Pubs Code

Kelly Tolhurst Excerpts

Tuesday 30th April 2019 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

The Department for Business, Energy and Industrial Strategy (BEIS) will today begin the statutory review of the pubs code (the code) and the pubs code adjudicator (PCA) through the launch of an invitation to all those with an interest to feed in their views and experiences of the operation of code and the effectiveness of the PCA.

Pubs are a vital part of communities across the country. The Government have been supporting them through freezing beer duty, cutting business rates for many pubs and supporting community pubs through changes to planning law and by funding Pub is the Hub’s pub diversification work.

The establishment of the pubs code was provided for by the Small Business, Enterprise and Employment Act 2015 (“the Act”) and is set out in the Pubs Code etc. Regulations 2016. The code governs the relationship between large pub owning businesses and their tied tenants, giving tenants certain rights, including the right at certain times to exercise a “market rent only” option, under which their rent is set at the market level and they are no longer required to buy products from their pub owning business.

The pubs code adjudicator (“PCA”) was established by the Act and is appointed by the Secretary of State for Business, Energy and Industrial Strategy. The role of the PCA includes giving advice and guidance; the investigation of non-compliance with the code; where non-compliance is found, requiring publication of information, imposing financial penalties or making enforceable recommendations; and arbitrating disputes under the code.

Section 46 of the Act requires the Secretary of State to review periodically the operation of the pubs code and section 65 of the Act requires the Secretary of State to review periodically the adjudicator’s performance. The review will look at the period from the establishment of the code and the PCA to 31 March 2019.

The invitation to submit comments and evidence will run for 12 weeks and can be accessed through gov.uk (https://www.gov.uk/government/consultations/pubs-code-and-pubs-code-adjudicator-statutory-review). Stakeholders have until 22 July 2019 to respond. Following this, BEIS will analyse the responses and other evidence as set out in the terms of reference. A report on the findings of the review will then be published as soon as practicable and laid before Parliament by the Secretary of State.

The terms of reference for the pubs code and PCA reviews will today be placed in the Libraries of both Houses.

[HCWS1529]

Post Office Network

Kelly Tolhurst Excerpts

Thursday 25th April 2019 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael), and the hon. Members for Motherwell and Wishaw (Marion Fellows) and for Paisley and Renfrewshire North (Gavin Newlands), on securing today’s important debate on the sustainability of the post office network.

As I have said many times before, I am always happy to challenge the Post Office on specific concerns that MPs have at constituency level. I am therefore grateful to hon. Members for their contributions. It is encouraging to see that all sides of the House share common cause in ensuring that a vital national asset continues to serve our constituencies for many years to come. It is because of the key role that post offices play in service to their communities that our 2017 manifesto committed to safeguarding the network.

[Brendan O'Hara]

Will the Minister join the consensus across the House to support the retention of the post office network in public hands?

[Kelly Tolhurst]

If the hon. Gentleman would allow me the courtesy of getting to the content of my speech, that would be really useful. I am still at the start. We made a commitment in our 2017 manifesto and are committed to safeguarding the network. The Post Office is publicly owned and it is a commercial business operating in competitive markets. The Government set the strategic direction for the Post Office to maintain a national network, accessible to all, and to do so in a more sustainable way for the taxpayer. We allow the company the commercial freedom to deliver that strategy as an independent business.

I must point out some of the language and words used in the debate, such as “managed decline” and “undermining the network”, and the idea that it is ideological of the Tories to run down post office branches. As the Minister responsible for post offices, I find that incorrect and inaccurate. I do not regard Government investment of £2 billion over eight years as a so-called managed decline or undermining of the network, and I do not regard the establishment of 450 new locations since 2017 as managed decline or an undermining of the network. As hon. Members have outlined, at the end of March there were 11,547 branches. That number is as stable as it has been in many decades, so I refute those claims.

[Patricia Gibson]

I hear the Minister’s objection to the term managed decline, and that is fine. We are allowed to disagree with each other in this Chamber; we have that privilege. However, there is no plan in place in the—I think not unlikely—event that WHSmith completely collapses. It has declined over 14 years. Would she care to take that up?

[Kelly Tolhurst]

I thank the hon. Lady for her comment, but I highlight that WHSmith has been successfully running post office franchises since 2006. We are now in 2019, and the reality is that, in any franchising service and any business, work is always going on behind the scenes in regard to the management of the network. There is a massive network of 11,500 outlets throughout the country. As the Minister responsible, I will, quite rightly, challenge the Post Office on any issues I am told about. I am committed to maintaining that network.

I have highlighted that so early in my speech because ever since I have had this role I have been clear at the Dispatch Box and in any debate that I will talk to any MP about issues they have in their constituency about post office branches. I will also talk to anyone about the Post Office and take those issues forward to challenge it. I will also defend the Post Office when required.

[Several hon. Members rose—]

[Kelly Tolhurst]

I give way to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry).

[Drew Hendry]

The Minister is making a powerful statement of commitment, but she has heard from around the Chamber the pressures faced by local post office sub-postmasters living on subsistence terms and struggling to maintain a living. Will she bring that enthusiasm, energy and commitment to sorting out their livelihoods and securing their post offices?

[Kelly Tolhurst]

I thank the hon. Gentleman for that, because that is exactly what I hope to do.

[Gill Furniss]

I want to continue on the point about contingency planning. At an APPG meeting some months ago, when we questioned the management who had turned up to talk to us about various things, it was clear that they had no contingency plan whatsoever should WHSmith fail. It is okay to say they have been doing it since 2006, but so have NatWest, HSBC and TSB, and now we see them disappearing from the high street. It is crucial that the Minister takes that seriously. If she did not know that the Post Office had no contingency plans in place, its keeping her in the dark is a serious omission on its part.

More generally, at that APPG meeting the management told us that the consultation was not worth the paper it was written on and that they would not take notice of any views from individuals or communities. Indeed, the only reason they were asking was to see whether there were any comments on disabled access. I asked them why that was the case, because they have a duty of care to look at disabled access and to listen to communities.

[Kelly Tolhurst]

I understand where the hon. Lady is coming from, but the reality is that 98% of the post office network is franchised. That is the fundamental business model within the Post Office and its distribution of services. The hon. Lady makes a presumption that WHSmith will fail, and its franchises will therefore be under threat. That does not take into account the potential future development of the Post Office and how we are challenging it. However, as I have outlined today, and in any conversation I have had with any colleague, when hon. Members highlight something to me, I will, as the responsible Minister, always raise that with the Post Office.

In my day-to-day role, I will always challenge the decisions and workings of the Post Office. However, while we are the Post Office’s shareholder, it is commercially run, so it is within its rights to manage operational delivery, but it is for me to challenge, oversee and raise questions where I believe work is needed to resolve matters.

[Hugh Gaffney]

I will keep it short and sweet: will the Minister ask WHSmith why it will not talk to the CWU, and ask it to talk to the CWU to represent members properly?

[Kelly Tolhurst]

I understand the hon. Gentleman’s concern about the CWU and perhaps the conversations with WHSmith, but the union’s relationship with an independent retailer such as WHSmith is a matter for it. It is not for me to direct an independent business. I know the hon. Gentleman and his passion for this subject well, so I am sure he will do all that he can, in his role and with his experience, to ensure that communication takes place.

[Gavin Newlands]

I had the time to advertise my surgery on Saturday in my speech, and I look forward to attending the Minister’s Tea Room surgery, where we can discuss some aspects of my speech in more detail. For the public record, will she give me and the people in Bridge of Weir and elsewhere in my constituency a commitment at least to look at the community designation of post offices? I am asking her to commit not to changing that but to looking at where there may be shortfalls.

--- Later in debate ---

[Kelly Tolhurst]

I am always happy to look at the details and where we can improve services if that is possible. I must point out that the post office network is long established and well loved. We love the people who work in our post office network: the sub-postmasters and the workers—[Interruption.] Hon. Members might heckle, but we do. The Government definitely do, and rightly so.

I have outlined this afternoon my personal commitment to the post office network, as we did in our manifesto, to see where we can improve it and where we can all work together to secure the future sustainability of a strong network throughout the country. There are challenges ahead, just as there are within retail. They are not insurmountable, but the challenge for us is to work with all of our stakeholders to tackle those and secure the network for the future.

The facts clearly show that the Post Office has made substantial progress over the past decade. The inhibiting cultural legacy of being a lesser partner to Royal Mail, with high public sector costs, has almost disappeared. As a business, Post Office Ltd is increasingly profitable and takes action to consolidate and defend its position in the market. Between 2010 and 2018, we backed the Post Office with nearly £2 billion to maintain and invest in a national network that had 11,547 post offices at the end of March. That extensive network gives the Post Office a unique reach among service providers. The Post Office currently meets and exceeds all the Government’s accessibility targets at a national level.

[Patricia Gibson]

I appreciate the amount of investment that the Minister is talking about; it is clearly a lot of money, although people might want a debate about whether it is enough. In spite of that investment, does the Minister understand the concerns raised today? In Scotland 22% of the entire post office network has closed over the past 15 years. Surely she, like me, laments that figure because of the scale of loss it represents.

[Kelly Tolhurst]

The hon. Lady is right to raise those concerns. She is also right that we are concerned about any particular closures that may happen, as is Post Office Ltd. That is why Post Office Ltd works hard—it always works hard—where there are unforeseen closures to make sure that those branches reopen. Since I have been in post there have been a number of examples where I and local MPs have worked with the post office network and local communities to make sure that new facilities are opened.

Where there have been closures, I would always encourage people to raise them with Ministers and to work with Post Office Ltd to make sure that we can sustain the network. The hon. Lady is right to have concerns, but she is wrong to say that the intention is not to renew those branches and not make sure that the network is stable in Scotland. There is a commitment and a desire to achieve that.

Government investment has also enabled the modernisation of over 7,500 branches, added more than 200,000 opening hours per week and established the Post Office as the largest network trading on Sundays. In terms of services provided, the Post Office’s agreement with the high street banks enables personal and business banking in all branches, ensuring that every community has appropriate access to cash and supporting consumers, businesses and local economies in the face of bank branch closures, particularly in rural and urban deprived areas. I encourage the House to look closely and objectively at these facts; they show unequivocally that the network is at its most stable and is much more sustainable today than in 2010.

We are not complacent. Post Office Ltd has to keep exploring new business opportunities to ensure a thriving national network for the benefit of communities, businesses and postmasters up and down the country. One of the most important and visible aspects of the Post Office strategy is its franchising programme. I accept that some communities have a strong emotional attachment to Crown post offices and naturally there will be concerns when proposals come forward to franchise their local branches, but our high streets are facing unprecedented challenges and the Post Office is not immune to them. Just like any other high street business, it needs to respond to these pressures and adapt to changing customer needs.

Franchising has reduced the taxpayer funding that the Post Office requires from Government, while maintaining—and, in some instances, improving—customer service levels. In fact, the report by Citizens Advice in 2017 indicated that franchised branches are performing in line with or better than traditional branches. I reassure hon. Members that, as part of its ongoing monitoring role, Citizens Advice will continue to track the impact of post office changes on consumers and on customer satisfaction in respect of post offices. Citizens Advice also has a formal advisory role in reviewing changes to Crown post offices across Great Britain that are relocated and franchised.

