Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019

Lord Duncan of Springbank Excerpts

Wednesday 23rd October 2019 Lords Chamber

Moved by

[Lord Duncan of Springbank]

That the draft Regulations laid before the House on 11 July be approved.

Relevant document: 58th Report, Session 2017–19, from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, I stress at the outset that a deal with the EU would render the provisions of this instrument unnecessary until the end of any agreed implementation period. The regulations are required only in the event of the UK leaving the EU without a deal, a reality which the UK cannot guarantee unilaterally but for which it must necessarily prepare.

A number of noble Lords have raised concerns with me over whether these regulations will remove the rights of EU nationals to establish a business or provide services in the UK. I am grateful to the noble Lord, Lord Stevenson, for meeting me earlier today to discuss this issue and those that he will raise in moving his amendment. I take this opportunity to put on the record that these regulations do not impose any new restrictions on EU nationals or EU-based businesses, or the nationals or businesses of countries with associated agreements, at the point at which we exit the EU. This is because the UK’s underlying legislative framework is compliant with these rights and, importantly, because EU retained law under the withdrawal Act will also apply.

The regulations do not impact on the immigration regime applying to the EEA or to Turkish and Swiss nationals in the UK. Indeed, they explicitly carve out any potential impact on the immigration rights of Swiss nationals and Turkish nationals to ensure that any changes come into force separately via primary legislation, which will be scrutinised in the normal way.

The regulations do not impact on the rights of EU citizens resident in the UK at the point of exit; those are protected separately. All EU citizens resident in the UK by exit day will still be able to work, study and access benefits and services, whichever scenario plays out.

The instrument addresses the reality, once we leave the EU, of reciprocity and necessary legal certainty affecting EU states and those states with which the EU has association arrangements. It covers the definition of “services”, rights of establishment and the provision of services, free movement of services, and the prohibition of non-discrimination, as set out in the relevant articles of the Treaty on the Functioning of the European Union and similar provisions contained in EU association agreements.

The Treaty on the Functioning of the European Union provides rights for nationals of member states and is founded on the principle of reciprocal rights, including in the areas of services and establishment. If the rights were not disapplied, this would create certain legal issues for the UK. Going forward, the UK could be in breach of the WTO’s General Agreement on the Trade in Services—the most favoured nation principle.

Unilateral provision of the measures could be interpreted as granting EU nationals additional rights to challenge the UK’s laws and decisions in the future, and could restrict the Government’s ability to regulate in the future. It would also create an uneven playing field in which EU nationals benefited and UK nationals in the EU did not.

The Government have sought the widest scrutiny of this instrument. The necessary consent of the devolved Administrations in Scotland and Wales was sought and secured, and the Northern Ireland Civil Service has been notified.

The Joint Committee on Statutory Instruments considered these regulations but chose not to report them to either House. The Secondary Legislation Scrutiny Committee chose to draw the instrument to the attention of the House, noting, in particular, compliance with WTO law and matters relating to satellite decoder cards.

To reiterate, the regulations impose no additional restrictions on EU nationals or EU-based businesses, or the nationals and businesses of countries with associated agreements, when we exit the EU, as the UK’s existing legislation is compliant with these rights. All relevant Whitehall departments have examined UK legislation to identify where direct impacts might arise from the regulations and underlying UK legislation is not already in line with the treaty rights. I am satisfied that UK legislation is compliant with the rights.

The regulations will impact on the use in the UK of satellite decoder devices intended for EU audiences—that is, dishonestly receiving programmes without payment. In essence, it brings the law into alignment with the rules for non-EU satellite decoder devices.

All EU citizens resident in the UK by exit day will still be able to work, study and access benefits and services, whatever the scenario. Further, the regulations will have no impact on the immigration regime applied to EEA, Turkish and Swiss nationals in the UK, save to ensure that changes to the immigration regime applied to Swiss nationals and Turkish nationals will come into force separately via primary legislation.

These regulations are necessary. They ensure the UK’s compliance with international law and protect the UK’s right to regulate in the future. On that basis, I commend them to the House.

Amendment to the Motion

Moved by

--- Later in debate ---

[Baroness Bull (CB)]

My Lords, the House has heard from many noble and noble and learned Lords. I rise briefly to add my support to this amendment and to put on record that the concerns set out by the noble Lord, Lord Stevenson, and which have been elucidated by so many distinguished and legal brains, are shared more broadly across the House. Those of us without legal backgrounds rely on the expertise of the House’s Secondary Legislation Scrutiny Committee, which has highlighted that removing treaty rights means that EU-plus citizens will no longer be able to use these rights to challenge new restrictions. It describes this as a, “significant reduction of rights”—yet, as we have heard, there has been no impact assessment, so we really do not know the scope and the extent of the impact of this reduction in rights.

I have two very simple questions, and they echo questions which have already been asked. First, what will be the impact of this on reciprocity and on the livelihoods of UK citizens who have established businesses in or provide services across other EU countries? Secondly, can the Minister clarify whether this does in effect apply retrospectively? As the noble Lords, Lord Oates and Lord Greaves, pointed out, paragraph 2.12 of the Explanatory Memorandum uses phrases such as, “It is anticipated” and “it is not expected”. To this non-legal brain, that does not seem very decisive.

Similarly, in paragraph 2.17 we read:

“This Instrument ensures that Swiss nationals operating a business or providing services in the UK immediately before exit day will not lose residence rights by virtue of the disapplication of the directly effective rights”.


That clarifies residence rights, but I would be grateful if the Minister could confirm that this extends to the right to carry on owning or managing businesses or providing services, because it is not clear.

Like the noble Lord, Lord Oates, I heard the Minister twice repeat that these groups would be able to live, work, study and access services and benefits, but he specifically did not say that they would be able to continue to be self-employed, own and manage companies or provide services. Can he clarify whether this will be the case?

None of this is particularly clear, and it is not surprising that I, like other noble Lords around the House, have been written to by members of the public asking, for example, whether this means that Turkish nationals will no longer be able to own and run a Turkish restaurant.

If there really is no problem here, perhaps the Minister might agree that the Government could be a little clearer about this and clarify the intention behind the SI and its impact on EU nationals who have made their home here. The memorandum says:

“Individuals and businesses will be able to check published no deal planning guidance on gov.uk”—


which is not particularly reassuring to the people around the UK who are concerned.

The Prime Minster has made much in recent speeches and statements about the contribution of EU nationals to the UK and its prosperity, success, culture and economy. This SI seems rather at odds with this newly warm and welcoming tone.

[Lord Duncan of Springbank]

My Lords, this has been a complicated debate, but I am drawn to the remarks by the noble Lord, Lord Campbell-Savours, as a way of helping us step into the debate. Tam Dalyell was absolutely right: it is the person who will help us understand the reality who we need to hear today. The individual spoken of by the noble Lord, Lord Campbell-Savours, has lived in the UK for 24 years, has two children and is a photographer and athletics coach. He is an important citizen in this country. There will be no diminution of his rights—not just to study or live, but to be self-employed, to offer services or, indeed, to operate as he currently operates—as a consequence of this statutory instrument. The noble Baroness, Lady Bull, at the end mentioned Turkish people who may feel that they will have their rights to operate a Turkish restaurant in some way curtailed; that is also not true.

The noble Lord, Lord Purvis of Tweed, spoke of 2.3 million EU citizens in this country. A number of noble Lords have asked why, when so many people seem to be affected by this, the impact assessment has not been provided and has therefore not given due consideration to something that will impact 2.3 million people. The important thing to remember here is that the 2.3 million people derive their rights from that element of retained EU law that we have brought across in the previous withdrawal agreement. Each of the elements that enshrine their right to the employment they enjoy is contained not just in our domestic law but in our retained EU law.

The important thing to stress here is that there will be no impact on individuals such as the gentleman raised by the noble Lord, Lord Campbell-Savours. I am fully aware that my department has not been successful in making this clear. It is perfectly obvious that a number of noble Lords have received a number of letters stating these concerns. The very fact that my department has allowed that state to exist is a failing of my department. We need to be better at making sure that not just the legislation but the Explanatory Memorandum is adequate to ensure that people reading it—not just eminent lawyers but others—are able to understand. This is too important a moment to get this wrong.

It is a difficult piece of legislation in one respect only. There are a number of conditional elements contained within it, but they refer to future situations in which something might happen. I was going to say, “If we leave the EU”, but let me put that the other way around and get my tenses right. When we leave the EU, if there is no deal the reciprocity we enjoy today would simply fall away and not be there. Our courts would still be able to draw on the body of law that exists inside the EU, but the actual reciprocity element would not be there. Going forward, because we have retained the EU law into our own corpus of law, the reality would be that certain EU nationals might be able to invoke their existing—previous—rights as a means of confronting the Government as they sought to move future policy forward. Future policy, however, would not be determined on a whim, nor would it use a Henry VIII power. It would be determined by this House and the other place in the traditional way. That is how future policy in this area will happen.

This is the important thing to stress in talking about the impact this will have on WTO rules or the question of reciprocity. As regards WTO rules, the suggestion is that individuals in that situation, without this disapplication within this body of retained EU law, would still be able to draw on those rights in the retained EU law to challenge the UK Government. Some noble Lords may think that that is not a bad thing, but that alone is the reason for the disapplication.

--- Later in debate ---

[Lord Pannick]

I am very grateful to the Minister. I ask him a question out of genuine puzzlement, in the sense of my noble and learned friend Lord Brown of Eaton-under-Heywood. His argument to the House, as I understand it, is that there is no need to worry because the individuals concerned will continue to enjoy the directly effective rights which are being brought across into our domestic law by the 2018 Act. My puzzlement is because Regulations 2(1) and 3(1) both say that any,

“rights, powers, liabilities, obligations, restrictions, remedies and procedures”,

which continue by virtue of Section 4(1) of the 2018 Act,

“cease to be recognised and available in domestic law”.

I am puzzled because I am concerned that the read-across is being disapplied by this very regulation.

[Lord Duncan of Springbank]

It is quite clear that we have not succeeded in convincing the noble Lord that the reality is that the retained EU law, which this House fought so carefully over and which was enshrined in the withdrawal agreement, sets out the rights of individual EU nationals in this country with regard to their ability to be employed or self-employed, to offer services and so on. That is contained in retained EU law and will become operational and functional at that point in the future.

Here we are talking about making adjustments to that retained EU law for certain rights to invoke the previous entity of the EU as a means of engaging directly with the Government as a challenge. It is that part we are talking about today.

[Lord Greaves]

My Lords—

[Lord Purvis of Tweed]

Would the Minister give way?

[Lord Duncan of Springbank]

No, I will make some progress if I may. This is complicated enough, and I fear I have to answer noble Lords’ questions before they ask new ones.

The noble Lord, Lord Oates, was very clear in some of the points he raised. That is why I am trying to be as unambiguous as I possibly can. He sought explicitness, and I am trying to give that. The self-employed will be unaffected if they are EU nationals. Those providing services will be unaffected, and their continued ability to provide those services will go undiminished. Those operating businesses will be able to do so going forward undiminished. The laws that underpin them remain as they are, both in our domestic law and in the retained EU law. There are no new restrictions whatever placed upon these individuals in this. That is why I am trying to point out that the limited impact is just that—a limited impact.

This will have no impact on the settled status of anybody coming in; for those noble Lords who are concerned about migration, this suite of statutory instruments explicitly carves out any issues of migration to ensure that they are considered carefully during the passage of the immigration Bill, which is primary legislation and will afford this House and the other place the full rights and abilities to inquire into that. So again, there is no attempt to pull the wool over anyone’s eyes—quite the reverse. In seeking to move this into primary legislation where it touches upon immigration, we are ensuring that this House has the full panoply of opportunity to explore this, as it will need to do going forward. That is why I refute the point of the noble Lord, Lord Oates, that this is a clear breach. I do not believe that it is.

The noble Lord, Lord Pannick, is quite right when he says that this places upon us no new obligations. There are no new obligations which rest upon EU citizens; they can enjoy the rights that they have been able to do so to date. The question is whether the disapplication materially impacts on, for example, the ability of the gentleman mentioned by the noble Lord, Lord Campbell-Savours, to do his business. It does not. The noble Baroness, Lady Bull, raised the question of the restaurateur who operates a Turkish restaurant and whether it places material changes upon them. No, it does not. It is important to stress that we are not seeking in any way to erode the rights currently enjoyed by these EU citizens. However, I should say that this would be far better addressed through an implementation agreement, and ultimately by that future relationship, whereby we can put to rest any suggestion that this Government are seeking to undermine the rights of EU individuals to undertake their legitimate exercises.

The question of what happens for UK citizens who work abroad is more challenging. Again, we cannot insist upon such reciprocity, since it rests with each individual member state, and we cannot offer guarantees on their behalf.

[Baroness McIntosh of Pickering]

I did ask my noble friend to put our minds at rest and specify what talks are happening at this time with other member states.

[Lord Duncan of Springbank]

I wish I could give my noble friend the reassurance she seeks, but these elements remain part of the future relationship negotiations and there has been unwillingness on the part of individual member states to discuss these matters. Much as I would like to be able to give her confidence on that matter, I cannot. That will be part of the future relationship negotiations, and I hope we can move on to that as swiftly as we can.

[Lord Bassam of Brighton (Lab)]

I have listened very carefully to everything the Minister has said. He seems to be saying that nothing changes. That being the case, why are these regulations required or necessary at all, if they change nothing?

[Lord Duncan of Springbank]

I did not say that. What I said was that these regulations have no impact upon the ability of EU nationals resident in the UK to operate, full stop. Going forward, they seek to disapply—bugger!

[Noble Lords]

Oh!

[Lord Duncan of Springbank]

Sorry about that; that was a big fly—bigger than normal.

[Lord Stevenson of Balmacara]

It was a big fly, not a big lie.

