Grand Committee
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Arrangement of Business
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
My Lords, the hybrid Grand Committee will now begin. Some Members are here in person, respecting social distancing, others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded, or any other safety requirements are breached, I will adjourn immediately. If there is a Division in the House, the Committee will adjourn for five minutes.
The microphone system for physical participants has changed. Your microphones will no longer be turned on at all times, in order to reduce the noise for remote participants. When it is your turn to speak, please press the button on the microphone stand. Once you have done that, wait for the green flashing light to turn red before you begin speaking. The process for unmuting and muting for remote participants remains exactly the same. So, let us begin. The time limit is one hour.
Communications Act (e-Commerce) (EU Exit) Regulations 2020
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Barran
That the Grand Committee do consider the Communications Act (e-Commerce) (EU Exit) Regulations 2020.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
My Lords, these regulations were laid in both Houses on 24 September. They seek to end the direct effect of article 3 of the e-commerce directive, also known as the country of origin principle, on Sections 120 to 124 and 128 to 131 of the Communications Act 2003; otherwise, it would become retained EU law after the transition period. These sections refer to the regulation of premium-rate services and nuisance calls respectively. The country of origin principle is an EU internal market measure designed to facilitate digital trade among businesses in the European Economic Area. It would not be appropriate to retain this measure in UK legislation beyond the end of the transition period.
These regulations do not create new policy. Rather, they are a technical measure to fix failures of retained EU law arising from the withdrawal of the United Kingdom from the EU. This intervention is essential to ensure that UK rules can be effectively enforced at the end of the year. The primary impact of these regulations is that they will allow a UK regulator, the Phone-paid Services Authority, to enforce its code of practice against online service providers based in the European Economic Area. Currently, article 3 of the e-commerce directive inhibits the exercising of its powers under Sections 120 to 124 of the Act against European Economic Area businesses. The regulations will also allow Ofcom to enforce rules under Sections 128 to 131 of the 2003 Act. Article 3 of the e-commerce directive currently inhibits it from enforcing these rules on the misuse of electronic communications and services against European Economic Area businesses. This change will ensure quicker regulatory action and more efficient user redress. UK regulators will be able to enforce UK laws for the protection of UK consumers.
I also bring to the attention of the Committee the reports of the European Statutory Instruments Committee in the House of Commons and the Secondary Legislation Scrutiny Committee in the House of Lords, and thank them for their work. I would like to address the Secondary Legislation Scrutiny Committee’s wish to discuss wider costs to UK business as a result of the UK becoming a third country in relation to the e-commerce directive. It is worth reiterating that these regulations have very limited bearing on UK businesses. UK businesses will be out of scope of the country of origin principle as a result of our leaving the European Union transition period at the end of December, not as a result of these regulations. Rather, these regulations ensure that European Economic Area businesses will come within the scope of UK rules, which they would not do unless we brought in these changes.
Of course, the loss of the country of origin principle as a result of leaving the EU also means that UK businesses will be newly in scope of certain European Economic Area laws from which they were previously exempt. We expect that the impact on UK business will be relatively low. The scope of the directive is narrow, and we do not expect regulatory regimes to be markedly different in the UK compared with other European Economic Area states. Depending on the nature of the online service, many UK businesses may already be compliant with relevant EEA laws and they will need to make little or no immediate changes to be compliant from 1 January 2021.
I will now give some further background on the proposals themselves and reiterate our reasons for intervening. The e-commerce directive seeks to contribute to the proper functioning of the European internal market by ensuring the free movement of online service providers within the European Economic Area. The e-commerce directive will no longer apply to the UK at the end of the transition period. This includes the country of origin principle set out in article 3 of the directive. The country of origin principle applies to online service providers based in any EEA state that operates across the European Economic Area. It means that the service provider has to follow certain rules only in the state in which it is established, rather than rules in each state where its service is received. If the state where the service is received wishes to enforce its laws against the online service provider, it can do so only where certain conditions set out in article 3 are met. That state must also follow a derogation procedure, notifying the European Commission and the relevant member state before enforcing its rules.
While the UK has been bound by the directive, this exemption has been reciprocal between the UK and EEA member states. UK-based online services have been exempt from relevant laws in EEA states as provided for by the country of origin principle. Equivalent businesses in EEA member states are exempt from those relevant laws in the UK. This country of origin principle is implemented in relevant pieces of national law.
Once the transition period ends, we will no longer be bound by the e-commerce directive, and UK-based online service providers will lose their exemption from relevant laws in European Economic Area states, as currently provided for by the country of origin principle. If we do not intervene to remove article 3’s effect on the Communications Act, online service providers in the EEA will continue to receive preferential market access beyond the end of the transition period while the same benefit will not be afforded to UK online service providers.
These regulations remove the direct effect of the country of origin principle from the Communications Act 2003. This removes the exemptions from rules under Sections 120 to 124 and 128 to 131 of the Act for businesses based in the EEA. The principle will be removed from all UK legislation in due course. This is to ensure that businesses in the EEA will be brought into scope of all UK laws from which they are currently exempt as a result of article 3.
As I have set out today, these regulations are a technical measure to fix failures of retained EU law to operate effectively, arising from the withdrawal of the UK from the EU. They will ensure that our regulators are able to effectively apply UK laws to online service providers based in the EEA, and ensure that UK consumers are protected. I beg to move.
Baroness Wheatcroft (Non-Afl) [V]
My Lords, I thank the Minister for her clear introduction to this short debate. The reason for these regulations is straightforward: when the transition period ends—and that time is frighteningly near—UK businesses in the communications industry will no longer be able to trade in EEA countries, relying on the fact that they comply with UK regulations. These regulations do not change that. They determine that companies from the EEA will no longer be able to rely on their compliance regimes to give them access to UK customers. Instead, they will have to comply with UK regulations. This means that they will have to master the regulations that apply in one more regime. Unfortunately, UK businesses will potentially have to comply with many different regimes in order to carry on trading with the EEA countries.
The Minister assures us that the cost to UK businesses will be minimal. But I wonder whether she can reassure us as to how that conclusion was reached. I understand that there was no consultation about the regulations and no impact assessment was conducted. I know that time is short but, if we are being told that costs will be minimal, we need to know what that is based upon.
Last month, the Minister for Media and Data, John Whittingdale, said reassuringly that
“we do not expect the regulatory regimes to be markedly different in the UK in comparison with other EEA states.”—[Official Report, Commons Delegated Legislation Committee, 20/10/20; col. 4.]
My noble friend the Minister has just repeated this. Those who, like me, regret the decision not to retain membership of the single market would surely shake their head at this comment. Given the expectation of such regulatory alignment in a growing sector, why is this country so set against this principle? It would have allowed continued membership of our most important trading bloc.
The EEA countries may choose to diverge their regulations. While this would not place extra burdens on member states, it would add to the burden on UK companies trading in the EU. Can the Minister tell us how confident she is that this will not be the case and that the regulatory regimes will remain reasonably aligned?
Effective regulatory insight is crucial in this sector. The legislation covers premium-rate phone services. Given that more than 200,000 people a year suffer text message scams—indeed, I was on the receiving end of one only last week—it is important that the Phone-paid Services Authority is given the power it needs to ensure that all companies trading in this sector play by the rules. Ofcom appoints the authority. As the Minister explained, it also has the responsibility for regulating electronic communications networks and services.
As we are asked to approve these regulations, I have one further question for the Minister. Back in September, it was rumoured that the Government planned to install Paul Dacre as the new chairman of Ofcom, which is a very powerful body. The Daily Mail reported it in some depth. As Mr Dacre is editor-in-chief of DMG Media, one might assume that these stories were well founded. Given that the chairman of Ofcom is a public appointment, the news was met with some surprise. A government spokesman insisted that the normal appointment process would be followed and that it would begin shortly. Yet the post does not appear to have been advertised yet. This important individual will play a vital role in ensuring that these regulations are put into practice. Can the Minister enlighten us as to when this appointment process is likely to begin?
Lord Clement-Jones (LD) [V]
My Lords, the ending of the country of origin principle on access to the EEA digital internal market in e-commerce is, I am afraid, the inevitable consequence of our regrettable decision to leave the EU and not to seek to stay in the internal market.
I agree with everything the noble Baroness, Lady Wheatcroft, said. I also want to draw attention to paragraph 12 of the Explanatory Memorandum relating to impact. It says:
“A full Impact Assessment has not been prepared for this Statutory Instrument because there is a low level of impact per business. A De-Minimis Assessment showed that ... there were annual time-saving benefits to certain UK businesses”.
For businesses which offer services to the EEA but not the UK, the Government estimate an annual time-saving benefit of circa £0.5 million. This is pretty breath-taking stuff, as I hope to demonstrate. The Government say that this is because they will no longer have to comply with UK legislation, as well as with the domestic legislation of the EEA state where the service is received. This is looking at it very much from the wrong end of the telescope. The Explanatory Memorandum goes on to say that for all businesses in scope:
“This will result in a small annual net direct cost to business of £0.6m over 10 years. Transition costs refer to the cost incurred by businesses when adjusting to new legislation, in this case the time that organisations will have to take to familiarise themselves with this new legislation.”
In their guidance on the e-commerce directive after the transition period, the Government say:
“The eCommerce Directive applies to ‘information society services’. These are defined as any service that is normally provided: for payment, including indirect payment such as advertising revenue … ‘at a distance’ (where customers can use the service without the provider being present) … by electronic means, and … at the individual request of a recipient of the service. This covers the vast majority of online service providers, for example online retailers, video sharing sites, search tools, social media platforms and internet service providers.”
As commentators have said, after the end of the EU transition period, service providers with a place of establishment within the UK will lose the article 3 protection and will need to comply with the relevant legal requirements within the “co-ordinated fields” of the directive in each EEA country in which they operate. UK online service providers may also become subject to “prior authorisation” schemes, such as licensing requirements, in EEA countries where they operate.
