Brexit: Workers’ Rights
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Lord Duncan of Springbank
I welcome the comments from the noble Lord. One of the important issues is the question about what a future trade agreement with the EU would deliver. I accept that he is saying that there is apparently nothing else to negotiate and perhaps it can be done very quickly indeed. This Government’s policy has always been that we can do that trade deal very quickly; it is important to stress that.
As to the elements in the leaked document, it will not surprise the noble Lord to know that I will not be commenting on them specifically. However, having been a member of the European Parliament, what I will say is that the European Parliament and the European Union set minimum standards. The secret to those is how you enforce them. This Government have put substantial investment into enforcing the rights and standards throughout all employment and welfare, which has not been matched by other countries. It is also important to suggest that we can now manage our own affairs in this regard and that it is for the other place and this place to determine what they shall be. My final point is that this Government will not diminish workers’ rights whatsoever.
Lord Fox (LD)
My Lords, I thank the Minister for repeating this Answer. Nobody doubts his sincerity in reading it out but, given the catalogue of issues set out at length by the noble Lord, Lord Stevenson, I am sure that the Minister will understand that there will be distrust out there; there will be people who suspect that Downing Street has said one thing and done another. So would the Minister agree that the best way of setting people’s minds at rest would have been to have an international trade Bill in which all these rights were set out and protected, and to have the scrutiny process enshrined in law? Does the Minister agree that it is a great tragedy that that has been canned by the Conservative Government?
Lord Duncan of Springbank
All the rights that we have accrued as a member of the EU are retained from EU law into our corpus of domestic law. That is the best place for them to be set out. Any changes to that, including any that a future Government may wish to make, must be made with the permission of the other place and this place, using voting procedures in the normal way. There shall be no diminution of the rights of workers as a consequence of this.
Frequent Flyer Airmiles Schemes
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Lord Duncan of Springbank
Yes, that is probably true. I am not sure how it would work, but I am willing to go away, look at it and see whether we can do something with it.
Lord Fox (LD)
My Lords, the Minister just dubbed this measure regressive in many ways. Could he enlighten your Lordships’ House on how it is regressive, given the climate emergency that we face?
Lord Duncan of Springbank
The reason why I suggest that it is regressive is that by taking this approach, whether banning air miles or making other restrictions in this fashion, the people affected will almost certainly be the poorest, not those who are wealthy or who are travelling business class. The problem is that they can continue to afford to do so, while those who take family holidays will be hit by the brunt of the tax. That is regressive.
Product Safety, Metrology and Mutual Recognition Agreement (Amendment) (EU Exit) Regulations 2019
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Lord Fox (LD)
My Lords, once again I associate myself with the comments of the noble Lord, Lord McNicol, about the necessity for this debate, but now that it is here it is important to get it right so I am happy to have it.
I refer noble Lords to my entry in the register of interests. I am not actually sure whether I have any interests which coincide with this instrument, but it seems impossible for there not to be, given that it covers ear-plugs to aftershave and toy trains to industrial pumps via explosives. The breadth of this SI is its weakness, because it is trying to bring together a compendium of things that need to be cleared up. I have complete respect for the team that has worked hard on trying to do this, because it really has a very broad remit. It seems unlikely to me that there is not another issue or two in here, so I welcome the Minister’s undertaking to continue to be vigilant on it. Perhaps he could undertake, in the event that further issues are uncovered, that further versions of this will be brought forward.
The point made by the noble Lord, Lord McNicol, about stakeholder involvement is absolutely right. The threshold of monetary value used is not always the right threshold when we are dealing with statutory instruments of this complexity; the problems and issues it creates for business are hard to monetise, and in this case the Government would have been best advised to err on the side of involving as many people as possible. I suspect that there is still a need to do that.
