Draft European Union (Withdrawal) Act 2018 (Consequential Amendments) Regulations 2018
(5 years, 6 months ago)
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The Parliamentary Under-Secretary of State for Exiting the European Union (Chris Heaton-Harris)
I beg to move,
That the Committee has considered the draft European Union (Withdrawal) Act 2018 (Consequential Amendments) Regulations 2018.
It is a huge pleasure to be here with you in the Chair, Ms Buck. This is my first such experience as Parliamentary Under-Secretary at the Department for Exiting the European Union, so I hope you will treat me gently. It is a particular pleasure to introduce the regulations, because one of my first acts on taking up my role on 9 July was signing them.
The regulations are one of three statutory instruments laid by the Department before the summer, all made under the consequential power in the European Union (Withdrawal) Act 2018. The Government have always been clear that the consequential power is a standard power, commonplace in legislation, that it is inherently limited and that its main expected use is for matters of a technical nature. All three statutory instruments laid under the power fall into that category.
I draw that to the Committee’s attention because, on Second Reading of the European Union (Withdrawal) Bill, the right hon. and learned Member for Holborn and St Pancras (Keir Starmer) suggested he had
“never come across such a wide power”—[Official Report, 7 September 2017; Vol. 628, c. 360]
as the consequential power under the Bill. I hope hon. Members will see that concerns about the use of the power were perhaps a touch overblown. I draw the Committee’s attention to the fact that, although the negative procedure could legally have been used for the regulations, we opted to follow the affirmative procedure in this case, so that we are not amending legislation of a constitutional character without providing the opportunity for parliamentary debate.
Put simply, the regulations help lay the groundwork for our exit from the European Union and ensure that the UK’s legal system will continue to function effectively on exit day. They are another step in our Brexit preparations, designed to support legal certainty and continuity as we leave the European Union.
To give some detail, the regulations repeal legislation that has become redundant in consequence of the repeal of parts of the European Union Act 2011 and the European Union (Amendment) Act 2008. On 4 July, my hon. Friend the Member for Wycombe (Mr Baker)—my predecessor at the Department—signed the commencement regulations that repealed section 5 of the 2008 Act and sections 1 to 13 of the 2011 Act. Those laws provided for particular procedures for the approval or ratification of certain EU decisions or treaty changes that would result in the transfer of power from the United Kingdom to the European Union, including the so-called referendum lock. Such provisions are now redundant in the context of our leaving the European Union.
As a consequence of those repeals, legislation that approved matters in accordance with those Acts has also become redundant. Affected legislation includes the European Union (Approvals) Act 2017 as well as parts of the European Union (Croatian Accession and Irish Protocol) Act 2013 and the Constitutional Reform and Governance Act 2010. Without these regulations, that legislation would continue to sit meaninglessly on our statute book; by repealing it, we ensure that the statute book remains clear and therefore more effective. Members should note, however, that the repeals in the regulations do not have any effect on the validity of anything done in relation to EU decisions or treaty changes approved by them.
The regulations also make consequential amendments to interpretive legislation to reflect the introduction of a new category of law—retained direct EU law—into the UK’s legal system on exit day. Amended legislation includes the Statutory Instruments Act 1946 and the Statutory Rules (Northern Ireland) Order 1979, which set out the rules on making statutory instruments—or, in the case of Northern Ireland, statutory rules—under powers contained in primary legislation. In order to provide certainty after exit, the regulations amend that legislation to make it clear that the normal rules on making statutory instruments or statutory rules apply when secondary legislation is made under powers contained in retained direct EU legislation.
The regulations amend the Laying of Documents before Parliament (Interpretation) Act 1948 to ensure that references to laying of documents before Parliament under retained direct EU law are understood to refer to the taking of specific actions in accordance with the relevant Standing Order, Sessional Order or other direction or practice observed by each House of Parliament, as prescribed in the Act. That approach is in line with that already taken in the EU (Withdrawal) Act for the purposes of Scotland’s interpretive legislation, as set out in schedule 8 to that Act. The regulations therefore ensure clarity and consistency for the whole of the UK statute book.
