Draft International Accounting Standards and European Public Limited-Liability Company (amendment etc.) (EU Exit) Regulations 2019
(5 years, 8 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I beg to move,
That the Committee has considered the draft International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Pritchard. The regulations aim to address failures of retained EU law to operate effectively in the field of accounts and reports of UK corporate bodies. They also address certain other deficiencies arising from the UK’s exit from the EU.
The international financial reporting standards are a set of international accountancy standards written for use by multinational companies when producing their annual accounts. The International Accounting Standards Board publishes those standards after consultation with its international stakeholders. The standards are required or permitted for use in more than 125 countries, including in all European economic area countries and in 15 of the G20.
Standardising financial reporting across the globe helps lower costs for businesses and enhances investor confidence in company reporting. For companies, using the IFRS reduces the burden of complying with multiple reporting requirements, if they are listed or have operations in different countries. Investors also find it easier to compare the accounts of companies in different jurisdictions when companies use the same set of standards to prepare their annual accounts.
EU regulation 1606/2002, known as the IAS regulation, requires that all publicly traded companies must use IFRS, as endorsed and adopted by the EU, when preparing consolidated accounts for their groups. In the UK, the Companies Act 2006 also permits other UK companies to produce their accounts in accordance with IFRS. Overall, approximately 15,000 companies in the UK use the standards to prepare their annual accounts.
The IAS regulation also sets out the provision for an endorsement process to adopt international accountancy standards for use in the EU. Once the UK leaves the European Union, the EU framework for adopting the IFRS will no longer apply. The regulations in front of the Committee aim to provide continuity and clarity to business by bringing the European framework for adopting IFRS into UK law. That will ensure that UK-registered companies will not have to change their processes for preparing annual accounts.
The power to endorse and adopt IFRS for use in the UK will be transferred to the Secretary of State. The responsibilities transferred to the Secretary of State will be bound by the process and the required scrutiny set out in the regulations. First, any new or amended international financial reporting standard must be considered against certain assessment criteria before it can be endorsed for use in the UK. Those criteria are consistent with those used by the European regulation and they include that the standards provide a “true and fair” view of an undertaking’s financial position; and their adoption is conducive to
“the long-term public good in the United Kingdom”.
Secondly, the regulations set out that for all proposed endorsement decisions on new or amended IFRS the Secretary of State must consult stakeholders with an interest in the quality and availability of accounts, and the final decisions must be published. Finally, the Secretary of State will also be required to lay a report before Parliament each year, detailing the carrying out of his or her responsibilities to endorse and adopt the IFRS. That will ensure that Parliament has an opportunity to hold the Secretary of State to account for adoption decisions.
The regulations provide for sub-delegation of endorsement and adoption powers to a designated UK body. A subsequent affirmative SI will transfer the powers to a new UK IFRS endorsement board. We expect that endorsement board to be hosted by a subsidiary of the Financial Reporting Council. As such, it will benefit from the FRC’s existing operational processes, such as the human resource function and premises. The FRC’s role will be limited to monitoring the governance and due process of the endorsement board. It will have no role in the process of adopting those standards.
As hon. Members will be aware, in December the independent review of the FRC published a comprehensive and detailed report that made 83 recommendations. The Government welcome and share the review’s vision for a new regulator, with a new mandate, new leadership and stronger statutory powers, and we will take swift action to deliver that. The role of the FRC in relation to the endorsement board will be transferred to the new regulator once it is operational.
The Government have worked closely with businesses and regulatory bodies while developing the regulations. Informal consultations were carried out with companies, their advisers and investors. In addition, a dedicated stakeholder group helped to inform the decisions about these regulations. Stakeholders were strongly in favour both of establishing a UK framework for the continued use of IFRS, and of consultation before a standard is adopted for use in the UK.
The draft regulations also make amendments relating to the societas Europaea or SE, a specific European type of public limited liability company that cannot be registered in the UK after EU exit. Regulations have been made to ensure that any entities registered in the UK on exit day will have a clear legal status by automatically converting those entities to a new corporate form, a UK societas.
The amendments relating to those entities do three things. First, they preserve a particular employee involvement provision, ensuring that employment rights have been maintained wherever practical. Secondly, they apply the Overseas Companies Regulations 2009 to SEs registered in other member states. This will ensure that UK branches of entities registered in other member states are treated in the same way as UK branches of any other overseas company. Finally, they make a number of minor consequential amendments to other legislation, such as replacing references to “SE” with “UK societas” where necessary to ensure that the UK has a functioning statute book on and after exit day.
The Government carried out a de minimis impact assessment of the regulation, as the overall cost to the businesses was established as being small. The annual net direct cost to business of the IFRS-related changes was estimated to be £2.4 million a year. The estimated impact for the SE-related changes was £10,400 a year. Both figures are below the £5 million threshold necessary for a full impact assessment.
In conclusion, these regulations provide continuity and clarity to business by setting out a framework for continued use of IFRS in the UK. I therefore commend them to the Committee.
Bill Esterson (Sefton Central) (Lab)
It is a pleasure to serve under your chairmanship, Mr Pritchard.
The importance of accounting standards cannot be overstated. I am sure all members of the Committee understand that it is crucial that we get this right, and that the public, stakeholders, investors and the Government can rely on the accuracy of published accounts. Given the recent public concern over audit and the question of the independence or otherwise of the big four, this topic deserves thorough debate and scrutiny. It is essential that accounts give a true and fair view and, therefore, essential that, whether the standards are national or international, they are delivered in the appropriate way and with the right degree of support, scrutiny and accountability.
I believe I am right in saying that we are dealing here with the arrangements that would be in place in the event of no deal. As ever with the regulations brought before us in these Committees, there is the question of the adequacy of scrutiny and our ability scrutinise properly, given the time available to us, the complexity of what we are being asked to consider and, frankly, the inadequacy of the consultation—in this case, the fact that no public consultation has been carried out.
I will ask the Minister to respond in her reply on the nature of the informal consultation on these regulations, who was consulted and what they said in response. I was informed yesterday, by being copied into a letter to one of her ministerial colleagues, about the nature of a consultation on another set of regulations; I was copied in because I was the shadow Minister on that occasion as well. What concerned me about the letter sent to the Minister’s colleague was that the consultee had been instructed—not asked, instructed—by the Department to comment only on the technical content of the regulations and not to advise on whether the regulations would deliver what the Government needed to be delivered in the event of no deal. That is of great concern. Will the Minister confirm whether that is true here and whether the informal consultees, assuming there have been some, were asked to comment on a similar basis—only on the very narrow technical content of the regulations—or whether they were asked to comment on their adequacy and the wider issues involved.
In this case, I assume—perhaps the Minister can confirm this for the Committee’s benefit—that the big four were consultees. If not them, then who? Perhaps she can also confirm whether there was wider public consultation or consultation with organisations independent of the accountancy profession, which would have been necessary to ensure proper scrutiny of what we are considering—not that we have been given sight of their comments, which is why I have asked her to let us know what they said.
Yet again, we have no business impact assessment. Again, I put on record that it is impossible for members of this Committee to know whether that is an appropriate judgment by the Department, because we do not have enough information before us; we do not have the depth of knowledge, the detail of consultation or comment by expert witnesses to give us the evidence to judge whether there will be a significant impact.
The regulations mention the Financial Reporting Council’s involvement and the fact that it is being asked to set up and oversee an endorsement board to take on the responsibilities currently delivered by the European Commission. That is cause for great concern. The FRC is due to be reconstituted, involving primary legislation, as a result of the Kingman review, which was published in December. I do not know whether the Minister is able to say when that primary legislation will be considered and when that work will be undertaken, but it clearly will not happen in time for these regulations to be enacted and for the FRC to take on the responsibilities set out in these regulations. Perhaps she can tell us when time will be made available for the work that needs primary legislation. Given the volume of legislation—we hear talk of the Easter recess being cancelled so that we can consider further statutory instruments like this one—perhaps she can tell us when that primary legislation is due to be considered by Parliament so that the FRC can be reconstituted.
That is of concern that we are in a position where, as the front page of the Financial Times put it, the FRC is
“to make way for stronger accounts watchdog after a string of audit failures”.
Given that concern about the FRC, it seems quite odd to ask it to take on this additional responsibility. The FRC is subject to 83 recommendations for change, a third of which require primary legislation. Will the Minister say how the FRC will have the capacity, and how we can be sure it has the competence, to take on this added responsibility as a result of the regulations? It is incredibly important that we get our financial standards right, for the reasons I set out. The concern is that the FRC simply has enough on its plate already, as set out by the Secondary Legislation Scrutiny Committee when it recommended that the draft regulations be subject to the affirmative procedure.
I am also curious to hear the Minister’s view on the Association of British Insurers’ suggestion that the Secretary of State should have active political oversight of the endorsement board. It made that suggestion because of the upheaval at the FRC, and also because of longer-term implications; as the international financial reporting standards evolve, a significant amount of work by the board will be needed. The Minister mentioned the annual report by the Secretary of State to Parliament, but that is very different from active and regular political oversight of the endorsement board.
I believe that Australia has such a system; I notice that Australia was mentioned a few times in the draft explanatory memorandum. I wonder why the Government have not considered what seems to be an effective system of political oversight and why they have taken this light-touch approach to the day-to-day management of this incredibly important piece of work. I remind the Committee that the independent review of the FRC found that it is not fit for purpose and has serious problems in how it recruits top staff. Those reasons are enough now for having that active political oversight, and they will be cause for great concern until that primary legislation comes forward and a new body is set up.
The Minister’s Department told a House of Lords Committee that it was
“currently working with the FRC to build capacity to set up the new Endorsement Board…in time for EU Exit.”
The Department also told the Committee that
“stakeholder input helped us define the extent of the FRC’s role in relation to the new Endorsement Board”.
How is the setting up of the new endorsement board going, who are those stakeholders and what was their input into the creation of the board?
The European Commission currently oversees the application, and influences the development, of IFRS across the EU. What is proposed raises concerns about a lack of political oversight of the board. I will be grateful for the Minister’s comments on that point. The United States applies IFRS only piecemeal, which reduces the international effectiveness of IFRS itself. Have the Government lobbied the US to adopt IFRS? Will the Minister tell us about the impact on US-UK trade agreements of a lack of adoption of those standards and of having different regulatory environments? Are these matters being discussed by her colleagues in the Department for International Trade in their preliminary discussions about potential US-UK trade agreements?
On the setting up of the endorsement board, will the Minister tell us who will be represented on it? Will it reflect stakeholders, including those independent of the profession, as well as representatives of the nations of the United Kingdom? Accounting standards are of great importance, and making sure that regulations are in place in the event of no deal is essential.
There are real concerns about the regulations and the ability of the FRC to put in place a system that ensures their robust implementation. Given that this instrument has already been through the House of Lords, I hope the Minister is in a position to give detailed responses to the points I have raised. They were raised in the House of Lords equivalent of this debate and I would like to think that she has come prepared to answer them.
Kelly Tolhurst
I am grateful to the hon. Gentleman for his contribution. International financial reporting standards are a world-leading set of accounting standards, used by a large number of companies in the UK, the EU and other countries around the world. Their use helps inform decision making, improves transparency and promotes confidence in the business environment. As we leave the EU, it is vital we maintain the integrity of the UK system of accounting and reporting.
I remind the hon. Gentleman that we are talking about a statutory instrument that would transfer the current rules that we already work to within the European Union and how the EU applies those rules across member states. In the event of our exit from the EU, we are bringing together a UK framework. It is important to bear that in mind. This is about how we develop a successful framework that enables us to maintain our position as a great place to do business, and reassures investors and companies of that.
We are the biggest capital market outside the US and, therefore, it is right for us to have the regulations; I am sorry to hear that the hon. Gentleman has concerns about them. Having worked through them as a Minister, I think they are sensible and would enable the UK to carry on securely.
I will answer some of the points raised by the hon. Gentleman. The stakeholder group was established in April 2018 to look at the regulations, and it held six meetings. That group included investors, accountants, advisers and business representatives who took part in the meetings as independent individuals. They were asked to participate because of their knowledge, expertise and potential to help in this area, to work with us to look at the technical information and ensure that any regulations brought forward would be in good order.
As the hon. Gentleman mentioned, there was no public consultation on the regulations, but we held informal stakeholder meetings of those affected and interested parties over a long period, from 2018.
With regard to the hon. Gentleman’s comments on the FRC, we welcomed the review undertaken by Sir John Kingman and we will bring forward primary legislation on that point. I must point out that the endorsement board will be a subsidiary of the FRC. It is not currently constituted. The regulations will enable the Secretary of State to have those powers and he will be able to sub-delegate them to an endorsement board.