What assessment has been made of the amount of digital trade which will suffer from cost penalties as a result of the withdrawal of country of origin protection? The impact on online services could be immense. The loss of these protections will mean that cloud service providers based in the UK and providing services to customers across the EEA will need to consider and take steps to comply with the national rules applicable to their cloud services in each EEA country where they are available. Online advertising, online retail and online contracts as a whole will suffer. This SI was inevitable but it is not without severe consequences. Should there not have been a full impact assessment of the regulations? Has a profound impact assessment of any kind been done?
This is a grossly inadequate debate, without any understanding by the Government of the real impact of this SI on all those businesses engaged in the digital market. I agree with the noble Baroness, Lady Wheatcroft, about Ofcom. I look forward to the Minister’s answer to this and to the impact question.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, I am grateful to the Minister for her very full introduction to this SI, which is much appreciated, and I thank her and her staff for offering the chance to talk over some of the issues the SI raises in a meeting earlier this week.
The noble Baroness, Lady Wheatcroft, picked up on a number of points, which I will not repeat, but I want to draw out a little further the question of the asymmetry of this SI. As she says, the main beneficiary appears to be Ofcom, and it is a pretty marginal benefit in the sense that it will no longer have to clear, in-country, issues raised by UK companies which have concerns about the way services brought into the UK are being regulated under the country of origin principle. As she pointed out, this seems a rather mixed blessing in some ways. It may well have been freed from the obligation, but the companies themselves will have to do the tracking around and chasing if they have an issue they want to raise in, as has been pointed out, any of the 27 countries with which they used to be able to deal on a relatively simple basis. The Explanatory Memorandum is a bit coy about this but the position is fairly clear, given the very wide range of organisations and companies—online retailers, video sharing sites, search tools, social media platforms and internet service providers—that will be caught by the provision.
Secondly, the main users of the process provided for under this SI are charities. The figures suggest that a number of charities, such as Red Nose Day, rely heavily on people phoning in their donations. Regarding the impact assessment, I cannot believe that some adjustment will not need to be made by bodies that are reliant on such forms of generating income. If the Phone-paid Services Authority does not have the necessary authority to deal with this issue, how on earth will such bodies cope if things go wrong? We have also heard about scams. I am anxious that the Minister deals with this issue when she responds.
Thirdly, although scams account for much of the downside of what happens in this world, as we have heard, there are also concerns about vulnerable people being drawn into conversations or receiving information they would not wish to receive. Effectively, this is another example of the online harms issue. Can the Minister confirm where we are with the forthcoming online harms legislation, and that the consumer and customer issues that this SI raises will be dealt with in it?
Both the previous speakers made a point about the wider context of this SI. I mean no disrespect, but it makes a very minor change. There are a number of discrepancies between how the UK and the EU, our nearest neighbour and largest market for our services, will regulate in this area post Brexit. When the Minister responds, can she give us a better sense of what is happening with roaming, an issue of great concern for many consumers? Will they be able to use their equipment in other countries and if so, under the current arrangements, or will costs be involved?
Spectrum management is an issue on which we need, and indeed have always had, the co-operation of many other players, mainly in the EU but obviously worldwide. As a sole player, we are in a much weaker position to negotiate the sort of spectrum we want. Using additional spectrum, spectrum that is not efficient or spectrum that is not as appropriate to the task will be more costly for British business. Do the Government have any plans to resolve this issue, and how will it be deployed in future?
On the wider question of net neutrality, which we were concerned about a few years ago, and on which we had many friends in the EU, how is that being managed as we go forward?
Baroness Barran (Con)
I thank all noble Lords who spoke for their contributions on these regulations. I will start with some points that I will respond to in writing. I do not have with me information on the exact timing of the recruitment process for the chair of Ofcom, but I will find that out and share it with your Lordships. I will also write on some of the broader issues raised by the noble Lord, Lord Stevenson, such as spectrum management, roaming and net neutrality. He may also have raised one or two other points, but I will make sure that I address those ones in full.
All noble Lords, including the noble Baroness, Lady Wheatcroft, questioned the impact of the SI and the Government’s assessment of it. A number of elements lead us to be confident in our assessment. First, the figures we have received from the primary regulator, the Phone-paid Services Authority, on derogation requests it receives from EEA states that wish to enforce their legislation against UK-based companies are very low. Double figures have not been reached in any given year, which suggests limited situations where a UK-based business has not complied with requirements similar to those in the 2003 Act when operating within the EEA.
Secondly—this perhaps touches on some of the issues raised by the noble Lords, Lord Clement-Jones and Lord Stevenson—because the scope of this directive is narrow, the current exemptions to which UK businesses have access apply to very few rules governing online activities. They do not apply to areas such as tax, certain gambling activities, personal data covered by GDPR, or legal requirements relating to goods. The noble Lord, Lord Stevenson, is absolutely right about the use made by charities of premium phone lines. However, the overall scope is very restricted. We also believe that there is unlikely to be marked divergence in regulatory regimes in the UK compared to the EEA in the coming years.
On the number of businesses that these regulations might impact, we estimate that approximately 75,000 UK businesses that provide services to one or multiple EEA-area states have the potential to fall within their scope. The figure for premium-priced phone services is 12,000, which is within that 75,000 estimate. I stress that no exact data exists, but these are the best estimates the Government have. I hope that goes some way to addressing the valid points that your Lordships raised.
On the online harms legislation, our position remains unchanged. We expect to publish the full government response by the end of the year and introduce the legislation early next year.
As I hope I have outlined, these regulations are a necessary technical measure to fix what would become a failure of retained EU law. Our intervention will empower UK regulators to enforce UK laws for UK consumers.
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
The Grand Committee stands adjourned until a convenient point after 3.45 pm. I remind Members to sanitise their desks and chairs before leaving the room.
The Deputy Speaker (Lord Duncan of Springbank) (Con)
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person, respecting social distancing, others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. The time limit is one hour.
Electronic Communications and Wireless Telegraphy (Amendment) (European Electronic Communications Code and EU Exit) Regulations 2020
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Barran
That the Grand Committee do consider the Electronic Communications and Wireless Telegraphy (Amendment) (European Electronic Communications Code and EU Exit) Regulations 2020.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
My Lords, these draft regulations are being introduced to transpose the EU Electronic Communications Code directive into domestic law, as we are committed to do under the European withdrawal agreement. The Joint Committee on Statutory Instruments, the Parliamentary Business and Legislation Committee and the Secondary Legislation Scrutiny Committee have all considered the instrument and did not raise any issues. The draft regulations are being introduced under powers set out in Section 2(2) of the European Union Communities Act 1972 as repurposed for the transition period by the European Union (Withdrawal Agreement) Act 2020.
The draft regulations make corrections to legal deficiencies arising from the UK’s exit from the European Union. The corrections being made under the powers set out in Section 8 of the European Union (Withdrawal) Act 2018 are mostly minor and technical, including references to EU law that are no longer applicable to the UK as a result of EU exit. These regulations are a crucial milestone towards the delivery of our digital ambitions and will play a significant role in aiding the delivery of our manifesto commitments, ensuring a future-proofed telecommunications regulatory regime. These changes will facilitate competition and a pro-investment regulatory environment, supporting gigabit-capable rollout across the country. UK consumers will benefit from better information to make informed decisions, have stronger contract rights and be able to switch their services much more easily than before, which will help support competition. The regulations will also ensure that universal services remain affordable for consumers with low incomes or other specific needs.
The measures sit alongside those being implemented by Ofcom under its existing powers. Ofcom is implementing new rules on information requirements for contracts, contract duration and termination rules, along with broadband switching rules. This includes rules banning providers from selling locked devices, ensuring that a customer’s new provider leads any switch, stronger contract exit rights and short summaries of main contract terms to help customers make more informed decisions. We recognise that the industry will need to make changes as it responds to Covid-19 so Ofcom will allow providers a further year to put these measures into place during this exceptional period.
A small number of measures in the directive are not being implemented via these draft regulations. Some measures are being implemented through other legislation, while others have already been put in place, including those that relate to car radios via the Road Vehicles (Approval) Regulations 2020. A limited number of the measures are applicable to “over the top” services, including instant messaging and email communications, which we are considering further how to take forward. We have given Ofcom powers to gather information on these services in the draft regulations. This will help us to better understand and assess this market and to continue to develop any future measures.
The draft regulations introduce measures to drive investment into future-proof networks and communications services through sustainable competition, supporting the efficient and effective use of radio spectrum and providing a high level of consumer protection. While we are required to implement these changes, they are legislative changes that we would want to make in any case. The UK played a key role in the negotiations and indeed shaped the wider regulatory framework for telecoms that the directive builds on.
A number of the provisions promote competition and are pro investment. Ofcom will be able to impose conditions to ensure connectivity and choice for consumers where it is challenging for competition to emerge in an area that already has a network. The instrument also provides Ofcom the power to ensure that another provider can access a dominant provider’s physical infrastructure assets—the ducts and poles that house the network—to ensure choice and competition irrespective of the market scope. We will enable Ofcom to impose longer-term pro-investment regulation, such as implementing longer market review periods that focus on promoting higher capacity networks. We will support the availability of build plan information to industry and to the Government in order to better inform any rollout plans. We will also enable co-operation between network providers, which should support these primarily rural deployments. These measures are essential if we are to create the right environment to encourage investment and ensure that Ofcom has the necessary powers to promote competition and protect consumers.
The draft regulations include measures that will enhance consumer protections. The Government, alongside Ofcom, are implementing measures to help ensure that UK consumers will benefit from better information to make informed decisions, stronger contract rights and the ability to switch services much more easily than before. The regulations will support the efficient and effective use of radio spectrum, promoting competition and the timely rollout of 5G services and the widespread availability of mobile connectivity. There are also measures that relate to the universal service obligation that will ensure that a range of telecoms services remain affordable for consumers with low incomes or other specific needs, giving them a safety net to ensure full participation in both society and the economy.
The instrument also includes powers for the Secretary of State to establish a mobile universal service obligation in the future if that is deemed necessary, and ensures that people who use legacy universal service obligation services, such as payphones, telephone directories, fax and particular methods of billing, will continue to be able to do so. Additionally, the instrument introduces measures to update the regime for social tariffs for telephony and broadband, should they be required. These will ensure that consumers with low incomes or other specific social needs are able to access universal services at affordable prices where the market does not provide these commercially or on a voluntary basis.