I shall make a couple of general comments and then focus on one particular issue—I am very pleased that the noble Lord, Lord Gardiner, is in his place, because it crosses over into the next instrument, and he will guess what it is about. My first point concerns the Explanatory Memorandum, which talks at paragraph 2.3 about manufacturers having to have either self-certification or third-party conformity assessment. It is not clear whether that is a change from the current situation—in other words, what was acceptable for self-assessment, will that remain, or will people either have to have increased or indeed, decreased third-party conformity assessment as a result of this change?
My second point mirrors exactly what the noble Lord, Lord McNicol, said about paragraph 2.6 of the Explanatory Memorandum and,
“substantially the same essential requirements”.
That means that not all of them are, yet there is no list of what is materially different. I think noble Lords should be aware, in detail, of what is actually the difference between this andwhat it seeks to replace.
I come to the issue I want to talk in some detail about. Regulation 8 talks about CMR chemicals; those which are,
“carcinogenic, mutagenic or toxic to reproduction”.
Much of the change the regulation makes is around labelling, but the reference to Schedule 34 talks about “historic animal testing data” and starts to stray into issues that the noble Lord, Lord Gardiner, will know we have discussed around REACH and the rollover use of historic data. It seems strange to me that we are trying to cover similar issues in two separate statutory instruments. What consultation has gone on between BEIS and DEFRA in the drawing up of this, and why should it all not be covered in one instrument?
That also causes me to raise, yet again, that in essence the SI brought by DEFRA, the REACH etc. (Amendment etc.) (EU Exit) (No. 2) Regulations 2019, which has yet to be tabled, has very severe financial consequences for the chemicals and cosmetics industries in this country. In the case of the chemicals industry, the relationship is managed, I think, by BEIS, rather than by DEFRA, so it seems to me that there is a lot of crossover here which is not necessarily finding its way through in the statutory instrument.
So there is work to do. First, it must be explained how this has come about as a separate part of a different SI, whereas it is not part of the one that dealt with that the substantive issues of chemical regulation. What awareness does BEIS have of the scale of costs that will be imposed on the chemicals industry by the implementation of the chemical regulation statutory instrument brought by DEFRA? We need an overall look at the process of delivering a sensible statutory instrument that is able properly to use existing data. There are extreme issues around the portability of potential data that seem to have been overlooked and will cause problems for the industry, and indeed for consumers who use the chemicals that are made by the chemicals, cosmetics and consumer chemicals industries.
Therefore, I ask the Minister—who I see is talking to his colleague—to undertake to do something that actually brings these together and gives us some clarity.
Lord Harris of Haringey (Lab)
My Lords, I draw attention to my interest as chair of National Trading Standards, which, as far as I know, is not involved in any of these regulations—but for all I know it might be.
I would like some clarity on two specific points. First, the Minister said that no specific impact assessment was drawn up for this statutory instrument, but that it was covered by the previous impact assessment and that the main impact would be in explaining these changes, which we all look forward to, to the businesses affected by them. Did that assessment also look at the role of explaining these changes to those who are responsible for enforcing the regulations and for ensuring proper compliance? It seems to me that this is quite an important area, particularly when we are talking about product safety.
Secondly—I hope this is not frivolous—as I understand it, according to the report of the Joint Committee on Statutory Instruments, there is an error in the instrument. The reference to regulation 15 should have been to regulation 18. The department accepts that this is an error but says that it probably does not matter—I am paraphrasing. I think it is implying that there will be a 24-hour gap during which the mutual recognition agreements will not be in force. If that is the case, will the Minister tell us how frequently the mutual recognition agreements referred to in this SI are in fact employed in this country, and whether an issue really is unlikely to occur during the 24-hour gap?
Lord Duncan of Springbank
My Lords, this suite of regulations is quite technical, as the noble Lord, Lord McNicol, said. The original suite was a bundle, and anyone who has managed to carry it around will recognise that it could be measured in depth of inches. The important thing to stress is that I have recognised what a challenge it is to face such a large document. I would not wish to see us go forward on that basis again, for the very reasons flagged here today. I am very happy to say that, as far as I can influence the situation, I will do that very thing.