[Lord Duncan of Springbank]

Goodness me, such words. I like a pun at this time.

We seem to be caught in a situation in which a number of noble Lords believe that this is of significance to the extent that it impacts upon 2.3 million people. It does not. However, if individuals affected by future changes in policy wish to confront the Government, they may be able to use elements of the existing corpus to do so, unless we disapply them. It may seem modest—I am sure the courts will be able to address this and many lawyers will make a great deal of money—but the point I am trying to make is that the change should, in the future, not happen. But it might happen. It is a relatively small adjustment we are talking about here, and it has had no impact assessment because the impact is de minimis.

[The Earl of Clancarty]

I understand that some countries are drawing up legislation to protect the rights of British citizens in those countries. That includes employment rights. Will the Minister comment on that?

[Lord Duncan of Springbank]

Those countries are, at present, unwilling to open discussions with this country and will not do so until the withdrawal agreement has been accepted and we move on to the future relationship negotiations. I hope that not just individual countries will seek to do this but the EU itself, collectively, to protect the rights of British citizens resident abroad—just as we will do exactly the same. I hope we would do so in the spirit of our withdrawal agreement’s evolution into that future relationship that delivers the very thing that each individual here would wish. However, at present, I cannot offer any guarantees in that regard.

[Baroness Bull]

To follow up the question of the noble Baroness, Lady McIntosh, we are looking today not at the scenario of a future agreement but at no-deal legislation. Surely reciprocity cannot be dependent, in this legislation, on the future relationship documentation because this is no-deal legislation. I echo the question: where is the conversation about reciprocity, should the unfortunate thing happen and we leave with no deal?

[Lord Duncan of Springbank]

The noble Baroness will be aware that the Government’s policy is to secure that deal. That is why we are here. The reason this has had to come forward in the manner in which it has is that, although this House and the other place have been clear that they do not wish the UK to leave with no deal—which I wholeheartedly share and endorse—that is not in our gift alone to ensure. The unintended consequences of actions that may unfold over the next few weeks could lead us into a scenario in which a no deal does emerge, and that scenario is the one we are touching on here. If it does not emerge, we will not have any of the risks we are touching on here because we will continue, I hope, to move into an implementation period during which we negotiate that future relationship. That is the point. This instrument is here because, in a scenario in which we end up outside the EU, these elements will be deemed necessary. As I said, the purpose is to ensure that in those small areas this aspect of the law is addressed.

I think I need to write—and am willing to do so—to every noble Lord who has received letters raising these concerns to set out the situation, in language clearer than my department has thus far achieved, to ensure that those individuals have confidence that they will not find themselves in any of the darker scenarios of which they may be fearful. That is critical and I give that commitment here at the Dispatch Box. If noble Lords will contact my office, I will write to every individual to ensure that they fully appreciate exactly what this suite of statutory instruments means and, in particular, what it does not mean. It is critical that that is done.

[Lord Pannick]

Perhaps I may suggest to the noble Lord that a more sensible approach would be to withdraw these regulations and redraft them so that they say precisely what they are intended to achieve and what rights are preserved.

[Lord Duncan of Springbank]

I disagree with the noble Lord for one simple reason. This is the moment when we face the question of whether we shall exit the EU with or without a deal. The purpose behind my offer is to reassure those individuals who fear that they will be in some way undermined in their rights in this country. They need to be reassured and I would much rather do that today. I am not sure I can sign all the letters in one go but, over the next few days, I will be keen to write to all those individuals affected. In so doing so, I hope to reassure them that this instrument does not do what they are fearful of. That is the most important aspect: this does not do what they fear it does. It is critical that it is taken from this debate, however it resolves itself, that there will be no impact on the 2.3 million EU citizens residing here; they will be in no way affected. They will be able to do their business, be it in self-employment, the operation and delivery of services or any other aspect. That must be taken from the debate today, irrespective of how we get to that conclusion.

I hope that in so doing I can not only give confidence to the noble Lord, Lord Stevenson of Balmacara, but, more importantly, give the individuals who have approached him and a number of other noble Lords the confidence that they need right now. On that basis, I beg to move.

[Lord Anderson of Ipswich]

The Minister has addressed a good number of questions but I raised one relating to the legal basis for these regulations, which is said to be a power to prevent, remedy or mitigate deficiencies in retained EU law. Deficiencies are precisely defined in the 2018 Act, but I have not heard from the Minister what provision of Section 8(2) or 8(3) these regulations purport to be made under, and I do not understand at the moment what the deficiency is said to be. There is some reference in the Explanatory Memorandum to the WTO but, as I understood what the Minister said earlier, the Government take no position on whether there is an incompatibility with the WTO.

[Lord Duncan of Springbank]

I am very grateful to the noble Lord, who has given me the opportunity to find the other pieces of paper that I did not get to in answering his question.

With regard to which provision, it is a deficiency specifically envisaged by Section 8(1)(e) of the European Union (Withdrawal) Act 2018, which covers the reciprocal arrangements that no longer exist on EU exit. That is the specific element that I think the noble Lord is looking for. In extension to that, on why this has a limited impact—on which a number of noble Lords have taken the view that I am wrong and that it has a much bigger impact—I hope we can correct that today, irrespective of how we do it. The important thing is that the practical impact of these regulations is limited because UK legislation is currently compliant. That is the important part. However, should a future Government wish to amend the ability of EU nationals to provide services, that would be debated in this House and in the other place in the normal manner. This suite of statutory instruments is designed to address future Governments making future legislation by the established mechanisms in this place and the other place—not, as I hope we can take from this, the impact on the 3.2 million EU nationals who reside in the UK.

[Lord Greaves]

At a less erudite level, what advice is currently given to these people on GOV.UK?

[Lord Duncan of Springbank]

GOV.UK is a resource which I hope helps people address their questions. Part of the difficulty with GOV.UK is that it is very hard to anticipate questions that have not been set out in government legislation. We did not anticipate that individuals who have written would be fearful of what had been done. That is why I say again that we must be better at how we explain this in all our communications, whether online or on paper, and in the Explanatory Memorandum. The important thing for individuals to take from this debate is that the impact on them is not what has been explored or explained by others but rather a restricted aspect of future issues that concern future government policy or the ability of the WTO and the UK going forward to agree on most favoured nations.

[Lord Stevenson of Balmacara]

My Lords, as I have been sitting and enjoying this debate, I have been reflecting on why the other 582—is it?—SIs on a no-deal Brexit did not attract audiences of this size and did not give rise to a debate of such excitement. I have reached no firm conclusions, but it is possibly because we as a House are reaching the end of our patience with the Government in how they use these regulations at a time when it is patently clear that we are moving on to different ground.

Having said that, this has been an extremely good debate, and I thank all noble Lords who have contributed. The right reverend Prelate the Bishop of Salisbury got it right in his contribution: while we are talking about important and possibly quite narrow legislation, this is really about trust—whether we feel we can place our trust in the Government to get this right in the wider context that we have been discussing. Although the Minister made a valiant attempt to persuade us of the correctness of his position, in his arguments, explanations, apologies for not making it more easily available to people outside and apologies for the drafting, he covered all the possible grounds for attack, but did not really answer the two or three main questions.

As the noble Lord, Lord Pannick, said, we are disapplying one set of regulations and relying on what has already been brought in under a different piece of legislation. You cannot have it both ways. Either you are losing the rights that applied under the original position, in which case there is a deficit, or different sets of relationships are being brought in by the new corpus of law, which has drawn on EU and UK national law. There might be no threat in that, but we simply have not had the opportunity to discuss it. At the end of the day, the lasting feeling, I fear, is of people’s frustration. The points that have been raised around the House from reading these documents at very short notice—in some cases, the shortest possible notice—have been significant and substantial, and they deserved a better and wider hearing in front of a greater and more expert group, such as would have been provided by primary legislation.

Therefore, my three main points are as follows. First, were the Government right to use the EU withdrawal Bill? I do not think that we have been persuaded on that: there would have been a better way of doing it through primary legislation. Secondly, will there be a diminution in the rights currently enjoyed by people affected by this SI? The Minister is probably right that there are no direct changes, but it is the fear of those changes and the fear of the possible consequences once the law has changed that is not being addressed properly. As I said, I do not see how we can balance the two things. Thirdly, in our earlier meeting, the Minister’s officials were keen to make it very clear that these regulations deal only with movement under the EU legislative framework; they do not deal with immigration rights that will be coming forward. At the end of the day, this is about the gap between what it is being said will change and what might change under the immigration Bill, of which we have no knowledge because it is not in front of us.

The Government have not been successful in the court of public opinion, and we owe it to that public opinion to test the opinion of the House.

Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2019

Lord Duncan of Springbank Excerpts

Wednesday 23rd October 2019 Lords Chamber

Moved by

[Lord Duncan of Springbank]

That the draft Regulations laid before the House on 9 September be approved.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, it is like I have never been away. This statutory instrument amends the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015. The existing legislation supports the competitiveness of energy-intensive industries by exempting eligible businesses from a proportion of the costs of funding renewable electricity. This instrument amends the existing legislation to: include the manufacture of grain mill products; clarify the application of state aid requirements which exclude firms in difficulty from the scheme; and improve the scheme’s overall operation.

The sectors eligible for the existing exemption scheme employ over 300,000 workers and account for more than a quarter of total UK exports. Many are located in areas of economic disadvantage and provide good, well-paid jobs. While our industrial gas price is internationally competitive, our electricity prices for medium and large industrial users are the highest in western Europe and have been for some time. Clearly, electricity costs have a significant impact on the competitiveness of such enterprises. The industries affected operate in international markets, so higher electricity costs place them at a competitive disadvantage, resulting in the risk of carbon leakage, which is when companies choose to move their production to countries with less ambitious climate policies.

Existing legislation covering energy-intensive industries allows eligible businesses to receive an indirect exemption of up to 85% of the costs of funding renewable electricity schemes. When an eligible business applies successfully for the exemption, its electricity supplier receives a reduction in the costs which it passes on to the eligible business. This approach mitigates the cost of the renewable electricity schemes, supports industrial competitiveness and provides certainty for businesses. The costs of the exemption are distributed to other electricity users.

As I said, the regulations add the grain mill products sector, as it now meets the criteria for inclusion in the scheme. The regulations clarify the information that applicants must give to enable the department to assess their eligibility. They also improve the scheme by ensuring that a business that uses a new meter will have to accrue only three months of data before applying; and that, when electricity meters are shared by more than one business, the proportion of electricity which is exempted will be updated more rapidly. Certificates will now expire at the end of June rather than March, thereby reducing the risk of businesses facing a gap in receiving the exemption. Businesses are also now able to submit their quarterly reports on any day of the quarter, resulting in increased flexibility for them.

In conclusion, these regulations will extend and improve the existing legislation and support the competitiveness of energy-intensive manufacturing industries in the UK. I beg to move.

[Lord Teverson (LD)]

My Lords, I am interested that the Minister did not mention carbon leakage, because that is absolutely the core of what this is about. It is about reducing our own carbon footprint. If industry migrates to China or to south-east Asia, that has no effect in any way on global emissions even though it reduces our carbon footprint. At that point we lose employment and all the advantages of business that he outlined.

There is a completely different and topical approach to this issue. Professor Dieter Helm, in his report earlier this year or at the end of last year to the department, said that one of the things that needs to happen if we are serious about electricity prices, energy prices and a carbon-neutral economy is that we should have external carbon tariffs. On our European position, whether we are inside or outside, it is interesting that the President-elect of the Commission, Ursula von der Leyen, said that external carbon tariffs were a way forward as a core part of her Green Deal package for Europe. Whether we have equivalence when we are outside is another question.

Has the Minister’s department looked at all strategically at this question, rather than fiddling around with which industry, sector, business, conglomerate or corporate should be in this definition? I have no idea why flour milling should be, but it is great that it needs to be. I have no argument with that. I have not come across that industry in this context before. Would moving forward in this external way not solve all these problems at a stroke? I suspect that a lot more might be produced internationally, but it seems the direction of travel.

I am not sure that the Minister mentioned businesses in distress, which are now excluded from this for state aid reasons. I do not necessarily disagree with it, but I want to understand it more. Has that exemption been used in the past? Perhaps we can understand some examples and what effect it had.

[Lord Lennie (Lab)]

The contracts for difference scheme demands that certain high-energy industries pay what is in effect a tax to fund a levy to help subsidise and encourage the generation and production of renewable electricity. Within the scheme, energy-intensive industries, or EIIs, can apply for an exemption from having to pay. This SI adds flour milling to the list of those industries eligible to apply for an exemption, to help the milling industry remain internationally competitive—what you might call flour power.

The SI also seeks to hasten the responsiveness to applicants seeking such exemptions. Where a meter is used for shared purposes either within or between companies, it allows speedier and more accurate removal from the scheme of those activities which do not qualify for such a reduction. It extends EII certificates from the end of March to the end of June each year, giving business more time to report and lessening the chance of a gap between reporting and granting of exemptions

I have some questions. Does the scheme apply to all flour millers and all flour milled, or is it restricted to flour milled for the human food chain only? Graded grains make finer flour, as the phrase goes. Is the scheme just for human-chain flour, or is it for other flour used for animal feed purposes? Is the Minister satisfied that the changes proposed in the scheme will ensure the long-term future of the flour milling industry internationally as well as helping to stabilise food security post Brexit?

The next review of the EII scheme is not due until 2023. Given the Government’s welcome shortening of their climate change targets, should not this review also be brought forward to determine any revisions that may be necessary to the scheme to help meet these obligations?

I understand that the feed-in tariffs scheme closed in April 2018, so why does paragraph 2.3 of the Explanatory Memorandum state that eligible EIIs,

“are also eligible for reductions in the costs of funding two other policies that support renewable electricity generation, namely the Renewables Obligation (RO) (in England and Wales and in Scotland) and the small-scale Feed-In Tariff (FIT) schemes”?