I hope that all members of the Committee will agree that the regulations perform a small but worthwhile role in our preparations to leave the European Union and demonstrate the Government’s commitment to ensuring certainty and continuity as we do so.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
May I, too, say that it is an absolute pleasure to serve under your chairmanship, Ms Buck?
The regulations are uncontroversial, so we do not intend to divide the Committee and I do not intend to detain us for very long, but I would like to probe the Minister on a number of points in the hope that he may be able to offer some answers.
It is an essential feature of the rule of law that legislation is not only clear but can be understood by those who are bound by it. Given that principle, will the Minister confirm plainly for the record that the purpose of schedule 1 to the regulations, which repeals provisions contained in two Acts of Parliament and repeals a third in its entirety, is only to tidy up redundant references to approval procedures for certain EU treaties, and that it therefore has no bearing, either directly or indirectly, on how any future treaty or treaties with the European Union will be approved and ratified? On a related point, can he confirm that any withdrawal agreement, subject to the additional procedures for approval that have been agreed, will still have to be laid before Parliament under the terms of the Constitutional Reform and Governance Act 2010 as a matter of law?
Turning to the various issues raised by schedule 2 to the regulations, could the Minister give the Committee a sense of why the Government feel that they have to legislate in this way and whether it is a direct response to the concerns set out by the Lords Delegated Powers and Regulatory Reform Committee? Its main concern was that clause 8 of the EU (Withdrawal) Act allows for tertiary lawmaking powers currently exercised at EU level to be reassigned to a domestic Government agency or other public body, say the Food Standards Agency or the Environment Agency, and for that agency or body to then make changes to the law in the same way that a Minister would, but without those changes being approved by this House by means of a statutory instrument pursuant to an Act of Parliament. If that is the reason for legislating in this way, will the Minister confirm that the schedule 2 is nothing more than, as he put it, a means of tidying up to ensure consistency and clarity and to close that loophole so that lawmaking powers contained in retained direct EU legislation will henceforth be subject to the same forms of domestic scrutiny as lawmaking by SI under Acts of Parliament?
I will take this opportunity to press the Minister on the wider issue of the progress that the Government have made to date in their legislative preparations for exit day. We all know that we will need approximately 800 to 1,000 SIs to be passed to ensure that we have a functioning statute book on 29 March next year—assuming, that is, that the Government do not use the forthcoming withdrawal agreement and implementation Bill to repeal the fixed exit day that they themselves inserted into the European Union (Withdrawal) Act. A recent report by the Hansard Society found that, so far, only 71 SIs have been laid before Parliament and that even processing SIs at the pace we have seen to date appears to be creating problems, with 20% of the SIs put before the European Statutory Instruments Committee found to contain some form, minor or otherwise, of technical deficiency. Given the importance of processing the hundreds of SIs necessary for an orderly exit, will the Minister give the Committee a sense of precisely how the Government are going to ensure over the coming weeks that all the SIs necessary will have been passed before exit day?
Chris Heaton-Harris
I can be quite brief in my answer to the three specific questions about schedule 1, withdrawal agreements and the purpose of schedule 2. The answer to all three questions is yes.
The hon. Gentleman also asked about the statutory instruments needed so that we are ready for exit day. Hon. Members will have seen that the Fisheries Bill has been introduced today, which is a big piece of exit legislation. The Agriculture Bill has also been introduced, and more Bills will come forward. The SI programme flows from legislation, so it was always going to be the case that there would be more SIs at this stage of proceedings than there have been in the previous two years. We have a manageable programme of SIs. It does mean that parliamentarians will be sat in Committees like this scrutinising them, but that is our role—
Chris Heaton-Harris
I understand that my hon. Friend the Member for Brigg and Goole has volunteered to sit on pretty much every Delegated Legislation Committee available. There is a programme, and my Department is co-ordinating an overview.
Sir Oliver Letwin (West Dorset) (Con)
My hon. Friend makes a jocular remark, but will he expand on the Government’s decision to use the affirmative procedure for this order? There is a sifting Committee, which we agreed as a result of a long discussion. Part of the reason for creating it was to make sure that important things are properly discussed, but it was partly also to make sure that very unimportant things are not. We are clearly all going to go completely mad—if we are not already so—if we have to deal with every totally uncontroversial and uninteresting piece of crypto-constitutional legislation conducted through statutory instruments in this form. Will he therefore give us an undertaking that really unimportant SIs will be put before the sifting Committee, so that it can decide whether they should be dealt with by this method or by the negative procedure?