Serving rural communities is at the very heart of the Post Office’s social purpose. There are over 6,100 post offices in rural areas and virtually everyone living in such areas is within 3 miles of one of those branches. Last year, a study by Citizens Advice found that seven out of 10 rural consumers buy essential items at post offices and almost 3 million rural shoppers—that is, 31% of rural residents—visit a post office on a weekly basis, compared to 21% of people living in urban areas. The importance of post offices to rural areas is illustrated by the fact that almost half have community status. They are the last shops in the village, as hon. Members have outlined. Rural post office branches, whether main, local or traditional, can offer the same products and services as urban ones of the same category.

The Post Office recognises the unique challenge of running a community branch and supports those postmasters differently from those in the rest of the network. They receive fixed remuneration, as well as variable remuneration, to reflect their special situation. In addition, the Post Office delivered almost £10 million of investment via the Community Fund between 2014 and 2018. That enabled community branches to invest in their associated retail business. The Post Office has now launched a smaller community branch development scheme that will benefit an anticipated 700 branches. Let me be clear: this Government and the Post Office will continue to support rural post offices.

Some hon. Members raised concerns about the rates of remuneration paid to postmasters, especially for banking services; I, too, have been and continue to be concerned about that issue. While the contractual relationship between Post Office Ltd and postmasters is an operational responsibility for the company, I care deeply about the issue and I am determined to make sure that running a post office remains an attractive business proposition.

We offer post offices several ways of doing that, including the development of services for the future. My challenge to people thinking of taking on a franchise or a post office is to make sure that they deliver the services demanded by consumers and therefore enable post offices to continue to be relevant in today’s market, given the way consumers use services now compared to the past.

I have committed to meeting interested parties, including the Post Office Ltd and the National Federation of SubPostmasters, more regularly so we can ensure that particular issues, case studies and direct concerns are discussed and challenged on a more frequent basis, and we can all work together. Everybody in this room and all our stakeholders want to see the Post Office thrive and develop in the future. Some Members may regard me as having a different ideological view: there may be different ways of getting there, but the outcomes should remain the same.

[Gill Furniss]

The Minister talks about her passion for post offices and how everyone will work together. Would it not make more sense to have a review of how things are working at the moment? As I and others have mentioned, having a friendly little chat probably will not work. We urgently need a proper review of the governance and management and of the remuneration of sub-postmasters.

[Kelly Tolhurst]

I appreciate that the hon. Lady would like me to announce that we will hold a review, but fundamentally, as I have outlined, the Post Office is a commercial entity operating in a competitive market. It is owned by the taxpayer, and it is right that we are challenged and that it is run efficiently.

I point out that the Post Office has been making a surplus. We now have a sustainable network and a surplus. We have moved on from a time when there were more than 7,000 post office closures and the Post Office was over £1 billion in debt. We are not in that place today. That has been achieved by maintaining the network and investing correctly. However, I have tried to show that I understand hon. Members’ concerns about the viability of postmasters and their pay. I hope I have already outlined and expressed my determination to get to the bottom of some of these challenges and to ensure that they are addressed by the Post Office.

[Drew Hendry]

The Minister is being generous in taking interventions, and I appreciate that. She speaks passionately about her commitment to investigating this, and has commented that she believes the network is sustainable and well invested in at the moment. Will she take that a step further by coming to speak to some of the people running local post offices, particularly in the highlands and islands? They might not recognise the fact that they are within three miles of communities or that they have that kind of investment, because that is not their lived experience. Will she take up that invitation?

[Kelly Tolhurst]

I thank the hon. Gentleman for that invitation. I do speak to postmasters and, if time allows, I will be happy to go and visit post offices in any part of the country, if possible. However, we really need to look at the network and understand the operation. Post Office Ltd operates more than 11,547 stores—a sustainable network. In many of those circumstances, there will be particular differences. Of those stores, 98% are franchises, which in effect are businesses in themselves. It is acceptable to expect that there will be some churn and there will be particular issues that need to be dealt with.

[Gill Furniss]

indicated dissent.

[Kelly Tolhurst]

The hon. Lady shakes her head, but that is the reality. I apologise to her, because she is always very courteous to me in the many debates we have. At some stage or another there will be issues with a number within the network, and it is right that those are raised and that we deal with them. This is not something I like to accept, but sometimes there will be cases that cause problems, and the right course of action is to have debates such as this, to challenge me or whichever Minister is responsible and to ensure that we work to ensure that those particular branch or constituency issues are dealt with.

Part of the changes to the network involved moving from fixed and variable remuneration to a fully variable basis, based on transaction fees. That means that it is now important that a post office service is combined with a good retail offer to be successful. At the same time, fixed remuneration remains in those rural and remote locations where that approach is just not viable.

Post Office Ltd is not complacent and periodically reviews the rate of return on all services for postmasters to reflect the time and effort involved. For example, last year the Post Office increased remuneration on banking deposits twice to reflect the increased demand for services. I thank hon. Members for their positive comments about the increase announced last week to remuneration for postmasters for banking transactions; as hon. Members have outlined, that has doubled or in some cases tripled the fee payable to postmasters. Where possible, Post Office Ltd will continue to use the renewals of commercial contracts as opportunities to negotiate improved rates that can be shared with the postmaster.

I will answer a direct question put to me about why the Post Office is bringing forward the increase in charges only in October and why it is not happening before that time. The Post Office has taken the decision to implement the new banking framework payments to postmasters one quarter before the new negotiated banking framework comes into play. I understand that postmasters may be concerned, but the Post Office has acted to bring that in early and to enable the uplift to postmasters as soon as practically possible.

I want to pick up on one point raised by the hon. Member for Glasgow North East (Mr Sweeney), and give him some more information on cashpoints. He raised a concern about a post office having to pay the Post Office for that machine. Under its agreement with the Bank of Ireland, the Post Office pays post offices for the provision of the machines; they are remunerated for that. I would not be able to comment on any private agreement between an individual post office and another provider for the cashpoints. I would very much welcome further information after the debate, and I am happy to look into the issue for him.

[Mr Sweeney]

The additional concern is that the ATM footprint is subject to business rates, which is obviously a cost borne by the franchise holder. That is money over and above that received from Post Office Ltd, and it therefore represents a financial detriment to the franchise holder. The Minister needs to come up with a mechanism to offset that cost to the business, because otherwise it is unsustainable.

[Kelly Tolhurst]

As the hon. Gentleman knows, the Government have been working to make business rates more equitable for small businesses, and we are looking at the impact of that. Post offices will have benefited from that work. He mentions costs that he has been made aware of; if he lets me know that particular constituency issue, I am more than happy to take that forward. As I have outlined, under the Bank of Ireland agreement with the Post Office, postmasters are remunerated for, rather than being expected to pay for the privilege of, delivering that service for our communities.

On the question of cashpoints, as we are faced with bank closures, which is a problem that we all very much agree on—they have deserted our high streets—it is for the post offices to pick up the slack in some cases. That is why this Government, with the Post Office, have been negotiating strongly on the new banking framework—to get a better deal for the postmasters who are delivering services that we all rely on in our high streets and communities.

The question of accessibility in the franchise branches has been raised. Franchising means that a post office presence can be maintained in town and city centres in a way that not only makes financial sense, but ensures that services are more accessible to customers, for example through the provision of extended hours and Sunday opening. Post Office Ltd is wholeheartedly committed to ensuring that the needs of the community and its customers are met in any relocation. That is why the Post Office consultation encourages the community to share its views on all matters, including issues related to accessibility under the Disability Discrimination Act 1995.

Post Office Ltd and its franchise partners have stringent rules regarding access to post office branches, which meet all relevant legal requirements, to ensure that all customers, including those with disability or mobility issues, can access their branches. The Post Office also runs local consultations in order to engage local communities, so that they help to shape its plans. The Post Office does not seek a mandate for the franchising, but consults on practical aspects of a proposed relocation, such as service provision and accessibility.

[Hugh Gaffney]

The Minister mentions communication. Has she met the Communication Workers Union about post office closures? Will she arrange that?

[Kelly Tolhurst]

If I might correct the hon. Gentleman, they are not closures; they are franchises. I am concerned about the language used when we talk about the post office network. We are talking about a change in operation, not closures or a loss of service. I will happily meet the CWU on any issues it wants to raise. However, I have to be clear that these are not closures; they are franchises. I think that that sends a really strong message, because communities will think that they are losing all their post office services, when that is factually not the case.

I am aware that hon. Members have expressed concerns about this process. I have met many hon. Members to discuss issues that they have had with franchising in their constituency, and have raised those directly with Post Office Ltd. Citizens Advice reports that Post Office consultation is increasingly effective, with improvements agreed and reassurances provided in most cases. That demonstrates that the Post Office is listening to communities. Ultimately, decisions on franchising are commercial ones for the Post Office to take—within the parameters set by the Government to ensure that we protect our valued network.

On the partnership between WHSmith and Post Office Ltd, WHSmith sees post offices as a central hub in the community and takes the social responsibilities that come with that very seriously. As I have outlined, WHSmith has successfully operated post offices within its stores since 2006, and following the recent agreement, the number of post offices run in WHSmith stores will be greater than 200. This will support the long-term sustainability of post office branches and bring longer opening hours, so that customers are offered seven days of trading a week in convenient locations. Throughout this period, WH Smith has shown that it can successfully run post office branches across the country by delivering excellent standards of customer service, with trained staff promoting products and services in a modern retail environment.

Hon. Members have levied accusations about the fitness of WHSmith and its operation, but it is still very much a recognised brand on the high street, as is the Post Office. We need to accept that some consumers and customers are still very much lovers of the WHSmith brand. I have visited WHSmith branches in which there have been franchises, and the feedback from the community has been very good. I have seen at first hand how it can work. However, each store operates independently. Again, if there are issues with branches in any Member’s constituency, we will always raise those directly with the Post Office.

The Post Office card account is a commercial matter for the Department for Work and Pensions and Post Office Ltd. However, it is no secret that the contract for the Post Office card account comes to an end on 30 November 2021. For claimants who are unable to open a mainstream account ahead of that date, DWP will implement an alternative payment service that allows users to obtain cash payments, wherever their location, before the end of the contract.

It is worth pointing out that that 99% of a bank’s personal customers are able to withdraw cash, deposit cash and cheques and make balance enquiries at a post office counter. Post offices will therefore remain central to delivering cash to customers, including the elderly or the most vulnerable, regardless of the banking product that they chose or move to.

The hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss) rightly said that it would not be appropriate for us to talk about the legal proceedings at this time. However, I assure her that as the Minister responsible, I will endeavour to take any action required. I am absolutely committed to doing whatever is in my power to make sure that the Post Office retains its standing, and that the relationships it maintains are the best that they can possibly be.

[Hugh Gaffney]

The Minister says that standards will be maintained. Franchises do not maintain the same standard of services as Crown post offices. That is the point I am trying to make.

