Taxation (Cross-border Trade) Bill (Third sitting)
Thursday 25th January 2018
(6 years, 3 months ago)
Public Bill CommitteesRead Full debate Taxation (Cross-border Trade) Act 2018 View all Taxation (Cross-border Trade) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 January 2018 - (25 Jan 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Chair
Good morning, everybody. Before we start, I will read out a few paragraphs about Committee arrangements. Some people are extremely familiar with all of this and a few are not, so just bear with me. As a general rule, I and my fellow Chair do not intend to call starred amendments, which have not been tabled with adequate notice. The required notice period in Public Bill Committees is three working days. Therefore amendments should be tabled by the rise of the House on Monday for consideration on Thursday, and by the rise of the House on Thursday for consideration on Tuesday.
Not everyone is familiar with the procedure of Public Bill Committees, so let me briefly explain how we will proceed. The selection list for today’s sitting, which is available in the room, shows how the amendments selected for debate have been grouped together for debate. Amendments grouped together are generally on the same or a similar and related issue. The Member who has put their name to the lead amendment in the group is called first. Other Members are then free to catch my eye in order to speak to the amendments in that group. A Member may speak more than once depending on the subjects under discussion.
At the end of the debate on a group of amendments, I will call the Member who moved the lead amendment again. Before they sit down, they will need to indicate whether they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendments in the group to a Division, they will need to let me know. I will work on the assumption that the Government wish the Committee to reach a decision on all Government amendments.
Please note that decisions on amendments take place not in the order that they are debated, but in the order in which they appear on the amendment paper. Decisions on new clauses will therefore be taken at the conclusion of the line by line consideration of the Bill. Where it is not already indicated on the selection list, Mrs Main and I will use our discretion to decide whether to allow a separate stand part debate on individual clauses or individual schedules.
Clause stand part debates begin with the Chair proposing the Question, “That the clause stand part of the Bill.” There is no need for the Minister, or any other Member, to move that a clause stand part of the Bill. We now move to line by line consideration of the Bill.
Clause 1
Charge to import duty
Question proposed, That the clause stand part of the Bill.
The Financial Secretary to the Treasury (Mel Stride)
Good morning, Ms Buck; it is a pleasure to serve under your chairmanship. It is also a pleasure to see some familiar faces on the Opposition Benches as we debate this important Bill.
Clause 1 provides that customs duty is to be charged with reference to the import of goods into the United Kingdom, in accordance with part 1 of this Bill; part 1, of course, deals with import duty. As members of the Committee will be aware, the UK’s current customs duty regime is set out in EU law. That legislation will cease to apply to the United Kingdom following our departure from the EU. This Bill makes provision for the establishment of a UK customs duty regime. The regime established by this Bill seeks as far as possible to replicate the effects of the existing EU provision. The aim of doing so is to ensure that on day one, operators who currently pay EU customs duty will see very little change in the process that is to apply following the establishment of the new UK regime. Clause 1 establishes the new charge to tax and provides that import duty is to be chargeable. Such a provision is a fundamental requirement of any tax regime.
Clause 2 provides the definition of chargeable goods, a term used throughout the provisions relating to import duty. The concept of goods being chargeable is fundamental to any import duty regime and therefore its meaning needs to be set out explicitly on the face of the Bill. As I explained, part 1 of the Bill sets out the UK’s new regime for import duty, which will be needed once we complete the process of withdrawal from the European Union. In doing so, it takes as its starting point the EU legislation, which currently provides the rules for import duty, and replicates them within domestic legislation. The virtue of doing so is that the majority of importers will see no change to the process by which they pay import duty. This principle applies to rules for determining which goods are liable for import duty or, to use the language of clause 2, to the way in which “chargeable goods” are defined.
Clause 2 is relatively straightforward. It sets out the basis upon which customs duty is to be charged. Clearly not all goods are liable for customs duty. The most obvious examples are goods that were made in the United Kingdom and have never left the country, or goods from abroad on which duty has already been paid. Clause 2 therefore uses the concept of domestic goods to define when goods are not to be treated as chargeable for the purposes of customs duty. It sets out that chargeable goods are any goods that are not domestic goods.
Domestic goods are defined in clause 33, and Members will have the opportunity to consider that definition in greater detail later in Committee. In essence, domestic goods are any goods on which no import duty is due, either because any duty has already been paid or because they were manufactured in, or originate in, the United Kingdom.
Clause 2 is straightforward. The concept of goods being chargeable forms a fundamental cornerstone of the UK’s import duty regime. I therefore recommend that both clauses stand part of the Bill.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
Clause 3
Obligation to declare goods for a Customs procedure on import
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 1 be the First schedule to the Bill.
That schedule 2 be the Second schedule to the Bill.
Mel Stride
Clause 3 does two important things: first, it establishes an obligation to declare goods that are imported into the United Kingdom; and, secondly, it introduces the concept of declaring goods for a specific customs procedure. Those are the basic building blocks of the UK’s new import duty regime.
The need to declare goods for a customs procedure is fundamental to any import duty regime. The procedure for which goods are declared determines when liability to import duty arises. The clause goes on to introduce another fundamental part of a customs regime—the customs procedures for which chargeable goods may be declared.
The purpose of importing goods may be to make them available for use in the UK, in which case they can be declared for a procedure known as free circulation, at which point they incur a charge to import duty. However, it is not always the intention to make goods freely available when they are imported into the United Kingdom. Goods are often brought to the UK for different reasons, such as to put them into customs warehouses for the time being, or to transport them through the UK on the way to another destination outside the country. In situations such as those, a business may declare the goods for a special customs procedure.
Special procedures either defer when a liability to import duty is incurred, or reduce the rate of import duty applicable to goods, provided of course the relevant conditions have been satisfied. Without those procedures, a business would have no option but to declare imported goods for the free circulation procedure and incur any import duty up front.
UK businesses currently rely extensively on special procedures, which together provide reliefs worth hundreds of millions of pounds each month. The provision made by the clause is supplemented by the detailed rules set out in schedules 1 and 2, to which I shall now turn.
Schedule 1 sets out the obligations to present and declare goods to customs on import. Many of the matters covered are of an administrative nature, such as the information that a declaration must contain or the time limits for when it must be made. I am sure that the Committee would not wish me to explain all those matters in detail, but I should highlight one important matter in which I think the Committee will be interested.
Paragraph 3 of the schedule enables Her Majesty’s Revenue and Customs to specify when goods must be declared before they are imported into the UK. That is an important point. Steps might be needed to reduce the risk of disrupting the flow of traffic at locations where goods need to be cleared quickly through customs. An obvious case in point is a port such as Dover, where significant amounts of goods arrive on roll-on roll-off ferries. It would clearly be of great help, in a situation such as that, to require the goods in question to be declared before their arrival at the port. That situation is therefore addressed by the schedule.
Schedule 2 deals with special customs procedures. There are five in all, namely: storage, transit, inward processing, authorised use and temporary admission. I will briefly describe their purpose.
A storage procedure allows imported goods to be stored without incurring liability to import duty. The goods must be kept in an approved facility, such as a customs warehouse or a free zone. There are currently no free zones in the UK, but should an area be so designated, provision may be made under the Bill for its operation.
A transit procedure allows goods to move between two places in the UK without incurring import duty. For example, goods from another country can pass through the UK en route to another destination, or goods within the UK can move from a customs warehouse to a port for re-export without needing to be declared for free circulation.
An inward processing procedure allows goods to be imported into the UK with the purpose of undergoing a qualifying processing activity without incurring a charge to import duty at that point. Once the procedure is discharged, goods may be exported without any import duty being due. Alternatively, a business may decide to declare the processed goods for free circulation in the UK and incur duty at that point.
An authorised use procedure is designed to assist certain industries by allowing a zero or reduced rate of import duty to apply to goods brought to the UK for a specific use. Finally, a temporary admission procedure allows for a relief from import duty for goods that enter the UK temporarily and for a particular reason. For example, that procedure applies when artworks situated overseas are brought to the UK on loan for display in a public gallery.
Taken together, the special procedures I have outlined exist to support trade fluidity and facilitate the movement of goods into the UK. Provision made by and under schedule 2 will allow HMRC to operate these special procedures. The obligation to declare imported goods is essential to an effective customs regime, and an effective customs regime must include special procedures that offer businesses in the UK the simplifications and reliefs that they rely on.
Kirsty Blackman (Aberdeen North) (SNP)
It is a pleasure to serve on the Committee, and to take part in the scrutiny of this important piece of legislation.
The Minister is right to talk about the administrative nature of the clause and its associated schedules. It appears to be the Government’s position that the UK will choose to leave the customs union. We are not yet clear whether they will pursue another form of customs union with the EU, but if they do not, or if they do not manage to get a customs union with the EU, it is likely that significantly more customs declarations will be required because we will not have those coming from the EU.
My concern about the clause arises from Tuesday’s oral evidence sessions, and it would be useful for the Minister to provide an update on that. Various organisations expressed concerns about the resourcing of HMRC and Border Force. Border Force is the first line for many imports, ensuring that customs declarations are made appropriately and that all appropriate processes are followed.
On HMRC, the concern was that no customs officers will be based north of Glasgow or Edinburgh. If goods are coming in to places such as Inverness, it is a three-hour drive for people to get there and look at those goods. What assessment has the Minister made of the extra resourcing that HMRC will need to fulfil the obligations in the clause and the schedules? Reasonable concerns have been expressed by businesses and organisations.
Mel Stride
I welcome the hon. Lady to the Committee and thank her for that initial contribution.
In terms of where the final deal with the European Union lands, whether we have a form of customs union with the remaining 27 members is subject to negotiation. The Government have made it clear that we wish the end point to be the facilitation of trade between ourselves and the remaining 27 members of the customs union. The Bill provides for that end point to be as close as possible to the existing rules and regulations around the Union customs code; that is very much what the Bill seeks to achieve. At the same time, the Bill retains the flexibility to ensure that we can put into effect the necessary and appropriate measures no matter where the deal lands—or, indeed, if there were to be no deal at all with the European Union, as we certainly do not expect.
The hon. Lady raised the important issue of HMRC resourcing. As we move towards our day one scenario—whatever that may finally look like—I assure her that the Government are vigorously engaged not just with issues around HMRC’s human resource requirements, but with other infrastructure requirements, whether for hard infrastructure or information technology systems such as the Customs Declaration Service, which will be important.
To address her particular issue, the head of HMRC has made it clear that his feeling is that we will need between 3,000 and 5,000 additional staff across HMRC to ensure that we cover off, wherever the day one deal lands. For an organisation of well in excess of 50,000 personnel, such an increment in staffing, particularly given that some will be reallocated rather than entirely new recruits, is perfectly manageable.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I am grateful to you for being in the Chair, Ms Buck. If I may, I will question the Minister on his explanation. I am grateful for it, but on Tuesday we learned that after HMRC’s ongoing restructuring programme there will not be a single HMRC hub north of Edinburgh and Glasgow, nor will there be one anywhere along the south coast, including Dover. We heard ample evidence in the witness sessions that that is the busiest and most concerning port from the point of view of customs procedures going wrong. In the light of that evidence, should we reconsider that HMRC reorganisation programme?
Mel Stride
I welcome the hon. Lady to the Committee. She mentions the location of the new HMRC hubs as they are rolled out, and I will make two important points. First, Border Force, which is very much part of the frontline, is in the Home Office’s remit, not HMRC’s. Secondly, proximity to the hubs or otherwise is not critical in determining whether HMRC provides the support that Border Force and other agencies require. The absence of a hub close to a need does not mean that HMRC staff cannot be in proximity to that point; they do not need to be based constantly at any one hub.
Peter Dowd (Bootle) (Lab)
May I pick up on that? I will not repeat what my hon. Friend the Member for Oxford East said, but try to reinforce the seriousness of the evidence witnesses gave on Tuesday. Mr Runswick said:
“HMRC is closing offices in places such as Southampton…So we think that there will be a real struggle to deliver the work that HMRC does with Border Force in that situation. My union believes that HMRC should pause the office closure programme until it is clear what the Government will need HMRC to do in a post-Brexit situation.”––[Official Report, Taxation (Cross-Border Trade) Public Bill Committee, 23 January 2018; c. 37, Q45.]
I want to tease out a little more from the Minister. Does he recognise that argument at all? It seems to be business as usual.
Mel Stride
I welcome the hon. Gentleman to the Committee. He reiterates the point that the hon. Lady just made, so I will spare the Committee a repeat of every element of my answer. However, specifically with relation to the points made in the evidence session by Mr Runswick, the trade unions have been resistant to the changes to HMRC wholesale, right across the piece. Therefore, when it comes to arguments about whether HMRC can be effective in clamping down on avoidance, evasion and non-compliance, bringing in tax yield and so on, the argument has been run that we need a number of offices in multiple locations to do that.
The critical answer is that the very nature of running an efficient tax system and customs regime needs technology, the right skills and the right people. That lends itself to having a concentration of such individuals in hubs, where skills and IT can be developed and brought in to be effective. Without repeating my answer to the hon. Gentleman’s hon. Friend, the Government and HMRC are clear that the configurations of the new hubs will lend themselves to appropriately support the new customs regime.
Kirsty Blackman
Other than the resourcing, which the Minister has fully addressed, I am concerned about the geographical issue. We do not want people to be a number of hours’ drive from the customs officials. Can the Minister give us some comfort that even though there might not be hubs in the area, there will be customs officers based closely and able to respond on a 24-hour basis?
Mel Stride
I can certainly assure the hon. Lady that the situation as it will pertain when we move to the new hubs—we are making some assumptions about what exactly the end point of the negotiations will be—will be sufficient to make sure we have a customs regime that works, that is low friction, and keeps trade moving and raises revenues on the duties that we may or may not apply.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
On resourcing, to add to the points already made, I want to double-check this because the first time I saw it I did not believe it was true, but it is. In December you asked for volunteers to be deployed to help plug the gaps in the UK’s Border Force. There had already been an acknowledgment that it did not have the number of people needed and you called for volunteers, which was opposed by Conservative MPs, who said they did not want to see a return to a Dad’s Army protecting the UK. Are you still planning to plug the gap with volunteers or will people be employed?
Mel Stride
I will take the hon. Lady’s references to “you” as not meaning the Chair of this Committee, but me. The issue that she has raised, which ran in the press a few weeks ago, relates to an issue for the Home Office and Border Force, not HMRC. It is outside the immediate scope of this Bill. I know that at least one Minister in the Home Office was able to refute those suggestions, but I will not dwell on that in this Committee.
Nic Dakin (Scunthorpe) (Lab)
The other thing that came out in the evidence was the concern about the loss of experience at a critical time. Is the Minister giving us a strong assurance—I think he is—that there will not be any problems as we move forward? If there are any problems, the Minister and HMRC will be jointly and severally responsible.
Mel Stride
I thank the hon. Member for his very helpful intervention. Of course Ministers have responsibilities for the areas that they oversee. I can assure the hon. Gentleman that I have had discussions with HMRC staff, including the head of HMRC, and we have looked specifically at the right mix of skills and people, so I am confident that we will have the right team in place to meet the challenges ahead.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Schedules 1 and 2 agreed to.
Clause 4
When liability to import duty incurred
Question proposed, That the clause stand part of the Bill.
Mel Stride
The clause determines when a liability to import duty is incurred. This is a necessary part of establishing a stand-alone customs regime as both businesses and HMRC need to know the point at which any money is due. The clause sets out a framework for determining the point at which liability to import duty is incurred. The general rule for importers wishing to release their goods for free circulation—that is, to discharge all customs obligations—is that the liability is incurred when HMRC accepts their declaration. For example, if a business were importing electronic goods from east Asia and declared the goods for free circulation, the liability for import duty would arise when HMRC accepts that declaration.
Similarly, the general rule when importing something under the temporary admission or authorised use procedures is that liability is incurred when HMRC accepts the declaration, but at a reduced rate. However, to facilitate trade and support businesses, liability can be deferred. In cases where goods are declared for a transit procedure, inward processing or a storage procedure, liability does not occur at the point when HMRC accepts the declaration, although liability may arise at a later date. The clause also makes further provisions governing these situations, including the consequences for liability purposes of the incorrect usage of the special procedures or their breach. The clause makes it clear when liability to import duty is incurred.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Goods not presented to Customs or Customs declaration not made
Question proposed, That the clause stand part of the Bill.
Mel Stride
Clause 5 deals with cases where goods imported into the UK are either not presented or not declared to HMRC. Where that is the case, it provides for the goods to be liable for forfeiture. It is essential to have rules that cater for situations in which someone fails to meet their obligations when they import goods into the UK. The clause provides such a rule: it makes imported goods liable to forfeiture if they have not been presented or declared to HMRC. That simply mirrors the existing position in EU law that applies in such cases.
The clause also makes it clear that such goods remain liable to import duty at the same time that they are liable to forfeiture. It is essential that appropriate sanctions are in place to deal with failure to meet the requirements of the import duty regime. That is what clause 5 provides in cases where goods are not present or declared to HMRC.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Person liable to import duty
Question proposed, That the clause stand part of the Bill.
Mel Stride
Clause 6 establishes who is liable to pay any import duty on goods imported into the United Kingdom. It is essential to establish who is obliged to actually pay import duty when it becomes due. The clause establishes the series of rules that do just that.
The rules set out by the clause illustrate a fundamental principle of the import duty regime, namely the link between the making of a customs declaration and the liability to pay an import duty that might be due. In cases where procedures have been followed correctly and the information provided is accurate, the liability for duty falls upon the person named on the declaration, or on whose behalf the goods have been declared. That could be the importer of the goods and/or an agent appointed to act for them. The basic rule is supplemented by other rules that apply in less straightforward circumstances: for instance, in cases where goods are not declared, the liability to pay duty falls on the person who is in possession or control of the goods when they arrive in the UK.
The clause also caters for other situations in which the rules have not been followed. They include cases where someone has provided false information when they make a declaration, or where they have not followed obligations imposed upon them, such as those that are imposed when goods are subject to a special customs procedure. In such cases, a person who has provided false information or who has breached the obligation can be liable for import duty. The clause also makes it clear that where the liability falls to two or more persons, the clause provides that they are jointly and severally liable for the import duty. It is essential to establish who is liable to pay import duty in all circumstances in which such liability arises. That includes making those who provide false information in connection with declarations liable for import duty.
Clause 7 contains no powers, but introduces the clauses in the Bill that will be used to set the amount of import duty applicable. The customs tariff will apply in all cases, but may be amended or adjusted to change the standard rate of duty in certain circumstances. The clauses referred to in this clause ensure that. The customs tariff will set out the rate of duty applicable to imports of goods into the United Kingdom. The tariff is made up of import duty rates for product categories. The standard customs tariff that the UK currently applies as a member of the EU is made up of more than 17,000 tariff lines.
The customs tariff established under clause 8 will contain the duty rates that apply to all imports from every country unless varied by another clause. The following clauses in the Bill enable the variation of the standard rate of import duty. For example, the UK will be able to reduce import duty when goods are imported under a preferential trade agreement, where preferential rates are granted unilaterally to developing countries. Parliament will also be able to reduce duty rates for applying a tariff suspension or relief, such as for items imported for educational, scientific or cultural purposes.
There are also circumstances where we may apply higher duties. For example, additional import duties can be applied when imports are causing injury to UK industry, as long as such additional duties are applied in line with our obligations as a member of the World Trade Organisation.
Clause 7 introduces the provisions under which we will establish our own tariff regime on leaving the EU. I suggest that clauses 6 and 7 stand part of the Bill.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7 ordered to stand part of the Bill.
Clause 8
The customs tariff
Kirsty Blackman
I beg to move amendment 104, in clause 8, page 5, line 27, after “other”, insert “relevant”.
This amendment requires the Government to classify goods in regulations giving effect to the customs tariff only in relation to relevant factors.
The Chair
With this it will be convenient to discuss the following:
Amendment 105, in clause 8, page 5, line 38, after first “the”, insert “number”.
This amendment clarifies that goods may be defined for the purposes of the import tariff simply by reference to their number.
Amendment 118, in clause 39, page 27, line 5, after second “to”, insert “number”.
This amendment clarifies that goods may be defined for the purposes of the export tariff simply by reference to their number.
Kirsty Blackman
I mentioned during Second Reading that the Law Society of Scotland had produced a paper on the Bill, and I offered to provide the Minister with a copy. If he does not yet have one, I am still happy to do that. The paper explains more fully the rationale behind these three amendments.
The amendments are not necessarily about changing the tack of the Bill; they are about making better law and ensuring that the law is clearer. I will quote a short extract from the paper submitted by the Law Society of Scotland. It states that,
“the power under clause 8(1)(a) to classify goods ‘according to their nature, origin or any other factor’ is a very broad one. At the very least, this should be limited to ‘any other relevant factor’ but it would be preferable to limit the scope of this provision by giving an indication of the types of factor which might be appropriate in this context.”
So, in our amendment, we have taken up the “very least” option suggested by the Law Society of Scotland. It seems a bit extreme for the Minister to be able to make changes or decisions on “any” factors, some of which may not be relevant. Adding the word “relevant” would ensure that, under the clause, the Minister was stuck to making changes or decisions in relation to relevant factors. It is simply a small technical change that would tighten up the way the law is written.
Similarly, amendments 105 and 118 are very small technical changes that the Law Society of Scotland suggests would be preferable or useful additions to the clause. It suggests that clause 8(3)(b) say, “the number, weight or volume of the goods or any other measure of their quantity or size.” Again, the aim is just to tighten up the language and ensure that the laws that we are starting off with in this wonderful Brexit Britain are as good and clear as possible and can be interpreted, if they need to be—by a court, for example—in the best possible way. As I said, they are very small technical changes, and I would appreciate it if the Minister would consider them.
Mel Stride
Clause 8 requires the Treasury to establish and maintain a customs tariff. The rates of duties set under this clause will apply to goods from every country, unless varied by another clause. It enables the implementation of a range of tariff options, so that the UK can respond to changes in the global trading environment, both now and in the future.
The UK currently applies duty to imports to the UK under the Union customs code. The standard duty rates of the UK, as a member of the EU, are contained in the common external tariff. When we leave the EU, this Bill will require the Treasury to establish and maintain a customs tariff that will, among other things, specify the rate of import duty applicable to goods. The UK is working with the WTO to establish the UK’s bound tariff schedule. That schedule sets the maximum rate of import duty that a country may apply to imports. The UK can then choose what rate to apply, provided it is at or below the bound rate. Import duty rates specified under this clause must be consistent with those international obligations.
Clause 8 sets out what must be contained in the customs—
The Chair
Order. May I remind the Minister that there will be an opportunity for a general debate on clause 8, but not necessarily at this point? He should be responding specifically to the amendment.
Mel Stride
I am sorry, Ms Buck. I assumed that we were also debating that clause 8 stand part. My apologies. I will turn specifically to the amendments tabled by the hon. Member for Aberdeen North. Although she may see them as clarifying matters, the Government’s view is that they are additional and unnecessary amendments to areas where no further clarification is required.
Kirsty Blackman
Just to be clear, it is not just me who sees them as necessary in terms of clarification; it is the Law Society of Scotland, which, I assume, knows quite a lot about the law, and therefore feels that these are appropriate changes that would be helpful in terms of the actual law.
Mel Stride
I thank the hon. Lady for that intervention and I fully appreciate that she is taking up recommendations made by the Law Society of Scotland, but let me comment on the two fundamental points she has raised.
First, relating to the relevance—that relevant considerations should be taken into account. The relevance of having the word “relevant” in there, prompts the question whether anybody would ever take decisions based on things that were entirely irrelevant, or at least not relevant. If one went down the road suggested by the hon. Lady, the word “relevant” would probably be inserted in multiple places throughout all the legislation that we ever pass in this House. It is understood that rational Ministers and others would take relevant decisions, rather than irrelevant decisions.
Secondly, before I go too far down this tongue-twisting route—
Mel Stride
Will the hon. Lady indulge me for a second? Parliament—through secondary legislation and in many cases in this Bill—will have the opportunity to test whether any of these measures are being taken on the basis not only of relevant considerations, but of all sorts of other considerations that will be taken into account as to whether these measures that come forward should proceed.
As to the specific point about the amendment relating to the insertion of the numbers, that clause already refers to reference or consideration being made of the quantity of the goods concerned. I think the meaning of the word “number” is, in that context, subsumed by the meaning of the word “quantity”. The Government have received the opinion that the clause already does that which the hon. Lady would like to see it do, namely ensure that the number of goods is also relevant to the function of that particular clause in the legislation.
Anneliese Dodds
It is just a brief—the Minister may feel, facetious—comment, but in the Help-to-Save regulations that we recently discussed there is reference to sufficient proof of death from a GP being required. The Government apparently felt that the word “sufficient” was necessary in that context, but most people would think it was not necessary if there is proof of death. Therefore, if an expert body such as the Law Society of Scotland feels that a word such as “relevant” is required, perhaps I would take its word for it.
Mel Stride
I am not a legal expert. I obviously appreciate that different words have different meanings in different legal contexts, but from the Government’s point of view, we are satisfied that there is not a requirement to have the word “relevant” inserted. That would be superfluous—to throw in another term—as would be the insertion of the word “number”, for reasons I have given to the hon. Member for Aberdeen North, because it would not affect the functioning or meaning of that clause.
Kirsty Blackman
I am not going to press the Minister on the word “number”, but on the word “relevant”, I think the Minister dug a hole when he was talking about “rational” Chancellors or Ministers in the Treasury. We are looking at ensuring that this regulation is future-proof, ensuring that if a Minister is not as reasonable as the one standing here, we can ensure that they are held to making relevant regulation. The clause states:
“The Treasury must make regulations establishing, and maintaining in force, a system which…classifies goods according to their nature, origin or any other factor”.
The Government are asking for this House to give them a significant level of delegated authority. They are asking for us to trust the Government, or any future Government that come after, in relation to making these regulations. In this case they are asking us to trust the Treasury. I think the Government can understand why there may be a lack of trust at the moment, given that we have been promised things that have not been followed through on. It would not be too much to ask to insert the word “relevant” into that clause, so that in future, if we do not have as rational a Minister as this one, we can ensure that they have to make the regulations on the classification of goods on relevant factors, rather than on ones that may be irrelevant.
Mel Stride
I reiterate that the Government are not in the business of taking irrelevant factors into account when they make decisions. I give that assurance equally in respect of the Opposition and other parties when they are or have been in government.
The hon. Lady also raises the issue of delegated legislation. At the introduction of the tariff, delegated legislation will be in the form of an affirmative statutory instrument that will be fully considered by a Committee, passed or otherwise by it and agreed to or otherwise by the House. A higher level of delegated legislative scrutiny will also apply to every occasion on which a duty is increased, as opposed to decreased. There is provision in the Bill for a higher level of scrutiny for the introduction of the tariff and for elements of its operation thereafter.
Kirsty Blackman
I thank the Minister. I would like to press amendment 104, but not the other two in the group.
Question put, That the amendment be made.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move amendment 1, in clause 8, page 6, line 1, at end insert—
“(aa) the interests of manufacturers in the United Kingdom,”
This amendment requires the Treasury to have regard to the interests of manufacturers in considering the rate of import duty.
The Chair
With this it will be convenient to discuss the following:
Amendment 78, in clause 8, page 6, line 6, at end insert “and
(e) the impacts on sustainable development.”
This amendment requires the Treasury to have regard to the impacts on sustainable development in considering the rate of import duty.
Amendment 106, in clause 8, page 6, line 6, at end insert “and—
(e) the public interest.”
This amendment requires the Treasury to have regard to the public interest in considering the rate of customs tariff in its standard form.
Jonathan Reynolds
This amendment requires the Treasury to have regard to the interests of manufacturers in considering the rate of import duty. UK manufacturing makes a vital contribution to the British economy each year. According to House of Commons Library research published in 2017, it accounted for 8% of jobs in the UK, which is 2.7 million; £177 billion of economic output, which is 10% of the UK’s total; and 57% of UK imports, to the value of £243 billion. On a personal note, I remain one of the vice-chairs of the all-party parliamentary group on manufacturing. In my constituency, those figures are roughly double the national average.
Manufacturing industry is significantly exposed to Brexit in a number of ways, the first of which is the export relationship. The UK exported goods worth £134 billion to the EU in 2015. In other ways, manufacturing industry is more reliant on imports, as many goods are imported to be used in the manufacturing supply chain. It is well known that the UK has a negative balance of trade at present; in 2016, that deficit was £98.7 billion.
Secondly, keeping the supply chain flowing freely is essential and time-critical. For example, while giving evidence to the International Trade Committee in February 2017, Nissan said that its Sunderland plant—a place very close to my heart because that is where I grew up—holds only half a day’s stock and uses 5 million parts a day, 60% of which are imported. As such, Nissan has said that any disruption to its supply chains would be “a disaster”.
Thirdly, supply chain imports are also heavily exposed to movements in the price of sterling, which has become considerably more volatile since the referendum result, with the pound losing 15% of its value against the euro between June and October 2016. Sterling’s weakness against the euro continues, with the pound still 14% below its pre-referendum levels.
Jonathan Reynolds
I agree. Every member of the Committee will recognise my hon. Friend’s constituency interest and expertise in this area. I felt that the evidence that UK Steel gave us earlier in the week was particularly helpful in being prescriptive as to where it believes the Bill falls short. As an industry, it is especially susceptible to gaps in trade remedy legislation given the historic damage that dumping has done to the sector.
Jonathan Reynolds
That is absolutely the case. Gareth Stace from UK Steel told us last Tuesday:
“The Government can promise anything they like, but more than a third of all tariffs in place affect the steel sector and it hits us hard, therefore, if this system, when it comes out, is not appropriate for what it is trying to do.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 68-69, Q105.]
That will clearly result in huge problems for the sector.
UK Steel’s main reservation with the Bill is the lack of detail, as my hon. Friend has said, which is present on a number of fronts where it believes the industry needs more certainty. Secondary legislation is being relied upon to provide a huge amount of the practical information we need. One of UK Steel’s specific concerns is around investigations relating to the dumping of foreign subsidies that can cause injury to UK industry. As related by Dr Cohen in her testimony, to which I referred earlier, there is no information on how dumping margins are to be calculated.
UK Steel goes further and sets out a list of other considerations that should be taken into account, including how to assess whether a UK industry has been injured; how to determine if such injury has been caused by the dumped or subsidised imports; what principles may be used in defining the products covered by an investigation; how subsidies can be defined; what evidence an industry needs to produce to trigger an investigation; how to conduct an investigation, including any time limits; and how to require guarantees to cover possible future duties when provisional measures are required. It is a long list and I could go on, but in the interests of the Committee’s time I will not. However, it serves to illustrate the point that there are a number of multi-layered and complex considerations to take into account.