The importance of electronic communications has been underlined during the Covid-19 pandemic. Telecoms are now more critical than ever for the country, with a large proportion of the population working from home. Combined with future expectations around new technologies and services, including 5G, building future-proof networks will be essential to our future economy. The changes that we are introducing represent a significant step forward in helping to achieve these ambitions. I look forward to hearing noble Lords’ reflections on this instrument and I beg to move.
Lord Clement-Jones (LD) [V]
I thank the Minister for her introduction. I should declare an interest as chair of Ombudsman Services, which deals with customer complaints regarding telecommunications.
I was delighted to hear the noble Baroness extol the virtues of an EU directive, which I think was a bit of a novelty, coming from a Minister. It is sad that we have only three speakers on such an important SI. After all, it encompasses a whole Bill’s-worth of changes to our communications laws. When I first looked at it, I thought, “Well, all I can do is to try to stop the ship sailing on regardless and stick an oar in here and there”, because quite a few substantive issues are involved.
The Government response to the consultation on implementing the European electronics code states:
“a ‘copy out’ approach to the Directive”
is being taken
“where we consider change is needed in UK legislation”,
but in line with
“our overarching approach of a minimal transposition”.
I am not quite sure that we can have it both ways. I am going to kick the tyres on the “minimal transposition” aspect, because the Minister seemed to be quite positive about the impact the directive will have on investment and rollout of our 1 gig capability.
The response also says:
“In some cases, we will adopt an alternative approach to transposition to certain provisions in a way that is tailored to UK markets. We take this approach where there is sufficient justification and evidence for doing so, for example, where it would contribute to the government’s ambitions for digital connectivity.”
We heard some of the positive approach, but I am not quite sure whether we fully heard the more minimal approach. We have heard about further aspects—I think the Minister said that there are two categories they are considering—but we did not hear in the interim about where a minimal approach had been taken.
The Government set out three categories in the response:
“Articles which we consulted on given their potential to support the UK’s digital ambitions”—
fine;
“Incremental changes to the existing framework which we intend to transpose in a minimal way”—
again, there is the use of the word “minimal”; and
“Deprioritised from 21 December 2020 deadline”.
The problem is that there is a rather inadequate approach to this issue in both the Explanatory Notes and the response to the consultation. There is no easy breakout of what changes fall within the three categories. You have to rather laboriously cross-refer when you get to the table which glosses annexe A of the response. I therefore hope that the Minister will forgive me if I go through a few aspects of the statutory instrument and ask a few questions.
The fundamental flaw is where the consumer comes in all this. The list of respondents to the consultation consists solely of telecoms companies. As we go through certain areas, can we be sure that the way the Government have transposed the directive is acting in the best interests of consumers?
The Government say that the transposition of the code
“recasts the objectives and regulatory tools of the current”
European framework on electronic communications
“to place a stronger emphasis on incentivising investment”.
They say that:
“The Regulations support the government’s digital ambitions and plans to deliver nationwide gigabit-capable connectivity ... This will enable Ofcom to support deployment and investments in gigabit-capable networks … These include ensuring that Ofcom’s use of specific market regulatory tools promotes very high capacity networks. Ofcom are also required to promote measures that facilitate a competitive retail market for consumers.”
It would be useful if the Minister could unpack some of those statements. Are they going to speed up rollout? Are they going to make up for the fact that Covid-19 seems to have delayed that 1 gigabit capability rollout?
I can see the benefit of transposing Article 22 in terms of survey information and designation of areas where there is no planned coverage, but what are the other benefits? For instance, what substantive difference will these changes make to rollout of 1 gigabit capacity? Why only the minimum transposition of Articles 76 and 79? The Explanatory Memorandum states:
“There are specific conditions known as significant market power … conditions, which can only be imposed on providers with market dominance. Ofcom must analyse markets on a regular basis in what is known as a market review.”
The Government seem simply to have decided to swallow Article 61 whole and extend the market review to five years, increasing the maximum time between market reviews from three years to five. In a sense, they are therefore making the situation worse from the competitive point of view. Of course businesses that were consulted prefer this, but what about consumers? Does that not precisely show up the problems with the original consultation?
Surely when major developments occur with great speed, as with a consolidation of digital assets—for instance, specialised mast companies such as Phoenix Tower with its significant market shares, or the joint venture between Liberty Global’s Virgin Media and Telefonica’s O2—these kinds of reviews are required at very regular intervals. There are some aspects which I unreservedly welcome, such as the new protection for certain end-users who purchase a bundle of services. There are the social affordability aspects, too.
When we come to the universal service obligation, we see a certain amount of changes. There is no change to the inclusion of affordability requirements, but it should be said in passing that the 10 megabits per second universal service obligation is still miserably unambitious. We have made that point many times before on these Benches and it was, of course, criticised by one of our own Select Committees. I hope that the Minister will give an indication of when it might change. It seems extraordinary that we have this ambition for 1 gigabit capacity, yet we are still hobbling along on 10 megabits per second as a universal service obligation.
What about the impact assessment? If all these provisions are to be so beneficial, as I hope they will be, why do the Explanatory Notes say that there will be an impact of less than £5 million on the economy? Surely the idea is to incentivise investment. Were we doing absolutely fine before we adopted this directive or was the Minister engaging in a bit of hyperbole? Where do we stand on the impact of these new regulations and what are the substantial changes? Will it mean faster rollout and, if so, in what respect?
It is interesting that the Minister’s colleague, the noble Lord, Lord Vaizey, wrote a very percipient piece in the Telegraph in July. I think the headline was “It’s high time we fixed Britain’s patchy mobile networks”. How will all this contribute to that, or are the Government really just making a virtue out of necessity?
Lord Stevenson of Balmacara (Lab) [V]
My Lords, I thank the Minister for her very good introduction to this SI. It is a long and complicated one, but she came across the issues quickly and with great clarity. I also thank her for arranging a meeting where I was able to ask direct questions of the officials responsible for this work.
It is, on first glance, a rather strange document—almost hybrid, if that is not a pun too far. It introduces most elements of a European directive positively and helpfully, but it also uses the EU exit regulations to discount a few things that might have got in its way. I say that to position myself on my first point: rather like the noble Lord, Lord Clement-Jones, it seems to me that this is almost primary legislation being achieved through secondary legislation because of the changes that are being made that will have an impact not only for consumers and companies but, more responsibly, for the regulator. This document is so large that one would almost want to go through it line by line and ask questions by having a due process that allowed more than this important but rather short exchange as a result of it being a statutory instrument.
I asked that question of officials. In a slightly unguarded moment, perhaps, the impression I gained—I will not quote them—was that Ministers presumably could have chosen either to seek a legislative opportunity to put forward primary legislation that might not have been time-efficient, as it certainly would not get us past the deadline of 21 December 2020, which is not far away, or to take the slightly unusual step of doing it through secondary legislation. These are my words, not theirs. For good reason or bad, the decision was taken to do it this way. I am not going to carry on with this point, because it was not picked up by any of our standing committees that looked at the legislation or by the Commons. However, it is quite interesting, and there must be a break point.
I will make one other point about it. One of the things that is looked at in deciding whether something should be primary or secondary legislation is the impact it has on consumers: for example, in criminal penalties or taxes. I do not think there is any such provision in here, but I wonder about the approach to the special subsidy. There is a phrase in the notes which gives the sense that it is not just a question of whether those who are vulnerable or have low incomes can get treated under the special subsidy system; it is also possible for Ofcom to look at whether others should make a contribution.
That point about “others” comes on page 8 of the Explanatory Memorandum in point 7.24, which says:
“If the burden is unfair, Ofcom may determine that contributions should be made by other providers to help meet the burden”.
I wondered whether that was heading towards taxation. I will leave my point in that area.
I want to make only two other points, because the noble Lord, Lord Clement-Jones, has made a substantial contribution to this debate. One is that, as he said, one of the key guiding principles, which we went over at length in earlier legislation and presumably will meet again as we go forward on this journey, is the attempt to get the country to have a gigabit-capable infrastructure. I welcome a lot of the measures here which will point us in that way, but I want to ask about two of them.
First, there is the question of whether the ability to share equipment, which is one of the powers that Ofcom has taken or will be given under these regulations, will be sufficient to ensure that the number of not-spots is reduced across the country. As the noble Lord, Lord Clement-Jones, said in citing the noble Lord, Lord Vaizey, it seems that we still have patches of the country, sometimes in major conurbations and many times in London, where the quality of reception is so bad that it is unbelievable that we are even thinking about getting to a USO of 10 megabits per second, rather than to this nirvana that we hope to have of one gigabit.
There are two measures that I thought might help with that. One is the need for a power to make providers share equipment where it is important. In the regulations, that appears to be limited to whether there is unfair competition. Is that right or is it more focused, as the noble Lord, Lord Clement-Jones, was saying, on this question of getting the whole country to a higher level of capability?
The second is the way in which spectrum is allocated, because that has such a major burden on the 5G capability of the country, and who knows what 6G or other Gs would do when they came along? One complaint that we were aware of 18 months or so ago, when we were doing the primary legislation in this area, was that the regulations relating to spectrum sales did not give sufficient fine-tuning of the arrangements under which Ofcom offered it to ensure that the quality of the spectrum available to those bidding for it was being met satisfactorily, given the needs that they identified.
I am probably at the limit of my technical knowledge at this point and will therefore not continue this line. But I am sure that the Minister is fully briefed on it today, and if she is not, perhaps she could write to me. Do the measures in this statutory instrument unblock that problem? When allocating spectrum, it is important to recognise that the bandwidth within it is as important as the amount available under certain measures, particularly 5G, because of its capability in ensuring that local areas are properly linked up so that those who live in blocks of flats, for instance, are not blocked simply because the walls are too thick or the material used in the building is obstructive to travel.
These are the two things we were left with after we went through this the last time around when we were talking about telecommunications development, the partnership that is necessary with the internet service providers and the problems faced by those in rural areas and in the centres of towns. They need to be assured that these regulations will bring this forward.
Finally, like the noble Lord, Lord Clement-Jones, I welcome the new consumer rights that have been brought in. They will be helpful, and I am glad to see them in place at last.
