Draft Public Procurement (Electronic Invoices Etc.) Regulations 2019
(5 years, 1 month ago)
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The Parliamentary Secretary, Cabinet Office (Oliver Dowden)
I beg to move,
That the Committee has considered the draft Public Procurement (Electronic Invoices etc.) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Gapes, in what I hope will be a fairly straightforward statutory instrument for the Committee to consider.
The Government are committed to securing a deal to ensure an orderly withdrawal from the European Union. In that event, we will be required to continue to abide by our commitments under the proposed withdrawal agreement, including the obligation to comply with EU law during the implementation period and to transpose European directives into UK law.
One such directive concerns electronic invoicing in public procurement. The draft regulations are a short and simple measure that aims to promote the uptake of electronic invoicing in public procurement by requiring public bodies to accept electronic invoices from their contracted suppliers. Principally, the draft regulations will transpose the e-invoicing directive, but they also make a number of small and minor technical corrections to public procurement rules.
Michael Fabricant (Lichfield) (Con)
This SI seems to make good sense—it is very modern, and this is how we should be doing business anyway. However, in the event of no deal, will we have to pass a different statutory instrument or will this one still apply?
Oliver Dowden
I was just coming to that. The draft regulations are due to come into effect after the withdrawal date so, in the event of no deal, we would clearly not be obliged to implement it because we would not be subject to EU law, but we might decide to continue to do so anyway. There are pretty good grounds for that, because it is in essence a simplification measure for businesses. That brings me to a segue.
Significant benefits can be realised by promoting the uptake of standardised electronic invoicing in public procurement, given the reduction in costs and administrative burdens for procuring entities and their suppliers, and given the environmental impact of a move away from paper-based invoicing. That is why in 2014 the EU adopted directive 2014/55 on electronic invoicing.
The draft regulations transpose that directive into domestic law. They do so by amending existing procurement legislation applicable to the award of public contracts and of contracts in the utilities sector. The Scottish Government have brought forward their own legislation to give effect to the directive in similar terms to this instrument. The directive contains one simple obligation for member states: to take necessary measures to require public sector buyers and utilities to receive and process electronic invoices that comply with a common standard.
It is important that I stress from the outset that private sector suppliers, other than those privatised utilities remaining subject to public procurement rules, will not be obliged to use the EU invoicing standard unless they wish to. We are not imposing additional costs on suppliers.
The measures that we are introducing will oblige contracting authorities and other procuring entities to include within their contracts an express term requiring them to accept and process electronic invoices that comply with the standard, where of course there is no dispute as to payment. In the absence of such express electronic invoicing provisions in the contract, a term to that effect would be implied—if they do not put it in, this statutory instrument will imply that term. Suppliers will be able to enforce their ability to invoice purchasers for goods and services electronically via the terms of the contract.
The European Committee for Standardisation was commissioned to draft the standard, and the British Standards Institution was involved in its development. The standard was published in October 2017, following which the UK had 18 months to implement the directive’s requirements. The deadline for that implementation is 18 April 2019. As I discussed with my hon. Friend the Member for Lichfield, it will not escape the attention of the Committee that that falls after the date on which the UK is anticipated to leave the European Union. However, the Government’s aspiration or intention remains that the UK will secure a deal with the European Union. Under the withdrawal agreement, we would then enter the implementation period, during which we continue to be bound by the directive, so the draft regulations will come into force on 18 April 2019.
There is a slight wrinkle in respect of central subcontracting authorities such as local authorities and utilities. The directive confers on member states the discretion to postpone the application of implementing provisions until 18 April 2020, in respect of those entities. We have taken advantage of that derogation. I think it is right that we allow procuring authorities other than central Government authorities time to adapt to the change. However, there is nothing to prevent those authorities from accepting electronic invoices prior to that date.
In the event that no agreement is reached, we will, as we have discussed, consider the options available. We would, of course, be free to implement this provision. I see no reason why we would not choose to do so, but we would make the decision at that point.
As set out in further detail in the explanatory memorandum, we have also taken the opportunity in this instrument to make minor amendments to how the Public Contracts Regulations 2015 and the Concession Contracts Regulations 2016 refer to offences under the Modern Slavery Act 2015. Those are essentially tidying-up measures.
I hope that members of the Committee will agree that with this instrument we have the opportunity to provide real benefits to both the supplier community and the public sector, and I look forward to seeing its progress through both Houses. I commend the regulations to the Committee.
Jo Platt (Leigh) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Gapes. I will start by expressing our support for efforts to modernise and improve the UK’s broken procurement system. From the outset, I should state that we support the principle of e-invoicing. However, there are a number of specific issues with these regulations that I must raise.
First, the timing of the implementation of this regulation derives from an EU directive passed on 16 April 2014, but it has not reached this House until close to the deadline of 18 April 2019. As the Minister is well aware, we are in the midst of a Brexit crisis, with dozens of essential SIs hit by a parliamentary logjam. For the Government to wait until now to lay this SI seems grossly negligent.
There were ample opportunities to pass the regulations—for example, during the passage of the Small Business, Enterprise and Employment Act 2015, which had its First Reading on 25 June 2014. I hope the Minister will explain why the Government have waited until the deadline and laid this SI at a time when Parliament is facing enormous and unprecedented pressure. Why has the Minister also chosen to delay the implementation of provisions relating to sub-central contracting authorities and contracting entities until next year?
One of the most important aspects I wish to raise is the support available for small businesses to adopt these changes. Currently, the Connecting Europe Facility provides funding to businesses adapting to new regulations such as these. Between 2014 and 2016, the Connecting Europe Facility provided over €430 million of funding to the UK. When we leave the European Union, funding such as that will no longer be available. As we know, the Government have consistently refused to commit to replacing EU funding for key areas and have failed to invest in sectors of our economy that need it most, especially regions such as the one I represent.