I also want to underline that this is not a matter of protectionism. As Gareth Stace also made clear in Tuesday’s evidence session:
“The steel sector thrives on free, liberalised trade. A third of all steel produced in the world is traded across borders.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 67, Q104.]
At present there are zero tariffs between developed nations for steel trade. It was his belief that, without trade remedies, there will be an increase in protectionism, as they are essential to allowing free trade to take place. I thoroughly endorse that message.
The upshot of such deputations is that manufacturers are not asking for special measures from the outset, but pointing out that we are on the cusp of a complex world post-Brexit and they need more detail. It has been the Government’s choice not to include such detail in the Bill and it is too late to make that change now. It is clear, however, that the lack of certainty that results has not been optimal for our manufacturing sector and has inhibited its ability to make plans and prepare for the future.
As UK Steel has highlighted, the legislation lays out the bare minimum needed, delegating all detail to secondary legislation. It is true that we are on a tight timeline for negotiations, but there is a wealth of global legislation that could have been drawn upon to help inform the Bill, such as the US Tariff Act of 1930, the Canadian Special Import Measures Act, the EU Regulations 2016/1036—
The Chair
Order. The Member is straying slightly outside the remit of the amendment and needs to bring it back.
Jonathan Reynolds
Well, Ms Buck, I am just pointing out that it was possible to put in detail. If that is not in the Bill, we have to have amendments that allow for the detail to be included.
Jonathan Reynolds
The Opposition are asking for the Government to offer reassurance to manufacturers by enshrining consultation into subsequent procedures. Clearly there are a great many things to consider, which may be made clear only by close consultation with the industries themselves. We are concerned that there is potential for an abuse of power by subjugating the process to secondary legislation, which is subject to considerably less parliamentary scrutiny. For the final time, I refer to UK Steel’s words:
“UK industry needs to be able to ascertain what its rights in domestic courts will be to challenge the decisions of the Trade Remedies Authority and the Secretary of State”—
The Chair
Order. I repeat that talking about the secondary legislation matter is not within the scope of the amendment. Please come back to the scope of the amendment.
Jonathan Reynolds
Okay. I will take your advice on that, Ms Buck.
Over the course of the Committee’s remaining days, given the amendments we are due to consider, I believe there will be a fuller debate about the issues I have mentioned. However, as things stand, we appear to be shackled to this process and it is therefore vital to enshrine a right of consultation for manufacturers to guarantee the future of UK industry and the 2.7 million jobs bound up within it. No one wants to see a Brexit underpinned by a race to the bottom, leaving the UK susceptible to a repeat of the events that punished Tata Steel in 2016. We cannot risk these being repeated in the rest of the UK manufacturing sector. Parliament must work with and listen to those on the front line, consider their input and let them guide us on what we need to succeed as a global economy in a post-Brexit world, drawing on existing best practice from around the world.
I call on the Committee to support the Opposition’s amendment, to enshrine the right to consultation, to protect British jobs and British manufacturing, and to guarantee that our post-Brexit economy does not leave British industry out in the cold.
Kirsty Blackman
This aspect of the clause is about
“considering the rate of import duty that ought to apply to any goods”,
and we have tabled amendments. The Government have chosen not to include in this provision a reference to “any other factor” or even the preferable “any other relevant factor”, but have laid down a number of factors that they are believe are relevant in this case. Both the Scottish National party and the official Opposition, with amendments 1, 78 and 106, are trying to increase the number of factors that will be considered when the rate of import duty that ought to apply is being considered. The clause already includes
“the interests of consumers…the desirability of maintaining and promoting…external trade…the desirability of maintaining and promoting productivity…and…the extent to which the goods concerned are subject to competition.”
On amendment 1, I associate myself with many of the shadow Minister’s remarks about the importance of manufacturing. It has been concerning that the Government have not taken into account the interests of manufacturing in many of the actions that they have taken. Therefore, it would be useful for the House to have the comfort that the Government would have to consider the importance of manufacturing when they were making these decisions.
The Scottish Government are in a much better place in that, in relation to steel and Tata Steel specifically, we have saved the Lanarkshire plants, and we have worked with BiFab. If the UK Government had previously taken actions like that, we would be in the much better position of feeling that they would be likely to protect the interests of manufacturing. We are therefore happy to associate ourselves with the Labour amendment.
Amendment 78 has been suggested by Traidcraft. I will talk about exactly why Traidcraft says that it is important. The UK has signed up to the sustainable development goals. They are incredibly important for the future of the world—for our children and our children’s children—in ensuring that there is sustainable development. Traidcraft says:
“It is therefore vital that consideration of sustainable development is contained in primary legislation to avoid the potential for the UK to inadvertently contravene its global commitments…If sustainable development were added to this list it would ensure the Government were able to fulfil its global commitments.”
That is a strong message from Traidcraft about this aspect of the clause. Because, as I said, the Minister has not included in it “any other relevant factor”, we want to be clear that the Government are protecting the interests of manufacturers, but also the interests of the future of the planet.
Amendment 106 is in my name and that of my hon. Friend the Member for Dunfermline and West Fife. Again, the factors that the Minister is required to consider when setting the rate of import duty are not wide enough. We suggest including a reference to the public interest generally, so that the Minister and the Treasury, in making these decisions, would be required to look at whether the public interest generally would be served by the rate of import duty that they were imposing.
All three proposals are relevant considerations for the long-term future of manufacturing which, given the not-very-good productivity in the UK, is hugely necessary and something that we need to protect. I do not know how anybody could argue with looking at sustainable development, given that the future of our planet is at stake. On the point about the public interest in general, we are all here to represent our constituents—we are here to ensure that their views are heard in this place—so it is completely reasonable that the Minister and the Treasury, in making any rules under this aspect of the clause, would consider the public interest generally, as well as the other four factors already mentioned.
Nic Dakin
In opening the debate, the Minister helpfully said that the intention was to introduce things in a way that did not disrupt things that were currently going on. The advantage of amendment 1 is that it would help to bring that about by adding in “the interests of manufacturers” as part of the test. It would give confidence to manufacturing areas.
I speak as somebody who represents a steel town. The confidence of manufacturers and the people who work there, who are also significant consumers in the local economy, is important because those manufacturing sectors desperately need investment in capital and in new ways of working to remain competitive in a competitive world.
The Minister and the Government would do well to consider that, because it would assist in delivering continuity—the outcome that the Minister set out at the beginning—and the confidence necessary for the investment we need. We cannot delay investment, although that might happen, because that would mean delayed opportunity. One of the Government’s overriding responsibilities is to put confidence into the system so that the risks of leaving the European Union are diminished and the opportunities are enhanced.
Anneliese Dodds
I shall speak to amendment 78, which has already been referred to. To be clear, we already have a list in the Bill of different considerations that ought to apply when calculating the rate of import duty for goods in a standard case, which includes,
“the interests of consumers…maintaining and promoting the external trade…maintaining and promoting productivity…the extent to which the goods concerned are subject to competition.”
That is why we suggest that we should have a holistic look at other matters that should be considered.
That is particularly important when it comes to the calculation of import duties with a view to environmental sustainability. When the current chief co-ordinator at the World Trade Organisation, Christiane Kraus, was at the World Bank, she spelled out reasons why environmental considerations might be relevant to the setting of trade parameters, in the absence of other mechanisms for promoting global environmental common goods. We may well be entering a period where it is very difficult to get international agreements on environmental matters, not least because of the direction of the American Administration, so it seems sensible to retain the possibility of so-called eco-tariffs in the Bill.
In addition, even inside the EU’s customs regime, there is evidence of illegal waste trading. Revelations from the Environmental Investigations Agency concerning the toxic trade in cathode ray tubes from the UK to Nigeria and Ghana make for very disturbing reading.
It is absolutely appropriate that we refer to sustainable development in relation to import duties, and to refer to it in this clause would rectify the fact that there is no mention in the rest of the Bill—I was very surprised by this—of the many factors relating to sustainable development that are otherwise covered by the EU customs regime. There is no mention of the environment, aside from the competitive environment; of forestry, aside from in relation to trading stamp schemes; or of chemicals, waste or wildlife. That is a significant departure from the EU customs regime.
The EU’s rules around authorised economic operators indicate that, for a company to become a member of that scheme, it needs to show that it does not have a record of serious infringements, including infringements against environmental legislation. EU legislation is clear that that status can be suspended if there is a threat to public safety, the protection of public health or the environment.
Many other areas in the customs regime that reference or have cross-connections with accompanying EU legislation are not picked up in the Bill. EU forest law enforcement, governance and trade—FLEGT—covers a licensing scheme for timber. That is relevant to import duty costs, because the importer is liable for the cost of the verification of any licences and of the translation of any paperwork related to its enforcement. Illegal, unreported and unregulated fishing is strictly controlled through EU regulation. Trans-boundary shipments of waste must comply with the 2006 EU waste shipment regulation.
The CITES treaty applies to wildlife, so we would still be covered by that when we leave the EU, but the EU goes further—that is incorporated in the overall customs regime. For example, there are regulations about documentation and labelling and a longer list of species upon which import controls are applied for the EU compared with under CITES. Finally, when it comes to measures about trade in environmentally-damaging chemicals, we have EU-level quotas on ozone-depleting substances and carbon-producing F-gases, and a notification procedure for other potentially dangerous chemicals.
I accept that in all those areas we could be asking for lots of different amendments to try to rectify some of these problems—I am sure Members will try—but having that environmental sustainability criterion for assessing import duties in the Bill, and placing it near the start, will raise its profile, which the Government sadly seem not to have considered at all when putting the Bill together. That is worrying given the prominence of these matters within the EU’s existing customs regime.
Peter Dowd
It is a pleasure to serve under your stewardship, Mrs Buck. I hope that, as in the sessions on the Finance Bill, we will have a major climbdown—the Minister and other members of the Committee will note that from that Bill.
The SNP amendment 106 would require the Government to have regard to the public interest in considering the rate of customs tariffs on our exit. It would add a public interest test to the four existing conditions that the Bill requires the Treasury to have regard to when deciding to apply customs tariffs to goods entering the United Kingdom. Those existing conditions in the Bill are the interests of consumers, the desirability of promoting external trade, the desirability of promoting productivity in the UK and the extent to which goods are subject to competition.
Members will note that, throughout the passage of the Bill, we have been seeking to ensure parliamentary scrutiny. We will continue to do so. In one of the evidence sessions, we heard from one witness, Kathleen Walker Shaw, the European officer of the GMB union, who said that she spent many evenings drafting her union’s response to the trade White Paper only to find eight hours later that the Bills had been published. I think that it is fair to say that that was not a particularly isolated view in the session.
The Opposition have concerns about the specifics of the SNP amendment, which means we take a slightly different approach. We believe that, in key sections of the Bill, the public interest is being used as a mechanism to widen the powers of the Secretary of State. That is perhaps most pronounced in schedule 4, which empowers the Secretary of State to reject a recommendation of the Trade Remedies Authority based upon a belief that it is not in the public interest. I respect people’s beliefs, but in this forum they have to be based on evidence, and I am not sure that we will get much of that. We have tabled a number of amendments of our own, and I want to dwell on them.
It is incumbent on me to point out that public interest is not defined in the Bill. That leaves a good deal of room for manoeuvre for the Secretary of State to determine the public interest, without appropriate parameters about precisely what it means. Precision is not one of the endearing features of the Bill. We are happy for the Government to have powers to take the public interest into account in certain circumstances, but only on the basis that it is concretely defined in primary legislation. That is yet another lacuna in the Bill, and a stubborn point that will be addressed time and again in these proceedings.
The Minister used the example of national security in the evidence session on Tuesday. That does seem a useful definition of public interest, and we believe that national security should provide an explicit limit to the definition of public interest in the Bill. We know, after all, that the Secretary of State has some novel ideas about what the public interest might be. They are views that ostensibly focus on the needs of the consumer over the producer. However, it has to be said that that is a one-dimensional approach taken by the Government, which was laid bare in the witness session. In response to the Financial Secretary’s question about consumers potentially being disadvantaged compared to producers, Ms Crawford responded:
“Consumers are also workers who are employed in some of these industries, and they will not benefit from having unfair trade practice disadvantage them and the quality of their goods. That is something we must bear in mind.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 42, Q53.]
That is a more sophisticated definitional approach than the Government’s.
Although we support the efforts of the Scottish National party to introduce checks and balances, we have concerns at this stage. In that regard, we cannot support the amendment. I hope the hon. Member for Aberdeen North will take our statement in good faith.
Mel Stride
We have had a wide-ranging debate on this group of amendments, much of which covers matters that we will come to later in the Bill. I will focus my remarks on the details of the amendments and the clause.
The hon. Member for Scunthorpe rightly pointed out that I said earlier that the Government’s intention was to ensure that we had a minimum of change in the regime, for the obvious reason of providing familiarity and certainty to businesses. That is an important point and it is why clause 8(5) takes precedent from the Treaty on the Functioning of the European Union. It is very much grounded in where we currently are, as opposed to venturing out to pastures new, some of which would be unfortunate or inappropriate, or so the Opposition would have us believe.
The hon. Member for Oxford East mentioned authorised economic operators, which we will come to in clause 22, to make the general point that a number of things do not appear in the Bill, such as our habitats and various other things in existing EU legislation. On AEOs, the Bill introduces powers in clause 22 that will allow us to address exactly those elements when HMRC and the Treasury come to lay regulations as to, for example, what qualifications there might be to become registered as a certified AEO. Those kinds of issues can be picked up at that time and scrutinised further by the House.
The meat of clause 8 is in subsection (5), which states:
“In considering the rate of import duty that ought to apply to any goods in a standard case, the Treasury must have regard to…(a) the interests of consumers in the United Kingdom”
and
“(b) the desirability of maintaining and promoting the external trade of the United Kingdom”.
It is hard to see how that would not have to take into account the manufacturing element and the health of the manufacturing sector. Subsection (5)(c) states that the Treasury must have regard to
“the desirability of maintaining and promoting productivity in the United Kingdom,”
It is very difficult to see how the manufacturing sector, which represents around 10% of the UK economy, could be entirely ignored or in any sense neglected. Subsection (5)(d) states that the Treasury must have regard to
“the extent to which the goods concerned are subject to competition.”
I suggest that manufacturing would be core to any decisions on the setting of duties made in that context.
Subsection (6) states:
“In considering the rate of import duty that ought to apply to any goods in a standard case, the Treasury must also have regard to any recommendation about the rate made to them by the Secretary of State.”
As the Committee will know, the term “Secretary of State” refers to any Secretary of State in any Department, so on concerns relating to sustainable development, the relevant Department—
Kirsty Blackman
Actually, subsection (7) goes on to say that the Secretary of State
“must have regard to the matters set out in subsection (5)(a) to (d)”,
and not to other factors such as sustainable development.
Mel Stride
The hon. Lady has pre-empted my next point. Although subsection (7) does say that, it does not say that the Secretary of State cannot have regard to any other matter—it does not exclude. It would be strange if a Secretary of State was told that they had to have regard to those four aspects when considering an issue and they took that to mean that they could not consider any other aspect. I draw the Committee’s attention to that aspect of the Bill.
On the specific case of sustainable development, we will debate and scrutinise the provisions in the Bill that accommodate setting up our unilateral trade preferences, which are extremely important in the context of sustainable development. On those grounds, I urge the Committee to reject the amendments.
Kirsty Blackman
Specifically on what the Minister has said, it is clear from various evidence we have received that the Government have not chosen simply to replicate things such as the Union customs code. In some places they have chosen to replicate it, but in others they have chosen not to. The concern is that the Government’s judgment has not been great in choosing which parts to replicate and which parts not to replicate. The measure has clearly been drafted in a hurry. From the Minister’s argument in relation to what the Secretary of State would have regard to, it is clear that this section of the legislation has not been particularly well thought through.
Opposition Members are not asking for unreasonable things. Having regard to sustainable development is completely reasonable. If the Minister is clear that that will be looked at anyway, or if the Secretary of State decides to get involved in any decision, it does not cost anything to add that into the Bill. If the Minister is clear that the Government will consider the interests of manufacturers because they are integral, it does not cost anything to add that into the Bill. It would be useful and helpful to businesses and would be a nice sign of confidence in businesses. It would be great for the Government to not just talk about increasing productivity, but to say to manufacturers, “We will support you and ensure that your interests are protected.” If the Minister is clear that such things are going to happen anyway, it would not cost the Government anything and they would lose nothing, but it would ensure that people feel more positively about the Bill.
Mel Stride
I will be brief because the Committee is anxious to make progress and move on to some important clauses. I will not repeat the earlier comments that I made other than the overarching comment, which is that the provisions in the Bill as drawn are very broad and will pick up on the concerns that the hon. Lady has raised.
Jonathan Reynolds
I appreciate the Minister’s response and his words of reassurance, but if he were being fair-minded he would acknowledge that there is still significant uncertainty and concern in UK industry, particularly in the manufacturing sector. As the evidence session showed the other day, there are more known unknowns than anything else in this area, and amendments that seek to mitigate that and provide more reassurance are reasonable and prudent, so we would like to press the amendment to a vote.
Question put, That the amendment be made.
Jonathan Reynolds
I beg to move amendment 2, in clause 8, page 6, line 9, at end insert—
“(b) by a relevant select committee of the House of Commons, or
(c) contained in a resolution of the House of Commons.”
This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering the rate of import duty.
The Chair
With this it will be convenient to discuss the following:
Amendment 3, in clause 11, page 8, line 18, at end insert—
“(b) by a relevant select committee of the House of Commons, or
(c) contained in a resolution of the House of Commons.”
This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering the rate of import duty.
Amendment 4, in clause 12, page 8, line 40, at end insert—
“(b) by a relevant select committee of the House of Commons, or
(c) contained in a resolution of the House of Commons.”
This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering whether to exercise the power to set lower rates of import duty.
Jonathan Reynolds
I will endeavour to take a little less time on amendment 2, Ms Buck. My enthusiasm and enjoyment of a Bill Committee perhaps gets the better of me at times.
The amendment would require the Treasury to have regard to the recommendations of any relevant Select Committee or those contained in a resolution of the House of Commons in considering the rate of import duty. This goes to the heart of how the Bill is constructed and how we will seek to scrutinise it. For reasons we have already covered, the Bill is very much an outline framework Bill, the details of which must be added at a later date. That relates to the way in which the negotiations have progressed. We must think about how to ensure that there is no democratic deficit in how the detail of the Bill is filled in, and that the core objective of Brexit—greater democratic control for the House of Commons—is achieved.
The Opposition recognise the need for the Government to make the necessary preparations to create the UK’s customs and tariff regimes post-Brexit, but we do not accept that that means allowing the Government to concentrate all those powers in the Executive. It is the Opposition’s view that, in this instance, the Conservative interpretation of taking back control has simply meant moving it from Brussels to Whitehall. That is true not just of this Bill but of many parts of the Brexit legislation. In our view, tariffs should undergo the same parliamentary process as taxation, with similar levels of parliamentary scrutiny.
In the evidence sessions on Tuesday, we heard about the sheer diversity of areas that could be affected and that will need input into the detail of the Bill. We believe that Select Committees could play a crucial parliamentary role in providing some of that detail. If the Select Committees were allowed to engage with a wide range of stakeholders to contribute to the Government’s evidence base, we believe that it would widen the debate. It would also provide for a critical role in holding the Government to account. Select Committees’ ability to compel witnesses to appear to give evidence would allow them to interrogate Ministers about the consequences of some of the details of the secondary legislation and process as it unfolds, which could be invaluable. It could also help build political consensus by identifying common ground between different groups of politicians, which is especially important given how divisive Brexit has been thus far.
Lastly, Select Committees could engage with the media and public, which would be a key contribution to the transparency of the process, accountability and scrutiny. Where there is potential in the Bill for trade decisions to be made seemingly unilaterally by the Secretary of State, having public and transparent debates through parliamentary Select Committees could be critical. I therefore urge the Committee to vote in favour of the amendment, which would be a significant step towards ensuring that we make every effort to handle this once-in-a-generation event with the parliamentary scrutiny, accountability and checks and balances that it demands.
Kirsty Blackman
I have previously complained about the composition of Public Bill Committees, given the UK Government’s gerrymandering so that they can have a majority in Bill Committees despite not having a majority in the House. The change would mean that scrutiny would be done effectively, and not just by Committees with a majority of Government representatives who will win every vote by 10 to nine. The amendment is incredibly important and would ensure effective and appropriate scrutiny, and make for better legislation.
Mel Stride
Amendment 2 would require the Treasury to consider recommendations made by a relevant Select Committee or a resolution of the House of Commons when considering the rate of import duty that ought to apply in the standard case.
The Treasury will listen closely to recommendations from a range of interested parties, including relevant Select Committees and, of course, Members of the House. In addition, Select Committees already have the power to question Ministers on policy within their departmental remit, and the Treasury will answer any questions from relevant Select Committees. Therefore, the Government believe that it is not necessary to include that in the Bill.
Amendment 3 would place the same obligation on the Treasury when considering what provisions to include in regulations related to quotas, such as determining the rate of import duty applicable to goods that are subject to quotas, and amendment 4 would introduce that requirement when making regulations concerning tariff suspensions. For the same reasons that I set out in relation to amendment 2, the Government do not believe that it is necessary to include such provisions in the Bill.
I have one final point in response to the point made by the hon. Member for Aberdeen North about scrutiny and needing provisions in the Bill. This Bill will, of course, have Report stage, which will be an opportunity for scrutiny by a far wider group than a Committee on which the Government might typically have a majority of one. Every Member of the House will have an opportunity to participate in that debate and consideration of further amendments.
Peter Dowd
The amendments seek to ensure that the Treasury must have regard to any Select Committee recommendations or House of Commons resolutions in two circumstances: first, when setting the rate of import duty on a specified good; and secondly, when lowering the rate of import duty on specific goods. Through the amendments, we seek to improve the mechanisms of accountability and ensure that any decision taken by the Treasury on duties and tariffs is taken on the basis of a democratic approach to the management of our economy, with a full and proper place for Parliament and its constituent parts.
We want the UK to have a full and functioning customs system in place when we leave the European Union. The powers transferred in the Bill give the Chancellor, the Secretary of State or others the ability to restructure the entire economy at a few strokes of a pen, without any consultation with those affected by changes to our customs regime. That is deeply concerning for anybody.
Since the Government failed to win a majority at the recent general election, we have seen numerous attempts to centralise power within ministerial portfolios, reducing the role of Parliament and the scrutiny of Government decisions, as has been alluded to on a number of occasions today. The Bill is yet another example of that trend. As the Lords Delegated Powers and Regulatory Reform Committee made clear, the current trend is towards a “massive transfer of power” to the Executive and away from Parliament. Every parliamentarian in this room should be deeply concerned about that because, at the end of the day, we get £75,000 a year to come here and scrutinise the Government and we are not being allowed to. We are therefore seeking to introduce the checks and balances necessary to ensure that a future customs framework and its operation continue to have proper democratic scrutiny and oversight. Stakeholders should be brought into the process.
The amendments would introduce an advisory capacity for Select Committees or the House in the process of determining import duties. That would broaden the number of those who have a democratic role in supporting and informing decision-making. That is what we are here for. Currently, as the Lords Committee made clear, the Bill provides 150 separate powers to make tax law. We are merely suggesting that widening the number of parliamentarians who can influence those decisions is a matter of building a genuinely rigorous democratic process.
Crucially, as hon. Members are aware, Select Committees are made up of Members from across the House. That cross-party approach can only support a proper decision-making process on the important issue of customs tariffs. We hope therefore that Members will consider the benefits of including the expertise of a Committee or the House in general within the vital process of examining evidence and providing independent advice— the Government may not wish to hear that advice, but it should nevertheless be given to them. Ultimately, that can only help to support the work of the Treasury in achieving the best outcome, regardless of party concerned.
It is reasonable in distillation to assert that Mr Blackwell from the Hansard Society said that there is a problem that
“the balance between Parliament and the Executive...has always been on the side of the Executive”––[Official Report, Taxation (Cross-border) Public Bill Committee, 23 January 2018; c. 51, Q71.]
This is a chance to rebalance that. Given the extent of delegation to Ministers set up in this Bill and other Brexit Bills, the role of Parliament is being downgraded. The Government know that; Members in this room know that; consumers know that; and producers know that and the public know that. The Government should think on that. Frankly, they should come clean, have the courage of their convictions, acknowledge it publicly and, in so doing, stop hiding behind what for many people are the vagaries of procedure—negative, affirmative and so on. We ask the Committee to support our amendments today in the interests of democratic scrutiny.
Question put, That the amendment be made.
Trade Bill (Third sitting)
Thursday 25th January 2018
(6 years, 3 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 January 2018 - (25 Jan 2018)
The Chair
I welcome our witnesses. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme order. We therefore have until 12.15 pm for this session. Will the witnesses please introduce themselves for the record?
Gary Stephenson: I am Gary Stephenson. I am the global regulatory affairs director for Devro, which is a collagen casing manufacturing company based in Scotland that exports to more than 100 markets. I am also chair of the Food and Drink Federation Scotland, which is a member-funded organisation that looks after manufacturers in Scotland. Its main focus is EU and UK regulatory influencing.
Sarah Dickson: I am Sarah Dickson. I am the international director at the Scotch Whisky Association. We represent 68 Scotch whisky manufacturers, producers and bottlers. Whisky is the UK’s largest food and drink export: whisky exports were worth £4 billion in 2016, and Her Majesty’s Revenue and Customs figures coming out soon should show an increase in that. We export to 180 different markets, and have done so for the past 150 years.
The Chair
We only need brief introductions. We do not need the full life story of every company.
Elspeth Macdonald: I am Elspeth Macdonald. I am the deputy chief executive of Food Standards Scotland.
Barry Gardiner (Brent North) (Lab)
Thank you, Mr Davies. May I wish everyone a very happy Burns day? So that our Welsh colleagues do not feel left out, I understand that it is also St Dwynwen’s day—I hope I pronounced that correctly—so let me say a very happy St Dwynwen’s day, too.
Barry Gardiner
Q
Sarah Dickson: For us, transparent and participative trade policy is really important. As an exporting organisation, we have been dealing with trade policy decisions in countries around the world for many years. We find that the best way to make trade policy is to involve people, consult them in that process and gather views, because you will find that some people will do better out of an agreement than others, and decisions will need to be made. Only by having a wide consultation on that and involving people in the process do you really get to a good outcome that it is then possible to implement and pass.
The Trade Bill as written at the moment—we do not know if there is more legislation to come—does not really cover that point in a statutory way. Of course, you do not have to consult and use statute to do that, but it concerns us that trade policy has been with the EU for many years and the UK has not done it. When it comes to having confidence—it is about confidence, rather than trust—in what the process is and when you would get input into that to have your say, we would be encouraged if we had more detail in a statutory instrument.
Barry Gardiner
Q
Sarah Dickson: Not at the moment.
Gary Stephenson: I see the Bill as a sort of framework for future implementation of more specific regulations. I think the challenge is in the detail. If we look at key sectors such as animal-derived products, which represent 70% of the food exports from Scotland, there are some specifics there that will be required, on, say, animal health, protection and regulations in regard to which countries are permitted to export to different markets. There is registration for different markets. There are export health certificates and border inspection posts for imports of those materials. All that is fairly complex and detailed. We would hope that we would be consulted on any more specific legislation. It is difficult at this stage to say whether it is heading in the right direction or not. It depends on that ability to consult. There will need to be consultation in the devolved Governments, as well as with the UK.
Barry Gardiner
Q
Gary Stephenson: I am an optimist, so I would like to think that I have confidence that we would be engaged in consultation, yes.
Elspeth Macdonald: From Food Standards Scotland’s perspective, the part of the Bill that engages most with us relates to implementation of trade agreements going forward. If current trade agreements between the EU and third countries are carried over in their current form, that may not change matters significantly. If those trade agreements down the road start to change, or there is a desire or a wish to start to change them, the transparency on how that would happen is not yet evident. Overriding all of that, of course, in the devolved context, is the issue about the constraints in competence that the Bill would bring on Scottish Ministers and the Scottish Parliament, and therefore on ourselves, to be able to provide assurances to consumers in Scotland about standards, and assurance in relation to international trade.
Craig Whittaker (Calder Valley) (Con)
Q
Gary Stephenson: It is difficult to tell with the Bill as it stands, because the devil is in the detail. There are 40-plus EU free trade agreements. Some are very small—economically they are not too important—but there are some very big free trade agreements within those. Clearly, we cannot do them all at once, and the key bit will be whether there is some sort of Government prioritisation of those agreements, perhaps from the standpoint of size of markets. There are some very big ones in there: Japan, Mexico, South Africa, South Korea, Ukraine, Turkey and Egypt are very large markets that are certainly important for UK-Scottish producers.
Craig Whittaker
Q
Gary Stephenson: There is uncertainty, because of the transitional phase within those discussions. If we are in a transitional phase, we are out of the EU but we are still controlled by the customs requirements. It very much depends. If there is good will on both sides, then things should progress acceptably. If any of these markets want to change the agreement with the UK, that puts us in a difficult position, because we have certainly got a fairly weak position during the transition period, where we are bound not to agree any future agreement but are still tied to the European requirements, though we are outside the EU. I am not sure how that will be resolved, and it is not detailed in the legislation.
Sarah Dickson: We are probably in a slightly different position, in that we think this Bill has the basics that you would need to carry over existing agreements. Also, because of the time pressure, we could understand that with existing agreements there may not be time for the sort of consultation and other discussion that you would want with new agreements, or if these agreements were to be changed. For an existing agreement, where the terms are to all intents and purposes similar, we can see that this Bill has the basics to do that.
For new agreements, or agreements that were changing, as Gary has mentioned, you would need a much more detailed consultation process, with scrutiny, and that is probably the bit of the legislation that it feels like the Trade Bill is missing. What happens with future deals or if deals change? How would that process work?
Craig Whittaker
Q
Elspeth Macdonald: No. As I understand it, this Bill provides for the carry-over of those existing trade deals between the EU and other countries. I think there is also—
The Chair
Could you speak up, please?
Elspeth Macdonald: Yes. This Bill provides for carry-over from existing trade agreements between the EU and third countries. I think that the European Union (Withdrawal) Bill has some influence on this process, too.
Bill Esterson
Q
“the proposed new international trading arrangements…may be on disadvantageous terms compared to the current conditions.”
Could you say what your concerns are about the trade agreements covered in this Bill, and where you see the possibility of them being included on disadvantageous terms?