Baroness Barran (Con)
My Lords, I thank both noble Lords for their questions and the constructive tone of their contributions. I am pleased that in principle the regulations command support from all sides of the Committee, and that we share the ambition that this country should be able to benefit from gigabit-speed connectivity and that consumers should benefit from greater protections. I will try to address the points raised but in a couple of cases I will need to follow up with a letter to your Lordships.
In answer to the point raised by the noble Lord, Lord Clement-Jones, about the respondents to the consultation, a number of organisations representing consumers responded; these included Citizens Advice, the Communications Consumer Panel and the Clarion Housing Group, to give just three examples. I hope that that reassures him that a balance of views was sought.
Both noble Lords questioned—perhaps I can express it as—our enthusiasm for implementing this legislation. As I mentioned, the UK was heavily involved in negotiating the final text of the directive to make sure that it would be truly positive for the UK telecommunications market, and we played a really leading role in the negotiations.
The noble Lord, Lord Clement-Jones, questioned whether we were going above and beyond some of the minimum requirements in the directive. There are more than 100 measures in the directive and in six of them we have gone further, where it has been clearly in the UK’s interest to do so. That relates to Ofcom’s ability to collect information regularly about gigabit-capable network future build plans; its ability to penalise BT or KCOM if either reneges on voluntary commitments; and the additional powers to promote retail competition in buildings where there is not room for more than network deployment. I think that addresses that point.
In relation to speeding up, questions were raised about the impact of the directive. The £5 million cited in the memorandum relates to the direct impact but we expect the indirect impact to be very substantial in terms of opening up and speeding up the implementation of high-capacity networks. We believe that this will support our plans to incentivise investment in gigabit-capable networks by promoting both competition and commercial investment wherever possible; allowing Ofcom to have longer market reviews, which gives industry greater planning time; and, as I mentioned, supporting the availability of build plan information to industry and government, which supports our rollout plans. There are other examples that I will happily share with your Lordships in a letter.
The noble Lord, Lord Stevenson, is testing my technical knowledge of the impact of the statutory instrument on our spectrum policy framework. If I may, I will include further answers on that in my letter. The statutory instrument does introduce a requirement for Ofcom to consider whether specified level of use conditions would promote efficient use of the spectrum when designing competitive awards, but that does not address the noble Lord’s point about the quality of the spectrum, so, if I may, I will include that in my letter.
Finally, the noble Lord, Lord Stevenson, asked about not-spots in both rural areas and some urban areas. As he will be aware, we have committed £5 billion to support the rollout of gigabit-capable broadband in the hardest-to-reach 20% of the country. We are sticking with our target of 2025. We acknowledge that it is a very ambitious target, but we are driving forward with it as hard as we can.
To recap, transposing these changes into UK law will allow us to drive investment in future-proofed networks and communications services through sustainable competition. It will support efficient and effective use of the radio spectrum and provide a high level of consumer protection. It will also ensure that Ofcom’s powers remain operable and reflect recent technological innovation. Some of the measures are being transposed through alternative legislation, such as the requirements for the security of networks and services.
With thanks to both noble Lords for their questions, I beg to move.
Arrangement of Business
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text
The Deputy Chairman of Committees (Lord Alderdice) (LD)
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person, respecting social distancing, others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
Common Rules for Exports (EU Exit) Regulations 2020
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Grimstone of Boscobel
That the Grand Committee do consider the Common Rules for Exports (EU Exit) Regulations 2020.
Relevant document: 29th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con)
My Lords, I hope that the Committee may be unanimous in support of these regulations and their objective. The regulations were laid before the House on 21 September and were approved by a Committee of the House of Commons on 14 October. They are made under powers in the European Union (Withdrawal) Act 2018, which I will refer to as “the Act” from now on. The Committee will be aware that, given the context, these powers are limited. All that they allow is the correction of technical deficiencies in existing EU legislation that, by the operation of the Act, is to be retained in United Kingdom domestic law following withdrawal from the European Union. The amendments made by these regulations correct those deficiencies by, for example, replacing references to the European Union, its institutions and legislation with the appropriate United Kingdom references.
The retained EU regulation, as amended by these regulations, lays down the basic principle that exports from Great Britain will not be subject to quantitative restrictions unless the restrictions are applied in conformity with the retained EU regulation. The new legal regime makes it clear what the purpose of any export restriction should be. In general, export restrictions may be used only where there is a risk of a critical situation arising on account of a shortage of essential products or to remedy such a situation, or where such a measure is needed to fulfil international undertakings entered into by the United Kingdom.
I start by drawing the Committee’s attention to the fact that these regulations amend the retained EU regulation only as it applies in respect of Great Britain. This is consistent with the Northern Ireland protocol, which preserves the ability of the European Commission to exercise these powers in Northern Ireland. However, as is also set out in Article 6 of the Northern Ireland protocol, nothing may fetter the movement of goods from Northern Ireland to Great Britain, other than to fulfil an international obligation. The EU regulation is not used to fulfil international obligations and so does not fetter the movement of goods within the United Kingdom.
Through the course of the year, we have seen the use of export restrictions on medical goods grow around the world in response to shortages arising during the fight against Covid-19. Indeed, the European Commission used the EU regulation in March in response to shortages of personal protective equipment—PPE. Under this EU regulation, the United Kingdom was required to temporarily authorise any exports of PPE, following a review of licence applications from exporters. In the vast majority of cases, the United Kingdom authorised these exports.
While export restrictions can be appropriate in dealing with critical situations in the short term, the restrictions we have seen build up around the world have disrupted the normal flow of trade and exacerbated the efforts of many countries to combat the global pandemic.
The Government have been clear that countries should limit their use of export restrictions as far as possible. In May, the United Kingdom joined calls for the use of export restrictions to be restricted and to be applied only where deemed completely necessary and in a targeted, proportionate, transparent and time-limited way. By applying strict conditions to the use of any export restriction, this legal regime sends a clear signal to our trade partners around the world that, despite the pandemic, the United Kingdom remains open for business.
I underline for the benefit of the Committee that the Government do not need to implement export restrictions pursuant to the United Kingdom’s international obligations by making regulations under the retained EU regulation as amended by this SI. Other, more specific legislation provides the appropriate powers with which to do this. For example, restrictions that apply to the export of arms are provided for under the well-established statutory regime under the Export Control Act 2002. In addition, Article 10 of the retained EU regulation does not preclude the use of export restrictions where this is required for the purposes of public policy.
I also point to the role that Parliament will play in overseeing any measures that are put into effect under the retained EU regulation as amended by these regulations. This is clearly set out in Article 7A. It explains that any such measures must be contained within a statutory instrument and describes the nature of parliamentary involvement, where Parliament can annul measures in some circumstances and can vote on the regulations in others.
This statutory instrument is subject to the affirmative resolution procedure because it transfers to the Secretary of State a power to legislate that currently sits with the European Commission. That is a power to put export restrictions into effect in Great Britain in certain circumstances. I commend the regulations to the Committee.
Lord Liddle (Lab) [V]
My Lords, I do not believe that I have yet spoken in a debate being replied to on behalf of the Government by the noble Lord, Lord Grimstone. I welcome him to his role—although he has been there for some time. I see him as a very capable and grown-up figure. I wish that could be said of the rest of the Government in which he serves.
I am speaking in this debate because I am a member of the Secondary Legislation Scrutiny Committee and this measure came before us a couple of weeks ago. In terms of Great Britain, it seems a perfectly sensible amendment of retained EU law. There is however some uncertainty, which is why I am speaking today, about its implications for Northern Ireland.
Perhaps I may quote from the 29th report of your Lordships’ Secondary Legislation Scrutiny Committee. Paragraph 7 states:
“While we note the Department’s explanation that the Commission could impose export controls or restrictions on Northern Ireland only in very limited circumstances, such as in relation to the movement of endangered species, it is not clear what other circumstances may allow the Commission to exercise its powers. These are issues that the House may wish to explore further, given the sensitivities around future trade between Northern Ireland and the rest of the UK.”
That is why we drew the regulations to the special attention of the House.
We have already had a rather shameful episode, in my view, where the Government signed up to the Northern Ireland protocol and then, when they considered it in more detail, decided that they did not like its terms. As a result, they attempted something which, as we saw in the Divisions last night, this House regarded as a gross breach of international law to change provisions of the protocol which they did not like. What I am seeking today is an assurance as to what exactly are the circumstances in which this bit of EU law will apply in Northern Ireland, and whether the Government will give an absolute undertaking that they will not seek in any future piece of legislation to override these provisions. Given what we have seen in the last year, I think that is a perfectly reasonable request.
The Minister rightly drew our attention to article 6 of the protocol—I have it open in front of me. He quoted point 1 of article 6, which says:
“Nothing … shall prevent the UK from ensuring unfettered market access for goods moving from Northern Ireland to other parts of the United Kingdom’s internal market.”
It goes on to say that any measures which
“restrict the exportation of goods shall only be applied to trade between Northern Ireland and other parts of the United Kingdom to the extent strictly required by any international obligations”—
Lord Parkinson of Whitley Bay (Con)
I am sorry to interrupt the noble Lord but the time limit for speeches in this debate is three minutes.
Lord Liddle (Lab)
That is even given the very few speakers in the debate, which I do not understand. I will sum up in a moment. So, the protocol speaks of
“the extent strictly required by any international obligations of the Union”,
but it goes on to say that, despite Northern Ireland’s integral place in the United Kingdom, the applicable EU legislation would apply in Northern Ireland. What would that mean?
Lord Parkinson of Whitley Bay (Con)
I am sorry to interrupt the noble Lord once again but we are very tight on time. I am afraid the noble Lord will have to conclude his remarks.
Lord Liddle (Lab)
I conclude my remarks, but I hope that we do not get into legal problems similar to those we have seen already.
Lord Wallace of Saltaire (LD) [V]
My Lords, after hearing Conservatives and Ukippers preach year after year about the unnecessary bureaucracy of European regulations, it is sad that we now have a Government hurrying to transpose European regulations into domestic law as necessary and useful elements in diverse aspects of government and in managing our economy. That is a sad irony.