We are working with FRC officials, and the Secretary of State has full oversight of the development of the EB and its design. He will eventually appoint a chair, shape governance and have full political oversight. The EB will be run separately, as a subsidiary; it will have its own running costs and will be funded through a levy, which organisations that have to comply with FRC rules currently pay to the FRC.
One good thing about the endorsement board and its being structured within the FRC is the future thought leadership that the board will give. It will really be able to influence, on the international stage, any future developments in IFRS standards. That area will be key for the endorsement board going forward.
Bill Esterson
Earlier, I put to the Minister her Department’s statement to the House of Lords Committee that it was working with the FRC to have the new endorsement board ready in time for EU exit. I take it, from what she just said, that that will not happen. Will she confirm that? Will she also confirm the arrangements for the work that the new endorsement board will undertake once it is set up?
Kelly Tolhurst
I am sorry; I thought I had already outlined that to the hon. Gentleman. The Secretary of State has those powers, which will he will sub-delegate to the endorsement board. We are working to develop that board, and our intention is that it will be in place by the end of 2019. I thought I had made that clear.
The Secretary of State will have the power to sub-delegate, but he will also have the power to revoke powers sub-delegated to the endorsement board in the future. To clarify, and to give Members comfort that political oversight will continue, the hon. Gentleman was quite right that the Secretary of State will have to report to Parliament annually, and the endorsement board that carries out these tasks in the future will also report annually to the Secretary of State. Those reports will be placed in the Commons Library. Even when there is an endorsement board, the Secretary of State will still lay an annual report in Parliament, which will give an opportunity for parliamentary scrutiny and for the Secretary of State to be scrutinised and held to account for particular activities of the endorsement board when that sub-delegation has occurred.
On the hon. Gentleman’s comments on whether we are lobbying the US to follow IFRS standards more closely, that is not something I am directly involved with. The draft regulations are very much about making sure that the UK is able to maintain its place in the global market. As an independent nation after EU exit, we will have the opportunity to make sure that we have a wider influence in the world on the adoption and formulation of standards.
As I have outlined, the draft regulations will provide continuity and clarity to business by ensuring that UK companies can continue to use IFRS, as adopted in the EU, when preparing their annual accounts. They also set out a future adoption framework for the UK that is robust and transparent, and that will act in the national interest. This framework has been developed in close consultation with stakeholders, as I have outlined, and represents the best way forward for the UK’s continued use of these international standards. I therefore commend the draft regulations to the Committee.
Question put and agreed to.
Draft Electronic Commerce and Solvency 2 (amendment etc.) (EU Exit) Regulations 2019
(5 years, 8 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Electronic Commerce and Solvency 2 (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship this afternoon, Mr Bailey.
As the Committee will be aware, the Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there will continue to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying statutory instruments under the European Union (Withdrawal) Act 2018 to deliver that, and a number of debates on statutory instruments have been held in this place and the House of Lords. This statutory instrument is part of that programme.
These draft regulations will fix deficiencies in UK law on the financial services elements of e-commerce, to ensure they continue to operate effectively post-exit. The statutory instrument also fixes deficiencies in an EU Commission delegated regulation that sits under the EU securitisation regulation and sets out further detail of the Solvency 2 regime. The approach taken in that legislation aligns with that of other statutory instruments laid under the EU (Withdrawal) Act 2018 to provide continuity by maintaining existing legislation at the point of exit, but amending it where necessary to ensure that it works effectively in a no-deal context.
On the substance of the statutory instrument, currently the electric commerce directive 2000 implements a regime to facilitate greater cross-border e-commerce activity in the EEA. E-commerce refers to commercial activity that takes place online only. The regime allows EEA firms to undertake online-only activity in an EEA state other than their home state, without being subject to regulation in that EEA country, on the basis that such firms will be subject to relevant regulation in their home state. In the field of financial services, that means that an EEA firm, excluding Solvency 2 insurers, can undertake online-only activity in the UK without needing authorisation from the Financial Conduct Authority. That is implemented in UK legislation through a provision in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, which excludes EEA e-commerce firms from needing FCA authorisation.
In a no-deal scenario, the UK will be outside the EEA and not subject to the e-commerce directive. As a result, the reciprocal arrangement that permitted EEA e-commerce providers to operate in the UK without being regulated in the UK will no longer be valid. The exclusion in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 will therefore be revoked, to prevent EEA e-commerce financial services providers from being able to undertake online-only financial services activity in the UK without the appropriate authorisation from the FCA.
This statutory instrument amends an EU Commission delegated regulation that provides further detail on the provisions of Solvency 2. One provision of that delegated regulation sets out requirements for investments in securitisations that no longer comply with the risk-retention and qualitative requirements. Those requirements relate to changes introduced by the EU securitisation regulation —a piece of legislation that is being domesticated through an earlier statutory instrument.
With regard to the e-commerce directive, these draft regulations therefore revoke article 72A of the Regulated Activities Order, where the exclusion for EEA e-commerce financial service providers from the UK regulation lies. In addition, this statutory instrument revokes the bulk of the regulations in the Electronic Commerce Directive (Financial Services and Markets) Regulations 2002, which gave the FCA rule-making powers pertaining to incoming EEA e-commerce financial services providers. Those will no longer be relevant post-exit.
However, to help protect the interests of UK customers of EEA financial services firms, and those firms themselves, it is also necessary to implement a regime that allows contracts taken out under the current exclusion to continue to be legally serviceable. As such, this statutory instrument will implement a run-off regime, to allow EEA e-commerce firms legally to service financial services contracts that were taken out before the commencement of the instrument, and which utilise the exclusion in the Regulated Activities Order for a limited period of time.
Pre-existing financial services contracts taken out under the e-commerce exclusion will continue to be excluded from the scope of regulated financial services activities under the Financial Services and Markets Act 2000. The run-off regime is similar to the contractual run-off established by the Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019, which was debated by this House. This will enable EEA providers of e-commerce activity of a financial services nature to wind down their UK operations in an orderly manner. That will provide certainty and fairness to both providers and users of financial services, and demonstrate that the UK remains open for business and takes legal certainty and business continuity seriously.
The draft regulations also make minor changes to a Commission delegated regulation related to Solvency 2, to reflect changes introduced by the securitisation regulation. Specifically, the regulations correct a cross-reference and add references to the UK regulators. Those changes are necessary as they were not included in the statutory instrument related to the EU securitisation regulation. The Treasury has been working very closely with the Financial Conduct Authority in drafting this instrument, and February it published the instrument in draft, along with an explanatory policy note to maximise transparency to Parliament and industry.
In conclusion, the Government believe that the proposed legislation is necessary to ensure that online-only e-commerce financial services contracts taken out between EEA firms and UK consumers can continue to be legally serviced, and that the legislation, including retained EU law, will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope colleagues will join me in supporting these 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 Bailey.
I am very grateful to the Minister, as always, for all his explanatory remarks. Once again, he and I are discussing a statutory instrument that makes provision for a regulatory framework after Brexit in the event of our crashing out of the EU without a deal. On each occasion, my Front-Bench colleagues and I have spelt out our objections to the Government’s approach of using secondary legislation to fulfil that process.
We are finally reaching the end of the process. I echo the remarks made by my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) on Monday. I thank him for his hard work, as well as those staff who have ably assisted with this Herculean task for the shadow Treasury team, not least Hana Al Izzi, Mary Partington, Max Harris, Suha Abdul and Sophia Morrell.
Yet again we are debating technical legislation that may not be needed, in a context where a major plank of that legislation has not been retabled, due to what appears to be Government reluctance to accept a vote on an amendment relating to tax transparency in Crown dependencies and overseas territories. Although the Financial Services Bill has been postponed, it appears—inevitably—that the long, slow and painful no-deal financial services legislation caravan continues to limp along in other forms, including this SI.
As with previous pieces of no-deal legislation, this SI makes changes that could prove to have a substantial impact. It has simply not been possible to engage with the regulations as proactively and in as detailed a fashion as would have been possible with a more normal timetable. In that context, it is highly possible that mistakes will be made, and the Opposition are very much aware of and concerned about that.
I have three specific questions about this SI. The first concerns naming decisions. It might appear to be a pedantic point but it is a germane one. Anyone trying to find information about this regulation through frequently-used search engines is likely to be provided instead with details for the confusingly virtually identically named electronic commerce no-deal regulation, which came from the Department for Business, Energy and Industrial Strategy. As the Minister mentioned, this SI deals instead with how the securitisation regulation and the electronic commerce directive provisions, once onshored, will interact with the onshored elements of Solvency 2, as well as establishing a new regime for electronic commerce provisions for information society services financial services firms.
As with other SIs, not least the one that we considered on Monday, this process is rather rag-bag and convoluted. Indeed, according to paragraph 2.7 of the explanatory memorandum, it seems that the securitisation element is due to an omission—in fact, the Minister said that it was just now—from the onshoring regulation for the securitisation regulation, which was passed just a few weeks ago. A large element of this SI seems to be just rectifying a previous lacuna, if I have grasped its purpose correctly. I see that the Minister is shaking his head—I am pleased if I have got that wrong and perhaps he can explain it.
Secondly, I want to probe the powers provided to the FCA via this instrument. Presumably these powers, provided during the run-off period, are identical to those provided to domestic EEA regulators for the regulation of information society service financial services firms—sorry for using that phrase again, but I do not think there is any other way to describe them. I want to check that, because regulations 15 to 17 enable the FCA to disapply or vary the exclusion from the need for FCA authorisation for firms in the electronic commerce directive run-off—that is, during the period of a contract being finished off, which could last for up to five years, according to the regulations.
In addition, according to the regulations, the FCA can determine fees for firms that are within the run-off period, so it would be helpful to understand whether those fees will mirror those for registration. I am not an expert in the area, and it is unclear to me whether registration is one shot or continuing. If the former, has thought been given to how the FCA will ensure that firms will not, in practice, be charged twice for registering—once in the EEA and once again during the run-off period? That may be unavoidable, but it would be helpful to understand the Treasury’s thinking.
As before, the impact assessment for the SI does not cover the impacts on EEA firms. I understand that the Government have taken that decision, and I respect that, but if it looked as if it would be too expensive for EEA firms to continue to honour those contracts, there would be a big issue for UK consumers.
Finally, as with so many other SIs, the question arises of how the arrangements will be applied in the opposite direction in the event of no deal. In particular, it would be helpful to understand the extent to which the Government understand it is likely that UK electronic commerce firms will still be able to operate in the EU27 in the event of no deal. Given this country’s strength in FinTech, I suspect there is a large number of such firms, so it would be helpful to understand whether the Minister anticipates that other EU countries are likely to adopt a similar run-off approach for servicing existing contracts, or a more drastic approach that could obviously lead to major legal difficulties for UK firms if they can no longer legally operate contracts that have already been signed with customers.
Mr Kevan Jones (North Durham) (Lab)
It is a pleasure to serve under your chairmanship, Mr Bailey. I apologise to the Minister—apparently he missed me last week in Committee when I missed an SI. I will make sure not to disappoint him today by asking a question. As my hon. Friend the Member for Oxford East said, we are coming to the end of the long series of SI Committees that we have served on. What a waste of parliamentary time they will have been if we, hopefully, get a deal. I also pay tribute to the civil servants who have spent hours and days of their valuable time on them, rather than their day jobs. A lot of the SIs are formed in the Treasury, but from speaking to former civil servants who I knew as a Minister, I know that civil servants across Whitehall are focused on these matters, so it is affecting their day jobs.
I will make a couple of points. My hon. Friend the Member for Oxford East raised the issue of overseas territories. In paragraph 4 of the explanatory memorandum, “Extent and territorial application”, it says:
“The territorial extent of this instrument is the United Kingdom…The territorial application of this instrument is the United Kingdom.”
Could the Minister touch on the overseas territories, such as Gibraltar and others, and how they will be affected or covered by the regulations?
I accept that the regulations are in preparation for a no deal, but in terms of their extent, what evaluation has the Treasury made of the number of contracts that will be caught by the regulations? In that context, what information has been put out to those companies, businesses and individuals about their possible effects when they come in? Many people will obviously want a deal, and are assuming that we will have one, but if we do not, the regulations will hit them straightaway if they are not careful. I wonder what preparation the Treasury has done for that. Some numbers would perhaps give us an understanding of the possible effects.
The Minister used the phrase “a limited period of time”. I am not sure that that is a legal definition. What evaluation has the Treasury made of how long the period would last, and what did he mean by “a limited period of time”?