[Kelly Tolhurst]

I respect the hon. Gentleman’s position, but I disagree that moving to a franchise equals a loss of services and standards. I do not believe that, and I have not seen that, so I respectfully disagree. However, I absolutely take his point and understand his concerns.

Decisions on bank branch closures are a commercial matter for banks and are taken by the management team of each bank, without intervention from the Government. So that hon. Members can see exactly how well I understand the problem, I highlight that I represent Rochester and Strood, and Rochester no longer has a bank in what was the city. However, the Government recognise that branch closures can be disappointing for customers and believe that the impact on communities must be understood, considered and mitigated where possible. That is why we support the Post Office’s banking framework agreement, which enables 99% of the UK’s personal banking customers and 95% of the UK’s small and medium-sized enterprise banking customers to carry out day-to-day banking in the post office network.

I reassure the House that all post offices across the network are of the utmost importance to the Government. We recognise their value and importance to communities, residents, business and tourism in rural and urban parts of the UK. We also recognise and respect our sub-postmasters and the people who work within franchises, who work so hard, as was outlined throughout the debate; some postmasters will go the extra mile. We respect them, and we are determined to work with our partners to make sure that we maintain the Post Office as a viable business proposition for any postmaster to continue with. We will continue to honour our manifesto commitments, so that post offices thrive and remain at the heart of our rural and urban communities.

I again thank hon. Members for their contributions to the debate. I understand their frustrations, and I take their issues on board. In closing, I remind colleagues that, as I have said several times, I am always willing to talk to any MP regarding any constituency branch issue.

Draft State Aid (EU Exit) Regulations 2019

Kelly Tolhurst Excerpts

Wednesday 10th April 2019 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft State Aid (EU Exit) Regulations 2019.

It is a great pleasure to serve under your chairmanship, Mr Hanson. The draft regulations were laid before the House on 21 January. They transpose into UK domestic law the EU state aid regime, as set out in articles 107 and 108 of the treaty on the functioning of the European Union and in various EU regulations. By so doing, they transfer the state aid regulatory functions of the European Commission to the UK’s Competition and Markets Authority. The draft regulations will therefore ensure that state aid rules continue to operate in a domestic context after exit day in the event of a no-deal exit. If passed, the regulations will come into force on exit day.

State aid is any Government subsidy or support provided to an economic operator that gives it an advantage that it could not get on the open market and that distorts competition between EU member states. The EU therefore has tough rules governing the way that subsidies can be given, to stop companies gaining an unfair advantage over their competitors. However, there are good policy justifications for state aid—when the rules enable it to be given—if the benefit from giving aid outweighs the potential harm that a subsidy would cause.

The rules are intended not to prevent public authorities from supporting industries and business, or indeed nationalising assets, but to minimise distortion to competition. Ultimately, spending decisions within the framework of the rules—how much, to whom and for what—are for successive Governments, the devolved Administrations and local authorities to make. To be clear, the state aid rules are about supporting fair and open competition, and the UK has long been a vocal proponent of them. Ultimately, the rules are good for taxpayers, consumers and businesses.

There are three main reasons to maintain the state aid rules and establish a UK regime when we leave the EU. First, it will provide continuity and clarity for public authorities that grant state aid and for organisations that receive it. That will give confidence to the wider business community, which will benefit from the continued protection provided by the rules. Secondly, it will help to maintain a level playing field throughout the whole of the United Kingdom.

[Nick Smith (Blaenau Gwent) (Lab)]

In appendix 1, there is a letter from Mick Antoniw AM, who chairs the Constitutional and Legislative Affairs Committee of the National Assembly in Cardiff. The letter is dated 6 February 2019. It points out the

“problem that the Welsh Government and the UK Government disagree as to whether State Aid is devolved.”

Mr Antoniw states:

“The Welsh Government has requested from the UK Government, an explanation of their legal position but there has been no response.”

Can the Minister please give us the Government’s legal position on that?

[Kelly Tolhurst]

The hon. Gentleman may be referring to the commitment, made by my noble Friend in the other place, to write to the Committee. He still plans to do so. The Government’s position is that state aid is a reserved matter.

[Martin Whitfield (East Lothian) (Lab)]

The Minister referred to the regulations being UK-wide and mentioned the devolved Administrations in Scotland, Wales and Northern Ireland. In the light of the Government’s contention that state aid is a reserved matter, can she share with the Committee the Scottish and Welsh Governments’ responses to the draft regulations?

[Kelly Tolhurst]

I thank the hon. Gentleman for his intervention requesting further clarity. We consulted the devolved Administrations before laying the draft regulations. It is true that there is a lack of agreement with the devolved Administrations on whether state aid is a reserved matter. We maintain that it is. The statutory instrument will bring over EU regulations so that they work in a domestic setting. We are not proposing any changes.

The European Commission’s powers will be transferred to the CMA. That will not result in fewer powers or less involvement for the devolved Administrations. Under the domestic regulations, they will still be responsible for submitting their own state aid requirements directly to the CMA. They will not lose any powers that they have at the moment.

[Martin Whitfield]

I am grateful for that clarification. It is therefore the case that, in essence, the devolved Administrations have the responsibility but not the authority, and they run the risk of having punitive damages found against them should it be decided that they are exercising state aid.

[Kelly Tolhurst]

No, I am afraid I disagree. Currently, the devolved Administrations are responsible for aid givers, and they will potentially be aid givers. Under current EU regulations, the devolved Administrations have to notify the Commission of the giver of that aid. The SI will not change that. In a no-deal situation, the CMA will act as the notified body. There is no change. I disagree with the hon. Gentleman’s statement, but I respect his attempt to push that point and get further clarification.

[Nick Smith]

Mr Antoniw’s letter was dated 6 February, which is now over two months ago. May I press the Minister on when we will get the Government’s legal position? Can she give us a date, please?

[Kelly Tolhurst]

I thank the hon. Gentleman for his intervention. I believe that the Secretary of State replied to that letter, but I will have to go back and look at what letters he has sent before I can clarify further. I am more than happy to let the hon. Gentleman know after the Committee, if that is agreeable to him.

--- Later in debate ---

[The Chair]

Not only that, but Mr Esterson has indicated that he might wish to have an adjournment. It is perfectly possible to table a motion that the Committee should now adjourn. A vote would be taken and the Committee would determine it. There are a number of options. The key point is that the documents before us have been tabled by the Government and speak for themselves. The Minister has to explain them to all members of the Committee accordingly.

[Kelly Tolhurst]

The Government made it clear in the intergovernmental agreements on the European Union (Withdrawal) Act 2018 that state aid would be a reserved matter. The SI before us relates to a UK-wide regime and would transpose retained EU law into UK law. Any further discussions or decisions on future state aid policy that might or might not be introduced will obviously not be for this Committee. As I said in a previous answer to the hon. Member for Sefton Central, I will happily provide him with the letter to which he has referred. However, I point out that the Secretary of State has communicated comprehensively with colleagues and with the devolved Administrations, and through officials. There has been no lack of communication between the Secretary of State and the devolved Administrations.

The hon. Member for East Lothian referred to appeals against decisions. The CMA is not the arbiter; it will be the decision maker, and the courts—either the High Court in England and Wales, or the Court of Session in Scotland—will make the judgment on an appeal. Looking at how the EU regulations already work, the Commission makes a decision and the courts then make a decision on an appeal. All law will always be a mixture of legal judgments and future policies. There is no contradiction in what I have said. The CMA will effectively be the decider and will hold the powers, and it will be for the courts to decide whether that decision is correct.

[Brendan O'Hara (Argyll and Bute) (SNP)]

I appreciate the fact that the Minister is taking so many interventions. This SI, like so many others, seems completely half-baked. Given that there is such opposition to it in Cardiff and Edinburgh, can she tell us whether the discussions with the devolved Administrations have ceased, or are they ongoing? Has any thought been given to what indemnifying policy or process could be given to the Scottish and Welsh Governments, should they be found in breach of these state aid regulations?

[Kelly Tolhurst]

I point out to the hon. Gentleman that the devolved Administrations are highly aligned with the policy position on setting a UK-wide state aid regime. Our conversations with the devolved Administrations are ongoing and will continue as they are. The Secretary of State has made it very clear that he is committed to meeting the devolved Administrations to discuss these matters and many others in relation to how we exit the EU. In fact, the Prime Minister has made it clear that, were we to enter into an agreement with the European Union and therefore not be in a no-deal situation, we would extend the opportunities for devolved Administrations to feed in.

[Andrew Griffiths]

Does my hon. Friend agree that just because we do not like the answer to a question, it does not mean the answer is incorrect? Is not what we are doing here just transposing the current EU regime into UK law, with the CMA replicating the role that the Commission currently undertakes?

[Kelly Tolhurst]

I thank my hon. Friend for that contribution. That is absolutely what we are doing here today. We have before us a no-deal SI, so in the event of no deal we will be replicating the EU laws in the domestic setting. The SI is extremely important for fairness and competition in the UK, so there really should be no resistance from the Committee to what is in it, because it is a fundamental of how we already work, and in a no-deal situation it would be important were we to enter into any future trade deals with the European Union.

I will continue with my opening remarks. Maintaining a level playing field across the whole UK means that the richer parts of the UK will not be able unfairly to distract investment away from less prosperous parts of the country. The existing principles and practices of the regulation of state aid will remain substantively unchanged in the domestic regime, in accordance with the aims and powers under the withdrawal Act. These regulations will therefore have minimal impact on public authorities that grant state aid or entities that receive it.

Instead, the regulations correct deficiencies in the retained EU law relating to state aid. That includes correcting references to EU concepts, such as the internal market and the functions of the Commission, which will ensure that the law remains operable in a domestic setting while minimising the impact on stakeholders. An alternative test of trade within the United Kingdom, however, would inadvertently change the scope of the rules by catching local measures that are currently not caught.

The main practical change under the new regime is that rules will be regulated and enforced by the CMA in place of the European Commission. The CMA is well placed to take over the European Commission’s role of approving, investigating and monitoring state aid across the whole UK. It has extensive experience and understanding of markets as the UK’s competition regulator, and is independent of the Government in its decision making. To prepare for its new role, the CMA has received £20 million from the Treasury contingency fund to prepare for EU exit in 2019-20, in addition to the £23.6 million it received for the year 2018-19, which specifically included £3.3 million for its state aid function.

The Government are working to ensure that the CMA will be ready to take on the new role and have every confidence in its ability to do so. The CMA is on track to recruit all the staff needed to start working on state aid by exit date, if necessary. The CMA will adopt the Commission’s existing state aid guidelines, which provide clear parameters for how and when aid should be approved. The CMA will also receive investigatory and enforcement powers broadly equivalent to those of the European Commission, although I should explain one point of divergence from the EU regime.

Under the EU rules, the European Council has the power in exceptional circumstances to intervene and approve aid before the European Commission has reached a decision. That power does not easily translate into the UK context and we do not consider it appropriate to use the regulations to vest the Government with similar powers. The regulations will still allow the Government to act swiftly if necessary, much as they have been able to do under the existing regime. Ultimately, the Government could bring forward legislation to amend the state aid rules if they deemed that to be absolutely necessary—an option that is not available to the European Council in the EU context.