If that scheme has closed, why does the Explanatory Memorandum use an active word, or has the scheme been replaced and renewed in ways that we have not yet heard?

The Government announced a control mechanism for low carbon levies in 2017: in effect, that they would have to prove that they were value for money. Can the Minister provide any up-to-date assessment of that decision?

[Lord Duncan of Springbank]

It has been a remarkably short and sweet debate. Long may such debates continue. I say to the noble Lord, Lord Teverson, that I did mention carbon leakage, as it happens.

[Lord Teverson]

I apologise.

[Lord Duncan of Springbank]

Not at all. The noble Lord is quite right in one respect: the notion of carbon leakage is potentially worse for global emissions, because moving from an area where there are high standards to one where they are lower runs the risk of one’s emissions being increased.

The issue of carbon border tariffs is fascinating. I spent a great deal of time as a Member of the European Parliament and a rapporteur looking at carbon border tariffs around the emissions trading scheme. The challenge with that was that, even at an EU level, it was hard to get a consensus to support it. I do not want to set any hares running, but I want to consider it carefully because we cannot rule anything out in the future.

However, the present scheme is designed as best we can to ensure a level of competitiveness, which I think we can appreciate. We need to recognise where the energy-intensive industries can become more efficient and thereby reduce their emissions, and where there are certain process emissions which are simply the output of an equation in chemistry and will always produce a certain number of carbon dioxide molecules. There are important things that we need to explore.

On businesses in distress, an example that might fit here is the steel industry but, in truth, it would have qualified even had it not been in distress, because it was already within the carbon intensives. We are looking at the supply chain, as we drop down from the larger sector to the smaller parts of the supply chain which may be in distress as a consequence of a bigger impact somewhere higher up. Rather than me simply saying this, I will write to the noble Lord to set this out in some detail and I will happily place a copy of that in the Library so that he can see exactly where that rests.

The question raised by the noble Lord, Lord Lennie, relating to the flour mills themselves is an interesting one, because it is a question that I also asked myself. Do all flour mills automatically qualify? The answer is, no, they do not; they still have to meet the obligations set inside. A flour mill would be eligible to take part because it is now within an industry that is recognised as qualifying, but the individual mill itself would still have to meet the criteria to qualify for inclusion in order to secure the benefits. That would apply to all sectors, so it is not an automatic inclusion, although some industries or sectors are pretty much in their entirety all within that.

As to the longer-term question, I would hope that this will help flour milling to be competitive at the European and global levels. Food security remains one of the prime considerations across the EU and here at home. On the issue of whether we will review this, I think we should in fact be constantly reviewing these issues. I appreciate that my making that statement and a review actually occurring might not be hand in glove, but I recognise that, on the glide path to COP 26 next year in Glasgow, we should look at all our obligations in this regard to make sure that they are all being delivered as expected. If we are not careful, we could become complacent and simply rely upon that which worked in the past. We want to make sure that it works going forward.

When the noble Lord raised the question of feed-in tariffs, I also had a little twinkle in the back of my mind that they were closed. They are in fact closed to new entrants but there are existing recipients who benefit from the payments, and that is why they are cited in the body of the Explanatory Memorandum. They are few in number and, if the noble Lord would like, I will happily set out how many still qualify under the feed-in tariff scheme within this wider obligation.

On that basis, I think I am content to move these regulations forward.

Motion agreed.

Post Offices: Cash Withdrawal Services

Lord Duncan of Springbank Excerpts

Tuesday 22nd October 2019 Lords Chamber

[The Lord Bishop of St Albans]

I beg leave to ask the Question in my name on the Order Paper and declare my interest as president of the Rural Coalition.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, the Government are disappointed by the withdrawal of Barclays from the renegotiated banking framework. None the less, the new banking framework will enable customers to access their cash from 27 high street banks. The Government will continue to ensure that communities receive support and have choice about how they manage their finances.

[The Lord Bishop of St Albans]

I thank the Minister for his reply. Rural communities rely on access to finance, but in many rural areas where there is poor broadband or weak mobile signal, online banking is impossible. This is a fundamental issue for our rural areas. What representations have Her Majesty’s Government made to Barclays Bank, and what will we do if other banks decide to follow its lead?

[Lord Duncan of Springbank]

The right reverend Prelate asks an important point: does this set a precedent? I certainly hope not. I would like to think that customers affected will reflect carefully on whether they should continue banking with Barclays. I am fully aware of the issues faced by those in the rural communities of which he speaks.

[Lord Cameron of Dillington (CB)]

My Lords, is the noble Lord aware that other countries, including France, the Netherlands and New Zealand, have saved much of their rural post office network by supporting their role as deliverers of financial services? Is he further aware that there are now more post offices in rural England than all the banks put together? In some areas of rural England, only post offices are serving the financial needs of local traders. Will the Government please offer some financial or fiscal incentive for Post Office Counters Ltd and all the banks to work together to ensure that the future of their local traders and communities is safe?

[Lord Duncan of Springbank]

The noble Lord is correct. Since 2010 we have invested £2.3 billion in the Post Office network, stabilising the number of banks. There was a 27% decrease in the 10 years before 2014. The decrease since then has been only 1%—the money is making a difference.

[Baroness Bryan of Partick (Lab)]

My Lords, does the Minister agree that the idea of changing a bank is a bit more daunting than he has suggested? Particularly if you are struggling on a daily basis to stay out of the red, the idea of going to a new bank can be intimidating. It seems that some banks are interested only in big cashless customers who have large deposits and not really anybody else. Will the Minister raise these concerns with Barclays Bank and ask it to think again? The banks are making life difficult, not only for people in rural communities but for those in inner cities and the peripheral schemes where paying cash machine charges is extortionate.

[Lord Duncan of Springbank]

The noble Baroness and the right reverend Prelate asked what representation we have made. My right honourable friend the Secretary of State for Business, Energy and Industrial Strategy has spoken to Barclays in words of only one syllable, I am afraid. She has made this point very clear to them: this behaviour is not acceptable. This is not about corporate banking; this is about rural communities and, sometimes, these are the most important aspects of rural communities.

[Baroness Pinnock (LD)]

My Lords, I understand that some of the major banks are making it extremely difficult for small organisations to retain their bank accounts when, for instance, they change their bank mandate. Can the Minister tell the House whether the banks have a responsibility to serve their communities in this way, or will these accounts be treated in the same cavalier way that Barclays has treated them in rural communities? If they are, where will these organisations go for their banking?

[Lord Duncan of Springbank]

The noble Baroness puts her finger right on it. Banks are not just about serving customers; they are about serving communities as well. When small organisations are unable to secure that banking, they will struggle. If she has specific examples, I welcome them being raised with me and I will raise each of them directly with the individual bank concerned.

[Lord Trefgarne (Con)]

My Lords, would it be possible for the Prime Minister to write to the chairman of Barclays Bank on this matter—perhaps with his signature at the bottom of the letter this time?

[Lord Duncan of Springbank]

My noble friend asks a very good question. I will certainly have that discussion—and you never know.

[Lord Stevenson of Balmacara (Lab)]

My Lords, does this Question not also raise the problem about access to cash more generally? I am sure the Minister is familiar with the Access to Cash review. I wonder whether the department is in a position yet to respond to that. In that excellent review were six recommendations, which focused on the fact that new fintech is often designed for mass markets and does not reach out to the poor, those who live in rural communities and the vulnerable. Of the recommendations, the fifth and most important was for a clear government policy on cash, supported by a joined-up regulatory approach that treats cash as a utility, which I think is what the noble Lord was saying at the end. Is this in progress?

[Lord Duncan of Springbank]

I can assure the noble Lord that this is, indeed, in progress.

[Viscount Brookeborough (CB)]

My Lords, is the Minister aware that we inquired into this subject in our report on financial exclusion a couple of years ago? When faced with the question of closing banks, the banks virtually unanimously said, “We consult widely”. We did not find one single branch that had been left open as a result of consultation. They are merely ticking boxes. They then faced us with the fact that the post offices would take on their business, and now they are withdrawing it. As much as we condemn it here, we have to do more than that. The banks are letting communities down and it is no good simply condemning them. Will the Government not take some action that forces them to be part of our communities?

[Lord Duncan of Springbank]

The noble Viscount is right: a consultation matters only if its results are taken forward. I will reflect carefully on what he has said. I believe there is an obligation that should fall on banks to respect their customers and treat them with the decency they deserve.

[Lord Kirkhope of Harrogate (Con)]

My Lords, while we can deprecate the actions of certain banks in this sense, should we not also congratulate those commercial and retail outlets, such as petrol stations and others, that are installing ATMs and providing these services in rural areas as well as in urban ones? I think particularly of the Co-op and other owners of garages around the country, which are doing just that.

[Lord Duncan of Springbank]

My noble friend is correct. Banking is changing and we need to reflect on how our future banking needs will be met: perhaps not through the traditional means of marble-fronted buildings but in a much more diverse way, both in reality and online. We need to consider how banking will look in five, 10, 15 and 20 years’ time.

Frequent Flyer Airmiles Schemes

Lord Duncan of Springbank Excerpts

Monday 21st October 2019 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask Her Majesty’s Government what plans they have to (1) ban or (2) restrict frequent flyer “airmiles” schemes.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, the fight against climate change is the greatest and most pressing challenge facing the modern world. The UK has done more than any other major economy to tackle emissions. UK airlines operate as commercial undertakings in the private sector; the Government do not intervene in commercial matters such as customer loyalty schemes.

[Baroness Jones of Moulsecoomb (GP)]

I thank the Minister for his Answer. However, given that, as he says, climate change is the greatest and most challenging issue, surely it would be sensible to encourage airlines so that, instead of rewarding the 15% of the population who take 70% of the flights, it would be better for all the rest of us if they did not run these schemes—and if they did, we should have a frequent flyer tax instead.

[Lord Duncan of Springbank]

I would much rather that we were able to address 100% of the individuals who take flights. That is why we are participating very strongly in the International Civil Aviation Organization—ICAO—to try to make sure that it addresses this matter at an international level. There are means which can be taken; the next meeting will take place in 2022, and the Government stand ready to play their part.

[Lord Teverson (LD)]

My Lords, the Minister will understand that that is an international offsetting mechanism, which will not work. As individual car drivers we pay 58p per litre in fuel duty, and on top of that we pay VAT. The airlines pay absolutely zero tax on aviation fuel. Surely that is wrong. Would it not be an excellent way to address this, when we chair COP 26 in Glasgow next year, to have as one of our objectives that all airlines internationally should pay their fair tax and their fair contribution to remedying environmental damage?

[Lord Duncan of Springbank]

To be very clear, the UK has an air passenger duty which raises £3.6 billion a year. It is the highest such tax in Europe—many countries in Europe do not have such a tax—and that money goes a long way to address climate change issues, which are of importance to the Government.

[Lord Hamilton of Epsom (Con)]

My Lords, surely a customer loyalty scheme is what it says on the tin: it is trying to persuade people to fly with one airline rather than another. There is no evidence that if you discriminate against these schemes, people will fly less; they will just choose between one airline and another.

[Lord Duncan of Springbank]

It is not the policy of the Government to intervene in these commercial decisions. It is also important to recognise that this is a regressive step in many respects.

[Lord Brooke of Alverthorpe (Lab)]

Is it not the Government’s responsibility to ensure that anybody going on a flight should know what damage is being done to the environment as a consequence of that flight? Is it not time that each individual should have on their ticket or in the email sent to them the amount of carbon that they will be using on that flight? Is it not right that we should have an international scheme whereby the more that people fly, which is recorded on their carbon footprint, the greater the contribution they should make towards the cost of the flight and towards putting the environment right by a tax that increases with more flying?

[Lord Duncan of Springbank]

To be very clear, our air passenger duty is a tax commonly passed on to passengers: the more you fly, the more you pay. Additionally, this should be addressed at international level, as the noble Lord said. I am not averse to the notion of people being more fully aware of what they are participating in, and I will examine that more carefully.

[The Lord Bishop of Salisbury]

Can the Minister explain why the gap between aviation fuel being untaxed and road fuel being taxed as it is, is so great? If the answer is the difficulty of getting international agreement, why are UK internal flights not taxed to get some parity between different methods of transport?

[Lord Duncan of Springbank]

The challenge we face in this country is that we are a major hub for international flights, as well as a country with a significant geographical challenge. We do all we can to ensure that people can take the types of journey they are able to take; it is up to commercial companies to determine how best to take that forward.

[Lord Tugendhat (Con)]

My Lords, might the Minister consider a more rifle-shot approach and, instead of thinking about commercial airlines, think about private jets? Might it be an idea to levy a tax on fuel sold to private jet companies, as distinct from the wider question of national and budget airlines? Private jets might be the best place to start.

[Lord Duncan of Springbank]

My noble friend raises a question to which I do not have the answer in my notes. It strikes me that private jets probably constitute a very small proportion of the overall flights in this country, and that private jets may choose not to come here, depending on circumstance.

[Baroness Randerson (LD)]

My Lords, does the Minister accept that there is great public concern, with the increased awareness of the damage of flying to our environment and climate? Does he accept that it is time that the Government took some action and worked with the grain of public opinion? Will he agree to talk to his colleagues and examine the simple carbon tax introduced by the French Government this year? It will come into force next year, it will tax every flight and it will start to address the damage that is being done.

[Lord Duncan of Springbank]

The noble Baroness makes a point, but air passenger duty is already a tax on every flight which is directly passed on to air passengers. It is also important to recognise that there is a responsibility on individuals. You do not have to fly abroad to take a holiday: St Andrews, in Scotland, is very pleasant, as are many other places in the United Kingdom.