If we leave with or without a deal, will the Government provide the necessary support businesses need to adapt to these new e-invoicing changes? The regulations are a positive move towards supporting and encouraging e-invoicing, but as prevalence increases we must also ensure that our small businesses, which are often less able to adapt to new and emerging technology, are not left behind.
I do not need to remind the Minister of the potential problems of introducing new technology to procurement. It was recently revealed, for example, that technological flaws in the new shared service platform saw a substantial increase in the number of late payments from the Cabinet Office to its suppliers. Indeed, the number of businesses receiving late payments from the Cabinet Office has nearly tripled in the past two years, despite the Department’s promise to crack down on contractors who pay suppliers late. That has sent a worrying signal to businesses who are looking to the Government for leadership, which the Government have failed to provide.
Without concrete reassurances that our procurement market is ready for another technological evolution, we risk further inflicting financial difficulties, which our small and medium-sized enterprises find harder to bear. That is the reason why we request impact assessments, which are made. The worrying trend emerging of the Government inadequately assessing risk further undermines the long-term stability of our already broken procurement system. This SI is another example of that.
I will also raise with the Minister the cyber-security threats presented by the growth of e-invoicing. What safeguards are in place to prevent fraud and protect the integrity of the system? As the procurement market is digitising, we are faced with unique challenges that require specific and rigorous safeguards. We know that UK organisations are particularly vulnerable, with a recent survey finding that 77% of organisations still operate with limited cyber-security and resilience. We also know that Government communication is poor, with only 4% of businesses recalling using any Government sources of information for their cyber-security. The further promotion of e-invoicing will not be without risk, so I hope the Government are able to detail how they are planning on mitigating that risk.
I turn to the final aspect of the regulations: the imposition of public procurement exclusions based on modern slavery tests. We fully welcome these steps. The Government should lead the way on this issue. However, although this is a positive move forward, because there are tens of thousands of people in the UK living in slavery, there is clearly far more that we need to do.
It is right that our procurement market is evolving and modernising to meet the realities of the modern economy, and we support the efforts to speed up the invoicing process, and to reduce waste and costs. If it is managed well, this would be an extremely positive and beneficial move for some of our small and medium-sized enterprises, but if they are again left behind to fend for themselves, we risk creating barriers to their involvement and competitiveness in the modern economy.
We can only hope that this evolution will not be met with the disruption that is becoming characteristic of this Government’s record on implementation.
Oliver Dowden
I welcome the support of the Opposition Front-Bench spokesperson, the hon. Member for Leigh, for these measures. I will try to address the points that she has raised; if I fail to address any of them, I will be happy to come back to her in writing.
First of all, in relation to timing it is true that the directive came into effect in 2014. However, it relied on the publication of the European standard, which was only published in 2017. Member states were given 18 months from then to bring forward their measures.
In respect of the delay for smaller entities, those are quite welcome to adopt the standards at an earlier stage; the regulations are simply permissive to allow them a longer period of time. I felt it was appropriate to invoke this derogation to allow those smaller entities a long period, because it may take them more time to adjust to the necessary changes to their procurement systems.
In respect of the other points that the hon. Lady raised, it is important to clarify that no private sector business, whether a large business or an SME, will be required to take advantage of these regulations. The regulations permit businesses, if they wish, to invoice electronically, but they can continue to invoice in a paper-based form if they wish. What the regulations do is require the Government supplier to accept an e-invoice if they so choose; if there is not a term within the contract that allows for e-invoicing, the regulations will imply that. They are very much about enabling rather than requiring.
The hon. Lady raised the point about Cabinet Office prompt payment. She is absolutely right that there was a decline in Cabinet Office prompt payment, which was due to the adoption of a new invoicing system. That is common with other Departments. I think I updated her, or another Opposition Member, in the House a couple of weeks ago on the progress that we are making in that regard. In fact, we are back up to standard now in the most recent months when it comes to the speed of prompt payment, but I would be very happy to write to her to set out those figures in detail.
Regarding impact assessment, Cabinet Office economists have calculated that the direct costs and benefits to business flowing from this directive do not exceed £5 million. On that basis, we did not feel it necessary to undertake a full regulatory impact assessment to be cleared by the Regulatory Policy Committee.
Cyber-security is very important, which is why the Government have established for the first time a national cyber-security strategy, accompanied by £1.9 billion worth of funding. As part of that strategy, they have set up a national cyber-security centre that sets standards for cyber-security. In addition, the revised Government playbook—the rules for procurement that I published the week before last—contains explicit provisions in relation to cyber-security requirements for all those contracting with Government.
I hope that my response has addressed the points that the hon. Member for Leigh raised. As I said, this is a fairly straightforward measure: it is simply about enabling businesses to invoice electronically, and requiring suppliers to accept that. I am grateful for the Opposition’s support, and I commend the regulations to the Committee.
Question put and agreed to.
Draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019
Draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019
(5 years, 1 month ago)
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The Chair
Hon. Members will have recognised that there are in fact two instruments to be discussed today. If it is the will of the Committee to consider the two together, the Minister will move the first instrument now and the second one later.
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019.
The Chair
With this it will be convenient to consider the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019.
John Glen
It is a pleasure to serve under your chairmanship, Mr Gray. As the two instruments are to be taken together, I will also speak to the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019.
As the Committee is aware, and as with the previous statutory instruments we have debated, these SIs are part of the legislative programme under the European Union (Withdrawal) Act 2018 that aims to ensure that, if the UK leaves the EU with neither a deal nor an implementation period, there will continue to be a functioning legislative and regulatory regime for financial services in the United Kingdom.
Gibraltar holds a special place within the British family, because of not only our shared history, which stretches back over 300 years, but the priorities and values that we share today. The UK Government are steadfast in their commitment to maintaining our close relationship, which will remain unchanged following the UK’s and Gibraltar’s parallel withdrawal from the EU.
