS and CLBILS. It is because businesses find themselves in this difficult position where they would otherwise have been viable that the Government have stepped forward to provide support.
I remember when I came to the Select Committee in April. I do not know if it was you, Richard, but colleagues were asking me about the schemes in Germany and elsewhere. They were effectively saying that we should have some sort of policy such as bounce back loans, which are of course now in place. A million of these have been approved.
I know colleagues on the Committee absolutely understand this. The whole point of the interventions has been to support businesses so that they are literally able to survive, but also then bounce back, when we come out the other side. That is why we have provided this.
Q531 Richard Fuller: To build on what you have said, you have painted a picture that Project Birch is essentially born of necessity, not an aspect of the overall strategy of the Department, but the Department does have a well-entrenched strategy. Should Project Birch investments fit into that strategy? Is if beneficial if they do, or will they just be judged on the fact that there is a necessity to support a business?
Alok Sharma: I set out the criteria under which we will look at individual companies. The key point is that conditions have to be put in place if the Government are going to provide finance to any particular company in that way. I hope we have shown you, with the conditions on Celsa, the sort of things we would require businesses that get this kind of support to adhere to. The Chair was talking about climate change; I think you raised that. That is one of the conditions in the agreement with Celsa.
Q532 Chair: The bailout for easyJet did not have any conditions attached to it. Why was that?
Alok Sharma: I do not think easyJet was with this Department.
Sam Beckett: It was the Department for Transport.
Q533 Chair: It was another Department’s responsibility. Are conditions not being set in agreement with the Treasury across Departments? Are there different schemes in different Departments?
Sam Beckett: DfT will have discussed that with the Treasury, because it will have needed Treasury approvals in a number of respects to proceed with that.
Chair: BEIS is leading the way on conditionality. I am pleased to hear it.
Q534 Judith Cummins: Good morning, Secretary of State. In my city of Bradford, 75% of workers have never worked from home. If the Government tell them to stay at home, they need to know what help will be available in the terms of their local lockdown. I have seen the letter from the Minister for Business and Industry to my honourable Friend the Member for Leicester West dated 7 July. He stated, “The Chancellor has already said that there are no plans to change the scope or extend any of the schemes currently available. I hope the lockdown is temporary and that affected businesses in Leicester will be able to reopen soon”.
Can you explain the thinking behind the decision not to extend any of the schemes designed to support businesses and workers during the pandemic to support people affected by local lockdowns?
Alok Sharma: Judith, you raise a very important point. In fact, the Chancellor very clearly set out the rationale for the changes we are making right at the start of his statement yesterday. The furlough scheme has now protected over 9 million jobs across the country. By the time it comes to an end, it will have run for eight months. I am sure the Permanent Secretary will correct me if I am wrong. By the time that eight months is up, with the support the Government will have put in, the net amount that companies will have put in will be 5% of what they would have put in if the employee had not been put into furlough. It gives you some idea of the scale of the support we have provided on an individual basis.
The Chancellor was very clear yesterday. We all recognise that these schemes have cost a lot of money and they obviously cannot carry on indefinitely because that would not be sustainable. We always have a discussion about taxpayers. Of course, it has been the right thing to do to protect jobs. As we come out of this, we now need to support businesses and make sure people stay in work, but in viable work, going forward.
Q535 Chair: I am sorry to interrupt, but I am sure we would be grateful if you could try to answer Judith’s question. She is asking why there is no support for local businesses and workers in local lockdown scenarios. Why is that?
Alok Sharma: The furlough scheme continues until October.
Q536 Chair: What will happen afterwards?
Alok Sharma: Chair, you will know that individuals who have previously been furloughed but brought back from furlough can be put back on to furlough. That facility is available. Grants have been paid out to small businesses across the country. I think the figure is £68 million for about 5,900 businesses in Leicester. There will be a larger number for the wider area. Support is available.
Q537 Judith Cummins: In places such as Leicester where they have a local lockdown, those people are going to feel as though the Government are neglecting them. We know that coronavirus thrives on poverty. Public health messaging will be undercut by people having to choose between going to work if they are not feeling well, because they cannot afford not to, and staying at home and following the advice. The Government are telling them to stay at home to stop coronavirus. Is it not neglectful of the Government not to help those people and businesses in places like Leicester?
Alok Sharma: I completely understand that it is an incredibly difficult time if you are in a place like Leicester and you are being locked down. People were looking forward to reopening businesses, pubs and restaurants last weekend, and suddenly they found they could not do that.
Q538 Judith Cummins: With the best will in the world, it is not a matter of looking forward; it is a matter of saving lives.
Alok Sharma: Yes, indeed, but as I said to you the furlough scheme continues. The grants are available. Other measures have been put in place. Of course we will continue to monitor this. There is a two-week review period on this, as you know. The point of these local lockdowns is to get the infection under control as quickly as possible so that businesses and areas can be reopened.
Q539 Chair: Is there no answer for support for businesses or workers in local lockdown scenarios?
Alok Sharma: With respect, I have explained that the furlough scheme continues.
Q540 Chair: You have not answered about what happens afterwards.
Alok Sharma: As I have said to you, we will of course monitor this. We will keep this under review.
Q541 Chair: So you have no answers today.
Alok Sharma: We are now in July. The furlough scheme will continue until October.
Sam Beckett: The business bank loans are open until September in the main parts. They are still open for people to get access there.
Chair: With the greatest respect, most of our questions today are about what is happening now and in the future. We do not need to rehearse what has been very welcome policy in the past because we have already considered those issues. Judith, did you want to come back or are you finished on that line of questioning?
Judith Cummins: I think the Secretary of State has given the answers.
Q542 Mark Pawsey: Secretary of State, thank you. I want to ask you about the obligations on businesses to pay rent for occupying commercial premises and the state of the commercial property market. There is a conflict. Many businesses have been able to pay their rent, particularly those retail and hospitality businesses that have been closed. Many businesses have not paid their rent because they were given licence not to do so. Was that the right thing to do? Many of the rents are paid to quoted property companies, which pay dividends that pay people’s pensions. How do we reconcile that conflict and where do you see the situation now?
Alok Sharma: This has come up previously and has come up in the House as well. There is a balance here. We have said all along that we want landlords and tenants to work collaboratively. If you look at the evidence provided by organisations like the British Property Federation or the British Retail Consortium, they are seeing that tenants and landlords are coming together and reaching agreements when it comes to debt obligations.
You will also know that we have introduced various statutory instruments in the Corporate Insolvency and Governance Act, as it is now. We have introduced measures on statutory demands and winding-up petitions. We have tried to find a balance where we protect tenants, but at the same time ensure, through this code of practice that MHCLG has published, that there is an opportunity for commercial tenants and landlords to work together.
If I can give you an example when it comes to pub companies, the Pubs Code Adjudicator has been working very hard together with pub owners and tenants. They have reached an agreement and support is being provided for tied pub tenants. There are rent reductions. That mechanism is ensuring that businesses continue to be viable so that they can go back to paying their full rent in the medium term.