I mentioned earlier that state aid rules help to ensure fair and open competition throughout the UK. Over the past year the Government have engaged extensively with each of the devolved Administrations and shared drafts of the regulations. As agreed, each devolved Administration will be responsible for managing the communication between their respective aid givers and the CMA. The Government have offered to sign a supporting memorandum of understanding with the devolved Administrations about the operation of the state aid regime, which we still hope to agree. Those discussions have indicated broad agreement on the substance of the Government’s policy to establish a UK-wide state aid regime that mirrors the EU’s. We will of course continue to work closely with the devolved Administrations on the development of state aid policy in the longer term.

As we leave the EU, the draft regulations will give certainty to public authorities and recipients of state aid, and help to maintain confidence for businesses across the UK. Commitments on state aid support free trade, as is recognised in the political declaration. The CMA has the expertise, operational independence and resources to enforce a UK state aid regime.

[Martin Whitfield]

I wonder whether the Minister will address the exemptions. With respect to Horizon 2020, with an uncertain no-deal departure date—or, we hope, no no-deal departure—what will happen where people have submitted applications but have not heard or are in the process of appealing decisions? With respect to the specified EU projects in schedule 2, what is the position on our contribution to CERN? CERN has always stood outside the EU, but our contribution is a Government-funded payment within the EU. How would the state aid rules apply to that?

[Kelly Tolhurst]

The draft regulations are not intended to stop any existing schemes in a no-deal situation, which is why we have the exemption list. The Treasury has been clear that all the projects that were committed to prior to EU exit will be honoured. I cannot go into detail about the specific project the hon. Gentleman mentions, because I do not have all the details to hand, but I am happy to give him further clarification on that.

I emphasise that the intention of the draft regulations, and the reason for including those projects in schedule 2, is to ensure that there are no unintended consequences of transposing the EU regulations and that state aid recipients have clarity and understand what will not be subject to state aid. I point out that in 2017, under the current state aid regime, 97% of state aid issued in the UK was pre-exempt. I commend the draft regulations to the Committee.

--- Later in debate ---

[Bill Esterson]

Oh, the hon. Gentleman does not have a legal background either—never mind. We are in danger of being diverted again.

In paragraph 6.10 of the explanatory memorandum, the Government say they will rely on EU case law in their application of state aid rules, but there is legal opinion that we may have to rely on case law from before we joined the EU—this point was picked up in the Lords—as we will no longer be bound by the treaties of the EU. That may be tested in the UK courts, and it may take years to resolve. That has been the case with other regulations passed in Committees like this, and Ministers have not been able to give a satisfactory answer—presumably because there are conflicting legal views about how it would be resolved. Before we joined the European Union, there was of course no comprehensive state aid regime to regulate what was and was not permitted, so the difference between the two options is very significant.

The information provided to us does not give us the evidence we need to make a reasonable judgment about the technical adequacy of the regulations. For a simple example of that, I refer Members to paragraph 6.14 of the explanatory memorandum. I have no doubt about the need to omit specific references to Germany in article 107(2)(c) of the EU regulation, but I also have no way of knowing whether such a technical change is appropriate. More to the point, we have no way of knowing whether all the necessary technical changes of a nature similar to those identified in paragraph 6.14 and a number of other paragraphs have been made.

A further example of our inability to form an opinion can be found in the wording of paragraph 6.28, which states that

“a large number of deficiency corrections were required to make the Procedural Regulation operable in a domestic setting.”

The explanatory memorandum does not describe in detail what that large number of deficiency corrections is, it does not say what the evidence base is for asserting the need for those corrections, and it does not give back-up expert witness evidence in support of that assertion. That sentence is a pretty fair indication that we have an impossible task and are being asked to approve something with a clear lack of evidence to support doing so.

The CMA is being asked to take on responsibility for oversight of the state aid regime from the European Commission. In paragraph 7.2 of the explanatory memorandum, the Government refer to

“the costs and benefits of setting up a completely new body or having an established regulator take this on”.

I note the information before us does not give the details of that cost-benefit analysis or why the decision was taken to choose the CMA rather than setting up a new body.

That takes me back to the points made in earlier interventions about the devolved Administrations. Paragraph 10.1 refers to the discussions with the devolved Administrations and the CMA. It sounded to me in those earlier exchanges as though the Minister was in danger of being right in the middle of a constitutional crisis. Without publication of the Secretary of State’s response to the letter from the Welsh Government, this dispute has not been resolved to anybody’s satisfaction. How can we judge what the outcome is or should be without sight of that response?

[Kelly Tolhurst]

I would like to clarify what I said earlier on that particular point, where I alluded to the fact that the Secretary of State had responded. I understood it to mean a letter that had been sent to the Secretary of State earlier in the year, which is known and has been published. I had not appreciated that the letter that the hon. Gentleman referred to was the letter sent to the Lords Committee, which my hon. Friend Lord Henley of the other House will respond to. I hope to clarify that point, since the hon. Gentleman raised it.

[Bill Esterson]

I am grateful to the Minister for that intervention, which tells us that we have not had the response from the Secretary of State. I am pleased that we got that on the record.

The Secondary Legislation Scrutiny Committee (Sub-Committee B) report, published on 7 February, refers to this issue and asked

“whether the Devolved Administrations were content with the approach”.

It is pretty clear that there has not been an answer to that question, let alone the more detailed letter published as evidence given to that Committee, which my hon. Friend the Member for Blaenau Gwent quoted from earlier and which I will quote from in more detail now. Not only are those responses not recorded, but it does not appear they have been made.

--- Later in debate ---

[Kelly Tolhurst]

It is great to be able to answer a few of the questions put to me. I have faced the hon. Member for Sefton Central in Committee several times in recent weeks, but I hope that earlier he was not questioning my integrity by not understanding or believing what is in front of him. I hope he accepts that I always try to answer the questions as openly as they are put to me.

[Bill Esterson]

On a point of order, Mr Hanson. I am sure that had anything disorderly taken place or the suggestion the Minister just raised been made, you would have intervened and stopped it. May I have your confirmation that that is what would have happened, and that as it did not, nothing disorderly happened earlier?

--- Later in debate ---

[The Chair]

We are having a lively debate and views are being exchanged. The Minister is on her feet, responding to the points made, at length, by the hon. Gentleman, and I call on her to continue.

[Kelly Tolhurst]

Thank you, Mr Hanson. I think the hon. Gentleman’s point of order highlights that he was not questioning my integrity, so I thank him for pointing that out.

[Andrew Griffiths]

We have heard Opposition Members speak at such length and with such passion that one might have thought that, if they were so bothered and exercised about the subject, half of their members of the Committee would have turned up to take part.

[Kelly Tolhurst]

My hon. Friend makes a fair point.

In many of our debates on no-deal regulation, the fact that we are where we are regarding the powers in the withdrawal Act and bringing in retained European law through secondary legislation has been a bone of contention for the hon. Member for Sefton Central. I understand that he wants further scrutiny, but I assure him that the reason we are here today, dealing with a no-deal SI, is that we are retaining EU law and bringing it over so that in the event that there is no deal on exit day, we have a functioning domestic regime. The regulations have been laid and there have been opportunities to read and examine them. I do not believe that the Government in this case are shirking their responsibilities or not giving Parliament the opportunity to scrutinise. We have been debating for an hour in this Committee. The withdrawal Act does not allow us to make big policy changes; we can make the changes required. We are debating a no-deal SI, which will come into effect if we leave the European Union with no deal. If we can reach agreement on a deal, the regulations will not be relevant.

[Bill Esterson]

That is interesting. I read the regulations and the explanatory memorandum in some detail several times. Although the Minister is right that the regulations will apply in the event of no deal, it is pretty clear that they will also apply if there is a deal. Indeed, I checked this point with the Library, and the regulations will apply whatever the arrangements for our exiting the EU. Will she confirm that that is the case?

[Kelly Tolhurst]

The hon. Gentleman makes a good point. If we entered into an agreement, we would go into an implementation period, and we would be bound by EU rules as they stand until the end of that implementation period. In any arrangement for our future relationship with the European Union, state aid would be subject to debate and to further negotiation and agreement. It would not be right for me to anticipate that. I am here to talk about a no-deal scenario and the legislation in front of us.

On the hon. Gentleman’s shopping list of state aid requirements—the things he would like to spend money on—I point out that the Post Office effectively does receive state aid. We subsidise the Post Office. We have maintained our network of 11,500 post offices, unlike previous Governments, who have undertaken programmes of closures. I am proud to stand here as the Minister responsible for post offices and say that the Post Office is in a much better place financially than it has been for many years. We are committed to delivering postal services in rural areas, and there are a number of funds to support that. I am determined that that will continue under these regulations.

It is a matter for debate whether, how, where and how much money will be granted to other worthy schemes. It is not for us to decide today which schemes and which parts of the country will receive additional funding. This debate is about the regulations—the rules—and how those decisions will be made. I understand the hon. Gentleman’s wants, but this debate is about the rules for agreeing or disagreeing.

The hon. Gentleman spoke about support for the regions. As he will know, the regional growth fund and most of the regional support funds granted through state aid are covered by the block exemption regulations, so these measures do not stop the Government supporting local communities and regions where required. This Government operate a successful industrial strategy and are determined to continue to invest in research and development, regional growth and opportunities, particularly for small and medium-sized enterprises. Let us not forget the funding available from the British Business Bank, which is an example of where those regulations have been used to benefit SMEs and provide access to finance.

On the devolved Administrations, I repeat that the Government consider the regulation of state aid to be reserved to the UK Government. However, individual choices about how and when to give aid within that framework are for public authorities, including devolved Administrations, to make. The devolved Administrations will have full autonomy in state aid case management and in dealing with the CMA. As I outlined, I recognise that there is a difference of view about whether the regulation of state aid is a reserved matter. However, given that the UK Government are closely aligned with the devolved Administrations on the substance of the policy, and given the limited scope to depart from mirroring the EU regime using powers in the regulations, it is not necessary to resolve that question now. The Government will continue to work closely with the devolved Administrations on the development of state aid policy.

[Brendan O'Hara]

The Minister says it is not necessary to decide that now. If not now, when will it be decided?

[Kelly Tolhurst]

As I have already outlined to the hon. Gentleman, the Government are clear that we believe state aid to be a reserved matter. I have tried to outline that a number of times, and I have outlined that there will be no loss to the devolved Administrations.

As I have said, under the current regulations, when the devolved Administrations decide to give aid they have to notify the European Commission. In the future, they will notify the CMA. As I have outlined, the Secretary of State will continue to consult, work with and have conversations with the devolved Administrations on any future aid policy. The Secretary of State has made that commitment, and there is no reason to suspect that it will not happen.

[Nick Smith]

Surely the Minister accepts that, although she may assert what the Government think, it is fair and reasonable for us to ask them to give us the legal explanation for their view. That is all we are asking for, and we should have it.