[Lord Bates (Con)]

My Lords, might not a positive way to address the issue be to extend the benefits of loyalty schemes to those who use public transport, cycle or walk?

[Lord Duncan of Springbank]

Yes, that is probably true. I am not sure how it would work, but I am willing to go away, look at it and see whether we can do something with it.

[Lord Fox (LD)]

My Lords, the Minister just dubbed this measure regressive in many ways. Could he enlighten your Lordships’ House on how it is regressive, given the climate emergency that we face?

[Lord Duncan of Springbank]

The reason why I suggest that it is regressive is that by taking this approach, whether banning air miles or making other restrictions in this fashion, the people affected will almost certainly be the poorest, not those who are wealthy or who are travelling business class. The problem is that they can continue to afford to do so, while those who take family holidays will be hit by the brunt of the tax. That is regressive.

[Baroness Jones of Moulsecoomb]

My Lords, I am sorry, but that is absolute nonsense. It is not true. The 15% are the wealthiest people, not the poorest people who take only one flight a year.

[Lord Duncan of Springbank]

I have a sneaking suspicion that the 15% who are the wealthiest will not be deterred by the removal of a loyalty scheme.

Northern Ireland (Executive Formation etc) Act 2019: Section 3(5)

Lord Duncan of Springbank Excerpts

Thursday 17th October 2019 Lords Chamber

Moved by

[Lord Duncan of Springbank]

That this House takes note of the Report pursuant to section 3(5) of the Northern Ireland (Executive Formation etc) Act 2019, which was laid before this House on Monday 14 October.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, on 9 October reports were published providing an update on progress on executive formation, the transparency of political donations, higher education and a Derry university, the presumption of non-prosecution, Troubles prosecution guidance and the abortion law review. Today’s report is a further update, in line with the obligations under the Northern Ireland (Executive Formation etc) Act 2019.

First, I take the opportunity to welcome the inclusion in the Queen’s Speech of the Bill on historical institutional abuse. I look forward to working with colleagues across the House to get that Bill passed so that we can begin to see redress for the victims in Northern Ireland. The people of Northern Ireland have gone for over 1,000 days without an Executive and Assembly. While efforts are being made to bring the parties back into that Executive, the current period for executive formation expires on Monday 21 October.

With regard to the obligations set out in the executive formation Act, should no Executive be formed before 21 October, this Government will be under a statutory duty to change the law in Northern Ireland on access to abortion services, same-sex marriage and opposite-sex civil partnerships and to introduce a new victims’ payment scheme. While every effort is being made to restore an Executive, appropriate steps are being taken to ensure that the Government will meet our obligations under the executive formation Act. In furtherance of that, an awareness campaign was launched last week to ensure that the people of Northern Ireland know how these changes to the law may affect them. Further information will continue to be provided in the coming weeks.

In the absence of a restored Assembly and Executive, the Northern Ireland Office has taken steps to ensure that the Government will fulfil our obligations on abortion. As part of the information campaign, on 7 October my department, working closely with the Department of Health in Northern Ireland, published guidance for healthcare professionals to provide clarity over the new state of the law and their duties and responsibilities. The guidance sets out the changes in law in this area from 22 October 2019 until a new regulatory framework is in place by the end of March 2020.

The immediate changes from 22 October, if the duty comes into effect, will be the repeal of Sections 58 and 59 of the Offences against the Person Act 1861 in Northern Ireland, meaning that no criminal charges can be brought under that Act against females who have an abortion or against qualified—I stress “qualified” —healthcare professionals or others who provide or assist in an abortion. There will also be a moratorium on current and future criminal investigations and prosecutions in this area.

The Government will introduce a new legal framework for abortion to come into force by 31 March 2020. It is worth noting that during this interim period, from 22 October 2019 until the new legal framework is in place, all other relevant laws relating to the termination of pregnancy will remain in place. This includes Section 25(1) of the Criminal Justice Act (Northern Ireland) 1945, which makes it a criminal offence for anyone “in good faith” to assist or wilfully act to,

“destroy the life of a child then capable of being born alive”,

except where the purpose is to preserve the life of the mother.

From 22 October, women resident in Northern Ireland can continue to access services in England and will now have all of the costs of the procedure, including their travel and, where needed, accommodation costs, met by the UK Government. Healthcare professionals will be lawfully able to refer patients to services in England by providing the details of the central booking service or directing them to information available on the GOV.UK website.

It is anticipated that access to abortion services will not be routinely available in Northern Ireland until the new legal framework is in place by 31 March 2020. The guidance notes that if healthcare professionals choose to offer an abortion service to women during the interim period within the bounds of the relevant laws, they should do so in line with their professional competence and guidance from their professional body.

The guidance that we have issued also notes the state of play relating to conscientious objection, and what to do in cases where patients have purchased abortion pills online. Copies of that guidance will be lodged in the Library, and I am happy to provide further information or any updated versions as we go forward. To be clear, we will take forward all the work necessary to implement the new regulations by 31 March 2020.

In addition to changing the law on access to abortion services if the Northern Ireland Executive are not restored by 21 October, Parliament has an obligation to extend same-sex marriage and opposite-sex civil partnerships to Northern Ireland by 13 January 2020, and to introduce a system of victims’ payments by the end of January 2020, to be in force by the end of May 2020. I beg to move.

--- Later in debate ---

[Lord Duncan of Springbank]

My Lords, I begin where I think we need to begin. Everyone in this House are of the same view that we need to restore an Executive in Northern Ireland. There is no doubt about the importance of that, not just going forward, but for what could have been achieved, which we will never know. However, my right honourable friend the Secretary of State for Northern Ireland has been working tirelessly, and I am pleased that the noble Lord, Lord Murphy, has recognised that. He has been straining every sinew to try to bring the two principal parties and all the other parties together. In response to the question asked by the noble Baroness, Lady Humphreys, we have made and will make every effort to bring the five parties together to move that forward.

The challenge, however, is that the obligations of the Northern Ireland (Executive Formation etc) Act fall on the shoulders of the United Kingdom Government early next week. While the Assembly may seek to convene—I do not doubt it will do so—and while I do not doubt that there may be a broader base of attendance than might have been expected, it is unlikely to be able to deliver on those issues that some noble Lords have wished it to do this evening for the reasons raised by my noble friend Lord Caine and the noble Lord, Lord Alderdice.

I say that with some regret because we all recognise the value of that. As has been pointed out by the noble Lord, Lord Murphy, this is a time when we would have valued that information. But I do not believe that, unless we make some serious progress on Monday, we will face anything other than the reality that the United Kingdom Government will take forward their obligations. That is how the Northern Ireland (Executive Formation etc) Act was formed. We did so recognising that, once we had taken on the obligation, we would see it through to its fulfilment. Whether that is deemed right or wrong, it is the law of the land and is exactly what we will do.

I shall take some of the points in reverse, as that may be easier. In response to the question from the noble Baroness, Lady Humphreys, about donations, the issue is that none of the parties has expressed any change in its view about backdating. The sister party of the Liberal Democrats here, the Alliance Party, has pushed strongest and most consistently for backdating, but other parties, notably the DUP and UUP, were keen for this to be a point going forward. Some of the other parties did not express a view on this, but none has changed its view. I am happy to write again to the noble Baroness with more details, but in the recognition that we need to bring this area to rest. I will write on that point.

My noble friend Lord Bates kindly brought the issue back to where we need to focus, for we are here today doing something that should be done elsewhere. As a number of noble Lords have observed, we have seen a deterioration of the situation in Northern Ireland, which is much to be regretted. The political vacuum that exists now will continue to be a problem. What we are doing here today is trying to address certain issues, in but a small moment in time. In truth, until an Executive is formed and the devolution situation works, we will not have adequate governance in Northern Ireland.

I hope that the deal spoken of by the noble Lord, Lord Murphy, delivers for Northern Ireland. I hope that that happening will take away one of the principal obstacles to the parties coming back together. We should be under no illusion that Brexit has been a factor in the parties’ approach to the situation. It would be remiss of me not to point that out. I therefore hope that a deal will remove one of the stumbling blocks—not the only one—and allow those parties to return to government, but, at present, we look forward to that, rather than being certain that it will happen.

I now turn to the conspicuous and very serious issue that has been raised by a number of noble Lords. That is abortion. I state at the outset that I believe this matter should have been taken forward by a devolved Executive. I am happy to put that on record once again. It will not be so; it will be taken forward by us. We have debated this more than once, and I want to correct some of the statements that I believe have been made in error.

The five-month period we talked about is the most challenging aspect of this. At the outset, we need to recognise that abortions in Northern Ireland can take place only in a registered clinic. Some have said that this can simply be circumvented if there is but one NHS employee. That is not true. The clinic still has to be registered and the NHS employee taking part needs the permission of the NHS commissioners. That has to be done formally. Therefore, this is not carte blanche for people to create an opportunity in secret, whether in a front street, a middle street or a back street. It was not designed to be that and it will not be that.

[Baroness O'Loan]

Perhaps when the Minister gets away from the House he could look again at Regulation 5.

[Lord Duncan of Springbank]

I am very happy to state categorically that in any clinic, even if it has one NHS employee, that employee must have the permission of the NHS commissioners. I will write on this point and lodge the letter in the Library to make it very clear that we eliminate this as an issue that might percolate back to Northern Ireland in a nefarious and bad fashion. Equally, it is important to stress that, should there be an attempt by any private clinic to seek registration, it will not be a simple or quick procedure. Certain obligations must be met, and they will be met very carefully during this period. It is important to stress that anyone who seeks to open a clinic that is not registered or that operates without due diligence will be subject to the criminal law, and that law will be broken if they do that. It is important to appreciate that in Northern Ireland.

Further, any independent practitioner who might wish to set up a practice must register with the Care Quality Commission. Therefore, again, it is not simply a question of wish fulfilment; they must undertake legal obligatory steps. The premises would need to be established and investigated, and it would be necessary to ensure that they met those criteria. I note that the period that we are talking of is five months. I also note that almost anything involving bureaucracy does not get resolved in five months.

It is also important to set out very clearly that guidance has already been issued by the GMC and the royal colleges to the practitioners in Northern Ireland so that they are aware that, should we be unable to form an Executive, those are the conditions under which they will operate. Any noble Lord who wishes to see those conditions can consult the Library or go to GOV.UK. We have been very clear and transparent, ensuring that they are clear.

[Baroness O'Loan]

I am very sorry and I do not intend to interrupt the Minister repeatedly but I would like to ask whether he accepts that the GMC guidance is predicated upon the Abortion Act 1967 and the obligations of doctors under that Act. In fact, the GMC is not a regulatory body or a law enforcement body, and practitioners in Northern Ireland cannot be asked to be bound by legislation that does not apply or guidance relating to legislation that does not apply.

--- Later in debate ---

[Lord Duncan of Springbank]

To be very clear and to correct that, it is not the GMC’s guidance; it is our guidance. It is the Government’s guidance that we have asked it to pass on to ensure that practitioners are fully informed about and entirely aware of their obligations. It is fully transparent. If any noble Lord wishes to see it, they can consult the website and it is also in the Library.

The noble Baroness raised a number of issues, particularly with regard to the conscientiousness element. I note that a number of practitioners may well have written on this matter. That is important, but I stress categorically that they are entitled to exercise their conscience in this matter and will not be obliged to act against it unless they find themselves in a situation in which the life of the female is endangered. The professional obligations will kick in at that point and they will be obliged to save the life of the female. However, it is important to stress that nobody will be obliged to act against their conscience. Importantly, from 22 October onwards, we will be consulting very broadly to make sure that we get the language absolutely correct. We have no desire to place anybody in the invidious position of having to act against what they believe, so we will make sure that there are consultations. We are looking not just at the medical professions or professional bodies but at the religious groups that might be affected.

I listened with some interest to the notion of noxious substances, raised by the noble Lord, Lord Morrow, and the deliberate attempt to abort a foetus by a dominant male administering the process. I note in saying that there are a number of laws in Northern Ireland that would be absolutely applicable should an individual seek to abuse the body of another person in this regard. They carry with them very significant sentences. At present, the law has not been used in this regard, but it certainly could be. There would be no question that somebody could, with some sort of lightness of touch, escape from criminal justice in this regard. I would like to make sure that nobody in Northern Ireland is of the view that there may be secret poisonings that could somehow go both unreported and unaddressed. That would be the wrong thing to take from this debate here today.

I recognise that there are going to be challenges in each of these areas, but I want it to be clear that during this particular period there is no carte blanche but rather a recognised period of necessity until we are able fully to frame the law as needs be—the law that we wish to see that will come in in March. The laws now in existence will protect the mother from poison or other abuse of that nature. There are existing laws that protect the viability of a foetus that could be born alive. Although we might argue where that particular window might rest—it is between 22 and 28 weeks—it will be on a case-by-case basis, determined not by us here or others, but by the practitioner who is involved in the delivery of that medical situation. That is as it should be.

This is not a legal free-for-all. It is not an opportunity for those in Northern Ireland to create a whole new sector of abortion clinics. It is a recognition that in Northern Ireland, there are challenges because of the situation over the years with the abortion law. As I said before, I would have much preferred this to have been done elsewhere, but it will not be so. It is therefore important for us to ensure that we do all we can to ensure that during that period, the health and well-being of females is paramount. That is our guiding light and that is what we are seeking to do.

We do not believe that during that period there will be a fully-fledged abortion regime put in place because of the challenges that will exist within that, not least just trying to make it so. That is why we are making sure that those who wish to seek an abortion are able to do so in England, and that all costs will be met; and that advice and information can be given by medical professionals without fear or recourse to the criminal law to females to make that decision for themselves. They can, at that point, come to Great Britain to undertake that particular medical procedure.