Gary Stephenson: I assume that refers more to the EU situation, in that in Scotland, a large proportion of our exports are to the EU, and we are clearly looking potentially at more challenging conditions from the standpoint of, “Will the UK be added to the EU list of approved countries?”, and registration of approved establishments. At the moment, it is probably the sheer volume of materials having to pass through customs and border inspection posts and so on that is likely to cause increased trading challenges, unless we get that right, and that is a critical piece.
Bill Esterson
Q
Gary Stephenson: For the EU free trade agreements, I do not necessarily see them being as challenging. The only issue would be—take Korea. We used to export to Korea before the free trade agreement. The free trade agreement came in and basically removed the tariff, so the only difference, hopefully, would be that we are back to a tariff situation, which we did not have during the free trade agreement.
Bill Esterson
Q
Gary Stephenson: I think the issue here is that the EU will still have a say in this. To what extent do we want to negotiate bilateral agreements with these free trade association countries? Or do we want a trilateral-type agreement, which would be a sort of joint EU-UK-third country negotiation?
Bill Esterson
Q
Gary Stephenson: My view would be that a trilateral would be a better option, because you are not looking at changing anything.
Bill Esterson
Q
Elspeth Macdonald: Certainly, in relation to regulatory standards—technical standards—for food, industry and consumers are generally fairly confident and satisfied with the standards in the current EU regulatory framework. Certainly, when we talk to businesses and the public about the regulatory standards governing the food that they eat, and the food that they buy and use in their businesses, in Scotland, there is a generally high degree of satisfaction with EU standards. Any changes in future that began to change those regulatory standards away from those that currently provide a high degree of public health protection and consumer protection would be of some concern.
Bill Esterson
Q
Elspeth Macdonald: My organisation’s perspective on this is probably more around the non-tariff side. Certainly, businesses that we regulate in Scotland will be concerned to ensure that they have as little disruption as possible to their access to markets.
Bill Esterson
Q
Gary Stephenson: That is probably more in the food manufacturers’ area, because how the tariff rate quota is divided up is obviously for negotiation between the UK and the EU. I know that the World Trade Organisation has some influence on how it is divided up. This is where the specific industry sector should be consulted on what it believes would be the fair quota. Any of us is probably not in a position to set out a position on any specific quota. Take lamb as an example: what is a suitable quota that the UK would take back from the EU? It is a complex area, and I think it is best to ask that question of the sector responsible.
Hannah Bardell (Livingston) (SNP)
Q
Gary Stephenson: Wow, that is a big one. There are a number of elements to this. My company is in a fairly unique position in the food industry, in that we already import product into the EU, so we understand the complexities of that process. It is about whether the region you are from is authorised on the EU legislation side. Is your business registered within the EU as a registered business to produce that product? Other countries have similar issues. The US has similar legislation, which requires overseas suppliers to be registered with the Food and Drug Administration.
There is an additional piece: the export health certificates, which are not needed for the EU at present, but will be. Each one of those costs the business. It is not just the cost of the certificates—the vet must come to inspect. Have we got enough vets in the UK to provide that service? That is an additional challenge.
Hannah Bardell
Q
Gary Stephenson: Yes. Every single shipment requires a certificate, which we get from Carlisle, from the Animal and Plant Health Agency. You would have an official vet come in to sign that certificate. For example, in our case, if we need four times more certificates after Brexit than we are currently using, that is four times the cost. I am not saying that the vet would come four times more often, but he would certainly be in there twice as often, so you would be looking at twice the cost. Some businesses have not yet been exporting and will need an export health certificate. All this is going to be new for them. They are going to need a new certificate, and they are going to need to pay the vet to come and sign that certificate.
The additional piece involves shipping agents and border inspection posts. If you are using a shipping agent to export your product, in order to get all the paperwork right and so on, that is going to cost you. As you mentioned, most businesses have not exported in a way that requires customs declarations and so on, so that is an additional cost to businesses that they are probably not very aware of. I cannot give an exact figure for how much more, but it is an extra cost.
Hannah Bardell
Q
The Chair
I remind witnesses to speak up. Some of those at the back are finding it difficult to hear. Please speak up as best you can.
Elspeth Macdonald: Gary makes some really valid points about the increased burdens and bureaucracy for business, but it is also important to be reminded that the additional level of checking and assurance that may be required in future is also likely to have a significant impact on local authorities, for example. They have an important function in providing assurance about standards and compliance with legislation in food businesses that export to other countries. There is absolutely the potential for a significant impact of a new requirement for veterinary checks and so on, but also, should more checks be needed in future than now, there could be significant impacts on local authorities.
Sarah Dickson: From a Scotch whisky perspective, we may not need the vets, but we benefit from the tariff reductions, the intellectual property protection and the non-tariff barriers given to us by the agreements. About 10% of our exports go to a country covered by an EU free trade agreement. One thing that we have been talking to Department for International Trade officials about is how business can help. We would be more than happy to see if there is any contribution we can make to make sure these agreements are carried over.
Gary Stephenson: There is an additional piece from Elspeth’s comments. Currently, importing countries’ manufacturing sites are visited by an EU vet to assess their suitability and whether they are meeting European standards. When we are outside the EU, that will become a UK responsibility. We do not have the resources available today to conduct those checks.
Hannah Bardell
Q
Sarah Dickson: I am working on the basis that, because we will have the carrying over of all EU legislation into the UK, we will not lose the GI and an intellectual property system will be there to protect protected names such as Scotch whisky. We use it in all markets all over the world to make sure that people do not copy our product and produce lookey-likey fakes and that kind of thing. That is very important to our industry. We are working on the basis that that comes across lock, stock and barrel.
The Chair
We have a maximum of 20 minutes left and at least six people still wanting to ask questions. If we have short questions and concise answers, we can get as many people in to ask a question as is possible.
Iain Stewart (Milton Keynes South) (Con)
Before I ask my question, can I just point out an important error in some of the official documents? Whisky is spelled with an “e” on some of the documents, and that is a very different product from Scotch whisky. On Burns night, I thought it was appropriate to point that out.
Iain Stewart
Q
Sarah Dickson: For us, 10% of our exports go to those countries and benefit from them. I cannot give you an overall figure, but obviously, if you are not paying the tariff, you are not paying the tariff and you do not have that cost. It would make a difference to about 10% of our exports, and our exports were £4 billion in 2016.
Elspeth Macdonald: I do not have figures in front of me, but I think the document the Scottish Government published recently, “Scotland’s Place in Europe”, about business, jobs and the economy, touched on exactly those issues and put some economic analysis around some of that in terms of trade.
Gary Stephenson: All I can say is that I think about 37% of exports of food from Scotland are to non-EU countries, but we have not quantified exactly what the impact would be and how much of that is going to countries with a free trade agreement. I cannot give an exact answer, but it will have an impact.
Matt Western (Warwick and Leamington) (Lab)
Q
Gary Stephenson: There has to be deep consultation. The people with the expertise are the ones shipping the products, so they need to be consulted in detail on those provisions, which are very specific. You mentioned phytosanitary; obviously seed potatoes are a big product for Scotland, and they are highly dependent on phytosanitary requirements.
Matt Western
Potatoes are?
Gary Stephenson: Yes.
Sarah Dickson: Our experience is that we are often the ones working with the EU to draft the provisions on whatever it might be—labelling, or other requirements that would be needed for a mutual recognition—so we currently work closely with the EU negotiators to provide them with the advice and support that they need.
Elspeth Macdonald: There is a more fundamental issue from my perspective. There are specific exemptions from reservation through the Scotland Act that make it a devolved function for technical standards to be set in relation to food. There is a fundamental question above: it is about not just the Government, but Governments having those discussions with businesses.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Gary Stephenson: I think it is critical, particularly looking at some sectors, that the devolved Governments consult with sectors, and that there is a unified approach. This is too important to get parochial about. It is an important issue for the whole UK, but there is a higher impact in some sectors, particularly in Scotland and Wales; I am thinking of hill farming products and that type of thing.
Alan Brown
Q
Gary Stephenson: It would help.
Alan Brown
Q
Elspeth Macdonald: The principal issue with the Bill that causes us great difficulties is the way in which it constrains the ability of the Scottish Parliament and Scottish Ministers, and consequently our ability, to act and regulate in ways that are considered appropriate for businesses and the public in Scotland. The fundamental issue is essentially the same as in the case of the constraints imposed through the European Union (Withdrawal) Bill; it is a similar matter of high principle that overarches the Bills.
Anna McMorrin (Cardiff North) (Lab)
Q
Sarah Dickson: When the EU negotiates a trade agreement, it always looks to protect geographical indications. It does that in different ways. Not every agreement has exactly the same provisions, but it is always what they call an offensive interest of the EU to make sure that geographical names are protected. Where we think that an agreement with that intellectual property protection—that is basically what a geographical indication gives us—does not exist anymore, we will have to find other means, which means spending time and resources trying to work the country’s system. All countries, via their TRIPS—trade-related aspects of intellectual property rights—agreement, should have intellectual property; it is just that the easiest, clearest way to do this is through a free trade agreement.
We have already started work, in countries where there is an EU trade agreement, on making sure that we double up, so to speak, and work through the Government system to try to make sure that there is no intellectual property gap.
Anna McMorrin
Q
Sarah Dickson: Looking at future trade agreements, I would hope not, because I would assume that the UK Government would give the same priority to protecting its geographical indications, like Scotch whisky.
Faisal Rashid (Warrington South) (Lab)
Q
Sarah Dickson: I think the engagement with the UK Government is the missing piece of the puzzle, but we assume that it will happen at some point, and that we will have more detail on it. The market access advisory committee is a great way for us, the industry, to feed in our views formally to all the member states. We regularly attend it. It has a spirit-specific working group that we are able to contribute to. It feels very much like a partnership. We explain the problems we face in markets around the world and the EU then works out how it can respond to that. It has to prioritise, but because you have all the sectors contributing in that way and it is quite an open, transparent process, you know that you are at least being listened to and included in its strategies.
Faisal Rashid
Q
Sarah Dickson: We would feel more confident at the moment to have that laid out formally by the Government, in terms of what they are planning to do and how it will work. Ad hoc can work where you have developed personal relationships. We used to know everybody who did trade policy in the British Government, but that is not true anymore. Now there are 500, 600 or 700 people across Government doing it. When there used to be 40, it was much easier. As that grows and changes, having a very clear structure, so we know how to feed in and when and how, would be very helpful for us.
Faisal Rashid
Q
Elspeth Macdonald: I do not think I am equipped to answer that question. It is almost more of a legal question, in terms of how the Bill would apply.
Faisal Rashid
Q
Elspeth Macdonald: Certainly, in terms of being able to provide the public with assurances that the trading relationships that the UK will have in future when it leaves the EU will provide the same degree of public confidence and public health protection, scrutiny is critically important.
Faisal Rashid
Mr Stephenson, can you comment on that?
Gary Stephenson: I was going to jump in there anyway. It is an optimistic view that it is just a lift and shift. If you go for trilateralism, you are more likely to get there; if you go for bilateral agreements, you are more likely to get some differences.
Judith Cummins (Bradford South) (Lab)
Q
Sarah Dickson: It would be very similar to what the US does. It has cleared advisers. When you are into a negotiation, I know one thing that this House has talked about before is how you talk about a negotiation while it is ongoing and how you consult on those provisions without revealing what is a moving target. What the US does is to have cleared advisors in statute; they are people it is able to talk to to work out how to make a success of a provision within a negotiation. We can see that there might be a role for legislation in this area, where you want to be able to talk to people on a formal basis about what is essentially a Government-to-Government discussion.
Judith Cummins
Q
Sarah Dickson: We believe that the more open and transparent trade policy is, the better. That means wide consultation. So we are not just talking about business in this—you need a wide range of stakeholders involved. We think you will need to define what that looks like, because there are going to be time limits and speed limits in doing the negotiations when you are trying to get something achieved. The wider and more comprehensive you can make that, the easier it will then be to pass and implement afterwards. We think it is very important that those principles are part of UK trade policy going forward.
Judith Cummins
Q
Elspeth Macdonald: Our interests in terms of geographical indications are that consumers know what they are buying and that, whatever system is in place—the Government’s stated intention is that things will be the same after exit—people can have confidence that products are not being misdescribed in terms of their geographic origin. There is confidence in the current system because it is a robust and well-regulated system that is set out in statute. Our particular interests are ensuring that, when businesses trade and when people buy products that are advertised and described in a particular way, those claims, whether they are about origin or anything else, are accurate.
Barry Gardiner
Q
I want to marry that up with what you said, Ms Dickson, about the roll-over of terms. When you were asked about South Korea, you did not actually narrate the history of your association’s difficulty with South Korea, which of course was very resistant to the geographical indicator when you presented it on behalf of the Scotch Whisky Association. Do you think there is a possibility that South Korea might use this opportunity to reverse the progress that was made? There is one question for each of you.
Sarah Dickson: I would love to be in the head of the South Korean Government and to know quite where they will take this process. The conversation between the EU, the UK and the South Korean Government will have to be for them. Is it impossible that third countries might try to use this opportunity to reopen agreements? It is not impossible, but I hope that is not the case. When the UK has left the EU and is having its own bilateral trade policy conversations with third countries, we will undoubtedly get into these conversations about what they might want to change.
Barry Gardiner
Q
Sarah Dickson: The flipside is what South Korean businesses are saying to them about the benefits they gain from the trade deal. That is the judgment in all trade deals: who is benefiting, how much they are benefiting, and whether the things they do not benefit from outweigh the benefits they get. As I said, that is really a judgment for the South Korean Government. That is partly why we are trying to protect our GIs as best we can in addition to agreements.
Gary Stephenson: I will build on that. You are exactly right: there is an opportunity for them to renegotiate, and the UK, given the set-up it will be in, will be in a weaker position to defend against that. It would be ideal if the transition were just an extension of article 50, but we know it will not be. We will be out of the EU and trying to negotiate in a transitional period in which we are not supposed to be negotiating and are not supposed to have a final agreement, we want to get things delivered on time, and we do not have all the necessary resources. How do we prioritise everything? I think there are a lot of things rolled into your scepticism, but I share that scepticism.
The Chair
Order. That brings us to the end of the time for questions. May I thank the witnesses, on behalf of the Committee, for your evidence? We are very grateful.
Examination of Witnesses
Gordon MacIntyre-Kemp, Jonathan Hindle and David Scott gave evidence.
The Chair
I remind everyone that we have until 1 o’clock at the latest for this session.
Mike Wood (Dudley South) (Con)
I declare an interest as a vice-chair of the all-party parliamentary furniture industry group, for which the British Furniture Confederation provides the secretariat.
The Chair
Thank you. Would the witnesses introduce themselves for the record, starting from our left?
David Scott: I am David Scott, senior director of Tepnel Pharma Services.
Jonathan Hindle: I am Jonathan Hindle, chairman of the British Furniture Confederation—coming from the industry.
Gordon MacIntyre-Kemp: I am Gordon MacIntyre-Kemp, chief executive of Business for Scotland.
The Chair
Can I also ask the witnesses to speak up? We seem a long way away back here. I invite Barry Gardiner to begin.
Barry Gardiner
Q
Jonathan Hindle: I certainly do not feel qualified to be commenting on devolved Administrations—it is not part of my remit or where our industry is particularly clustered, so I do not feel qualified to answer that. I defer to the two gentlemen beside me, who probably know more.
David Scott: I am not convinced I am able to answer either, but the consultation is definitely a good thing. There is a voice that needs to be heard and various parties look for representation, not necessarily to veto anything, but certainly to ensure that the best interests of all parts of the UK are represented.
Gordon MacIntyre-Kemp: Business for Scotland was founded in 1996 to campaign for devolution and to set up the Scottish Parliament, so protecting the powers of devolution is one of our key remits. It is an area we have been investigating. This is one part of the whole Brexit process. The European Union (Withdrawal) Bill centralises about 100 Europe-influenced powers in Whitehall after Brexit, even though many of those cross over with the responsibilities of the devolved Parliaments and Assemblies. The deadline to amend clause 11 of the withdrawal Bill was missed, and that means we are sitting here without proper protections in place. The Trade Bill seems to suggest that it puts the power to act almost unilaterally in the hands of a single Minister—a single Minister who has what has been labelled a “hard Brexit agenda”—without clear protections on the public right to consult, scrutinise or stop trade deals.
At best, that means that a great deal of confusion remains over how trade negotiations will be handled where they overlap with the devolved Assemblies and Parliaments, and that is damaging to business. At worst, it looks like a deliberate attempt to delay the transfer of EU-held powers in particular to the devolved Parliaments until after the UK Government has had free rein to agree deals that you could say run roughshod over the devolution agreements that currently exist in these islands.
To give a key example, if we are going to do an instant trade deal, which we want to do with the Americans and which has to be the highest priority, the Transatlantic Trade and Investment Partnership is a great guide to what we can do with them. It is quite progressed; the key reason that TTIP did not make progress in the EU was that the EU wanted to put in protections to allow Governments to maintain public services such as the NHS, and our NHS is something that the United States is very likely to want to have access to.
I do not know much about trade negotiations, but I was trained in negotiation by a FTSE 100 company and by an American top 500 company, and the very first rule of negotiation is, “Make sure the person you’re negotiating with has the ability to say yes to the deal you’re presenting.” If we have devolved Parliaments who have control over the NHS, the Americans will look at that and say, “Well, you don’t have the ability to agree a trade deal with us,” so devolution is ipso facto incompatible with rapid trade deals, especially done under a World Trade Organisation agreement. I see that as being a problem and potentially creating constitutional issues not just in Scotland, but particularly in Northern Ireland.
Barry Gardiner
Thank you. That was an extremely interesting response, and I am sure one that will help our deliberations this afternoon, when we come to the first set of amendments. You have raised a number of very serious constitutional questions. It may be that the Minister has clear answers to them, but I think we will all be keen to hear what they are.
Martin Vickers (Cleethorpes) (Con)
Q
“the government is committed to maintaining the existing trade relationships, effectively preserving the status quo.”
You go on to say:
“It therefore seems that there is the potential to spend a significant amount of time, effort and expense to deconstruct the current processes”
and introduce a new process to bring us back to the same place. The way I read them, those two statements are somewhat contradictory. Surely what we are looking at in the Bill is the provision to ease that transition to provide the status quo?
David Scott: From my perspective—I speak for my company, which has 60 individuals in Scotland working in the pharma services sector—there are established regulations and ways in which we currently work with the European Union and with global pharmaceutical companies. The Bill would suggest that, while we seek to maintain those, we reserve the right to deconstruct them and come back to the same position. That is how I read it; I may be wrong, and I do apologise if I have misconstrued that. It is important, from my business perspective, that we maintain our relationship as it currently is, because that is a major way in which we trade with European countries on behalf of the pharmaceutical industry.
Martin Vickers
Q
David Scott: I appreciate that, but I do not believe that we can. I think the current system works in the best interests of the UK. The Medicines and Healthcare Products Regulatory Agency is regarded as a powerhouse within the regulatory sphere. If we tried to set up a secondary or different regulatory system, it would not be to the benefit of the UK in terms of how we operate in the global marketplace for some pharma services.
Bill Esterson
Q
Gordon MacIntyre-Kemp: Yes, and I think there is a great deal of confusion around it. I do not believe that there is sufficient clarity in the Bill about what is defined as a free trade agreement, for instance. If you do a deal with a nation that has multiple elements including an element of free trade, does that mean that the Minister would have full powers to do a deal that runs contrary to or overruns devolved powers? What is a specific trade deal? That needs to be defined, so as to limit the scope of the regulatory powers being granted by the Bill. A lot more clarity needs to come through in terms of the legal writing of it.
Bill Esterson
Q
David Scott: From my perspective, it would be good to engage with Life Sciences Scotland, the industry leadership group there, to understand the concerns and any wishes likely to be put forward. There is also the Scottish Lifesciences Association. There are a number of bodies in Scotland that should be spoken to and asked to come provide evidence from that perspective, so you can get a wider perspective on how Scotland’s life sciences community feels, not just in pharma and chemical but in animal health and across the broad remit of research and all these sorts of things, and get some information from the whole body of Scotland that is representative of the wishes of industry and business from that perspective.
Jonathan Hindle: I do not have a particular Scottish perspective on this. Generally speaking, the furnishing and furniture industry is keen to achieve what I am hearing from a lot of other industries: stability and consistency, equivalence and mutual recognition across the process. We are keen to advocate dialogue wherever we can have it to achieve that transition as smoothly as possible.
Bill Esterson
Q
Jonathan Hindle: I cannot say that our industry is concerned at the moment that there will not be consistency; in everything that we are reading, we are told that attempts are being made to make that transition as smooth as possible. We do not currently endure any significant issues. There are some issues with policing and surveillance of some of the standards that we have mutually agreed; that is a current scenario and a problem now. I am hoping that the formation of the Trade Remedies Authority will allow for some more robust investment in policing and surveillance of the standards where we currently endure problems, but I would not say that we are suffering from dumping in the fullest sense of its description in this context, although we are a very substantial net importer. There is a big trade gap that we as a nation endure in our industry.
Gordon MacIntyre-Kemp: You have raised an important point. Business for Scotland represents mainly small and medium-sized enterprises in Scotland. We surveyed 758 businesses and asked for their opinions on how the trade deals in Brexit have been processed and handled. There were 199,000 employees, half of the companies exported, and 41% had at least one non-UK-born EU national on their staff. We found that only 8% of Scottish business owners trusted the UK Government to deliver a deal that works best for Scottish business. Interestingly enough, 76.81% to 77% thought that calling a halt to Brexit would be beneficial to the Scottish economy. I think you have got an issue there: business does not really understand what is going on and there is a great deal of uncertainty. There is more uncertainty and more negativity towards Brexit in Scotland because Scotland voted to remain, and therefore there is less confidence in business as a direct result of that; so you will see that follow through.
I think the period between the point where we are still talking about deals and the point where we can actually start looking at trade deals has to be used for a massive consultation exercise with all the sorts of bodies that David mentioned before, but right across the UK. If we are going to do that we need to be preparing for it now. We need to be talking about it now. We need to be saying, “How are we actually going to deliver this?” Business for Scotland will be able to help, from a Scottish perspective, as much as we possibly can.
Bill Esterson
Q
Gordon MacIntyre-Kemp: Yes.
David Scott: Can I echo that? I think uncertainty is a killer at this point, specifically for my customers, whom I trade with on a global basis. They have a global supply chain and have to make contingency plans to ensure that whatever medicines they make are available to patients. Those contingency plans cannot wait until the eleventh hour or the last minute of any negotiations of any sort. I can tell you that they are starting to put those contingency plans in place now, and that they will have a massive effect on companies such as mine, and companies across the UK that support pharmaceutical R&D and the development and release of products on to the European market.
Hannah Bardell
Q
Perhaps I can start with you, David, and pick up on what has been said about confusion. The way I read your comments was that you were talking about concerns about legislative change under the Bill, and the ability to make changes in primary legislation. As we know, the Law Society of Scotland has raised issues concerning the timescale that that might mean for your organisation and sector. Could you talk about that a bit? Also, I notice from your photograph that you are MHRA and Food and Drug Administration approved. On the impact of leaving, and potential disjoint—we have already lost the European Medicines Agency to Amsterdam—can you talk about the impact on your sector and company?
David Scott: Yes, the potential impact is massive. The whole of the medicines regulation is about harmonisation and working under one single set of standards, which are beneficial and mean that the speed to market of life-saving medicines is reduced. If we try to come up with a different set of regulations or way of working, and have duplication of effort, which is what would happen under the current proposal if we became a third country outside the EEA, pharma will look at us and think, “Is the market big enough?”
We are now a net exporter of pharmaceuticals into the European Union and have a trade surplus. We want to avoid anything that puts us into a deficit. If we cannot get some harmonisation and cannot stick with the current harmonisation, I am concerned that we will lose our reputation—or not our reputation, because the MHRA is one of the best in the world, as far as I am concerned, but the ability to get joined-up connectedness. That would have a massive impact on my industry and my company, without question. I would then be forced, contingency-wise, to say “What do I do? I can’t serve some of my customers’ needs in a different regulatory system.” It is a massive thing for us.
Hannah Bardell
Q
Gordon MacIntyre-Kemp: For sure. In the survey we did, we did not just want to survey our members; we surveyed companies across Scotland. The feedback was surprising to us as an organisation. We had sensed that Scottish business was not happy with how this was being handled, but we have some quotes from non-members of Business for Scotland. A director of a FTSE 100 company said:
“When the virtually inevitable car crash happens the Scottish end of the business will most probably be moved to Europe which is a crying shame as the expertise at home is unsurpassed in our market segment. However with no likelihood of stability it will be a logical step to move.”
A director of a New York stock exchange limited company with 800 employees in Scotland said:
“Stop now and ask the people, do they want to continue with this process, knowing what they know now?”
A director of a UK bank left a pithy statement. He just said: “Absolute bloody shambles.” That was the sort of feedback we were getting. Some 79% want a second EU referendum after the deal is done.
In terms of the Trade Bill itself, what I am finding is that Scottish business is not engaging with the detail of Bills such as this. The information they are being asked to understand is so confusing that the only answer they have psychologically is to keep their heads down and hope that it will all be okay. That is why I suggested that through the whole process there has to be a lot more consultation.
In terms of fisheries, food standards and health, which I mentioned before, there are lots of areas where promises have been made. There are issues around tariffs and protections. For instance, I was told during one debate that it is far better to do a trade deal with India because it is so big and so on, but the wages in manufacturing in India are about 79p an hour, and we are approaching £8 an hour here. If a trade deal is done that opens up markets without the right level of consent from devolved Parliaments and industry groups, that will not be a trade deal but a bonfire of manufacturing in the United Kingdom. There have to be checks and balances in that. Multiple sectors will have to feed that in, because if we do not know that, we are going to be signing trade deals that will have unforeseen consequences, and I think that will be very damaging to the UK economy.
Hannah Bardell
Q
Jonathan Hindle: We have made recommendations to the Department for Business, Energy and Industrial Strategy for some updating of and amendments to the flammability regulations in particular. On a more broad basis, I understand that the British Standards Institution is looking to remain a member of the European Committee for Standardisation and the European Committee for Electrotechnical Standardisation, for example, to keep that continuity. That is what the industry is looking for. By and large, those standards, if they remain in place, are adequate. It is our ability to police, surveil and properly address transgressions that has much more been the issue for the industry. A plethora of products are making their way into the country that do not meet our stringent standards.
Hannah Bardell
Q
Jonathan Hindle: That would be a big concern for the industry. It already is under the current regime, and we are looking for improvements.
David Scott: To Gordon’s point specifically, there is a complexity here that we do not really understand. As you said, my company knew nothing about the Trade Bill or these sorts of things until we were asked to look into this. We focus on our bits. I think that Gordon is absolutely right: if we put in a trade Bill, there will be unforeseen consequences for certain sectors that you cannot foresee at this point in time.
Part of that is the safety element. Regulated drugs are there for a reason. If we start to loosen those regulations to make trade easier, then we open ourselves up to all sorts of problems, in terms of the fitness for purpose of the products that are brought into this country for use by patients.
Craig Whittaker
Q
David Scott: We would always want to comply with the highest standards of good manufacturing practices—GMP—for the pharmaceutical industry. What we do not want is to see any easing-up of the requirements of that to make trade easier with other parties. That is what I was trying to say. We need to be part of a harmonised system that works on a global basis, because if we have our own system then it becomes much more—not difficult to trade with us or to get things regulated, but we would set up an extra set of barriers. Currently, 60% of all medicines that are used in Europe are released from the UK.
Craig Whittaker
Q
David Scott: No, absolutely—it is not a trade issue. We would continue to work to the highest standards, but I would be concerned that things being imported into the UK might not meet the same standards as we would look to use ourselves.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: The Bill itself does not supply sufficient detail to be safe to pass, in my view. The evidence that I am offering is not based on any nationalistic principles; in fact, I think Brexit is also a nationalistic principle, but that is not what we are here to talk about, as you say.
There is one particular thing about standards, in that it is not really defined which ethics and standards will constrain trade Bills. You talked about pharmacy. I worked for Scottish Enterprise for many years and led a mission out to the States to look at poultry processing over there, and chlorine-washed chicken is one of the issues. Everyone was focusing on the fact that there was going to be chlorine-washed chicken as though that is a bad thing. Actually, it is not that bad a thing; it is just that their process is completely different.
If you wash chicken at the end of the process with chlorine, then you do not actually have to have all the high standards in every single process right through, until you get to the point that you have finished. You have then got a product that is a lot less expensive to create. If that is allowed to be imported into the United Kingdom, it will destroy poultry jobs, and therefore we have to think about this question: “Does this Bill actually have sufficient protections to mean that the unforeseen consequences will stop the loss of jobs in the UK as a result of the free hand that has been given?” I do not think it will.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Except the wording of one of the points—I am sorry, but I do not have it in front of me—is that the Minister and the devolved Administrations will have the ability to act, where appropriate. That gives a huge free hand without the right level of scrutiny and professional input. That in itself is the danger of the Bill. That is very specific to this Bill, and the point is about what it allows and how it can be read.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: I understand that this is largely about rewriting—or, if you like, cutting and pasting—from European rules into British law, but elements of the Bill are ill-defined and could, like the Henry VIII powers, direct too much power—
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Inasmuch as I have read about them and have written newspaper articles about them, but I am not a lawyer, if that is what you are getting at. Am I able to give you a complete legal run-down of them? No, but I do not think you would have the time if I were able to.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Yes, I do.
Faisal Rashid
Q
Jonathan Hindle: A very quick answer from the furniture industry point of view is that we would want to see as much scrutiny as possible. You referred to parliamentary scrutiny; whether that is the most effective form of scrutiny is another matter. We would certainly want the TRA to be made up of appropriate individuals to provide good-quality scrutiny.
Faisal Rashid
Q
David Scott: As I said at the start, consultation is absolutely essential. You have to start with the industries and then bring it to yourselves from that point of view. If it being in the Bill would force that to happen, I would certainly say that that is a good thing from my perspective. I guess that what we do not want is one or two people making a decision for the populous.
Gordon MacIntyre-Kemp: Very quickly, that was my point in response to Mr Esterson’s question. Yes, it should be in the Bill.
Faisal Rashid
Q
Gordon MacIntyre-Kemp: I am not an expert on other nations. For almost all my life, we have been in the EU. We did not need to study what other people did. We are just making it hard for ourselves now.
Mike Wood
Q
Gordon MacIntyre-Kemp: You are talking specifically about it not allowing anyone to do a deal to do with chicken, but I was using that as an example to point out that the actual wording of the Bill seems to allow a significant amount of power in one particular place and to not have sufficient levels of consultation. Basically, afterwards, it would indeed be applicable across many different sectors, food being one of them.