John Glen
I thank the hon. Member for Oxford East and the right hon. Member for North Durham for their questions, which I will endeavour to answer.
As has been the norm, we have exchanged an analysis of the nature of this process, and the desirability of it. I think it was back in October that the hon. Member for Glasgow Central (Alison Thewliss) asked what the point of it was. I must admit, I have had some reflections on that myself. However, we are getting to the end, with the 54th statutory instrument and the 33rd Committee today. We have systematically brought SIs to Committee under the powers of the European Union (Withdrawal) Act 2018 and, as the hon. Member for Oxford East has shown, we have constructively scrutinised them. We have not agreed on every occasion, but I have sought to do that in as professional a way as possible in the circumstances. I will now examine the points that she has made.
On how the SI is named, I recognise the issues with Google but, as is the case with other pieces of legislation under this programme, it is necessary to group certain provisions together. I am not familiar with precisely how they are named. It is not a process that I have been involved in personally, but I imagine that there is a certain set of protocols, and I recognise that it is rooted in legal language. I cannot say more than that.
On the impact of no deal on e-commerce providers, those established in the UK will lose their exemption from other EEA countries’ laws that fall within the co-ordinated field as defined in the e-commerce directive. UK e-commerce firms will therefore want to prepare by checking for any compliance issues or additional legal requirement that they need to comply with in each EEA country in which they operate. UK providers of online services to EEA countries will need to continue to comply with a range of EEA countries’ individual legal requirements relating to online activities that already fall outside the scope of the directive.
The purpose of the directive was broadly—I think this touches on another point that the hon. Lady raised—around the alignment between different regulators. The purpose was to say that the domestic national competent authority regulator in an EEA country was sufficient in order to conduct financial services trade online with a UK consumer. That has been the broad understanding to this point. Obviously, if we entered into the undesirable no-deal situation, further legislation will be needed to safeguard UK consumers.
The hon. Lady asked why the changes to the Commission delegated regulation were not introduced in the securitisation regulations. The changes that needed to be made to the delegated regulation required further analysis which, due to timing constraints, the Government were unable to complete by the time those regulations were put before Parliament. To ensure that all relevant amendments were captured the Government therefore decided to spend more time on that analysis, and to introduce the changes through a further SI.
I have never said that this is a perfect process. We always envisaged, when we timetabled the SIs, that there would be a few at the end that would allow us to make provision where there would be some degree of aggregation. I recognise the hon. Lady’s point that the neatness, suitability and desirability of it at this stage is not as clear as it could have been, but that was an inevitable consequence of laying 1,000 pages of SIs in this condensed period.
Anneliese Dodds
I am sorry to rewind the Minister a bit, but I was not sure when he had finished his previous point. Just to be absolutely clear, we have been able to get some agreement, as I understand it, from the EU-level regulators that there would be reciprocal provisions on some other areas of financial services. Is the Minister suggesting that in this area we do not yet have that kind of agreement, and therefore that there could be problems with the continuation of contracts unless agreement is reached with those other regulators?
John Glen
In terms of reciprocity in a no-deal situation, actions taken in recent days and weeks give us that equivalence assessment. The scope and effectiveness of those going forward would not be fully compliant. We would then be in a situation, in the case of no deal, where we would need to undertake considerable examination and further legislation in that context.
On registration, EEA firms will need to notify the FCA but they will not need to register. That will not incur a fee. The right hon. Member for North Durham raised a number of points about evaluation and the time of the run-off. The maximum length of the run-off is five years. It is that long because of the scope of the contracts that could be involved.
The hon. Member for Oxford East asked about the assessment the Treasury had done of the number of contracts between UK consumers and EEA firms. It is very small because most UK consumers would not be comfortable entering into that sort of contract with an online-only company in the EEA. Our assessment and that of the FCA is that that number is, therefore, very small.
The right hon. Member for North Durham mentioned the territorial application of the legislation with respect to overseas territories. The SI does not affect the law in Gibraltar or the Crown dependencies, being Jersey, Guernsey and the Isle of Man. I do not know about the overseas territories. I do not know whether Gibraltar is a proxy for all of the overseas territories—I imagine so. I will write to clarify that matter because I do not wish to mislead the right hon. Gentleman.
We had a de minimis impact assessment because we anticipated very few contracts due to the limitations of the online activity and online-only business that exists. We expect EEA firms to use passporting instead of the e-commerce exclusion. I am happy to examine the matter in more detail. I will write to the right hon. Gentleman on that point and acknowledge that my answer is not adequate.
I hope I have answered hon. Members’ questions. I recognise this has been a long and arduous process. I would like to put on record my respect and thanks to the hon. Member for Oxford East for the constructive and thorough way in which she has taken the matter on and how we have engaged in these Committees.
I would also like to acknowledge the considerable support I have had from hon. Members on the Government side of the Committee, in particular the Lord Commissioner of Her Majesty’s Treasury, my hon. Friend the Member for Calder Valley, who has been with me on every single one, and the various Parliamentary Private Secretaries who have supported me.
I am not taking for granted that the Committee will agree the SI this afternoon but, in conclusion, I would say that we do need it to ensure that EEA firms providing e-commerce of a financial services nature can continue legally to service their contracts, and that the legislation functions appropriately if the UK leaves the EU without a deal or an implementation period. The SI also ensures that retained EU law remains accurate if the UK leaves the EU without a deal. I hope the Committee found my answers and explanation satisfactory and will agree the regulations.
Question put and agreed to.
Draft Social Security Coordination (Regulation (EC) No 987/2009) (Amendment) (EU Exit) Regulations 2019
Draft Social Security Coordination (Council Regulation (EEC) No 1408/71 and Council Regulation (EC) No 859/2003) (Amendment) (EU Exit) Regulations 2019
Draft Social Security Coordination (Regulation (EC) No 574/72) (Amendment) (EU Exit) Regulations 2019
Draft Social Security Coordination (Regulation (EC) No 883/2004, EEA Agreement and Swiss Agreement) (Amendment) (EU Exit) Regulations 2019
(5 years, 8 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister for Employment (Alok Sharma)
I beg to move,
That the Committee has considered the draft Social Security Coordination (Regulation (EC) No 987/2009) (Amendment) (EU Exit) Regulations 2019.
The Chair
With this it will be convenient to consider the draft Social Security Coordination (Council Regulation (EEC) No 1408/71 and Council Regulation (EC) No 859/2003) (Amendment) (EU Exit) Regulations 2019, the draft Social Security Coordination (Council Regulation (EEC) No 574/72) (Amendment) (EU Exit) Regulations 2019 and the draft Social Security Coordination (Regulation (EC) No 883/2004, EEA Agreement and Swiss Agreement) (Amendment) (EU Exit) Regulations 2019.
Alok Sharma
It is an absolute pleasure to serve under your chairmanship, Mr Gray. We are all delighted that we are able to proceed this afternoon.
The draft regulations were laid before both Houses on 30 January, alongside the other three sets of regulations we are debating. They form a package that will enable the Government to address deficiencies in retained European Union law that will impact on the operation of the retained social security co-ordination regulations should the UK withdraw from the EU in a no-deal scenario.
Before I go into the detail of the draft regulations, it might be useful if I provide some context. The whole system of social security co-ordination across the EU relies on co-operation and reciprocity. The legal framework for that would cease in a no-deal scenario. The UK would have no means of enforcing reciprocal obligations on EU member states, and therefore cannot legislate for that when correcting deficiencies in the co-ordination regulations. We cannot force member states to co-operate with the UK or to provide the UK with information when dealing with UK benefit claims. In a no-deal scenario, member states cannot be required to apply the rules contained in the co-ordination regulations to individuals moving to and from the UK.
The draft statutory instruments will allow the UK to apply the current social security co-ordination regulations on a unilateral basis to ensure that citizens’ rights are protected as far as possible in a no-deal scenario. They are intended to ensure that the UK has a functioning statute book by fixing deficiencies in retained EU law in line with the power provided by section 8 of the European Union (Withdrawal) Act 2018.
As hon. Members are aware, the Immigration and Social Security Co-ordination (EU Withdrawal) Bill was considered recently in Committee—a number of colleagues present served on the Bill Committee—and is being prepared for Report. The draft statutory instruments are necessary to ensure that we are ready for exit day. The Bill will provide the legislative framework that is required to deliver future policy at the appropriate time.
The legislation that the draft instruments will amend is lengthy, but it can be split broadly into three categories. The first category is data and information sharing. The co-ordination regulations require EU member states to exchange information through specific procedures laid down in the regulations. The data shared are used to establish which member state is responsible for the payment of benefits, to take into account contributions made in other member states when deciding benefit entitlement, and to avoid overlapping benefit payments.
The draft statutory instruments will ensure that the UK can continue to share data with member states when they are applying the co-ordination regulations, and we will continue to work closely with the EU27 so that the first port of call for all contribution queries will be the appropriate administration in a member state. However, if the member state is unable to provide information, the instruments will enable us to ask claimants to provide, within a reasonable timeframe, the relevant information to allow the UK to determine if it is competent in respect of benefits.
Secondly, the instruments remove provisions in the retained co-ordination regulations that will be inoperable if the UK leaves the EU without a deal. For example, the co-ordination regulations provide for a number of bodies at EU level to deal with administrative and technical issues or disputes arising from the application of the social security co-ordination regulations, the administrative commission being the main one. The instruments remove references to those bodies on the basis that they will be inoperable if the UK withdraws from the EU in a no-deal scenario. If disputes arise post exit date, the UK will continue to use the same rules as it does now to determine whether it is the responsible country for making payments. However, any challenges will be resolved through domestic routes.
Finally, the instruments deal with applicable legislation. The co-ordination regulations state that an individual shall be subject to only one EU member state’s legislation at a time. The arrangements rely on co-ordination between member states to operate effectively. The instruments amend the co-ordination regulations to maintain the status quo on when the UK legislation does and does not apply.
The regulations are being made using powers in the European Union (Withdrawal) Act 2018 to fix legal inoperabilities and other deficiencies that will arise in retained EU law on exit, so that the converted law continues to operate effectively post exit. The amendments are in line with both the policy and the legal intent of the Act. The use of secondary legislation to amend primary legislation through so-called Henry VIII powers was debated at length during the passage of the Act.
Kate Green (Stretford and Urmston) (Lab)
As the Minister says, we debated some of these points when we served together on the Immigration and Social Security Co-ordination (EU Withdrawal) Bill Committee a couple of weeks ago. May I ask him about the use of Henry VIII powers? As he knows, clause 5 of the Bill has very wide Henry VIII powers in relation to changing social security rules. When the Bill becomes an Act of Parliament, could clause 5 be used to make amendments to the regulations that we are debating in this Committee?
Alok Sharma
As the hon. Lady acknowledges, we debated this issue, in particular the Henry VIII powers, in the Immigration and Social Security Co-ordination (EU Withdrawal) Bill Committee. The process for any changes will be affirmative and they will therefore be debated and voted on in Parliament. I made that point in the Bill Committee, and no doubt we will have an opportunity to discuss the matter again on Report.
The statutory instruments are part of a wider legislative package that my Department is laying before Parliament. We have laid SIs relating to private pensions and the European job mobility portal, which is more commonly known as EURES, and we have made consequential amendments to domestic legislation. The Department for Work and Pensions has carried out no formal consultation on the regulations, as they address deficiencies in retained EU law and there is no material impact on business, charities, voluntary bodies or the public sector. My officials nevertheless held informal discussions last year with the Social Security Advisory Committee on the instruments, which focused on both technical issues and policy considerations.
In conclusion, the regulations are an essential part of the legislative programme and have been laid in preparation for a potential no-deal scenario. They are needed so that the social security co-ordination system can function, even unilaterally, and in order to retain the ability of the Department for Work and Pensions to make payments to claimants and to determine claims. Not proceeding with this legislation would result in a statute book that did not function correctly, and in not doing so we would be failing to protect citizens’ rights. I therefore commend the regulations to the Committee.
Mike Amesbury (Weaver Vale) (Lab)
It is a pleasure to serve under your chairmanship, Mr Gray. I thank the Minister for outlining the Government’s position on the regulations. I am less thankful to the Government for causing us once again to be in a Committee discussing detailed statutory instruments, regulations and amendments that will affect thousands of people, when we have little or no idea of exactly what our relationship with the European Union will be in just a few days’ time.
In June 2018, there were 3.7 million EU nationals living in the UK. The most recent figure we have, which is for 2017, put the number of UK nationals living in other EU states, excluding Ireland, at 750,000 people. The current situation is causing incredible uncertainty for those people.