Q543 Mark Pawsey: In the June quarter, 43% of industrial rents were paid, 35% of retail rents were paid and 21% of leisure operators paid their rent. Property companies cannot survive in that environment, can they?
Alok Sharma: I completely understand that. The alternative is that, if those businesses that are tenants no longer operate, the amount of money paid to landlords would be even less. This is about making sure that we support these businesses over the next few months so that they can stay in business and meet their rent obligations. This is difficult; I am not going to pretend that this is not difficult for landlords, but also for tenants.
Q544 Mark Pawsey: A proposal was brought forward for a space furlough scheme. Why was that not implemented?
Alok Sharma: I suspect the space furlough scheme did not come to BEIS. I suspect that would have been discussed with MHCLG, but I am very happy to go to back and discuss that with my colleagues. As I said, MHCLG put forward this code of practice, and worked with landlords and tenants to come up with the code, but I am very happy to go back and have that discussion.
Sam Beckett: We very recently extended the moratorium on allowing tenants to be evicted. Now it ends on 30 September. That was updated at the end of last month, so that has been rolled forward.
Q545 Ruth Jones: Good morning, Secretary of State. This Committee has received a number of reports about pregnant woman who may be unable to socially distance in work. Those women are being forced on to statutory sick pay, placed on unpaid leave or even forced to take maternity leave earlier than planned. How is your Department responding to this? What are you doing to help these women and their families?
Alok Sharma: That is a really important point. It has been raised by a number of colleagues in the House. We touched upon it at the last Select Committee, Chair, as you know.
First, as I said last time, any kind of discrimination when it comes to pregnancy and maternity is unlawful. There is absolutely no place for that at work at all. I just want to reiterate that particular point. We also know that during this Covid pandemic women who are pregnant have been defined as clinically vulnerable by Public Health England as part of the measures that have been announced.
I am aware that some women, some of it may be through mistakes, have been asked to take sick leave rather than be found other roles, or indeed be paid. As you know, risk assessments have had to be carried out in businesses under Covid. Risk assessments are nothing new; businesses are required to carry them out more generally anyway. Clearly, businesses should try to see whether they can find alternative work within the business for individuals or different ways of working to support them. If controls cannot be put in place, women should receive their appropriate level of pay rather than either not being paid or being put on statutory sick pay.
I would raise one other point on this. At the end of April, we brought forward some legislation and statutory instruments, making very clear that employee statutory maternity pay should be based on actual pay rather than furlough pay. Of course, it is possible for pregnant women to be furloughed. Again, this point came up last time.
Ruth, please write to me where there are individual cases. I am very happy to look at individual cases. We will do that, because we want people to be treated fairly at the end of the day.
Q546 Ruth Jones: You have outlined very clearly what should be happening, which is great. We know what should be happening, but this is what is actually happening on the ground. It is going to take forever for us to relate individual cases across all four countries to you. I am just wondering whether you could issue guidelines as a Department. Could you do something proactively to help these women? Tribunals take time. The money for these people will take a long time to come to them and they need the help now.
Sam Beckett: We are very conscious of that. We have been working with Public Health England to get the guidance as clear as it can be. We are putting that updated guidance about risk assessment on GOV.UK. We have also been working with ACAS to reach out and have that guidance on hand when they are getting calls and inquiries about this. I am sure there is more we can do to get the proper message out there, but we are certainly trying to do that, recognising the issues you have raised.
Alok Sharma: We will look to see if there is anything else we can do. This is a really, really important point. As the Permanent Secretary said, we have tried to address this. If we are not doing enough and should be doing more to inform employers, we are very happy to look at that.
Ruth Jones: That is helpful. Thank you.
Q547 Mark Pawsey: Secretary of State, just a month ago you announced the five business focus groups that you have set up to accelerate growth and recover from the present situation. Which of those two are the key priority? Do you have a short-term perspective on these groups or are you looking for a longer-term horizon?
Alok Sharma: The short answer to that is both. We set up these five groups. The five groups are looking at five different areas, if I can put it like that. First it was levelling up. Then how do you start up and scale a business in the UK? How do you get to net zero through a green recovery? How do you make the UK a more innovative place to operate? How do we attract and retain inward investment?
We ran taskforces and I can give you some of the key feedback that came out of them. One was prioritising short-term job creation; people were keen for us to do that. The others were committing to green recovery and focusing on technical skills in the workforce.
Q548 Mark Pawsey: Has each of them already met?
Alok Sharma: Yes, they have met. We have also had several hundred written submissions from individuals. I think one of the issues was that we needed to have the right number of people on each taskforce, but we did not want so many people that we could not actually have a useful discussion. We were approached by businesses and individuals wanting to be part of them. We said to them, “I am sorry. We have not been able to accommodate everyone, but please write to us”. We have had hundreds of submissions; we are going through those right now.
Q549 Mark Pawsey: How will you prevent them from being just another talking shop? How will you ensure that their work contributes to short-term recovery and the longer-term horizons you have spoken about?
Alok Sharma: I have been very clear about these taskforces. They are certainly not going to be talking shops that meet every few weeks and have a natter. That is not what this is about. We have some very concrete ideas that come from these taskforces and are going to help shape the work we are doing in Government on economic recovery. I have also said to them that, when we bring individuals back together on an ad hoc basis, it will be to look at specific issues rather than have a general talk once again.
We talk about green recovery. You will have seen that some of what the Chancellor said yesterday plays to that, in terms of a green recovery and prioritising jobs in the near term. I hope members of this taskforce will see that what they are telling us is also coming through in policy and action within Government.
Q550 Mark Pawsey: Will each group prepare a report? How does their work get translated into new initiatives?
Alok Sharma: No, they will not prepare a report. My officials have been collating this information and preparing information for me internally, which I have then shared with ministerial colleagues. As I said, that is part of the very active discussion we have on the economic recovery, particularly the green recovery that the Prime Minister spoke about in his speech last week.
Q551 Mark Pawsey: There has been some criticism that there are no trade union representatives on any of the groups. Why is that?
Alok Sharma: You are right that there were no trade unions on the five taskforces. I was very keen to get the trade union team together separately to hear their views. We only had around 25 people on each of these taskforces; we published the names.
Mark Pawsey: With respect, surely the views of the workforce would be relevant and appropriate.
Alok Sharma: I was about to say that we did bring together trade unionists. We had a meeting on 30 June to go through exactly the same questions that were discussed with the taskforce. Frances O’Grady chaired that particular event with me. I do have a list. Around nine or 10 colleagues from trade unions were part of that discussion.
Q552 Ms Ghani: Secretary of State, you mentioned the green recovery, levelling up and innovation. All those are key to the maritime sector. There is concern at the lack of maritime representation on your taskforce groups. Are the taskforce groups now closed or are you deliberately excluding maritime?