Mike Wood
Q
Gordon MacIntyre-Kemp: In my opinion, what it allows is too free a hand post-Brexit to do deals without the right level of consultation. Sorry if that has not been clear, but I have said it four or five times.
Mike Wood
Q
Gordon MacIntyre-Kemp: Right. I understand what you mean now.
Alan Brown
Q
David Scott: Absolutely. I would refer you to the Industry Leadership Group position paper written by Dave Tudor, the chair of the Industry Leadership Group for Life Sciences Scotland. There are four key points. One is regulation, which we have talked about already: maintenance of regulation on a harmonised basis. There is trade and supply, which we are obviously talking about today. Access to talent is a key thing. In Scotland, we are a diverse community. Research and development are best done using a diverse set of people, so that freedom of movement and the ability to attract people not just into Scotland but into the UK is fundamental for us. That is not to downplay our abilities, but a mix of different people helps us bring the best ideas to the table.
Again, from a Scottish point of view, we have a heritage of innovation in the medical sciences that we are very proud of, and we want to continue to use our talent base and other talent to help us achieve that.
Alan Brown
Q
David Scott: In my opinion, we are too late. People are starting to put processes in place and to make contingencies. We need some clarity on the issue as soon as possible.
Alan Brown
Q
David Scott: Again, as much clarity as possible on that is good. I have some European nationals who work for me. They are concerned about their position and whether or not they will continue to work for me as we go forward. As soon as we can get clarity on that, an agreement would be fantastic. If that were within the powers of the Scottish Government, I would welcome it, but it is about understanding as quickly as possible how to get clarity so that we can allay the fears of our own people and go out to our customer base to allay their fears and stop any potential actions before they happen.
Alan Brown
Does anyone else want to add to that?
Jonathan Hindle: The furniture industry has a similar exposure to migrant workers. We have a high degree of Polish migrant workers in the industry, particularly with sewing and upholstery skills. The unknown quantities about all of this have meant that some of them are leaving, so there is concern in the industry to provide some clarity, once again, about how we would deal with migrant issues for industry.
Gordon MacIntyre-Kemp: Again, some of our members have expressed concerns. In particular, highland hotels are saying that 65% to 70% of their staff during the summer are EU nationals and so on. There are significant issues in Scotland. I think that this shows, in terms of the overall remain vote, that immigration is seen radically differently in Scotland in terms of an opportunity to engineer the age of our society and bring skills to Scotland.
Matt Western
Q
“Make provision about the implementation of international trade agreements”.
To elaborate on the point you were making earlier, what do you understand that to mean?
Gordon MacIntyre-Kemp: What do I understand the “international trade agreements” to be?
Matt Western
Q
Gordon MacIntyre-Kemp: Sorry. What do I understand “international trade agreements” to mean? They are basically agreements between countries that facilitate trade, such as TTIP and CETA and so on, and they have significant impacts on the different sectors, in terms of what sectors are opened up to particular trade deals. Now, regarding the EU, it already has trade deals with South Korea, Canada and so on. I think that is kind of basic.
However, there could be difficulties if there is not an exact definition in the Bill of what a trade deal is; I refer to evidence from legal experts on this issue, as well. It could mean that deals that are not specifically seen as trade deals can come under the remit of the Bill.
Matt Western
Q
Gordon MacIntyre-Kemp: More open than it possibly should be; not as restrictive as it—
Matt Western
It could be open?
Gordon MacIntyre-Kemp: Yes. It could be seen that way. I am just asking for it to be tightened up a little bit.
Matt Western
Q
Jonathan Hindle: Fairly limited, inasmuch as when most people look for certificates of origin in tendering processes and evidence of supply chain in that regard, they ask for either an EU reference or a UK reference. If we were to devolve to a UK reference as a source of origin, it would carry equal weight in the minds of those in the particular markets that I am familiar with who often require that evidence.
Regarding the quantities coming out of the EU versus the UK, normally we are asked to make a judgment on a split and err towards the country of origin being where the majority of the material originates or where the bulk of the manufacture occurs. There are some guidelines that we tend to follow, along those lines. I am not hearing any concerns from our industry that that will present any problems. We continue to adhere to the current remit for declaring origin.
Matt Western
Q
Jonathan Hindle: Offhand, I cannot see it impacting the ability to trade effectively, or our competitiveness, or how we are perceived in any way; no, I cannot see that and I am not getting anything from our industry, as we poll it, to suggest any specific concerns on that particular point.
Of course, we have all the problems that we have had with a weak currency and all the inflationary impact that that has had, because most of our industry relies for a large part of its materials on continental Europe and elsewhere in the world. Weak sterling has had an impact and countered, if you like, the benefits that we might otherwise have enjoyed as an exporter from having a weaker currency on the other hand. It has been a double-edged sword in that regard.
Matt Western
Q
Jonathan Hindle: Very much so, yes. We would certainly welcome having someone on that TRA that understands our sector and all the nuances and complexities that have been alluded to—absolutely.
Barry Gardiner
Q
Gordon MacIntyre-Kemp: Yes, exactly, and as food safety is a devolved issue in Scotland—
The Chair
Order. I apologise to the hon. Member, but we have come to the end of the time allotted to the Committee for questions. May I thank the witnesses on behalf of the Committee for your evidence today? The Committee will meet again at 2 o’clock this afternoon in Committee Room 12.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Trade Bill (Fourth sitting)
Thursday 25th January 2018
(6 years, 3 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 January 2018 - (25 Jan 2018)
The Committee divided: - Ayes: 2 / Noes: 9 - Question accordingly negatived.
The Chair
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting, which is available in the room, shows how the selected amendments have been grouped for debate. Grouped amendments generally deal with the same or similar issues. Please note that decisions on amendments take place not in the order they are debated, but in the order they appear on the amendment paper. The selection list shows the order of debate; decisions will be taken when we come to the clause an amendment affects.
I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules following debates on relevant amendments, but it will certainly help if right hon. and hon. Members, including Ministers and shadow Ministers, stand if they wish to speak on clause stand part.
Clause 1
Implementation of the Agreement on Government Procurement
Hannah Bardell (Livingston) (SNP)
I beg to move amendment 33, in clause 1, page 1, line 15, at end insert—
“(1A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(1B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.
The Chair
With this it will be convenient to discuss the following:
Amendment 34, in clause 2, page 2, line 40, at end insert—
“(7A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(7B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.
Amendment 36, in schedule 1, page 7, line 24, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.”
This amendment would give the Scottish and Welsh Ministers power, by regulation, to amend direct EU legislation that forms part of domestic law on and after exit day in devolved areas.
Amendment 37, in schedule 1, page 8, line 5, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.
Requirement for consultation in certain circumstances
3A (1) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 1(1) or 2(1) so far as the regulations are to come into force before exit day unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(2) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 2(1) so far as the regulations make provision about any quota arrangements or are incompatible with any such arrangements unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(3) In sub-paragraph (2) ‘quota arrangements’ has the same meaning as in paragraph 3.”
This amendment would replace the requirement for the Scottish and Welsh Ministers to obtain the consent of the UK Government when acting alone under section 1(1) or 2(1) with the need to consult before making such regulations.
Hannah Bardell
It is a pleasure to kick off what I think we all agree is a hugely important debate. We are pleased that the amendments were selected.
It is important to say at the outset that our amendments to clauses 1 and 2 would ensure that the principles of devolution are safeguarded in the Bill as the UK leaves the EU. Just over 20 years have passed since devolution, and it is important to pause for thought. There has been a lot of discussion—on Second Reading and in the public discourse—about how the cross-party agreement that brought us devolution and the Parliaments and Assemblies of the devolved nations of the UK all those years ago is threatened. Much in the Bill drives a coach and horses through the cross-party agreements that brought huge changes to the devolved nations of the UK. I say to fervent defenders of the United Kingdom that by threatening devolution and devolved powers—the Scottish National party has set out 111 areas in which they are under threat—the Bill threatens to undermine the Union.
We agree with the provision in clause 1 that aims to ensure continued access to Government procurement markets after the UK leaves the EU, but we believe that UK Ministers should have to seek consent, not just to consult. During our debates on the European Union (Withdrawal) Bill, the Prime Minister promised that the devolved nations of the UK would be consulted. As we know, it has not been possible to seek proper consultation in Northern Ireland because of the situation there; we look forward to seeing what happens in Northern Ireland and what threat that poses. However, I think it is fair to say that the devolved nations do not really feel that consultation has happened. For us, consultation and consent are absolutely the bottom line.
Amendment 33 would ensure that the consent of the Scottish Ministers or the Welsh Ministers is required for any regulations made under clause 1 that deal with matters within the competence of devolved authorities in Scotland or Wales. The Library briefing for the Bill states:
“If responsibilities for much of procurement law move from the EU to the UK with Brexit, there are questions about who takes on these responsibilities. At present, responsibilities for procurement are generally either devolved or set at the EU level.”
The devolved legislatures in Scotland and Wales implement EU directives directly.
Let me draw on a specific example. Procurement is probably quite a dry and technical subject to many people, but it is very important. Back in 2008, we had a big challenge with superbugs and sickness in hospitals in Scotland, as did much of the UK. Through Government procurement measures, we were able to take contracts with private firms back under Government control. That was absolutely vital. If our amendments are not agreed to and we are unable to guarantee our procurement rights, there is a risk that they will be lost in the 111 areas I mentioned.
My Labour colleagues should think very carefully, given that it was their party that was instrumental in devolution. Labour should be congratulated on that. Labour Members must reflect on the impact of the Bill and the opportunity presented by the amendments, which have been laid with a degree of cross-party consensus and support. If we choose to push the amendment to a vote—obviously we will listen to the full debate—it would be excellent to have their support, and perhaps that of some Government Members. They might deem the promises made to Scotland in the past to lead not leave the UK, to be an equal partner—all those words and rhetoric—to be not rhetoric, but something that Members actually stand by.
On amendment 34, we agree with the provision in clause 2 that aims to provide continuity to existing trade deals that the UK is part of by virtue of its EU membership. There are about 40 trade deals, with more than 60 countries. We have heard a huge amount of evidence from a number of different organisations, including today from Devro, a company that makes sausage skins—we might argue that there will be no breakfast after Brexit if Devro is not able to produce the skins for sausages. We also heard from Hologic, a company I visited some time ago that operates in my Livingston constituency. Its representative spoke about the importance of consultation and consent and the involvement of the devolved nations.
We believe that UK Ministers ought to seek the consent of devolved Ministers when amending the law in devolved areas. The amendment would assure that the consent of Scottish or Welsh Ministers is required for any regulations made under the provisions of clause 2 that deal with matters within the competence of devolved authorities in Scotland and Wales.
I ask colleagues on both sides of the Committee to think about when trade deals are being negotiated. I know the Bill is about transferring current deals across, but it is also about what happens beyond that; it is about the framework that is put in place and ensuring that that framework is good and robust for everybody in the UK, wherever their business is and wherever they live. It is incredible to think that we would not get support, particularly from our Labour colleagues, on ensuring that the devolved Administration in Wales, whoever that may be, would have a say and would be able to give consent on the decisions that are made for those businesses.
Mr Mark Prisk (Hertford and Stortford) (Con)
Let us say a major treaty was going forward that was in the interests of Scottish whisky, for example. Is it the hon. Lady’s position that Welsh Ministers should be able to veto that?
Hannah Bardell
Those are things that can be discussed. I am not going to draw on particular areas—if it were Welsh lamb, for example, should we have a veto?—and say that we should be interfering. I would like to think that if it came to that situation, the Welsh Government—whoever was in power in Wales—would take a sensible approach and realise it was the right thing that the Government in Scotland, whichever colour they may be, should be able to consent and be consulted on the products of their nation. We should have an even hand across the UK.
Mr Prisk
I note that the hon. Lady said no to that. In other words, as it stands, what she is saying about consent means that the treaty in question could not go forward. I put the question to her again: what if there was a major interest in Scotland that, under her amendment, was vetoed by Welsh Ministers? Is that what she intends?
Hannah Bardell
No, that absolutely is not the intention. We all live in a world at the moment where we can put scenarios forward and say this or that might happen.
Hannah Bardell
And the point of the amendments is that in relation to goods coming from whichever part of the UK, we do not create a democratic deficit. That is what the Bill creates. The amendment rectifies that.
Bill Esterson (Sefton Central) (Lab)
I am proud of the Labour Government’s role in delivering devolution to Scotland and Wales, and I appreciate the hon. Lady mentioning that role. Can she set out when she sees there is a need for the consent of the devolved Administrations and when there is a need to consult them? Perhaps she could give some examples to demonstrate the difference.
Hannah Bardell
To be honest, the point is that we have the powers and we can have that discussion on an issue-by-issue basis. We have many examples of where we have worked well with the UK Government on trade and on rights, but we can consider other things—workers’ rights, for example. I know that when the Bill that became the Trade Union Act 2016 came to Parliament, many Members in the hon. Gentleman’s party and in other parties had huge problems with it, and it was hotly debated and discussed. Unfortunately, what we have seen is a rolling-back, despite the fact that there was opposition.
If we turn that on its head and say, “Could there be vetoes from other parts of the UK?” or, “Could we be in a position where one country is blocking a trade deal on a particular product over another within the United Kingdom?”, I would like to think that people will not use those powers in the way that the UK Government have often used their powers to impose legislation on devolved nations against their will. The whole point is that the rights, protections and opportunities, the access to and membership of the single market and the customs union are so vital to Wales, Scotland and the rest of the UK that we must not row back on those things and not give the devolved nations the opportunity to consent and be consulted. We could pick any particular issue and we could all have a discussion about whether there should be consent or consultation. The point is that we have the powers and they are powers for a purpose, and we should not have powers taken away.
Amendment 36 would amend schedule 1, which provides that Scottish and Welsh Ministers have
“No power to modify retained direct EU legislation etc.”,
such as EU regulations, or to make regulations that would create inconsistencies with any modifications to retained law that the UK Government have made, even in devolved areas. However, those restrictions are not being placed on UK Ministers. We believe that, as a matter of principle, devolved Ministers should have the same power in respect of matters falling within devolved competence as UK Ministers are being given. That is not is an unreasonable request. We are in a Union and we have devolved powers and devolved Governments; Ministers in each of those countries should have the same power as any UK Minister. Amendment 36 would remove the restrictions placed on the Scottish and Welsh Ministers’ ability to amend directly applicable EU law incorporated into UK law, bringing the powers into line with those being given to UK Ministers.
Amendment 37 would replace requirements imposed on Scottish and Welsh Ministers to seek UK Ministers’ consent when
“acting alone under section 1(1) or 2(1)”
with a requirement to consult UK Ministers before making those provisions. We have heard from stakeholders on this matter. I am sorry I was not here at the earlier evidence sessions; I was at the Council of Europe, but I have watched and read the contributions that were made. As we know, stakeholders were invited to give evidence and discuss their concerns. Chris Southworth from the International Chamber of Commerce UK said,
“Overall...I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations—or the regions, I have to say—to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations, where there are vulnerabilities on a whole range of different industries.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]
That is not SNP Members or Members of other parties just making political points; it is what we have heard in the Committee.
Today, we heard Elspeth Macdonald from Food Standards Scotland say that one of the reasons her organisation is supporting the Scottish Government on withholding a legislative consent motion is that it feels there could be a lowering of food and drink standards. Given that Scotland’s food and drink industry has grown at twice the rate of that of the rest of the UK and is a leading light of our exports, that is something.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Davies. I will make a few remarks on the principle of devolution and the amendment that has been tabled.
During one of the evidence sessions the hon. Member for Corby threw out the proposition that Opposition Members should not have voted against Second Reading of the Bill, even though we believed it to be flawed. He suggested that we should have voted for it and tabled amendments in Committee. Well, the proof will be in the pudding now. How many amendments will the Government back? Will we be back at square one and left with a flawed Bill?
The blunt reality is that both the Welsh and Scottish Governments have said they will withhold their legislative consent motions if the Bill remains as it stands, so it certainly needs amending if it is to get buy-in from the Scottish and Welsh Governments. Our amendments were drafted in agreement with the two devolved Administrations. That is why, as my hon. Friend the Member for Livingston said, it is slightly disappointing that Labour MPs have not backed an amendment that was drafted by the Welsh Government.
We also heard in the evidence sessions a number of witnesses agree that the Bill in its current format excludes input from the devolved Administrations. As a result, agreements could be forced on devolved Administrations. The UK Government can legislate and make regulations that affect devolved competences. During the witness sessions we heard about tariff rates and quotas, which could be an issue; the subdivision of quotas within the UK will need to be considered, as will rules on origin. That is why it is critical, in the spirit of co-operation, that the devolved Administrations have to give consent to agreements or regulations that the UK Government put forward.
We are constantly told that the Scottish Parliament is the most powerful devolved Parliament in the world, but that is incorrect. We heard during our evidence sessions about the devolved Government of Wallonia in Belgium, which was able to veto the entire comprehensive economic and trade agreement with Canada. That is a devolved Parliament with real power. It is vital that we hold on to and do not allow any erosion of the powers of the Scottish Parliament and the Welsh Assembly.
We were promised that clause 11 of the European Union (Withdrawal) Bill would be amended to protect the devolved nations. That did not happen. That is why we need to amend this Bill and to get agreement from the UK Government that they are willing to work with the Scottish Parliament and the Welsh Assembly. It is essential that their competences are protected.
I think that is all I need to say in support of the amendments. I am interested to hear what the Minister has to say.
Barry Gardiner (Brent North) (Lab)
It is good to have you back in the Chair, Mr Davies. I look forward to the Committee making progress under your guidance.
The Labour party brought forward and delivered the devolution settlements when it was in government, so we absolutely support the rights and powers that are conferred on the devolved Administrations by their respective devolution settlements. Matters of devolved competence must not be subject to overreach by Ministers of the Crown who seek to amend or overrule the will of the people, as expressed through their devolved Governments. For Labour, that is absolutely the starting point of this debate. We believe that the powers of those devolved Governments must be enforced and, indeed, reinforced where appropriate.
That said, we have real concerns about some of the implications of this group of amendments in the context of implementing our legally binding obligations under international law. The amendments might, in effect, create a veto power, which in turn might result in the UK failing to deliver on its binding obligations under a treaty. We have a conundrum. Often in Committees like this we have what are, in effect, set-piece debates, but this is a real debate about a profoundly complex constitutional issue, which I do not think will be easily resolved. Let me try to set out what I think is at the heart of it.
I pay tribute to the hon. Member for Hertford and Stortford, whose question went to the heart of the matter. Interestingly, the spokesperson for the SNP, the hon. Member for Livingston, used the words consult and consent in the same sentence as if they were interchangeable. The difficulty is that, in law and in effect, they are not.
Barry Gardiner
I will happily give way after I have made a little more progress. I do not seek a point-scoring debate, because we have to get to the heart of some extremely technical and complicated issues, but I will of course give way in due course if the hon. Lady wishes me to.
In respect of the devolution settlements, trade agreements and the negotiation thereof remain exclusively reserved to the UK Government. International treaties are also the exclusive reserve of the UK Government. I have no doubt that the devolved Governments recognise that and supported that approach when the relevant devolution Acts were passed. Our membership of the European Union has meant that the competence for trade has been exercised by the EU under the common commercial policy—in effect, it has been taken up a level from the UK Government to the EU. That relationship has meant that no devolved Government—nor, indeed, the national UK Government—has been able to legislate in any way that contravenes EU law. In respect of trade agreements, that has meant that we have amended our domestic legislation where required to align it with the terms of agreements concluded on our behalf by the European Union. No devolved Government therefore has any effective veto on the implementation of those agreements, nor have they ever had such a veto.
Of course, the Bill prepares us for life outside the European Union, when that common commercial policy will no longer apply and the competence for trade will be returned to the United Kingdom. Similarly, the obligation on the devolved authorities to ensure compliance with EU law may also no longer apply. That, in effect is the crux of the issue.
The amendments would, in some respects, extend upwards powers of devolved Governments that they might not currently have in respect of international trade agreements. It was telling to hear from the gentleman from Business for Scotland this morning—I am delighted that you managed to squeeze me in to ask my question at the last minute, Mr Davies. In his response to whether the Scottish Government or a devolved Assembly should, in effect, have the right to consent regarding the content of the trade agreement, with reference to his chlorine-washed chicken example, he said that, yes, he thought there should be a consent power at that level.
Whether the Bill is about an agreement with America is completely by the bye. That was a thought experiment to show the sort of situation that could arise. If we want to bring it slightly closer to home, we could talk specifically about one of the agreements the Minister proposes to have a corresponding agreement with through the good offices of the Bill: CETA. Of course, one of Canada’s main objectives when negotiating with the European Union was to be able to get chlorine-washed beef and chicken into the European market. It failed in that endeavour, because that was not agreed to by the European Union in the eventual treaty. However, it is not beyond the wit of any of us—we heard this on many occasions from our witnesses—to construct a situation in which Canada might do what other countries at such a juncture might do, which is seek to reopen the negotiations in a particular way to its advantage, to try specifically to achieve with the European Union that which previously it had not been able to.
That brings the example much closer to home, and to the Bill in particular. The key point is that, as was said by Business for Scotland’s witness, the Scottish Government’s view is that they should have the power of consent to the substantive measures of the international treaty. We recognise that there are clear implications for what might be set out in the international trade agreements on matters of devolved competence. Agricultural policy, food safety, fisheries, the environment and so on are all areas that are touched upon by modern trade agreements. They are all areas where trade agreements will of course have an impact.
Hannah Bardell
I take on board the hon. Gentleman’s point. The notion of consent is an interesting one. Let me just expand a little on my take on it. The idea of consent—not just consultation—for us is that we cannot have certain aspects of our regulatory framework, or deals done, that go against the principle of devolution.
The memorandum of understanding concordat from devolution was binding
“in law, but promises cooperation on exchanging information, formulating UK foreign policy, negotiating treaties and implementing treaty obligations.”
In our view, the Bill goes across that.
For the sake of argument, say that Scotland or Wales could not give consent to a trade agreement. That would force the UK Government to go back and look at why consent could not be given, and hopefully bring something forward. If we only have the power of consultation—we could argue that consultation is not really a power—we are at the mercy of whatever the UK Government of the day do. It could be argued that the power of consent is absolutely vital in negotiating trade deals.
Barry Gardiner
It is not that I do not understand the force of the position the hon. Lady is taking and the way in which she is trying to express it, but of course those powers are powers that the devolved Administrations do not currently possess vis-à-vis the European Union. That is why, as I said, the levels at which we consider this, and the change in those levels, are absolutely material to the discussion we have today.
The hon. Lady is absolutely right to say that if the substance of a trade agreement or any of the corresponding agreements that the Minister is seeking to roll over from our existing EU trade agreement is substantively changed, it may well have an impact on areas that are devolved competences. But that is the substance of what is agreed at the international level. Trade is a reserved matter. Treaties are a reserved matter. Therefore, the question of the implementation comes in two ways. I do not want to depart from my notes too much, but I am seeking to respond to the hon. Lady’s intervention in the spirit in which she made it.
The difficulty is that our legislative language is poor. We talk about implementing an international agreement in UK law and we also talk about implementing the terms of the agreement within the devolved competence. It is very easy to have a confusion about which implementation we are talking about. I will progress the argument, because it seems to me that it is not cut and dried. There are serious issues here that we need to consider as a Committee.
I cannot say that I normally say this, but I very much look forward to listening to what the Minister says on this occasion, because I trust he has had the benefit not only of parliamentary counsel, but of constitutional legislators, who will have looked at the matter very carefully when they saw the amendments. I look to what the Minister is going to say in the Committee to guide us on these matters.
Picking up from where I left off talking about the substantive changes, new institutions may be required—institutions that might otherwise be within the devolved competence of the Scottish and Welsh Governments. That simply arises from the changes that will be made to the free trade agreements, because they might specify the European Food Safety Authority and that would need to be changed. New institutions may have to be established to fulfil the competences that the European Food Safety Authority or any other such agency had, and they would have to be designated in the roll-over Bill.
Of course, it may be that the Minister specifies the Food Standards Agency in England as the body that will now make the specifications. It might be better to use Food Standards Scotland, which we heard from earlier today. It is absolutely right that there is a process of consultation between the devolved Administrations and the Minister at that point to say, “You’re proposing to specify that body, but actually there are far more relevant skills in this other body.” Consultation is absolutely essential to try to ensure that they get this right.
Barry Gardiner
In one moment. I hope the hon. Lady will intervene in a moment, because this is the question I think she may wish to respond to. Imagine a situation where Wales said, “We believe our agency should be the certification body,” Scotland said, “No, it should be our agency,” and because both had the power of consent and not simply the right to consultation, the Minister and the UK were unable to fulfil our international obligations under an international treaty.
The hon. Lady may say, “Surely no devolved Ministers would be so pig-headed as to say, ‘It’s got to be ours.’” The Westminster Minister may well be the one who is being pig-headed—who knows? However, I cannot imagine that it is right for the Committee to pass an amendment that could give rise to a situation in which we were unable to fulfil our international treaty obligations.
Hannah Bardell
I guess the simple answer is that they would have to consult each other. I argue that what is proposed drives a coach and horses through many aspects of devolution, and others also have serious concerns. If the hon. Gentleman believes that there is an overreach in the amendments, what answers does he propose? Given the supposed “consultation” that was part of the European Union (Withdrawal) Bill process, does he really have faith in that aspect of today’s legislation? I know that I do not.
Barry Gardiner
I said at the beginning that I was not going to engage in point scoring, so I will not take up the hon. Lady’s invitation to beat the Minister over the head about the lack of consultation. The witnesses have amply displayed their dissatisfaction with the consultation process, but she has, in effect, made my point for me. She said, “Well, they would have to consult.” Of course they would; that is why I believe that it is vital that consultation with the devolved Administrations is statutorily required, in a way that is not transparent on the face of the Bill. Consent, however, which could bring about the sort of impasse I referred to, should not be built into the legislation.
It is one thing to imagine legislation working in a benign, perfect scenario where people have good will, are engaging with each other and want to come to an agreement. Sadly, that is not always the case, and we must make our legislation such that it survives not only when things go right, but when things go wrong and a way through an impasse is necessary. The danger in the amendments is the reaching upwards into what would currently be seen as the competence and the rights of the European Union to negotiate the substance of those trade agreements. That is why I am fearful of the route down which the amendments would take us.
Alan Brown
Has the hon. Gentleman discussed this with the Welsh Government, and explained that his concerns about the devolved Administrations “reaching upwards”, in his description, outweigh his concerns about the UK Government being able to impose regulations on them?
Barry Gardiner
Yes, of course I have. I went down to Cardiff just last Friday to meet the Minister there and some political advisers. We talked through precisely these issues, and I have done the same with Welsh colleagues here. On Monday, I even met the special adviser from the Scottish National party group here. I have also spoken with my own Scots colleagues. I think that there is a recognition that we are dealing with genuinely difficult constitutional matters. That is why we have a difficult job as a Committee.
Barry Gardiner
I will give both scenarios, and then the hon. Lady can choose.
Our fictional country, Xanadu, has very relaxed laws about the rearing and sale of chicken for consumption. In Xanadu, chickens may be hormone-fed, genetically modified or chlorine-washed prior to slaughter for consumption. In the UK, one of the devolved Governments may have a particularly robust animal framework code, coupled with robust agriculture and food standards regulations, which would not allow for the production or consumption of such chickens. What happens if the UK agrees terms with this country that ultimately liberalise trade in chickens between our nations, such that hormone-fed, genetically modified, chlorine-washed chicken is allowed to be imported into the UK and sold on the shelves of our supermarkets for consumption by British citizens?
The devolved Government would argue, “These are matters of devolved competence, and we have right of consent regarding the implementation of the agreement, especially as it conflicts greatly with our standards.” They might also think, “There is no way we are allowing these products on to our shelves, and we will not give our consent.” In that example, I would probably be cheering and saying, “Good for them. We don’t want those chickens on our supermarket shelves.” However, the point is that if the agreement had been made, we would be bound by the obligations under it, whichever way they went—whichever example we use.
Failure to implement would result in remedial action being pursued by Xanadu. Indeed, many such countries might not even come to the negotiating table if they had significant concerns about potential consent reserve functions distorting their access to the market on terms that had been agreed at state-to-state level. When we heard from the witnesses this morning, the example of Canada was used. We have already seen that the provinces in Canada are brought in at the beginning of the process precisely to get round countries’ reluctance to engage in trade agreement negotiations without certainty that devolved Administrations cannot veto what is agreed.
The hon. Member for Livingston asked me whether I had spoken to my Welsh counterparts and I explained that I had, as well as to two of my Scottish counterparts. We have also spoken with the House of Commons constitutional law experts. They explained to us that they cannot answer the question. They do not know. They have recognised that this is a problem, and that neither the Bill nor the amendment address the issue in a way that would prevent our reaching the situation that I have tried to articulate.
We have spoken with House of Commons trade experts, and have similarly drawn a blank. They advised us that the matter has not been considered because it was not an issue before. They said they had just not come across it. What everyone has recognised is that there must absolutely be consultation in advance, to ensure that no trade agreements come unstuck if a veto is exercisable at a later stage. Also, how will the UK Government ensure that the provisions of a concluded trade agreement are implemented across the United Kingdom, as they are bound to by their obligations under international treaties?
The Bill fails to set out how the Government intend to resolve the issues. It does not define what implementation frameworks will be constructed to mitigate the extent of conflicts between the powers of the UK Government and the devolved competence of the devolved authorities. It does not differentiate between the incorporation of the terms of the agreement into UK law and how that might be considered to be separate from implementation at a devolved level. It does not set out what consultation processes will be instituted to address those issues early on, and to ensure that the interests and experience of the devolved Administrations are represented at the negotiation stage to avoid any conflict at implementation stage.
Of course the devolved Governments must have a say in the process. They must have the capacity to scrutinise it to ensure that it is compatible. The Government’s approach to consultation has not been what it should. Ad-hoc meetings between the Secretary of State and representatives of the devolved Governments cannot be considered a formal consultation process, even if the Secretary of State donned his President of the Board of Trade hat for them.
It is our view that a formal consultation role must be established for each of the devolved authorities and, indeed, for a much wider group of stakeholders with an interest in the outcomes of any trade agreement. Their views are essential in ensuring not only that any future implementation issues are addressed up front, but that their constituent interests, be they commercial or public, are properly considered before negotiations begin and as negotiations progress. It is our view that the Government must be obliged formally to consider and respond to representations made through that stakeholder engagement process, whatever those might look like.
The Minister for Trade Policy (Greg Hands)
Let me start by saying what a pleasure it is to serve under your chairmanship, Mr Davies.