My first question to the Minister is to ask whether he can tell us yet how many more SIs are still to come before the House from his department before transposition and replacement are complete. We will be very busy between now and the new year with continuing legislation to clarify our future external trade policy and our relations with the EU and others. How many more SIs are still to come? Secondly, has preparation for this transposition been accompanied by any contingency planning in Whitehall about products not easily available in Britain that could be critical in an emergency?
I understand that constraints on exports of specific foodstuffs might be rational and necessary in an emergency. I am aware that the UK produces a range of pharmaceuticals to which this SI might apply. However, we have learned during the current Covid-19 emergency that there are a number of medicines that we do not produce in quantity, and a wide range of other medical supplies of which we have lacked domestic stocks—and which the Government had failed to ensure were available in usable forms in stockpiles.
Now that the UK is abandoning its guaranteed access to its largest market from which to source many essential products, have the Government embarked on any discussions with the EU and its member Governments about future co-operation in any shared or global emergency? Do they have plans to increase domestic production or expand domestic stockpiles?
I shall leave the Irish dimension to others, beyond noting that the growing prosperity of the Irish economy means that Ireland has also become a significant source of medical and related products used within the UK. Instead, I wish to inquire what the officials who gave evidence to our Secondary Legislation Scrutiny Committee meant when they said that our pursuit of national priorities and constraint of exports would be limited by the need “to meet international obligations”. What international obligations would limit government sovereignty under such circumstances? Which states or international organisations could impose such obligations on us?
I understood from the Brexiteers that the UK was asserting its sovereignty from international obligations by leaving the EU. Were those officials saying that there are nevertheless unavoidable limits on UK sovereignty? Are they saying that it is not only the European Union that cramps our freedom, but that, even after we have escaped from European domination, we will be held down by other foreign commands?
Lastly, is there any prospect of being able to use the powers set out in this SI in early 2021? The NAO report, published last week, put it bluntly, saying that
“preparations to manage the border at the end of the transition period remain very challenging”.
Does this SI set out an aspiration, rather than a deliverable set of proposals?
Lord Loomba (CB) [V]
My Lords, I will make two points about these regulations. As I have said before, a multitude of retained EU law is coming through Parliament. Some legislation may better serve its purpose if, instead of amending existing EU law with multiple statutory instruments—meaning the original instrument has to be consulted as well—we had one completely new instrument. It would make the law much less complex and possibly less confusing, especially with regard to this instrument and its implications for the Northern Ireland protocol.
Secondly, the pandemic has thrown a light on the difficulties that can be faced in accessing goods from other countries, when goods are in high demand and stocks are low, such as with PPE. Even Brexit itself and the end of the transition period may cause some shortages, especially if there is no deal. What if there were a shortage of some vital product and the UK Government put quantitative restrictions on it to ensure adequate supplies within the UK? There is no fetter on the movement of goods between Northern Ireland and Great Britain, as per Article 6 of the Northern Ireland protocol. Those goods are sent across to Northern Ireland where they are needed.
In this situation, the EU does not have any quantitative restrictions on goods, as it does not have a problem with supplies. In such a scenario, can the Minister tell us what precautions are in place to stop a company selling their goods on to the EU without having to follow the same restrictions as in the rest of the UK, and thus gaining a competitive edge over other companies within the UK?
Lord Moynihan (Con)
My Lords, these regulations are presented to the Grand Committee as no more than a correction of technical deficiencies in existing EU law that are to be retained on 1 January, irrespective of the outcome of current negotiations. Specifically, as the Minister confirmed, the regulations address the basic principle that exports from Great Britain will not be subject to any quantitative restrictions unless the restrictions are applied in conformity with the retained EU regulation.
It is to the first point made by the noble Lord, Lord Liddle, and the work of the Secondary Legislation Scrutiny Committee to whom we should be grateful for the level of interest shown in these Committee proceedings. As has been noted, the purpose of these regulations is specifically focused on the retention of retained EU law on common rules for exports to operate effectively in Great Britain after the end of the implementation period. This provides the Secretary of State with the powers to impose export control or restrictions where this is necessary to prevent a critical situation arising due to a shortage of essential products or to meet international obligations. Vaccines would fall into the former, CITES into the latter. However, these are the only two examples which have been given to Parliament, although I note in the EC note of 17 August that cultural goods are mentioned in this context.
Clearly, under the precise wording of these regulations, their potential application could be wider, and the wider they are, the greater the potential divide between Great Britain and Northern Ireland in trade. Therefore, I ask the Minister to clarify the breadth of their application and the circumstances surrounding it.
One issue of concern is that it is unclear whether proposed export restrictions are specifically to be used where there is a critical situation arising on account of a shortage of essential products. For example, on the definition given by the Minister today, and picking up comments made by the noble Lord, Lord Loomba, is it envisaged that the Oxford AstraZeneca vaccine will be subject to these regulations? If so—assuming that that vaccine will come into use after 1 January— will the only recourse Parliament would have to the recommendations of government be to negate the regulations placed before the House, possibly after the date of their implementation, if the Covid-19 regulations are a suitable precedent?
What is lacking is clarity over exactly the circumstances in which the Government could invoke these regulations and, equally important, what reciprocal action could be taken by the EU in the context of export controls or restrictions as applicable to Northern Ireland as opposed to the rest of Great Britain. How broad is the definition of public policy, since Article 10 of the retained EU regulation does not preclude the use of export restrictions where that is required for the purposes of “public policy”?
Greater clarity on these powers, an understanding of under what circumstances they can be undertaken and clarity on their true scope would be helpful. I regret very much that we do not have the opportunity to debate this critically important subject, particularly in the context of the debate on the Floor of the House yesterday.
Lord Empey (UUP) [V]
My Lords, in his opening address to the Committee, the Minister said that the European Commission will “exercise these powers in Northern Ireland”. Will the Minister explain to the Committee how it is possible for the status of Northern Ireland not to be changed after 1 January if a foreign power, which the EU Commission will become on that date, exercises power within what is supposed to be an integral part of the United Kingdom? How are the two things consistent? If it came to a dispute in so far as products coming from Northern Ireland to Great Britain were deemed by the European Union to be better retained within the EU rather than sent to Great Britain, who would pull the lever and take a decision on that matter?
There has been a consistent refusal by the Government to accept the realities of their proposals to the European Commission, dated 2 October last year, in which they put forward an alternative to the then withdrawal proposals. They have created a border in the Irish Sea but consistently denied it. I ask the Minister again: how is it consistent with the integrity of the United Kingdom if a foreign power has the ability to exercise powers within a part of the kingdom, even though the people living there will have no say whatever in the decisions that the Commission might make? The Minister owes the Committee an explanation for that.
I thank the noble Lord, Lord Liddle, and other committee members who have looked at this. It is interesting that everyone who has spoken so far has zeroed in on this issue. The inconsistency is so obvious. How can you take back control if, where I live, those who I had the pleasure and privilege to represent for many years are effectively abandoned to a foreign power? Does the Minister not realise the implications of this? I hope that, when he comes to sum up, he will be able to give the Committee an explanation.
Viscount Trenchard (Con)
My Lords, the Minister has helpfully explained the purpose of the regulations, and I understand why it is necessary to amend them to replace references to European institutions with references to British ones. It is also welcome that there has been some simplification of the procedure contained in the new legislation. There is no longer a requirement to provide market trends and statistical analysis to the EU and its member states before deciding whether to act on a product shortage. That power now lies with the UK Government, which should lead to swifter intervention when the UK’s interests are affected by product shortages. Could the Minister tell the Committee whether the nature of the market trends and statistical analysis which the Government will require before deciding whether to act will be the same or simpler than that presently required by the Commission?
I understand that export restrictions were placed on PPE exports in spring this year, when shortages first appeared. Could the Minister confirm that the introduction of those restrictions in respect of the UK was triggered by the Commission rather than by the British Government? Could they alternatively have been triggered by a member state Government? Could he also tell us how many times this regulation has been used in respect of British exports since its adoption in 2015?
In researching this measure, I wondered whether my understanding is correct that this SI amends EU regulation 2015/479, which is itself also retained in UK law. The Explanatory Memorandum says that the SI makes “technical amendments” to the retained UK version of the EU regulation. However, the Lexology website states that the SI will “replace” the EU regulation. The two statements are not the same, and I would be grateful if the Minister could say which is correct. I am sure that the same question applies to very many transpositions of EU regulations into UK law, as the noble Lord, Lord Loomba, already referred to.
Of course, the new measures apply only to Great Britain, as the EU regulation will continue to apply in Northern Ireland. Could the Minister confirm that that will be the case whether we enter into a free trade agreement with the EU or not? It is inevitable that UK law and EU law will diverge; if we were to slavishly follow and replicate every change in EU law, there would be no point in our leaving the EU. That is, of course, a wider question, but could the Minister tell the Committee how exports from England which are partly or wholly composed of products manufactured in Northern Ireland will be treated? Can he confirm that the new measures, as they will apply in all parts of the UK, are compatible with the common frameworks proposals? The noble Lord, Lord Empey, has already referred to this subject, and I look forward to hearing the Minister’s reply.
Lord Blencathra (Con) [V]
My Lords, I support these regulations in their entirety. They are eminently sensible at any time, whether or not there is Chinese coronavirus on the go. However, I have two queries for my noble friend the Minister.
First, why are the SIs under Article 5 negative but those under Article 6 affirmative? Secondly, and of more substance to me, can my noble friend update the Committee on Project Defend? We have discussed previously the Henry Jackson Society’s report on the vital and strategic infrastructure goods and services for which we are far too heavily reliant on China. Now that China has emerged as a major threat to world peace and security, how is Project Defend getting on?
I see that the International Trade Committee, in a report published in July, cites evidence given by the Trade Secretary, Liz Truss, suggesting that onshoring supply chains “is not being proposed” as part of the scheme. Why ever not? I accept that it is vital to have diverse supply chains and the height of folly, as we have just seen with PPE, to have everything coming from one country, whether a ruthless regime such as communist China or a democracy such as Germany or Taiwan, but surely making more things at home has a part to play. I am not suggesting that we try to manufacture everything vital that we get from China at the moment, nor even half of it in the short term, but if my right honourable friend the Trade Secretary says that some onshoring is not being proposed, then she is utterly wrong and naive. It is contrary to what the British people want. We will lose millions of jobs because of this Chinese disease and our people will not forgive us if we continue to export more jobs to China.