As we all know, Brexit is a divisive issue. From where we are now, it seems we can all agree that the statement made by the right hon. Member for Wokingham (John Redwood) in July 2016 that,
“Getting out of the EU can be quick and easy—the UK holds most of the cards in any negotiation”,
has not aged well. Certainly, from the explanatory notes associated with the regulations, it does not appear that we hold all the cards; in fact, quite the opposite. Having read the regulations in detail, if this is “quick and easy”, I would hate to see what constitutes technical, difficult and protracted. However, we are where we are.
Unfortunately, there is the strong possibility of no deal in nine days’ time. That is the crux of the issue. Paragraph 2.4 of the explanatory note states:
“The whole system…relies on cooperation and reciprocity from other Member States”—
as the Minister rightly said—
“but we cannot assume this would continue in a no deal scenario. It will not be possible to impose reciprocal obligations on Member States…such as requiring that they cooperate with the UK”
to provide information. Indeed, the regulations adopted yesterday by the European Council reaffirm this.
Countries usually have a minimum number of qualifying years for a state pension. When people move between one EU member state and another, the system for social security co-ordination allows contributions made in one member state to count towards the state pension of another. There are nearly half a million retired people—some 468,000 of them—living in other EU states where they draw a UK state pension. The largest numbers are in Ireland, where there are 132,700, and Spain, where there are 106,400, but there are 67,000 living in France, 42,100 in Germany and 35,200 in Italy. Those figures include not only UK citizens, but citizens of other EU states who have worked in the UK and built up pension and social security entitlements here.
The UK state pension is already the lowest in the OECD and the state pensions of people drawing them in other EU states have been hit by the devaluation of sterling following Brexit. What assessment has the Minister made of the likelihood and consequences of any member state refusing to co-operate? Does the Minister have a more recent estimate of the number of people who could be affected should this scenario occur?
The explanatory memorandum tells us:
“These instruments aim to ensure that citizens’ rights are protected”—
as the Minister rightly said—
“as far as possible in a no-deal scenario.”
That is a necessary and welcome aim, but we should all be concerned by the phrase “as far as possible”, because it leaves open the suggestion that citizens may not be protected. Indeed, the intention to remove article 4 of regulation 883/2004 reaffirms that. What assessment has the Minister made of the likelihood of individuals’ rights being affected in a no-deal scenario? What rights are they and what might the consequences be?
One of the key concerns is data-sharing. The regulations enable the Government to ask claimants to provide relevant data, within a reasonable time, to determine competence because an EU member state has not been able to do so when asked. What assessment have the Government made of claimants’ ability to source and provide that information in a manner acceptable to the Government? Will the Government produce guidance to assist claimants so that they know what they might need and what they might need to do in order to provide the necessary information?
We are told that if the information provided by the claimant is insufficient, the UK will no longer be required to fulfil any obligation under the co-ordination regulations. The UK will, of course, cease to be represented on the bodies that deal with disputes in this area and will no longer have those powers or functions. What, if anything, does the Minister think will replace those bodies, and what safeguards are there to ensure that individuals are not left in complete limbo, given the absence of the provisional payments that exist in the EU system?
There is particular concern about medical assessments, employment and support allowance, and state pensions. The Government already have a record of underpayments in this kind of circumstance—for example, 210,000 people are currently affected by ESA underpayments. What assessment has the Minister made of the capacity and ability of the Department to avoid any problems in this area?
We hope that the Minister can provide satisfactory answers to our questions, and we look forward to hearing them and responding constructively. What is not satisfactory, however, is the fact that we are having to do this at all. Paragraph 11.1 of the explanatory notes states:
“In the event of a no deal scenario, guidance will be provided in due course and in adequate time in order to adapt these amendments in practice.”
We are nine days away from exit day. Is that really adequate time? The Government expect claimants to accept that the DWP needs five weeks to process and pay a universal credit claim—something the Opposition dispute—but here we are, expecting the Department to prepare for relationships with 27 other EU member states in a little over a week. It is no wonder that an impact assessment has not been prepared—there would barely have been time to read it, let alone respond to its findings. This is, of course, a matter of concern.
With that in mind, will the Minister confirm why he believes that these changes will not give rise to any new costs or financial or economic impact beyond the status quo? It might be expected in the case of no deal that, should the potential consequences of a refusal to co-operate come to pass, there may well be some cost to the Government in supporting, administering and responding to such a situation. Will the Minister confirm whether the Department believes that there is likely to be any impact or any consequences in respect of legal challenges, or any wider costs of individuals returning to the UK from other member states as a result of a loss of entitlements there?
Given that it is necessary to deal with the situation as we find it, rather than as we might expect it to be had the Government had an effective and competent approach to Brexit, we do not intend to oppose the draft regulations, but we cannot give them enthusiastic support either. I hope that the Minister can answer the concerns and queries that I have outlined.
Chris Stephens (Glasgow South West) (SNP)
It is good to see a fellow Glaswegian in the Chair, Mr Gray. It is the greatest city in the world, as you and I are well aware.
First, the Government suggest that the draft regulations will protect citizens’ rights “as far as possible”. However, it is clear that there can be absolutely no guarantees that the current rights of UK citizens in the EU will be protected.
Secondly, I think that the European Statutory Instruments Committee was correct to decide that the statutory instruments should be upgraded to the affirmative procedure, as opposed to the negative procedure. I say that as a former member of that Committee—I thought the Whips were disciplining me for something. It is a Committee that always takes the issues very seriously.
Thirdly, there appears to be a paradox in the UK Government putting in place mechanisms for the operation of social security co-ordination agreements in the event of no deal. The statutory instruments will enable the UK Government to ask claimants to provide them with data to determine whether the UK or another relevant member state is responsible for the payment of social security. The explanatory notes state that should the information be insufficient, the UK will simply not make the payment, even if it is its competence to do so. What information will claimants be asked to provide? Will claimants have to obtain the information themselves at their own cost? What deadline will the UK Government give to such claimants? Will the Minister also tell us what the determination of “sufficiency” is? How will such determinations of sufficiency be communicated to claimants? These are serious questions, and the Government must answer them.
What is the situation for people who have worked in the UK, whether they are UK or EU nationals, but who do not live in the UK? In the event of no deal or there being no reciprocal arrangements, will their national insurance contributions be put on hold? Will they be inaccessible for the duration until the person provides sufficient information? What will the Government do with those national insurance contributions until the person provides the information? Is there a cut-off point? If that person passes away, will the national insurance contributions pass to their next of kin?
Will the Minister confirm that a UK claimant in the EU will lose their right to provisional payments by the DWP during disputes over competence? Will he also confirm that workers who are resident outside the UK, whether UK or EU nationals, could be subject to legislation in two different states at the same time? The entire point of the social security co-ordination regulations at the EU level is to stop that from happening.
It is clear that social security co-ordination could essentially cease with these draft regulations, meaning that there would be no protection for those to whom it currently applies. This situation adds to the arguments of those of us in this House who believe that we should be extending article 50 and putting a vote to the people.
Alok Sharma
I thank the hon. Members for Weaver Vale and for Glasgow South West for their speeches and their constructive approach to today’s proceedings. I start by saying that this Committee is about fixing deficiencies in a set of regulations, rather than a detailed debate about Brexit. Many of those take place already in the main Chamber. I see that the urgent question is now over, but no doubt there will be lots more debate on the wider issues around Brexit.
The hon. Member for Weaver Vale said that there was incredible uncertainty for individuals. I hold out the hand of friendship to him and all colleagues on the Opposition Benches. If he wants to get rid of that incredible uncertainty, he should support the deal that is on the table when it returns to Parliament. As I said, I am sure there will be further discussion on that matter.
A large number of very good questions were raised by the hon. Members for Weaver Vale and for Glasgow South West. I will try to get through as many of those as I can. If I fail to answer any question of a material nature, I am very happy for my officials to write subsequently to Members. I will start with state pension uprating, which has garnered a lot of interest. As Members will know, it has been announced that state pensions for pensioners currently living in the EU will be uprated for 2019-20. We wish to continue uprating pensions beyond that, but we will take decisions in light of whether, as we would hope and expect, reciprocal arrangements are in place with the EU.
Kate Green
I note what the Minister says, and I understand the point he is making about reciprocity, but the Government could choose unilaterally to uprate pensions after 2020. That has been the case since at least 1996, when the then Department of Social Security made it clear in a memorandum.
Alok Sharma
I note what the hon. Lady is saying, and I know she is an expert in welfare and social security matters, but I can only repeat what I have said, which is that we have made a commitment for 2019-20. We want to see a reciprocal arrangement in place thereafter. No doubt these discussions will continue.
To return to the point about pensions that was raised by the hon. Member for Weaver Vale, I want to make it absolutely clear that the International Pensions Centre in Newcastle will guide claimants through any processes as required.
Both hon. Gentlemen who spoke raised the issue of protections and questioned the use of the phrase “as far as possible” in the explanatory notes. All I say is that we can only legislate to protect rights to benefits that are paid by the UK where we are maintaining the status quo; as hon. Members will appreciate, we cannot amend retained EU law to protect UK nationals receiving benefits from member states.
Both hon. Gentlemen asked what evidence individuals would be required to produce in order to confirm their contributions to the EU. The UK Government will obviously consider evidence on a case-by-case basis. We would expect the claimant to provide wage slips or proof of contributions made, and the Government will provide support to claimants where any additional information is required from them. On the specific point about the related costs, one of the issues that has come up before is the cost of any translation or notarisation of documents that are not in English. The Department for Work and Pensions currently receives documentation from all 27 EU member states and, where necessary, we translate those documents. The claimants would not need to pay to translate or notarise documents.
With regard to the issue of provisional payments and dispute resolution, which was raised by both hon. Gentlemen who spoke, the current provisional payments system operates where there is a dispute between member states of the European Union. Such disputes are resolved following a decision by a mediation body of the administration commission of the European Union. As I said in my opening remarks, the UK will no longer be a member state or part of that body in a no-deal scenario, which is why that provision has been removed. We will continue to use the same rules that are used now to determine whether the UK is competent. DWP and Her Majesty’s Revenue and Customs have only ever made provisional payments twice. They use all available data to ensure that disputes over which country is responsible for paying benefits do not arise, and individuals will be able to appeal any decision on benefit entitlement using domestic appeal routes.
The restoration of reciprocity in a no-deal scenario was raised. I have addressed this point, and I reiterate that the UK is seeking discussions with member states on social security co-ordination arrangements in a no-deal scenario. We are exploring options to protect past social security contributions as well. As Members know, an agreement has been reached with Ireland. The UK Government have announced an agreement with Ireland on social security, guaranteeing continued access to the state pension and benefits of UK and Irish citizens and their qualifying family members when in the other’s state.
The hon. Member for Weaver Vale mentioned the European Commission regulations. I note that the Commission’s proposals for contingency measures, which cover all member states and the UK, are more limited in scope than those set out in the Government’s policy paper that was published on 6 December 2018, entitled “Citizens’ Rights—EU citizens in the UK and UK nationals in the EU”. The Government have expressed concern with the EU that the coverage of the regulations is minimal in terms of social security rights, and that it does not match the UK’s legislation.
The issue of equal treatment was raised in relation to article 4 of regulation 883/2004. The removal of the principle does not have a practical impact on the rights of EU nationals who wish to access the UK’s social security schemes.
On impact assessments and related costs, the reason an impact assessment was not prepared is that the changes we are discussing are technical in nature and do not make any policy changes. As such, they do not give rise to any new cost or to any financial or economic impact beyond the status quo.
Kate Green
It may be very marginal, but there is a potential cost both to individuals and their employers and former employers in trying to find evidence that in the past could have been obtained automatically through reciprocal arrangements from other EU states. They may now find themselves having to track that down and having to pay to find, copy and produce it in a form that is acceptable to the Department.
Alok Sharma
I note the hon. Lady’s point but, as I said, the impact assessment was in relation to any material changes. We do not believe that there are any, as these are merely technical changes to retained law.
A point was raised about data-sharing. We will of course continue to work closely with the EU so that the first port of call for contribution queries is other member states. The instruments include provisions to ensure that the UK can continue to share data with EU member states when they are applying the co-ordination regulations. If I have not been able to answer any questions—
Chris Stephens
The Minister is obviously going to tell us that he is going to write to us on some of the questions. Could he also write to members of the Select Committee on Work and Pensions about this? Will he be liaising with that Committee on the regulations in the event of no deal, and what it means for social security claimants?