The UK Government have made clear their commitment to working closely with the devolved Administrations to deliver an approach to future trade agreements that works for the whole UK and reflects the needs and individual circumstances of England, Scotland, Wales and Northern Ireland. We have been clear that we will continue to engage with the devolved Administrations as we transition our current agreements, and that we will work together to prevent disruption to UK business and consumers. The Department for International Trade engages regularly with the devolved Administrations: DIT Ministers and senior officials visit the devolved nations frequently and engage devolved Governments and stakeholders right across the UK.
Let me turn to amendments 33 and 34. The concurrent powers in the Bill that allow either devolved Administrations or the UK Government to implement in areas of devolved competence will ensure that, where it makes practical sense, it is possible for regulations to be made once for the whole UK.
Judith Cummins (Bradford South) (Lab)
What does the Minister think are the best examples of things under the government procurement agreement that would be matters of devolved competence?
Greg Hands
If I understand the hon. Lady correctly, she asks about signing up to the GPA and the schedules to the GPA. I might add that, contrary to what the hon. Member for Brent North said, the UK’s joining the GPA will actually be subject to a separate process in Parliament. There might be a question about which authority within these islands has a right to administer a particular part of the GPA. For example, the relevant Scottish body might be the right body in Scotland, the relevant UK body in England, the relevant Welsh body in Wales, and so on.
The approach I described is essential for providing continuity to UK businesses, workers and consumers. As set out in our recent trade White Paper—this is the nub of the argument—we will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved Administration, and we will certainly never do so without first consulting them. It is crucial to understand that.
Bill Esterson
My hon. Friend the shadow Secretary of State made the point that there is nothing in the Bill about a formal consultation. Does the Minister accept that point, and does he accept the need for such a formal process in the Bill?
Greg Hands
It is crucial to draw out what we are talking about. This is about transitioning existing agreements that are already in effect right across the United Kingdom. As I have already laid out, the Secretary of State and I have met the devolved Administrations in different capacities and in different ways. Our officials have certainly exchanged a lot of views on that.
I will come on to where we are with future trade agreements in a moment. Our intention is to involve fully devolved Administrations, devolved Parliaments and so on in that process.
Bill Esterson
On Second Reading, the Minister acknowledged that there may well be changes to those existing agreements. In the case of Norway and Turkey, can he confirm that that would almost certainly have to happen? Otherwise, they would cross the Government’s red lines. What consultation does he anticipate in those situations?
Greg Hands
As you know, Mr Davies, perhaps better than anyone, it certainly it is not for me to suggest what may or may not happen as part of the ongoing negotiations with the European Union. Clearly, aspects of the European economic area agreement will be dependent on those. It is our intention for there to be no substantive changes in those agreements as we go forward and transition. It is very important to understand that.
Hannah Bardell
Is that not at the heart of the issue? The Minister does not know what may happen in the future, or what may have to be traded off so that we can tread water and stay where we are. The power of consent is, in some ways, a negative power and a threat, but it means that a negotiation and an agreement have to be reached by all the devolved Administrations. Until now, consultation has not been a very positive experience for Scotland and the other devolved Administrations.
Greg Hands
We made a commitment in the trade White Paper to not normally use these powers in areas of devolved competence without consultation. I repeat that commitment to continuing that consultative process as we go forward. That commitment can be heard loud and clear.
Hannah Bardell
I try to speak on behalf of my constituents and others in Scotland. “Not normally” is, quite frankly, not good enough. The Minister might be as good as his word, but what about future Governments and future Ministers?
Greg Hands
I know that the hon. Lady takes up issues for her constituents—she and I have meetings about particular issues in her constituency. I repeat that we would not normally use these powers, and we would never do so without consultation. I will refer to some of the other reasons, which have been alluded to by my hon. Friend the Member for Hertford and Stortford, and by the hon. Member for Brent North, why we will not go down the road of requiring consent. We would not normally use the powers, but it is very important that we do not require consent to use them. That is a very serious commitment, which should offer the hon. Lady reassurance.
Amendment 36 seeks to remove the restriction on devolved Administrations amending direct retained EU law. Some EU law applies directly and uniformly across all EU member states without needing to be implemented in domestic legislation. On the day that we exit the EU, that type of EU law will be converted into what will be called retained direct EU law.
As the Government’s guiding principle is that no new barriers to living and doing business in our own Union should be created on exiting the EU, it is right that there should be only a co-ordinated set of changes made to that type of law, in order to maximise continuity and certainty for businesses and consumers. We are committed to consulting the devolved Administrations on the most appropriate way to legislate in areas of retained direct EU law that have effect in otherwise devolved areas.
Regarding amendment 37, we also consider it right that where measures affect the whole UK, such as quota arrangements or the use of powers in clauses 1 and 2, before we exit the EU, decisions are taken at UK level before the devolved Administration can take the measures.
Let me turn to some of the individual points raised. The hon. Member for Livingston asked whether a proper consultation could not be sought in Northern Ireland. It is important to recognise that, for reasons of arithmetic, there is not a Northern Irish Member on the Committee, but I will try to answer her point. We are working hard, as she will know—I think she will agree—to restore devolved Government in Northern Ireland as soon as possible. We are committed to working to ensure that Northern Ireland’s interests are represented in the meantime. The Department for International Trade engages with officials in Northern Ireland on a regular basis.
The hon. Lady also asked whether the GPA allows Governments to nationalise or privatise anything, whether for procurement or any other purposes. The UK Government will be bound to open up procurement markets only to the extent they have committed to do so in the new schedule to the government procurement agreement as lodged with the WTO. That will preserve the present position in relation to procurement in areas such as the NHS.
I think the hon. Lady asserted that procurement is devolved. This is a complicated area. The UK Government accept that some procurement is devolved, and the Scottish Government have made some regulations about procurement. However, the UK Government’s position is that procurement is an activity for devolution purposes rather than a subject matter. In other words, whether a procurement is devolved or reserved depends on the functions of the public body carrying it out. I think the saying is that if the public body answers to part of the Scottish Government, it might be devolved, but if it is a UK body of Her Majesty’s Government that operates in Scotland, it is likely not to be devolved.
The hon. Member for Kilmarnock and Loudoun referenced the power that Wallonia has. I am familiar with such arguments: I think the hon. Member for Brent North debated that at some length in relation to CETA in February last year. To be clear, I expect he knows that the UK and Belgium have very different constitutional arrangements. Foreign relations are the responsibility of the UK Government under each of the devolution settlements.
The hon. Member for Brent North made some interesting points. For the first third or so of his speech, I thought I was coming close to being in complete agreement with him—at least in his thrust that the proposal in the amendment to have in effect a veto power for the devolved Administrations would make the whole endeavour unworkable. He is right. He made reference, as I will, to the short, succinct intervention by my hon. Friend the Member for Hertford and Stortford about the potential for a Welsh Government veto over something that was felt to be particularly important in Scotland. That, or vice versa, is a very real example. Our approach is best: not normally to use the powers to amend legislation in devolved areas without consent, and never without consultation with the devolved Administration.
I was surprised by the approach taken by the hon. Member for Brent North. It was my impression that the amendments were drafted by the Scottish and Welsh Governments together. Therefore, much as I welcome him saying that he will not vote for the amendment, it surprised me a little that he seems to be at odds with the Welsh Government viewpoint. Anyway, I am glad that he may be joining us on this occasion.
In terms of the GPA and rolling over the existing schedule, yes, that is the intention, but—I repeat—the terms on which the UK enters the GPA in our own right will be subject to a separate vote in Parliament. The Constitutional Reform and Governance Act 2010 applies to the terms of the UK’s new membership of the GPA —in other words, it is possible to bring a vote in Parliament on the terms under which the UK will join the GPA.
Barry Gardiner
The Minister just assured the Committee that there will be a vote on accession to the GPA. I am surprised that he says he can assure the Committee of that, because the procedure of the Constitutional Reform and Governance Act 2010 does not ensure that there will be a vote at all. CRAGA procedure is precisely the statutory instantiation of the Ponsonby rule of 1924, which means that all the Government need to do is lay the text of the agreement before Parliament for 21 days. Unless Her Majesty’s official Opposition, or any of the Opposition parties, raise that as an objection in an Opposition day debate, it goes through—that is if they are granted an Opposition day motion within that 21 sitting days, which is by no means guaranteed. You will recall, Mr Davies, that between 27 January and September 2017, the Government did not grant the Opposition a single Opposition day debate. Even if they were to object through an Opposition day, the Minister would simply have to acknowledge it, re-table the text, and it would lie on the Table for another 21 days. Unless we went through the same process, there is no process for the Opposition to amend or vote unless we are given an Opposition day debate.
Greg Hands
I know the hon. Gentleman has a particular fascination with the Ponsonby rule of 1924, but I remind him that that rule was made otiose by his own party’s legislation—the Constitutional Reform and Governance Act. I went back and checked. Mr Davies, you and I were in Parliament at that time as Members of the Opposition—
Greg Hands
In 2010. The hon. Gentleman supported that Act. That is why I was careful to clarify that it is possible to bring forward a vote on the UK’s terms of entry into the GPA. For all those reasons, I ask the hon. Member for Livingston to withdraw her amendment.
Anna McMorrin (Cardiff North) (Lab)
The UK Government must have meaningful engagement with devolved Administrations about the shape of the UK’s future customs and tariff regime post-Brexit. That has not been the case so far. Just like the EU (Withdrawal) Bill, the Trade Bill puts restrictions on the Executive capacity of the Scottish and Welsh Governments, while placing no restrictions on the capacity of the UK Government.
Essentially, under the Bill, UK Ministers will be able to legislate in devolved areas without consent from Welsh or Scottish Ministers. That is an overt power grab and a rolling back of devolution. I am proud to have played a part in bringing devolution about in Wales 20 years ago. It is vital that we maintain what devolution was set up to deliver: a proud and confident nation.
It is also disappointing that there is no provision for the Trade Remedies Authority to have any input from devolved nations. It is important for it to be an independent and impartial body, separate from the Government, but it must also represent all parts of the UK, including Wales and Scotland.
It is important to remember that in the trade White Paper, the UK Government stated that the Bill would have provisions for UK Ministers to seek consent from Welsh and Scottish Ministers when making secondary legislation under the Bill, but that has now disappeared.
In 2016, First Minister Carwyn Jones told the Welsh Assembly’s External Affairs and Additional Legislation Committee that it was “hugely important” for devolved Administrations and legislatures to have a say in the negotiation of future agreements that would have an impact on Wales. He gave the specific example of a free trade agreement with New Zealand:
“The impact of that might be to remove the current controls that exist on the import of New Zealand lamb. If they were to go, that would clearly be a great difficulty for Welsh lamb producers. That issue might not be as apparent in Whitehall as it is in Wales, and that’s one example there of why it’s important that the views of the devolved Governments are understood and the interests of the devolved nations are respected.”
It is not new. We are not advocating new devolved powers. It is not even about extending devolution. It is about preserving devolution. It is important to remember that there are restrictions on competence. The devolved settlements of both Wales and Scotland ensure that both Welsh and Scottish Ministers cannot legislate in ways that interfere with UK international obligations. That comes under the Government of Wales Act 2006, specifically sections 82 and 114. It simply cannot legislate to interfere.
Hannah Bardell
The hon. Lady is making an excellent speech and highlighting the importance of the devolution journey we have travelled. Particularly on the devolution settlement, does she agree that there might be challenges if this amendment passes—it is about consent? As she says, it is written into the devolution settlements and that agreement would have to be reached to ensure that that legislation is passed. Does she agree that it would be absolutely in the interests of devolution, and in the interests of Scotland, Wales and Northern Ireland, that those amendments pass today?
Anna McMorrin
It is absolutely about consent, agreement and consultation. Essentially it is about not rolling back on the devolution settlement. Amending the Bill to explicitly ask for the consent of devolved Administrations for secondary legislation under the Bill would therefore not interfere with that, nor would it amount to a veto power.
As I already said, what was already drafted in the UK Government’s White Paper should be in the Bill. Consent and consultation are at the very heart of devolution. If there is secondary legislation being made within an area that is currently within devolved competence, the devolved Administrations and Welsh Ministers must give consent and ensure the democratically elected Welsh Assembly or Scottish Parliament is able to debate it. That is why I agree with the principle underlying the amendments, as agreed by both the Welsh and Scottish Governments.
Professor Jones, a Welsh political expert, told the Select Committee on Public Administration and Constitutional Affairs:
“We see the UK Government in effect reintroducing a kind of conferred powers model where it will decide which bits of the powers returning from Brussels will be conferred on the Welsh Government… That—in the context of this constant churn and change—looks one-sided and objectionable.”
The most disappointing aspect of this Bill’s disregard for devolution is that the UK Government know it is completely unacceptable.
Mr Prisk
It is excellent to have a Member from Wales speaking. Naturally we have heard from the hon. Member for Livingston, the Scottish Member who is moving this amendment. Do I take it from what the hon. Member for Cardiff North is saying that she supports the principle and therefore will be supporting the hon. Lady’s amendment?
Anna McMorrin
As I said, I absolutely support this principle, which has been agreed jointly with the Welsh Government and the Scottish Government.
Ministers, Conservative MPs and civil servants privately acknowledge how extremely ill-advised it is to remove the power of devolved Governments over devolved areas. Clearly the issue is one of trust: trust to exercise devolved powers responsibly; trust to carry out measures that represent the people of Wales and Scotland; and trust to provide meaningful scrutiny of legislation. As it stands, under this Bill, and after Brexit, the devolved Governments will be at the mercy of Whitehall, which will have complete control of all areas, including those which are currently devolved. That is called rolling back devolution. As set out in the Government’s White Paper, devolved Governments must have the right to give consent to secondary legislation in areas of devolved competence.
Hannah Bardell
I have listened carefully to hon. Members. I am not saying that there are not areas of concern, and I understand that we are in unchartered territory. I am sure when we look back, when the history books are written, how we have handled this matter will probably not reflect well on politicians, but we have had a good and detailed discussion.
I pay tribute to the hon. Member for Cardiff North. She has been extremely brave in standing up to say what she has said. She has stood up for her country and for the devolution settlement and the devolved nations. I commend her for that, and for her point about conferred powers and the evidence given in the Brexit Committee. That is really about protecting and preserving devolution.
I understand that the UK Government might have concerns about losing their grip on power, but they have to understand that for generations the people of Scotland, Wales and Northern Ireland have had power wielded over them at times by the UK Government, and devolution sought to move forward from that to create a more consensual approach across the UK. That has been absolutely vital in the development of our society and of how we see ourselves as nations and as the UK. As a result, internationally, we have been looked on as a world-leading model for how different nations in a union can share power.
I believe in Scottish independence and that we could sort all this out if Scotland had all the powers of a fully devolved nation. I appreciate that that is not necessarily going to happen straightaway. However, if the UK Government and the Conservatives continue on this road by stopping and encroaching on the devolved powers of Scotland and the other nations, Scottish independence is increasingly likely. They should bear in mind as we leave the EU the creation of a situation in which consent is required.
I understand the point made by the Labour spokes- person, the hon. Member for Brent North, about Xanadu, chickens and so on. I would make a point in return that UK Ministers will have power that Scottish Ministers and those from other devolved Administrations do not. Why should they be allowed to wield those powers and encroach on the powers of devolution? If we have the power of consent and there is a concern that something may not be agreed to, surely instead of being concerned about not adhering to our international obligations, it would not be beyond the wit of those Ministers and that Government to go back to the devolved nations to ask, “What will it take for you to give your consent and reach an agreement?” I am sure that that is entirely plausible.
I appreciate that we are in uncharted territory, but unfortunately those in government have got too used to having power over the other nations. If they are not willing to listen to and concede the points being made not just by us politicians but by people outside—organisations, trade bodies, law societies—who say that that is encroaching on the powers of devolution, that will be at their peril. That is absolutely something that will befall them. I will not withdraw my amendment and will press it to a vote.
Barry Gardiner
I beg to move amendment 4, in clause 2, page 2, line 7, leave out “subsections (3) to (5)” and insert “subsections (2A) and (5).”
This is consequential upon Amendment 3.
The Chair
With this, it will be convenient to discuss the following:
Amendment 3, in clause 2, page 2, line 12, at end insert—
“(2A) Regulations under subsection (1) to make provision for the purpose of implementing an international trade agreement may only be made if—
(a) the provisions of section [Parliamentary scrutiny of free trade agreements before signature] were complied with before the United Kingdom had ratified the agreement;
(b) the requirements under subsection (3) and under paragraph 2A of Schedule 2 have been met;
(c) the requirements under subsection (4) have been met; or
(d) the requirements under subparagraph 2(1A) of Schedule 2 have been met.”
This would expand Clause 2 to include international trade agreements that do not correspond to a prior or existing EU trade agreement. Sub-paragraph (d) would link to Amendment 20.
New clause 4—Parliamentary scrutiny of free trade agreements before signature—
“(1) The United Kingdom may not become a signatory to a free trade agreement which does not meet the criteria under section 2(3) unless—
(a) before entering negotiations on the proposed agreement, the Secretary of State has laid before Parliament a sustainability impact assessment carried out following consultation as prescribed by section [Sustainability impact assessments];
(b) both Houses of Parliament have passed a resolution authorising the Secretary of State to enter negotiations on the proposed agreement as prescribed by section [Parliamentary consent to launch of trade negotiations];
(c) during the course of negotiations, the text of the agreement as so far agreed or consolidated has been made available as prescribed by section [Availability of agreement texts];
(d) the Secretary of State has, within ten sitting days of the close of each round of negotiations on the proposed agreement, laid before Parliament a statement detailing the progress made in each area of the negotiations and the obstacles still remaining at the close of that round;
(e) the text of the agreement in the form to which it is proposed that the United Kingdom should become a signatory has been made available to Parliament for a period of 21 sitting days; and
(f) a resolution has been passed by the House of Commons approving the Secretary of State’s intention to sign the agreement.”
This would establish a procedure for parliamentary scrutiny before signature of free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 5—Sustainability impact assessments—
“(1) A sustainability impact assessment laid before Parliament under section [Parliamentary scrutiny of free trade agreements before signature](1)(a) shall be carried out following consultation.
(2) A consultation under subsection (1) shall—
(a) be carried out in line with any guidance or code of practice on consultations issued by Her Majesty’s Government, and
(b) actively seek the views of—
(i) Scottish Ministers,
(ii) Welsh Ministers,
(iii) a Northern Ireland devolved authority,
(iv) representatives of businesses and trade unions in sectors which, in the opinion of the Secretary of State, are likely to be affected by the proposed international trade agreement, and
(v) any other person or organisation which appears to the Secretary of State to be representative of interests affected by the proposed international trade agreement.
(3) The Secretary of State shall ensure that public bodies, non-governmental organisations and the public may be made aware of the consultation by circulating and publishing details of it prominently on relevant government websites.
(4) A sustainability impact assessment under subsection (1) shall be conducted by a credible body independent of government and shall include both qualitative and quantitative assessments of the potential impacts of the proposed trade agreement, including as a minimum—
(a) the economic impacts on individual sectors of the economy, including, but not restricted to—
(i) the impacts on the quantity and quality of employment,
(ii) the various regional impacts across the different parts of the UK,
(iii) the impacts on small and medium-sized enterprises, and
(iv) the impacts on vulnerable economic groups;
(b) the social impacts, including but not restricted to—
(i) the impacts on public services, wages, labour standards, social dialogue, health and safety at work, public health, food safety, social protection, consumer protection and information, and
(ii) the government’s duties under the Equality Act 2010;
(c) the impacts on human rights, including but not restricted to—
(i) workers’ rights,
(ii) women’s rights,
(iii) cultural rights and
(iv) all UK obligations under international human rights law;
(d) the impacts on the environment, including but not restricted to—
(i) the need to protect and preserve the oceans,
(ii) biodiversity,
(iii) the rural environment and air quality, and
(iv) the need to meet the UK’s international obligations to combat climate change;
(e) the impacts on animal welfare, including but not restricted to the impacts on animal welfare in food production, both as it relates to food produced in the UK and as it relates to food imported into the UK from other countries; and
(f) the economic, social, cultural, food security and environmental interests of those countries considered to be developing countries for the purposes of clause 10 of the Taxation (Cross-border Trade) Act 2018, as defined in Schedule 3 to that Act and as amended by regulations.
(5) The elements of the sustainability impact assessment to be undertaken under (4)(f) must be sufficiently disaggregated so as to capture the full range of impacts on different groups of developing countries, and must include both direct and indirect impacts, such as loss of market share through trade diversion or preference erosion.
(6) A sustainability impact assessment under subsection (1) shall include recommendations for possible action to maximise any positive impacts and to prevent or offset any negative impacts foreseen, including the possible limitation of the negotiating mandate so as to exclude those sectors most at risk from the proposed trade agreement.”
This would establish the process of consultation for, and the required content of, sustainability impact assessments for free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 6—Parliamentary consent to launch of trade negotiations—
“(1) The Secretary of State shall not commence negotiations relating to a free trade agreement which does not meet the criteria under section 2(3) unless all provisions of this section have been satisfied.
(2) A Minister of the Crown shall lay before Parliament a draft of a negotiating mandate relating to the proposed international trade agreement.
(3) The draft mandate under subsection (2) shall set out—
(a) all fields and sectors to be included in the proposed negotiations;
(b) the principles to underpin the proposed negotiations;
(c) any limits on the proposed negotiations, including sectors to be excluded from the proposed negotiations; and
(d) the desired outcomes from the proposed negotiations.
(4) No sooner than 21 sitting days after the draft of the negotiating mandate has been laid under subsection (2), the Secretary of State shall make a motion for a resolution in the House of Commons in respect of the draft, setting out the elements listed in subsection (3).
(5) A motion for a resolution under subsection (4) shall be made in such a way as to permit amendment of any of the elements prescribed under subsection (3).
(6) A motion to enable consideration of the negotiating mandate shall be laid before the House of Lords.
(7) The terms of any negotiating mandate authorised by a resolution under subsection (4) shall be binding upon the Secretary of State and anyone acting on his or her behalf in the course of negotiation.”
This would establish the procedure by which Parliament would agree a negotiating mandate for free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 7—Availability of agreement texts—
“(1) The text of any proposed international trade agreement which is being negotiated shall, so far as it is agreed or consolidated, be made publicly available within ten days of the close of each round of negotiations.
(2) Every—
(a) document submitted formally by the United Kingdom government to the negotiations, and
(b) agenda for each new round of negotiations
shall be made publicly available by the Secretary of State.
(3) All other documents relating to the negotiations and not falling within the descriptions provided in subsections (1) and (2) shall be made publicly available by the Secretary of State, subject to subsection (4).
(4) The Secretary of State may withhold from publication any document of a kind falling within the description in subsection (3) but must publish a statement of the reasons for doing so.
(5) In the case of any document withheld under subsection (4), the Secretary of State shall provide full and unfettered access to that document to—
(a) any select committee of either House of Parliament to which, in the opinion of the Secretary of State, the proposed agreement is relevant, and
(b) any other person or body which the Secretary of State may authorise.
(6) In the case of a document to which access is provided under subsection (5), the Secretary of State may specify conditions under which the text shall be made available.
(7) The Secretary of State shall maintain an online public register of all documents published under subsections (1), (2) and (3) or withheld under subsection (4).”
This would establish the procedure by which the agreed or consolidated texts of, and other documents relating to, international trade agreements would be made available during the process of negotiation.
Barry Gardiner
Earlier today, Members of the Committee may have tapped into their emails. If they are like me, they would have received 1,700 emails in less than 24 hours, because we are members of this Bill Committee.
The email was clearly a standard email. The subject heading was, “Amend the Trade Bill to protect democracy”, and it began, “Dear Trade Bill Committee Member…”, which is why I assume that most hon. Members in the Committee have received it. It has probably taken us all a great deal of time to sift through, perhaps from some of the child protection cases that have been brought before us and need urgent attention. That in itself is a concern. However, the fact that 1,700 people have emailed each one of us about this Bill shows the level of public concern that exists about its failings.
The Member’s explanatory statements make clear that these two amendments together have the effect of expanding the remit of clause 2, to include those international trade agreements that do not correspond to a prior or existing EU trade agreement. That means that they would have the effect of expanding the remit of the Bill itself, to include all the trade agreements that the UK will negotiate with its trading partners or, as we would see it, they would have the effect of restoring the Bill to its proper proportions.
On Second Reading, I mentioned that we believe the Bill to be highly negligent in restricting its focus only to those future UK international trade agreements where a corresponding EU trade agreement already exists. The Government repeatedly told us that the Bill would provide the basis for this country’s future trade policy once we had left the EU. The background notes to the Queen’s Speech of last June were unequivocal in stating:
“The Bill will put in place the essential and necessary legislative framework to allow the UK to operate its own independent trade policy upon exit from the European Union.”
Matt Western (Warwick and Leamington) (Lab)
Does my hon. Friend agree that this is a key piece of legislation? As he has been articulating, the amount of public interest in it—not just simply through the democratic process—shows that the public are seeking far greater scrutiny and visibility of the trading negotiations and legislation to be formulated and widened through the Bill. There is an expectation that it should be, and there is a void in the Bill. As was mentioned by the witness from the CBI, this is such an important opportunity and there is an expectation that scrutiny and consultation should be included.
Barry Gardiner
Yes, I absolutely concur with my hon. Friend. That is precisely what those of our constituents who wrote to us earlier today were getting at. The gentleman from the CBI who gave evidence only two days ago posed a very pertinent question to the Minister on two occasions—at the beginning and the very end of his remarks. He pointed out that the Minister and the Government have said repeatedly that they will bring forward legislation in the future to put in place what we now think should be here. They give no assurances of that though. What the CBI, supported by the International Chambers of Commerce, said was: if not now, then when?
The Minister is keen to suggest the importance of passing this Bill is that we are pressed for time, and we are. But if we are pressed for time on the need to have trade agreements that correspond to existing agreements in place by the time we leave the European Union, surely we are also pressed for time if we are to have, as the Government have suggested they could have on day one, new trade agreements in place ready to go. Where is the legislation to facilitate that? This should be that legislation and it is not.
By choosing to focus solely on providing continuity with pre-existing EU trade agreements, the Bill has gone back on the promise that the Government made in the Queen’s Speech, and in other places on other occasions. The opening words of the Bill identify its scope perfectly clearly:
“A Bill to make provision about the implementation of international trade agreements”.
My hon. Friend the Member for Sefton Central tried to elicit comment on that point from the witnesses this morning. The Bill bears no qualification to suggest that we should be focusing only on a subset of the broader whole. The issue before us is explicitly the implementation of the UK’s future international trade agreements, which is why we consider the two amendments to be essential to restoring the Bill to its correct proportions right from the outset.
It was highly revealing that several witnesses from the business community voiced their concern at the failure of the Bill to address so many essential aspects of our future trade policy, which are precisely the aspects on which their members desperately want clarity, so that they can start making the necessary investments and operational decisions on how to take on board the new realities. Was it not depressing to hear business leader after business leader in our witness sessions saying that, because there is not that clarity, businesses are now having to execute their plan B? They are being precipitated into taking decisions to make investments abroad in order to safeguard their trading future. That is not good for this country, yet in this Bill we could set out clearly how we will achieve that.
I was concerned and taken aback to hear how angry some businesses are about the Government’s mishandling of the whole process of informing them what the Bill is about and the Government’s abject failure to take on board any of the business community’s input into the official consultation. It came up time and again. It is hardly surprising when we consider that the Bill was already printed before the consultation on the White Paper informing it had run its course. The consultation closed on 6 November, and when we went into the Table Office on the morning of 7 November, copies of the Bill were available.
Hannah Bardell
I absolutely agree with what the hon. Gentleman is saying. Does he share my concern that when it comes to involving businesses, trade bodies and organisations in trade agreements, the Government have huge lessons to learn from the mishandling of the process and the anger? The British Retail Consortium was absolutely infuriated by how the process had been done. Businesses, individuals and trade bodies had been asked to spend staff time, effort and money feeding into a consultation, but there was no space. As he said, the Bill was printed before the consultation had even finished. That is an appalling way to treat businesses and trade bodies, and an appalling way to govern.
Barry Gardiner
I absolutely agree. It was shameful. The Cabinet Office circulates principles of Government consultation that make it clear that, when they consult, they should take notice of the responses. Nobody can persuade me that between 12 midnight on 6 November last year and 8 o’clock the following morning, all the consultation responses had been sifted, considered, documented and incorporated into the ministerial view that emerged in the Bill as printed. That is not consultation.
In that regard, we should all commend the representative of the CBI who spoke to us and gave the understatement of the year in his answer to my question during the second witness session on the Government’s mishandling of the consultation process. When he ventured his verdict, he said after much thought and deliberation that
“the optics were not ideal.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 34, Q79.]
They really were not.
I confess that I was not prepared for the level of anger from business in our oral evidence sessions, as industry representatives lined up alongside trade unions, civil society, legislators and academics to announce—to denounce, actually—the Government’s failure on every aspect of this Bill.
Matt Western
Does my hon. Friend agree that it is not simply the failure to consult that has frustrated and angered so many in the business community? As we heard earlier, many businesses are so worried and uncertain about the future that they are having to take out extensive warehousing facilities. We have seen that across the southern part of the UK, where warehousing is now at a super-premium because they do not know what is happening, what is going on or what is around the corner. That is coming at a great cost to UK businesses.
Barry Gardiner
Of course, my hon. Friend is absolutely right. As was stressed this morning in our latest evidence session, in what I think were the witness’s words, businesses say, “We want clarity.” At every turn, that is what the Government have denied them. We see the reports that businesses, industry and sectoral organisations are producing. We have read of the disconnect between the Administration and the business community. Many individuals have made the same point to me in private meetings, but it was quite remarkable to hear in this public forum just how deeply business feels betrayed as a result of the Government’s determination to do it their way and go it alone.
Government Ministers have promised, in the least convincing way, that the UK’s future trade agreements will remain to be talked about at some unspecified point in the future. I think the Scotch Whisky Association said that the “missing piece of the puzzle” was when that would happen. It was instructive to hear the evidence from the representative of the International Chamber of Commerce UK, who pointed out just how inadequate the Government’s commitments in that regard have been. He noted that the Government have given no indication of whether this mythical debate over our future trade policy will be a random chat, a formal consultation or a second piece of legislation. We do not know what it will be, and we do not know when—or if—it will be.
Given the Government’s record leading up to the publication of this Bill, it is small wonder that no one is prepared to give Ministers the benefit of the doubt. Since the consultation here was so bad, why should people trust that the Minister will do what he has suggested—I would not say promised—he will do? That is why we need to talk about the implementation of all the UK’s international trade agreements now, when we have the Trade Bill in front of us, not in some future world that the Secretary of State might imagine—
Barry Gardiner
I will give way to the Minister if he can give a promise or commitment from the Government to this Committee, and a date by which such legislation will be introduced.