However, the issue that we need to be more conscious of is the notion of people buying medicines online. The difficulty there is that it is not just for abortion purposes: more widely, there is a criminal offence of individuals selling those particular medicines unprescribed. Again, should a female find herself in a situation where she is suffering because of this, she can now go to a medical professional and seek the necessary help to ensure that she is safe and well. That is important. We need, as a Government, to consider how medicines are now being marketed or purchased online, because it is a matter where health is much more difficult to ensure when we are unable to be sure what the medicines themselves are. That is even if they are what they claim to be, let alone when they are not what they claim to be.

I realise that this is not where any of us would wish to be, but it is important for me to stress that going forward, the most important issue will be the health and well-being of the females of Northern Ireland. We will do all we can to ensure that that is so, and we will make sure that where we can offer that guidance, it will be understood by those who now will be able to take forward their own approach to the question of abortion. After March, there will be a fully-fledged regime in Northern Ireland. I hope that this period will give us the opportunity to ensure that it is fit for purpose and carefully constructed, and that it recognises the challenges that we have witnessed in the debate this evening and, more widely, the question of people’s own conscience and views.

The important thing today, however, is to recognise that we need an Executive in Northern Ireland. On that we can all be absolutely clear. I can assure noble Lords that I do not want to be back doing this again. The important thing for us all right now, however, is to hope that the deal itself might well bring a new opening and a new opportunity for Northern Ireland; and that the parties themselves recognise that there is a way forward and that they can begin to work again in the interest of the people of Northern Ireland. They are better fit and able than we are to do that. On that basis I would like to close my remarks.

Motion agreed.

Product Safety, Metrology and Mutual Recognition Agreement (Amendment) (EU Exit) Regulations 2019

Lord Duncan of Springbank Excerpts

Monday 7th October 2019 Lords Chamber

Moved by

[Lord Duncan of Springbank]

That the Regulations laid before the House on 9 September be approved.

Relevant document: 69th Report from the Joint Committee on Statutory Instruments (special attention drawn to the instrument)

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank)]

My Lords, the extension to Article 50 requires changes to legislation made earlier this year to ensure continued confidence in our consumer safety system. This statutory instrument will amend three earlier regulations: first, a number of product schedules in the Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019, made in March 2019; secondly, the Pressure Equipment (Safety) Regulations 2016; and, thirdly, the Conformity Assessment (Mutual Recognition Agreements) Regulations 2019. I will now take noble Lords through the detail of the changes made to each of these regulations—I can see the excitement building.

The change in exit day has created ambiguity for the personal protective equipment industry, necessitating revision to the Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019. The opportunity has also been taken to refine the instrument based on stakeholder feedback and ongoing developments in the sector, notably clarifying the continued use of data from pre-March 2013 as it affects cosmetics and ensuring that the UK will be able to update the lists of prohibited or restricted substances in all circumstances going forward.

I am concerned that, following publication of the main product safety instrument, stakeholders drew to our attention a number of these issues. I wish to apologise that these errors were identified by stakeholders after our own internal scrutiny processes had been cleared. Once alerted to these issues, we held meetings with the representative bodies from across the product areas to discuss the drafting errors identified and review the relevant product schedule for any other potential points that might require clarification. Eight meetings were held and a number of phone calls and emails were exchanged with relevant stakeholders. We have sought to do all we can in this regard to catch any issues that might not have been caught in the first instance.

Consequently, minor amendments regarding outdoor noise, recreational craft, toys, electromagnetic compatibility, electrical equipment, radio equipment, simple pressure vessels, machinery, measuring instruments and accreditation will be made. We will also correct the error whereby pressure equipment manufacturers would have been deprived of the option of having their manufacturing processes of base materials certified by a competent body.

Details of the technical changes are included in paragraph 7 of the published Explanatory Memorandum. These could ordinarily have been addressed through guidance. However, the extension to exit day meant that we were required to make an instrument to address specific exit-related issues, and we decided that it would be good practice at the same time to bring these minor changes into legislation to give full clarity for business.

We have also taken the opportunity to update the Pressure Equipment (Safety) Regulations 2016 to ensure full implementation of the importer labelling requirements to make it clear that an importer must put their information on both pressure equipment and assemblies. Post exit, UK importers in some circumstances will be able to put their details on a document accompanying the equipment or the assembly.

The instrument also implements into domestic law obligations that the UK currently has as an EU member state with regard to certain goods imported from Switzerland. This was originally implemented through a global provision in the Conformity Assessment (Mutual Recognition Agreements) Regulations 2019. Following further departmental legal analysis, we considered it more appropriate to make it explicitly clear in the law itself. This instrument will allow UK importers of relevant products from Switzerland to put their details on accompanying documentation rather than on the product for a period of 18 months after exit and extend recognition of Swiss authorised representatives to act on behalf of manufacturers to comply with regulations on noise emissions from outdoor equipment in line with the existing EU/Swiss mutual recognition agreement.

A full impact assessment has not been prepared for this instrument because no provisions trigger changes to in-scope operational costs. The impact is limited to familiarisation costs for business, which were previously assessed in a full impact assessment on the earlier instrument as de minimis. A copy of that full impact assessment is publicly available on legislation.gov.uk.

On consultation, the department has benefited from significant stakeholder feedback following the passage of the original regulations, all of which has been taken into account in the revised instruments. However, clearly, this was the wrong way round. As I said when taking forward regulations last week, my department will reflect carefully on ensuring adequate consultation before bringing forward such complicated legislation. This commitment from the Dispatch Box follows on from issues raised by the Joint Committee on Statutory Instruments, whose comments we welcome and will take fully on board.

The amendments made by this instrument will ensure that instruments are correct and that our high standards are maintained after our exit from the European Union. I beg to move.

[Lord McNicol of West Kilbride (Lab)]

My Lords, moving between topics as varied as Hong Kong to product safety is one of the joys of being a Front-Bencher in the House of Lords.

The House is again debating an instrument to rectify problems with previous no-deal regulations, this time on the crucial issues of product safety and metrology. Before I delve into the specifics of the instrument on mutual recognition, I ask the Minister to explain why the House is still debating regulations which will apply only in the event of no deal when the recent European Union (Withdrawal) (No. 2) Act will prevent such a scenario. This feels both disrespectful of Parliament and a little bizarre.

Much of the instrument is intended to ensure that previous regulations will be operable for the latest exit date. As he was asked last week, can the Minister confirm that Parliament will be asked again to revisit these issues if the exit date is again changed?

According to the department’s Explanatory Memorandum, the regulation strives to ensure that products placed on the UK market continue to meet,

“substantially the same essential requirements”.

Why is it only “substantially” the same requirements, not exactly the same ones? If there is no difference, will the Minister clarify this? If there is a difference between substantially copying over requirements and completely doing so, which ones are not required to be copied over?

--- Later in debate ---

[Lord Harris of Haringey (Lab)]

My Lords, I draw attention to my interest as chair of National Trading Standards, which, as far as I know, is not involved in any of these regulations—but for all I know it might be.

I would like some clarity on two specific points. First, the Minister said that no specific impact assessment was drawn up for this statutory instrument, but that it was covered by the previous impact assessment and that the main impact would be in explaining these changes, which we all look forward to, to the businesses affected by them. Did that assessment also look at the role of explaining these changes to those who are responsible for enforcing the regulations and for ensuring proper compliance? It seems to me that this is quite an important area, particularly when we are talking about product safety.

Secondly—I hope this is not frivolous—as I understand it, according to the report of the Joint Committee on Statutory Instruments, there is an error in the instrument. The reference to regulation 15 should have been to regulation 18. The department accepts that this is an error but says that it probably does not matter—I am paraphrasing. I think it is implying that there will be a 24-hour gap during which the mutual recognition agreements will not be in force. If that is the case, will the Minister tell us how frequently the mutual recognition agreements referred to in this SI are in fact employed in this country, and whether an issue really is unlikely to occur during the 24-hour gap?

[Lord Duncan of Springbank]

My Lords, this suite of regulations is quite technical, as the noble Lord, Lord McNicol, said. The original suite was a bundle, and anyone who has managed to carry it around will recognise that it could be measured in depth of inches. The important thing to stress is that I have recognised what a challenge it is to face such a large document. I would not wish to see us go forward on that basis again, for the very reasons flagged here today. I am very happy to say that, as far as I can influence the situation, I will do that very thing.

It is also important to stress—this comes back to the notion of why we are where we are—that the date changes which were necessitated by the change in the exit date were necessarily made in the document we are debating. It has now been—I am going to use the term—Brexit-proofed, in so far as we will not have to revisit these dates because of the manner in which they have been drafted. I reiterate, however, that it is the Government’s policy to leave the European Union on 31 October and noble Lords would expect me to say that, so I am saying it again.

I will go through some of the points raised in the order they were made. The noble Lord, Lord McNicol, again raised the issue of “substantially” versus “exactly”. My team tells me that broadly they are the same. Noble Lords might notice that I used the word “broadly” in that particular context, but they are the same, so they should not be interpreted as being in any way different. As to the question of the stakeholder feedback—

[Lord Fox]

“Broadly” and “substantially” are broadly the same phrase, but why is that phrase being used? Is it because the department is not aware that there are any differences but thinks that there might be unintended differences, or is it aware that there are actual differences between the two situations?

[Lord Duncan of Springbank]

My team has helpfully provided a note on that, just in case someone was querying whether they were indeed the same. On “substantially the same” and an essential requirement, certain essential requirements require the involvement of notified bodies. Post exit, these same essential requirements will require the involvement of UK-based approved bodies, in line with the UK-only system developed under the no-deal legislation. We are therefore at that stage of approved versus notified. There will be differences, in essence, but the substance of those differences is textual rather than meaningful in that context—I hope that is helpful and makes sense.

--- Later in debate ---

[Lord Duncan of Springbank]

I would be happy to do so, because we are stepping into the etymological element of the debate. As I understand it—I will happily put this in writing—the notion of a notified body and an approved body differs in so far as which is recognised by which entity. The UK itself has a recognised approved body whereas the notified body stems from the earlier legislation. However, rather than going too far down the rabbit hole of exactly how that works, if the noble Lord, Lord Fox, will allow, I will write to him on that point.

On the question of stakeholder involvement, in truth, this is why I apologised. We did this the wrong way round—there should have been greater engagement in advance of such a complex and dense series of materials, to ensure that we had captured all the elements the first time. We did not do that, and we were blessed by the fact that a number of directly affected organisations raised with us the substantive points which have led to the minor changes we have before us today. In truth, although I say they are minor, they are none the less changes we would wish to make to the body of the law—to the instrument itself. However, I acknowledge that this is the wrong way round, and I have said that on the record.

I am grateful to the organisations which have come forward. I am also aware that, once that began to happen, my departmental team therefore recognised that it had to do a thorough combing exercise of the substantive element of the original instrument. I asked the question which I think a number of noble Lords will have asked: “Is there a risk of institutional blindness? If you missed it the first time, will you miss it the second time?” That is why, again, I was assured that the manner in which the second, third and fourth iterations were conducted involved different groups to ensure that we were able to bring before you what we believe to be the comprehensive elements of the corrections which need to be made. I can go through them with your Lordships if you like, but I have a feeling that you probably do not want that. If noble Lords allow, I will therefore put that record into the Library for your consultation. However, noble Lords will be aware that it covers the full range, as the original instrument did, and as we are learning today, it is quite a broad range.

The final point raised by the noble Lord, Lord McNicol, was whether there are any other redundant statutory instruments. The answer to that is, not to my knowledge. There you are.

[Noble Lords]

Oh!

[Lord Duncan of Springbank]

Noble Lords will discover that I am full of these lines.

The noble Lord, Lord Fox, raised a couple of points. There should be no change to self-assessment whatever. On the question of the carcinogenic, mutagenic and reprotoxic elements—CMR—the rollover of the historic data rests within this particular body because it affects the elements within the EU-defined law which we have brought across. However, the noble Lord is right to note that clearly, the ingredients which are part of these elements rest within the wider EU REACH directive, and therefore will fall under the jurisdiction and leadership of Defra. Happily, I can confirm to the noble Lord, Lord Fox, that my noble friend Lord Gardiner will indeed facilitate such a meeting with him regarding the costs of the wider registration or reregistration of chemicals by a British entity. In due course, therefore, such a meeting will take place, and thereafter I hope that we will place on the record useful information for the entire House.

The noble Lord, Lord, Pickles—

[Noble Lords]

Lord Harris!

[Lord Duncan of Springbank]

I apologise. My goodness, I would not wish the noble Lord to be seen as dallying with the other side. The noble Lord, Lord Harris, raised two specific questions, including on the impact assessment in its broadest sense. The detailed impact assessment was specific to the original material. He asked about the familiarisation costs and whether they encompass the costs resting on bodies responsible for enforcement and compliance. The answer is yes, they need to do so, for obvious reasons, because they will have to take forward the management or oversight of this broad area.

As to the question of the 24-hour gap—this feels a bit like the Richard Nixon tapes: a gap during which something has gone on—my team tells me that the answer is no. Immediately before exit date means exactly that. The gap will be a few seconds, and my team assures me that in those few seconds, very little should interfere with the continuity which this suite of instruments represents.

I hope that that answers the questions raised. I also appreciate that this is a technical instrument. This is not the way I wish to do things in future, and I will ensure that there is adequate consultation not just with your Lordships but with wider interested parties. I will learn that lesson and will ensure that my department learns it. On that basis, I commend the Motion.

Motion agreed.

Irish Border: Checks and Customs Arrangements

Lord Duncan of Springbank Excerpts

Tuesday 1st October 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, with the leave of the House, and on behalf of my noble friend Lord Callanan of the Department for Exiting the European Union, I will now repeat in the form of a Statement the Answer given in the other place earlier today by my honourable friend the Parliamentary Under-Secretary of State for Exiting the European Union:

“Mr Speaker, we are committed to finding a solution to the North/South border which protects the Belfast/Good Friday agreement. We can best meet these commitments if we explore solutions other than the backstop.