Alok Sharma
I will, of course, write to the hon. Gentleman. When it comes to the Select Committee and other bodies of the House, there is always an opportunity to have a dialogue with them. As he will know, DWP Ministers are in front of the Select Committee on a regular basis—I will be making another appearance in a few weeks—so we are always happy to liaise.
In conclusion, the Government are committed to ensuring that the social security system works for everyone post exit day. The draft regulations will help to do that by fixing deficiencies in retained EU law. I therefore commend them to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Social Security Coordination (Regulation (EC) No 987/2009) (Amendment) (EU Exit) Regulations 2019.
Draft Social Security Coordination (Council Regulation (EEC) No 1408/71 and Council Regulation (EC) No 859/2003) (Amendment) (EU Exit) Regulations 2019
Resolved,
That the Committee has considered the draft Social Security Coordination (Council Regulation (EEC) No 1408/71 and Council Regulation (EC) No 859/2003) (Amendment) (EU Exit) Regulations 2019.—(Alok Sharma.)
Draft Social Security Coordination (Council Regulation (EEC) No 574/72) (Amendment) (EU Exit) Regulations 2019
Resolved,
That the Committee has considered the draft Social Security Coordination (Council Regulation (EEC) No 574/72) (Amendment) (EU Exit) Regulations 2019.—(Alok Sharma.)
Draft Social Security Coordination (Regulation (EC) No 883/2004, EEA Agreement and Swiss Agreement) (Amendment) (EU Exit) Regulations 2019
Resolved,
That the Committee has considered the draft Social Security Coordination (Regulation (EC) No 883/2004, EEA Agreement and Swiss Agreement) (Amendment) (EU Exit) Regulations 2019.—(Alok Sharma.)
The Chair
Before we leave, I apologise again to the Committee for my disgraceful lateness. I have no excuse; I was just wrong.
DRAFT ZOONOTIC DISEASE ERADICATION AND CONTROL (AMENDMENT) (EU EXIT) REGULATIONS 2019
(5 years, 8 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (David Rutley)
I beg to move,
That the Committee has considered the draft Zoonotic Disease Eradication and Control (Amendment) (EU Exit) Regulations 2019.
It is a pleasure to serve on the Committee with you in the Chair, Mr Robertson. This statutory instrument applies to the United Kingdom and is being made under enabling powers in the European Union (Withdrawal) Act 2018. It makes technical changes to ensure operability post EU exit, and transfers powers held by the European Commission to the appropriate Ministers in the UK. It ensures that when the UK leaves the EU, there will continue to be functioning regulatory and legislative controls to protect human health against zoonotic disease, which is—some Members were asking this earlier—disease that may transfer from animals to humans, in this case with a particular focus on salmonella.
I should make it clear, first, that the instrument does not make any changes to the standards set out in the EU regulations, and secondly, that in transferring the powers held by the Commission to appropriate Ministers in the UK, there is no intention to lower the standards that protect the public from the risk of contracting salmonella from poultry. Thirdly, we have worked with the devolved Administrations on this instrument, and they have given consent to it.
The current EU requirements set out in EU regulation 2160/2003 and related legislation set targets to reduce the prevalence of salmonellas of public significance in poultry. Targets are achieved through control programmes, regular sampling for the presence of salmonella and action such as culling where salmonella is found. Where poultry and hatching eggs are traded between EU member states and with other countries, the results of salmonella sampling must be shown on health certificates. Trade with countries outside the EU is permitted only if the country is on a list of approved third countries with equivalent controls.
The SI makes technical amendments; for example, it removes or amends references to EU institutions such as Community reference laboratories and the Commission —references that will no longer be appropriate after EU exit. There are no changes to the standards in the EU regulations.
Part 2—the main part of this SI—transfers powers currently held by the Commission to the appropriate Ministers in the UK. The powers that are being transferred permit procedural and technical changes relating to, for example, targets for the reduction of the prevalence of salmonella, detailed requirements for control programmes and specifying the responsibilities and tasks of laboratories.
Theresa Villiers (Chipping Barnet) (Con)
It would be helpful to know whether anything in the regulations will address anti-microbial resistance risks. Although those risks are obviously a significant threat to human health, zoonotic diseases affect the risk of AMR in the animal population having an effect on the human population. If we are to tackle AMR, it is crucial that we have in mind problems relating to zoonotic diseases. I would be very grateful if the Minister commented on that point.
David Rutley
My right hon. Friend makes an important point. I know she has a keen interest in these issues. Overall, British Poultry Council members have reduced antibiotic use by 80 tonnes—by 85%—between 2013 and 2017. That is important. We are keen to reduce AMR across the population, and among farmed animals, over the next few years. In poultry, we already see significant reduction.
These powers also permit the Secretary of State to make changes to the list of third countries from which imports of live poultry and hatching eggs may be accepted. Part 3 makes minor consequential changes to European economic area agreements. Part 4 makes very minor consequential amendments to secondary legislation in England, Scotland and Northern Ireland; the Welsh Government have chosen to make the corresponding changes separately. Part 5 ensures that existing programmes controlling salmonella in poultry through regular testing and control methods, such as culling and restrictions on eggs from infected flocks, will remain in place after exit day, and that the reference laboratories carrying out testing and analysis are able to continue to operate without new designations.
As a result of transferring powers to the devolved Administrations, instead of having UK-wide targets for the reduction of salmonella and UK-wide national control programmes, each Administration will have their own. We will continue to work closely with the devolved Administrations to establish sensible ways of working together to maintain a coherent UK system of controlling zoonotic disease after EU exit while respecting the devolution settlements. The control programmes in the devolved Administrations will continue to function after we leave the EU much as they do now. Targets will be set at the same level, and requirements for testing, culling and other restrictions will remain unchanged.
Ian C. Lucas (Wrexham) (Lab)
I represent Wrexham, which is on the border, as the Minister, who comes from Cheshire, knows well. Businesses in Wrexham—food-related business, in particular—will be very interested in the fact that the regime that is being put in place in Wrexham appears to be separate from the one that will apply in, for example, Chester. Has there been any consultation on that? If so, who has carried it out?
David Rutley
I thank the hon. Gentleman for that intervention. I hope his team is doing better than Macclesfield, although we are in a higher division. However, let us move on from the football.
David Rutley
I just wanted to rub it in. We have respect for football and many other things.
Although there will be different control programmes, the targets will be set at the same level. The point is that we want to continue to work with the devolved Administrations. They have had engagement with the process. The hon. Gentleman makes an important point about consultation. I was just moving on to that, so I am grateful to him for raising it. We have not consulted formally, because that is not required. A large number of EU exit statutory instruments make minor amendments or introduce the technical fixes necessary to ensure a functioning statute book. In such cases, as with this statutory instrument, consultation is not required as there is no change to policy. Nevertheless, we and the devolved Administrations have engaged with key stakeholders about the instrument, and we have explained that there will be separate targets and control programmes in each Administration once it takes effect. That is understood by stakeholders.
Ian C. Lucas
Can the Minister clarify that for me? As I understand it, these regulations are currently dealt with at an EU level, and in the future they will be dealt with separately by the Welsh Government and the UK Government. Is it not the case, therefore, that by definition there is a change in policy, because there is a transfer and an introduction of different standards in Wales and the rest of the UK?
David Rutley
I understand that point. If the hon. Gentleman or any of his local businesses need further clarification, I will gladly pick that up separately. We want to make sure people fully understand. We are moving from a UK-wide control programme to one that is devolved, so these powers will be transferred not only to the UK but to the devolved Administrations.
The devolved Administrations have been involved with this. I have worked with them, and visited the Scottish Government. There is an active dialogue on these really important issues. I do not think anyone is seeking to change standards in this area imminently—the hon. Member for East Kilbride, Strathaven and Lesmahagow is nodding. That is where we are, but that is not to say that, at some point in the distant future, if we were to move to this scenario, there might not be some divergence, but that is not planned right now. I assure the hon. Member for Wrexham that I will happily meet him separately or arrange meetings with his local poultry producers if required.
As the control programmes will continue to operate much as they do now, the potential impact of this SI have been estimated to be unlikely to be significant. As a result, no impact assessment has been undertaken.
The Zoonotic Disease Eradication and Control (Amendment) (EU Exit) Regulations 2019 aim to ensure that there will be functioning regulatory and legislative controls for salmonella in poultry when the UK leaves the EU. For the reasons I set out, I commend this statutory instrument to the Committee.
Dr David Drew (Stroud) (Lab/Co-op)
I am delighted to serve under your chairmanship, Mr Robertson. I am always pleased to serve on the occasional statutory instrument with the Minister; this is only the second today. It is nice that we have moved into our front room from the more austere surroundings further up the corridor. We just need a sofa in the corner and then we can lie down to be ready for the next SI, as they come with great regularity.
I make the usual caveat. The SIs are coming through at a rate of knots. The Opposition have to do the best we can, given the seriousness of the issues being addressed. The way in which we are trying to scrutinise this SI is not the best way to pursue a proper legislative overview of what is happening to our wonderful nation.
I am going to start with a quizzical point. We are scrutinising the Zoonotic Disease Eradication and Control (Amendment) (EU Exit) Regulations 2019 and I might be wrong, but the only things mentioned are salmonella, chickens and turkeys. Does the SI not apply to any other zoonotic species? It is not named correctly, in my opinion, because it should mention poultry. If we are to define and defend these things, it would help to get it right at the outset. I have searched through the regulations to try to find other animals, but there are none, so this piece of secondary legislation is very specific. The Minister might at the very least look at that because in previous debates we have mentioned African swine fever, blue tongue, avian influenza and bovine tuberculosis. They are all zoonotic diseases, but they are not mentioned in this particular SI, unless I am mistaken. I will not talk about them in any great detail because they will not be relevant to this debate, so I will stick to salmonella and poultry.
Although this is a clearly defined and limited debate, as far as I can make out, unlike our previous one—that was opaque and I am still trying to understand it—it is in a sense very simple because we are moving regulations across from the EU into the UK for the benefit of food safety. Clearly, salmonella is an ever-present threat and a nasty disease. Those of us who have had salmonella—I think by mischance many of us have—do not wish it on anyone else. Salmonella is an ever-present danger—I do not know how many suffer from it, but it must be a considerable number as it is the most common form of food poisoning—so my first question is: what happens if there is no deal next week? Are we ready and able to put in place a regime whereby we check our poultry, we check the imports of poultry and check what happens if the consumer buys poultry and is not very well?
I am intrigued that for the first time we are talking about devolving responsibility. It is good to see the Scottish National party spokesperson in her place. Normally we talk about the centralisation of the process, but in this debate, we seem to be decentralising responsibility. How will that work when poultry moves backwards and forwards between the different nations of the United Kingdom? Who will take responsibility if there are outbreaks?
Although I am not going to talk about wider issues, those of us who lived through both bovine spongiform encephalopathy and foot and mouth know that the onus is on the country from which the disease supposedly comes to take responsibility quickly, otherwise exports are shut down. With both BSE and foot and mouth, we suffered for a considerable period and were unable to open up the export markets. How will the policy work between the different devolved Administrations? Have they the capacity to bear down on diseases or will we be left with a difficult situation in which everybody looks the other way when we have a major disease outbreak on our hands?
This instrument was originally going to be considered under the negative procedure, but it is now being considered under the affirmative procedure because the Joint Committee expressed concerns. We welcome that, but it is intriguing why the instrument was first designated as it was, because this is an important part of the jigsaw puzzle of how we see our food safety as being of paramount importance.
Paragraph 7.1 of the explanatory memorandum states that the Government wish to retain health protection standards relating to salmonella, which is a good statement —that is the very minimum—but how do we keep up with improvements, dare I say, in the rest of the world, but more particularly in the EU? We have driven up food standards across the whole Community, not just in this country, and we import considerable amounts of poultry, particularly from Denmark and the Netherlands, so it is important to know that their standards and ours have commonality.
Likewise, paragraph 7.3 states that, for the UK authorities to exercise functions transferred back from the EU, they need
“setting requirements for national control programmes, special control measures and reference laboratories”.
This has come up in previous debates on statutory instruments. Where are those laboratories? Do they exist? Are we using the existing facilities at Pirbright and Weybridge or wherever, or do we have other laboratories that we can bring into operation? It is important that we know that, because if there is an outbreak during the change from what we have now, someone has to know exactly where we will deal with the impact of such an outbreak.