--- Later in debate ---

[Kelly Tolhurst]

As I have outlined, we expressed our belief in the intergovernmental agreement on the withdrawal Act that state aid is a reserved matter. That is our opinion, as I have said a number of times. It is not for the Committee to debate whether we were in the right when we expressed that position. The SI in front of us concerns a UK-wide regime. It is a no-deal SI that transposes EU law into UK law and remedies the deficiencies within that law for the UK domestic system, so that if we leave the European Union with no deal we have a functioning state aid regime, which is extremely important for us to trade with the European Union without a deal. If we leave without a deal, businesses will still want clarity over trade opportunities with the European Union. Therefore, the regulations are an important part of ensuring consistency and continuity for the business community and aid givers.

[Bill Esterson]

I will repeat part of the quote that I read out from the Welsh Counsel General about clauses 7 to 9 of the withdrawal Act. It relates to the inter- governmental agreement that the Minister has just referred to, and states that

“the powers will not be used to enact new policy in devolved areas; the primary purpose of using such powers will be administrative efficiency”.

I put it to her that this is a million miles away from being just about administrative efficiency. By any definition, this is about new policy in devolved areas.

[Kelly Tolhurst]

I thank the hon. Gentleman for that, but the SI does not create new policy; it relates to retained EU law. As I said, if there are any future changes on state aid—I cannot answer hypothetical questions about what might be coming in future—we will continue to consult and work with the devolved Administrations. If we reach an agreement to leave the European Union with a deal, the devolved Administrations will have a greater opportunity, as outlined by the Prime Minister, who has been very clear that she wants to work with them on formulating the future relationship.

I reiterate that this would be a UK regime. The devolved Administrations would still be able to act as aid givers and make those decisions on where they want to put that aid; they will just have to notify the CMA rather than the European Commission. I highlight the fact that a number of aid options are covered through the block exemption, which I have already outlined; as I said in my opening comments, that covered 97% of the state aid given in the UK in 2017. I therefore believe that the regulations we have before us are sensible, valid and definitely required if we leave the European Union with no deal.

The hon. Member for Sefton Central also asked whether the CMA is the correct authority to take on the state aid function, and why another regulator would not be set up. Let us be clear that the CMA has an international reputation and is extremely well respected for the work it does within competition and markets. It also has relationships throughout the international community. I am absolutely assured that it is the right organisation to take on this function, because of its expertise, the respect it commands and its understanding of competition, which will enable it to ensure fairness while being able to guarantee that state aid is administered without restricting competition or giving unfair advantage. That goes to the heart of what our state aid regime will be. In my view, the CMA is the right organisation to take that on and it has the necessary expertise, so there is no need to create a new regulator.

The hon. Gentleman also asked how the CMA’s preparations are going. I have outlined already the funding that has gone to the CMA to enable it to prepare. I reassure him that we are indeed looking at the devolved Administrations; that is why the CMA has been strengthening its Edinburgh branch—it is expected that some state aid work will be happening in Edinburgh. I assure hon. Members that the CMA has done a great job so far with its recruitment and getting the numbers of people that it will require in place before exit day to manage the new state aid regime. There are only 24 people left to recruit and the CMA has made great strides in that respect.

The hon. Gentleman also talked about the guidance that is being reissued. The guidance that will be provided by the CMA on approving state aid will be issued prior to exit day. He talked about primary legislation and where the Secretary of State will be able to—[Interruption.]

[The Chair]

Order.

--- Later in debate ---

[Richard Harrington]

I do not know what happened. I pressed every button to try to make it stop.

[Kelly Tolhurst]

The hon. Member for Sefton Central mentioned paragraph 7.6 of the explanatory memorandum. He read out the passage relating to how the Secretary of State would enact primary legislation. The Secretary of State would do so, in the event that the state aid rules were too restrictive, to provide any state aid that was required. That would rarely be used, but it is an option detailed in the explanatory memorandum.

The hon. Member for Bassetlaw mentioned the motion of regret that was moved in the other place, which focused on the provision of aid rather than the rules governing it. It is important to note that the motion was withdrawn and not divided on. I want to touch on his comments about state aid and the WTO. I understand that he is a great supporter of Brexit and that he might have concerns about this SI. I would like to explain that we have a set of rules here that relate to a no-deal situation. I want to reassure him that the state aid rules in front of us, and the European rules as they stand, have vast flexibility. Over the past 40 years, we have had only six negative judgments against the UK. The decision on whether to offer state aid is a matter for the Government of the day. The regulations before us have not been a barrier to the use of state aid, and they have not restricted our ability to fund the British Business Bank or other projects.

With regard to WTO rules, there are rules that would still need to be adhered to. These regulations would obviously help us establish a future trading relationship with the European Union, and it would be helpful to us to have a clear regime in place, so that the European Union could have confidence in our ability to offer that trade. Quite rightly, as we would be a third country, WTO rules would still be used. They do not necessarily offer us any better protections or give us more flexibility in the long run, but I understand the concerns of the hon. Member for Bassetlaw.

I think I mentioned earlier that WTO rules do not stop any Government nationalising a service; the rules stop them paying more than the market rate for a particular asset. By the Opposition’s admission, they would like us to have a deal with the European Union rather than to go into a no-deal situation, so I would have thought that the Opposition would welcome these regulations to give assurances. Indeed, were we to move to a customs union—the policy favoured by Opposition Front Benchers and their leader—there would need to be some kind of state aid regime.

I could keep rabbiting on forever about state aid. We need to provide continuity and certainty for public authorities that grant state aid and their beneficiaries. This approach will maintain business confidence, particularly in the event of the UK’s leaving without a deal. The regulations safeguard competitiveness, and I commend them to the Committee.

[Bill Esterson]

On a point of order, Mr Hanson. In the light of the Minister’s inability to deal with the point about the response from the Welsh Government to the Secretary of State, is there a way for the regulations to be further debated on the Floor of the House as part of their passage? That would give the Minister time to get us the answers to that question and others, because this is very unsatisfactory.

Companies House Public Targets

Kelly Tolhurst Excerpts

Monday 8th April 2019 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

My noble Friend the Parliamentary Under-Secretary of State of Department of Business, Energy and Industrial Strategy (Lord Henley) has made the following statement:

I have set Companies House the following targets for the year 2019-20:

Public Targets

Ensure that our digital services are available 99.9% of the time.

Ensure that 97% of companies have an up-to-date confirmation statement.

Achieve a customer satisfaction rate of 83%.

Provide a digital service to enable someone at risk to apply for their personal data to be protected.

Deliver digital services that transform the end to end accounts filing journey.

Increase job applications from underrepresented groups by 10%.

Ensure that our people understand, and are engaged with, our purpose and vision, achieving a score in this area in the civil service people survey in the upper quartile.

Reduce the cost of our business activities by 3.5%.

[HCWS1495]

Whirlpool Tumble Dryers

Kelly Tolhurst Excerpts

Thursday 4th April 2019 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

The Office for Product Safety and Standards (OPSS) will imminently publish its review of Whirlpool’s tumble dryer modification programme.

In 2015 Whirlpool identified a design issue in several tumble dryer models which could lead to increased risks of fire incidents due to excessive lint accumulation at the rear which then ignites. The company then undertook a modification programme to address the issue. However, concerns were raised about the modification programme and in May 2018 my predecessor, the hon. Member for Burton (Andrew Griffiths), commissioned OPSS to review the actions taken by Whirlpool.

Following a review of the modification programme, as well as consideration of technical documents supplied by Whirlpool, the OPSS has concluded that the risk is low and further reduced by the modification. However, shortcomings were found in the testing and quality assurance procedures, and the business must improve its monitoring and management of risk. They must also continue their consumer outreach programme and use more creative methods to contact affected consumers.

Given the full circumstances of the current position, in particular that the overall level of risk is low and that efforts have been made by Whirlpool to address the identified problem and to comply with its legal obligations, formal enforcement action is not justified at this stage. However, OPSS has produced a list of requirement actions for Whirlpool to take in light of the findings of the review, and OPSS will continue to monitor the programme. Should Whirlpool fail to take the expected action within appropriate timescales, enforcement action would need to be considered.

The main findings of the review are:

The ongoing risk from tumble dryers modified by Whirlpool is low and consumers can continue to use them.

Whirlpool has made efforts to address the identified problem but must do more.

OPSS is requiring Whirlpool to take further action and will continue to monitor the steps taken to ensure the efficacy of the modification in consumers’ homes over the long term.

The modification and outreach programme should continue, with new and different methods used to reach consumers.

The safety of consumers is the number one priority for Government. We acknowledge the steps Whirlpool has taken to reach consumers and modify their tumble dryers, and we will continue to monitor the situation.

[HCWS1490]

Exiting the European Union (Consumer Protection)

Kelly Tolhurst Excerpts

Tuesday 2nd April 2019 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the draft Geo-Blocking Regulation (Revocation) (EU Exit) Regulations 2019, which were laid before this House on 14 March, be approved.

The statutory instrument will revoke both EU regulation 2018/302 and the Geo-Blocking (Enforcement) Regulations 2018 in the event of the UK exiting the EU without a withdrawal agreement. This recognises that in the event of a no-deal exit from the EU, there will be no way to enforce effectively the geo-blocking regulation on behalf of UK consumers.

Geo-blocking is the term used to describe traders discriminating against customers on the basis of nationality or of the location of the customer. The EU’s geo-blocking regulation prohibits certain forms of geo-blocking, including through mandating access to all versions of a website in the EU, preventing discrimination between EU customers when distance shopping online or otherwise, and preventing discrimination in the payment terms accepted. This regulation came into force on 3 December 2018. The geo-blocking regulation does not apply to copyrighted online content, such as movies, e-books and video games.

The Geo-Blocking (Enforcement) Regulations 2018 enabled the domestic enforcement of the geo-blocking regulation. The regulations gave powers to certain regulators and acknowledged the right of customers to bring claims directly against infringing traders. These regulations came into force on the same day as the geo-blocking regulation. In the event of a no-deal exit from the EU, the geo-blocking regulation will be transposed directly into UK law, under the European Union (Withdrawal) Act 2018, as retained EU law. The Geo-Blocking (Enforcement) Regulations 2018 will also continue to have effect after a no-deal exit, unless revoked.

It is necessary to revoke both these pieces of legislation as it will not be possible to enforce effectively the geo-blocking regulation on behalf of UK customers after a no-deal exit from the EU. This is because EU regulators will no longer be obliged to bring action against businesses through EU mechanisms for cross-border co-operation; UK civil and commercial judgments would no longer be automatically enforced in EU member states and courts; and the UK Government cannot unilaterally enforce the geo-blocking regulation across the EU.

Given that geo-blocking cannot be enforced unilaterally by the UK across the EU in the event of a no deal, it is not possible to replicate the geo-blocking regulation’s benefits for UK consumers in domestic law. The provisions of the geo-blocking regulation do not apply to transactions occurring solely within one country. Therefore, there is no benefit to UK consumers in retaining a version of the geo-blocking regulation that applies only to the UK.