The instruments deliver on the commitment made at the Joint Ministerial Council with the Government of Gibraltar in March 2018. The UK guaranteed that the access of Gibraltar’s financial services firms to UK markets will continue until 2020 in any scenario. In a no-deal scenario, both the UK and Gibraltar will be outside the European economic area and outside the EU’s legal, supervisory and financial regulatory framework. Since the current market access arrangements between the UK and Gibraltar are underpinned by the EU framework, the UK-Gibraltar framework would become deficient without the SIs.
The SIs update existing UK legislation and make amendments to other EU exit legislation to make special provision for Gibraltar, ensuring that UK legislation relating to Gibraltar operates effectively in a no-deal scenario. The draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019 deal primarily with the Financial Services and Markets Act 2000 (Gibraltar) Order 2001, known as the Gibraltar order. Along with section 409 of FSMA, the legislation modifies EU passporting rights to allow market access for authorised financial services firms between the UK and Gibraltar. It applies to a range of authorised firms and, importantly for Gibraltar, includes those in the insurance industry.
Subsequently, since domestic legislation is derived from EU law, in a no-deal scenario, passporting arrangements between the UK and Gibraltar will become deficient. The draft SI amends domestic legislation, including the Gibraltar order and section 409 of FSMA, to retain existing passporting arrangements between the UK and Gibraltar until at least 2020 after we leave the EU. That is in line with the Government’s previous commitment. The provisions are therefore sunsetted and will cease to have effect at the end of 2020.
At the JMC in March 2018, the UK Government also announced that they will work closely with the Government of Gibraltar to design a long-term permanent framework for market access beyond 2020. That will similarly be based on shared high standards of regulation enforcement and regulatory co-operation. Although the duration of market access in the SI is contingent on the introduction of a replacement framework, the UK Government are committed to preventing a potential cliff edge in Gibraltar-based firms’ access in 2020 and to providing clarity to Gibraltar’s market. Accordingly, the SI includes a power to extend existing market access arrangements by one year at a time from the end of 2020. This will be supported by a ministerial statement on progress towards the replacement framework between the UK Government and the Government of Gibraltar.
Currently, EEA firms passporting into Gibraltar also have the ability to onward passport into the UK, and vice versa. Consistent with the general removal of EEA passporting provisions in the event of our leaving without a deal, the SI also removes provisions enabling such access. It will have no impact on UK or Gibraltarian firms.
The draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 relate to non-passporting arrangements between the UK and Gibraltar in financial services that support the market access arrangements. Various references across legislation in retained EU and UK law treat Gibraltar as if it were an EEA state in relation to such arrangements. For example, Gibraltar, like other EEA states, has home-state responsibility in the event of a Gibraltar-based firm becoming insolvent in the UK. Gibraltar-based firms are also included within existing treatments for policyholder and deposit protections, as well as in the EU payments regime for euro transactions.
As a result of the UK’s withdrawal from the EU, the arrangements between UK and EEA states will change to reflect the new relationship, but we need to ensure that our existing arrangements with Gibraltar are not affected. The draft regulations therefore make bespoke amendments to EU-derived financial services legislation and to other EU exit SIs to maintain the current treatment of Gibraltar. The draft regulations also make a set of broad provisions that save relevant matters in remaining EU-derived and EU exit legislation that relate to Gibraltar so that regulatory arrangements between the UK and Gibraltar can be treated as they were before exit.
The provisions specifically ensure that Gibraltar-based firms, UK-based firms, Gibraltar trading venues, and provisions related to the arrangements between the UK and Gibraltarian regulators continue to be treated in UK law as they were before exit day. Additionally, these broad savings provisions allow the rights or obligations that are dependent on the function of an EU body to instead be performed by the appropriate UK regulator or the Treasury.
Lastly, the SI makes minor amendments to the Prudential Regulation Authority’s existing powers of intervention over Gibraltarian insurers operating in the UK. That will allow the PRA, where necessary and appropriate, to address risks of disruption that could threaten the financial stability of the UK. No changes are being made to the Financial Conduct Authority’s powers in relation to Gibraltar-based firms.
The Treasury has been engaging closely with the Government of Gibraltar on the legislation, and it supports the approach taken in the SIs. It has also engaged with the PRA and the FCA in drafting the SIs and has shared with the financial services industry drafts of them ahead of their publication. On 19 December 2018, the Treasury published the draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019. The draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 were published on 7 February 2019, with an updated explanatory policy note on the two Gibraltar SIs.
The Government of Gibraltar are also undertaking their own contingency preparations for Gibraltar’s withdrawal from the EU to ensure that UK firms currently operating in Gibraltar retain their market access in the event of our leaving the EU without a deal and to maintain current regulatory arrangements.
Before I conclude, I draw the Committee’s attention to a small mistake that has been discovered in the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019—unfortunately, mistakes happen from time to time. Where they are found, I have always been transparent about the need to put an explanation on the record. Shortly after the draft SI was laid, a small typographical error was found in regulation 10(3), which inserts proposed regulation 4C into the Solvency 2 and Insurance (Amendment, etc) (EU Exit) Regulations 2019. Paragraph 2(a) of that proposed regulation refers to
“UK law which implemented or the Solvency 2 directive”.
It should read, of course, “UK law which implemented the Solvency 2 directive”. That typographical error will be corrected before the draft SI is made.
The draft regulations are necessary to ensure that Gibraltar-based financial services firms can continue to passport into UK markets as they do now and that existing regulatory treatments in relation to Gibraltar continue to function effectively after exit day if the UK leaves the EU without a deal or an implementation period. I hope colleagues will join me in supporting the regulations, and I commend them to the Committee.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a pleasure to serve on this Committee with you in the chair, Mr Gray. As always, I am grateful to the Minister for his explanation of the statutory instruments.