My usual caveat is that I am an honorary associate member of the British Veterinary Association, but it is important that we put it on the record that the association is largely happy with this bit of secondary legislation. However, it stresses that trade and animal movements across the borders of the UK are hugely important and that any disease interruption would cost the UK dear. That is one thing that we have to recognise: we will be less able to access the various European organisations that are there to bear down on disease eradication and to try to prevent those diseases. As we will not be part of that, it would be interesting to know what the Government’s strategy is.
Although the Government have placed a duty on competent authorities to co-operate, it is difficult to co-operate from outside the club, so again, it would be interesting to know what discussions the Minister has had with other EU countries about what a post-Brexit scenario would look like in dealing with disease issues.
It is likely that we will get more of this when we talk about the livestock SI, which I believe is coming up on Monday, unless it has been reordered, which is always possible in this mad world that we live in. Those are the questions that I would like the Minister to answer; they are important. I have kept my remarks to salmonella and poultry, because they are what this SI is all about.
Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)
It is a pleasure to serve under your chairmanship, Mr Robertson.
We think it is extremely important that we retain the same high and exemplary standards in health protection on EU exit, no matter the type of exit that we behold in the new future. I thank the Minister for working so closely with the devolved Governments on this issue. As has already been said, consent has been given by the Scottish Government and the other devolved Governments across the UK.
The Scottish Government aim to have exemplary and the very best practice in the UK. There will be no risk at all of standards dropping or slipping, and it is our aim to have evidence-based best practice in all that we do. A high level of co-ordination between the nations of the United Kingdom will be required for the issues to be taken forward—as is already the case.
It is extremely important that we do not introduce new burdens for small businesses. They already feel very much under the cosh because of the changes that they are required to adapt to with the different types of potential exit from the EU. It is important, at the same time as maintaining the highest welfare and safety standards, to be pragmatic on business issues.
On AMR, the Health and Social Care Committee undertook a quite comprehensive report on that very issue recently. One of the recommendations concerned high standards of animal welfare, which we hope to maintain and surpass on leaving the EU, and which are critical. Support to farming communities is essential to achieving that.
I thank everyone involved for their consensual approach. My party supports the regulations.
Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)
I have a brief question. I wanted to pick the Minister up on something he said in his opening speech about trade and the list of countries where, effectively, we authorise trade.
The regulations refer to Finland and Norway. Can the Minister expand on the list of countries, and explain whether the United States is part of the wider list he mentioned? He will be aware in particular of the greater prevalence of salmonella in the US, where 1.2 million people are affected each year and there are 23,000 hospitalisations. The US Centres for Disease Control and Prevention estimate that there are roughly 380 deaths because of salmonella each year in the US. In comparison there are on average about 8,500 cases a year in the UK. In a report that it published last year, Sustain raised concerns about food safety fears in US-UK trade deals, and their potential additional cost to the NHS. I should be grateful if the Minister would tell us whether any representations have been made.
I note the document published by the US trade ambassador about US trade negotiation principles. There is something in it that could affect the salmonella effect, in relation to US agriculture and their objective to eliminate
“practices that unfairly decrease U.S. market access opportunities or distort agricultural markets to the detriment of the United States, including non-tariff barriers”.
Given the considerably greater prevalence of salmonella in the agriculture sectors of the US, maintaining high food safety standards will be important after we leave the European Union and I should be grateful if the Minister would explain whether the US is on the country list he mentioned. Also, should there be trade deals with any countries with a salmonella issue, what scrutiny arrangements would be available in respect of the powers and obligations in the statutory instrument?
Ian C. Lucas
I have one brief question about the lists of countries referred to by the Minister. He was talking about the EU designation of individual countries, and perhaps additions to the list of countries affected. I was wondering what the process would be, after the new regime is in place, to take account of changes within the EU to designations in their list. How would that be taken into consideration in relation to the countries on the UK list? Is any relationship envisaged, or has there been any discussion about the relationship between the EU and UK country lists after Brexit?
David Rutley
I thank members of the Committee for their contributions. As ever, I will endeavour to answer some questions, and will seek inspiration for others, before the end of the Committee.
The hon. Member for Stroud asked why the draft regulations were originally laid before the sifting Committee as being subject to the negative procedure. At that time, we did not seek to transfer functions from the Commission. Those provisions were added in as events evolved, and the procedure was changed as a result. I am sure that he is grateful that the draft regulations have been granted the degree of scrutiny to which he is accustomed.
The hon. Gentleman also asked why the regulations did not relate to zoonotic regulations more widely. Regulation 216/2003 creates a framework through which any zoonotic disease can be regulated and, at present, the EU only uses the framework to regulate salmonella.
The hon. Gentleman asked about the particular pressures on reference laboratories and others on day one. Poultry is tested on the farm at present, and there is no reason to believe that there would be any additional pressures on day one on reference laboratories or enforcement bodies. The Animal and Plant Health Agency is confident there is sufficient capacity to operate as normal.
The hon. Gentleman also talked about the testing laboratories. The current laboratories in England—there is one in Weybridge—and a similar laboratory in Northern Ireland will continue to operate as normal. He mentioned resources. As I said, APHA is confident that its expertise will continue to be able to enforce salmonella controls post EU exit.
There was also some concern from the hon. Gentleman, and from the hon. Member for Wrexham, about how the devolved Administrations would work together. We are exploring options to combine the expertise of advisory agencies and committees to build on existing capability and expertise and to provide advice from day one in a no-deal scenario. We are also exploring what modifications might be needed to existing decision-making machinery, with the aim of having joined-up evidence in a flexible decision-making process, in order to operate to deliver our biosecurity needs.
Salmonella testing is carried out by UK laboratories approved by the Department for Environment, Food and Rural Affairs and the Food Standards Agency. That will not be affected by EU exit. As I said, our current reference laboratories in England and Northern Ireland will continue to operate as normal.
I want to reassure the Committee that, although there will be an operational change in the sense that the different control programmes will be administered by the devolved Administrations instead of a single UK entity, they will continue to have a joined-up approach. That was extensively highlighted by the hon. Member for East Kilbride, Strathaven and Lesmahagow.
My right hon. Friend the Member for Chipping Barnet and the hon. Member for East Kilbride, Strathaven and Lesmahagow raised anti-microbial resistance, which is important. We talked about what is happening with poultry trends. I am trying to keep my remarks to the point, as the hon. Member for Stroud did, but there are concerns about AMR more generally. The partnership with the livestock protectors in every profession has already reduced the sales of veterinary antibiotics by 40%, down to the lowest level seen since records began in the 1990s. The Government are working with vets and farmers and are committed to further reducing the use of antibiotics in animals by 25% between 2016 and 2020.
Some concern was expressed about international trade. I am trying to read through the inspiration that I have received—
David Rutley
I was asked whether the US was on the third country list. It is. To get on the list, it will have had to demonstrate that it has an equivalent control programme.
I know the hon. Member for Plymouth, Sutton and Devonport is very assiduous on these Committees, and he has been very disciplined today, but I want to reassure him that this in no way seeks to water down our standards at all. In terms of chlorine-washed chicken, the existing food safety provisions from the EU will come across with the European Union (Withdrawal) Act 2018, which will make sure that those protections are in place.
I hope that I have been able to answer the Committee’s questions, and I commend this statutory instrument to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Zoonotic Disease Eradication and Control (Amendment) (EU Exit) Regulations 2019.
Draft European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019
Draft European Structural and Investment Funds Common Provisions Rules Etc. (Amendment etc.) (EU Exit) Regulations 2019
(5 years, 8 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister for Agriculture, Fisheries and Food (Mr Robert Goodwill)
I beg to move,
That the Committee has considered the draft European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019.
The Chair
With this it will be convenient to consider the draft European Structural and Investment Funds Common Provisions Rules etc. (Amendment etc.) (EU Exit) Regulations 2019.
Mr Goodwill
Thank you, Mr Owen. I welcome everybody, in particular the former agriculture Minister, the hon. Member for Poplar and Limehouse, and the former Secretary of State, my right hon. Friend the Member for North Shropshire. What a panoply of expertise we have in the room.
As a farmer, and given the family business participation in an agri-environment scheme, I should mention my entry in the Register of Members’ Financial Interests. The matter in the two instruments is closely interrelated and I will speak to both together.
The instruments amend retained EU law and domestic legislation to ensure that rural development payments and maritime and fisheries payments can still be made after exit day. Those amendments will maintain the effectiveness and continuity of EU and domestic legislation that would otherwise be deficient following our exit.
The changes are necessary to enable rural development programmes, partially funded by the European agricultural fund for rural development and the maritime and fisheries operational programme, and partially funded by the European maritime and fisheries fund, to continue operating effectively in the United Kingdom following exit, until their closure after the end of the 2014 to 2020 programming period.
There will be an opportunity to consider the scheme-specific regulations for the European agricultural fund for rural development tomorrow, and for the European maritime and fisheries fund during the week commencing 25 March, because they are made operable in the EU exit regulations for the common fisheries policy.
There are currently four rural development programmes operating in the UK, one in each Administration, providing funding for rural businesses, farmers, land managers and applicants living in a rural community with the intention of growing the rural economy, increasing productivity and improving the environment.
The projects funded include water environment grants, the English woodland grant scheme and the growth programme, which supports rural business development, food processing, tourism and broadband. The maritime and fisheries programme is UK-wide and promotes growth in the sector by providing funding for sustainable fisheries, marketing and processing and sustainable aquaculture, among other things.
Examples of projects include health and safety initiative training schemes delivered through Seafish, individual pots—creels, north of the border—and net replacement schemes, as well as support in ports and harbours. The EMFF also supports innovative projects that aim to promote partnerships between scientists and fishermen.
The European agricultural fund for rural development supports the delivery of rural development in the UK and is worth £430 million per year over the programming period. The European maritime and fisheries fund supports the implementation of the common fisheries policy and promotion of growth in the sector. It is worth £32 million per year. The UK Government have guaranteed that any projects funded from the 2014 to 2020 allocations from those funds will receive their full financial allocation and will continue to receive funding over the project’s lifetime. That repeats the reassurances I gave during a similar Committee yesterday.
The changes made by the instruments ensure that payments can continue to be made to beneficiaries, including domestic funding in place of funding from the EU, providing certainty to individuals and businesses that currently receive rural development and maritime and fisheries funding, or that are considering applying for funding during the current 2014 to 2020 programming period.
The draft European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 amend the EU regulation that sets out the shared framework for all of the European structural and investment funds but only as far as it applies to rural development and maritime and fisheries.
The draft European Structural and Investment Funds Common Provisions and Common Provision Rules etc. (Amendment etc.) (EU Exit) Regulations 2019 amend the supplementary and implementing rules for European structural and investment funds for rural development and maritime and fisheries. I emphasise to hon. Members that these instruments ensure that those funds continue to operate effectively when we leave. The instruments do not introduce new policy; they preserve the current regime for supporting rural businesses, environmental land management and sustainable fisheries, among other things.
The amendments include omitting references to the European Commission and member states, which will no longer be relevant as a result of the UK leaving the European Union, and replacing them with “the relevant authority” as appropriate. The instruments also amend references to European Union law throughout, so that the relevant EU regulations continue to operate effectively as part of our national law. Provisions that are deficient because of exit and where the relevant actions have already taken place have also been omitted, such as provisions relating to pre-financing, which was paid out when the programmes were initially set up.
One purpose of those modifications is to ensure continuity and clarity as to which public bodies have responsibility towards the programmes. The obligations and discretions placed on member states will continue to be exercised after exit by relevant authorities in the UK. In that context, “relevant authority” means the current managing authority of the maritime and fisheries operational programme; the Marine Management Organisation; the Secretary of State in relation to the rural development programme for England; Scottish Ministers in relation to the rural development programme for Scotland; Welsh Ministers in relation to the rural development programme for Wales; and, at the moment at least, the Department for Agriculture, Environment and Rural Affairs in relation to the rural development programme for Northern Ireland.
As hon. Members are aware, agriculture and fisheries are devolved policy areas and are of special importance to all parts of the UK. We have worked closely with the devolved Administrations to produce these instruments. Those Administrations place great importance on them, and have given their full consent. I repeat that these instruments are required for the continued operation of the rural development programmes and the maritime and fisheries programme. Without them, there would be no legal powers to make payments to fulfil the promise that those important programmes will continue. I therefore commend the instruments to the Committee.
Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)
It is a pleasure to see you in the Chair, Mr Owen. It is also a pleasure to be back in another Committee for another Department for Environment, Food and Rural Affairs SI, which gives me an opportunity to ask the Minister similar questions to those I asked last time we were here, which was yesterday, about the missing pieces of primary legislation that are necessary to complete our exit from the European Union, namely the Agriculture Bill and the Fisheries Bill. Before I do so, I will talk about the SIs we are dealing with today, because all of those bits form a jigsaw that needs to be complete in order to ensure that those who work in farming and fishing have the correct regulatory environment and a working statute book.