[Mr Jim Cunningham (Coventry South) (Lab)]

I have a genuine question: will the Minister tell us how we can protect the British consumer in that particular situation?

--- Later in debate ---

[Kelly Tolhurst]

We are debating a no-deal SI, and leaving the European Union means that the law is disapplied, so by leaving the European Union we are moving out of those protections.

Furthermore, if we do not revoke the geo-blocking regulation, it would result in a competitive disadvantage for UK traders. They would have to continue giving EU consumers preferential treatment, while EU traders would not need to do the same for UK customers. To avoid this, which is in the EU’s favour, we propose revoking the geo-blocking regulation in the UK.

The effect of this statutory instrument is simple. The retained EU law version of the geo-blocking regulation and the Geo-Blocking (Enforcement) Regulations 2018 will be revoked in the event of a no-deal exit from the EU. The substantive rules contained in the geo-blocking regulation will no longer have effect in the UK after that regulation is revoked. It is important to note, however, that this legislation will continue to operate in the EU. As such, UK businesses operating in EU markets will still have to comply with the EU regulation when dealing with EU consumers.

The changes made to schedule 13 to the Enterprise Act 2002 by the Geo-Blocking (Enforcement) Regulations 2018 were undone by a separate statutory instrument, the Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2019. Those regulations were debated and approved by the House on 30 January and were made on 6 February 2019.

The Geo-Blocking (Enforcement) Regulations 2018 enable the domestic enforcement of the geo-blocking regulation. They also provide for UK customers to bring claims directly against traders that breach the geo-blocking regulation. As the intention is to revoke the geo-blocking regulation in the UK and UK customers will not be able to rely on it thereafter, such provisions would serve no purpose.

A failure to revoke the geo-blocking regulation and the Geo-Blocking (Enforcement) Regulations 2018 would not preserve UK customers’ consumer rights. Those rights will in effect be lost if the UK leaves the EU without a deal. The only effect would be to continue to impose obligations on UK traders while providing no benefit to UK customers.

The subject matter of this statutory instrument is partially devolved to Scotland, Wales and Northern Ireland. The statutory instrument has been consented to by the Welsh and Scottish Administrations, and the Northern Ireland civil service was notified in line with the protocol agreement in place during the absence of the Northern Ireland Executive. I would like to take this opportunity warmly to thank the devolved Administrations and the Northern Ireland civil service for their ongoing co-operation.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

I rise as a former Chairman of the Subordinate Legislation Committee in the Scottish Parliament. The Minister has mentioned the co-operation at civil service level. May I have the safety of an assurance that there is similar co-operation at political level between those who handle statutory instruments in Westminster and those who do a similar thing in Holyrood?

[Kelly Tolhurst]

I would like to outline the fact that this was given political consent: the Minister in Scotland wrote to us to give his consent for the statutory instrument.

In conclusion, the statutory instrument simply recognises the practical effect of a no-deal exit from the EU. The Government are seeking to ensure that UK traders are not unfairly subject to rules that do not benefit UK customers.

--- Later in debate ---

[Kelly Tolhurst]

I thank all hon. Members who have contributed to the debate. Just to recap, the geo-blocking regulation is an EU regulation that came into effect on 3 December 2018. It is important to note that, up to the end of February, no claims had come forward to the Competition and Markets Authority. It does not apply to transactions that take place entirely within one EU member state.

The geo-blocking regulation prohibits certain forms of discrimination in the single market, specifically: blocking access to, or forced redirection away from, a website on the basis of an internet user’s location in the EU; discriminatory terms of access, which include but are not limited to price offered, on the basis of a customer’s location in the EU when selling goods delivered across a border but still within the EU, wholly online services, excluding copyright materials such as e-books, streamed movies, music and video games, or services delivered in a specific location, such as hotels and theme parks; discrimination in payment terms on the basis of a customer’s location.

The geo-blocking regulation could not function properly on a unilateral basis in a no-deal scenario. Effective enforcement outside the UK would be very difficult, because the UK would no longer operate within the EU’s consumer protection co-operation network or enforcement agencies. EU regulators would no longer be obliged to bring actions against businesses through EU mechanisms for cross-border co-operation. UK civil and commercial judgments, which were alluded to in the debate, would no longer be automatically enforced in the EU member state’s court, and the UK Government cannot unilaterally enforce the geo-blocking regulations throughout the EU without help from regulators in other member states.

Even if the geo-blocking regulations were not revoked, a no-deal exit from the EU would lead to a loss of protection for UK customers while imposing the same level of obligation for UK traders. The provisions of the geo-blocking regulation do not apply to transactions that occur solely within one country, so there is no benefit to retaining the version of the regulation that applies to the UK.

Let me outline the concerns relating to not revoking the EU regulation. EU consumers would receive preferential treatment in respect of UK traders, while UK consumers would be unlikely to receive any reciprocal benefits from EU traders. That is why we are proposing the revocation of the regulation. Revoking will preserve UK rights. It will not strip consumer rights, which will be lost in the event of a no-deal Brexit, but the regulation would continue to impose obligations on UK traders, with no benefits for UK consumers.

Let me answer some of the shadow Minister’s questions. He is concerned about the effect of this statutory instrument in a no-deal situation. I say to him: please support the Prime Minister’s withdrawal agreement. We have been extremely clear that we would like to uphold and maintain the highest standards of consumer protection in the UK. If we agree to the Prime Minister’s withdrawal agreement, we will be able to satisfy our ambition as a Government to maintain high consumer protections and to be able to enter into agreements and negotiations with the European Union so that we can maintain cross-border co-operation. That is what I would very much like to do. We should not only engage in the mutual exchange of information and evidence but work on a framework so that we can work collectively with the European Union on the wider detriment to consumers.

The shadow Minister asked about the impact assessment. He has rightly expressed concerns about impact assessments throughout the no-deal SI process. I have on many occasions tried to explain to him the reasoning behind what the Government have been doing in relation to some of these SIs. On this particular SI, we assessed the impact of the instrument to be de minimis because the costs are below £5 million. As the shadow Minister will know, that means that, in line with the better regulation framework, we did not need to carry out a full impact assessment. The assessment was that the maximum impact could be £1.2 million, based on around 75,000 businesses having to familiarise themselves with the new rules.

The shadow Minister also asked about consultation. On bringing forward this regulation, he wanted to know who we had spoken to and who we had engaged with. As he alluded to, we have consulted and spoken to business representative organisations, including the CBI, the Federation of Small Businesses, the British Retail Consortium, and the Association for UK Interactive Entertainment. The feedback was that they had no strong views on these regulations. However, we did publish a technical notice on 12 October 2018, which clearly laid out our plans for geo-blocking in the event of a no deal.

Let me re-emphasise a point. We have heard a lot today about a potential loss of rights for consumers. I have always been clear in any Committee in which I have spoken on bringing forward no-deal legislation that, whatever the outcome, we are both prepared for and committed to delivering on the high standard of consumer protections that we already have in the UK. We also have a track record of consumer protection in this country and of going above and beyond; in fact, many of the consumer protections in this country go further than those of the European Union.

[Drew Hendry]

The Minister says that this Government go further than many others. Can she therefore address the conundrum that I raised earlier: why are consumers in Scotland paying so much more for delivery, but being treated so badly compared with other consumers? Why is that still happening if what she is saying is a fact?

[Kelly Tolhurst]

I was going to come on to that, but I thank the hon. Gentleman for raising it. He and many of his colleagues—as well as many of my hon. Friends—have raised the issue of Scotland’s surcharges for parcel delivery. He will know that I have been working with the Consumer Protection Partnership to see how we can ensure fairness across the British Isles, but I must remind the House that we are talking about individual parcel organisations—as opposed to the Royal Mail—using these surcharges. However, it is true that many organisations are unable to use Royal Mail to distribute their products throughout the country. I remain committed to working with colleagues across the House to resolve this issue and to enable fairness for consumers right across the UK. He is right to raise it and I do take his point.

I just want to return to the point that I was making about consumers. If we want to make sure that we are able to enter into good agreements in terms of cross-border participation and consumer protection and to work with the European Union, my view is—and I will be clear about this—that we should vote for the withdrawal agreement. [Interruption.] Hon. Members reject a no-deal Brexit, but they are not prepared to support something that is on the table that would enable us immediately to have those conversations—

[David Linden]

rose—

[Kelly Tolhurst]

I will give way to the hon. Gentleman.

[David Linden]

When might we have the opportunity to vote for the withdrawal agreement again?

[Kelly Tolhurst]

Well, I hope that the hon. Gentleman is asking me that question because he wants to support me and my colleagues on the Government Benches. It is quite right that any responsible Government would prepare for a no deal, and that is exactly what we are doing. I must remind colleagues that this regulation came into force in December last year, and, where we have had to enforce it, there have not, as yet, been any complaints.

[Bill Esterson]

The hon. Lady demonstrates that she and I are in agreement about the benefits of geo-blocking and the current arrangements that we have as members of the EU. This regulation is about no-deal preparation, and we will lose those benefits if we leave with no deal. Perhaps she can tell the House what preparations she and her Department have made to ensure that, if we do manage to avoid no deal, there is a mutual recognition agreement that keeps these provisions in place.

[Kelly Tolhurst]

The hon. Gentleman’s question suggests that he is considering supporting the withdrawal agreement, because he is asking me about the preparations that we have made in the event of that happening. We have been quite clear that we have to agree the withdrawal agreement. As we have said in our technical notices, and as I have said in many SI Committees, we will be working with our neighbours to ensure that we are able to enter into mutual co-operation agreements if the withdrawal agreement is passed.

[Bill Wiggin (North Herefordshire) (Con)]

As the Minister was speaking, I was mulling over the point made by SNP Members about the greater charges for having things delivered to Scotland. I can understand their point; it does seem a little unfair. But has the Department had a chance to do the maths? Is it not clear that my constituents, who are contributing to the Barnett formula, are actually paying more than the people who are receiving goodies from Amazon, eBay or any of the other excellent retailers?

[Kelly Tolhurst]

I thank my hon. Friend for highlighting that particular point. I have made it clear that we need to get into a situation whereby we can enter into close co-operation on consumer enforcement. What happens on geo-blocking will depend on whether we leave the European Union with a deal, but we are here today to talk about a no-deal SI.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) has disappointed me by saying that he will not support the SI this afternoon. As I have outlined today, the very act of leaving the European Union without a deal would make the EU regulation redundant. It would be perverse for us to keep a regulation that would put UK traders at a disadvantage compared with EU traders.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

The Minister is talking about not disadvantaging UK consumers, which is a very laudable aim; that is what we all want. Does that mean that she will align with the European Union when it brings in a standard minimum expiration period of five years for gift cards?

[Kelly Tolhurst]

I remind the hon. Lady that we are already going above and beyond what the European Union is doing on many consumer protection matters. The UK is working on further protections. We will always be mindful of what is coming from the European Union, and we will always be minded to go further. I will ensure that UK consumers are protected as far as possible, and I will be looking into strengthening many measures in the near future.