The backstop risks weakening the delicate balance embodied in the Belfast/Good Friday agreement. This was grounded in agreement, consent, and respect for minorities. Removing control of the areas of commercial and economic life of Northern Ireland to an external body, over which the people of Northern Ireland have no control, risks undermining that balance. Any deal on Brexit on 31 October must avoid the whole or just part—that is, Northern Ireland—being trapped in an arrangement where it is a rule taker.

The Government intend to set out more details on our position on an alternative to the backstop in the coming days. In the meantime, I can assure the House that under no circumstances will the UK place infrastructure, checks or controls at the border. Both sides have always been clear that the arrangements for the border must recognise the unique circumstances of the island of Ireland and, reflecting that, be creative and flexible.

The Prime Minister’s European Union sherpa, David Frost, is leading a cross-government team in these detailed negotiations with Taskforce 50. We have shared in written form a series of confidential technical non-papers, which reflect the ideas the United Kingdom has been putting forward. These papers are not the Government setting out our formal position. These meetings and our sharing of confidential technical non-papers show that we are serious about getting a deal, and one that must involve the removal of the backstop”.

[Lord Murphy of Torfaen (Lab)]

My Lords, if there is an ounce of truth in the reports today that the Government’s technical non-paper, or indeed a real paper, dealing with the Irish border is suggesting physical infrastructure or indeed anything that currently does not exist at the border, does the Minister accept that that could compromise the Good Friday agreement, that it flies in the face of the joint declaration of 2017 and that it would break the law as outlined in Section 10(2)(b) of the European Union (Withdrawal) Act 2018? Can he categorically tell the House that no such proposals have been considered?

[Lord Duncan of Springbank]

My Lords, the noble Lord speaks with wisdom on this matter and brings great experience to the question. I can be categorical: there will be no infrastructure at the border. That is the policy of this Government; it continues to be that, and it will be that going forward. As for the technical non-papers, those are matters for discussion with the EU and it would be inappropriate just now to talk further on them, but this House will have ample opportunity in due course to examine them in the thorough and careful detail that I know it will take to do so.

[Lord Bruce of Bennachie (LD)]

My Lords, has the Prime Minister not acknowledged that there will be physical customs posts within striking distance of both sides of the border? Would that in itself, according to the reaction that we have seen across Northern Ireland, not be deemed by most people to be incompatible with the Good Friday agreement? Could the Minister respond to the freight industry’s suggestion that any such proposal would require designated routes, which clearly would require restrictions on other routes across the border and therefore would in themselves be fundamentally disruptive of free movement across the border? This is a non-paper so presumably the Government are sounding the water, but do they not recognise that what they are coming up against is that there is no Brexit arrangement that will not deeply damage the economy and security of the people of Northern Ireland and indeed of the rest of the UK as well?

[Lord Duncan of Springbank]

My Lords, I had the pleasure this morning of waking up to the dulcet tones of my right honourable friend the Prime Minister on the “Today” programme. When he was asked about proposing a customs border five to 10 miles back from the border, he was very clear, saying: “That’s not what we are proposing at all”. I reiterate the point that there will be ample opportunity to discuss this very clearly. It is very difficult to discuss a non-paper when the non-paper is not available to discuss.

[Lord Hain (Lab)]

My Lords, given that the Government have formally and legally agreed with the EU on no border, no hard-border-related checks or controls between Ireland and Northern Ireland, preserving an all-Ireland economy and the single market, and protecting North/South co-operation as part of the new Good Friday/Belfast agreement, can the Minister explain why they appear ready to present proposals in Brussels that achieve precisely none of those objectives—including by suggesting customs checks away from the border, as I heard the Prime Minister indicate today that they would do? Surely the Government are proposing to break the law again by contravening Section 10(2)(b) of the European Union (Withdrawal) Act 2018, which specifically bans,

“border arrangements between Northern Ireland and the Republic of Ireland after exit day which feature physical infrastructure, including border posts, or checks and controls, that did not exist before exit day and are not in accordance with an agreement between the United Kingdom and the EU”?

[Lord Duncan of Springbank]

The noble Lord raises a point that we must be very clear in answering. My right honourable friend the Prime Minister has been very clear: there will be no infrastructure, no checks and no controls at the border, and we will be in full conformity with our obligations under the law. With regard to the comments that have been floating around today regarding the dialogue with the EU, it will be easier to have a proper discussion on this issue when those documents are in the public domain, as they will be, to facilitate that very discussion and the interrogation by the Members of this House.

[Lord Empey (UUP)]

My Lords, we are having a debate tomorrow on the European Union. Not only do we not have a non-paper; we do not have any paper. It is very difficult to negotiate, suggest or judge if you have absolutely nothing in front of you. I appeal to the Minister to implore his colleagues that if we have a general debate tomorrow, at some point immediately thereafter—whether next week or whenever—we actually put down proposals in black and white that this House can debate and, hopefully, share with the other place. We are running around in circles and arguing over language, one thing is contradicting the other, and this merely adds to and builds up the uncertainty that is so corrosive to not only our economic but our political existence.

[Lord Duncan of Springbank]

My Lords, it is important to stress that this House is not itself negotiating: the UK Government are negotiating with the EU. It is important in that negotiation itself to respect the conditions of the negotiation. Equally, it will be vital for this House and the other place to fully examine that which emerges from those negotiations, as it is right and proper to do.

[Lord Adonis (Lab)]

My Lords, will the Minister confirm the point made by my noble friend Lord Hain that any new infrastructure at or near the border would be a breach of the European Union (Withdrawal) Act 2018?

[Lord Duncan of Springbank]

The UK Government will not breach that Act. As I have been very clear before, the discussions that we must necessarily have as a preamble to the negotiations will be fully transparent and available to all here and in the other place to interrogate, as I am sure they will, very thoroughly.

[Lord Browne of Belmont (DUP)]

My Lords, will the Minister confirm that it is still the Government’s policy that no new border checks will take place in the Irish Sea as a consequence of any deal being reached with Europe?

[Lord Duncan of Springbank]

I am very happy to offer that confirmation.

[Lord Wigley (PC)]

My Lords, is it the Government’s intention that goods coming from the Republic of Ireland to the United Kingdom via Holyhead will be subject to exactly the same sort of border controls as those in Northern Ireland, or is Northern Ireland being treated differently from the rest of the United Kingdom?

[Lord Duncan of Springbank]

It is not the intention of this Government to have Northern Ireland treated any differently from any other part of this, our United Kingdom.

[Baroness O'Loan (CB)]

My Lords, in a situation where there is no technology to deal with the interface between the European Union and, in this case, the United Kingdom, and recognising as the Minister does the need for the economic interests of Northern Ireland and the Republic of Ireland to be protected, there must be a mechanism to allow manufacturing and trade to continue uninterrupted on 31 October and 1 November. Surely the Minister has to agree that, in the absence of other ideas—and we have not really heard any—the compromise must be a time-limited backstop which does not keep us in the European Union indefinitely, without any power to withdraw unilaterally? As I hope that the Minister is aware, the risk of attack on any physical structure, no matter where situated, is very high. Dissidents are still active, and the UVF on Sunday announced that it would continue to fight if the situation deteriorates further.

[Lord Duncan of Springbank]

The important thing to stress right now is that my right honourable friend the Prime Minister has put to the European Union, in a series of clear technical papers, different approaches that can be considered in those negotiations. He will take the full position and present that to his European Union colleagues over the weekend. Thereafter it will come to this House and the other place for a full and careful consideration.

[Lord Bowness (Con)]

Will the Minister please explain his advice to your Lordships that we will all have plenty of time to discuss this matter? Can he explain how, if the Prime Minister comes back with a deal in the middle of October, he is going to be able to comply with the provisions of Section 13 of the European Union (Withdrawal) Act 2018 and legislate for the actual withdrawal agreement itself, without requesting an extension of time from 31 October?

[Lord Duncan of Springbank]

My noble friend asks an important question, to which the answer has been straightforward. It is the intention of this Government to leave the European Union on 31 October.

[Lord Redesdale (LD)]

My Lords, like the Minister I have only got information from Radio 4 on what is going forward, but that seems to be common parlance. Excuse my ignorance of the situation, but my under- standing is that a border between two countries is set as a line. However, the Minister is indicating that there will be no checks on the border, but the border zone could be 10 miles wide.

[Lord Duncan of Springbank]

Again, the Prime Minister made it very clear this morning, on the show which we all tuned in to, that that is not what he is proposing at all. There will be no new infrastructure on the border. I hope the negotiations which are taking place right now will lead to a successful conclusion which can be interrogated by this House in due course.

[Lord Liddle (Lab)]

Could the Minister confirm that the Government are abandoning the solemn commitment that they made in December 2017 to ensure regulatory alignment on the island of Ireland?

--- Later in debate ---

[Lord Duncan of Springbank]

I am happy to respond simply to the noble Lord. We will continue to meet our obligations as we have set out before this House and the other place, and we will continue to do so throughout the negotiations themselves.

Insolvency (Amendment) (EU Exit) (No 2) Regulations 2019

Lord Duncan of Springbank Excerpts

Monday 30th September 2019 Lords Chamber

Moved by

[Lord Duncan of Springbank]

That the draft Regulations laid before the House on 22 July be approved.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, these regulations address the consequences of the change in the UK’s departure date from the EU to the insolvency regulations previously approved by Parliament. The purpose of the new regulations, as with the previous regulations, is to ensure that the UK’s insolvency law operates effectively after Brexit, in all circumstances. The regulations laid before your Lordships make two changes that are necessary to address the introduction of the modernised Scottish insolvency rules, which came into force after 31 March, and the coming into force of Article 25 of the original EU regulation, which creates an integrated insolvency register across the EU.

These latest regulations update the Scottish rules by removing references related to the EU regulation to ensure a consistent approach to the UK courts’ jurisdiction to commence insolvency proceedings. The changes are made at the behest of the Scottish Government and with the support of the Scottish Parliament, following consultation.

The changes to UK insolvency necessitated by Article 25, which seeks to integrate member states’ insolvency registers, would carry an immediate cost that would be incurred without certainty of reciprocity after exit day. The current regulations would revoke Article 25 of the EU regulation if we leave the EU without agreement.

I stress that it is not the Government’s preferred outcome for the UK and the EU to cease co-operating on cross-border insolvency issues. We have listened carefully to industry professionals, who have outlined the risks that such an outcome would pose to the efficient management of insolvency cases. None the less, we must ensure that the UK’s approach to insolvency is legally correct irrespective of the nature of our exit.

Our assessment of the impact of losing automatic recognition for UK insolvencies in the EU was carefully made; the cost to business would be in the region of £2.7 million per year. We note also that a similar cost will befall EU insolvency practitioners applying to UK courts. However, both sides can retain the benefit of reciprocity only if there is a deal. In the absence of such an arrangement it is important to provide businesses and individuals with certainty regarding the rules governing insolvency in the UK.

These two changes ensure that the impact of leaving the EU will not be exacerbated by retaining inoperable law, which would lead only to confusion and cost. On that basis, I commend the regulations to the House.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I thank the Minister for taking time before the discussion on the Floor of the House to go through some of the more technical detail of the SI. As he said, the regulations make amendments to the Insolvency (Amendment) (EU Exit) Regulations 2019, which were agreed by this House in January. Those regulations were mostly welcomed by the industry and, although concerns were raised by the Joint Committee on Statutory Instruments at the time, the House ultimately passed them. They dealt with the core policy, which I will not seek to reopen, while the No. 2 instrument debated here today appears to make only minor technical amendments.

I shall move on to the substance of today’s regulations. Despite Parliament making it clear that it does not wish the UK to crash out without a deal, it appears that much of this instrument is necessary only to facilitate such a scenario. As the Minister will be aware, both Houses have repeatedly rejected the UK leaving the EU without a deal. Why spend the time and money, therefore, moving forward with SIs that should play no part in the future of our decision-making? Are there any further SIs yet to be laid that deal specifically with a no-deal scenario?

As noted, another element and purpose of this instrument is to amend the Scotland-only regulations, as insolvency is partly devolved. I note from the EM at the back of the SI paperwork that consultation was carried out with the Administration in Scotland. It would be helpful to get a little more detail about what consultation was carried out between the department here and the Scottish Administration. I am curious too about timing. Why have the regulations been brought forward only now, when the new Scottish insolvency laws came into force in April this year?

With regard to the drafting of these regulations, I mentioned earlier that the previous insolvency regulations were mostly welcomed by industry. As the Minister has pointed out, there is a financial cost. I am curious about whether any further discussion or consultation has taken place with the industry.

We have no intention of opposing these technical regulations, though I would be grateful if the Minister could offer assurances in relation to a number of the issues that I have raised.

--- Later in debate ---

[Lord Flight (Con)]

My Lords, the UK has a great advantage over most European economies and the US when it comes to effecting a sorting out and recovery of a business that is failing. Can the Minister confirm that whatever EU rules we may be moving in tandem with will not damage our advantage in sorting out businesses?

[Lord Duncan of Springbank]

My Lords, this has been a short and relatively sweet debate in some respects. There seems to be a recognition that these modest adjustments are necessary, primarily as a consequence of the earlier date not being met. I suspect there is a question about reciprocity. Let me tackle that head on. One of the challenges we have here, even allowing for the legislation made in the other place, is that the situation regarding the EU depends upon the EU. We cannot provide for what it will do in these circumstances. That is why we must be absolutely certain that in any circumstances in this area of insolvency we are legally sound and entirely correct. It would be wrong to do otherwise. However, it is important to stress that if we secure a deal, these regulations will become moot. We will not be pursuing them in that regard, so we will end up in a transition period and then, I do not doubt, the future relationship will examine a number of these aspects and we will see a very different outcome. However, these regulations are necessary. We have spoken with a number of bodies representing those responsible for insolvency to ensure that they are content with the way we are taking this forward.