As is usual when any Opposition Member responds to a statutory instrument, I place on record our concerns about the sheer volume and speed of SIs being pushed through. Personally, I fear that one of those SIs will contain a gremlin: a problem that will cause bigger complaints in the future, which the speed of this consideration does not allow us to spot and edit out. The Opposition will not be opposing these SIs, but these structural funds were recently debated in the other place. I will voice my concerns and reiterate some of the points made by my noble Friends.
The draft European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 are a rare exception, in that minor consultation with the farming and fishing industries has taken place, for which the Opposition have called in relation to many of these SIs. Under regulations relevant to the European maritime and fisheries fund, no details regarding stakeholders are given, other than that there was “targeted engagement”. Will the Minister clarify what targeted engagement amounts to, and specify exactly what stakeholders, regions and nations were involved? As we are not dealing with one single fisheries industry, but with many different ones—from crabbing and scalloping all the way through to line hooks and big industrial fishers—will the Minister tell us which sectors were consulted? His answer will help determine whether the targeted engagement was sufficient to make this a credible consultation.
I also point out that the note says:
“In addition, a ten-week consultation was conducted through the Fisheries White Paper. Stakeholders were broadly supportive of the approach being taken.”
The fisheries White Paper was published a very long time ago, and I do not think it fair to suggest that the detail of this SI was somehow included in that, because it was not. Suggesting that that consultation is also a consultation on a far more detailed piece of legislation is a bit cheeky.
It is important that this SI fits seamlessly with the other SIs that the House is considering, as well as the Fisheries Bill and the Agriculture Bill. I asked the same questions yesterday. I hope the Minister has had the opportunity in the last 24 hours to update his answer, and that he will be able to tell us when the Fisheries Bill will come back to the House. There needs to be seamless implementation of the SIs and the Fisheries Bill, particularly in looking at how the EMFF fund will work in any new regulatory environment.
The SIs ensure the programmes of EAFRD and EMFF can continue to be domestically deployed, and remove obligations that relate to the European Commission. Will the Minister set out who will be taking over the obligations that were previously exercised by the Commission? How much additional funding will be allocated to those organisations to cope with the new workload? The explanatory note says that the amendments
“will maintain a status quo position as far as possible.”
Will the Minister clarify his assessment of that? Will the industry be better or worse off because of these changes?
The explanatory note adds that the delivery requirements for the EMFF will be dealt with in the upcoming Common Fisheries Policy (Amendment etc.) (EU Exit) Regulations 2019, but there is confusion, as some related responsibilities lie with the Department for Environment, Food and Rural Affairs and some with the Department for Business, Energy and Industrial Strategy. Will the Minister set out how that SI will deal with those two responsibilities? Will we have two separate SIs, or will the responsibilities be contained in one SI? If so, which Department will lead? Clearly, specialist scrutiny will need to be applied to make sure that it is proper.
It would have been helpful to have been able to look at all of the related SIs in the round. I know the Government are looking to pass many SIs, but it would make sense that SIs on a certain topic be considered together, or at least within the same broad window, rather than scattered around in the timetable as they seem to be.
The explanatory note states that
“the UK Government has guaranteed that any EAFRD and EMFF projects whose funding has been agreed before the end of 2020 will be funded for their full lifetime. This means that the UK Government will fund any remaining payments due after March 2019, ensuring continued funding for these projects until their end. The guarantee also ensures that new projects can continue to be signed under the current programmes after the UK leaves the EU during 2019 and 2020.”
Will the Minister confirm that those projects will still be funded regardless of whether the UK leaves with a deal—be that the Prime Minister’s or another that might command more support in the House—or in a no-deal scenario? That would provide certainty to those coastal communities and rural areas that depend on the funding.
We note that the amount of funding is calculated at £132.7 million for the remainder of the programme period for the EMFF, and between approximately £400 million and £450 million a year for the EAFRD, depending on exchange rates. Labour has called for every penny of EMFF funding to be protected, but we also want the Government to match the level of EMFF funding we would receive in the future. Will the Minister say whether we are on track to meet that commitment or whether, as we suspect, there will be a huge cut in the funding available for our coastal communities as we have seen with agriculture funding—Brexit has been a mask to cut 40% of funding for our rural areas? Is that also the case for our coastal communities? That was not in the prospectus on leaving the EU during the 2016 referendum campaign.
My colleagues in the other place echoed that point. On 14 March, in the debate on the draft regulations, Lord Stevenson of Balmacara said:
“The main point to make is that the Government are taking the opportunity to continue the existing funds either by paying through to the EU to continue with the existing schemes or by taking on the burden themselves. The problem is that of course the first approach is obviously right, given that these are contracts which are in place, commitments have been made, there are funding streams which are currently in process with recipients who are in urgent need of these moneys. Given that, it is right that they should be continued. However, the problem is that, as and when the Government take over responsibility for these schemes and for the payment of them, that will come under the cosh of the general economic situation at the time and the question of future budgetary opportunities for changing them. To what extent can the Government guarantee that the funding will be maintained at least at current levels and that schemes which need second and subsequent phases to complete will be considered fairly and on their merits as if the original arrangements were in place?”—[Official Report, House of Lords, 14 March 2019; Vol. 796, c. 1148.]
The latter point on phased funding streams is useful because, as we know, many of the funded projects take place over a number of years, both in terms of building capacity and building additional infrastructure. I would be grateful if the Minister could set out the certainty that can be provided to rural and coastal communities in relation to continuation of that funding.
The explanatory memorandum for the draft European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 even suggests that it is more expensive for us to leave the EU:
“There may be a negligible increase in administration cost as notifications may go to responsible bodies within the UK rather than European institutions”.
How much is defined as negligible in relation to this?
Lord Teverson made a good point in the other place. He welcomes the continuation of funding, but there is again discrimination within that funding. Paragraph 7.6 of the explanatory memorandum states that there will be
“the same cash total in funds for farm support until the end of parliament, expected in 2022”.
That is farm support, but where is the fishing industry support in relation to those particular bits? Understanding the differences between our coastal and rural communities is important. Lord Teverson said that the fishing industry is
“funded only up to 2020. There is no commitment to fisheries for those final two years. Once again, I see discrimination for an agriculture industry that is, to be frank, pretty well off, against one, fisheries, where certain sectors are well off, but there is no government guarantee to continue that EMMF funding until 2022.”—[Official Report, House of Lords, 13 March 2019; Vol. 796, c. 254.]
I hope Lord Teverson has that wrong, and I would be grateful if the Minister could clarify that fishing and farming have different end dates for their funding, because that would complicate the situation. We know that coastal communities need to be funded properly, and certainty for long-term investment in our coastal communities is important, especially if they are to believe to promise made during the 2016 referendum that there would be more fish available after Brexit, of which I remain sceptical. If that opportunity is to be realised, it is important that the EMMF funding provides additional capacity, especially in our smaller ports, to enable the landing and onward sale of more fish, following the promises that were made.
Will the Minister confirm what will replace the provisions that the SI omits? There is a requirement for an annual review meeting to be held with the Commission in order to review the regulations. Will that be replaced with an annual review meeting in the UK context? The Commission is right to participate in the programme’s monitoring committee. What oversight will take place if there is to be such a committee in the UK’s implementation of the regulations? What support will be implemented to replace the Commission’s ability to initiate technical assistance to those two funding streams?
There is a requirement to submit an ex-post evaluation to the Commission for each programme. Will that evaluation work still take place and, if so, what scrutiny of the effectiveness of funding will be available to Parliament or other bodies? The Commission is right to increase payments for member states with temporary budget difficulties. That is an interesting one, because it looks at how decisions will be made in relation to economic conditions in our coastal and rural communities, and whether that will be at the whim of any Government in power, or whether there will be more long-term certainty.
I suspect the Minister will say that this is all part of taking back control, and that the provisions will somehow slot into place, but we need to understand that the domestic arrangements for our coastal and rural communities will be properly resourced and, importantly, have proper scrutiny. My concern about these SIs and others is that we are only getting one jigsaw puzzle piece at a time in the hope that piecing them together will make the larger picture visible. At the moment, I am not certain that all the jigsaw pieces fit together or that there will be a picture visible at the end of it. I would be grateful if the Minister could provide clarification.
Brendan O'Hara (Argyll and Bute) (SNP)
We understand that these instruments are limited to correcting deficiencies in the legal text and do not actually change policy. On the surface, they appear largely technical, and there does not seem to be a significant impact on businesses, charities or voluntary bodies. Like the Official Opposition, we will not oppose this SI, but we make the point, again, that the Government could avoid all of this administrative burden by simply ruling out a no-deal Brexit, as they have been instructed to do by a majority in the House of Commons. I wholeheartedly agree with the hon. Member for Plymouth, Sutton and Devonport about the speed and volume of SIs going through the House, and I share his concern that something somewhere will go horribly wrong. Something will slip through the net and, whether in this or future Parliaments, we could find ourselves in a difficult situation because of the speed and volume at which the SIs are being put through the House.
The instruments relate to funding structures, including the European regional development fund, the European social fund, the cohesion fund, the European agricultural fund for rural development, and the European maritime and fisheries fund. The Minister knows that EU structural funds in Scotland are worth almost €1 billion across the EU budget period for use in economic development. Those EU-funded programmes represent a vital source of funding to communities across Scotland, and they are particularly important to rural communities, which are in greater need of support. He will be aware that any loss of funds to those fragile rural economies—such as my own in Argyll and Bute—could have a devastating effect on our farming and fishing communities, yet there seems to be no guarantee about the continuity of the funds beyond 2020. The much talked about UK shared prosperity fund, which is designed to replace structural funding, has yet to be provided with any detail or definition of what it will do or how it will work.
The UK Government promised that details about the shared prosperity fund would be forthcoming by the end of 2018. We are now almost a quarter of the way through 2019, and we have seen nothing to say what it will be, how it will work, who will benefit, and, more importantly, how we find out who will lose, if people are to lose. It is ridiculous that bodies across these islands know nothing about the method of application, the distribution method, or the quantity of funds that will be available to them post-next year’s funding.
Will the UK Government continue to respect the devolution settlement and the role of the Scottish and Welsh Governments in distributing and allocating whatever new funds there are? Do the UK Government agree with the Joseph Rowntree Foundation, which said that they should at very least match the £2.4 billion a year that communities across these islands currently receive as a result of EU structural funding? Does the Minister agree with my hon. Friend the Member for Glasgow East (David Linden), who recently said that one penny less is not acceptable?
Finally, research by the Conference of Peripheral Maritime Regions shows that the Highlands and Islands region will miss out on approximately £160 million from the European regional development fund for the 2021 to 2027 period, yet the UK Government have still not brought forward a plan for their proposed replacement fund. Can the Minister provide assurances to areas such as my Argyll and Bute constituency that that funding will be replaced at the same levels?
Mr Goodwill
It gives me great pleasure to respond to constructive questions that we all need reassurance about. Fundamentally, the two measures are an insurance policy in the event of a no-deal exit from the EU. Members have talked about the difficulties of a no-deal situation, but the answer is simple: vote for the deal, as I have done twice already. If we can get the deal over the line, as Members on both sides of the House have already voted to do, we can get into the implementation period and these measures will not be necessary. The people of this country are looking at Parliament aghast and wondering why we cannot implement the decision that they made in that historic referendum. I suspect that Members of Parliament, of whatever party, who do not deliver on that, however they justify casting their vote, will not be thanked when it comes to the next time their constituents visit the ballot box.
The instruments ensure that those rural development programmes that are partially funded by the European agricultural fund for rural development, and the maritime and fisheries operational programme, which is partially funded by the European maritime and fisheries fund, continue operating effectively in the United Kingdom following the EU exit. The rural development fund is worth some £430 million a year and the maritime and fisheries fund is worth £32 million a year. The Government have guaranteed that any projects funded from the 2014 to 2020 allocations will be funded for their full lifetime, and I hope that reassures the Committee.
The instruments provide the legal basis to continue making payments to agreement holders, providing certainty for farmers, land managers and fishers, and preserving the current regime for supporting rural businesses, environmental land management and sustainable fisheries, among other things. The hon. Member for Plymouth, Sutton and Devonport raised the progress of the Agriculture Bill and the Fisheries Bills through Parliament. I repeat that I am keen to make progress, but there is, of course, a lot of other business in the House that needs to be cleared.