Alok Sharma: Can I first pay tribute to all the work you did as Shipping Minister? No, we have not deliberately shut out any particular sector or industry; that has certainly not been the plan. As I said, the taskforces will meet on an ad hoc basis in future. They have not been disbanded, but we are not having a set meeting every few weeks. I am very happy to see if we can involve senior people from the maritime sector. We are very happy to have your thoughts on who might be part of it.
Q553 Ms Ghani: I can forward some of the correspondence we have had from Maritime UK, and in particular from the Marine Energy Council. I must put on record that I have been up to Orkney, so my next question will be based on that.
There is some concern within the maritime and marine energy sector. We must remember that maritime in the UK is the only sector that has a clean maritime plan. It is the first of its kind worldwide. The work that they are trying to propose, whether it is tidal or marine energy, is not being looked at by your civil servants within your office. How can we ensure that they are going to be incredibly dynamic in looking at the work that is taking place in Orkney, or by the Marine Energy Council, so it can form a part of the post-Covid green and innovative rescue plans in place?
Alok Sharma: As I understand it, we have supported technologies such as tidal stream turbines, including at the European Marine Energy Centre in Orkney. I know there has been a discussion on tidal, Chair, and I have written to you on one particular case. Can I put on the record that the Government remain very open to looking at tidal range proposals, barrages and other alternatives? We are very happy to look at all that. This is ultimately about making sure there is value for taxpayers and consumers.
Joanna Whittington: We have given a lot of support to the sector in different ways. Since 2010 about £80 million has been spent on wave and tidal, leading to 10 megawatts of tidal stream being deployed for testing. It is a slightly less developed technology than other technologies that we are more familiar with in the marine environment, in particular offshore wind. That is why it is probably more appropriate to see it as part of our energy innovation space as opposed to the more established schemes, such as contracts for difference. In due course, that might also be appropriate as we move from development into deployment.
Chair: Thank you for that. We will probably come back to these questions a little later.
Q554 Alexander Stafford: Thank you very much, Secretary of State. I am sure you have avidly read my articles on The Guardian website yesterday and today about the Chancellor’s green package. A £3 billion investment in it is obviously very welcome, but let us be honest. It is not as much as promised in the Conservative manifesto.
When are we going to get up that level of funding commitments to the green recovery? How are we going to deal with energy efficiency? What are we doing to make sure that our industry is not left at a disadvantage against our nearest competitors in the net zero transition? I am sure the Secretary of State knows about my interest in hydrogen, as one of those interests to get there.
Alok Sharma: Alexander, I apologise—I have not seen your articles, but I will pull them out and go through them when I get back. You are right; the Chancellor set out the £3 billion yesterday. Just to be clear, the commitment in the manifesto was £9.2 billion over the Parliament, so we are talking about a five-year period. We have pulled that forward.
The other thing to point out is that £2 billion of that is for energy efficiency in homes. That is money that we want to ensure is spent as quickly as possible, so that particular scheme will launch in September. We have been very clear on that. This is of course about energy efficiency, but it is also about creating and supporting green jobs, and, at the end of the day, cutting emissions. I am pleased that we have ensured that we are going to provide more support to those from lower incomes as part of that particular package. It is £9.2 billion overall, but I hope the fact that we have brought forward £3 billion in a matter of months since the general election will be a positive sign.
Q555 Paul Howell: In terms of the industrial strategy, we hear a lot of conversations about shovel-ready projects. We need these shovel-ready projects to be delivered, and we understand that, but the industrial strategy needs to remain cohesive. What is going to happen? Are we going to see a revision of that?
Alok Sharma: No, I think the Prime Minister has been very clear in what he has said. We want a green, resilient recovery. We also have to prioritise jobs now; that is obvious in the circumstances that we are in. If you look at the context of what is being defined as shovel ready, one of those projects is the £3 billion that is going into energy efficiency. That is effectively shovel ready. I think it fits well with the industrial strategy when we are talking about net zero. There is coherence to what we are trying to do.
Q556 Paul Howell: I think there is a potential risk that we charge into shovel-ready projects, and something that is important but not shovel ready does not get the attention it deserves. Are we making sure that we do not do that?
Alok Sharma: We are setting out a plan for net zero. At some point we might talk about the climate action implementation committee that I chair. It is about a coherent plan across Departments to get to net zero. It should be welcome if, as part of that, we can bring forward projects that fit with the net zero agenda and can create jobs right now. This was a point that the taskforces were collectively making about trying to make sure that jobs are being created in the near term, but you still fit with the issue when it comes to the green recovery.
Q557 Paul Howell: To build on that direction of travel in the conversation, one challenge is that we put green-friendly, carbon-friendly operations in the UK, but might be competing with international supply chains that do not have the same credibility on that front. How do we make sure that we get value for money for the projects we are pushing, but also pick up on the green agenda and do not unbalance it just because something is coming in from wherever in the world? Financially it might be the wrong step, but green-wise it might be the opposite.
Sam Beckett: There are discussions about different mechanisms. I know the EU has talked about mechanisms for dealing with that carbon issue at the border. For now, it is just a process of making sure that what we are doing domestically has the best credentials, but also thinking about how that supply chain in some areas can actually grow domestically, so we get less from overseas as part of the components of the green technologies and investments we are making.
Paul Howell: It is a regular concern that we receive. People are worried that we do not take enough consideration of the longer supply chain, particularly on Government contracts. I really would encourage that focus to increase.
Q558 Alexander Stafford: Let us be honest. Most businesses and industries support the net zero target, but there seems to be some concern about a lack of an overarching strategy for the industrial decarbonisation. That may undermine some of the efforts. Do the Government have plans to support industrial decarbonisation through a stimulus package or similar?
Alok Sharma: I think you have seen some of what has been put forward by the Chancellor. I am not going to pre-empt what the Chancellor will say in the Budget or the spending review; that would not be wise to do. The direction of travel of what we are trying to achieve is very clear. We are at the interesting point where large corporates, civil society, non-state actors and Governments are coming together and realising that a green recovery is the way forward.
You are seeing that internationally. In my role as part of the COP26 presidency, I have discussions every few days on these particular issues with colleagues. You can see that this is gaining real resonance internationally. I am encouraged and optimistic about what this will mean for the global economy coming out of Covid.
Q559 Ms Ghani: You said at the most recent Select Committee that you were keen to explore Sunday trading, Mr Sharma. I find it extraordinary that we are allowing people to buy a pint of beer beyond the normal times, but we are not allowing mums and dads to buy nappies beyond a period of time on a Sunday. Can you explain why we are in this situation?
Alok Sharma: Nus, you wrote to me with 44 colleagues and set out your views very clearly. I said previously at the Select Committee that I am very open to looking at this. As you know, there are mixed views on this particular issue. I certainly remain open to looking at this.