Chris Heaton-Harris
If only my hon. Friend the Member for Stone (Sir William Cash) were present to answer that. I can give my right hon. Friend that assurance. Before the Committee stands a very junior Minister who was very keen to ensure that he did not make a mistake in the laying of his first statutory instrument. However, that is exactly the purpose of the sifting Committee.
To answer a question that the hon. Member for Greenwich and Woolwich asked, I have had conversations with the chairs of the sifting Committees in the Lords and the Commons to give them a rough idea of the Government’s plans. My Department will absolutely co-ordinate the flow of SIs so that we have a functioning statute book as we leave the European Union.
Question put and agreed to.
Draft Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018
(5 years, 6 months ago)
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The Minister for Energy and Clean Growth (Claire Perry)
I beg to move,
That the Committee has considered the draft Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
It is always a pleasure to serve under your chairmanship, Mr Stringer. The principle behind the draft regulations is one that we would all support: encouraging good behaviour. What gets measured gets managed, and sunlight is a great disinfectant.
The draft regulations will introduce new requirements for large unquoted companies and large limited liability partnerships, and additional requirements for quoted companies of all sizes, to disclose in their annual report information on emissions, energy consumption and energy efficiency action. They will deliver streamlined energy and carbon reporting, as part of a package of changes announced in the 2016 Budget with the valuable aim of simplifying what some stakeholders saw as an overly complex tax and reporting policy landscape—a point of view with which I have great sympathy. They will also ensure that reporting on energy and associated emissions continues after the closure of the carbon reduction commitment energy efficiency scheme at the end of its current phase.
After Green Great Britain Week last week, the Committee will need no reminding that Britain has led the world in introducing measures to reduce greenhouse emissions. That was thanks to an awful lot of cross-party work—long may that continue. Our emissions intensity reduction by unit of national income is at the top of the G20 measurement league; those are not my figures, but those of PwC. One reason for that success was that in 2013 we were the first country in the world to make it compulsory for quoted companies’ annual reports to include emissions data for their entire organisation.
In September 2017, we were one of the first countries to endorse the recommendations of the brilliant Task Force on Climate-related Financial Disclosures. The taskforce, which was set up by the Bank of England, called on companies and financial institutions to implement “decision-useful” disclosure of energy and emissions information in their mainstream financial reports, so that shareholders, investors and employees can clearly understand the risks from changes in climate.
Our clean growth strategy looks at the other side of the problem. Reporting on emissions should encourage companies to take action to reduce them, so we have set out several measures for leading global efforts to cut greenhouse gas emissions by working with businesses, with the aim of improving energy efficiency in business and industry by at least 20% by 2030. In order to take action, however, organisations must know the quantum of the problem, and the first step is measuring energy use and emissions.
The draft regulations will provide an estimated 11,900 organisations with a legal framework, creating much-needed consistency in organisational energy emissions reporting. We estimate that that will lead to savings for businesses of more than £250 million a year in average energy bills.
The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 introduced a requirement for approximately 1,200 quoted companies to state in their directors’ report their annual greenhouse gas emissions alongside an intensity metric, and to disclose the methodology used. The draft regulations will introduce a new obligation for those companies to report their underlying global energy use, to better reflect the true impact of their operations.
The draft regulations will also introduce new requirements for more than 10,000 large unquoted companies and large LLPs to report information about their UK energy use and greenhouse gas emissions in relation to electricity, gas and transport, and to disclose the methodology used to calculate the relevant disclosures. They will further introduce a new requirement to report on the principal measures that the organisation has taken to increase energy efficiency in the financial year. As per the existing requirements, those disclosures are to be included in annual reports—specifically, the directors’ report for companies and a new energy and carbon report for LLPs. We believe that not only will they provide improved transparency for senior management, investors and stakeholders but will enable energy and carbon performance to be in line with both financial and operational performance. Companies might well take interesting learnings from considering what other peer group companies are doing.