[Patricia Gibson]

The Minister is being very generous with her time. Can I take from what she has just said that she is indeed going to bring in a five-year statutory expiration time for all gift cards? I have been urging her to do so and I have not quite had a yes. Has she given me a yes today?

[Kelly Tolhurst]

The hon. Lady will know that we are discussing an SI related to geo-blocking, not gift cards, but I am happy to talk to her about gift cards and to make her aware when we decide to move forward with any changes or improvements in that area. I assure her that I am absolutely committed to protecting consumers in this country, and this Government will be working hard to ensure that we do that whether or not we get a deal.

This statutory instrument simply recognises the practical effect of a no-deal exit from the EU, and it is important for ensuring that UK traders are not unfairly subjected to any rules. I am therefore disappointed with the hon. Member for Inverness, Nairn, Badenoch and Strathspey for saying that he will not support the draft regulations this afternoon. Failure to revoke the geo-blocking regulation would not preserve UK customers’ consumer rights, which would effectively be lost if the UK leaves the EU without a deal. The only effect of non-revocation would be to continue to impose obligations on UK traders while providing no benefits to UK customers. I therefore commend the draft regulations to the House.

Question put.

The House proceeded to a Division.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I ask the Serjeant at Arms to investigate the delay in the Aye Lobby.

Community and Sub-Post Offices

Kelly Tolhurst Excerpts

Wednesday 27th March 2019 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I congratulate the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) on securing today’s important debate on community and sub-post offices. I am sorry that I do not have much time, but I will try to respond to some of the issues that have been raised. I am aware of his close interest in this subject, as we exchanged correspondence on this very issue last October. For centuries, post offices have been the centre of social life in our communities, towns and villages across the UK. This is why, in our 2017 manifesto, we committed to safeguarding the post office network and supporting community and sub-post offices, recognising the key role that post offices play in their communities.

At this juncture, it is worth setting out the overall context within which the Post Office operates. Although the Post Office is publicly owned, it is a commercial business operating in competitive markets. The Government set the strategic direction for the Post Office—to maintain a national network accessible to all and to do so more sustainably for the taxpayer—and allow the company the commercial freedom to deliver that strategy as an independent business.

Between 2010 and 2018, we provided nearly £2 billion to maintain and invest in a national network of at least 11,500 post offices. That extensive network gives the Post Office a unique reach among service providers. The Post Office currently meets and exceeds all Government accessibility targets at a national level.

The Post Office’s financial performance has improved significantly. Consequently, Government funding required to sustain the network has drastically decreased and is set to decrease even further in future years.

[Dr Whitford]

Will the Minister give way?

[Kelly Tolhurst]

I will not give way—I have only six minutes left.

Government investment has also enabled the modernisation of over 7,500 branches, added more than 200,000 opening hours a week and established the Post Office as the largest network trading on Sunday.

I encourage hon. Members to look objectively at those facts. They clearly show that the network is at its most stable in decades. Maintaining a stable network of community-status branches is at the heart of the Post Office’s social purpose. They are effectively the last shop in the village.

Almost half the 6,000 rural post offices have community status, including some of the post offices in the constituency of the hon. Member for Paisley and Renfrewshire North. In those areas, post offices are regarded as part of the fabric of community life. For example, a report by Citizens Advice on the use of the rural post office network found that seven out of 10 consumers bought essential items at a post office and almost 3 million shoppers visited a post office on a weekly basis.

The Post Office recognises the unique challenge of running a community branch and supports the postmasters who run them differently from the rest of the network. Those postmasters receive fixed remuneration, as well as variable remuneration, to reflect their special circumstances.

In addition, the Post Office delivered almost £10 million of investment via the community fund between 2014 and 2018. That enabled community branches to invest in their associated retail businesses. The Post Office has now launched a smaller community branch development scheme that will benefit an anticipated 700 branches. Let me be clear: the Government and the Post Office will continue to support rural post offices.

The hon. Gentleman will be interested to hear that, as part of the post office network transformation programme, 10 of the 14 branches in his constituency have been modernised. Modernisation makes post office branches simpler to run for retailers and improves services for customers through new modern environments and longer opening hours. Modernisation has led to 200 additional opening hours a week in the hon. Gentleman’s constituency. Five branches are also open on Sundays, delivering greater convenience to consumers.

Looking more widely at the post office network in Scotland, there are around 1,400 post offices, 66% of which are delivering these important services to communities in rural locations. Scottish branches account for around 11% of branches that have been modernised, creating an additional 24,000 opening hours a week as a result of the network transformation programme. There are around 470 post office services in Scotland that have community status, and around £800,000 has been provided to those branches from the Post Office community fund.

When a branch closes unexpectedly, the Post Office works hard to maintain or restore rural services in Scotland. For example, post office services have been restored at Eyemouth, a rural branch in the Scottish borders, which reopened in February after temporary closing last October and is now providing 122 hours of service per week. Muir of Ord post office, which has been closed since December 2016, is set to reopen next month, and that branch will offer double the service hours previously provided.

Hon. Members have raised concerns about the rates of remuneration paid to postmasters, especially for banking services. Although the contractual relationship between Post Office Ltd and postmasters is an operational matter, I care deeply about the issue and I am determined to make sure that running a post office remains an attractive business proposition.

The Post Office has invested significantly in its branch network to enable its branches to operate more effectively in the retail environment. However, the Post Office recognises that there are some locations where that approach is not viable. In those locations, fixed remuneration remains. The Post Office is not complacent and periodically reviews the rate of return on all services for postmasters to reflect the time and effort involved. Post Office Ltd will also use, where possible, the renewals of commercial contracts as opportunities to negotiate improved rates that can be shared with postmasters.

I want to touch on the issue of Crown franchising, in particular the assumption that franchising means closing and downgrading services. Those criticisms are misplaced. Post office branches are not closing; they are being franchised to other sites. In fact, 98% of post offices across the UK are successfully operated by independent businesses and retail partners.

I assure the hon. Gentleman that all post offices across the network are of the utmost importance to this Government and to me as the Minister. We recognise their value and importance to the community, residents, businesses and tourists in both rural and urban parts of the UK. We will continue to honour our manifesto commitment so that the post office can thrive and remain at the heart of our rural and urban communities.

I thank the hon. Gentleman for raising the issue. [Interruption.] I cannot hear him, sadly, because I have a cold, but I am always happy to talk about post offices at any time and happily welcome further debates.

Amazon and SMEs

Kelly Tolhurst Excerpts

Wednesday 27th March 2019 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate the hon. Member for Cardiff West (Kevin Brennan) on securing this important debate and thank him for bringing this issue to Westminster Hall. That has enabled him to highlight the particular case of his constituent and it gives me the opportunity to respond. This subject is of personal interest to me. I am the Minister responsible for small business but, before coming to this place, I ran my own business and dealt with big organisations, so I am not unfamiliar with particular challenges that exist in the wider market and not just in regard to the sectors and platforms to which he referred.

In 2018, 5.7 million UK businesses were SMEs. That represents 99.9% of UK business, 60% of total UK private sector employment and 52% of turnover. People should be in no doubt that this Government, this Department and I understand that SMEs are the backbone of our economy. That is why it is of particular concern to me to hear about the experiences of the hon. Gentleman’s constituent as the SME seller Bikers Gear UK on Amazon. I can only imagine what a difficult experience that must have been for him and his family.

No company should be able to abuse its market position to the detriment of other companies, particularly SMEs. That is why, in our industrial strategy, we committed to a review of competition law, which is ongoing in the Department. As part of the review, we are actively assessing digital markets, including whether those markets pose unique challenges to competition law, such as novel forms of abuse of dominance. Part of the review will also involve assessing recommendations set out to my right hon. Friend the Secretary of State by Andrew Tyrie. His proposals outline reform of the competition and consumer protection regimes led by the Competition and Markets Authority.

The Government also welcome the recent publication from the digital competition expert panel—it was published alongside the spring statement. That independent report sets out how to unlock competition in digital markets. The panel was led by the renowned economist Jason Furman, who was chief economic adviser to President Obama. The proposals are at the frontier of global thinking on how to deal with the challenges of large digital platforms. One key recommendation is to introduce a new digital markets unit to ensure that digital markets work to deliver competitive outcomes.

In particular, recommendation 5 of the report states:

“To account for future technological change and market dynamics, the digital markets unit should be able to impose measures where a company holds a strategic market status—with enduring market power over a strategic bottleneck market.”

That proposal focuses on firms with “strategic market status”. It would be backed by powers to ensure compliance. We are assessing the proposal but, if taken forward, it would mean that large platforms such as Amazon would need to comply with a statutory code of conduct or some other form of regulatory framework. The code of conduct will cover how large platforms interact with smaller firms, ensuring that that is fair. The Government will consider the reports’ proposals and report back by the summer.

Importantly, the hon. Member for Cardiff West highlights the fact that businesses, and in particular large businesses that are leaders in their industries, must act responsibly. This Government support responsible business as a force for good in society and we are prioritising in our modern industrial strategy responsible long-term business growth. Our new company reporting requirements make big businesses more open, responsive and accountable to society. That includes the issues of executive pay, and relationships with employees, suppliers and customers. Our inclusive cconomy partnership brings together businesses and civil society to tackle social challenges. Our civil society strategy announced that the Government would refresh their policy approach to responsible business during 2019, and we are partnering with the Department for Digital, Culture, Media and Sport as we work towards that objective.

We recognise that we must be active not just in holding large corporations to account, but in supporting small businesses in our economy, including SME retailers like Bikers Gear UK. This Government are working hard to support retailers of all sizes as they respond to market pressures from a range of factors. Retailers will need to adapt to take on the challenges and opportunities presented by the changes, and the Government want to support the sector as it responds to change.

That is why in March 2018 we established the industry-led Retail Sector Council to bring Government and industry together to boost the sector’s productivity and economic health. All retail activity in the UK, including SME retailers, is represented. I co-chair the council, and it is hugely valuable in understanding the concerns of retailers in the changing landscape. The council has agreed its priority work areas for the next two years: they focus on costs to businesses, skills and lifelong learning, employment protections, the circular economy, consumer protections, and retail and the industrial strategy. A senior industry figure will lead each of the work groups and bring proposals for action for both industry and Government back to the council for consideration.

I want to be clear that this Government want all types of retail to thrive now and in the future and that I am committed to playing my part. I and my officials in the Department regularly engage with Amazon, and I am always vocal in encouraging it to leverage its resources to the benefit of SMEs across the country. Douglas Gurr, Amazon UK country manager, serves on the Retail Sector Council which, as I said, I co-chair. I met Doug and a number of Amazon Marketplace SME retailers last October to discuss and understand the issues they faced. However, this debate has highlighted to me the need to ensure that I reiterate to Amazon that it needs to treat all suppliers with absolute fairness, and I will be sure to make that point to Amazon directly after the debate today.

The hon. Gentleman’s debate has highlighted important issues. I have said before and I will say again that SMEs are the backbone of our economy. This Government are committed to supporting SMEs and to reviewing our frameworks in the context of the ever changing marketplaces and organisations that are growing. No company should act inappropriately in a marketplace or abuse its position.