We must not accept the greedy demands of big business that so long as we can get vital supplies from, say, three or four different countries in the world, then we should not worry our pretty little heads about reshoring things back to the UK where it is possible to do so. I hope that my noble friend the Minister can give me some reassurance on Project Defend.
Baroness Ritchie of Downpatrick (Non-Afl) [V]
My Lords, I thank the Minister for his explanation of these regulations. I see a direct read-across to the United Kingdom Internal Market Bill, even if it was unintentional. My interest lies in the fact that these regulations are made under Section 8C(1) of the withdrawal Act to implement the protocol on Ireland/Northern Ireland to the EU withdrawal agreement. In that respect, I have some questions for the Minister to build on what the noble Lord, Lord Empey, said.
I recognise that the protocol is required to prevent a hard border on the island of Ireland and to protect the Belfast agreement. However, there is a problem with the border that will be created in the Irish Sea, a border which the Government insisted for quite some time would not exist. The bottom line is that we in Northern Ireland do not want borders anywhere, whether on the island of Ireland or in the Irish Sea, because both types of border would act as impediments to business development.
Therefore, I ask the Minister: what steps will be taken to ensure that there will be unfettered access between Britain and Northern Ireland in respect of goods? We know that the First Minister and Deputy First Minister have written to the European Commission about the need for checks and controls on food products entering Northern Ireland from Great Britain and how that might impact on the supply of food to supermarket chains. They are concerned about material price increases or reduced supply lines, because that would not be good for Northern Ireland. That issue has already been raised in recent weeks by the Northern Ireland Retail Consortium. What solutions have been considered by the joint committee to resolve this issue? Businesses need clarity.
The Minister will recall that I and the noble Lord, Lord Hain, were signatories to an amendment to the Trade Bill, tabled in Committee, on the trader support service that is to be set up to facilitate GB-NI trade. We need it to be permanent, not just for two years, and that should be put in the Bill. Will the Government bring forward amendments on Report, and what steps will be taken to ensure that Northern Ireland goods that are produced in accordance with EU rules under the Northern Ireland protocol will not be discriminated against in the operation of the UK internal market? In my view, the regulations before us today are intertwined with the Trade Bill, the United Kingdom Internal Market Bill and the Northern Ireland protocol. On behalf of all those operating businesses in Northern Ireland and wider consumers, we need answers to these vital questions.
Baroness McIntosh of Pickering (Con) [V]
My Lords, I am delighted to follow the noble Baroness, Lady Ritchie, and I echo many of the points that she and other noble Lords, including the noble Lord, Lord Empey, have made. The fact is that after 1 January 2021 there will, effectively, be a border in the Irish Sea, and these regulations reflects the consequences of that. Two separate regimes will apply, one to Great Britain and one to Northern Ireland. It is an indisputable fact and I regret that.
I want to take this opportunity to thank my noble friend the Minister for bringing forward these regulations and giving us a chance to put questions. In that regard, can he clarify paragraph (2) of the regulations, which refers to fulfilling international obligations relating to “primary products” that are defined, for greater clarity, to
“include unprocessed agricultural products and raw materials”?
The noble Baroness, Lady Ritchie, referred to the implications for agri-food. It is extremely important to have a degree of certainty before we reach the end of the transition period. Will my noble friend take this opportunity to further clarify the position?
Equally, can the Minister comment on the questions arising and the conclusions reached from the evidence given by his department for the 29th report of the Secondary Legislation Scrutiny Committee? On pages 3 and 4, it states:
“‘we will ensure that the necessary procedures apply only to very minimal volumes of relevant trade necessary to comply with those obligations. For goods affected, the processes put in place in these very specific cases will have negligible implications for trade as a whole.’”
Surely, the issue here is that that is for the EU Commission to decide, not the Westminster Government. I am sure the Minister will wish to clarify that he and other Ministers of the Crown in Westminster have no control over that whatsoever.
Like other noble Lords speaking in this debate, I would like a number of clarifications. Certain circumstances are as yet unclear. May I ask my noble friend directly: under what circumstances will the Commission be allowed to exercise this power? Can we have further clarification and a better understanding of the implications? These regulations prove that there are going to be enormously difficult issues, particularly agri-foods going into and out of Northern Ireland and Great Britain after 1 January.
Lord Purvis of Tweed (LD)
My Lords, this short debate has flagged up a number of critical areas. I have a degree of sympathy with what the noble Lord, Lord Liddle, said about the time that we have; nevertheless, within this short period, all noble Lords have raised appropriate questions and issues.
I want to use most of the time that I have to address points that have already been raised by noble Lords, but I want to close on the wider issue of border preparedness, because we are now a matter of weeks and days from operating an international border outside the European Union and it is valid to raise more recent concerns.
On the valid points already raised, it seems that a lot of the consideration has been about how the UK and the European Union will agree or come to a working relationship on how international obligations are defined for exports from Northern Ireland to GB.
We support this measure as the corrective that it is meant to be, but the concerns that have been raised about the impact on Northern Ireland are valid. Let me ask first about notification. We are replicating a cascading process under the original European regulation whereby the Commission was notified of potential areas of market concern about the shortage of certain goods. That notification would then go to the Council and the European Parliament. As has been asked in this debate, what is the equivalent of notification to Parliament under these elements? Why is there a difference in Regulations 5 and 6 so far as the procedures are concerned?
Given that we are replicating the potential acknowledgement that certain geographical areas could have shortages compared to others, there is nothing in this measure which would allow for consultation of devolved Administrations. The Government have used the example of medical equipment for PPE because it is the most recent, but it could be very broad so far as the potentials are concerned; for example, raw agricultural products or, as the noble Viscount, Lord Trenchard, mentioned, components as part of intermediate trade. That can have a differential effect, whether it is in the north-east of Scotland or the south-west of Wales, but there is no element of consultation. Before the Government bring forward orders, can the Minister commit that there would be consultation with devolved Administrations, because certain areas may need certain protections?
This brings me on to the position of the Government with regard to the continuing authority of the European Commission in Northern Ireland. It was very interesting before coming to this Committee to read the report of the European Scrutiny Committee in the House of Commons and that of the European Union Committee in this House. The latter was interesting in that it highlighted the Government’s view—repeated by the Minister—that the continuing authority of the Commission to bring Northern Ireland under the existing EU regulation is strictly limited to a number of procedures relating to specific international obligations binding on the UK and the EU under the Northern Ireland protocol. Can the Minister state where these are outlined? The committee rightly asked for further information about how the Government define these “limited number of procedures”. It cited CITES and those regarding endangered species, but this is not necessarily the position of the European Union. As referred to by the noble Lord, Lord Liddle, the European Union’s position as set out in its technical note is that
“all goods leaving Northern Ireland to either a third country or Great Britain are subject to prohibitions and restrictions applicable to exports under relevant Union law, without prejudice to Article 6(1) of the Protocol”.
The definition that the European Union is using is different from that used by the UK, which could bring about certain interesting tensions and is likely to be very difficult.
The House of Commons European Scrutiny Committee report asked for further clarification with regards to ongoing regulations and Northern Ireland. Not only do we have the successor regulations; the House of Commons committee report asked the Government for further information about “ongoing” changes that the European Union would make in regard to the specific regulation that we are inheriting. There is nothing in the mechanism that indicates that there should be an ongoing working relationship if the European Union changes its definitions. Under one interpretation, the European Union could consider its obligations under the WTO in that light.
In the final few seconds, I will refer to the National Audit Office report. It is a sobering independent analysis of the major problems that businesses will face on 1 January. I hope that the Minister can provide greater reassurance that the issues raised in that NAO report will be considerably addressed. They have not been, so far. The clock is ticking. Businesses are waiting for clarity. So far, they have not got it and they desperately need it.
Lord Bassam of Brighton (Lab) [V]
My Lords, these regulations transfer from the EU to the Secretary of State the power to impose export controls or restrictions after the end of the transition period, as noble Lords have observed. In Northern Ireland, as has been seen, the relevant EU regulations will continue to apply directly under the EU (Withdrawal) Act 2018 and the Northern Ireland protocol. We should be grateful to the Secondary Legislation Scrutiny Committee for drawing attention to this SI, because we require more clarity. Throughout this year, we have seen export controls being used to help deal with the pandemic and shortages in medicines, paracetamol and PPE, around the world. The use of export controls should not be exercised lightly, as they have serious consequences and, as we know, can invite retaliation, if not prompt other countries to take a view of us that is not in our interests.
The UK Trade Policy Observatory said that it is important that we acknowledge the role of reciprocal trade in our own fortunes, and acknowledged how important it is that we have strong bilateral arrangements and relationships. Therefore, it would be helpful to hear from the Minister today about what the Secretary of State will take into consideration when they decide to use their powers. Will there be consultation, and with whom? What assessment will be made? Will it be published? Will there be proper parliamentary scrutiny? How much warning will be given before controls are introduced?
After the votes yesterday on the removal of Part 5 of the United Kingdom Internal Market Bill, I was intrigued to see the Government’s response to the SLSC on trade between Northern Ireland and Great Britain. The Government said that, despite the EU regulations still applying in Northern Ireland, Article 6.1 of the protocol on Ireland/Northern Ireland makes clear that
“Nothing in this Protocol shall prevent”
Northern Ireland businesses from enjoying
“unfettered market access for goods moving … to other parts of the United Kingdom’s internal market.”
To me, this demonstrates not only the lack of cross-government understanding of the protocol, but how Clauses 42 to 47 of the internal market Bill were not needed to, as the Government said, stop any EU blockade.
I hope the Government do not try to reinstate these clauses. The committee said that
“the Commission could impose export controls or restrictions on Northern Ireland only in very limited circumstances, such as in relation to the movement of endangered species”.