If approved, the regulations will be introduced for financial years starting on or after 1 April next year. As always, we consulted widely on the policy and we received 155 responses. The majority of respondents agreed that mandatory reporting is important and that it should apply UK wide, be aligned with best practice in the UK and internationally, and build on the existing mandatory reporting of greenhouse gas emissions by quoted companies and mandatory energy audit under the energy savings opportunity scheme.
There was a very strong message that Government should not impose undue regulations and administrative burdens on UK businesses. The provisions contained in these regulations have gone through a number of refinements to meet that aim, such as the introduction of a minimum energy use threshold for the full disclosures. We have introduced the ability for unquoted companies and LLPs to introduce, as sometimes happens with parliamentary questions, a statement that it would not be practical to meet the reporting obligations, because it is impractical to obtain the information or that disclosure would be seriously prejudicial to the interests of the organisation.
In conclusion, we believe these regulations strike the right balance between disclosure of energy and carbon information and limiting the red tape burden, and that they will help to deliver consistent transparent and comparable reporting, to ensure that businesses can make informed investment decisions as we transition to a low-carbon future. I therefore commend the draft regulations to the Committee.
Dr Alan Whitehead (Southampton, Test) (Lab)
It is a pleasure to serve under your chairmanship, Mr Stringer. I am just getting over the title of the statutory instrument this morning; I concur with the Minister that they are beginning to set new records in sub-clauses and brackets. Perhaps we should keep a running tally, for reporting purposes, of the length of the titles of statutory instruments.
The essential element of this statutory instrument is what companies should do to report their emissions, energy use and various other matters. I completely concur with the Minister that reporting arrangements provide sunlight as a disinfectant. It is right that a scheme should allow that to happen. There was a previous scheme that allowed that to happen under the original carbon reduction commitment. The CRC arose from the Climate Change Act 2008; in its design, it not only required reporting but had a trading element, which was sub-traded between companies. It allowed an extension of the trading arrangements alongside reporting arrangements, which had originally been envisaged in the Climate Change Act for larger companies.
The CRC was systematically whittled away by various measures as it progressed: first by the end of the trading arrangements with companies; secondly by the element of the CRC that not only provided for reporting but for reporting league tables to be produced by the Environment Agency, to allow comparisons of companies’ performance. As the Minister has said, it also provided direct sunlight on to those companies’ activities by comparing them with others.
The third whittling away was the complete closing down of the CRC. It will finish in the 2018-19 reporting period and will be the end of the CRC as a whole. This replacement arrangement for the reporting elements of the CRC is very welcome, but it is the least one might expect following the closure of the CRC. Yes, in introducing additional requirements to the climate change levy on smaller companies the Government have introduced an element of revenue-neutral arrangements for trading, but the arrangements are a welcome successor to the reporting arrangements under the CRC. To some extent they extend those reporting arrangements, as a substantial number of non-quoted companies will now be included. Some 11,000 companies will be required to put these directors’ reports in their company filing.
The problem that we still have is that there appears to be nothing in this particular SI that requires or indicates what will be done with that material once it appears in directors’ reports. At the very least, I would expect spreadsheet reporting, perhaps through the Environment Agency, of collated versions of those company reports. At the very best, I would expect a new league table of those performances, using that data and reporting nationally. There is nothing in the SI that suggests that that will be the case, so the sunlight is apparently somewhat filtered.
A person can get the comparative material coming out of those companies’ reporting, but only if they trawl through every single directors’ report and sit there with a towel on their head for weeks on end trying to put those into line. The original CRC reporting and league table reporting substantially resolved that problem and was widely welcomed when it was originally published.
The slightly alarming backdrop to that is that league tables are theoretically available for company reporting from 2010 to 2012 under the original CRC arrangements. However, were someone to look them up, they would find that they do not exist. They have been deleted. There is not very much sunlight at all so far as historic CRC reporting is concerned. I warmly welcome the introduction of the reporting arrangements, but can the Minister tell me what her Department’s intentions are concerning the presentation of the material in collated form by Government? Better still, can she tell me whether there are any arrangements in hand or proposed for producing, as was the case with the original CRC, some form of league table presentation of those results? It may be that there are separate intentions that are not represented in this SI. If there are, I would very much like to hear about them this morning.