I repeat what I said at the last Select Committee. This temporary measure was put in place at the time of the Olympics. I think it was well received. It was good for consumers. It was good for businesses. How we look to support jobs and the economy will be quite interesting going forward. I certainly keep this under review.
Ms Ghani: This is not about the principle of keeping Sunday special, which I think was one of the counterarguments. There are already rules in place to ensure that people are not forced to work on a Sunday. Supermarkets are hiring more for Sunday. People like to work on a Sunday. People do not want to be forced into smaller shops or pay more for their basket of goods. Opening up Sunday trading for supermarkets will allow greater choice and good prices. It will stop people queueing in quite tight spaces. It feels incredibly curious that the unions are struggling with the concept of giving people choice, creating jobs and making sure that they are paying a bit less for their food. If we want to open up the economy, this is one sure thing that we can do.
Alok Sharma: All I would say is that you are making a very credible case. I know that you will continue to make that case in the weeks and months ahead.
Q560 Chair: I know there are mixed views on this issue, so I am sure it will be an interesting debate in the months ahead. Moving now to COP26, Mr President, we are all very excited about Britain co-presiding over COP26 later next year and keen that Britain is doing all it can to show our allies across the world that they need to follow suit with us. Could you set out for the Committee whether we will be bringing forward plans to make sure that we deliver on our sixth carbon budget in advance of the summit next year?
Alok Sharma: First, we are ahead of track on carbon budgets 1 to 3. We need to do more on carbon budgets 4 and 5. The CCC will set out its thoughts on carbon budget 6. Of course, we will need to respond to that in a timely fashion.
Q561 Chair: I commend the Government for being so exemplary on the early rounds of budgets, but we need to recognise that we are falling behind. I am a little conscious of the timings of these issues. The Committee on Climate Change produced its progress report a couple of weeks ago, which showed that we need to take much more urgent action. It will come out with its full update in December, but we also have to submit our nationally determined contribution around the same time in advance of COP26. Will our NDC set out how we will reach our own statutory obligation to meet net zero at that time?
Alok Sharma: In terms of the NDCs, the UNFCCC is encouraging all countries to be ambitious. I understand that applies equally to the UK, so we are currently looking at this issue. Particularly with the COP presidency, we will have to put our best foot forward on this particular issue.
Q562 Chair: Presumably you agree that it would be a little embarrassing to ask every country in the world to be ambitious as president of COP26 when we are perhaps not meeting our own statutory obligations.
Alok Sharma: As I said, I would like us to be as ambitious as we can.
Q563 Chair: That is very good. In an earlier question, Secretary of State, you seemed to suggest there would be a new net zero plan coming forward. Did I understand that correctly?
Alok Sharma: No, I think the point I was making was that the climate implementation committee I am chairing is working its way through with colleagues to look at how we get to net zero. We had a meeting this month and there will be another before recess. You made the point about how we reach carbon budgets 4 and 5, and then potentially carbon budget 6, on the road to net zero. We are giving that a lot of consideration.
At the end of the day, the industries that BEIS effectively oversees are responsible for 40% of UK emissions. We have our own role to play in making sure that we have a roadmap to net zero for those sectors.
Chair: All that is timely. We will be able to talk about that in the run-up to our NDC contribution and the COP26 meeting.
Q564 Alan Brown: Sticking to domestic progress, you are well aware that the fourth and fifth carbon budgets are not on track. Looking at the recent Committee on Climate Change progress report, only two of 31 policy milestones have been achieved. There is no progress on 14 of them. Actually, 18 of the 2019 targets have already been missed. The fourth and fifth budgets are only based on 80% reduction rather than net zero, so what are your plans to definitively get the UK back on track to meet net zero in 2050?
Alok Sharma: I think the Committee on Climate Change also noted that we had made progress towards a net zero policy. I think there was an acknowledgement that there is a framework in place, and this is looking at the transformation of the whole economy in effect.
Q565 Alan Brown: The current framework is based on 80% reduction and not even net zero by 2050. The existing framework is not even tight enough. How does that get addressed?
Alok Sharma: We will set out a heat and building strategy later this year, as well as the energy White Paper, which I know has been anticipated for some time under several Secretaries of State. We very much hope that that will come out in the autumn.
To step back from this a bit in terms of what successive Governments in the UK have managed to achieve, from 1990 to 2018, we have managed collectively to ensure that our economy has grown by 75%, with emissions down by 43%. You will know that we have also ensured that electricity generation from coal fell to just 2% of the energy mix last year. We went for three months without coal between March and the middle of June and 47% of the UK’s energy generation has come from renewables.
We are making progress. I am not sitting here suggesting that we should rest on our laurels, absolutely not, but we are making progress. I am very conscious as well that we need to ensure that CB 4 and 5 catch up before we see what has been suggested for CB 6.
Q566 Alan Brown: It is one of the issues where BEIS has responsibility on one level, but other Departments can trump what BEIS wants to do. For example, Treasury previously pulled funding for carbon capture and storage. The Chancellor made big announcements yesterday. The Prime Minister is talking about recovery being “build, build, build”, and that includes roadbuilding. How does that fit in when we do not have the policies in place and, as you have acknowledged, we are already behind progress?
Alok Sharma: Sorry, Alan, I did not catch all of that, but I think you were talking about carbon capture, usage and storage. There is a plan for that. I completely understand that we have made announcements. You are quite rightly asking us when we are going to deliver them. From my perspective, the Department understands that we need very clear plans for all these items that we have set out in the manifesto and subsequently. How do we deliver those pilots? Alex talked about hydrogen; the Prime Minister mentioned that in the House as well. We are working up very concrete plans for all of this. I hope I can come and talk a little more about some of them in subsequent Select Committees.
Q567 Alan Brown: The Committee on Climate Change progress report says that, by the end of 2020, a funding model needs to be in place for CCS infrastructure and hydrogen production, with, effectively, the go-ahead given for multiple clusters to be operational by the mid-2020s. Will that funding policy mechanism and strategy be in place?
Joanna Whittington: You will be aware that we announced £800 million to support carbon capture and storage in the Budget. That was specifically to make one facility operational by the mid-2020s and a second by the 2030s.
Alan Brown: The Committee on Climate Change has said you need to have multiple clusters operational by the mid-2020s.
Joanna Whittington: That is why we consulted last year on business models to support that. That was looking at business models not just for CCS for power generation, but CCS for industrial consumers, as well as the production of hydrogen, and for the transportation and storage facility, which will be necessary for all these technologies and possibly others across the economy.
Q568 Alan Brown: Will the Department release money for a green hydrogen project that is on the table that the Department has been looking for? It is up in Scotland.
Alok Sharma: Alan, if you write to me afterwards, or we could have one of these Zoom calls, I will be very happy to talk to you about it.
Alan Brown: I would be delighted.