Does the Minister recognise this limited power and will he now clarify, as noble Lords from all sides asked in Grand Committee, exactly when these regulations will be used? It is not clear to us how and when they will be operable and in what circumstances they will become effective.
The Minister has done a good job trying to explain the regulations, but he also said that they represent a small technical change. We are not convinced that is the case. I think that we, in this Committee, see that such changes could have profound implications and consequences on implementation. I am grateful to the Minister for his observations and I am sure other Members of the Committee are too, but we need greater clarity if we are to better understand how to operate these regulations in the post-transition period.
Lord Grimstone of Boscobel (Con)
My Lords, I thank Members for their contributions and will respond as fully as I can in the time available. I am conscious that I will not be able to do full justice to the many points that have been raised which, as always, show the great expertise of your Lordships. If I may, I will write to those noble Lords whose questions I am not able to do justice to during my closing statement.
As I have set out in my opening remarks, the SI makes technical amendments to the retained domestic version of the EU common rules for exports regulations. This will ensure that the retained EU regulation can apply effectively at the end of the implementation period. Many of the complexities to which noble Lords have referred are not as a consequence of this SI, which in a sense has quite a simple purpose; they relate to the complexity of the underlying regulations of the EU. I repeat that the purpose of this SI is to make technical changes to those regulations to bring them into line with our leaving the European Union.
This is a debate about the application of the retained EU regulation as amended in relation to Great Britain. I completely understand the many and varied points that noble Lords have made about Northern Ireland, but for those who want additional information about Northern Ireland, I direct colleagues to the Government’s Command Paper, The UK’s Approach to the Northern Ireland Protocol. This sets out that any procedures that are necessary to comply with any international obligations provided for under Article 6(1) will apply only to—and I stress this—minimal volumes of relevant trade. I take this opportunity to make absolutely clear that any such processes put in place in these very specific cases will have negligible implications for trade as a whole. An important point is that they will be administered by UK authorities, which will, of course, retain operational responsibility. I assure noble Lords that these authorities are able to, and will, exercise their discretion as appropriate.
To make it clear to noble Lords, I repeat that, as I set out in my opening remarks, Article 6(1) of the Northern Ireland protocol makes it clear that nothing—I repeat, nothing—shall fetter the movement of goods from Northern Ireland to Great Britain, except in order to fulfil an international obligation. The EU regulation is not used to fulfil international obligations, and therefore will not fetter the movement of goods from Northern Ireland to Great Britain. The noble Lord, Lord Wallace, asked where on earth these international obligations come from. They come about if the UK agrees to enter into any such international obligation and agrees to be bound by them.
Since the regime in Northern Ireland will be unchanged after the end of the implementation period, the United Kingdom Government will still be able to implement export restrictions in Northern Ireland in circumstances permitted by Article 10 of the EU regulation; that is where they are required on grounds of public policy, or for the protection of health and life for humans. These restrictions under Article 10 are very specific in this effect, and noble Lords can see those in the original regulation.
I ought to again make it clear that this SI is compatible with the United Kingdom Internal Market Bill. The objective of the United Kingdom Internal Market Bill is to protect the highly integrated market across the United Kingdom, guaranteeing that, as EU law falls away at the end of the year, companies will be able to continue to trade unhindered in every part of the United Kingdom. This SI will ensure that the retained EU regulations on the common rules for exports will operate effectively in Great Britain from the end of the implementation period. As I have described, in no way will trade be fettered between Northern Ireland and Great Britain, except in circumstances not covered by these regulations, and therefore perhaps not appropriate for us to debate in great detail today.
A number of noble Lords, including the noble Lords, Lord Blencathra and Lord Purvis of Tweed, asked how the role of Parliament operates and, in particular, about the differences between Articles 5 and 6. As I said earlier, the role of Parliament is as set out in Article 7A in the regulations. The difference between why that article is subject to the negative resolution procedures and Article 6 is subject to the affirmative procedure relates directly to the urgency of the situation in front of us.
Let me explain further. If the Secretary of State implements a measure under Article 5 of the retained EU-authorised regulation as amended, that export authorisation can only be implemented for up to six weeks to prevent a critical situation arising on account of a shortage of essential products or to remedy such a situation. That seems appropriate if the urgency is such that this has to be brought forward quickly and last for only six weeks. A negative resolution SI, which can be annulled in either House of Parliament, is therefore appropriate. If the Secretary of State implements measures under Article 6 of the retained EU regulation as amended, they can take a wider range of forms and are not time-limited. In those circumstances, because of the greater scan, scope and longevity of such regulations, they would be set out in a “made affirmative” SI, which must be voted on within 40 days of being made.
The noble Lord, Lord Purvis, asked about the information that would be available at that time and drew a contrast with the Commission report under the EU regulation. In both cases, further information would be provided to the Houses of Parliament as part of an Explanatory Memorandum. I can assure noble Lords, particularly the noble Lord, Lord Wallace of Saltaire, that in coming to their conclusions about the necessity for the use of regulations, the Government would take account of the whole UK and, if necessary, any views expressed by the devolved Administrations.
I should stress that we are not rushing or looking to find ways in which to use these powers. The Government have been clear throughout the Covid-19 pandemic that the use of export restrictions around the world should as far as possible be limited. No one would be happier than us if we found that we never had the need to use these powers. The Prime Minister underlined that view recently in a speech to the United Nations, in which he urged countries to lift export controls on Covid-critical products wherever possible. The Government have no plans at present to bring forward further export restrictions under this retained UK regulation.
The Government do not apply any restrictions on medicines under these regulations and do not intend to do so. I can reassure the noble Lord, Lord Wallace of Saltaire, on those points. The UK applies certain limited restrictions on the export of medicines designed for UK patients on the UK market where there is a risk of a shortage in the UK, but those restrictions are made pursuant to the Human Medicines Regulations 2012, which require wholesalers to ensure, as far as possible, that the needs of patients in the UK are met.
In conclusion, my noble friend Lord Blencathra asked about Project Defend, as it is commonly known. The coronavirus pandemic has demonstrated the importance of resilient supply chains to ensure the continued flow of critical goods and to keep global trade moving. We are working closely across the Government to analyse UK supply chains for a range of critical goods, excluding food, and to help define strategies to ensure that the UK has resilient and diverse critical supply chains.
My noble friend Lord Trenchard asked about how this SI would technically operate in conjunction with the retained EU regulation. It amends the retained EU regulation, which then passes into UK law in this amended form if noble Lords agree to these regulations today.
I have my eye on the clock and am conscious that I have not done full justice to the detailed points raised by noble Lords. As I said at the beginning of my wind-up, I will write to them and place a copy of my reply in the Library. On that basis, I commend these regulations to the Committee.
Motion agreed.
The Deputy Chairman of Committees (Baroness Barker) (LD)
The Grand Committee stands adjourned until 6.15 pm. I remind noble Lords to sanitise their desks and chairs when leaving the Room.
Arrangement of Business
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text
The Deputy Chairman of Committees (Baroness Barker) (LD)
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person, respecting social distancing, others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded, or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
Prevention of Trade Diversion (Key Medicines) (EU Exit) Regulations 2020
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Grimstone of Boscobel
That the Grand Committee do consider the Prevention of Trade Diversion (Key Medicines) (EU Exit) Regulations 2020.
Relevant document: 26th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con)
My Lords, I hope that the Committee will be unanimous in support of these regulations and their objective. I have no reservation in saying that these regulations perform a laudable function. They ensure that pharmaceutical companies in Great Britain can continue to produce and sell certain medicines to developing countries at a low cost to help fight key diseases such as HIV and malaria without the potential drawback of these medicines being reimported into Great Britain for sale at a price lower than the domestic market price.
As noble Lords will recognise, many of the poorest developing countries are in urgent need of access to affordable essential medicines for the treatment of communicable diseases. These countries are heavily dependent on imports of medicines because local manufacturing may be limited. Price segmentation between developing and developed countries is necessary to ensure that the poorest developing countries have access to essential pharmaceutical products at heavily reduced prices, while also ensuring that fair market prices in wealthier markets incentivise drug development and investment.
Pharmaceutical manufacturers will produce large volumes of pharmaceutical products at reduced prices for the developing world only if they are assured that these products will not find a way into developed countries’ markets. These regulations correct deficiencies in legislation to establish a procedure that identifies the products, countries and diseases covered and prevents the reimport of such products through seizing and disposing in accordance with national legislation.
These regulations were laid in draft before this House on 2 September. They are made under powers in the European Union (Withdrawal) Act 2020. The Committee knows that, given the context, those powers are limited. All that they allow is the correction of technical deficiencies in existing EU law that, by the operation of the Act, were retained in UK law following withdrawal. These regulations correct such deficiencies by, for example, replacing references to the European Union, its institutions and legislation with the appropriate UK references.
This statutory instrument follows the affirmative procedure because it transfers to the Secretary of State a power that currently sits with the European Commission. That is a power to amend the list of pharmaceutical products under the regulations and the criteria for products to remain on that list. This statutory instrument also replaces the requirement that pharmaceutical products, packaging and connected documents should be affixed with an EU logo with a power for the Secretary of State to make regulations providing for marking, labelling or other identification requirements. This relates to a logo more appropriate for the UK now that we have left the European Union. I beg to move.
Lord Lansley (Con)
I thank noble Lords for the opportunity to participate in this brief debate on these regulations. I do not dissent from anything that my noble friend Lord Grimstone of Boscobel has said about the regulations, although I have one or two questions about the manner in which we are proposing to adopt them and incorporate them into UK practice.
I particularly wanted to come to say a word about the regulations themselves. Tiered-price products—which is, I think, in a sense what we are talking about here —or the concept that developing countries can have greater access to medicines in circumstances where the price can be lowered is a very important objective. Indeed, it is in the EU regulation, in these terms:
“to encourage pharmaceutical manufacturers to make pharmaceutical products available at heavily reduced prices in significantly increased volumes by ensuring through this Regulation that such products remain on the … markets.”
That is an entirely laudable objective, as my noble friend rightly said.