Greg Hands
I understand the thrust of the hon. Gentleman’s argument, but does he not agree that if we were to agree to these amendments and new clauses today, we would be effectively pre-empting the ongoing consultation on what Britain will do on future trade agreements? That is the key thing to understand. On future trade agreements, we would wish to consult further; passing these new clauses and amendments today would be cutting that process short.
Barry Gardiner
Mr Davies, I have long admired this Minister’s chutzpah. The chutzpah of somebody to say, “Although I, as the Government, have completely abrogated my responsibility to get this Bill right, and you the Opposition have decided to fulfil my role for me, to try to put it right and get the stuff in place, if we passed your amendments we would not have consulted on them”! What complete, spurious nonsense. Let us have a grown-up debate, because that is not one; it really is not. It trivialises the work of this Committee and the important work that Government must do in scrutinising our future framework for trade negotiations. Mr Davies, I will calm down and try to get back to the essence of what we are doing here.
Barry Gardiner
I am grateful to the hon. Gentleman for giving me the opportunity to lower my blood pressure after the Minister’s intervention.
Mr Prisk
I will do my best, but he may not take that view when he calms down and the blood pressure starts to ebb. My understanding on Second Reading and in earlier debates was that the crux of Labour Members’ worries—on this Committee and in the House generally—was that the Bill’s problem is that it reaches far too wide. Why, then, propose amendments that extend its remit even further? Do the Opposition want a narrow or a wide Bill, and if it is too wide, why extend it?
Barry Gardiner
A plausible case. Elements of the Bill go far too wide, including the Henry VIII powers, which we will come on to later. We believe that the way in which the Government have sought to use Henry VIII powers in this legislation is too wide and unacceptable. The hon. Gentleman is right: that was one of the subjects of debate in our Second Reading deliberations. One other key criticism made by many Labour Members in that debate was that the Bill not only did the few things that it did badly, but failed entirely to do the one thing that it should have done properly. That is, to quote the Queen’s Speech policy paper, to
“put in place the essential and necessary legislative framework to allow the UK to operate its own independent trade policy upon exit from the European Union.”
There are many deficiencies in the Bill. Some relate to the widening of powers that it gives to Government, whereas others relate to the narrowness of the Bill.
Matt Western
Are we not simply taking the opportunity to ensure that this important legislation is comprehensive? It is about widening the remit of the Bill as regards the coverage of trade agreements without widening the powers of a select few.
Barry Gardiner
I am very grateful to my hon. Friend for saying incisively what I was trying to convey to the hon. Member for Hertford and Stortford. My hon. Friend is entirely right. We want a comprehensive Bill that is fit for purpose and does the job that business expects it to do. This Bill does not do that. We want it to do what the Queen’s Speech promised it would, but we do not want the Government to use the Bill to abuse their powers and widen the powers available to them.
Let me speak first to amendment 3, so that what we seek to achieve through it is clear. The amendment expands the Bill through paragraphs (a) to (d) to include new trade agreements that do not correspond to any prior or existing EU agreement. Paragraph (a) relates to free trade agreements as defined in the Bill under clause 2(7): namely, agreements that are notifiable under the relevant articles of the principal WTO goods and services agreements—that is, article XXIV of the general agreement on tariffs and trade and article V of the general agreement on trade in services. Paragraph (d) relates to international trade agreements that the Bill leaves undefined as being
“other than a free trade agreement.”
Dr Lorand Bartels, a witness on the first day of the Committee, noted in his oral evidence the Bill’s failure to define that second category. We will certainly endeavour to address that failure through a subsequent amendment to the Bill. For both categories of trade agreement, our amendments point ahead to the requirements of parliamentary scrutiny that will pertain to them. Let me say at this juncture that we consider the two types of trade agreement to be materially different in that regard.
As we heard from numerous witnesses, the modern generation of free trade agreements are comprehensive in scope. They range far beyond the narrow focus on mutual tariff reduction that characterised the multilateral trade agreements negotiated under the auspices of GATT in the 40 years after the second world war. They reach behind the border to address regulatory issues at the heart of our society, including issues of public health, social standards, labour rights and environmental standards, among many others. Those were precisely the reasons why we had such a comprehensive debate on the amendments proposed by the hon. Member for Livingston.
These are international treaties that introduce binding obligations on future generations and thus cannot be repealed as domestic legislation can be repealed. That is why in all our interventions we have proceeded according to the principle that there must be maximum parliamentary scrutiny and democratic oversight of free trade agreements to ensure that we get them right, rather than storing up the prospect of irreparable harm at a later date.
The other international trade agreements covered by the Bill, to use its phrase—that is, the ones that are not free trade agreements—include such ancillary agreements as mutual recognition agreements, according to the explanatory notes. There are many more such agreements, and they tend to be far more narrowly focused than free trade agreements, so we have proceeded on the assumption that they will not require the same level of parliamentary scrutiny. That is a deliberately pragmatic approach I have adopted to ensure that future Administrations can make progress in agreeing such deals where necessary, but we will ensure that there is sufficient potential for scrutiny in all cases to guard against any potential harm from those other agreements.
As well as drawing in the new UK trade agreements that do not correspond to a prior or existing EU trade agreement, amendment 3 speaks to the new UK trade agreements that correspond to a prior or existing EU trade agreement—that is, the ones that the Government would like to restrict us to in this Bill. Again, let us agree from the outset that they will be new trade agreements, even if they correspond to agreements that the EU had previously negotiated with the third country in question. Ministers have done their level best to suggest that the new UK agreements will just be rolled over or grandfathered from the pre-existing EU deals. The delegated powers memorandum issued alongside the Bill by the Department for International Trade is unequivocal: these will be new agreements, on two counts. First, the agreements will be legally distinct from any pre-existing trade deals the EU may have negotiated—that was underlined by witnesses to the Committee, such as Dr Holger Hestermeyer—and secondly, and even more important, these new trade agreements may include
“substantial amendments, including new obligations.”
It is vital to read the Bill on this point. To qualify for the waiving of scrutiny foreseen in the Bill, a UK trade agreement need bear no resemblance whatever to the EU agreement it seeks to replace. Do I think the Government are likely to waive that scrutiny? No. Is the legislation effective in allowing the Government to do that? Yes. Under clause 2(3) and (4), there is no requirement for the UK agreement to match or mirror the EU’s existing agreement in any way, shape or form. It can be a wholly new departure with wholly new obligations, since all the Bill requires is that the other signatory and the European Union were signatories to a free trade agreement—not a corresponding one or a similar one, but “a free trade agreement”—before Brexit takes effect.
Matt Western
If I recall correctly, Dr Holger Hestermeyer talked about not only scrutiny, but the importance of having impact assessments alongside the consultation, as these are, as my hon. Friend was explaining, essentially new agreements being put in place.
Barry Gardiner
Again, my hon. Friend makes a very important point. We heard from our witnesses about the importance of understanding what we are doing before we rush out and do it. My remarks on this afternoon’s legislation have been extremely cautious in many respects, because I think that legislation is important. It is particularly important in this area, because we are talking about internationally binding obligations that are extremely difficult for us, as a country, to reverse. That is precisely why my hon. Friend’s point is so essential. We need proper impact assessments before we have our mandates established and before negotiations are concluded.
We heard in the first evidence session that there is every likelihood that the UK’s trading partners will regard the negotiation of new trade agreements as an opportunity to re-open the provisions that they had previously negotiated with the EU. Those agreements were designed to meet the interests of all 28 member states of the European Union, and the relative weight of the EU in the negotiations that informed them means that the third country in question would have been pressed into making sacrifices that it might not choose to make when acting alone in forming a bilateral relationship with the UK.
Discussions on those countries’ new agreements with the UK are taking place now. I know that the Government are respectful of the EU treaties and are not trying to negotiate at the moment, but they are having fairly detailed discussions. The Minister, in his sedentary position, remains immobile but a smirk is creeping across his face. Those discussions are taking place behind closed doors, so we do not know what the Government have already said, and what they have said they would be prepared to trade away. Make no mistake: the Government are keen to ensure that they get deals done. This whole endeavour is a different way of approaching our trading future, and the credibility of the Government’s position politically relies on being able to conclude deals swiftly. We must be very wary of negotiations done in secret in order to achieve quick results for political convenience to save the Government’s blushes.
We know that we are talking about new agreements, which could well include substantial new obligations on the part of the UK. That is why the Government’s suggestion that they should be granted the powers to smuggle the implementing regulations past Parliament with no provision for scrutiny is so outrageous. The need for a proper parliamentary oversight process for such agreements was alluded to by our witnesses, Jude Kirton-Darling, the rapporteur on the EU Trade Committee, and Dr Brigid Fowler from the Hansard Society. They stressed that point repeatedly in their oral evidence to the Committee, as did so many other witnesses. To that end, paragraph (b) in amendment 3 looks ahead to the enhanced scrutiny procedures that we will propose under schedule 2 to replace the negative resolution procedure envisaged by the Bill as it currently stands.
Amendment 4 is consequential on amendment 3 and would require any regulations made under clause 2(1) of the Bill to be subject to the provisions not of subsections (3) to (5), as at present, but of subsection (2A), which would be introduced via amendment 3, and subsection (5), which speaks across to the Treasury’s powers to set tariffs under the Taxation (Cross-border Trade) Bill currently going through Committee in parallel with this Bill.
Together with amendments 3 and 4, I would like to speak to the four new clauses that they bring into play, namely new clauses 4 to 7. New clause 4 is the top-line clause, because it outlines the stages of what we consider to be a proper parliamentary procedure for scrutiny and oversight of free trade agreements before signature. Once again, let me underline that the procedure is designed to apply to free trade agreements, not to other international trade agreements referred to in the Bill under clause 2(2)(b).
Equally, let me emphasise the importance of the words “before signature” in the title of the new clause. We have deliberately designed a procedure so that Parliament has the opportunity to debate and direct trade negotiations in the early stages, rather than protesting once it is too late. We will surely be supported by the Government in that, given how publicly the Secretary of State has rued the loss of legitimacy that led to the failure of the TTIP negotiations between the EU and the USA. Nick Dearden from Global Justice Now touched on exactly that point in our first evidence session.
Our aim in bringing forward the maximum possible scrutiny and oversight before signing is to ensure that Parliament can amend and improve free trade agreements where they are found to be wanting. That is infinitely preferable to a system whereby Members are presented with negotiated agreements on a “take it or leave it” basis, thus risking the loss of an entire agreement and all the vital export opportunities that go with it simply because there was no possibility of excising or amending one or two of the offending provisions.
In oral evidence, Dr Hestermeyer referred to the system in Germany, where Parliament is involved early on in the proceedings precisely so that it can direct the federal Government in respect of trade negotiations, even though their negotiations are carried out by the European Commission. We want a constructive procedure that focuses on the best possible outcomes for our future trade agreements, not one where the whole ship is spoiled for a ha’p’orth of tar.
I will run through, in plain English, the six stages we have set out and then expand on them as necessary as they have been placed in the amendments, as subsequent new clauses hang off the overview clause. The first is the need for a sustainability impact assessment before the launch of negotiations towards a free trade agreement. The second is the need for Parliament to be involved in setting the mandate for the objectives of the negotiations. The third is the need for transparency—and, in particular, access to negotiating texts—while the negotiations are being conducted. The fourth is the need for regular progress reports to Parliament after each round of negotiations. The fifth is the submission to Parliament of the full text of the agreement as negotiated before its signing. The sixth is a resolution from the House of Commons to give the Secretary of State the green light to sign the agreement.
The first step in any proper procedure towards negotiating a free trade agreement is to undertake a sustainability impact assessment to identify the opportunities and risks that the agreement might present. Nick Ashton-Hart spoke of the importance of that in his oral evidence to the Committee. Carrying out a sustainability impact assessment is already a standard requirement for every new set of EU trade negotiations, and the methodology for conducting such assessments has been developed considerably over the years. Our new clause 5 provides basic instructions as to what a sustainability impact assessment should include at a minimum. For those who want to take the methodological issue further, the European Commission published in 2016 the second edition of its “Handbook for trade sustainability impact assessment”, which I refer the Minister to and is freely available online.
Crucially, our blueprint for what a sustainability impact assessment should include relates not only to the content of the assessment, but to the process that lies behind it. Any impact assessment must incorporate consultation with the devolved Administrations and with representatives of all those businesses and trade unions that are likely to be affected, as well as offering the opportunity for all other bodies to contribute to it.
We have also written into the new clause that the consultation must be in line with the existing code of practice for Whitehall consultations—something that we might usually consider unnecessary to include in legislation. Given the extraordinary mishandling of the consultation prior to this Bill, there obviously needs to be a reminder that every consultation should follow the rules.
The assessment needs to cover the economic impacts of any trade agreement, and importantly those impacts need to be disaggregated both geographically and by sector. The consequences for jobs, small and medium-sized enterprises and vulnerable economic groups are particularly significant, as free trade agreements have sometimes been to the disadvantage of all but the most powerful economic actors.
Alan Brown
Apologies, but I just want to take the hon. Gentleman back slightly. I agree with his suggestion that sustainability impact assessments should be carried out and should seek the views of the devolved Governments. What does he suggest happens if a sustainability impact assessment shows a negative impact on one of the devolved Administrations? Given that there is no requirement for consent, how would that be resolved?
Barry Gardiner
I am very happy to take that comment on board, but I do not want to get sucked back into our previous debate—I know that you would not let me anyway, Mr Davies.
That is precisely what an economic impact assessment is there to do: to show up those areas of the economy that might benefit and those that might be losers from an international trade agreement. It is then a matter for the Government, and a responsible Government should be trying to balance the interests around all of the United Kingdom to spread wealth and prosperity throughout all of the parts of these islands.
The other day, I was deeply affected to see a graph that I had not seen before and is specifically relevant to the hon. Gentleman’s point. In the top right-hand quadrant were those countries where both GDP and average income are growing. In the bottom left-hand quadrant were those countries where both GDP and average income are declining. In the top left-hand quadrant were those countries where GDP is declining but average income is growing. In the bottom right-hand quadrant were those countries where GDP is increasing but average income is declining. There was only one country in that bottom right-hand quadrant: the United Kingdom. That is a disgrace. That is a shame. It shows precisely why we need economic impact assessments. As many trade agreements have shown over the years, it is possible to increase the GDP of a country through a trade agreement while the people of the country become poorer. That is why we must take these deliberations so seriously. That is why putting these strictures in place is a vital part of what a responsible Government must do in relation to our future trade policy.
Greg Hands
I think that the hon. Gentleman is saying that he is very satisfied with the current system of EU scrutiny in relation to EU trade agreements.
Barry Gardiner
I am pointing out to the Minister, in response to his earlier remarks, the reason I voted for CRAGA then. I think I am right in saying that while his party voted against CRAGA, which it is now relying upon so heavily—there is an irony there—he did not turn up for the vote. I turned up for the vote and I voted for it, but because it was subject to all the scrutiny procedures that were already in place from the EU. The situation has changed.
Mr Prisk
I have listened very carefully to the six stages of assessment. I do not have a problem with the principle that there should be a thorough process, but the amendments and new clauses ignore one tiny detail: next March, we leave the European Union. All business representatives, particularly of businesses in my constituency, have said that they need to know what happens on 1 April. How will it be possible for any of these existing trade agreements, which is what the Bill is about, to be transferred across under his proposal? How many years will businesses have to wait?
Barry Gardiner
In fact, they would not have to wait. I have great respect for the hon. Gentleman and I know he speaks with real experience in these matters, having been a trade Minister. I ask him to look at what we have proposed: we have tried to introduce the bifurcation at a high level in the legislation. We have put the proposals in at that point. Of course, they would have an impact on all the new free trade agreements. We are trying to ensure that for new free trade agreements, this is the proper process of scrutiny that will come into place. On the corresponding agreements—where the EU already has an agreement—there will be a streamlined procedure, but one that is still subject to appropriate parliamentary scrutiny, particularly where those agreements have been substantially amended.
Let me conclude this section of my remarks by repeating that we have tabled the amendments and new clauses to establish a procedure for new free trade agreements that do not correspond to any prior EU agreement—that is the point I just made to the hon. Member for Hertford and Stortford. I was struck by how forcefully the representatives of business made the case to the Committee in our final oral evidence session on 23 January that there needs to be substantially greater consultation on the new trade agreements that the Government are negotiating, which correspond to prior EU agreements. Wherever those EU agreements are modified to incorporate new obligations, those obligations must be highlighted and presented to Parliament, to business and to the country as a whole, for proper debate, proper scrutiny and proper accountability. We will precisely return to the issue of scrutiny for these new replacement UK agreements as we go through the rest of the Bill.
Greg Hands
The Government have been clear that we do not seek to renegotiate existing trade agreements. In leaving the EU, we seek to maintain continuity in our existing trade and investment relationships. As such, we seek no change in the effects of our existing agreements as we leave the European Union. Therefore, special review procedures, as proposed in new clause 8, for example, are unnecessary.
The powers in the Bill will be used only to transition the existing trade agreements that the EU has signed up to prior to exit day. The Bill does not relate to the negotiation, signature or implementation of future free trade agreements. We have taken that approach for a specific reason: we want Parliament to play a vital role in the scrutiny of future trade agreements, as it always has done. In the trade White Paper, we made it clear that our future trade policy must be transparent and inclusive, and that Parliament will be engaged throughout the process. We will continue to respect the role of Parliament when agreeing the terms of future trade agreements.
Bill Esterson
Is the Minister giving us an undertaking that there will be an affirmative or super-affirmative scrutiny process in Parliament on the new trade agreements?
Greg Hands
All that will be considered in due course. We will bring forward proposals in the coming months on how Parliament will interact with future trade agreements.
Hannah Bardell
Will the Minister give a definition of “due course” and say what his vision is? Many external organisations and hon. Members have expressed about the structures in this place and Delegated Legislation Committees. I have sat on those Committees and I know they are not sufficient to allow proper scrutiny of the thousands of statutory instruments and regulations that will have to be dealt with, or to allow Parliament and its Members to have a say on them and be confident that they will be able to scrutinise what has been decided.
Greg Hands
We want a clear and significant role for Parliament in the scrutiny of future trade agreements. Returning to my intervention on the hon. Member for Brent North, the amendments and new clauses would pre-empt those arrangements before we have been able to consider properly what we are doing and to consult on that.
On 5 January, the Government published a response to the trade White Paper, which covered a number of things—of course, not everything that was in the White Paper is in the Bill. We will consider the views expressed in that consultation as we develop proposals regarding the role of Parliament in respect of future trade negotiations.
Hannah Bardell
A number of deficiencies have been highlighted. Does the Minister think that some of the deficiencies in the Bill, and the fact that he is having to tell us that some things will come later—I appreciate that he has great integrity and the best intentions—relate to the fact that the Bill was published before the consultation period ended? Is that the reason why some aspects of the Bill are so deficient?
Greg Hands
As I have stressed, consultation on future trade policy is ongoing. It is not dependent solely on the trade White Paper. We are consulting by speaking with partners, businesses, the devolved Administrations and other stakeholders constantly as we seek to bring forward proposals on our future trade policy. However, as I have explained, we consciously decided to make this Bill about our current trading arrangements and ensuring that they can be transitioned properly into UK law.
Therefore, these amendments pre-empt the full consideration of the 7,429 responses received during that consultation and of the views expressed inside and outside the House. It is right that we take the appropriate amount of time to develop a range of proposals that ensures that Parliament, the devolved Administrations, devolved legislatures and a wide range of stakeholders, including business and civil society, are engaged throughout the negotiating process.
The hon. Member for Brent North made a fascinating speech on what the UK’s future trade policy might look like, but that is not what we are deciding today. He said that Government can smuggle new trade agreements through Parliament without a vote. No. The implementation powers in clause 2 are exercisable by negative procedure statutory instruments. These are subject to a vote in either House of Parliament, if the regulations are objected to by parliamentarians. Parliament has the right to vote on the implementation of transitionally adopted trade agreements, if it so desires.
Barry Gardiner
The Minister must be more straight- forward with the Committee. We have already been over this ground. He knows that the negative procedure does not make provision for anything but the grace and favour of the Government in giving Her Majesty’s Opposition an opportunity to object. There is no necessity at all for a debate or vote on the Floor of the House. He must be straightforward about that.
Greg Hands
Again, I stress that Parliament has the right to vote on the implementation, but we also must remember that these will be agreements that are substantively the same as the current agreements. The reason I intervened on the hon. Gentleman—when I think he confirmed he was quite content with the existing EU scrutiny procedures—is that of course all of those agreements have been through the existing EU scrutiny procedures. I was not necessarily with him in the Chamber or upstairs each time one of those EU trade agreements went through, I think he was satisfied with those procedures at the time.
Bill Esterson
Is the Minister categorically saying that there will be no changes to the agreements that we are describing as corresponding agreements before they come through?
Greg Hands
I refer the hon. Gentleman to the evidence of the International Trade Committee, if that is in order. We had a good round about this at the Select Committee yesterday—some of the members of the Select Committee are here or are at least members of the Bill Committee—and we are quite clear that 70-plus partners have been engaged in this process. All 70-plus have agreed in principle; none has raised objections in principle to doing this. There is no reason that they necessarily would want to change the substance. They need continuity in their trading arrangements in the same way that we do.
The hon. Member for Brent North claimed that a wide range of stakeholders provided oral evidence calling for greater scrutiny mechanisms for future approved trade agreements. I think that was a fair comment. There were a number of views on how our future scrutiny arrangements might be, but I think the evidence session showed just how varied and complex the views on this matter are. It is right that we take the time to think through our options carefully. Let us not rush ahead and put in place arrangements that may not be fit for purpose. That is why we will be returning to future trade agreements in the future.
We will return to Parliament with proposals on future free trade agreements, on which we will seek views in due course. Accepting these amendments and new clauses would frustrate our ability to fully consider all of the issues and options in the round. I therefore ask the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
I will try to extract the crumbs of comfort from the Minister’s remarks. He has said that he recognises that there is a role for greater parliamentary scrutiny of our trade arrangements and that these are matters to which we should return in due course. He has also suggested that we should be able to have a proper consultation on the future trading arrangements. Those are things that I take as good will on the part of the Minister.
I propose not to press these amendments, but I make it clear to the Minister that, at a later stage in the passage of this legislation, he should table his own amendments to do what the Bill says it is about and what Her Majesty in the Gracious Speech to Parliament said it was going to be about. If he does that, I will be very happy. I will see him as a man of his word, and will be looking forward to going through what I assume will be a very similar text to the one I have tried to present to the Committee today.
I will not press these amendments today, but I put the Government on notice that it is time for them to act and to come forward with their own proposals. If they do not, these Opposition measures will return at a later stage. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Taxation (Cross-border Trade) Bill (Fourth sitting)
(6 years, 3 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 8 / Noes: 10 - Question accordingly negatived.
The Chair
It is quite warm in the room, so if any right hon. and hon. Members would like to remove their jackets, please feel free.
Clause 8
The customs tariff
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 7, in clause 32, page 19, line 14, leave out subsections (2) to (4).
This amendment is consequential on NC1.
Amendment 8, in clause 32, page 19, line 31, leave out
‘other than regulations to which subsection (2) applies’.
This amendment is consequential on NC1.
New clause 1—Setting the customs tariff: enhanced parliamentary procedure—
(1) This section applies to—
(a) the first regulations to be made under section 8, and
(b) any other regulations to be made under that section the effect of which is an increase in the amount of import duty payable under the customs tariff in a standard case (within the meaning of that section).
(2) No regulations to which this section applies may be made by the Treasury in exercise of the duty in section 8(1) except in accordance with the steps set out in this section.
(3) The first step is that a Minister of the Crown must lay before the House of Commons a draft of the regulations that it is proposed be made
(4) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (3)—
(a) the rate of import duty applicable to goods falling within a code given in regulations previously made under section 8 or in the draft of the regulations laid in accordance with subsection (3);
(b) anything of a kind mentioned in section 8(3)(a) or (b) by reference to which the amount of any import duty applicable to any goods is proposed to be determined; and
(c) the meaning of any relevant expression used in the motion.
(5) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).
(6) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4)(a) to (c), give effect to the terms of the resolution referred to in subsection (5).
This new clause establishes a system of enhanced parliamentary procedure for regulations setting the customs tariff, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of import duty on particular goods.
Peter Dowd (Bootle) (Lab)
It is a pleasure to see you in the Chair, Mrs Main.
The new clause establishes a system of enhanced parliamentary procedure for regulations setting the customs tariff, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of import duty on particular goods. It requires a vote in the House of Commons to authorise the rate of import duty on particular goods through enhanced parliamentary procedure. The details are set out in the new clause—it is indeed quite detailed.
I do not consider asking for normal parliamentary oversight to be a controversial request, as shocking as that might seem to the Government. They have made it clear that this is a money Bill and will therefore avoid proper scrutiny in the House of Lords. I sound like a stuck record, but Parliament’s ability to scrutinise has been a theme since the general election.
That concession highlights a key point, however: this is Parliament’s power of the purse. That convention dates back to Charles II and ensures that taxes cannot be collected without the consent of the Commons. We should be deeply concerned about this Bill getting through because we were not alert to or cognisant of the significant issues that face us. In all the melée of Brexit, the EU (Withdrawal) Bill, this Bill, the Trade Bill and the other Bills that will come through, we must assert our right as parliamentarians to hold the Government to account, particularly when it comes to taxes.
The raising and lowering of tariffs is effectively the taxation of goods coming into the country. It will bring revenue to the Exchequer that will have a significant impact on public finances and departmental budgets, not to mention the economy as a whole. I could push further on the £350 million a week for the NHS, but I will not on this occasion—I know the Minister will be pleased.
The Financial Secretary to the Treasury (Mel Stride)
Thank you for not mentioning it.
Peter Dowd
The Opposition believe that, just as changes to tax are brought in in the form of a money Bill, so should changes to tariffs and customs duty. That is practical, reasonable and very responsible, if I may say so. We are not suggesting that there should be a vote every time that a tariff is raised or lowered; instead we envisage the Government regularly introducing to Parliament a list of changes for Members to scrutinise and vote on.
The alternative to a democratic and open process is the hoarding of power in the Treasury or the Department for International Trade, which alone will set the UK’s future customs tariffs. The workings and logic behind their decisions will be largely unknown, and hidden from the scrutiny of the House. That is the theme of our amendments with regard to the Select Committees. The Minister says that Select Committees will be able to bring the Minister in, question them and have a chat with them, but I am afraid that is not strong enough.
This is the biggest constitutional change we have had for as long as anyone can remember, and it is incumbent on us to ensure that when we have major shifts in power between the Executive and the Commons, we can challenge them. I think a confident Government would acknowledge that. I would not use the word “concede”, but I think a Government, who were confident in their own abilities—
Peter Dowd
I refuse to use the phrase “strong and stable”, but if the Government had confidence in their policies, they would not shy away, in any way, from the proposals that we have set out. I am interested to hear what the Minister says about them. In the oral evidence sessions, several witnesses expressed concern, and were reluctant to agree that the lines of communication between businesses, between organisations, between agencies and so on were conducive to getting a proper hearing. I think Members most probably got that message from the witnesses. Communication lines are there, but in a sense no one is at home; that is certainly the perception that I got.
Customs tariffs will be unamendable and unchangeable except, in effect, at the whims of the Chancellor and a Trade Secretary. It may well be that those individual Ministers are very open to dialogue and persuasion, and are in listening mode. Then again, they might not be, and this Parliament has always challenged the whim of whoever might be in power. [Interruption.]
The Chair
Order. I am sure the hon. Member for York Outer (Julian Sturdy) knows where the off switch is. Perhaps he would like to find it?
Peter Dowd
The Government have done precisely the same thing in relation to scrutiny—they have turned it off.
As I said, we cannot allow this to be left to the whims of a Minister, because as has been suggested in the last day or two, the amount of Ministers coming and going has been vast, and it is causing a certain amount of dissonance in the operation of Government from what I can gather, and from what the report says. So, we cannot have a system that is at the whim of this dissonance, so to speak, in two or three years’ time—whichever party is in power.
Ultimately, this comes back to the phrase by James Otis, which must have been quoted millions of times in the House in the three or four centuries since it was spoken: “No taxation without representation”, because that leads to tyranny.
Kirsty Blackman (Aberdeen North) (SNP)
It is a pleasure to be here and to have you in the Chair this afternoon, Mrs Main. We support new clause 1, which has been tabled by the Opposition, and we would be happy to support it if they decide to put it to the vote.
I have concerns about clause 8 because of the deficiencies that we discussed earlier. I hope that, by Report, the Government will have come back to some of the suggestions that the official Opposition and the Scottish National party have made, and given them some level of consideration. Although clause 8 has deficiencies, it is my working assumption that even if we were in a customs union—which would be my preferred option—we would still need to set our tariffs and to lodge those schedules with the World Trade Organisation, so, even in the event of the UK being in a customs union with the EU, I imagine that there would still be a requirement for the Government to have the power to set tariffs.
On that basis, clause 8 is necessary whether or not the Government decide to come out of the customs union or to pursue a customs union. So, although it is deficient, we need to do something. It would be useful if the Minister was to say that he might consider coming back on Report to some of our amendments—even if he said he would consider it, that would be incredibly helpful—but as I said, we will support Labour’s new clause.
Mel Stride
It is a pleasure to serve under your chairmanship, Mrs Main. I thank the hon. Member for Bootle for his remarks. His usual brilliance was enhanced by an unknown quality of being able to summon dramatic music to enhance his comments. He gets better and better, the longer we hear from him.
The hon. Gentleman raised various general points, including the fact that this is, in effect, a Finance Bill and therefore will not be amended in the House of Lords. There are good reasons for that. There is a very, very long tradition for Bills that relate substantially to tax and the rating of charges to be handled in that way—both by this Government and by Labour, when it was in government.
Mel Stride
The Government of course listen to everybody who has an opinion—or, should I say, a relevant opinion; a rational opinion, even—on the matter in hand, and we will continue to do so.
The hon. Member for Bootle raised the obvious and important point that with Brexit in the round, we are looking at a big constitutional change—I think that was the expression he used—which is undoubtedly true. However, he seized on that known fact to suggest that in the narrow case of the change in the duties on specific goods, we should therefore have a highly augmented level of scrutiny. I do not think that the two things are linked. The Bill deals narrowly with duties, and more robust scrutiny is suggested through the affirmative statutory instruments for the first introduction of the tariff and for all duties that are changed in an upward direction afterwards. He stated that there will be a huge change, but the Bill’s purpose is to narrow down that change wherever we can, not least regarding our tariff arrangements.