Q569 Alexander Stafford: I know this was raised in the House yesterday or the day before. It is about the energy White Paper. I know it has been delayed for 18 months. I appreciate a general election, Covid, prorogation and a lot of things have got in the way, but it is getting to be quite a long time. When is this going to be published? I think you said “this year” in the House recently, but is it this financial year, this academic year, this municipal year? More exactly, when will it be published?
Alok Sharma: It will be this autumn.
Q570 Alexander Stafford: Sorry, “autumn” means a lot of different things to Ministers. Are we talking end of December or September?
Alok Sharma: I want to show ambition in publishing this when I say “the autumn”.
Q571 Chair: It makes sense for plans to be aligned with the autumn statement.
Alok Sharma: On a more serious note, it is very important for us to be co-ordinated in terms of wider policy and announcements that are made. Thank you for helping me out there, Chair.
Chair: No, it is my pleasure. I like to where I can. Those answers are helpful. I know we do not need to stress this, but the Committee on Climate Change said that, of the 31 policy milestones from last year, 14 had made no progress whatsoever. We really need to keep your feet to the fire on this.
Q572 Mark Jenkinson: I am keen to understand how cognisant the energy White Paper will be of the part that new technologies will play on our route to net zero. We spoke previously about some tidal stream energies and things like that. The problem is that we measure everything against offshore wind, which is not a panacea. How are we to adopt new technologies into our energy mix if all we do is look purely at the financial cost in the early days?
Alok Sharma: As you know, we have a consultation on CfD 4, which is out at the moment. As part of that, we are looking at wider technologies as well as wind. There is an opportunity for people to set out their thoughts on that. As a Government, we are very keen to encourage energies to come forward and become financially viable. The contracts for difference projects actually delivered that. I know we talk about offshore wind, but it is remarkable what that has allowed us to do in terms of prices. The UK is now a global leader in offshore wind, which was not the case a few years ago.
Q573 Mark Jenkinson: In terms of the direction of travel on things like tidal, the technology and the ownership of the intellectual capital, for want of a better phrase, of that sort of project work that we could get in front of the curve on is an opportunity that we should be looking at. For wind, we are actually delivering the project, but it is not our technology in same way as some of the tidal stuff could be. Do you see that as something we can grab hold of and push towards?
Alok Sharma: Yes, absolutely. If the Committee has some views and thoughts, we would be very happy to hear more formally from you.
Chair: We love the idea of producing our own manufactured goods in the UK for our renewable target.
Alok Sharma: Yes, indeed.
Q574 Judith Cummins: I am turning now to the machinery of government, the two new Cabinet committees on climate strategy and climate action, and how they will integrate with BEIS’s role to co-ordinate climate mitigation across Government. Last week, the chair of the Committee on Climate Change, Lord Deben, told us that the Cabinet Committee had met just once and he thought it ought to be a regular and clear driver of the whole programme. Can you confirm that the original Cabinet Committee on climate change met only once since its creation? Can you tell us the thinking behind the splitting of the committee in two? Can you set the specific roles of each of the new committees and reassure us that these will meet on a regular basis of once a month as recommended by the Committee on Climate Change?
Alok Sharma: You are right that there are two committees. There is the strategy committee, chaired by the Prime Minister, and the implementation committee, chaired by me. The strategy committee met in March. We then obviously got into the Covid-19 pandemic and, as you will appreciate, the short-term priorities took over. The implementation committee is about setting out the detail and the policy development of how we get to net zero going forward, allied with the work we are doing on COP26. As I said to the Chair, we had a meeting of this particular committee on 1 July. There will be another meeting before the House rises.
I am very keen that individual Departments work up detailed proposals for how we get to net zero for the sectors they are responsible for. From my point of view, I am very keen that we meet on a regular basis. That certainly will happen. I think there is a lot of commitment from Cabinet colleagues who sit on the implementation committee to drive this forward.
Q575 Judith Cummins: Secretary of State, just to clarify, by “a regular basis” do you mean once a month or once every two months?
Alok Sharma: This month we will be meeting twice. I will see what we can do during the recess period. To be clear, the Prime Minister and I do not see this as something we just work our way through. There are very clear consequences of what we are trying to do here in terms of net zero. Particularly given that we have the COP26 presidency, we will quite rightly be judged on what we ourselves are doing in setting out plans to get to net zero.
Q576 Judith Cummins: Thank you, Secretary of State, because that leads me on to Lord Deben’s comments to us last week. He said that BEIS had an important role to play in co-ordinating with other Departments through the Cabinet Committees more widely and that the old arrangements were not working very well at the moment. Why does the Secretary of State think that this is? What is he going to do to improve it?
Alok Sharma: As I said, I got into this particular role in the middle of February. We have had the strategy meeting. We have had the implementation meeting and there will be another one. I am totally committed to driving this forward. Look at the key Departments that have equity in this, in terms of driving it. You have seen the work that Grant Shapps is doing for transport, Defra on land use and MHCLG on homes. All I can say to you is, “Judge us by what happens over the coming months and the progress we are making”.
Q577 Judith Cummins: In terms of judging you by the progress you are making, what are the arrangements for scrutiny and accountability so that we can actually see what is happening?
Alok Sharma: That is a very good question. You will see what we set out in the White Paper and the various plans we have for net zero buildings. From a transport point of view, you will have seen the £2 billion that was announced by the Secretary of State for Transport. Milestones are coming up where you will be able to see the progress we are making. Anyway, Judith, you will have plenty of opportunity to quiz me when I return to this Committee over the coming months, I am sure very regularly.
Q578 Chair: It is something to look forward to. Moving to questions about research and development funding, I asked the question in departmental questions in the House about our membership of Horizon Europe. In a very short answer, can you give us an update as to whether we have made any progress on achieving third-country associate membership of Horizon Europe?
Alok Sharma: Yes, and I understand that is of very particular interest. It is absolutely right that you raise this. I have a bit more to tell you, which is that the negotiations are still ongoing. We are open to participation—I have said that previously. I cannot tell you the detail of these negotiations, which are part of the wider picture. We have also said that if we do not formally associate with Horizon Europe, we will have alternatives in place as quickly as possible and we will address the funding gap. You will have seen the R&D roadmap and we have made reference to this particular point there as well.
Q579 Chair: Is the preference that we have associate membership of Horizon Europe?
Alok Sharma: As I said, we are open to participation. I completely understand why you want me to set it out very clearly.
Chair: I am interested in your view.
Alok Sharma: I am giving you my view. My view is very clearly that we are open to participation, but this will come down to a negotiation. It will come down the wider negotiation that takes place with the EU.
Chair: That is understood.
Sam Beckett: The EU members are negotiating among themselves about how to allow associate membership, so that is not finalised yet either.