Once again, the Minister and I are here to discuss statutory instruments that make provision for a regulatory framework after Brexit in the event that we crash out without a deal. On each such occasion, I and my Labour Front-Bench colleagues have spelled out our objections to the Government’s approach to secondary legislation. The volume of EU exit secondary legislation is concerning in terms of accountability and proper scrutiny. The Government have assured the Opposition that no policy decisions are being taken. However, establishing a regulatory framework inevitably involves matters of judgment, and raises questions about resourcing and capacity.
Secondary legislation ought to be used only for technical, non-partisan, non-controversial changes, because it allows for limited accountability. Instead, the Government continue to push through far-reaching financial legislation via this vehicle. As legislators, we have to get things right. These regulations could represent real and substantive changes to the statute book, and they need proper, in-depth scrutiny. In the light of that, the Opposition would like to put on the record our deepest concerns that the process is not as accessible and transparent as it should be.
On 18 February, I asked the Minister why Gibraltar was excluded from some previous SIs. The SIs we are considering today are presumably intended to fill that gap. It is of course essential that they do so appropriately. As colleagues will know—the Minister referred to this—Gibraltar is part of the EU as a so-called special member state territory, but it does not follow all elements of the EU’s policy approach. It is exempt from the common agricultural policy, the common external tariff and the VAT rules. Obviously, recent months have been very worrying for many people living in Gibraltar, given the potential for the Brexit negotiations to open up other constitutional questions and, of course, the fact that 96% of its population voted to stay in the EU.
I understand that, in March last year, at the Joint Ministerial Council with the Government of Gibraltar, the UK Government announced that, in a no-deal scenario, Gibraltar’s authorised financial services firms would continue to be able to access the UK as now until 2020 and, vice versa, that UK firms would continue to be able to access Gibraltar as now. The two SIs set out to enact that. It has taken some time for them to be laid—a point I will return to later. It would be helpful to know whether that rather delayed process has caused any problems for those in Gibraltar or elsewhere. Clearly, we have had many months since last March.
Surely it is more important than ever that we ensure that the arrangements the House makes for Gibraltar take account of its specificities and needs, at the same time as recognising the need for sound and thorough financial regulation. The latter is particularly important given the unique nature of economic activity on the Rock. As Committee members are probably aware, there are two businesses per head of population in Gibraltar. Despite its tiny population, there are more than a dozen registered banks there. The Rock’s self-description suggests that at least some activities on the Rock reflect differences rather than similarities with the UK’s regulatory and tax systems.
For example, the Gibraltarian Government website refers to the fact that those using Gibraltar can conduct
“business in a quality low-tax jurisdiction with a profit oriented capital base at low levels of corporate tax, all in a stable currency with few restrictions in moving capital or repatriating dividends”
and distribute
“competitively priced VAT-free goods and services to the markets of the EU and Africa.”
The Gibraltarian Government also note that there is a
“variety of interesting fiscal products ranging from lucrative”—
their word, not mine—
“funds development and administration to customized financial solutions, ranging from international tax planning strategies to monthly tax-free registered debentures”.
Finally, the Gibraltarian Government inform us that legislation is in place there
“to encourage High Net Worth Individuals…and High Executives Possessing Specialist Skills…to establish tax residency in Gibraltar, affording them the opportunity to have the tax payable on their income restricted to a capped amount.”
All that occurs, of course, at the same time as Gibraltar has EU membership and, again in the words of the Gibraltarian Government, a
“highly-developed business services infrastructure where it is possible to passport an EU licence in financial services such as insurance and re-insurance, EU-wide pensions, banking and funds administration, amongst others”.
I am aware that Gibraltar was taken off the OECD’s tax haven list after making progress in concluding double tax agreements, and I am also aware that its representatives would strongly reject such a characterisation, although all I have done is quote the Gibraltarian Government’s own words. Indeed, I recently met representatives from the Rock, and I am grateful to them for enabling me to discuss their jurisdiction’s situation. I know they would maintain that they have strong procedures in the area of financial regulation, and against money laundering in particular, and they feel their current status enables them to have financial independence from the UK. I am also aware of their genuine concerns about unfair criticism from Spain.
In that regard, I was encouraged to read earlier this week that Gibraltar, with the support of the UK Government—as I understand it, the UK Government have to negotiate these matters for Gibraltar—has just signed a tax treaty with Spain that provides
“for Gibraltar to keep legislation equivalent with EU law on matters related to transparency, administrative cooperation, harmful tax practices and Anti-Money Laundering once EU law ceases to apply in Gibraltar”.
That is a positive commitment, which will also pave the way for the removal of Gibraltar from Spain’s tax haven blacklist and enable it to sign up to the OECD’s base erosion and profit shifting process.
That is the context of these two SIs, both of which are obviously focused on no-deal planning. As the Minister stated, in the longer term, it is envisaged that the UK Government will work closely with the Government of Gibraltar to design a long-term framework for market access beyond 2020, which will be based on these regulations. The approach that is represented here, to use an overused word, appears to be a form of passporting of services between the UK and Gibraltar; instead of the previous context, in which Gibraltar and the UK were viewed by the EU as one jurisdiction, they will have to operate as two jurisdictions outside of the EU.
However, the existing passporting measures for Gibraltar are provided for within a plethora of different bits of legislation. Some are focused on just Gibraltar, including the 2001 Gibraltar order, which the Minister mentioned. Others are much more wide-ranging and cover UK financial services as well. Why was the no-deal SI dealing with some of the regulations that cover both the UK and Gibraltar—specifically, those on payment systems and electronic money—passed back in November, while a different approach has been taken here? That is particularly the case for regulations around insurance, which are directly amended by the amendment SI that we are considering. I beg your pardon, Chair—these are convoluted matters.