Peter Dowd
I understand exactly where the Financial Secretary is coming from. Given the level of change and the surety that we must give people that these matters are being carefully and assiduously considered, the parts are in a way greater than the sum. Does he therefore agree that it is important to send a message that Parliament—appropriately, through a proper mechanism, and not through ministerial diktat—should be able to consider these matters in more detail than it can under the mechanisms and frameworks being provided by the Government?
Mel Stride
The hon. Gentleman has eloquently revisited the points that he made in his opening remarks. We have a narrow scope for the tariff’s introduction, with all the thousands and thousands of different categories, duties, goods and so on that will be contained within it. It allows for provision to vary those duties. As I mentioned, we have said that when the tariff and all the duties that are under it are introduced—and indeed, when the duties are increased, or the Government seek to increase them—the affirmative procedure will be in place. Given the narrowness of the scope of the regulations and the fact that enhanced scrutiny will be in place through the affirmative procedure, I hope that the hon. Gentleman feels that that will be enough under the circumstances.
Before I deal with the specifics of clause 8 and the new clause, I will respond to the hon. Member for Aberdeen North. She exhorted me to consider her pleas carefully—how could I possibly not, under those circumstances? I can reassure her. As we were discussing earlier, I had haggis for lunch, with some mashed potato and swede, and I now have the “Braveheart” spirit—although that did not end all that well, did it? However, fortified with that spirit I will do my utmost, as I would in any case, and consider the amendments very carefully. I am sure that the hon. Lady will return to the matters on Report.
Kirsty Blackman
I beg to move amendment 107, in clause 9, page 6, line 24, leave out “may make regulations” and insert
“must make regulations following consultation with relevant stakeholders”.
This amendment requires the Treasury to consult relevant stakeholders before making regulations giving effect to an arrangement for a preferential tariff.
To explain the reasoning behind our amendment I need to mention a couple of things in the clause. It is headed, “Preferential rates: arrangements with countries or territories outside UK” and the explanatory note explains more about those:
“This clause broadly covers any arrangements, international agreements or memoranda of understanding”.
Therefore it relates to whenever there is a move away from a most favoured nation tariff into a free trade agreement, or some other form of preferential tariff rate.
This short amendment would make two changes to the Government’s intentions around the clause. First, it would leave out “may make regulations” and insert “must make regulations”. In subsection (1), the Bill states that,
“the Treasury may make regulations to give effect to the provision made by the arrangements”.
If there has been an international agreement, surely the Treasury must make regulations, because that would be sensible. That is the first change we suggest.
The second change we suggest is on consultation. It is clear that there has not been the right level of consultation. The Government have said that if they are varying the rate of import duty downwards rather than upwards, there should be a less rigorous procedure, but if the rate of import duty is varied downwards, that may have a greater effect on our local producers and manufacturers. The amendment asks for there to be “consultation with relevant stakeholders” in advance of not just international agreements, but any of these changes.
When the Government are deciding to make international regulations, it would be useful if they first consulted the House using the existing processes. I understand that most Governments across the world make trade regulations with the authority of the House, rather than simply by the authority of the Executive. In the absence of those kinds of changes, which are outside the scope of the Bill, we are asking for the Government to definitely make the regulations—if they are bound by an international treaty or agreement, it would be sensible to do so—but to consult with relevant stakeholders. We want to put that duty of consultation on the Government.
Peter Dowd
The points that the hon. Lady makes hit the nail on the head in relation to engaging with those who will be affected by the legislation. I fully understand where she is coming from.
The clause allows the Government to introduce through regulations a lower preferential rate of duty applying to goods originating from specific territories. It also covers a broad range of situations, including arrangements between the UK and a British overseas territory, free trade agreements negotiated with Britain and other countries, and a possible customs arrangement with a large economic regional organisation such as the European Union. Preferential trade agreements comprise a variety of arrangements that favour member parties over non-members by extending tariff and non-tariff preferences. PTAs, particularly free trade agreements, have proliferated in recent years. In the post-war period, the EU has developed the largest network of PTAs in the world. The explanatory notes state:
“The ability to use a preferential rate under an arrangement may be subject to any conditions specified in the arrangement, including…quotas, rules of origin or safeguard measures.”
Given that context, it is important that stakeholders are taken into account, as the hon. Lady says. There could be a wide range of stakeholders, and the proposal suggested by the Minister did not go far enough. He almost seemed to suggest that everybody is included, but everybody is not included if the Secretary of State does not want to include them. The clause presents another example of the litany of delegated powers found throughout the Bill. The Treasury takes immense powers without proper consultation right across the board.
Clause 9 is beyond vague when it comes to explaining what consideration the Treasury will make when introducing regulations that will pave the way for offering preferential rates. The clause leaves a range of questions unanswered, particularly around the test that the Treasury will put in place before preferential rates can be included.
I am sure that all members of the Committee agree that reciprocal preferential rates are the foundation of free trade agreements. Again, that goes to the heart of who is to be consulted on this one, and the clause gives a free hand to introduce regulations that will create preferential rates and seem to open the door to the Treasury to—
The Chair
Order. This is a narrow debate on amendment 107. There will be a debate on clause stand part later. I ask the hon. Gentleman to confine his remarks to the amendment proposed.
Peter Dowd
I will, Mrs Main, and I will come back to the clause later if that is appropriate. I am just trying to support the contention made by the hon. Member for Aberdeen North that stakeholders are crucial to making the measure work. Having tried to set out the context, I am happy to sit down and to come back later to talk about the clause more generally. However, I support the hon. Lady’s contention.
Mel Stride
As the hon. Member for Aberdeen North has said, the amendment seeks to do two things. It would require the Treasury to consult before giving effect to a trade arrangement that has been agreed with another territory or country, and to make regulations in such circumstances.
To take the first of the points, any consultation on regulations made under clause 9 would not be meaningful as the Government would not be in a position to take account of the views received without withdrawing or renegotiating the agreement reached. As set out in the trade White Paper, the Government have committed to engaging stakeholders throughout the process of negotiating new trade arrangements.
On the proposed requirement for the Treasury to make regulations, it goes without saying that the Government are required to meet their international obligations in the trade agreements that they have entered into. The word “may” is used, however, because there might be unforeseen circumstances that make it inappropriate for the Treasury to be obliged to lay regulations. As I say, however, the Government will of course be bound their international obligations.
On that basis, I urge the Committee to reject the amendment.
Kirsty Blackman
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider:
New clause 2—Preferential rates under arrangements: enhanced parliamentary procedure—
(1) This section applies to—
(a) the first regulations to be made under section 9 in respect of a country or territory outside the United Kingdom, and
(b) any other regulations under that section the effect of which is an increase in the amount of import duty applicable to any goods set by any regulations to which paragraph (a) applies.
(2) No regulations to which this section applies may be made by the Treasury in exercise of the power in section 9(1) except in accordance with the steps set out in this section.
(3) The first step is that a Minister of the Crown must lay before the House of Commons—
(a) a statement of the terms of the arrangements made with the government of the country or territory outside the United Kingdom; and
(b) a draft of the regulations that it is proposed be made.
(4) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (3)(b), the rate of import duty applicable to goods, or any description of goods, originating from the country or territory.
(5) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).
(6) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4), give effect to the terms of the resolution referred to in subsection (5).
This new clause establishes a system of enhanced parliamentary procedure for regulations setting lower import duties as a result of an arrangement made with the government of another country or territory, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of import duty on particular goods.
Peter Dowd
My new clause 2 would require a vote in the House on regulations that lower import duties as a result of an arrangement between the Government and another country. I will wrap that up with speaking to the clause in general, with your permission, Mrs Main.
The powers the Government have given themselves under the Bill to offer preferential rates to other countries through free trade agreements, and with no regard to the House of Commons, should concern us all. I will return time after time to the theme of parliamentary accountability. The lowering of import duties, if done carelessly and without consultation of key industries, can have disastrous economic consequences that can destroy whole sectors and cost jobs and livelihoods. The Government have made it clear that this is a money Bill, as I said earlier, and will therefore not be subject to further scrutiny.
In that regard, the raising and lowering of tariffs are in effect the taxation of goods coming into the country. As far as I am concerned, it is crucial that we maintain frictionless negotiation of free trade agreements, instead of risking the scenario that I am afraid the Bill will almost inevitably enable or provide for. It appears that the powers outlined in the clause, as in other clauses, comprise a huge accretion of power to the Treasury, which will give it a hegemony in Parliament, notwithstanding the issue of negative or affirmative resolutions. Ministers will be left to their own devices to introduce regulations where they see fit, with no parliamentary oversight of any significance, and no requirement to consult industry or the relevant stakeholders that the changes will affect. Similarly, there is no inkling about what considerations or conditions the Treasury will agree to when it comes to entering into preferential rate agreements, particularly whether industries will be protected by the use of quotas or rules of origin.
Peter Dowd
My hon. Friend makes a very important point. There is a danger that we are walking into this with a bit of a fuzz around us. We just do not know the impact this will have on us. If the Government do not get it right, as in spot-on, it is potentially very dangerous for our industries. That is why we are concerned, which is another of our themes in relation to the Bill: one is about democratic accountability, and the other is about how the Bill will protect our vital industries, from manufacturing right the way through the whole ream.
The scenario I referred to earlier is far from absurd and reflects the reality that, when it comes to negotiating and signing free trade agreements, there are always winners and losers, particularly when negotiating with countries that are larger both in population and economic size.
The free trade agreement negotiated between Australia and the United States in 2004 was negotiated in a relatively quick period, and it was so bad that officials refused to recommend it to the Australian Parliament. John Howard, the then Prime Minister, was forced into signing it by President George W. Bush, who essentially reminded him of the close security collaboration between the two countries. After signing, John Howard was often and repeatedly chided by political opponents who would shout, “Where’s the beef?”—a reference to the failure of the free trade agreement to stimulate beef exports for Australia.
We do not want to be in that situation. The UK could easily find itself in a similar scenario whereby we will offer preferential rates to the USA or China, with little in return. In November, we had Wilbur Ross, the US Commerce Secretary, saying that the UK retaining EU regulations on chemicals, genetically modified crops and food safety would represent “landmines” for a potential deal. The Secretary of State for International Trade is reported to have given him private assurances that this would not be a problem.
Stakeholders could find themselves shut out of the process. The Opposition’s concerns are not scaremongering, particularly when we have a Secretary of State who has already made it clear that he supports a race to the bottom, with cheaper consumer goods and weaker regulations and standards. Again, our witnesses spoke about how it is not consumer against producer—the two are almost interchangeable. If we look at the trade remedies outlined in the Bill, we see the Government have ensured there is a clear economic interest test for the Treasury to follow that does not consider the interests of UK manufacturers or key industries, which is unique among most World Trade Organisation countries.
If this Bill and the Trade Bill remain unamended, the Treasury will have to take the advice only of the Secretary of State in that regard, but it will receive a recommendation from a Trade Remedies Authority that will be appointed by the Secretary of State and no doubt made up only of people he trusts—that does not mean that anyone else does—unless its composition is amended in the Trade Bill. We saw that only yesterday, with a vote in the House of Commons in relation to the Electoral Commission. Parliament is entitled to express a view on such appointments, but in this case I do not think we will get that capacity. It certainly does not seem to be in the Bill. Key stakeholders will therefore bear the brunt of any changes to tariffs and again effectively be shut out of the process.
Those key stakeholders will be at the mercy of a Secretary of State who appears to be desperately attempting to negotiate free trade agreements at any cost and potentially to pay a price that most of us would not be prepared to pay. If hon. Members do not have the ability to challenge it, the Treasury will also have a free hand to introduce regulations that will set the framework for the lowering of tariffs which, if we are not careful, will change the UK economy as we know it. I exhort the Committee to think carefully on the proposals in the Bill and to take into account what we say in our new clause.
Kirsty Blackman
New clause 2 is, for a variety of reasons, one of the most important measures we will discuss in the three days of debate we will have on the Bill. The clause is very important. I mentioned earlier that reducing tariff rates could have a significant impact on manufacturers in the United Kingdom as well as on agricultural producers, which is a major concern, particularly in more rural parts of the UK.
This measure looks at preferential rates under conditions specified in an arrangement including, for example, quotas, rules of origin and safeguard measures. It is about not just reducing tariff rates for the total number of goods coming in from one country, but reducing the number of those under a certain quota or having a differential rate, depending on the amount of goods coming in—it is a bit more complicated than it may look.
The UK Government will go away and negotiate trade deals with other countries, and the Bill will allow the Treasury to put regulations into place. The UK Government would be more likely to negotiate better trade deals if they knew that they had to justify them to Parliament, get its approval and go through a more rigorous approval process after that. Given the concerns that the Scottish National party has raised consistently about changes that this and previous Governments have made in different areas that we feel have negatively affected either our constituents or manufacturers, producers and companies who work in the United Kingdom, and in Scotland specifically, we do not trust the Government to go away and negotiate trade deals that will be good for outlying parts of the UK, particularly those not in the south-east of England.
If Ministers had to justify themselves to Parliament more—if they had to convince us that they had struck a good deal—it may be that when they were sitting round the negotiating table, they would come up with a better deal because Parliament would be more likely to approve it. That is why new clause 2 is important. Any move by any country away from most-favoured-nation tariffs could have an impact on companies that work in our country as well as on consumers. As parliamentarians, we want to provide a level of protection for them, which is why we will support new clause 2.
Mel Stride
Clause 9 allows the Treasury to implement preferential trade arrangements on the recommendation of the Secretary of State. That will enable the rate of import duty applied to goods originating from a territory covered by a preferential arrangement to be lower than the standard rate.
The clause ensures that the tariff-related part of any new or existing free trade agreement can be implemented and enables the UK to continue the treatment that the British overseas territories currently receive. The Bill does not give the Government powers to sign such agreements but to implement the tariff parts of them.
The clause is essential to ensuring that the UK can implement any tariff outcome from negotiations with the EU. The Prime Minister has been clear that our aim is to secure a tariff-free trade deal with the EU. As a member of the EU, the UK is part of around 40 free trade agreements with countries and territories outside the European Union. When the UK leaves the EU, the Government are committed to seeking continuity in our trade relationships, including those covered by the EU’s FTAs or other EU preferential arrangements.
Mel Stride
That is a specific question for the Department for International Trade, but think all the indications are that we have been out speaking to many potential trading partners.
Mel Stride
Current trading partners and others. Obviously, as an EU member, we are bound not to enter into any other arrangements prior to our departure, but I am confident that we are having appropriate conversations at this stage of our withdrawal.
In addition, as set out in the trade White Paper, after leaving the EU, the UK will have the opportunity to
“look to forge new and ambitious trade relationships with our partners around the world”.
Clause 9 provides a basis for those aims.
The clause enables the UK to implement preferential import duties on goods originating in territories covered by a preferential arrangement. That will cover arrangements made bilaterally with a Government of another territory. A recent example is the comprehensive economic and trade agreement between the EU and Canada.
The Bill refers to making arrangements to allow preferential rates of import duties to apply before an agreement is ratified. That is common when implementing FTAs and is the case under the comprehensive economic and trade agreement, which has been provisionally adopted but is not yet fully ratified.
The clause will also enable the UK to continue to provide preferential tariff treatment to those British overseas territories, including the British Virgin Islands and the Falkland Islands, that currently receive that access under the EU via the overseas association decision.
As I was looking through new clause 2 during the hon. Member for Bootle remarks, my eagle eye spotted what I think is an error. Although subsection (1)(a) of the new clause would do what is intended—that the first regulations to be made under clause 9 will be subject to the provisions of the new clause—the explanatory statement and the points made in his speech suggest that subsection (1)(b) should relate to instances where there has been a lowering of import duties. In fact, as currently drafted, subsection (1)(b) refers to
“the effect of which is an increase in the amount of import duty”.
I can only imagine that that is a drafting error or has been lifted from new clause 1, which does refer to the increase in import duties. However, I fully understand what the hon. Gentleman intended, and I will deal with new clause 2 on the basis of its intention and of the way in which he describes it in the explanatory statement.
The new clause would put in place an additional parliamentary process for regulations giving preferential import duty arrangements to other countries. As I previously set out, for indirect tax matters, it is common to have framework primary legislation supplemented by secondary legislation. The Bill introduces a comprehensive framework for a new stand-alone customs regime. It ensures that the scrutiny and procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the technicality of the regulations, the frequency with which they are likely to be made and how quickly the law may need to be changed.
Clause 9 allows the Treasury to give effect to the tariff section of trade arrangements once they have been negotiated. It is therefore appropriate and proportionate for the negative procedure to apply. Any delays in implementing preferential duties in trade arrangements could have significant impacts on UK supply chains or exporters who rely on the arrangements. As set out in the trade White Paper the Government are considering how to ensure that the process for negotiating new trade deals is transparent, efficient and effective, and we will ensure that Parliament is engaged throughout.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a pleasure to see you in the Chair, Mrs Main. I have a couple of questions for the Minister. I am grateful for his comments. He seemed to suggest that the appropriate time to consider these matters might be at the time of ratification of any preferential trade agreement and that the provisions are merely enabling. How will we be able to scrutinise at that stage? Will we be able to have a developed and involved discussion at that stage? My understanding is that we would not be able to do that.
In his opening remarks—perhaps this is unfair—the Minister referred to the existing preferential trade arrangements that we have with the overseas territories and the EU and those between the EU and other countries, but, as many others have mentioned, we could be concluding new trade arrangements, particularly with the US, and there are all the concomitant problems that that might cause as well as potential opportunities. Have the Government considered whether the scope of the clause could be reduced so that it relates only to areas where we already have preferential trade arrangements?
Mel Stride
There are a couple of important points to make here. This particular clause enables the Government to put into effect the tariff-related elements of an FTA, for example. When it comes to the points that the hon. Lady understandably makes about treaties that we may enter into with other countries or with countries with which we already have existing arrangements that we wish to continue on our departure from the European Union, those kinds of debates and issues do not rest within this clause. As the trade White Paper sets out, they rest with the Government whose duty it is to make sure that we consult during the negotiation of those treaties so that we conclude them in an appropriate manner.
Anneliese Dodds
I find that very helpful because it has clarified that there is not a detailed parliamentary process for us to consider the matters that are covered by the clause. We believe that they will not be scrutinised in an appropriate and thoroughly democratic manner. Also, there will not be much opportunity for parliamentarians to engage with the issues raised by free trade agreements.
Mel Stride
I do not think my response to the hon. Lady earlier suggested that there would not be any parliamentary scrutiny of the provisions in clause 9. Indeed there will be, as she knows. If we are going to change duties or introduce tariffs, such matters will be subject to secondary legislation and statutory instruments in the normal manner.
Anneliese Dodds
I did not say “any”. I said that there would not be scrutiny of the type that is necessary and of an appropriate thoroughness, which would not be of a one-shot nature whereby it is difficult to have the kind of debate that we all think is necessary, given the impact that the provisions could have on major sectors of our industry.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Preferential rates given unilaterally
Kirsty Blackman
I beg to move amendment 108, in clause 10, page 6, line 35, at end insert—
“(1A) The Secretary of State must consult on a proposed version of any regulations to be made under this section before making them.”
This amendment requires the Treasury to consult prior to making regulations establishing preferential rates for developing countries.
The amendment is about consulting on a proposed version of any regulations to be made under the section before making them. This would make sure that relevant people are consulted in advance, specifically in the case of unilateral preferences. The Minister previously argued about the processes that are gone through in advance of the signing of international agreements, but those are slightly different in relation to this clause. We are specifically talking about consultation. Again, we have been clear that there is not enough consultation throughout, and more consultation would be appropriate.
As amendment 108 is about unilateral preferences, we think that consultation is necessary. It is absolutely clear that unilateral preferences, particularly those relating to these provisions, and the reasons for unilateral preferences, are good—they are sensible in relation to our least developed countries—but we must also ensure that relevant stakeholders are consulted.
Anneliese Dodds
I agree with much of what the hon. Lady said. We heard on Tuesday some of businesses’ concerns about consultation even relative to the Bill. It is important, when we move on to its exact provisions, that we have proper consultative mechanisms. I have certainly benefited hugely from the input into the process around the Bill and information from the Fairtrade Foundation and Traidcraft. If this Government are truly committed to policy coherence for development, it is important that they ensure that non-governmental organisations with expertise on the ground in international development can comment on preferential trade decisions, which could have a significant impact on different nations.
I was encouraged by what the Minister said to me when we talked about ensuring policy coherence for development when it comes to tax treaties. We need to ensure that that is the reality for our preferential trading regimes as well. One way to do that is by having appropriate consultation with experts in the area.
Finally, the Library note to the Bill, which was enormously useful as always, says that,
“the Government argues that the negative procedure is appropriate here as regulations might be lengthy, technical, frequently changed, not yet known and/or administrative.”
The note goes on to indicate what the EU process is for such schemes. It is quite different from what the Government propose:
“The regulations setting out the current EU scheme…were adopted by the EU Parliament and Council”,
meaning that there was debate within both those organisations. Our country is represented in the Council, and our MEPs represent us in the European Parliament. Then there are
“provisions allowing technical/routine updates through Commission delegated regulations.”
Again, delegated regulations can involve thorough scrutiny. I suggest that in many ways, it is far easier for an MEP to trigger a debate on a piece of delegated legislation on the Floor of the European Parliament than for an MP to do so in the British Parliament, certainly when the negative procedure is used, but also, potentially, when the affirmative procedure is used, given the arithmetic of Committees mentioned by the hon. Member for Aberdeen North. It is enormously important that we have proper scrutiny of such provisions. One way of embedding that is by having appropriate consultation. We support the amendment.
The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)
It is a great pleasure to serve under your chairmanship, Mrs Main. It is an intimidating task that falls to me. I see many familiar faces, all pretty experienced and used to being in Bill Committees, as well as the Rolls-Royce Minister to my left. Fortunately, I am backed by the most extraordinary sea of talent behind me, as well as having on my right a much improved Treasury Whip, compared with his predecessor.
Amendment 108 seeks to create a statutory duty to consult on regulations relating to unilateral trade preferences for developing countries. The Government sought views on unilateral preferences as part of the trade White Paper and proposed creating a trade preference scheme that, as a minimum, maintains the preferential market access of countries in the EU’s generalised scheme of preferences, or GSP. The Government regularly engage with stakeholders on the issue, and—I can undertake—will continue to do so in future.
Kirsty Blackman
I appreciate the Minister speaking on these matters in Committee, and I welcome him to his place. He is absolutely right about the importance of the preferential trade agreements, but perhaps we had a slight misunderstanding. I am not suggesting that opposition to such agreements would be likely. It is just that some organisations such as Fairtrade and Traidcraft have been in touch with us, and they might have better insight into what is happening on the ground in some of those countries. They might be able to provide more information to ensure that the preferential tariffs being provided unilaterally are the most appropriate ones.
The amendment is not about trying to create a blockage in the system. My reason for moving it is not about protecting our industries, but about ensuring that the best possible preferences are put in place for those countries that most need them. That is more likely to happen if there is an opportunity—a requirement, I suppose—for the Government to consult, in particular those bodies and organisations working in the country which can be absolutely clear about the best way forward for any trade deals.
If the Minister is clear that he will consult, that is useful. However, I intend to press the amendment to a vote.
Graham Stuart
I am disappointed that the hon. Lady will press for a Division, not because the points she has made are not important, not because the Government should not consult and listen to those voices, and not because we should not seek to improve our programme of support for developing countries, but because to put consultation in at that particular point in the process will not deliver the outcome that she desires and might in fact cause damage to the very system that we all want to see improved and working properly after having taken such consultation.
We are in regular contact with external stakeholders. We hold roundtables with representatives of civil society, business and academia, and we have received about 20 responses on trade with developing countries as part of the White Paper consultation. We have heard support from some of the organisations that the hon. Lady mentioned for creating a UK preference scheme, and an understanding of our approach to maintaining in the first instance existing levels of market access as we leave the EU. In effect, we are replicating the system we have now. In the oral evidence earlier this week, the Committee heard someone from the Fairtrade Foundation say of the measure:
“It takes the best bits of current EU policy and brings them over into UK policy.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 21, Q23.]
In some areas, stakeholders have suggested changes for the future, including extending to more countries, simplifying rules and adding more products. All of that can be considered by Government. I suggest to the hon. Lady that it is not too late not to press this amendment to the vote, because I do not think it is appropriate, although I take on board entirely the points she is making.
Kirsty Blackman
I still intend to press this to a vote.
Question put, That the amendment be made.
Kirsty Blackman
I beg to move amendment 109, in clause 10, page 7, line 5, at end insert “and—
(c) may make provision about the restoration or reinstatement of the nil rate band.”
This amendment places beyond doubt that regulations may reinstate the nil rate band after suspension or withdrawal.
This amendment comes from the Law Society of Scotland. It was a kind of tidying-up exercise that we suggest would be helpful in the clause. Clause 10(3)(b) allows the trade preference scheme to
“make provision about the suspension and withdrawal of the application of the nil rate.”
I am sure this is unintentional, but it does not make provision to reinstate or restore the nil-rate band, if it is necessary to do so. It is just a slight technical change suggested by the Law Society of Scotland, allowing for the restoration of the nil-rate band if that is what the Government need to do.
Anneliese Dodds
This seems like a sensible amendment, particularly because accessing that nil rate is crucial for so many nations. If there is ambiguity around the conditions, they need to be clarified. Definition, initially, as a least-developed country, is partly with reference to vulnerability to economic shocks. Inability to access that nil-rate, or inability have it reinstated when it should be, could cause economic shocks. As we know, the value of access to the nil-rate to UK markets for least-developed countries is incredibly important—it is £323 million a year. It is important that we have no ambiguity and are absolutely crystal clear.
Graham Stuart
As we have heard, the amendment seeks to clarify that the regulations may provide for the restoration or reinstatement of the nil rate of import duty to least-developed countries where this has been suspended or withdrawn. It is clearly important that we can reinstate preferential rates of import duty after they have been suspended or withdrawn, but the Government do not believe that the amendment is required. The existing power enables the withdrawal or suspension of preferences to least-developed countries to be partial and reversible. That is in line with the general principles relating to regulation-making powers. It goes to show that even when you deal with lawyers as eminent as those at the Law Society of Scotland, they sometimes get it wrong, even technically.
The Government intend to use the power to suspend sparingly and, if used, we will work with the relevant country with a view to reinstating preferences as soon as is appropriate. For trade preferences to be effective, they must be relatively stable, so that businesses have confidence to make decisions to import from beneficiary countries. I therefore ask the hon. Member for Aberdeen North to withdraw the amendments and give a categorical assurance that a provision to do what they suggest is already in place.
Kirsty Blackman
Having looked at subsection (2), I still do not think it is particularly clear. It says that the scheme can make provision about the withdrawal, but then does not make clear that it can be reinstated. I will not press it to a vote because I hope the Government will table an amendment on Report to make it clear that they have the ability to reinstate the rate. I would not like a situation in which the Government were unable to do so because there was a challenge around the language used in the law. The amendment seeks to make it as unambiguous as possible. The hon. Member for Oxford East was absolutely clear on the importance of nil rates, particularly in relation to economic shocks. SNP Members would echo that. I am not going to press it to a vote, but I would appreciate it if the Minister would consider returning to the matter on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 80, in schedule 3, page 57, line 18, at end insert “among other things”.
This amendment provides that the Secretary of State may have regard to things other than the classification of least developed countries by the UN in amending the list in Part 2 of Schedule 3.
That schedule 3 be the Third schedule to the Bill.
Amendment 10, in clause 32, page 19, line 32, after “which” insert
“section (Preferential rates given unilaterally: enhanced parliamentary procedure, etc) (7) applies and”.
This amendment is consequential on NC4.
New clause 4—Preferential rates given unilaterally: enhanced parliamentary procedure, etc—
(1) No regulations may be made by the Treasury in exercise of the power in section 10(1) except in accordance with the steps set out in subsections (2) and (4) to (6).
(2) The first step is that a Minister of the Crown must lay before the House of Commons—
(a) a statement on the matters specified in subsection (3); and
(b) a draft of the regulations that it is proposed be made.
(3) Those matters are the reasons for—
(a) the proposed application and non-application of the scheme to each country listed in Parts 2 and 3 of Schedule 3;
(b) any proposed conditions for the application of the lower rates or nil rate, and
(c) any proposed provisions about the variation, suspension and withdrawal of the application of the lower rates or nil rate.
(4) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (2)(b)—
(a) each country to which the proposed regulations apply;
(b) the proposed conditions for the application of the lower rates or nil rate, and
(c) the proposed provisions about the variation, suspension and withdrawal of the application of the lower rates or nil rate.
(5) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).
(6) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4), give effect to the terms of the resolution referred to in subsection (5).
(7) No regulations may be made under the following provisions unless a draft has been laid before and approved by a resolution of the House of Commons—
(a) section 10(4)(a) (meaning of “arms and ammunition”);
(b) paragraph 2(1) of Schedule 3 (power to add or remove countries from lists in that Schedule).
This new clause establishes a system of enhanced parliamentary procedure for regulations setting lower import duties for eligible developing countries, with a requirement for the House of Commons to pass an amendable resolution authorising the key provisions of the proposed regulations, and also requires that certain other regulations are subject to the affirmative procedure.
Graham Stuart
Clause 10 ensures that the UK can operate a unilateral trade preference scheme when the UK leaves the EU. It will provide the powers to implement a scheme that will enable the reduction of import duty on goods originating from developing countries. By legislating now, we can ensure continuity for businesses both in the UK and in those countries when the UK leaves the EU.
As you know, Mrs Main, the UK has a long-standing commitment to support developing countries to reduce poverty through trade. One important way to do that is to offer preferential access for their exports to the UK. Trade preferences will also provide opportunities for UK businesses, while enabling UK consumers to benefit from lower product prices. In 2016, the UK imported £19.1 billion of goods from countries receiving trade preferences.
The UK currently provides trade preferences through the EU’s generalised scheme of preferences. Under GSP, the product coverage and import duty rates for countries vary depending on their development levels and trade flows. The granting of a unilateral preference to facilitate the trade of developing countries should, under WTO rules, be based on objective criteria. The European Commission regularly updates EU legislation to reflect that. Examples include making changes to a country’s economic circumstances, or to the list of products in respect of which a country receives a preference. After the UK leaves the EU, similar legislative powers will be needed to establish and manage an effective trade preference scheme. Clause 10 provides for a power to create a trade preference scheme for eligible developing countries.