I trust that the details I have outlined today of the actions we are taking in reviewing competition law and leading the way on responsible business demonstrate to the hon. Member for Cardiff West that the Government and I take these issues very seriously. I again commend him for bringing the debate to Westminster Hall and for giving a very articulate explanation of the particular challenges that his constituent, Mr Brana, has had to endure. I would be more than happy at any stage in the future, if it were necessary, to get further information from his constituent, if he would like that, because this is an area of interest. I would like to finish by saying that I wish the hon. Gentleman’s constituent all the best in his new venture. I wish him every success and I thank the hon. Gentleman for the debate today.

Question put and agreed to.

Young Entrepreneurs: Independent Review

Kelly Tolhurst Excerpts

Tuesday 26th March 2019 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

The UK consistently ranks as one of the most entrepreneurial nations in the world, but there is more we can do to break down the barriers that stop some of our best and brightest young people from all backgrounds starting their own business.

Our modern industrial strategy sets out our plan to make the UK the best place to start and grow a business. We want to ensure we are driving forward a thriving entrepreneurial culture across all corners of society. Harnessing untapped talent will be key to achieving this.

To help us realise this ambition, my Department has this month launched an independent review into how best to tackle the barriers facing aspiring young entrepreneurs, aged 18-30, in England. The review will look at issues including access to finance, access to advice, support and business networks so that we can close the gap between entrepreneurial ambition and reality.

It will also look at the support on offer to young entrepreneurs from disadvantaged and low-income backgrounds and adds to efforts by the Government to improve diversity in the business community, following the Rose review into female entrepreneurship published earlier this month.

The review will be led by Nick Stace, chief executive of the Prince’s Trust. To support the review, Government and the Prince’s Trust are bringing together a steering group comprised of entrepreneurs with experience and insight. Details of this group will be set out in the coming weeks.

The review will make recommendations to Ministers later this year about what can be done to ensure young entrepreneurs are properly supported as they start building the businesses of the future.

[HCWS1453]

Draft International Accounting Standards and European Public Limited-Liability Company (amendment etc.) (EU Exit) Regulations 2019

Kelly Tolhurst Excerpts

Wednesday 20th March 2019 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019.

It is a pleasure to serve under your chairmanship, Mr Pritchard. The regulations aim to address failures of retained EU law to operate effectively in the field of accounts and reports of UK corporate bodies. They also address certain other deficiencies arising from the UK’s exit from the EU.

The international financial reporting standards are a set of international accountancy standards written for use by multinational companies when producing their annual accounts. The International Accounting Standards Board publishes those standards after consultation with its international stakeholders. The standards are required or permitted for use in more than 125 countries, including in all European economic area countries and in 15 of the G20.

Standardising financial reporting across the globe helps lower costs for businesses and enhances investor confidence in company reporting. For companies, using the IFRS reduces the burden of complying with multiple reporting requirements, if they are listed or have operations in different countries. Investors also find it easier to compare the accounts of companies in different jurisdictions when companies use the same set of standards to prepare their annual accounts.

EU regulation 1606/2002, known as the IAS regulation, requires that all publicly traded companies must use IFRS, as endorsed and adopted by the EU, when preparing consolidated accounts for their groups. In the UK, the Companies Act 2006 also permits other UK companies to produce their accounts in accordance with IFRS. Overall, approximately 15,000 companies in the UK use the standards to prepare their annual accounts.

The IAS regulation also sets out the provision for an endorsement process to adopt international accountancy standards for use in the EU. Once the UK leaves the European Union, the EU framework for adopting the IFRS will no longer apply. The regulations in front of the Committee aim to provide continuity and clarity to business by bringing the European framework for adopting IFRS into UK law. That will ensure that UK-registered companies will not have to change their processes for preparing annual accounts.

The power to endorse and adopt IFRS for use in the UK will be transferred to the Secretary of State. The responsibilities transferred to the Secretary of State will be bound by the process and the required scrutiny set out in the regulations. First, any new or amended international financial reporting standard must be considered against certain assessment criteria before it can be endorsed for use in the UK. Those criteria are consistent with those used by the European regulation and they include that the standards provide a “true and fair” view of an undertaking’s financial position; and their adoption is conducive to

“the long-term public good in the United Kingdom”.

Secondly, the regulations set out that for all proposed endorsement decisions on new or amended IFRS the Secretary of State must consult stakeholders with an interest in the quality and availability of accounts, and the final decisions must be published. Finally, the Secretary of State will also be required to lay a report before Parliament each year, detailing the carrying out of his or her responsibilities to endorse and adopt the IFRS. That will ensure that Parliament has an opportunity to hold the Secretary of State to account for adoption decisions.

The regulations provide for sub-delegation of endorsement and adoption powers to a designated UK body. A subsequent affirmative SI will transfer the powers to a new UK IFRS endorsement board. We expect that endorsement board to be hosted by a subsidiary of the Financial Reporting Council. As such, it will benefit from the FRC’s existing operational processes, such as the human resource function and premises. The FRC’s role will be limited to monitoring the governance and due process of the endorsement board. It will have no role in the process of adopting those standards.

As hon. Members will be aware, in December the independent review of the FRC published a comprehensive and detailed report that made 83 recommendations. The Government welcome and share the review’s vision for a new regulator, with a new mandate, new leadership and stronger statutory powers, and we will take swift action to deliver that. The role of the FRC in relation to the endorsement board will be transferred to the new regulator once it is operational.

The Government have worked closely with businesses and regulatory bodies while developing the regulations. Informal consultations were carried out with companies, their advisers and investors. In addition, a dedicated stakeholder group helped to inform the decisions about these regulations. Stakeholders were strongly in favour both of establishing a UK framework for the continued use of IFRS, and of consultation before a standard is adopted for use in the UK.

The draft regulations also make amendments relating to the societas Europaea or SE, a specific European type of public limited liability company that cannot be registered in the UK after EU exit. Regulations have been made to ensure that any entities registered in the UK on exit day will have a clear legal status by automatically converting those entities to a new corporate form, a UK societas.

The amendments relating to those entities do three things. First, they preserve a particular employee involvement provision, ensuring that employment rights have been maintained wherever practical. Secondly, they apply the Overseas Companies Regulations 2009 to SEs registered in other member states. This will ensure that UK branches of entities registered in other member states are treated in the same way as UK branches of any other overseas company. Finally, they make a number of minor consequential amendments to other legislation, such as replacing references to “SE” with “UK societas” where necessary to ensure that the UK has a functioning statute book on and after exit day.

The Government carried out a de minimis impact assessment of the regulation, as the overall cost to the businesses was established as being small. The annual net direct cost to business of the IFRS-related changes was estimated to be £2.4 million a year. The estimated impact for the SE-related changes was £10,400 a year. Both figures are below the £5 million threshold necessary for a full impact assessment.

In conclusion, these regulations provide continuity and clarity to business by setting out a framework for continued use of IFRS in the UK. I therefore commend them to the Committee.

--- Later in debate ---

[Kelly Tolhurst]

I am grateful to the hon. Gentleman for his contribution. International financial reporting standards are a world-leading set of accounting standards, used by a large number of companies in the UK, the EU and other countries around the world. Their use helps inform decision making, improves transparency and promotes confidence in the business environment. As we leave the EU, it is vital we maintain the integrity of the UK system of accounting and reporting.

I remind the hon. Gentleman that we are talking about a statutory instrument that would transfer the current rules that we already work to within the European Union and how the EU applies those rules across member states. In the event of our exit from the EU, we are bringing together a UK framework. It is important to bear that in mind. This is about how we develop a successful framework that enables us to maintain our position as a great place to do business, and reassures investors and companies of that.

We are the biggest capital market outside the US and, therefore, it is right for us to have the regulations; I am sorry to hear that the hon. Gentleman has concerns about them. Having worked through them as a Minister, I think they are sensible and would enable the UK to carry on securely.

I will answer some of the points raised by the hon. Gentleman. The stakeholder group was established in April 2018 to look at the regulations, and it held six meetings. That group included investors, accountants, advisers and business representatives who took part in the meetings as independent individuals. They were asked to participate because of their knowledge, expertise and potential to help in this area, to work with us to look at the technical information and ensure that any regulations brought forward would be in good order.

As the hon. Gentleman mentioned, there was no public consultation on the regulations, but we held informal stakeholder meetings of those affected and interested parties over a long period, from 2018.

With regard to the hon. Gentleman’s comments on the FRC, we welcomed the review undertaken by Sir John Kingman and we will bring forward primary legislation on that point. I must point out that the endorsement board will be a subsidiary of the FRC. It is not currently constituted. The regulations will enable the Secretary of State to have those powers and he will be able to sub-delegate them to an endorsement board.

We are working with FRC officials, and the Secretary of State has full oversight of the development of the EB and its design. He will eventually appoint a chair, shape governance and have full political oversight. The EB will be run separately, as a subsidiary; it will have its own running costs and will be funded through a levy, which organisations that have to comply with FRC rules currently pay to the FRC.

One good thing about the endorsement board and its being structured within the FRC is the future thought leadership that the board will give. It will really be able to influence, on the international stage, any future developments in IFRS standards. That area will be key for the endorsement board going forward.

[Bill Esterson]

Earlier, I put to the Minister her Department’s statement to the House of Lords Committee that it was working with the FRC to have the new endorsement board ready in time for EU exit. I take it, from what she just said, that that will not happen. Will she confirm that? Will she also confirm the arrangements for the work that the new endorsement board will undertake once it is set up?

[Kelly Tolhurst]

I am sorry; I thought I had already outlined that to the hon. Gentleman. The Secretary of State has those powers, which will he will sub-delegate to the endorsement board. We are working to develop that board, and our intention is that it will be in place by the end of 2019. I thought I had made that clear.

The Secretary of State will have the power to sub-delegate, but he will also have the power to revoke powers sub-delegated to the endorsement board in the future. To clarify, and to give Members comfort that political oversight will continue, the hon. Gentleman was quite right that the Secretary of State will have to report to Parliament annually, and the endorsement board that carries out these tasks in the future will also report annually to the Secretary of State. Those reports will be placed in the Commons Library. Even when there is an endorsement board, the Secretary of State will still lay an annual report in Parliament, which will give an opportunity for parliamentary scrutiny and for the Secretary of State to be scrutinised and held to account for particular activities of the endorsement board when that sub-delegation has occurred.

On the hon. Gentleman’s comments on whether we are lobbying the US to follow IFRS standards more closely, that is not something I am directly involved with. The draft regulations are very much about making sure that the UK is able to maintain its place in the global market. As an independent nation after EU exit, we will have the opportunity to make sure that we have a wider influence in the world on the adoption and formulation of standards.

As I have outlined, the draft regulations will provide continuity and clarity to business by ensuring that UK companies can continue to use IFRS, as adopted in the EU, when preparing their annual accounts. They also set out a future adoption framework for the UK that is robust and transparent, and that will act in the national interest. This framework has been developed in close consultation with stakeholders, as I have outlined, and represents the best way forward for the UK’s continued use of these international standards. I therefore commend the draft regulations to the Committee.

Question put and agreed to.