In relation to some of the points raised by the noble Lord, Lord McNicol, we have looked at this very carefully to establish exactly where the costs rest. Had they been above the £5 million threshold, of course we would have done a full impact assessment. The current assessment is that the figure is £2.7 million and therefore it does not fall into that category. We have done a thorough consultation to ensure that there is no risk whatever that this will suddenly conflagrate beyond that.

As to timing, the noble Lord rightly pointed out that the Scottish Government moved forward its legislation in April, just after the previous proposed exit date. It is not a question of dawdling on our part, but of trying to put these two things together and move them forward, and we would have done so before that exit date in October because it would be necessary to do that. As to the level of consultation with the Scottish Government, it will not surprise noble Lords that we did a thorough consultation with them. One of the Scottish Parliament’s committees did an investigation and affirmed that this was the right approach. We spoke to several bodies in Scotland about this. The changes we are making at this point are relatively modest. They correct the legislation which emerged after 31 March to make sure that it is legally sound. It could not have been done before then because at that point we were not sure what was going to happen by that date, so the legislation could not anticipate the situation in which we ultimately found ourselves. I think the Scottish Government are relatively content, but I am quite happy to provide more information, should that be required, on the official level of engagement that has taken place.

The noble Lord, Lord Fox, made a point about the wider insolvency framework and touched on the balance of powers in respect of authorities. He will be aware that a review in 2016 looked at this. I believe that out of that, some of the issues the noble Lord has raised will be addressed looking at international best practice. We will look at European best practice. It would be foolish not to, given that we are so often involved in cross-border insolvency matters. I expect that in years to come we will see a very different approach to how we examine the wider insolvency question, while also keeping pace with where the EU finds itself.

Both noble Lords asked whether there are any more no-deal SIs. The answer is, not from me. I hope that is the answer they are looking for. I am probably going to have correct that if it is not true. I am nearly certain: not from me, and if I am wrong, I will confirm that later. The important thing to stress is that much of the work I have done today and last week was modest adjustments primarily resulting from the adjustment to the date. It is not my intention to bedraggle you for much longer.

[Lord McNicol of West Kilbride]

I just want to follow up on that and seek some clarification from the Minister. If, for some unknown reason, we do not exit the EU on 31 October, will we need to be back here changing the dates in the SIs all over again to whatever the next date is?

[Lord Duncan of Springbank]

That is very easy and straightforward to answer. It is the Government’s policy to leave on 31 October, but the laws have been drafted to ensure that, going forward, we will not have to revisit these regulations. I reiterate that, come Halloween, we will be on the other side.

[Lord Fox]

Can the Minister clarify the point about the modified version of the jurisdictional tests?

[Lord Duncan of Springbank]

I had written that down but then forgot to mention it. The noble Lord will be aware that one element of the original regulations was the jurisdictional tests. The modification that we are talking about here is to ensure that those tests are broadly compliant with the changes that have been brought in. The jurisdictional tests themselves remain broadly intact. Their purpose is to ensure that the legal jurisdictions of the various courts function after Brexit.

[Lord Fox]

To be clear, the modification is with us rather than with Europe.

[Lord Duncan of Springbank]

Absolutely—the modification is with us. However, the point is that broadly the tests are part of retained EU law and we have made the adjustments to make sure that they are compliant with our own statute book.

[Lord Flight]

My Lords, will these changes in any way damage the superior insolvency legislation that this country has at present?

[Lord Duncan of Springbank]

My noble friend is right to remind me of a point that I had almost overlooked by gazing at the Benches opposite. No, it should not damage that legislation. In fact, the UK is a good jurisdiction in which to address insolvency issues. I think that that is widely recognised in the EU and around the globe. We have an advantage there, and if we can maintain that advantage, this will be a place where such law can be made and we can maintain our leadership credentials. On that basis, I would be content to move forward with the regulations.

Motion agreed.

Gas Tariffs Code (Amendment) (EU Exit) Regulations 2019

Lord Duncan of Springbank Excerpts

Thursday 26th September 2019 Lords Chamber

Moved by

[Lord Duncan of Springbank]

That the draft Regulations laid before the House on 10 July be approved.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, I did not expect such a packed House for my statutory instrument. Let me give your Lordships some background. EU legislation governing our energy markets will be incorporated into domestic legislation via the withdrawal Act retained law. The department is working to ensure this energy legislation continues to function smoothly after exit, and supports a well-functioning, competitive and resilient energy system for consumers.

What does this statutory instrument do? The Article 50 extension to 31 October means that additional EU law will now be retained. Chapters 2, 3 and 4 of the TAR code, which established network code on harmonised transmission tariff structures for gas, have applied since 31 May. We need to amend our previous legislation, the Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019, to address inoperabilities in these additional chapters—for example, with reference to the naming of EU institutions. This supports our aim to retain regulatory functions and frameworks in all eventualities by keeping Great Britain and Northern Ireland’s gas markets working effectively, and by providing continuity for UK industry and its consumers.

The aims of TAR are to increase transparency and the coherence of tariff structures for gas sale and purchase and procedures used to set tariff structures. Tariff structures cover ways in which transmission system operators collect revenues associated with the provision of services at entry and exit points, and collect via capacity and commodity-based transmission tariffs and non-transmission tariffs.

Chapters 2, 3 and 4 applied across the UK and the EU from 31 May 2019. Regulations need to be amended by this statutory instrument to correct deficiencies in what will be the retained EU law—namely, where we state EU entity functions and references to EU institutions and bodies. Deficiencies need to be removed or replaced with reference to UK entities—for example, replacing “member states” with references to UK elements. The regime introduced by TAR is retained, subject to these amendments. The statutory instrument aims to maintain existing domestic rules while amending or removing provisions no longer functioning on exit day. It also aims to retain technical specifications wherever possible, with the result of maximising business continuity for market participants and cross-border gas trading.

In conclusion, the regulations are an appropriate use of the powers of the withdrawal Act to maximise business continuity for UK market operators, facilitate continued efficient international trade in gas, and help to protect security of affordable gas supplies for UK consumers. On that basis, I commend these regulations to the House.

[Lord Teverson (LD)]

My Lords, first, I welcome the Minister to his role. I know this has already been done by our official Front-Bench spokesman, but I very much welcome that he has taken on this broader brief, particularly when the areas of climate change and energy are of great importance—globally as well as within this country. I have no issue with this secondary legislation, but it enables us to ask some key questions related to energy markets, Brexit and, in particular, gas.

The first area that I want to explore is the island of Ireland. As the Minister will be well aware, there is a single energy market across the Irish Sea. I notice particularly that this statutory instrument covers the whole United Kingdom, including Northern Ireland. It is important for the Minister at this stage, particularly in the context of potential no deal, which this secondary legislation is about, to assure us that the single energy market, which includes gas as well as electricity, remains coherent. There are ways of making it remain coherent, given the total dependency that there is on energy supplies between both sides of the border in a no-deal situation. The Republic of Ireland is almost completely dependent on the UK for its gas supplies—gas is starting to come through from its own fields, but that is far from full at the moment—and any disruption of that totally integrated market would be very negative for both the Province of Northern Ireland and the Republic.

I also want to ask about interconnectors, which are an increasingly important part of our energy strategy, and rightly so; I have welcomed many times the fact that we have pushed the interconnector concept forward in relation to energy balancing within the UK, particularly with the increase in renewables. When it comes to gas, we have three interconnectors: one is with Ireland, of course, but we also have them with the Netherlands and Belgium. Again, I seek the Minister’s reassurances—I hope with some reason—that those interconnectors will continue to work, given the fact that we have had, albeit on the electricity side rather than gas, a number of energy incidents recently that mean that our energy security is particularly important in this area. As I understand it, PRISMA and the systems around it will stay in place but, as we come out of the internal energy market if we have a no-deal Brexit, I am not confident that those interconnectors will be quite so straightforward as they might be.

I wish to push the envelope slightly into the important area of oil. As I understand it, the Government have said that when we leave the European Union, however we do so, one area that has not been dealt with in terms of a rollover of European law will be the reserves of petroleum held by the UK after Brexit, and that the Government do not feel bound by the European Union rules on fuel reserves, which I think would mean some 85 million barrels of petroleum being held within our reserves. Rather, they are looking to the International Energy Agency rules, which would reduce that to 35 million barrels, under half that figure. I understand that some of that reserve is actually held in the Rotterdam/Antwerp area. If that is the case, I wish to be reassured by the Minister that in the event of no deal we would still have access to those reserves abroad.

Given the situations in Saudi Arabia with the drone attack, in the Strait of Hormuz, in Iran and in Venezuela, I caution strongly that at this time we should not look to reduce our petroleum reserves in the United Kingdom. This is fundamental to our national security and I urge severe caution on the Government. I would be very interested to hear the Minister’s response to that.

In the Mansion House speech by the previous Prime Minister, and indeed this has since been confirmed by the previous Minister, Claire Perry, we intended to remain—if we could, difficult though that may be outside the single market—a member of the internal energy market, where we have been one of the greatest proponents of liberalisation and one of the countries that has done most to set up that internal market. I wonder whether it is still government policy to try to remain within that energy market, which covers gas as well as electricity.

One of the fears of the gas industry on Brexit is about our need for labour mobility. This industry, more than almost all others, depends on the mobility of expertise and the way that it operates. Why should the Minister be confident of keeping that expertise in circulation following Brexit?

Lastly, this statutory instrument mentions the transmission systems operator. Since the electricity brownout during the Summer Recess, there has been a question about conflict of interest and whether National Grid is the right body to remain as the transmission systems operator. Will the Minister comment on this with reference to the gas side of that operation?

--- Later in debate ---

[Lord McNicol of West Kilbride (Lab)]

My Lords, I join the noble Lord, Lord Teverson, in welcoming the Minister to the Dispatch Box. I am sure that in preparing for this SI, looking through the paperwork and the impact assessment, which says there is no significant impact, he might have thought this was a nice, easy one, but the noble Lords, Lord Howell, Lord Teverson and Lord Liddle, have rightly asked further far-reaching questions on the wider issues of energy and gas supply as we move forward. I shall take the Minister back to the start.

The regulations before us deal with the establishment of a network code on harmonised transmission tariff structures for gas, arising from the UK’s withdrawal from the European Union. This issue was debated at length during the debate on the Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019. The Explanatory Memorandum makes it clear that today’s instrument is needed because exit day has been pushed back: it therefore amends those regulations. Will the Minister therefore begin by assuring the House that these regulations do not mark any shift in policy towards the regulatory framework relating to gas?

Looking briefly at how these regulations were laid, I need not remind the House that they would not have been debated and passed until next month had the Supreme Court not announced that Prorogation was invalid. In such a situation, can the Minister be certain that they would have completed their passage before exit day? If not, what would the consequences have been? On the drafting of these regulations, the House will be aware that other regulations need to be amended as a result of the change in exit date. Will the Minister explain why these need to be amended? If this instrument is necessary to make such a small change, will he say why the Government chose to pass this through the affirmative procedure?

More widely, the regulatory framework is an important cornerstone of energy policy, and while the subject has been debated at length, I want to return to one core issue. My noble friend Lord Grantchester has been vocal on the transfer of powers relating to energy policy, particularly on the many responsibilities due to be handed to Ofgem, which has faced budgetary constraints under this Government. Can the Minister say whether any further regulations due to be laid before exit day will transfer any energy powers to UK agencies? Going back to a point made by the three noble Lords who spoke earlier, protecting our energy supply is critical to our safety and security in such difficult and troubling times. I agree with the noble Lord, Lord Teverson, that retention of the petroleum reserves is an issue of national security. Although it does not relate directly to the SI, some words about that from the Minister on behalf of Her Majesty’s Government would be appreciated.

[Lord Duncan of Springbank]

I thank all noble Lords for their participation in this short but none the less instructive debate. I will begin where the noble Lord, Lord McNicol, left off, to answer some of the questions specific to the statutory instrument.

The issue to remember is that because we did not leave on 31 March, the legislation that had been passed at that point as retained law had to incorporate the fact that this piece of EU law was passed on 31 May and therefore became part of EU retained law. The reason we have brought this back now is that there are certain elements of that retained law which would need to be adjusted to be functional after Brexit within domestic law. The changes are relatively modest but none the less critical.

The answer to why it was done via the affirmative procedure is simple: because it has elements in relation to fees. As to whether it represents any shift in our policy, at a fundamental level the answer is no. This is simply a tidying-up exercise, which is modest in its implications but none the less critical to make sure that there is a functioning statute book after Brexit. As to the transfer of powers to Ofgem—it was not in my briefing pack but it is now—in the transfer of powers from the EU regulator ACER to Ofgem, no additional powers are created.

Those are the specific answers to the questions on the statutory instrument. I will now turn to the questions raised by noble Lords and begin, in order, with the noble Lord, Lord Teverson. One of the important things to stress about the market on the island of Ireland is that it is a single electricity market, not a single gas market. The gas does not cross the borders, only the electricity. The UK Government remain fully committed—as do the Irish Government—to ensuring the single electricity market on the island of Ireland. We believe that will be a priority for both Governments to ensure.

There is an interconnector transferring gas from the United Kingdom into the Republic of Ireland and we do not anticipate that that will be affected by any of these issues. The gas market across the EU is a remarkably—I want to use the term without meaning it as a pun—liquid market, but it is a very significant and successful market.

When it comes to interconnectors with the EU, touching on some of the issues raised by the noble Lord, Lord Liddle, we secure only 5% of our gas from the EU. It is a modest amount. Will that be affected by some of the geopolitics on the continent of Europe? We do not anticipate so, but have reserves which will allow us to secure continued use of gas during any such period.

