Licensing of Operators and International Road Haulage (Amendment etc.) (EU Exit) Regulations 2019

Monday 18th March 2019 Lords Chamber

Motion to Approve

16:10

Moved by

[Baroness Sugg]

That the draft Regulations laid before the House on 6 February be approved.

Relevant documents: 17th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)]

My Lords, these draft regulations will be made under the powers conferred by the European Union (Withdrawal) Act 2018 and will be needed if the UK leaves the EU without a deal. They amend regulation 1071/2009, which sets the requirements and procedures for transport operator licensing, and regulation 1072/2009, which regulates access to the international freight market. This SI makes minimal changes to those regulations and consequential amendments to domestic legislation to ensure that road haulage markets continue to operate effectively.

Regulation 1071/2009 provides a framework for the licensing of transport operators—both haulage and bus and coach operators—in member states of the EU and ensures minimum standards across the EU. Operators are licensed by national authorities. In Great Britain, this is the traffic commissioners; in Northern Ireland, it is the Department for Infrastructure. Operators need to comply with four criteria in order to be considered fit and proper persons to hold an operator’s licence. These criteria are: having a stable establishment; being of good repute; having a sufficient level of financial standing; and possessing the required professional competence.

Regulation 1072/2009 sets out the rules and procedures for accessing the international road haulage market. It allows appropriately licensed hauliers from EU member states to operate in other member states and provides for enforcement mechanisms to regulate and control this access.

The withdrawal Act will retain regulations 1071/2009 and 1072/2009 in their entirety on exit day. The draft instrument we are considering makes the changes necessary so that these regulations continue to function correctly, and it is essential to ensure that the regulatory regime in place after exit continues to operate.

The regulations will ensure that the requirements of regulation 1071/2009 continue to be applicable to UK hauliers and public service operators—both those operating in the UK and those operating overseas. They will also ensure the continued operation of regulation 1072/2009, which provides that hauliers from the 27 EU member states will continue to be admitted to the UK provided they have a valid operator’s licence, issued by the country in which they are established, showing that they meet the requirements that I outlined earlier.

The regulations require hauliers to hold a UK licence for the Community after their current Community licence expires. This is a new document and will look very similar to the current EU Community licence, which hauliers already hold when operating in the EU. The criteria for this will be the same as for the Community licence.

The European Commission has already published legislation that would govern UK operators’ access to the EU for nine months after Brexit. This is based on the principle of reciprocity, and this SI allows us to offer a reciprocal level of access to EU hauliers. The regulations might also help in future negotiations. They demonstrate that the UK is committed to maintaining high standards in the freight industry that meet the EU baseline. They also allow for the UK to adjust levels of market access to EU hauliers in order to reciprocate whatever is agreed in the negotiations.

The access rules in regulation 1072/2009 also include provisions to allow hauliers to practise cabotage—jobs entirely in another member state. Currently, three domestic jobs in a seven-day period are permitted for EU hauliers as part of their return trip once they have completed a job in another member state. Previously the power to suspend cabotage provisions if they disrupted the domestic market was subject to the approval of the European Commission. These regulations transfer this power to the Secretary of State so that we have the ability to suspend cabotage for non-UK hauliers if reciprocal arrangements are not offered to UK hauliers in the EU.

The regulations also modify the Goods Vehicle (Licensing of Operators) Act 1995. Section 2 of the Act makes it an offence for a person to use a goods vehicle except under an operator’s licence. However, for very practical reasons, the provision exempts holders of Community licences issued by member states from this requirement. This means that EU hauliers are able to operate in Great Britain without having to apply for an operator’s licence. An equivalent provision is made in Northern Ireland legislation. The SI also allows us to exempt operating licences using secondary legislation in future.

The regulations provide for the continuation of the road haulage and passenger transport licensing system. They also allow for EU member state hauliers to continue to operate in the UK, ensuring that supply chains continue to function effectively. I beg to move.

16:15

[Baroness Randerson (LD)]

My Lords, I start with the big question, as I see it: where does this dovetail with ECMT permits? We have already been through those in relation to an SI. They are already established as part of our no-deal preparations, and there has already been feedback on the fact that only 5% of the industry will be covered by them. So is this an either/or, or is it an either/or that kicks in after December this year? Perhaps the Minister could clarify for me exactly where this regulation stands in the whole thing.