Of course, this regulation was established with, I think, initially three principal disease groups in mind. One was HIV, the second was TB and the third was malaria. Of course, where TB and malaria were concerned, there were relatively few requirements for those drugs in the most developed countries, so, in fact, the scope for diversion was relatively modest. However, the scope for diversion in relation to HIV products was potentially much greater.
I want first to say that my noble friend did not offer a view about the long-term future of the regulation but, of course, back in 2015 the European Commission undertook an independent evaluation of the regulation. At that time, the evaluation took the view that trade diversion from poor countries into high-income countries was still largely theoretical. It did not find that much evidence of it. The question is, why did it not? On the face of it, you would find low-price products. Partly it was because of the disease groups it was looking at, but it is also because, notwithstanding the regulation, there are mechanisms by which many pharmaceutical companies are able to segment their markets.
They do so by way of second brands, different branding in different markets, different packaging and often different formulations, which make it very difficult for people to try to divert product. Of course, product traceability is an essential part of pharmaceutical marketing, so one hopes it makes it increasingly difficult for these products to be diverted. Of course, some of these products can be counterfeited or falsified, and those who want to make illegal profits are perhaps more likely to go down that route than simply through diversion. Indeed, many of the supply chains we are talking about are becoming more secure; organisations such as the Global Fund and Gavi are making supply chains more secure over time.
So, the evaluation of the regulation back in 2015 did not arrive at the conclusion that the regulation had achieved much. However, it arrived at the view that the regulation was itself an important signal in relation to tiered pricing and the desirability of securing additional lower-cost, higher-volume pharmaceutical presence in developing country markets. It was also a backstop power. If there were not to be many of these other pharmaceutical industry initiatives that would enable these products to be available in those markets, this would create a mechanism by which that could be achieved. On the basis of that, the Commission renewed the regulation, and I think we are due to see the Commission come back to this, after a five-year period, in the latter part of 2021. So the first question is: will we review the regulation, or is our intention for the time being simply to carry on and wait and see whether the Commission proceeds with it?
I will make a general point. The Bill and Melinda Gates Foundation has done research and published its views, with which I very much agree. I take the view that value-based pricing is important for this country—I talked about this in our discussions on the Medicines and Medical Devices Bill. Actually, value-based tiered pricing in different markets across the world is an extremely important objective. It enables the expectation to be that pharmaceuticals are priced at different levels in different markets according, substantially, to the capacity to pay in those markets.
In the absence of that, we are at risk of what is called reference pricing, where everybody thinks that they should pay no more than other people. Very often, what they say is that they should not pay any more than the average; in fact, they all aim to be below the average. We know where such a policy leads us: to a downward spiral in pricing. The significance is that the present United States Administration have pursued the concept of reference pricing themselves, which creates perhaps the largest single threat to the long-term capacity of the pharmaceutical industry to undertake innovation and drug development. As such, as an objective, value-based tiered pricing is really important.
Finally, will my noble friend explain why it would not be simplest, from the industry’s point of view, to retain the EU logo? In this particular context—the one in Annexe V—this is not particularly indicative of the European Union; it is a winged staff with a set of stars around it. It would not hurt us too much to accept the same logo. To be clear: from the point of view of the desirability of making it possible for pharmaceutical companies to produce, the more we add cost and inconvenience, the less likely they are to use this regulation. Many do not do so as it is because of the additional bureaucracy involved, which is not great. We need to minimise the bureaucracy on this regulation.
Additionally, however, I was rather pleased to see that the Government will not try to reproduce the European Commission’s biannual reports. It is reasonable for them simply to review the products that have been put forward. Presumably, it will be the Government’s intention—I hope the Minister can confirm this—that the bureaucracy involved in putting a product into our regulation in parallel with the European Commission’s regulation will be kept to an absolute minimum because the benefits of having products in this regulation to the pharmaceutical companies can sometimes be quite modest. With that, I hope I have explained why I think that there is an interesting issue here, but I do not think it is completely obvious that we would keep this regulation for ever.
Lord Bassam of Brighton (Lab) [V]
My Lords, the Minister has said that these regulations will ensure that the tiered priced product system for certain medicines can operate effectively after the end of the implementation period. I am sure that we are all grateful for that because it is a very important regulation, as the noble Lord, Lord Lansley, has said. It is important because it aims to ensure that the poorest developing countries have access to affordable essential medicines for the treatment of communicable diseases, focused, as the noble Lord, Lord Lansley, said, on HIV/AIDS, TB and malaria.
Access to medicines for developing countries remains of critical importance for all nations across the world: it is in all our interests. While there has been huge success over the last 20 years in bringing down the numbers infected with HIV and dying of AIDS, we need to recognise that there are still just under 1 million deaths a year from both. We must continue with programmes like this.
Developing countries need to ensure that their citizens have access to the medicines produced by the pharmaceutical giants. The prices these medicines typically retail at in developed countries would put them out of reach for many if prices were not adjusted. Tiered pricing, which is used to make these drugs affordable to the poorest and most vulnerable, was a significant step when it was agreed, and it continues to be an important practice in pharmaceutical markets.
Without the regulations, Britain could also suddenly become a very attractive market for those wanting to exploit Brexit to export drugs meant for the world’s poorest to the UK at a higher price. For all these reasons, we recognise the importance of these regulations.
I too have one or two questions about the SI for the Minister. First, how many staff members does the Department for International Trade have who are specialists in access to medicines in developing countries or in medicines? What is the process for consultation between the FCDO and the Department of Health and Social Care, which has expertise in those areas?
We are in negotiations with Ghana, Kenya, Cameroon and Côte d’Ivoire to try to roll over trade agreements but those have not yet been completed. Is there any reason to be concerned that the export of drugs to those four countries, which could reasonably be sold into neighbouring and even poorer countries, might be affected if those crucial trade agreements cannot be rolled over?
At the moment, the pharmaceutical companies which are exporters have to apply to the Secretary of State to have a product listed under the EU regulation. What consultation, if any, has there been with developing countries or experts on access to medicines to encourage pharmaceutical companies to seek listing under these regulations? What are the processes for encouraging pharmaceutical companies to provide drugs for the treatment of other diseases, such as cancers? Rates in developing countries are rising fast in these diseases, so this becomes more important.
Finally, what arrangements are being developed for tiered pricing of Covid vaccines? As the Covid pandemic spins out, access to those treatments and vaccines that will become available in the marketplace will clearly be important. We must do all that we can to ensure developing nations have access to the medicines they need at affordable prices, and all that we can to help protect millions of people to avoid illnesses that are eminently avoidable, right across the world. We therefore support these regulations.
Lord Grimstone of Boscobel (Con)
My Lords, I thank my noble friend Lord Lansley and the noble Lord, Lord Bassam of Brighton, for their contributions to this debate. I am pleased to acknowledge that they also support the reasoning behind the existence of regulations such as these; as I said, I completely concur with that. Let me respond briefly to some of the important questions that were raised directly by the noble Lords.
My noble friend Lord Lansley asked about the logo. Indeed, it is a rather fine logo; for those who have not seen it—I hope noble Lords with a classical education will not mind if I no doubt mispronounce this—it is the winged staff of Aesculapius, with a coiled serpent in the centre of a circle formed by 12 stars. Obviously, there is a relationship between this and other EU logos but it may be important in future, more so than just a sense of “Why can’t we have our own logo?”, to distinguish drugs that have come from the European Union and are subject to its regulations. Who knows, those may over time move differently from our regulations. We therefore need a logo of our own.
That is why the SI contains a power for the Secretary of State to make regulations providing for the marking, labelling or other identification requirements for tiered-price products as the Secretary of State considers appropriate. Obviously we would do this only in consultation with the manufacturers, and new labelling or other identifications will be provided for in future regulations after consultations with stakeholders.
It is perhaps a shame, given the benefit of these regulations, that only one pharmaceutical company takes advantage of them at the moment. The noble Lord, Lord Bassam, asked whether the Government should be more evangelical about the regulations. I suppose my answer is that in a sense the regulations are neutral. They are there for a pharmaceutical company to take advantage of when it makes an application. I am not sure it is the role of the Government to proselytise and evangelise about the regulations, but maybe the mere existence of this debate today will encourage others to raise these points and ask the valid question, “Why are these regulations not made more use of?”
The need for member states to report to the Commission is not relevant to the United Kingdom after withdrawal. This instrument provides for the Secretary of State to review from time to time whether a product listed as a tiered-price product fulfils the requirements of the retained regulation. How that will work is that information on imports and Border Force activity will be collected, reviewed and, where appropriate, made public by the Government as part of standard procedure. We will remain accountable to Parliament in relation to this in the usual way.
As I said, manufacturers or exporters of pharmaceutical products who wish their product to be added to the list have to submit an application to that effect. The noble Lord, Lord Bassam of Brighton, quite properly, and with a great deal of perception, asked what expertise there is in my department, the Department for International Trade, to handle applications in this area. I am happy to reassure the noble Lord that, although DIT has the role of approving these applications, we will work very closely with the Medicines and Healthcare products Regulatory Agency, the MHRA, which of course has the required expertise to assess any medicinal information provided by manufacturers or exporters, to ensure that all considerations are given appropriate weight.
My noble friend Lord Lansley asked about reporting under these regulations. As he noted—having, as always, done his homework very carefully—the last report was published in October 2015 by the European Union. As my noble friend said, the report said that although the net benefits of the scheme are small, what you might call the signalling impact of these regulations is very large, and it came to the conclusion that there was an economic justification for maintaining the regulation. My understanding is that the next report by the EU will be published towards the end of 2020. We await that to see whether it comes to a similar judgment.
The regulations set a requirement for the Secretary of State to publish a report before the end of the period of five years, beginning with the date on which this instrument comes into force. Because we are about to get a report from the European Union, I believe we will not be rushing to do a report of our own under these regulations. We will allow time to pass to assess how these regulations are used, and then we will bring a report forward in due course within the required timescale.
I hope that I have managed to answer all noble Lords’ questions in relation to this short debate, but of course if either of the noble Lords who spoke today wishes to approach me subsequently for any further information or clarification of the points that I have made, as always I will be delighted to do so. On that basis, I commend these regulations to the Committee.
The Deputy Chairman of Committees (Baroness Barker) (LD)
That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.