Q580 Chair: That is useful to know. Yesterday, in the Chancellor’s statement, there was some disappointment, including from me, around a lack of sectoral support for the manufacturing sector. The Chancellor said in response to my question that he would be bringing forward research and development funding to try to help the sector retain jobs and develop new technologies. There are many of these examples. The Brunel Challenge in my constituency around the future of engineering is one. When will we know if the R&D budgets for these issues will be brought forward to try to offset the redundancies currently happening due to a lack of support more generally for jobs in manufacturing?
Alok Sharma: Chair, I think you wrote to me. I have now written back to you on this issue of manufacturing, so I will not rehearse what is in the letter. The key issue is that we are committed to the R&D spend. At this particular time there will be pressures on budgets across Departments. You saw the commitment that was set out in the spring Budget when it comes to R&D. We have a roadmap, which we have published. I am quite sure that the Committee, as well as the Science and Technology Committee, will share thoughts on the questions we have raised. This is something I want to do quickly, not taking a long time. I hope we can say a little more once we have done that.
The overall commitment, and you will know this, is the fact that spending on R&D also drives productivity. We see that in places like Germany. It drives jobs and inward investment. There is a stat floating about that says that, for every £1 you spend on R&D, you get an economic and social benefit of £7. This is about leveraging private sector money at the same time.
Q581 Chair: That is something to look forward to, perhaps in the run-up to the autumn statement. Moving to the issue of the Government’s purchase of OneWeb, the satellite system, could you give us a general view as to how this fits in with the original announcement from Government to build a sovereign capability? How do you envisage the OneWeb network fitting in between our multitude of needs, in terms of civil and defence requirements?
Alok Sharma: In terms of OneWeb, we looked at this from the perspective of a commercial case and a strategic case. As you know, we have co-invested alongside Bharti. The commercial case was looking at the provision of broadband to people in remote areas and in aviation and maritime. In terms of the strategic case, the UK has an ambition to be a world leader in the space sector. There is a space council, as you know, which the Chancellor will be chairing. This also presents, if I can put it like this, strategic geopolitical opportunities for the UK. That is the basis on which the decision was made.
There has been debate around GNSS. That was not the rationale for this particular investment. Of course, we are exploring how OneWeb may be able to contribute to PNT resilience in the future.
Q582 Ruth Jones: I would like to stay with R&D and, in particular, the space sector, please. I am looking at Copernicus in particular. It is great that we won some contracts there, but it is deeply disappointing that we did not gain a single prime contract. Why was that? Have you investigated to make sure it does not happen again? We have lost a lot of money and potential for jobs as well there. What are you going to do to make sure it does not happen again?
Jo Shanmugalingam: We are talking to the European Space Agency about Copernicus. It is probably best if we follow up on the specifics of it in writing afterwards, if that is okay.
Q583 Chair: To follow up briefly, if we cannot retain jobs manufacturing space components as part of a European partnership, will there be opportunities with the purchase of OneWeb for those workers to perhaps do their work in other ways, or will those jobs just be lost as a consequence of us not having the European relationship?
Alok Sharma: To be clear, is that in relation to employment within OneWeb currently, or are you talking about more generally?
Q584 Chair: I mean more generally. We have people in the UK, including in Ruth’s constituency I think, who have contributed to Galileo, Copernicus and the European satellite systems, which we are no longer partners in. Will the OneWeb purchase provide opportunities for them to carry on doing their work perhaps with OneWeb or with other supply chains?
Alok Sharma: The purchase of OneWeb secures the jobs we have currently in the UK. Longer term, we would want to look at what we could do in terms of direct manufacturing and supply chain. The key point is that we want to become a world leader in the space sector. It is a growing sector, so I hope there will be opportunities. What I cannot tell you is, “Here is a detailed strategy that will deliver X number of jobs”. As I said, we have a space council that has been set up. It will be meeting shortly and I am sure you will hear more of it from there.
Q585 Richard Fuller: Can I stick on R&D? The Chancellor announced a big increase in R&D expenditure, £9 billion in 2020 to £22 billion by 2024-25. We now have Covid. You have just published the R&D roadmap, which is saying how we might answer some of the questions about delivery. Should we anticipate that there is going to be any rollback in that ambition, or are you still fully behind that target of increase?
Alok Sharma: I think it is £11.4 billion currently, if I am right. If I am wrong about that, I am happy to write back.
Jo Shanmugalingam: The roadmap reconfirmed the Government’s commitment to the announcement made by the Chancellor in the Budget that the public investment in R&D would be £22 billion by 2024-25. The publication of the roadmap is a demonstration that that commitment remains central to the strategy for the future growth of the economy.
Alok Sharma: To be clear, I think it is currently around £11 billion that we are spending in terms of public expenditure. Is that right?
Jo Shanmugalingam: Yes.
Q586 Richard Fuller: Whether it is £9 billion or £11 billion now, £22 billion is quite a large increase. In the figures today, we find that the response to Covid overall for Government is £310 billion. Your Department has £73 billion in loans, £30 billion in business rates relief and similar projects—that is more than the MoD’s annual expenditure—and £69 billion on the furlough programme so far. That is more than the Education Department. How do other Cabinet Ministers look at you now? Do they think you are spending like a drunken sailor or do they think you are on point of what we need?
Alok Sharma: I hope they would never think of me as a drunken sailor. I am a very sober individual. We have to separate the two things, as you know. One is the short-term measures we have had to take. Of course, the reason this is sitting within BEIS is because the British Business Bank is within BEIS. I see that as a separate component to the day-to-day business as usual spend that we have. Maybe the Permanent Secretary wants to elaborate a bit on this. Obviously, throughout this process it has not been business as usual because we have had to reprioritise. A lot of colleagues within the Department are focused on the Covid response. Internally, we have had to reprioritise spending commitments.
The key thing in terms of R&D is that we have that commitment. It was remade in the roadmap. For me, there is a very good reason for that. That is going to help drive these high-value-added jobs going forward.
Sam Beckett: Obviously, our departmental budget was set for 2020-21. For everything that comes along, as the Secretary of State has been talking about, that is a future spending commitment beyond what the Department has already been set, there is a special arrangement with the Treasury where you get confirmation that you can have access to that funding.
Normally, that would be set in a spending review. Because of exceptional circumstances, some of that spending has been brought forward. That is accounted for, an item at a time, through recorded arrangements with the Treasury. That is all set out in Managing Public Money. My job, as accounting officer, is to make sure that has been nailed down and we know that, if we are making spending commitments beyond the spending review, they have all been approved by the Treasury and notified as appropriate.
Q587 Richard Fuller: That is helpful. To close on this point, we had these anticipated expenditures, such as the R&D. We now have this extraordinary and very significant amount. The Government do not have money. Taxpayers have money and then we borrow from capital markets. The Chancellor said yesterday that he would be trying to get the public finances back under control. Will the Secretary of State engage with the Chancellor by looking at those programmes in his own Department that perhaps can be scaled back, if not R&D then perhaps in other ways?