In essence, and I say these words carefully, this SI substitutes a community licence applied for in the UK with a UK licence for the community. No wonder the public are beginning to get frustrated with the whole thing. Given that this applies to thousands of hauliers—thousands of small haulage firms, many with one or two vehicles—they could be forgiven for getting confused over this. That innocuous though confusing change of name hides a fundamental potential change in their rights to operate within the EU.

On Northern Ireland, I have very serious concerns about cabotage and cross-trade. Paragraph 6.5 of the Explanatory Memorandum makes several references to future arrangements in Northern Ireland. There is of course a great deal of cross-border haulage between Northern Ireland and the Republic. The situation is very nuanced because goods haulage is very different from passenger transport. What will happen to these arrangements if Northern Ireland is caught in the backstop? Generally these SIs say, “We’re sorting Northern Ireland separately”, but this one incorporates arrangements for Northern Ireland. That led me to wonder how it will operate if Northern Ireland is caught in the backstop. Am I right to assume that in that situation these arrangements would cease to apply?

Rather obliquely, paragraph 6.6 of the Explanatory Memorandum says that the amendments made by the SI also apply to coach and bus services, but paragraph 7.9 says that there is separate provision for international passenger transport. Could I have an explanation of that?

Importantly, regulation 1071/2009 allows member states some discretion to impose additional requirements of operators, and once again the Secretary of State is to get that power. I repeat my usual questions. What about transparency? On whose advice would the Secretary of State exercise this power? How would it be done? Would there be a role for Parliament? Would there be a negative or an affirmative process? I know I ask this every time, but I assume that the answer is different on each occasion.

Applications for Community licences currently go to the traffic commissioners. Will they maintain that role for UK licences in future? If so, what about resources? I am well aware that the traffic commissioners have a very broad responsibility and their organisations are usually extremely thinly staffed. There is the usual hope that the EU will continue to recognise our rights as usual, but there are EU proposals on this and, as I understand it, they do not give us full cabotage rights. They also extend only to the end of this year.

The Explanatory Memorandum says that it is hoped that this SI will be superseded by full legislation by the end of the year. As time goes on, the end of this year looks remarkably soon for there to be even more legislation on this. To clarify, is this EU offer for nine months after we leave for a rolling nine months following Brexit, which will kick in only when we leave, or has it offered this up to the end of this year and that is it?

Once again, there has been no consultation. That is especially serious in this case, because thousands of hauliers who make their living in international haulage will not be able to rely on a Community licence in future. This is not a minor change; it is fundamental. Again, SMEs are not especially taken into account.

Finally, if you currently have a Community licence, will you have to reapply for it? Suppose you have a Community licence that is valid to this end of this calendar year: are there any events or potential Brexit scenarios, foreseen or unforeseen, that could lead to hauliers having to reapply for their licence within that timeframe? Everyone expects that they will reapply for their licence at the end of the period covered, but is there anything that could happen that would interrupt that licence? Or are hauliers right, and can be confident to assume, that if they have a valid licence until the end of this year, for example, they can carry on working until then? I would be grateful for clarification on that.

[Lord Tunnicliffe (Lab)]

My Lords, I took a slightly more optimistic view of this SI than the noble Baroness, Lady Randerson. However, clarification in plain language will help. Paragraph 2.7 of the Explanatory Memorandum says:

“The UK operator licensing regime will generally remain as at present”.


I wonder whether we could have simpler language than that. My understanding, taken with recent agreement in the EU, is that the situation will be fully reciprocal. I will say it again, because it is a question to which I would like a direct answer. The Explanatory Memorandum uses terms such as “provided that”, which enthused me to look up the European Commission—I will not do this again. On 19 December 2018, it published a regulation of the European Parliament and of the Council on,

“common rules ensuring basic road freight connectivity with regard to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the Union”.