My final request is for the Minister to arrange to ensure that those original CRC league tables are restored to the public record. That would be a good idea because it is not satisfactory that they have been deleted, as they appear to have been. I would be grateful for the Minister’s assistance in getting those back into the public domain.
Ronnie Cowan (Inverclyde) (SNP)
Any move to tackle climate change is welcomed by the Scottish National party. We see it as the greatest risk we face this generation. We are concerned that allowing directors to decide when to be exempt from making statements because of such a statement being
“seriously prejudicial to the interests of the company”
could mean a real risk that the companies that most need to make reductions will just avoid making a statement, because of regulation 6. We encourage the Department to consider removing the exemption, or at least explicitly requiring a director making such a judgment to note in a report that there is no statement on energy usage because “such a statement would be seriously prejudicial to the company’s interests”.
Claire Perry
I thank my friend the hon. Member for Southampton, Test for a characteristically detailed analysis. I have an idea. I imagine that we will be meeting many times over the next few months, on various things, and I thought that perhaps we could enliven proceedings if the hon. Member for Enfield, Southgate taught us all to floss. I was very impressed when I saw his efforts, and that would be marvellous on parliamentary TV.
Turning to the meat of these important regulations, I obviously welcome the support for them expressed by the hon. Member for Southampton, Test. He asked, I think, about why this arrangement is replacing the CRC, but it sounds as though we agree that it is increasing the scope and reducing the burden and this does lead to net cost savings, based on estimates. I am pleased that he welcomes this change.
The hon. Gentleman asked a really important question about what will happen to the data once it is produced. I understand his desire for statutory measures on how the data should be reported. I want to invite him to come with me to something that I am organising about how the world looks at climate-related information disclosure. We had a big event at Bloomberg during Green Great Britain Week, and I was astonished at the amount of analysis and reporting in both standardised and bespoke ways that is happening with all sorts of aspects of climate data, because the audiences for the reporting are very different. Employees might be interested in what their company is doing and will potentially look at the information on a corporate intranet. Government are clearly interested in calculating what the emissions savings are from a particular company. We would be able to query the data remotely, because of course most of this stuff is now in the electronic domain.
There is an enormous and increasingly important raft of activist shareholders and investors whose funds want to align entirely with a low-carbon investment base and who will be relying on analytic platforms such as Bloomberg to grab the information and assess it for them. I think it is rather good that we do not have just one standard way of reporting but are making the information available to a global audience of armchair analysts, who can cut and mash up the data in any way they please. Of course, there are organisations such as BusinessGreen, which both the hon. Gentleman and I have worked with, that will be taking the data and generating their own league tables. I do not think it is for Government to specify how the data is presented. I think it absolutely right that we have made it a mandatory requirement that it be reported, but I imagine that the creative use of the data will be incredible.
I will take away and analyse the hon. Gentleman’s very good point about the league tables, because it would clearly be interesting to see how companies in that group have done over time; we can assess what is happening. We will publish more detailed guidance, and of course any reports that are published will be publicly available from Companies House, which will also act as a repository for all this data.
To pick up the point made by the hon. Member for Inverclyde, I think it is a good idea that if someone is opting out, they say so. I will take advice after the sitting as to whether that is implicit or explicit in the regulations. We have had, on similar measures in relation to some of our offshore oil and gas things, the debate as to what is a material event and what is a prejudicial event; and certainly it would be for companies to be clear about what that is.
My instant support team tell me that we will keep the use of non-disclosure options under review, but I think that we could go further and ask companies to say that they are using the non-disclosure option, without giving away too much information.
I am pleased that we have cross-party support for a very useful and balanced set of measures about disclosure. I am almost amazed by how much scrutiny is happening on a global basis on behalf of investors, including some of our largest pension funds, in determining that their portfolios are investing in companies committed to a low-carbon future.
I will invite the hon. Member for Southampton, Test to my office for a cup of tea when our Bloomberg terminals, which we have in the building, are set up and installed, because perhaps we could have a bit of a tutorial together from Bloomberg on how the information is actually being used. I think that that would be very helpful. With that, I commend the regulations to the Committee.
Question put and agreed to.