Alok Sharma: I cannot speak for the Chancellor or the Treasury, but I suspect all Departments will have to look very carefully, as they always have to, at whether they are providing value for money in any of the programmes they are pursuing. I am sure that, even if we were not in this position, the Treasury would require us to do that. In terms of future years’ budgets, there will be a discussion on the SR starting very shortly and we will have the outcome of that in the autumn. I know you are very focused on value for money for taxpayers and so am I. There is no such thing as Government money. This is all taxpayers’ money.
Q588 Ms Ghani: Secretary of State, I am sure that you will be just as concerned as I am that some individuals in our society can be paid less for doing the same job, in particular Pakistani and Bangladeshi women, who can earn up to 20% less in the workforce compared to their white female counterparts. Diversity means good business, so this has to end somehow. The Equality and Human Rights Commission chair said that significant progress would be made if there was transparency on the ethnicity pay gap. The same was said by the McGregor report. I wonder if you could explain your reluctance to produce the ethnicity pay report when you have already had 300 detailed responses.
Alok Sharma: This is a very important issue, but it is also quite complex. The information that came out of all this analysis was that you cannot talk about people as a group, in terms of an ethnic minority group. If you look at employees of Chinese, Indian, mixed or multiple ethnicity, they all have higher median hourly pay than white British. You are absolutely right: there will be other groups, such as the Pakistani and Bangladeshi women in the lowest quartile in terms of hourly pay. We have to look at it and understand why that is the case. This is quite complex. I will ask Sam if she wants to come in on this. There are issues with what people are paid. There are also issues about representation within businesses at managerial and, ultimately, board level.
Sam Beckett: On what the consultation uncovered, the Secretary of State has set out that different ethnic groups have wildly different benchmarks against median earnings, some of which are up to 30% above white median earnings. It is very difficult to make that blanket comparison meaningful. If you try to separate it out to look into it by different groups, you get into the problem of very small numbers in companies and the risk of identifying individuals. It has been a difficult issue.
We did some voluntary methodology testing with businesses. We are still looking at it and trying to see if there would be a workable methodology. On 14 June, as I am sure you know, the Prime Minister announced his new commission on race and ethnic disparity. That will be a forum for thinking about future Government policy in this area.
Turning to board representation, you will be aware of the Parker review, which is trying to get greater representation of BAME directors on boards. Ministers in BEIS have been writing to stress the importance of that and encourage all businesses to participate fully. The Financial Reporting Council is trying to help and making efforts to improve diversity reporting in companies’ annual reports.
Q589 Ms Ghani: Apologies if I interrupt. I only have a few more minutes. I find it hard to believe that the Department would undertake an inquiry that it knew was going to be difficult without understanding the criteria for publishing the data, unless it was uncomfortable with the data. You talked about boards there. It is important that we have representation on our boards, as well as having representation on entry into important jobs. Secretary of State, how many of your directors-general are of BAME heritage?
Alok Sharma: One, I believe.
Sam Beckett: It is one.
Ms Ghani: It is just one.
Sam Beckett: We have targets in the Department to improve our ethnic diversity. It is something that I am extremely conscious of and I know is part of the Civil Service reform agenda. We have sprint targets to get more black staff in and we are on course to do that. Our representation across the Department on BAME staff is around 20%, but it drops off, unfortunately, at the more senior levels.
Q590 Ms Ghani: You are holding businesses to account. It is incredibly important that the Department that is holding the businesses to account can show diversity, not only at the top, where you have just one, but also at entry level. My final question is whether you have neutral CV applications, where one’s gender, name and heritage is not recognised, a bit like the Spectator, where people of all backgrounds, whether BAME or working class in particular, can enter the workforce to begin with.
Sam Beckett: We will meet all the requirements of legislation on that agenda. We also have a policy for helping with any disability candidates who come in. We are very careful to encourage diversity. We also use a tool called Textio, which tries to make sure that our advertising is not accidentally prejudicing against the audience.
Q591 Chair: The question was whether the applications are neutral on these characteristics, though. Do you see ethnicity on the applications?
Ms Ghani: Do you see names? Do you see gender?
Chair: If you do not know, you can write to us.
Sam Beckett: We do. You have to fill in a declaration.
Q592 Chair: Maybe you can confirm the detail of this.
Alok Sharma: We can write to you. The general point, which is well made, is that, if we, as Government, are holding businesses to account, across the Civil Service we should be seen to be doing everything we can to get those levels up, based on merit.
Sam Beckett: All applications have the checklist on diversity attached, but you can say “prefer not to say”.
Q593 Ruth Jones: Looking at the need now for an independent inquiry into the Horizon IT system within the Post Office and the ongoing issues with the sub-postmasters, which many of us have in our constituencies—I know I have—it is very disappointing to many that this new independent inquiry is not judge-led. How independent will it be? Will current and former officials be compelled to attend and give evidence?
Alok Sharma: You are right. I know that Paul Scully, my ministerial colleague, has written to the Committee and the Chair on this particular point. There is a lot of interest in this. The reason we are doing it in this way is that we believe it is going to be quicker than a statutory inquiry, which could run for a pretty long time. We want to get on and do this. There have already been judgments in this particular case, which have provided independent judicial review into the facts.
Post Office Ltd itself, under the new CEO, has committed to effectively leaving no stone unturned, so it will take part in this. I know that Paul Scully is also having discussions with the National Federation of SubPostmasters. Yes, we are absolutely committed to making sure we can have people come forward. I was not in post when these issues arose, but I may ask Sam to comment on the specific case of bringing forward civil servants and others.
In terms of timing, we want to do this very soon. We are in the process of identifying a chair and having that discussion. I think the plan is to start an inquiry by September at the latest.
Sam Beckett: Civil servants would of course comply. I know that the CEO, Nick Read, has undertaken to represent the whole history of this case, in terms of the inquiry. He will be answering not for his own term but for the whole history of this very long and ongoing issue.
Q594 Ruth Jones: If necessary, will former colleagues and employees be compelled to give evidence? Their history on it will be more current and useful than maybe somebody reading from an article or whatever.
Sam Beckett: I do not think they will be compelled. I will confirm that.
Alok Sharma: I do not think they can be compelled, because it is not a statutory inquiry. If I can put it like this, the moral pressure to come forward and give evidence will, I hope, ensure that people come forward in good faith and talk to this inquiry. That is certainly what I want to see. I know that is what Minister Scully wants to see.
Q595 Chair: This will be very important because UK Government Investments, as a shareholder in the Post Office, will have had officials on the board, who will need to give evidence to this inquiry. Are you able to tell us whether UKGI officials ever notified BEIS departmental officials about concerns with the Horizon system?
Sam Beckett: You are right. UKGI has been on the board over that period as our shareholder representative. When issues were raised, which they were, and were communicated to the Department, they then sought assurances from the company and received every assurance that there were no legitimate issues raised. Subsequently, we have discovered that is not right.