My noble friend Lord Howell raised the wider situation on the continent of Europe. It is important to look at some of the real challenges this creates for the continent, the EU and ourselves. The first thing to stress is that we believe the Nord Stream pipeline is a problematic reality, which is why we are supportive of where Ukraine stands. However, there are also serious issues for the states to the east of the European Union. In this country we are moving swiftly towards decarbonisation but Poland, the Czech Republic, Slovakia and others are presently faced by the impossible devil’s dilemma of having to continue with their indigenous coal reserves being utilised or importing from Russia. Noble Lords can appreciate the dilemma that creates for the EU as it seeks to determine a decarbonised agenda. We have been, as a number of noble Lords have noted, a very liberalising influence in trying to secure the movement going forward to help those countries decarbonise, but it is, as my noble friend Lord Howell correctly stresses, one of the greater challenges faced by the continent today.

We will seek to continue to be participants in the energy markets of the EU. Brexit will have an impact on that and it is very difficult for me to anticipate exactly how we shall continue in that area. For example, one of the issues on which we have been a great leader inside the European Union is emissions trading, where we have sought from a leadership position to encourage the decarbonisation through a market-based regime. Exactly how we will continue to do so after Brexit remains to be determined. Part of the difficulty, with which noble Lords will be very familiar, is that we are unable to begin to negotiate the future relationship until we have established the departure. Some of these questions which rightly should not only be answered now but should have been some time ago have not been answered. On that basis, we cannot do it unanimously and must wait until such time as we can move this forward with the EU after Brexit.

[Lord Teverson]

I thank the Minister for giving way. What I am trying to get at here is that the previous Government—the previous Prime Minister and her Ministers—were able to say, “We want to remain a part of the internal energy market. We may not achieve it, but that is our intent”. I am very aware that the present Prime Minister is trying to quite substantially change the political agreement within any withdrawal agreement, and I am trying to determine what government policy relating to this is known. Is the position the same or has it changed?

[Lord Duncan of Springbank]

Let me be very specific: it is the policy of this Government to remain part of the internal energy market. The policy has not changed—for the same reasons, in truth, that applied before. They still apply today.

I will write with a specific answer to the question about petroleum reserves, which might be helpful. It is important to stress that it is government policy to ensure that the reserves are adequate for every eventuality. They must be stress tested necessarily through the challenges that Brexit represents. It is not our ambition to in any way put at risk what those reserves mean for the functioning of the wider energy situation in the United Kingdom. I also stress that we are—primarily in gas, certainly—dependent on imports from outwith the EU as a whole, although not primarily from Russia.

[Lord Howell of Guildford]

We are talking about gas and not oil reserves. That means gas storage. As we know, our own gas storage system is not all that reliable and has within recent memory gone down quite severely, with devastating effects on short-term gas prices. Are we planning any further storage projects of the kind we have had in the past, or to replace the Rough storage facility in the North Sea as a result of moving into the Brexit situation?

[Lord Duncan of Springbank]

I do not believe that the Brexit situation changes the dynamic of how we approach the wider question of gas storage. We need to make sure that the storage is adequate for any—in fact, every—eventuality. Brexit itself has not changed the policy on that. It will be our intention to ensure that it is not only adequate but able to anticipate whatever challenges come ahead. We will remain committed to that end.

[Lord Teverson]

I will not interrupt again. However, I feel that this is a really important national issue. Will the Minister confirm or give us assurance that, following Brexit, the Government will not—immediately or within a short period of time—reduce the amount of petroleum reserves that have to be held in this country?

--- Later in debate ---

[Lord Duncan of Springbank]

The Government will ensure that the reserves held are adequate for every eventuality. I suspect that the noble Lord is asking a more fundamental question, which is whether that limit should be set by the EU or follow international standards. Quite clearly, in both instances, it is important for the Government to judge what is right for the United Kingdom. We will do so on that basis.

I think that I have just about tackled all the issues. If I have missed anything out, I am very happy to respond in writing. On that basis, I beg to move.

Motion agreed.

Statutory Auditors, Third Country Auditors and International Accounts Standards (Amendment) (EU Exit) Regulations 2019

Lord Duncan of Springbank Excerpts

Thursday 26th September 2019 Lords Chamber

Moved by

[Lord Duncan of Springbank]

That the draft Regulations laid before the House on 15 July be approved.

Relevant document: 59th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

It is like I have never been away. Noble Lords will be aware that regulations were laid before Parliament earlier in the year to address deficiencies arising in the fields of accounting and audit from the withdrawal of the United Kingdom from the European Union. They did not implement new policy but granted new powers and responsibilities to the Secretary of State and the Financial Reporting Council. Further regulating adjustments are now required.

The EU accounting and audit directive, together with the EU’s international financial reporting standards regulation—to the extent that they are not repealed—will form part of the retained EU law under the European Union (Withdrawal) Act. The accounting and audit directives set out the requirements on the accounts and audit of most incorporated businesses, as well as a framework of standards. The directives also set out the responsibilities of the competent authorities.

The EU’s international financial reporting standards regulation sets standards for accounting by parent companies of groups. The audit regulation sets additional requirements on the statutory audit of those businesses defined as public interest entities. These are banks, building societies, insurers and issuers of shares or debt securities on regulated markets.

Our aim is to ensure that the framework for accounting and audit regulation works effectively following the UK’s withdrawal from the EU. The statutory instrument under discussion takes some further steps to help facilitate this. With regard to the audit directive, this instrument will ensure that equivalence or adequacy status decisions will be granted by negative resolution regulations. It makes sure that, irrespective of whether a withdrawal agreement is reached, the Secretary of State can make regulations after our exit from the EU to set out the framework for future assessment of equivalence and adequacy by the UK regulator. It will also enable us to grant equivalence and adequacy status to some third countries that have had applications under consideration in the EU during the period since March this year.

This instrument also completes the process of extending powers to the UK’s competent authority, the Financial Reporting Council. It extends the FRC’s ability to regulate third-country auditors to include EEA and Gibraltarian auditors. It also puts beyond doubt that those EEA auditors who have already registered in the UK as statutory auditors will retain that status after exit. The instrument makes an important change to the audit exemption framework. In common with the exemptions in the accounting framework for subsidiaries, the subsidiaries audit exemption will not be available unless the subsidiary has a UK parent. Finally, on audit, the instrument corrects an error in the previous audit statutory instrument affecting the frequency of audit inspections required for auditors of public interest entities.

On accounting standards, the instrument revokes some EU regulations relating to the adoption or amendment of IFRS within the EU. Without revocation, these regulations would be brought into domestic law by the European Union (Withdrawal) Act. However, the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 have already made provision for what will be the international accounting standards for the UK at exit day. These revocations remove any duplication and potential confusion. The revocations here also reflect changes in EU adopted international accounting standards issued or identified since the earlier accounting statutory instruments were made.

What will the impacts be? The Government have carried out a de minimis impact assessment of this instrument as the overall costs to business are anticipated to be small. This confirmed that the additional impact on business of the changes in this instrument is a cost of approximately £930,000 per year. Only limited sectors are affected by each of the changes. This limited impact is counterbalanced by the beneficial effect of the changes in the first audit EU exit statutory instrument, which was assessed as saving businesses approximately £2.96 million per year.

In conclusion, these amendments aim to provide continuity for businesses operating in the audit sector wherever possible and to ensure that UK companies will continue to benefit from global trade and investment. If the UK leaves the EU without an agreement, the measures contained in these regulations will be critical in ensuring that the audit regulatory framework in the UK works effectively. I commend these draft regulations to the House.

[Lord Purvis of Tweed (LD)]

Is the Minister able to indicate a little more why it was a de minimis consultation? There has been briefing, but companies that operate on a cross-border basis have to register with the country in the EEA that they will be doing business with. This means that, effectively, there will now be British businesses doing duplicate processes after exit—a UK one and an EU one. These points of principle on the additional burdens on British businesses having to operate in two entities were raised repeatedly during the passage of the Trade Bill. It is even more complex for those in Scotland, where the Minister and I both live, which is under the ICAS registration process. What information does the Minister have about how many British businesses will have to have these dual processes? Why was there no consultation on the regulatory impact on those businesses, which will be a cost to the British economy?

[Lord Duncan of Springbank]

The impact assessment was conducted on a de minimis basis and it established that the cost is £0.93 million—£930,000. I am happy to write further to the noble Lord on this matter to set out exactly how this figure was reached and who is affected by it and will place a copy in the Library.

[Lord McNicol of West Kilbride (Lab)]

I thank the Minister for his introduction to this statutory instrument. Before I come to the substance of the policy in these regulations, I highlight the comments made by the House of Lords Secondary Legislation Scrutiny Committee, which said:

“However, the range and magnitude of the changes are significant: the Regulations make changes to 15 items of legislation and include a sub-delegation of powers to UK regulators and extend a ministerial power of direction”.


The committee is right. Despite the utterances in the Explanatory Memorandum that this instrument exists only to continue the framework of the regulatory oversight and professional recognition of statutory auditors and third-country auditors in the UK, concerns have been raised, as we have just heard, that the regulations extend beyond this. The challenges financial services organisations will face in adapting to these changes are numerous, and were also noted by the SLSC. Can the Minister confirm whether any recent support has been offered to such firms to assist them in adapting to the changes?

In the light of such wide-ranging challenges resulting from these regulations, I draw the House’s attention to the fact that one of the core reasons why the other place divided on this instrument was the absence of a full impact assessment. Although I have no intention of similarly dividing this House, I place on record my disappointment that the Government have chosen not to publish an assessment in the period between these regulations being debated in the Commons and today. Parliament needs to be given the full information on the impact that these regulations will have on the financial sector; without such an assessment, that is not the case.

Moving on, I should like to ask the Minister a number of technical questions about the substance of these regulations. I will speak slowly. First, on Regulation 4, which deals with the loss of the EEA subsidiary exemption, can he confirm the timescale for the issues here to take effect? The legislation does not give a specific timeframe for the implementation of this provision, so I can assume only that further regulations may well be necessary. Secondly, in relation to Regulation 6, which focuses on the EEA qualification for auditors and which the Minister touched on, can he guarantee to the House that EEA-qualified auditors recognised up to December 2020 will retain their eligibility? If I missed that in his introductory remarks, my apologies.

To conclude, the way in which this instrument has been progressed, with little assessment and consultation, is deeply disappointing. It is mentioned in the Explanatory Memorandum for the SI, under paragraph 10 on “Consultation outcome”, that there has been no consultation on this instrument, which is deeply worrying. There also seems to be a thread of ambiguity through the regulations, which I hope the Minister can cast aside with assurances today. On this side of the House, we have agreed that the Government should make preparation through secondary legislation to ensure continuity after exit, but I hope the Minister can confirm that future regulations aimed at doing this will take a different approach.

--- Later in debate ---

[Lord Duncan of Springbank]

My Lords, this is quite an exciting issue when you get into it—more so than I anticipated. I will attempt to tackle each of the questions raised in turn. After that, perhaps I may make some general points.

In reference to the points made by the noble Lord, Lord McNicol, the first thing to note is that the passage he quoted refers to the 58th report of that committee and not the 59th. In that report, the committee described the SI as being of interest, but the reports are quite different in the way they tackle the elements themselves. On the noble Lord’s specific points about the EEA auditors losing their exemption and to what timescale, that will happen at the point at which the changes come into force on exit day. Regulations 4 and 7 amend the Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019, which will also come into force on exit day. He asked whether the EEA qualification of auditors will be recognised up to December 2020 and the answer is yes, it will.

I hope noble Lords will bear with me because I am trying to make sure that I give all the answers that they expect. On the question asked by the noble Lord, Lord Liddle, about the implications of this, the impact assessment that was undertaken was able to show that the impact was modest. But the question he asked echoes the points made by the noble Lord, Lord Purvis of Tweed, so if the noble Lord, Lord Purvis, will allow, I will copy him into the answer that I will lodge in the Library. Noble Lords should have all the information that I have. I have no problem with that.

As to the wider philosophical questions of potential conflicts of interest and so forth, I am probably less equipped to answer those specifically. However, the Government will always maintain the highest levels of integrity, as noble Lords would expect. I have no reason to suspect any reason why I should be discomfited by what I am putting forward today, whether there are ethical or indeed wider accountancy considerations. It is not the intention of the Government in any way to create further ambiguity in this, but rather to ensure continuity as we move this matter forward. However, I will take away the issue about consultation, which is useful. I will reflect on that. I would not wish there to be an issue where noble Lords were uneasy because of the absence of information. I want noble Lords to have as much information as I have. I will reflect on that and make sure that in future I am able to bring noble Lords information that might help them.

[Lord Purvis of Tweed]

It would not be the first time that Ministers at the Dispatch Box during consideration of statutory instruments or Brexit-related legislation have said that they will reflect on the lack of consultation. To set my mind at rest on this aspect, what consultation was carried out on this measure with the Institute of Chartered Accountants of Scotland? What consultation was there with the Scottish Government? As the Minister will well know, the implications of this measure affect all parts of the United Kingdom, including those that have distinct history and presents, not just England.

[Lord Duncan of Springbank]

I am happy to write to the noble Lord, Lord Purvis of Tweed, answering each of those questions—if he will permit. Again, I will ensure that the answer is laid in the Library as appropriate.

I use the term “reflect” because it is the only term I can use in this instance. It is not just my own views that might reflect on the wider questions. My view right now is that I do not wish to stand before the House when these questions are raised when the answer is not adequate for noble Lords’ consideration. I wish all noble Lords to be able to see that we have taken every possible measure to assess the correctness of the approach and I want noble Lords to have comfort and confidence that that has been done adequately. I will give a guarantee that I will do that very thing. On that basis, I wish to move forward with the instrument.

Motion agreed.