The Minister mentioned the need to preserve stability, particularly in the area of insurance, and that it was necessary to empower the PRA to do so. However, that surely applies to other areas of financial services as well. I am rather confused about this. Given that the amendment SI amends a number of no-deal SIs as well, one rather receives the impression that arrangements for Gibraltar have been considered quite late on in the process, rather than as an integrated part of it. [Interruption.] I am pleased to see the Minister shaking his head; I hope he can expand on that in his remarks.
Finally, it would be helpful to understand how the Gibraltarian Government are responding to this—whether they are happy with the approach that has been taken, and whether they feel it is going to be sufficient to remedy any potential gaps or inconsistencies. I urge the Minister to ensure that the door remains open to discussions with them as time goes on, to make sure that any potential glitches or problems can be quickly dealt with.
John Glen
I thank the hon. Member for Oxford East for the thoroughness of her scrutiny, and will endeavour to answer the questions she has raised. On the general points that we have rehearsed a number of times, I remind the Committee that everything we have done through these SIs has been within the scope of the withdrawal Act. I understand that having 30 debates in three months has been unusual; it has not been a desirable process, but it has been a necessary one.
The hon. Lady made a number of points about the delay following the Joint Ministerial Council in March last year. That delay did not cause problems for Gibraltar, and the financial services industry in Gibraltar has welcomed these SIs. There has been a lot of dialogue over the year, and the Government of Gibraltar have been closely engaged with the SIs and are content with the approach we have taken.
The hon. Lady raised concerns about the overall regime in Gibraltar. Gibraltar complies with EU and global standards on tax transparency. It has received the same rating for tax transparency from the OECD’s global forum as Germany, the United States and the United Kingdom, and because of its status within the EU, it follows all EU directives relating to tax avoidance and tax transparency. I recognise that there are bigger issues about the final regime we end up with, which will be scrutinised outside of the scope of this Committee.
We have undertaken consultation throughout the EU exit process, and have been committed to engaging with the Gibraltar Government. On a ministerial level, that engagement has been structured through the JMC on Gibraltar-EU negotiations. As for contingency preparations, the Government of Gibraltar have received both SIs positively, and we have had deep discussions over the past year at official and ministerial levels.
Some other points were made about the nature of the fix for insurance. Of course, the vast majority of the financial services industry in Gibraltar relates to insurance. We did things this way because it was a pragmatic solution that did what was necessary, based on conversations with the PRA and the FCA. The second statutory instrument is essentially a horizontal fix that deals with all the deficiencies in terms of references to Gibraltar.
As I have acknowledged in previous debates in recent weeks, there is no one way to do this. Given the resources and timetable available, and given that it is a contingency arrangement for no deal, we have taken pragmatic steps that are in line with the expectations of the Gibraltarian Government and that deal with the risks that existed. Obviously, we hope that we will enter an implementation period and have time to develop a fuller solution for the long term, beyond the end of 2020. One in six UK motorists has insurance contracts from Gibraltar, so it was important to put an emphasis on insurance.
I do not think any other specific issues were raised. I have dealt with the degree of co-operation. In the light of that, I hope the Committee will support the regulations as being necessary in the circumstances that I have set out.
Question put and agreed to.
DRAFT GIBRALTAR (MISCELLANEOUS AMENDMENTS) (EU EXIT) REGULATIONS 2019
Resolved,
That the Committee has considered the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019.—(John Glen.)
Draft Waste (Miscellaneous Amendments) (EU Exit) Regulations 2019
(5 years, 1 month ago)
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The Committee divided: - Ayes: 9 / Noes: 4 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dr Thérèse Coffey)
I beg to move,
That the Committee has considered the draft Waste (Miscellaneous Amendments) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Austin. The need for the statutory instrument arises as the UK leaves the European Union, as provided for by the result of the 2016 referendum and as subsequently agreed by Parliament. In line with the European Union (Withdrawal Act) 2018, the regulations simply make technical legal amendments to maintain the effectiveness and continuity of UK legislation that would otherwise be left partially inoperable, so that following our exit from the EU, the law will continue to function as it does today. I assure the Committee that the adjustments represent no change in policy and will have no impact on businesses or the public.
The matters under consideration are devolved, but the four Administrations have agreed to make most of the necessary changes through the statutory instrument, so its territorial extent and application is the United Kingdom. That said, the following amendments do not cover the whole United Kingdom.
First, in part 2, the Environmental Protection Act 1990, which is amended by regulations 2 and 5, does not extend or apply to Northern Ireland. Secondly, Council decision 2003/33/EC, which is amended by regulation 15, does not form part of retained EU law in relation to Scotland, as the requirements of that decision have previously been implemented directly in Scottish domestic legislation. Thirdly, of the new reporting requirements that replace the existing reporting requirements to the Commission, which I will cover later in my speech, a particular example refers to England only, as the devolved Administrations did not want that duty to apply to them in the instrument. We have worked with the devolved Administrations during the drafting of the instrument. They have all given their consent, as has the Scottish Parliament.
The instrument covers the waste management areas of waste batteries and accumulators, end-of-waste criteria, packaging waste, end-of-life vehicle destruction certification, landfill acceptance criteria, the classification of hazardous waste, the management of waste from extractive industries, and calculation methods for verifying compliance with recycling targets under article 11.2 of the waste framework directive.
To ensure operability, the instrument will make amendments to three waste-related Acts of Parliament and 14 related EU regulations and decisions. More broadly, as has often happened with such statutory instruments, a large number of the changes are due to amending references to the European Union, EU institutions and EU administrative processes to make them refer to their domestic equivalents in the UK, and to updating legal references to refer to relevant domestic legislation.
Neil Parish (Tiverton and Honiton) (Con)
I thank the Minister for giving way and assure her that I will not keep her long. The end-of-life vehicles directive puts a sum of money in place to dispose of vehicles. Naturally, the statutory instrument only passes the legislation from European to British law, but further down the road, I would like the Minister to consider the cost of scrapping vehicles. Perhaps electric vehicles and hybrid vehicles could have a lesser charge, which would be yet another way to encourage people to use electric vehicles so that we improve our air quality in the long run.