It is also important to stress—this comes back to the notion of why we are where we are—that the date changes which were necessitated by the change in the exit date were necessarily made in the document we are debating. It has now been—I am going to use the term—Brexit-proofed, in so far as we will not have to revisit these dates because of the manner in which they have been drafted. I reiterate, however, that it is the Government’s policy to leave the European Union on 31 October and noble Lords would expect me to say that, so I am saying it again.
I will go through some of the points raised in the order they were made. The noble Lord, Lord McNicol, again raised the issue of “substantially” versus “exactly”. My team tells me that broadly they are the same. Noble Lords might notice that I used the word “broadly” in that particular context, but they are the same, so they should not be interpreted as being in any way different. As to the question of the stakeholder feedback—
Lord Fox
“Broadly” and “substantially” are broadly the same phrase, but why is that phrase being used? Is it because the department is not aware that there are any differences but thinks that there might be unintended differences, or is it aware that there are actual differences between the two situations?
Lord Duncan of Springbank
My team has helpfully provided a note on that, just in case someone was querying whether they were indeed the same. On “substantially the same” and an essential requirement, certain essential requirements require the involvement of notified bodies. Post exit, these same essential requirements will require the involvement of UK-based approved bodies, in line with the UK-only system developed under the no-deal legislation. We are therefore at that stage of approved versus notified. There will be differences, in essence, but the substance of those differences is textual rather than meaningful in that context—I hope that is helpful and makes sense.
Lord Fox
We are getting there, but I am not sure that I know the difference between an approved and a notified body. Perhaps the Minister could write to me and the noble Lord, Lord McNicol, and place a copy in the Library, explaining what difference the word “substantially” makes regarding which organisations are involved in future versus those involved now.
Insolvency (Amendment) (EU Exit) (No 2) Regulations 2019
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Lord Fox (LD)
My Lords, I thank the Minister for introducing this SI and for his explanation. I associate myself with the comments of the noble Lord, Lord McNicol, about the necessity for no-deal statutory instruments if the Government are, in good faith, going to follow the law. I notice that the noble Lord, Lord Callanan, is also sitting on the Front Bench opposite, and he has repeatedly said—when I have been in this Chamber and often when I have not—that the Government will observe the law, so I hope that means the spirit as well as the letter. However, the SI has been tabled and it is incumbent on me to make some comments.
It is, perhaps, appropriate that we should be talking about insolvency because, in the event that there is a no-deal Brexit, insolvency will be an issue for many businesses in this country, small, medium and large. Perhaps this gives us a chance to soberly reflect on the stupidity of a no-deal exit. These rules are welcome and it is very hard for us to stand in their way. The Explanatory Memorandum talks about avoiding an “inefficient insolvency process”. What is an efficient insolvency process other than a disaster? In not opposing these rules, I suggest that these Benches do not wholeheartedly endorse the current system on insolvency. There is, many people feel, an overdominance of HMRC’s call on insolvency in the current rules. This is not for debate today, but I put that down as an issue.
The Minister talked about reciprocity, a word that should be used carefully. However, it seems to me that this is a unilateral assertion of reciprocity, which, by its nature, is not reciprocity. What guarantee does the Minister have that the EU 27 will turn this into a reciprocal process and not merely watch us put our cards on the table while they decide not to? Without the EU 27 participating in this, we do not have the systems in place that we need for the Government’s definition of efficient insolvency to apply. Can the Minister tell us what assurances are in place?
Paragraph 2.11 of the Explanatory Memorandum says that we will,
“maintain a modified version of the EUIR’s jurisdictional tests”.
What are the modifications to the EUIR’s test? If they are different, how can we expect the EU 27 to reciprocate in process? I would have thought that the whole idea to keep reciprocity would be to have harmony, rather than modification, between those rules. I wonder what those differences are and how they have been presented to our EU 27 partners.