At the end it says that the regulation applies until 31 December 2019, and that it was “done at” Brussels. I do not understand EU law. Is that now a piece of EU law? Does it, together with this SI, mean that in all respects, except the names of these licences, the situation for operators is identical to where we are now, with, of course, the overriding importance that the agreement of the EU is only until the end of the year?

[Baroness Sugg]

I again thank noble Lords for their consideration of these regulations. The noble Baroness, Lady Randerson, asked about the hot topic of ECMT permits. The European Commission has published the draft regulation on road transport. It was approved by the European Parliament last week. We expect it to be approved by the Council of Ministers this week—tomorrow, in fact. We welcome the substance of these proposals, which will ensure that the majority of UK hauliers can continue carrying goods into the EU for the rest of the year without needing an ECMT permit, providing that we reciprocate and provide equivalent rights to EU hauliers, which we are doing through these regulations.

[Lord Tunnicliffe]

Am I right in understanding that that also includes the cabotage allowance?

[Baroness Sugg]

The Commission’s proposal includes the right for UK hauliers to complete point-to-point journeys and transit journeys. It also offers limited cabotage and cross-trade journeys. Cross-trade journeys are limited compared to what UK hauliers can do now, which is three movements in seven days. They will still be allowed to do two cross-trade or cabotage operations on every international trip for the first four months of these regulations, then one cross-trade or cabotage operation every trip during the next three months.

[Baroness Randerson]

Could I point out that this complexity underlines the importance of consultation and, therefore, public awareness? People in the industry could be forgiven for being confused.

[Baroness Sugg]

I agree with the noble Baroness. The EU has proposed a complex system. It has been clear that it is not replicating current market access provisions, but it is ensuring basic connectivity and phasing out the current system by the end of the year. However, given that UK hauliers are allowed to have these journeys, we do not expect the vast majority of haulage operations to be able to continue. We have ECMT permits to fall back on.

As I said, the measure is based on the UK granting reciprocal access. To protect businesses and minimise disruption, we are currently offering more to EU hauliers than the EU is offering us, so we are mirroring the situation at the moment. We have the power to amend this and mirror the EU’s offer. The regulation does not cover transit to third countries, but will cover transit to EEA countries such as Norway, so we will use the ECMT permits to those third countries. It also makes it clear that bilateral agreements with the UK can be negotiated and concluded for periods during which the regulation applies—for example, after December 2019—but should we be in a no-deal scenario and should these regulations come in, we will of course be negotiating at pace to understand our future arrangement.

If we leave the EU without a deal, we will not be able to issue Community licences, as we will no longer be a member state. Therefore, we have had to come up with a replacement document: the UK licence for the Community. UK hauliers should continue to carry their current Community licence, which lasts for five years. Only when a Community licence expires will it be replaced by the new UK licence for the Community.

16:30

Article 3 of the new EU regulations allows a UK haulier to conduct international haulage on the terms set out in the regulation. The UK road haulage operator licences are defined in the regulation, and in practice, as any suitable licence issued by the UK for the purpose of international haulage. That licence will be the UK licence for the Community, issued by the traffic commissioner. The noble Baroness, Lady Randerson, is right to say that they have a very broad responsibility. Currently, the DVSA issues Community licences, and will continue to do so for the UK licence for the Community.

The noble Baroness mentioned Northern Ireland, raising the very important aspect of cabotage on the island of Ireland. In any scenario, our objective is that traffic there should be maintained without additional burden for businesses or citizens. In the case of no deal, the EU measures preserve the rights of UK hauliers to access the EU market via point-to-point and transit journeys, as well as enabling cabotage and cross-trade within the limits I spoke about earlier. That approach is in line with the joint report published in December 2017 by the UK and the EU, which made clear our steadfast commitment to upholding the Belfast agreement, specifically preserving in full cross-border co-operation on transport.

The regulation includes the cabotage services in Irish border country until September 2019. Should we leave with no deal, we will of course continue to work with the European Commission and the Republic of Ireland to ensure that any long-term UK-EU transport arrangements take into account the unique road transport demands on the island of Ireland. If we are in a backstop situation, Northern Ireland will continue to follow EU regulations, and continue to have access under them.