Dr Coffey
My hon. Friend makes an interesting policy point, but he will recognise that the purpose of the instrument is not to generate new policy at this stage. That will be a matter for a future separate debate. I fully understand where he is coming from—he mentioned the matter in the Environment, Food and Rural Affairs Committee yesterday—but to keep the debate relevant to the statutory instrument, I suggest we talk about it another time.
Dr Coffey
A significant part of the instrument addresses the way in which references to EU directives will be applied after exit day. I now turn to the detail of the changes that are being made through the instrument.
In part 2, regulations 2 and 3 effectively bring references to the waste framework directive up to date with respect to part II of the Environmental Protection Act 1990 and the Waste and Emissions Trading Act 2003. That is enabled by section 2(2) of the European Communities Act 1972. Part 2 of the draft regulations therefore brings our existing regulations up to date with the correct references.
Part 3 comprises the substantial changes needed to make the retained law operable, with respect to primary legislation, after exit from the EU. That is the element directly relevant to the withdrawal Act. Regulation 4 considers the Control of Pollution (Amendment) Act 1989, which contains a specific power for the Secretary of State to exempt—by secondary legislation—a waste carrier operating in the UK from the need to be UK registered, based solely on meeting the legal requirements in other EU member states. That power has never been used and will be redundant upon exit so we are revoking it, but the existing general power to exempt registering when prescribed conditions are met will remain. I emphasise that all carriers operating in the UK will still need to meet the requirements set by UK competent authorities.
Regulation 5 inserts new section 75A into the Environmental Protection Act. The new section clarifies how the waste framework directive will be applied after exit to maintain the existing effect and operation of the law.
Regulation 6 contains two strands of amendments to the Waste and Emissions Trading Act 2003. Regulation 6(2) amends section 1 of that Act. It omits subsection (2), which referred to landfill targets contained in article 5.2 of the landfill directive, as those targets are already set out in domestic legislation. Subsection (4) is also amended to require the Secretary of State to consult the appropriate devolved Administration for each part of the UK before setting any new landfill targets or amending existing ones. That fully respects the devolution agreements as waste is a devolved matter. A similar change is made by regulation 6(3) to the secondary legislation-making power in section 23 of the 2003 Act. Regulation 6(4) amends section 37 of that Act, which defines waste for the purpose of the Act, and inserts new section 37A to provide modifications to clarify the way that the waste framework directive will be applied after exit, in order to maintain the existing effect and operation of the law.
Part 4 of the instrument makes amendments to and revocations of retained direct EU legislation. The lawyers have drafted the regulations by number in order of year, but I will speak to groups of new regulations that refer to specific waste-related subject areas. Chapter 1 of part 4 makes amendments to EU regulations. Regulations 8 and 10 of the instrument are about batteries. They make amendments to Commission regulation 1103/2010, which relates to capacity labelling of batteries, and to Commission regulation 493/2012 on the calculation of recycling efficiencies of the recycling processes of waste batteries and accumulators.
The amendments include replacing references to “Member States” with “The Secretary of State”, and defining “appropriate agency”, which would be the environmental regulators in England, Scotland and Wales, and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland. The amendments also insert modifications that clarify the way that the various EU directives referenced in those EU regulations will be applied after exit in order to maintain the existing effect and operation of the law.
Regulations 9, 11 and 12 cover waste criteria and make amendments to three EU regulations made under article 6.1 of the waste framework directive. Those three EU regulations provide criteria for determining when certain types of scrap metal, glass cullet and copper scrap cease to be waste. The required processes for businesses to achieve end of waste will not change as a result of the instrument. The assessment of end-of-waste status and the guidance provided by regulatory agencies will still apply as before.
The principal amendments made to those EU regulations insert modifications to the way that references to EU directives in those regulations are to be applied on and after exit day. For example, references to “Member States” are to be read as references to the “appropriate authority”, “competent authority” or “local authority”, which was responsible for the UK’s compliance with that obligation or was able to exercise that discretion before exit day. To be clear, those are not new burdens; they merely maintain the status quo about who does what currently.
In addition, the amendments account for the fact that environmental verification under the eco-management and audit scheme—known as EMAS—will no longer apply in the United Kingdom. Hon. Members who have regularly attended such Delegated Legislation Committees will know that the amendments relating to that scheme have already been passed by both Houses.
Chapter 2 covers EU decisions. Regulation 13 amends Commission decision 2000/532/EC, which contains a list of waste classifications for hazardous and non-hazardous waste. The amendments introduce modifications to clarify the way that various EU directives will be applied to maintain the existing effect and operation of the law.
Regulations 14 and 16 make amendments to decisions made under directive 94/62/EC on packaging and packaging waste relating to derogations for glass packaging and plastic crates and pallets. References to “Member States” will be replaced by the “Secretary of State”, references to “Community” will be replaced by the “United Kingdom”, and appropriate agencies defined as the regulator of each nation and DAERA in Northern Ireland. They also introduce modifications that clarify the way in which EU directives referenced in the legislation will be read.
Regulations 15 and 17 to 20 amend various decisions made under directives 1999/31/EC and 2006/21/EC relating to the landfilling of waste and extractive waste respectively. These amendments include replacing references to “Member States” with “The Secretary of State”, and references to “Community” with “the United Kingdom”, and provide certainty on definitions and defining the appropriate agency. Two amendments convert requirements to report information to the European Commission into a statutory duty to publish the same information reports. As before, they introduce modifications that clarify the way in which EU directives referenced in the legislation will be applied.
Regulation 21 relates to Commission decision 2011/753/EU on establishing rules and calculation methods for verifying compliance with a target set in the waste framework directive. Regulation 21(7) applies to England only. This is where we have amended article 5 of the decision so that it now requires the Secretary of State to publish the progress report on whether the current target to recycle 50% of household waste by 2020, set by article 11.2 of the waste framework directive, has been met in respect of England. The progress report must be published before 1 January 2022. The devolved Administrations did not want this duty to apply to them in this instrument.