It is intended that the UK scheme will have tiers of preferences for groups of countries with different economic characteristics. The UK will reduce to zero the import duty on goods originating from the 48 least developed countries, except for the import of arms and ammunitions, which is called “everything but arms”. That fulfils an international commitment made in the UN sustainable development goals, and will provide vital support to the world’s poorest countries.
To maintain continuity at the point of exit, in the first instance the UK intends to mirror the EU’s scheme, which includes two further tiers, known as standard GSP and GSP-plus. The standard tier will reduce import duty on the majority of goods. The enhanced GSP-plus tier will reduce to zero the import duty applicable to those goods covered by the standard tier when such goods originate from economically vulnerable countries that make commitments on human and labour rights, environmental protection and good governance.
The trade preference scheme will allow for the variation, suspension and withdrawal of trade preferences in certain circumstances. For example, where the import of a good threatens serious injury to UK business, the preferential rate could be amended or revert to the standard customs tariff rate. That would take place following discussion with the specialised, expert Trade Remedies Authority. Importantly, a preference may also be varied or withdrawn from a country in response to serious and systematic human rights violations.
Schedule 3 lists the countries that are eligible to receive unilateral trade preferences. It is an objective list based on economic criteria. Countries in part 2 of schedule 3 are currently or recently classified by the UN as least-developed countries. Countries included in part 3 have not been classified by the World Bank as upper middle income or above for the last three consecutive years. Not all of the countries on the list will actually receive the trade preferences. Some of the eligible countries will trade with the UK under a different arrangement, such as a free trade agreement. In such a case, it is intended that the FTA terms will apply to that country instead. Schedule 3 gives the Secretary of State the power to amend the list of eligible developing countries when a country’s economic characteristics change. It is important that a UK preference scheme can react swiftly in such circumstances.
Amendment 80 will allow the Secretary of State to consider things beyond the UN’s classification of least-developed countries when deciding which countries must be provided with a nil rate of import duty. When determining whether a country is least developed, the Secretary of State must have regard to its classification by the UN but, importantly, other relevant considerations may be taken into account. The amendment is therefore unnecessary.
Anneliese Dodds
It is a pleasure to see the Minister in such a prominent role now. In his role as a Whip, he was of course fundamental to the operation of all the discussions that we have had in this Committee room, but it is good to see him speaking on these issues.
As the Minister intimated, the amendment relates to part 4 of schedule 3, which sets out the conditions under which amendments can be made to parts 2 and 3, including the lists of least developed countries and other countries eligible for preferential trading schemes. Colleagues will be aware that those schemes arose out of the work of the United Nations Conference on Trade and Development, which from the 1960s onwards argued for improved market access for developing countries as a means of fostering their economic development. The so-called generalised system of preferences was adopted in 1968.
The whole point about that—the Minister alluded to it—is that a generalised system of preference, just as with a customs union like that of the EU, is allowed as an exemption from the most favoured nation rules within the WTO. Those rules stipulate that no country can have a preferential trade agreement with any other country that is not offered to every other member of the WTO. It is therefore enormously important to have the ability to deviate from WTO rules to promote development.
As the Minister suggested, the arrangements have over time developed at EU level into, effectively, three different layers of preferential scheme for developing countries: the everything-but-arms approach, which applies to the least developed countries; the generalised system of preferences—GSP—and then GSP-plus which, as the Minister said, offers additional favourable terms to those countries fulfilling environmental and good governance requirements.
Will the Minister clarify one issue relating to GSP-plus, and my reading of the existing Bill, with regard to classification as another eligible developing country under part 3 of schedule 3? I thought that the Bill referred to the Secretary of State developing regulations with a view to
“among other things…classification by the World Bank”
and that those “other things” were not just economic factors but human rights and environmental considerations, as is the case with the GSP-plus system in the EU. I think that was what he intended to say, but it was not crystal clear and it would be helpful if he would clarify it.
Our amendment is focused not on the arrangements for GSP and GSP-plus countries, which I believe are all gathered under part 4 but, in practice, on the least-developed country regime—the successor to everything-but-arms, which the Government say they want us to take on board. It is positive that the Bill provides the possibility for a three-year transition period, so that countries currently described as least-developed countries can remain in the scheme for another three years, as a graduation period. However, particularly with regard to current EU developments, it seems that in the Bill, the Government are missing out on an important opportunity.
The Minister was correct to say that the current everything-but-arms regime does not explicitly include reference to human rights and the environment or other criteria, but there is pressure at EU level for those factors to be taken much more closely into account. Our country could play a key role in that. That is very important when we look at how the everything-but-arms process has worked in practice.
A very good case study is the sugar trade in Cambodia. The sugar industry in Cambodia has grown exponentially over recent times due to changes in the overall sugar price, but also due to the imposition of a preferential trading regime. That has not led to sustainable development. Instead, very large global conglomerates have captured much of the market. Ninety seven per cent. of Cambodia’s sugar exports went to the EU in 2012. Tate & Lyle bought 99% of those, and companies linked to it—or some of those which it has now sold off—were controlling much of the new sugar plantations in Cambodia.
Those plantations have been enormously controversial because they have involved the wholescale removal of families from their smallholdings. Many people illegally transferred into Thailand because the sugar plantations forced them off the land. The growth in the industry has not led to an increase in people’s incomes. In fact, the opposite has happened: it has led to many people becoming destitute who formerly were able to live at subsistence level at least. Some families from Cambodia have even taken cases against Tate & Lyle to our High Court because they were dispossessed of their land and are no longer able to live sustainably.
Other changes occurred around sugar in the EU—minimum pricing and its removal—but surely, given that example, we should think about whether we need to do more to try to stop developments of the kind that existed under the everything-but-arms initiative from occurring in any UK-specific schemes. There is certainly an argument in the development community about whether it is appropriate for human rights matters to be taken into account in trade deals. Particularly in the sugar market, very large corporations are making a huge benefit, but that has not led to a more sustainable income for ordinary people—quite the opposite.
In addition, it is important that other factors can be taken into account in these classifications and in determining whether countries should be on the list. Three years is a good graduation period but it may be necessary for some countries to have longer, especially if they are subject to a particular economic or other problem.
Furthermore, I understand that there are cases where countries have used additional considerations in relation to classification under these kinds of regimes. Norway has said that if a country is not classified as a least-developed country but is part of a customs union with other least-developed countries, it is a good thing because it promotes regional integration. That nation is also likely to share many trade characteristics with the least-developed countries, and therefore should be able to be allotted trade preferences on the same basis. Norway at least believes that it does not need a waiver from the WTO for that—not only is that not being actioned by the WTO, but Norway believes that it does not even need to approach the WTO for a waiver. We could be more ambitious in that regard, and I hope that as a result the Minister takes our suggestion on board.
Graham Stuart
I thank the hon. Lady for her passionate espousal of a number of interesting issues. I will respond as best I can, but my three weeks in this post probably does not match her many years of expertise.
As highlighted, clause 10 and schedule 3 ensure that the UK can operate a unilateral trade preference scheme when the UK leaves the EU, supporting our long-standing commitment to support developing countries. The group of least-developed countries, as set out in schedule 3, are among the poorest in the world. As I said, providing nil-rate import duty access to goods from those countries helps them to reduce poverty through trade and is part of the UN’s sustainable development goals. Clause 10 enshrines that in UK law, ensuring that the commitment will be maintained in future. The clause is not prescriptive about the level of import duty for other eligible developing countries—they are listed in part 3 of schedule 3—that are not designated as least developed. However, as I have mentioned and as the Government set out in the trade White Paper, the Government’s policy intention is to ensure continuity at the point of exiting the EU by replicating the market access of all countries currently part of the EU’s generalised scheme of preferences.
I take on board the fact that the hon. Lady talked about being more ambitious. We have said that, as a Government, we wish to be more ambitious, but we need to bring into place in this country continuity from the existing system and give assurance and confidence that we are not opening up. If we open up the issues more widely, we will create uncertainty as to what we will continue—we may be strengthening in some areas; we might weaken in others. I therefore ask the hon. Lady to accept that I need to think and talk to her over time about some of the issues that she has raised. We do want to be more ambitious in the future, but for now, we believe that the right thing to do is to have continuity with the existing system and bring that as effectively as we can into UK law.
The amendment proposes that changes to schedule 3 be done by the affirmative procedure. As I have mentioned, eligible developing countries will be determined with regard to the classification by the World Bank or UN. The Government need to be able to react promptly to a country’s change in economic circumstances. Similarly, the power to specify the meaning of the term “arms and ammunition” is intended to allow the preference scheme to adopt the same nomenclature enabled through clause 8 for the customs tariff, which will itself be constrained by international nomenclature.
As I said, our intention is closely to replicate the EU’s preference scheme, including the GSP-plus tier. That is the enhanced tier of preferences available for economically vulnerable countries that ratify the international conventions I have mentioned. We expect beneficiary countries to continue to respect the conditions in GSP-plus, including meeting those international obligations. Those conditions will be set out in secondary legislation, as clause 10(2)(b) allows.
The question is asked why we would give preference to Cambodia even though land disputes have occurred following the EU’s everything-but-arms access. A key objective of the UK is building the UK’s prosperity by increasing exports and investment and promoting sustainable global growth. Greater prosperity leads to greater stability. We are aware that the Government of Cambodia have taken steps to improve their issue of economic land concessions, such as introducing a compensation process. Furthermore, the Ministry of Environment cancelled more than 20% of all economic land concessions. For now, therefore, we continue to work through the EU’s GSP monitoring system, and we seek to bring the existing system into UK law.
Peter Dowd
I rise to speak to the Opposition’s new clause 4 and will also touch on schedule 3, if I may. We do want to require a vote in the House of Commons on the giving of preferential rates unilaterally to developing countries—I do not mean in relation to amendment 80, but in future. We can all agree that the Government have a responsibility to ensure that our trade policy works for everyone, including the poorest in society, and how tariffs are set has an important bearing on that.
The Minister was very clear and comprehensive about the Government’s direction of travel. I welcome him to his position—as a former Whip, he has come out of the darkness into the light—but I also agree that the current Government Whip, the hon. Member for Macclesfield, is much better.
Graham Stuart
I will respond to some of the points that the hon. Member for Bootle has just made. I pay tribute to him for featuring so well. He must be another fine engine, if not a Rolls-Royce. I have certainly heard him purr in this Committee Room on many an occasion. As with my right hon. Friend the Financial Secretary, I have admired the style and content he has presented.
The hon. Gentleman raised the issue of whether the trade preferences will undermine human and labour rights. The UK has a long-standing commitment to universal human rights, and that will be reflected in our trade preference scheme. As part of transitioning EU arrangements, we will maintain a similar approach to human rights commitments in UK trade policy.
The hon. Gentleman raised Burma, based on the Rohingya situation, and mentioned the fact that the EU has, after all, suspended Burma before. I agree that this is an important issue. The UK is deeply concerned by the violence taking place in Rakhine state. The UK has been a leader in responding to the crisis in terms of both speed and size, helping to meet the urgent humanitarian needs that have arisen. For now, we continue to work through the EU’s GSP monitoring system. Under a UK scheme, it will be possible for countries to have their preferences suspended, although we intend to reserve suspension powers for serious and systematic human rights violations.
We must make sure that when we act, it is always to tackle the problems in those developing countries, and that the long list that was laid out—including climate change, forestry and various aspects of human rights—is not used as an excuse for protectionism of interests in this country while we are morally posing ourselves as helping those in developing countries. That is why the presumption is that we should let them trade with us; however, in serious cases we should act. I hope that both this Committee and the House can continue to take that proportionate and balanced approach.
On the clauses that the hon. Gentleman says give too much power to the Government, and on the question whether there is sufficient parliamentary scrutiny and due process in setting up this preference scheme, I would say that these powers are moderate and entirely necessary to create and maintain a trade preference scheme for developing countries, which is a goal that we all share. The overarching principles of the preference scheme are set out in primary legislation. That is important. Parliament will have the opportunity to debate the inclusion of these principles and powers throughout the passage of the Bill. Parliament will later have the opportunity to consider regulations setting details of the scheme. The scheme will need to be updated regularly. As economies grow or contract, their eligibility for trade preferences will change over time. We must ensure that the legislation is kept up to date to ensure that we trade on fair terms and avoid challenge from the WTO.
I did not respond earlier to the point made by the hon. Member for Oxford East about amendment 80 and why the Secretary of State cannot consider factors other than the UN’s classification when deciding which countries are least developed. The Government have chosen to enshrine in UK law the obligation to provide nil-rate import duty to least developed countries. This meets a commitment the UK made in the UN sustainable development goals to implement duty-free market access for LDCs. As a result, there needs to be significant certainty on the list of LDCs in part 2 of schedule 3, because it is in primary legislation that this legal duty will be in place. Therefore it is right that the Secretary of State is closely bound to the internationally recognised UN classification. The distinction in language between sub-paragraphs (2) and (3) in part 4 of schedule 3 reinforces this point.
As a final remark, I will quote the Fairtrade Foundation, which said that
“from the perspective of developing countries, where in some instances there is a high dependency on the UK market…changes to tariffs could make or break the livelihoods of producers. If you were to ask for a vote on every single tariff change, that would not be workable, so this is about finding the right balance”.—[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 19, Q21.]
Being balanced and proportionate is the basis of the Government approach, and I ask the Opposition not to press their proposed amendments.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 11
Quotas
The Chair
With this it will be convenient to discuss the following:
Amendment 11, in clause 32, page 19, line 32, after “which” insert
“section (Quotas: enhanced parliamentary procedure, etc)(7) applies and”.
This amendment is consequential on NC3.
New clause 3—Quotas: enhanced parliamentary procedure, etc—
(1) No regulations may be made by the Treasury in exercise of the power in section 11(1) except in accordance with the steps set out in subsections (2) and (4) to (6).
(2) The first step is that a Minister of the Crown must lay before the House of Commons—
(a) a statement on the matters specified in subsection (3); and
(b) a draft of the regulations that it is proposed be made.
(3) Those matters are—
(a) in respect of any case where the condition in section 11(2)(a) is met, a statement of the terms of the arrangements made with the government of the country or territory outside the United Kingdom;
(b) in respect of any case where the condition in section 11(2)(b) is met, a statement of the reasons why the Treasury consider it is appropriate for the goods concerned to be subject to a quota.
(4) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (2)(b)—
(a) the amount of import duty proposed to be applicable to any goods that are or are proposed to be subject to a quota; and
(b) the factors by reference to which a quota is to be determined.
(5) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).
(6) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4), give effect to the terms of the resolution referred to in subsection (5).
(7) No regulations may be made making provision on the matters in section 11(3)(c) unless a draft has been laid before and approved by a resolution of the House of Commons.
This new clause establishes a system of enhanced parliamentary procedure for regulations setting quotas under Clause 11, with a requirement for the House of Commons to pass an amendable resolution authorising the key provisions of the proposed regulations, and also requires that regulations establishing a licensing or allocation system are subject to the affirmative procedure.
Mel Stride
Clause 11 makes provision for the purpose of establishing an independent quota regime for the United Kingdom. The clause specifies the circumstances in which a quota may be established and gives the Treasury the power to make regulations concerning the administration of the quota regime.
A range of tariff and quota regimes currently govern imports into the UK. The EU currently notifies more than 140 tariff rate quotas to the WTO. TRQs allow specified quantities of a product to be imported at a lower or zero tariff rate. They are often used where the introduction of particular products to the domestic market raises specific policy sensitivities, for example in the case of agricultural produce. Depending on the nature of the goods in question, TRQs may be administered in a number of ways, such as on a first come, first served basis, via a licence system or on a traditional/newcomer basis.
Clause 11 establishes the general rule that a quota may be set only if arrangements, such as a free trade agreement, have been made with another territory outside the UK for that purpose, or if the Treasury has determined that it is appropriate that the goods in question be subject to a quota. In addition, clause 11 gives a power to make regulations concerning the administration of the quota, the conditions subject to which the quota has effect, how the amount of the quota is to be determined and conditions of eligibility, including, where appropriate, a requirement that the quota be subject to a licensing system.
Any power to make regulations that make a quota subject to a licensing system are exercisable by the Secretary of State, and any other power to make regulations under clause 11 is exercisable by the Treasury, having regard to any recommendation made by the Secretary of State. As can be seen, clause 11 does not set specific quotas, but rather seeks to maintain the effect of the general framework by which quotas are set and administered under EU law. Maintaining the framework will help minimise any disruptions to trade as the UK establishes an independent customs regime.
New clause 3 and consequential amendment 11 seek to put in place additional parliamentary procedures for setting the amount of duty applicable to goods subject to a quota. The Bill introduces a comprehensive framework for a new stand-alone customs regime, which will be underpinned by detailed and technical secondary legislation. As I have said in relation to other, similar proposed amendments, the Bill ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the complexity of the regulations.
Tariff rate quotas are complex and varied in terms of how they arise and how they are administered. Regulations related to tariff rate quotas are lengthy. They will include, among other things, administrative provisions for the opening and management of quotas, conversion factors and details on import licence applications. For the powers under clause 11, the negative procedure will apply, which the Government consider appropriate and proportionate. The procedure provides a sufficient level of parliamentary scrutiny while having regard to the technical and administrative nature of quota regulations.
TRQs are an integral part of the UK’s existing customs regime, particularly for agricultural imports. Clause 11 sets out the necessary provisions to allow us to establish the UK’s quota regime post-EU exit. I therefore commend the clause to the Committee.
Kirsty Blackman
Quotas have concerned us for some time, particularly the question of how they will happen post-Brexit. I understand what the Minister is saying, and I have read the clause and understood what it says about the regulations and how quotas will be put in place by this Government, but I am still not entirely clear how those quotas will be decided in advance and what circumstances will be used to decide an appropriate level of quota. I am not sure if the plan is for that to follow in regulations. I have tried to work it out from the legislation before us; it may be in the Trade Bill rather than this Bill.
Quotas are important, particularly on agricultural products. If our farmers can only produce a certain percentage of the beef consumed, we must allow a certain amount of beef into this country, but not so much that our farmers will be squeezed. We must protect our farms here. It is about ensuring balance.
The UK and the EU Commission agreed in September 2017 how they would divide the quotas currently in place. They agreed that the tariff rate quotas lodged with the WTO would be divided on the basis of consumption. For example, there is a tariff rate quota for sugar cane. Sugar cane is consumed mainly by the UK—the EU generally uses not sugar cane but sugar beet, which it grows itself—so it makes sense for a more significant proportion of the quota to go to the UK than to the EU. Division by consumption seems like a relatively sensible way to do it.
Julian Sturdy (York Outer) (Con)
Actually, a lot of sugar beet is produced in the UK, as well as in Europe.
Kirsty Blackman
That is absolutely the case, but generally the sugar cane that comes into the UK and the EU is consumed in the UK; very little of it is consumed in the EU. This is specifically about the consumption of sugar cane, rather than about the production of sugar beet. I understood that probably most of the sugar beet produced in the UK is not for human consumption, but I could be wrong in that regard. I am happy to chat to the hon. Gentleman afterwards, if he is keen.
Julian Sturdy
I will have to be careful what I say here but, without promoting British Sugar too much, if someone sees Silver Spoon in the supermarket, that is British sugar produced by British Sugar.
Kirsty Blackman
I thank the hon. Gentleman for that clarification. I appreciate that his knowledge of sugar is better than mine.
On quotas in particular, the situation is that the UK and the EU Commission have now decided how to divide the quotas and the amount that is lodged as a schedule with the WTO. However, in September 2017, Uruguay, Canada, Thailand, Argentina, Brazil, New Zealand and the US wrote a letter to say that they contested the way in which the UK and the Commission had decided to divide up the quotas, and that they had a concern about the decision taken. I can understand that concern.
For example, let us say that beef is coming into the UK and the EU. If we have a collapse in the beef market in one of those places, the beef cannot simply be redistributed to other countries. That is particularly so in the case of the UK. If the UK ends up with a tenth of the EU’s quota for beef, and the quota allows for 100 tonnes of beef, 10 tonnes of that are a quota allocated to the UK. If something strange happens in the UK, everyone decides that they do not want beef burgers or steaks any more and the market collapses, the country exporting the beef to the UK cannot just send it to another country, because the UK schedule will be the UK schedule alone.
I can therefore understand why countries are unhappy with how that division is working and why they have come back to say that they do not think it is a technical rectification. That is a serious thing in the WTO, because if the change of quota is not a technical rectification but a modification of the schedule, it needs to go through more of a process in order to be agreed.
My big concern is that none of that seems to be in this legislation. None of the way in which the UK Government will be dealing with the WTO on quotas or defending itself against challenges brought to the WTO seems to be in the Bill. While I am on the subject, to throw the cat among the pigeons, I have not seen anything in the European Union (Withdrawal) Bill, in this Bill or in the Trade Bill that gives the UK Government the power to lodge schedules with the WTO. I hope the UK Government have not missed that and it is written somewhere in one of the pieces of legislation, because it would be rather unfortunate if the UK Government were, post-Brexit, unable to lodge schedules with the WTO or to have its most favoured nation tariffs lodged with the WTO.
I hope that that power is in one of the pieces of legislation—I am happy for the Minister to come back to me and mention it afterwards—because clearly we want to be in a situation in which, post-Brexit, the UK continues to be a functioning country and is able to have tariffs, not just preferential ones but most favoured nation ones as well. Generally, I have concerns about the provisions on quotas because I am not sure that they adequately fulfil all the things that the UK will need to do on quotas.
I have thrown an awful lot of things at the Minister—not literally, I hasten to add for anyone reading this later—and I am happy for some of them to be dealt with at a future sitting. My concern, however, is that because we are leaving the EU and doing so in a short period of time, so legislation has been hastily drafted, some things might be missing. If that is indeed missing, that would be amusing because it is pretty fundamental going forward. I will appreciate the Minister’s providing some clarification, if he can, on the clause.
Peter Dowd
Our new clause 3 would require the House of Commons to pass an amendable resolution authorising the key provisions of the proposed regulations. It would also require that regulations establishing a licensing or allocation system are subject to the affirmative procedure.
As with the other related new clause we have discussed today, there are four steps set out in our proposed process. First, the Minister lays a statement to the House along with the draft regulation that is proposed to be made. Secondly, the Minister lays a motion setting out the various duties and tariffs that the Government wish to impose. Thirdly, the House would have to pass a resolution on that motion. Finally, the regulations will be made. Amendment 11 is consequential on the above, making a small technical change to clause 32 to accommodate our proposals.
Ultimately, however, we are less concerned with the exact steps for any process for ensuring parliamentary oversight. We just want to see that the Government are acting on the principle that Parliament should have an extended role in scrutinising the changes in this regard. As I have said previously in relation to the other clauses, we seek to guarantee an enhanced parliamentary process. The logic is pretty undisputable. The Government have tabled this Bill as a financial Bill, as I referred to earlier on. In that regard, the House of Lords does not have any capacity to scrutinise it and the Commons does not have the same capacity it usually would. We ask, therefore, that as in all other financial matters a case is presented to the House for a debate and a vote.
It would be a very unfortunate outcome if the Treasury was to acquire powers to alter the rate of taxation without such basic democratic processes. The Government really should think a little longer than this—it is not a short-term matter. It is of course more conceivable that they may be in opposition sooner than they think. They should be looking to construct a fair process for scrutiny, with, in effect, cross-party agreement as to what that would be, in the light of this significant change that we are about to face in one way or another, maybe within the next 12 months or so, possibly a little longer, but the reality is that we are facing change. This House has to face up to the fact that scrutiny processes need looking at, especially with regard to finance.
Mel Stride
The hon. Member for Aberdeen North rightly raises the issues around quotas. First, we have to work out what those quotas will be. We have existing arrangements through the European Union and we are currently in discussions regarding, as she has suggested, how the various quotas should be allocated, whether that be on the basis of consumption, or consumption and other issues that we might consider. The point I would make on that is that this Bill is enabling, in that sense, rather than prescribing or seeking to suggest any particular outcome to those discussions.
In the hon. Lady’s second point she raised an example of 100 tonnes or 100,000 tonnes of beef, and a certain amount coming by way of a quota to the UK, and then circumstances of that changing not to our liking, and asked what we would do in such a situation. That prompts the question as to where the quota itself originated.
Kirsty Blackman
I am sorry; I was obviously not particularly clear when I was making that case. I was suggesting that this was why third countries are upset about how the division might work, because 90 plus 10 is not the same as 100 in a bigger area, because they cannot just redistribute that in the event of a market collapse in the UK, because the 10 is for the UK and they cannot just send that to the EU, because the quota for the EU is now only 90.
Mel Stride
I think I have the gist of the point. In terms of the overarching point about what one would do if the arrangements come to be seen, in the way they are measured, as being inappropriate, that prompts the question where the quotas originate in the first place. If it is in the schedule of concessions at the WTO, I guess we would have to revisit that aspect of it. If it comes from provisions within a free trade agreement, I guess we would attempt to renegotiate that aspect, or perhaps trigger some provisions within that agreement to resolve the issue at hand. If it was a so-called autonomous quota in which we had decided to implement a quota regime or quotas at the request of a third country, I imagine that we would be able to reverse or change that in some way through secondary legislation as well, depending on the precise nature of that agreement.
Mel Stride
I am grateful to the hon. Gentleman for reasserting his arguments, but our arguments remain as I set out in my earlier remarks.
Question put and agreed to.
Clause 11 accordingly ordered to stand part of the Bill.
Clause 12
Tariff suspension
Peter Dowd
I beg to move amendment 5, in clause 12, page 8, line 40, at end insert—
“(6) No regulations may be made under this section unless a draft has been laid before and approved by a resolution of the House of Commons.”
This amendment requires regulations under Clause 12 to be subject to the affirmative procedure.
The Chair
With this it will be convenient to discuss the following:
Clause 12 stand part.
Amendment 9, in clause 32, page 19, line 32, after “regulations” insert “under section 12 and”.
This amendment is consequential on Amendment 5.
Peter Dowd
I am pleased that the Minister is getting the drift of our line after several hours—[Interruption.]—I hear the Minister saying “with much repetition” from a sedentary position, but I do not think it is as repetitive as the Government’s refusal to give Parliament scrutiny. It is a persistent “No, no, no” from the Government, and that is dangerous. I do not say that as a Labour Member per se; I say that as a democrat. It is crucial that Government Members recognise that. I am sure some of them do, because these things come back to bite Members when they are in a different position. I exhort them to listen to what we say—no matter how often I say it.
The Chair
Order. I suggest that the hon. Gentleman’s comments should be pertinent to the part of the Bill that he is discussing, rather than a reiteration of points that have already been made.
Peter Dowd
I understand that, Mrs Main. Amendment 5 is another amendment pertinent to the clause, in that it continues to wish to hold the Government to account. That is not just the view of the Opposition, but of the House of Lords Delegated Powers and Regulatory Reform Committee, which I have referred to before. It says that the Bill involves a “massive transfer of power” that gives Ministers over 150 powers to make tax law for individuals and businesses. Those laws will run to thousands upon thousands of pages, with little opportunity for us to scrutinise them. The Treasury’s delegated powers memorandum alone, which sets out in detail all those law-making powers, runs to 174 pages.
The Fairtrade Foundation has raised concerns over the use of delegated powers in the Bill around the setting of tariffs and the establishment of rules of origin. That relates to developing countries—we touched on them earlier—where, in some instances, there is a high dependency on the UK market and where there are products with tight margins, so changes to tariffs could make or break the livelihoods of producers.
The Hansard Society also rightly pointed out in its evidence that unless the Government can give a compelling reason, all Henry VIII powers should be subject to the affirmative procedure, which the Delegated Powers and Regulatory Reform Committee is also in full agreement with. Mr Blackwell from the Hansard Society does not see any evidence in the delegated powers memorandum that justifies the Government avoiding an affirmative procedure. Nor does the Hansard Society understand the Government’s justification and distinction between the use of urgent and non-urgent powers.
I will continue to repeat that this House is entitled to scrutinise the Government appropriately and as much as it wants within the confines of procedures. I wish that the Government would listen not only to the Opposition but to virtually every organisation out there who tells them that in these times of significant change, the Government should open their arms to scrutiny and challenge and not shut the door in our faces.
Mel Stride
Clause 12 provides for an exception to the application of the standard rate of duty as set under clause 8. It allows some or all of the import duty that would otherwise be charged on specified goods to be waived for a specified period of time. The primary purpose of a tariff suspension is to facilitate domestic production by ensuring that businesses have access to the supplies that they need. A similar exception to the application of the standard rate of duty exists under the Union customs code. A suspension could be introduced on the Government’s own initiative, or after a request for one: for example, from a business.
Suspensions are usually applied to certain types of goods. Any goods that will be subject to a suspension will be specified by regulations. For example, under the current arrangements suspensions are generally granted only where the good is a raw material or unfinished product, which will be used by UK manufacturers; where no competing domestic product exists; and where the goods covered by the suspension are subject to a significant amount of duty. In other words, the suspension would have a material benefit for UK industry.
A suspension of duty would apply for a given period of time that could be extended. Where a continuation of a suspension implies a lasting need to import a certain product at a reduced or zero rate, the Government would look to reduce the standard rate of duty. To be consistent with WTO rules, a suspension on any given good must be granted equally to every country and supplier. Regulations made pursuant to the clause will be subject to the negative procedure.
Amendment 5 and consequential amendment 9 to clause 32 change the proposed parliamentary procedure for regulations relating to tariff suspensions from the negative procedure to the draft affirmative procedure. The Government believe that the scrutiny procedures that apply to the exercise of each power in the Bill are appropriate and proportionate, taking into account the length and technical complexity of the regulations and the frequency with which they are likely to be made.
For tariff suspensions, the negative procedure is both appropriate and proportionate. The power in clause 12 only permits the standard rate of import duty to be temporarily lowered and could not be used to increase the rate. Delays in implementation of suspensions owing to the use of the draft affirmative procedure would only be to the detriment of UK manufacturers.
I will provide an example that might be pertinent to our debate. The suspensions are likely to be numerous and detailed. For example, in the last round of EU suspensions, a UK business successfully applied for a tariff suspension on a specific type of gearbox with a hydraulic torque converter, with at least eight gears and an engine torque of 300 newton metres or more. It is the kind of gearbox I might have in my Rolls-Royce car, perhaps. It is not clear that such a level of detail would benefit from a greater level of parliamentary debate, despite the fact that we have debated Rolls-Royces, and by extension gearboxes, to some degree in this debate today.
In short, the clause is a crucial part of the overall import duty regime, allowing the Government to take action to support manufacturers in the United Kingdom. I therefore move that the clause stand part of the Bill.
Peter Dowd
Given the time, I will spare the Committee further scrutiny. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(David Rutley.)