Paragraph 2.2 of the Explanatory Memorandum says that the other purpose of this statutory instrument is to avoid the creation of uncertainty. There are lots of ways of avoiding uncertainty, but changing the rules governing insolvency is not really the way to do it. There is uncertainty about standards; there is uncertainty about regulation; there is uncertainty about whether people who work for our businesses today will be able to work for them after 31 October. If the Government really are in the business of certainty, perhaps they could address those issues.
Finally, a number of Bills are currently crashed or in the holding tank of the other place. We were told that these Bills were essential to planning for no-deal Brexit. Now we are told by the Leader of the other House that the Government have all the rules they need to manage no-deal Brexit. I find these two positions irreconcilable. Perhaps the Minister can tell us how many more statutory instruments we can expect that will be substituting for those Bills. I remind your Lordships’ House that those Bills have proper scrutiny. They have the right sort of scrutiny that enables us to produce the right sort of legislation. Statutory instruments are not a substitute for primary legislation. They are an unscrutinised version of regulation. To substitute one for the other, which seems to be what the Government intend to do, is wholly unsatisfactory.
Lord Flight (Con)
My Lords, the UK has a great advantage over most European economies and the US when it comes to effecting a sorting out and recovery of a business that is failing. Can the Minister confirm that whatever EU rules we may be moving in tandem with will not damage our advantage in sorting out businesses?
Lord Duncan of Springbank
That is very easy and straightforward to answer. It is the Government’s policy to leave on 31 October, but the laws have been drafted to ensure that, going forward, we will not have to revisit these regulations. I reiterate that, come Halloween, we will be on the other side.
Lord Duncan of Springbank
I had written that down but then forgot to mention it. The noble Lord will be aware that one element of the original regulations was the jurisdictional tests. The modification that we are talking about here is to ensure that those tests are broadly compliant with the changes that have been brought in. The jurisdictional tests themselves remain broadly intact. Their purpose is to ensure that the legal jurisdictions of the various courts function after Brexit.
Lord Duncan of Springbank
Absolutely—the modification is with us. However, the point is that broadly the tests are part of retained EU law and we have made the adjustments to make sure that they are compliant with our own statute book.
Spending Round 2019
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Lord Fox (LD)
My Lords, it seems like we were never away. In fact, if we listened to the Lord Speaker earlier, apparently we were not; we were here all along. I trust that the Minister did not have to break off a family holiday to be here, and I look forward to this debate.
The spending review was presented amid a febrile day in Parliament—a febrile day in a chaotic week—so a take-note debate would be something of a novelty were the Chancellor here, because quite frankly no one took any notice of the spending round when it was announced. It disappeared almost without trace. It should have been the Chancellor’s big day but, to be honest, No. 10 had already ridden roughshod over his moment. It selectively leaked the contents—contents which, in most cases, had been inserted by the Prime Minister’s chief of staff in the first place. Then at short notice, it cancelled his speech the weekend before. Finally, the announcement itself was eclipsed by all the unconstitutional activity that was going on around it. However, I have one concern. Since that time, the Chancellor seems not to have been seen in public. Perhaps the Minister can use this opportunity to assure your Lordships that Mr Javid is safe and well—that he is all right—because, frankly, we have seen no sign of him since this announcement was made. A take-note debate gives us a chance to scrutinise the Statement and, thanks to this unexpected debate, we now have that opportunity.
In truth, though, as the noble Lord, Lord Tunnicliffe, said, this spending round was never really intended as a serious projection of public finances. It is an uncosted manifesto, a launch for the next election, and its best-before date is before Christmas. If noble Lords had any doubt about that, the subsequent activities of the Prime Minister proved that this was the launch of an election campaign. Perhaps the most surreal was his speech in front of the police recruits in West Yorkshire, but each appearance, right up to his stunt at Whipps Cross Hospital, were part of a timetabled election launch.