In chapter 3 of part 4 and the schedule, the instrument revokes some directly applicable EU legislation on waste. Some of this legislation has been revoked because it is redundant in a domestic context, for example Commission decisions that set the format of questionnaires and data reports that EU member states complete and return to the Commission in relation to the implementation of EU directives.
Other pieces of the directly applicable EU legislation are being revoked because their requirements are already embedded in domestic legislation. For example, Commission decision 2003/138/EC covers material and component coding standards for end-of-life vehicles; and Commission decision 2002/151/EC relates to minimum standards for the certificate of destruction for those vehicles. In both cases, the requirements of those decisions are already set out fully in the End-of-Life Vehicles Regulations 2003.
This statutory instrument is long and technical, but as I said at the start, it does not change policy. It simply makes the rules that we have today applicable.
Sandy Martin (Ipswich) (Lab)
This statutory instrument is an attempt to replicate current arrangements with the EU and to enable the current statutory regime on waste to continue after Brexit day. However, we believe there are very good reasons why that regime may not be effective after Brexit day, and we are sceptical about whether this SI will be able to remedy that. It also revokes some EU legislation that the Minister tells us it is not necessary to retain, but I re-state our profound concerns about the rate at which SIs are being driven through, and the lack of available time to scrutinise them before they come to Committee. It would be very serious if any of the revocations turned out to be of regulations that were not adequately replicated elsewhere.
This is a very important matter; if waste is not properly regulated in this country there could be a significant additional contribution to our carbon footprint, and thus climate change, and also to the pollution of our seas, air and countryside. Labour is extremely concerned that without the regulatory umbrella of the EU, recycling and waste management will take a major step backwards. I am seeking cast-iron guarantees from the Minister. If she does not feel able to give us those guarantees, I am afraid we will have no option but to vote against this SI to register our unease at the situation.
The UK target to recycle 50% of household waste by 2020 is important. It is of great public concern at a time when plastic and the lack of recycling more generally is often highlighted as causing damage to our natural world, blighting our countryside and coasts. Clearly, the lack of recycling does not of itself cause litter, but a strong social focus on recycling, particularly a regime that gives every citizen a financial incentive to recycle, as in Germany, will tend to reduce littering and pollution. Adequate recycling facilities in the UK would remove the need to export our waste, and so would bring an end to much of the outrageous pollution of our seas from materials supposedly being recycled in Malaysia and Indonesia.
Sir Bernard Jenkin (Harwich and North Essex) (Con)
Will the hon. Gentleman explain to the Committee why he thinks the United Kingdom is incapable of providing these policies and legal frameworks for ourselves?
Sandy Martin
I do not believe that the United Kingdom is incapable, which is why I am asking the Minister to give us a cast-iron assurance that these things will be put in place.
The recycling rate in Labour-run Wales is 57.7%. Wales is already meeting its target, but the rest of the UK is falling below the 50% recycling rate. The rate in England has flatlined at about 40% to 45% for the past 10 years. We all know some of the reasons for that: the lack of resources for local government and the complete lack of a joined-up national strategy. The Secretary of State has bombarded us with Bills, strategies and consultations over the past few months, so it certainly appears that the Government recognise the need for action, but the appearance of action here in Westminster does not necessarily translate into actual, practical action on the ground. The 50% target and future targets are critical to hold the Government to account and ensure that there is a materially significant driver to remove the hurdles to increased recycling. Will the Minister give a cast-iron guarantee that the progress report provided for in the SI does not in any way reduce or dilute the requirements imposed on the UK as a current member state by article 11.2 of the waste framework directive, which stipulates a minimum 50% recycling rate by 2020? Will she reiterate the Government’s firm commitment to the 50% recycling rate by 2020 target?
Under current EU legislation, it is a requirement for the UK Government to report to the European Commission on their record with regard to meeting targets. If targets are not met, the report must include the reasons for failure and the actions that the member state intends to take to meet them. Under the new rules set out in this SI, the Government will produce a progress report on whether the 50% recycling target has been met by 2022,
“in a manner which the Secretary of State considers appropriate.”
So far as I can tell from this SI—I invite the Minister to correct me if I am wrong—that will be the only action required if the UK fails to meet its targets. That would drastically erode the importance of the UK’s obligation to meet the 50% target. Will the Minister give a cast-iron guarantee that, in the event that the 50% recycling target in the waste framework directive has not been met as required by 2020, the report that the Secretary of State must produce by January 2022 will include, as the directive would have required, the reasons for failure, the actions that the Government intend to take, and the date by which the target will be met?
Recent additions to EU legislation require member states to recycle staged, enhanced target percentages of municipal waste—55% by 2025, 60% by 2030 and 65% by 2035. If we are to maintain our current good standing as a nation and, depending on future trade arrangements, if we are to maintain some of our trade with the EU, particularly in the field of waste management, we need to ensure non-regression with the EU. Will the Minister give a cast-iron guarantee that those enhanced targets will form part of the UK statute book, alongside the current 50% target?
If an EU member state were to be found guilty of failing to meet its targets in a directive, the EU penalty formula would be applied—in this case, a maximum fine of about €700,000 every day if we do not meet the target in 2020 and continue not to meet it for a significant period. To try to replicate that level of deterrent, we would require a strong, accountable watchdog, completely independent of Government, with the power to impose significant financial sanctions on the Government, which would have to be spent outside the immediate remit of the responsible Department if it was to have any chance of concentrating the minds of those responsible for the targets in the Department for Environment, Food and Rural Affairs. This SI simply states that the Secretary of State must produce a progress report in a manner that they consider appropriate. That is a policy change. We are going from a compulsory and obligatory target with strict fines to an advisory target with no consequences for targets being missed. Will the Minister give us a cast-iron guarantee that the watchdog proposed in the Government’s draft Environment (Principles and Governance) Bill will be set up within a reasonable timeframe and will have the power to impose actual and significant sanctions on the Government in the event of recycling targets being missed—including any missed before it came into operation?