Q596 Chair: I hope we get to a position where Ruth’s point is met and officials can give evidence. Otherwise, we will have to call you before this Committee. I appreciate it is probably not a Civil Service appointment, but will there be an opportunity for a pre-appointment style hearing for the chair of the Post Office Horizon inquiry?
Alok Sharma: Let me write to you, Chair. That is certainly not something I have considered at this stage.
Q597 Mark Pawsey: Secretary of State, I would like to ask about reform of the audit sector. As you will know, this Committee undertook a report, which came out in April last year, about changes that we wanted to see to the audit market. We made 54 recommendations. At the same time, the Competition and Markets Authority has done a report. Sir John Kingman has done a report. There has been the Brydon report. The only change that seems to have happened is that, a couple of days ago, the Financial Reporting Council asked the big four to build Chinese walls between their audit and advisory teams and gave them four years in which to do it.
We all understand that there are many other priorities for the Department but, at a time when businesses’ trading is under pressure, when their balance sheets are under pressure, is it not even more important that stakeholders get an accurate picture of the state of a company and confidence in the financial reports being brought to them? That is clearly not the case, given the scandals we saw at Carillion, BHS and Patisserie Valerie. Why so little progress in this sector?
Alok Sharma: First, I absolutely agree with you. As someone who was an auditor, quite a long time ago now, I think audit needs reform. If you look at the work that, for instance, Sir Donald Brydon did, it talks about the fact that this should not just be a compliance assurance exercise; it should be a bit more informative, looking at the sort of areas, such as fraud, that people actually have an interest in. I am very open to some of those ideas. I completely understand. There have been these three reports. The Committee has done its own report.
As a Department, we need to come forward on those consultations and set out our views. I will take that away and see how quickly we can come forward. If we are going to bring forward any kind of legislation, et cetera, that will require parliamentary time. As you know, there is quite a lot of pressure on that at the moment. I completely get why this is important. As you said, there has been a set of high-profile failures and we cannot allow that to continue.
Q598 Mark Pawsey: How do we turbo-charge getting some of these implementations on to the statute book? A lot of the recommendations were consistent across all the reports. It seems extraordinary to me that the best the FRC can come up with is this change within the big four, which we all agree with. We know they are using their audit work to get a foothold into businesses and the companies that will give them the more lucrative advisory work. Why four years in which to do it? This is a glacial rate of progress. What can we do to move things forward more quickly?
Alok Sharma: It requires us, as a Department, to come forward on these consultations, set out our views and then some form of timetable about how we go forward. If I can put it like that, that is on us. That is on me.
Sam Beckett: Just to confirm, the recommendation fundamentally is to have this Audit, Reporting and Governance Authority, which is a successor to the FRC with more teeth. It requires primary legislation. The FRC is trying to follow up with the CMA on those issues that can be done on a voluntary or non-statutory basis. We have a new chief executive at the FRC, so the leadership is thinking about the future agenda, when we can get the new and more powerful regulator into place. As I say, it needs some parliamentary time.
Mark Pawsey: We will look forward to those proposals.
Q599 Ms Ghani: The sweatshops in Leicester showed us the disgusting conditions that are endured by so many workers just to feed fast and cheap fashion. So many laws were broken, whether it is the Modern Slavery Act or the Coronavirus Act. Secretary of State, will you be doing a quick inquiry into Boohoo, but also into trading standards, local authorities, the police and local elected officials that allowed these sweatshops to continue?
Alok Sharma: You raise an incredibly important point. The stories we have all read about are really quite appalling. As you know, there is an investigation ongoing, so I do not want to comment on that particular investigation. This issue has been around for a little while. There was a working group set up. If you look at the various matters that have been raised, they will range from anything to do with coercive behaviour, modern slavery or, more recently, non-observation of Covid guidelines, to people not being paid the living wage.
There are a range of bodies across Government that look at this, from the HSE to the Home Office and the police. A working group came together a couple of years ago on this. I will write back if this is not correct, but in the last 18 months I think there have been around 200 interventions across all bodies to look at individual allegations that have been made. That has led to disqualification of directors. It has led to fines and, in some cases, I think, to arrests.
Q600 Ms Ghani: Could you write to us to explain or try to share which firms?
Alok Sharma: I am happy to do that.
Q601 Ms Ghani: My concern is that the legislation either is not strong enough or the legislators involved are not prepared to use the powers they have. I wondered if you would do a separate inquiry into Boohoo and its supply chain in particular.
Alok Sharma: Can I write back to you on that particular issue? The Health and Safety Executive sits with the DWP, I think. By the way, I am not trying to get away from the concept of what you are suggesting. I am just thinking out loud. From the BEIS perspective, our responsibility is on the living wage, but HMT/HMRC help us enforce that, if I am correct. Let me come back to you and write to you on this important point.
Q602 Ms Ghani: Let me refer you back to one of your earlier answers about Project Birch and conditionality. There is no doubt that your Department will be more and more engaged in some of our bigger companies in the UK. The Leicester sweatshops showed us the level of forced or low-paid labour. There is a situation where we have UK firms involved in supply chains from China, in particular from Uyghur camps where it is basically slave-trade-produced products that enter the UK market or are in the supply chain for UK firms. I know there is a Modern Slavery Act and we have done tremendous work with the Magnitsky Act as well. Secretary of State, I wonder whether you would review legislation into UK-China supply chains for some of our larger British firms.
Alok Sharma: May I suggest, Chair, that I would be very happy to sit down and have a discussion on this issue? I am not coming to this Committee aware of individual cases, but I am very happy to sit down and have a discussion around that.
Q603 Ms Ghani: I do not want to mention particular firms that are internationally well known, that promote their UK brand and that have, at the base of their supply chain, work that comes out of slave camps in China, produced by Uyghurs in particular. I am incredibly concerned that we are not being absolutely transparent in how the supply chains work in the UK.
Alok Sharma: That is understood.
Chair: Thank you for that. I agree with Ms Ghani. We have the Modern Slavery Act. We have transparency in supply chain legislation in place. We need to make sure that is really being enforced. Companies in the past have said, “If our supply chain goes as far as China or Bangladesh, it is difficult for us to check”. That is not a good enough excuse. When these issues arise in Leicester, that is even less of a good excuse. We need to make sure this legislation is being enforced in the right way.
We have come to the end of our questions today. Thank you, Secretary of State, Permanent Secretary and your colleagues on the call for going through so many issues today, whether it is about flexibility in the Covid restart, time-ticking issues on different sectors, commercial rent, local lockdowns, the imminent energy White Paper, the NDCs and the net zero plan in advance of December, the R&D roadmap over the summer, the appointment of the Post Office inquiry and the Government’s view on audit reform, as well as on these issues we have raised. You are clearly going to be very busy over the summer recess. I hope we can look forward to hearing from you perhaps in advance of the autumn statement in the new parliamentary term. In the meantime, may I wish you a good summer? Thank you for your time.