The noble Baroness also asked about bus and coach operators. EU regulation 1071/2009 provides a framework for the licensing of transport operators—both haulage and bus and coach operators—in member states. The specific licencing for international passenger journeys will be dealt with in a separate SI which we will debate on Thursday. We are just dealing with the specific provisions for haulage here.

Regarding delegated powers, in many cases the reference to “Secretary of State” is a technical change in places where the EU regulation specifies member state authorities; in the UK, those authorities would currently be the traffic commissioner or the Secretary of State. New powers are being inserted into the retained version of EU regulations 1071/2009 and 1072/2009, to enable Ministers to amend retained legislation through regulations. These changes will be required to ensure consistency and the necessary flexibility.

The noble Baroness is right to say that there are different rules for different parts of the regulation. In regulation 1071/2009 we are inserting two powers permitting future amendments. One, in Article 6, deals with the provisions relating to the good repute of transport managers who work for haulage operators. That will be a negative procedure. We are recognised internationally for our high standards in the freight industry and the affected and targeted enforcement from the DVSA and the traffic commissioners, and there is certainly no intention to water down or reduce those standards.

The second new power under regulation 1071/2009 deals with the requirement of transport managers to hold certificates of professional competence—CPCs. The degree to which we recognise foreign CPCs will affect the wider relationship between the UK and the EU, and for that reason, amendments to the criteria for professional competence will be subject to the affirmative procedure. Again, UK hauliers have a good reputation in the EU, due to the high compliance with the standards, which will be maintained regardless of our future relationship with the EU.

The powers to amend substantively the rights of access to the UK, including changes to cabotage under EU regulation 1072/2009, are provided under an affirmative resolution SI. We are inserting three powers, which permit future amendments dealing with the technical requirements for the UK licence for the Community, the technical requirements for driver attestations and the suspension of cabotage. These will be needed if we reach an agreement with the EU in which we need to do reciprocal action on cabotage. As all those powers affect the way in which access to the UK market operates, with implications for reciprocal access to the EU freight market, these are all considered appropriate for affirmative resolution SIs.

The noble Baroness, Lady Randerson, asked about the impact of any short extension period. If there is a short delay, it would also delay when the EU regulation came into force, but it will end on 31 December 2019. It would mean a slightly less complicated EU regulation, because the final two months of the regulation, where no cabotage or cross-trade would be permitted, would not occur, therefore reducing the pressure on ECMT permits. However, it would of course be in place for a shorter period and mean that we needed to ensure we had in place by then a future agreement on access.

On consultation, the noble Baroness was right to point out how big a part of the market small and medium-sized enterprises are. The regulations ensure continuity after Brexit in the event of no deal. We published back in September technical notices on commercial road haulage in the EU which explained what UK hauliers need to do to operate in the EU. We have close and constructive links to trade associations, including the Freight Transport Association and the Road Haulage Association, as well as a range of industry associations and operators, from major operators through to SMEs. We hold regular ministerial and official-level round tables.

Industry is of course concerned about the changes required as a result of Brexit and the little time that it will have to adapt to them. We have discussed this SI with the industry. As expected, it is looking for as much continuity as possible. Where changes are required, it seeks clear guidance from the Government on what it needs to do. This SI is based on ensuring that there are no changes in licensing requirements for hauliers and the minimum change possible in documents that hauliers will require when operating internationally.

I think that I have answered the noble Lord’s question about the European Parliament approving the regulations. It did so last week and the decision will be finalised at the General Affairs Council tomorrow. The proposal was discussed both in Article 50 formation and in working groups with the UK in the room. I think that it is fair to say that the majority of the text was agreed under Article 50 formation, as this is related to our departure from the EU, when we will be treated as a third country, but we have highlighted UK hauliers’ interests at ambassadorial and working-group level. I believe that the regulation did not originally contain any cabotage rights, so we have seen an improvement on that so that UK operators will be able to continue operating cabotage and vice versa.

I hope that I have answered all noble Lords’ questions. If I have missed any, I will follow up in writing. These regulations will make the changes necessary to ensure that retained EU legislation setting out UK operator licensing requirements continues to function properly and allows for the regulation of international market access in the event that we leave the European Union without a deal.

Motion agreed.