Current EU legislation requires member states to report progress—a requirement that currently covers the entire UK—but the SI requires the Secretary of State to publish a report only on whether the UK target to recycle 50% of household waste by 2020 has been met with respect to England. It sets no obligation for the devolved Administrations to publish such a report. Wales is well ahead of England in meeting recycling targets and there is no reason to suppose that Scotland might not be well ahead of it in the future, but, while waste and recycling policy are devolved matters, there are UK-wide issues that will affect the Scottish and Welsh Governments’ ability to continue to improve their levels of recycling. Will the Minister therefore give a cast-iron guarantee that the Government will work with the devolved Administrations to ensure that a UK-wide report is produced on the extent to which the 50% recycling target has been delivered by the 2020 deadline, as well as separate reports for each country?
Sir Bernard Jenkin
I am the Chair of the Select Committee on Public Administration and Constitutional Affairs, of which the hon. Gentleman was a member. He will recall how much work we did on trying to reinforce the linkages between Whitehall and the devolved Adminstrations and the relationships between the devolved Parliaments and this Parliament, and to create consensual frameworks around exactly the kind of thing that he is discussing. I hope that the Minister will treat his request extremely seriously.
Sandy Martin
I thank the hon. Gentleman for his intervention, and I am sure that if he agrees with me the Minister will be able to do so, too.
The Opposition are concerned about the potential significant weakening of the UK’s obligations to meet existing EU recycling targets. No legislation is set to be in place on exit day to hold the Government to account for their action or inaction on recycling rates and other crucial environmental targets, and the least that we can do is demand a firm guarantee from the Minister that the Government intend to abide by them.
The Minister claims that the SI simply replaces the reporting requirements in the waste framework directive with an equivalent domestic requirement. However, in effect it changes the important recycling rate targets from obligations to advisory targets that can be easily ignored. We need strong targets that the UK must stick to, and an environmental watchdog that is funded, well resourced and independent of Government, to hold the Government to account. It will need the power to impose sanctions that will deliver real compliance with those important environmental objectives.
We are still waiting for the details of the office for environmental protection, and to know whether it will have powers to issue fines equivalent to the EU powers currently in operation. It should not solely be down to organisations such as ClientEarth, in the case of air quality, to bring cases against the Government for failure to hit their own targets. Only a statutory body with independent statutory powers will do. I await the Minister’s response with interest.
Martyn Day (Linlithgow and East Falkirk) (SNP)
It is a pleasure to serve under your chairmanship today, Mr Austin. I am grateful to the Minister for her summary of the regulations before us, which deal with fairly complex areas. I am grateful also to the Opposition spokesperson for setting out their position. I find myself in some of the same territory, although not entirely.
I am grateful to hear about the respect for the devolution agreement, which is positive. However, I am left with some concerns about continuing uncertainty as to wider environmental protections post-Brexit, and about the possibility of backsliding on standards, if that is needed to secure trade deals in the future. That should not happen. The UK should work with the EU on maintaining the same or better environmental protection standards.
Dr Coffey
It is a pleasure to respond to the questions, starting with the hon. Member for Linlithgow and East Falkirk. The Government absolutely recognise the devolution arrangement. The hon. Member for Ipswich effectively complains that reporting requirements apply only to England, and is trying to get the UK Government to make sure other Administrations prepare reports. It is not our obligation to do so.
The 50% target is not advisory; it is already in domestic legislation, and that is not changing in any way. Such targets are not imposed on the United Kingdom; we vote for them in the Council. We also voted for the adoption of the circular economy package. We said in the resources and waste strategy that we intend to bring that package into effect, but the detail of the transposition of directives has yet to be resolved, because elements are still going through certain processes.
Sandy Martin
The Minister is well aware that, although it is certainly the case that EU targets are derived from decisions made by all EU members working together, which is why some of us believe that the EU is a fairly democratic body, none the less once those decisions have been made, they are imposed on the member states. Imposing something on a member state is very different.
Dr Coffey
I do not accept that—the decisions are not imposed on the United Kingdom. We have that system of decision making. It is a collaborative process at the moment, so they are certainly not imposed; we agree to them. That is why we put them into our legislation. The 50% target is already in domestic law.
The hon. Gentleman is right to praise Wales, which is ahead of the target already. At the moment, Scotland is the lowest of the four nations, but I know that active work is being done to improve that. We have already started to see improvements in Northern Ireland. I really hope that hon. Members are aware of the current consultations on how we are considering changing the recycling system, the exchange of producer responsibility, with the packaging recovery network process, and other fiscal measures that we believe will stimulate an increase in recycling.
The hon. Gentleman will be aware that the office for environmental protection is now going through pre-legislative scrutiny. The Secretary of State and I gave evidence yesterday to the Environment, Food And Rural Affairs Committee. We are due to give further evidence to the Environmental Audit Committee. We await their views, which we will consider as we go through to the next steps in the creation of the new body. It is worth pointing out that only the European Court has the ability to submit fines. To date, I am not aware of any fine that has been imposed on the United Kingdom regarding an environmental matter, although I recognise that we may have been on that journey in several places regarding infraction.
There is a desire to ensure that we improve recycling. I believe that the regulations do exactly what they are supposed to. As I said, we updated part 2 using the European Communities Act 1972. The rest of the regulations simply provide that what happens today will happen the day after exit day. It is important that we have that level of regulation, recognising the issues that have been raised about the challenges on what we need to do to ensure that we still have an effective waste system. I hope that the Committee will support the regulations.
Question put.