That is one reason why we should suspect these numbers and the document that they appear in. The other is that they have been built on very shaky ground. This spending round was, in the words of the independent Office for Budget Responsibility in the letter that it sent to the Treasury Select Committee on 9 September,
“unusual in two respects: first, it covers only one full fiscal year”—
as has already been mentioned—
“second, the aggregate limits and departmental allocations have been announced together”,
making them very difficult to unpick. Due to the OBR’s primary legislation, it was not asked to issue a forecast because this spending round did not cover the statutory five years needed for a forecast. I am not the only person disturbed by that sidelining of the OBR; Ben Zaranko, research economist at the IFS, said:
“Making major fiscal announcements without new OBR forecasts risk a return to the bad old days when chancellors could make fiscal claims not based on the best available independent forecasts”.
His colleague Rowena Crawford added detail, saying:
“Based on OBR forecasts from the spring it looks like the Chancellor has plenty of room to meet his spending pledges … But growth has slowed since the spring and in reality he may have a lot less than the £15 billion of headroom he seemed to have back then”.
In more detail, the IFS has projected the public sector borrowing for the fiscal year 2020-21. The OBR forecast for March was £21.2 billion. If you add in the reclassification of student loans—for which I am not blaming anyone on the Benches opposite—that takes borrowing up to £32.8 billion. Add in the cost of the spending review as in the booklet at the moment, and that takes borrowing for that fiscal year to £46.2 billion. However, if you also factor in weakening growth, which is already happening, that takes the borrowing requirement to over £50 billion. That is not my projection but that of the IFS. This is why we need the OBR’s input before a spending round. I would be very interested to hear the Government’s justification for deliberately cutting out the OBR in the way that they did. What was going on?
In his speech, the Chancellor of the Exchequer announced that he would review the Government’s fiscal rules. That smacks of closing the stable door after the horse has bolted because it is quite clear that the fiscal rules are already up in the air. What is the timetable for this review? What criteria will the review adopt? And, beyond the Prime Minister’s chief of staff, who will be conducting the review?
Lastly, these numbers do not add up because they completely ignore the budgetary elephant in the room, which is the event of a no-deal Brexit. There most decidedly would not be money to spend on any of this in the event of a no-deal Brexit. The OBR said around three months ago that a no-deal Brexit, even of the most benign kind, would add around £30 billion a year to borrowing from 2021 onwards and around 12% of GDP to net debt by 2023-24. Adding that to the IFS projections that I mentioned earlier—that is, the OBR March number, the student loans re-evaluation, the Chancellor’s costs in the spending round document and no deal—raises the public sector borrowing requirement for 2021 to £76.2 billion. Where is the contingency for this in this document? To ignore this financial risk is very reckless.
I look forward to this debate, but it comes with a warning: this is not a normal spending round. It is a sham, full of imaginary numbers that do not pass the normal tests and have not met the normal safe- guards. It does not take into consideration the current economic weakness and does not weigh the perils of a no-deal Brexit. It is further evidence of the sort of shameless behaviour that we have come to expect from the Government.
Nuclear Power Stations
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Lord Duncan of Springbank
My noble friend is of course absolutely correct that nuclear power itself is a means of reducing carbon emissions, and it will remain part of our electricity generation mix—necessarily so, as it is already 20% at present. When Hinkley Point comes online it will represent 7% of the overall electricity generated in the entire United Kingdom. It is therefore important that we are able to ensure that nuclear remains a component part of our offering and our energy reduction. It is also important to recognise that one of the conditions of the nuclear strategy which we have put forward—the £200 million fund—is that there is a significant reduction in the cost of the production of nuclear energy. That will represent a 20% reduction overall, which must be part of that strategy. We are alert to these issues. Again, the time is right for a proper debate on the wider questions, which I suspect my noble friend would have raised had we had more time.
Lord Fox (LD)
My Lords, I welcome the new Minister to his position. He will be aware that I usually use this opportunity to conflate nuclear power with energy storage. With high-capacity energy storage, the need for nuclear becomes much less critical. There are also short-term issues around storage, which we saw on 9 August, when there were blackouts across large swathes of England. The cost of replacing that short-term storage is about £1 billion to double it to 2,000 megawatts. What is the Government’s plan for storage, what money is available, and how is it being invested to deliver a robust system?