Thangam Debbonaire (Bristol West) (Lab)
With the shadow Minister’s permission, as a Whip I wish to protest. The Minister says there is a lot of business in the House, but we have missing Bills that, if we were to leave the EU next Friday, would have to have been passed before then. The Agriculture Bill and the Fisheries Bill were not only raised in these SIs, but they were described by the Government and by those in the leave movement as the big new dawn for fisheries and agriculture. Where are they?
Mr Goodwill
Thank you, Mr Owen. Your constraints are welcome, but I will briefly say that the one important piece of business that we need to get over the line in this House is the withdrawal agreement. That is why many other measures are on ice and unable to make progress.
The hon. Member for Plymouth, Sutton and Devonport is absolutely right: there is a jigsaw of statutory instruments, and these are two important pieces that we need to put into place. He asked whether there will be gremlins, and whether mistakes will have been made. I can honestly state that that is not impossible, and if we spot gremlins and mistakes they need to be fixed as soon as possible. Yesterday, I said that we spotted that the European Commission was increasing the de minimis payment level for fishing communities, and we made that correction before the matter came to Committee.[Official Report, 29 March 2019, Vol. 657, c. 6MC.]
The hon. Gentleman talked about consultation. There is no statutory requirement to consult, because no changes are being made to the operation of the schemes. However, we carried out stakeholder engagement separately for the rural development, and maritime and fisheries elements of the SI, and I can go into that in some detail if he wishes.
That engagement targeted stakeholders on the approach of the broad set of common fisheries policy EU exit statutory instruments, which included those related to the European maritime and fisheries fund. It included meetings with the DEFRA-led external advisory group, and other separate meetings with the fishing industry and non-governmental organisations, involving key stakeholders from the fisheries sector, the food industry, and environmental non-governmental bodies.
Additionally, as the hon. Gentleman said, a 10-week consultation was conducted through the fisheries White Paper, which described future fisheries policy as well as the legislative approach taken in these instruments. Stakeholders were broadly supportive of the approach outlined in the White Paper, and did not raise concerns about the way in which funds are being delivered, which might have had a bearing on these two provisions.
Some of the stakeholders who were present in those meetings and engaged with the White Paper had an interest that went wider than England. For example, the Scottish Fishermen’s Federation is very keen to make progress on Brexit, unlike the Scottish National party, and NGOs. DEFRA was also in contact with the devolved Administrations, which confirmed that they are engaging with their own stakeholders about these statutory instruments.
In terms of rural development, on 25 September 2018 DEFRA met the Rural Payments Agency’s industry partnership group to update farming and land management stakeholders on the Government’s plans for EU exit. At that meeting, stakeholders were informed of the plans to make retained EU CAP legislation, and existing domestic CAP regulations, fully operable at the point of EU exit. That will enable DEFRA and the devolved Administrations to continue to deliver ongoing CAP pillar 1 and pillar 2 commitments to the agriculture sector in 2019 and beyond, in the event of a non-negotiated EU exit.
Stakeholders present at that meeting included the Tenant Farmers Association, the Country Land and Business Association, the Farming Community Network, the Institute of Agricultural Secretaries and Administrators, the British Institute of Agricultural Consultants, and the National Farmers Union. A subsequent meeting was held on 26 November 2018 between DEFRA and the Rural Payments Agency to update stakeholders further on legislative progress in preparing for EU exit.
The Welsh Government did not undertake a formal consultation on the statutory instruments, which officials considered to be technical in nature. However, stakeholders in Wales, including farming industry representatives, were invited to a workshop to learn about the approach, and they have been kept informed of progress by the Cabinet Secretary for Energy, Planning and Rural Affairs, and officials at the established EU exit stakeholder roundtable and legislation sub-groups. Chapter 8 of the Welsh Government document for the “Brexit and our land” consultation proposed an orderly exit from the rural development programme. That consultation received more than 12,000 responses, which are still being considered by Welsh Ministers.
The Scottish Government published a consultation in June 2018 entitled “Stability and simplicity”, which invited comments on Scottish Government proposals about dealing with the implications of leaving the common agricultural policy. It explained that the first stage would be to retain EU law in domestic legislation. The consultation closed on 15 August 2018, with 137 responses received. Overall, responders were broadly content for support to continue it in its current form to ensure a period of stability for the rural economy. The Scottish Government have been and continue to be in regular contact with stakeholders in Scotland regarding the implications of leaving the EU, and the effect of the statutory instruments is consistent with the proposal set out in that consultation. Last week, I spoke to Fergus Ewing on the phone, and I look forward to my first face-to-face meeting with him.
Let me turn to some of the other points raised by hon. Members. I was asked about continuity and the responsibilities of the Department for Business, Energy and Industrial Strategy, which has tabled a separate SI that addresses the remaining funds. I was asked who takes responsibility for the roles currently held by the Commission. As I said in my opening remarks, the relevant authorities will be the Secretary of State in England, Scottish Ministers in Scotland, Welsh Ministers in Wales, and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland. The relevant authority for fisheries is the Secretary of State in England, with the role delivered by the Marine Management Organisation.
There was some talk about how we will fund taking over these roles, but that exposes a degree of misunderstanding because the European Commission does not deliver those projects in the UK, and they are delivered by the UK Government on behalf of the Commission. For example, the environmental schemes were delivered by Natural England and are now delivered by the Rural Payments Agency. There will be no change in the way that happens, and it is similar for many of the fishing schemes.
Luke Pollard
My point was about not the implementation, but the scrutiny and overview. The Commission provides an overview function, which is being removed by this SI. What resources are being given for the overview functions contained in the SI, rather than the implementation?
Mr Goodwill
Farmers and fishermen will understand that scrutiny and checks are carried out not by the European Commission but by my Department, in order to ensure that rules are complied with. That will not change, but we will still have our homework checked nationally by the National Audit Office, for example, which will take on that role, and the MMO and DEFRA will publish a quarterly report on fisheries funding.
I was asked whether there will be any cuts to agricultural funding and what guarantees the Government can give. The EU funds will be replaced—£137.4 million for the remainder of the programme period of the EMFF and between £400 million and £450 million a year from the EAFRD. Those figures depend on the euro-pound exchange rate. The EMFF figure is higher than the figure in the explanatory memorandum. It is a more accurate figure, based on the most recent returns from each of the intermediate bodies. The Treasury has guaranteed funding to cover all European structural and investment fund projects entered into before the end of 2020 for their full lifetime, and I hope the hon. Gentleman takes that reassurance on board.
The Government have pledged to continue to commit cash totalling the funds for farm support until the end of this Parliament, and that includes all funding provided for farm support under the EAFRD. On 10 December 2018, the Government committed to provide £37.2 million of extra funding for the UK seafood sector for projects approved during 2019 and 2020, so as to boost the industry as we become an independent coastal state.
The hon. Gentleman asked whether fisheries will be better or worse off. There will be four schemes after 2020, when the EMFF ends. Those will be comparable to the EMFF, but designed for the UK fishing industry, alongside the devolved Administrations, and that will be detailed in the next spending review. The fisheries White Paper, which was published in 2018, asked the industry for its opinion on future funding and how it wants the industry to be reformed. Our approach was always going to be long term, and it will not change in several months.
I hope I have answered hon. Members’ questions. If they have any specific questions about the detailed financial information and funding—I would not want to mislead the Committee by winging it—I would be more than happy to give them that information. Indeed, it would be great to see the Labour party’s long-term plans for funding agriculture and fisheries. There seems to be a bit of a vacuum, which might need funding before farmers consider how they will cast their vote at the next election.
These statutory instruments are required for the continued operation of rural development programmes and the maritime and fisheries programme, and they will ensure that farmers, land managers and fishers are able to be paid after we leave the EU.
Question put and agreed to.
Resolved,
That the Committee has considered the draft European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019.
Draft European Structural and Investment Funds Common Provisions Rules etc. (Amendment etc.) (EU Exit) Regulations 2019
Resolved,
That the Committee has considered the draft European Structural and Investment Funds Common Provisions Rules etc. (Amendment etc.) (EU Exit) Regulations 2019.—(Mr Goodwill.)
Draft Food and Drink, Veterinary Medicines AND RESIDUES (amendment ETC.) (EU Exit) Regulations 2019
(5 years, 8 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 9 / Noes: 1 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (David Rutley)
I beg to move,
That the Committee has considered the draft Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations 2019.
It is an honour to serve with you in the Chair, Mr Austin. Most of this statutory instrument, which was laid before the House on 13 February, corrects retained EU law on geographical indication schemes, or GI schemes, using the powers in the European Union (Withdrawal) Act 2018. The remainder makes a small number of amendments relating to wine and spirits provisions, and to veterinary medicines.
I turn first to the provisions on GIs. GI schemes provide legal protection from imitation for local and traditional food and drink specialities. They make up 25% of UK food and drink exports by value and together were worth more than £5.5 billion in 2018. Because of the number of relevant pieces of EU legislation, there are a number of EU exit statutory instruments that deal with GIs.
The instrument we are focusing on today has a pivotal role, as it sets the frameworks for the new GI schemes for agrifoods and aromatised wine; we will have lots of conversations about some of the other GIs, but those are for another day. Further SIs will complete those frameworks. This instrument enables the Government to administer and enforce those GI schemes in the UK after the UK’s withdrawal from the EU, and ensures that our GIs remain protected against imitation in the UK. Parliament approved the framework for spirit drinks last week and, in the next exciting instalment of the GI story, we will be putting the framework for wine before the House very soon.
Together with other legislation on GIs, this statutory instrument will ensure that the UK continues to comply with World Trade Organisation obligations after exit—specifically the agreement on trade-related aspects of intellectual property rights. I know hon. Members will be interested in the detail of exactly how the instrument will do that. It will provide a UK framework to administer and enforce GI schemes for agricultural products and foodstuffs, and aromatised wines, throughout the United Kingdom. It will enable applicants from the UK and third countries to apply for UK GI protection. It will also enable the number of UK GIs to continue to grow after we leave the EU.
Sandy Martin (Ipswich) (Lab)
Whether or not we protect GIs here in the UK, will that have any further effect in the rest of Europe? If we introduce new GIs in the UK, will the rest of Europe recognise them?
David Rutley
I will answer the hon. Gentleman’s question about new GIs later in my speech, but on the UK GIs that are currently in operation, our understanding is that the EU will continue to recognise those, because we are listed in its legislation.
In addition, the instrument will amend retained EU law on the method of analysis used to ensure that spirit drinks comply with the relevant rules. It also amends retained EU law concerning the documentation that must accompany the movement of wine and imported wine, the certification of wine and the registers that must be kept by wine operators relating to the wines handled by them.
The Government launched a public consultation in October 2018 to seek the views of stakeholders and the public about our proposed new UK GI rules. The majority of respondents supported the Government’s proposals. GIs are intellectual property and, as such, reserved. The relevant powers currently exercised by the European Commission will therefore be transferred to the Secretary of State. We have worked in partnership with the devolved Administrations on the whole of this instrument, and where it concerns devolved matters, they have given their consent.
I turn to the provisions on veterinary medicines. This is the second EU exit statutory instrument to cover veterinary medicines. The other, with which Opposition Members may be familiar, is the Veterinary Medicines and Animals and Animal Products (Examination of Residues and Maximum Residue Limits) (Amendment etc.) (EU Exit) Regulations 2019. That instrument has already been debated in, and accepted by, both Houses.
The instrument we are debating covers three areas of veterinary medicines. It transfers powers and functions to set maximum residue limits for veterinary medicines. It provides for veterinary medicines that have been approved by the European Medicines Agency to remain on the UK market. It also makes necessary consequential changes to the fees charged by the Veterinary Medicines Directorate, as set out in the Veterinary Medicines Regulations 2013.
Maximum residue limits are the maximum safe limit of a particular substance in produce from animals. These limits are used to establish withdrawal periods—the period that must elapse after the last administration of a medicine before produce from that animal may enter the food chain. The UK MRL-setting framework is necessary to ensure the safety of produce from food-producing animals.
Veterinary medicines are devolved to Northern Ireland, so the power to set MRLs is shared between the UK Government and the Department of Agriculture, Environment and Rural Affairs. The Department for Environment, Food and Rural Affairs will be able to act on a UK-wide basis with the consent of DAERA, and the Veterinary Medicines Directorate will continue to act as the UK-wide regulator to ensure consistency. In addition, this instrument brings across from the European Medicines Agency the existing MRL application fees of £62,300 for a new MRL and £18,850 to amend an existing MRL. As stated in the explanatory memorandum, these fees will be reviewed as soon as possible.
As a cost recovery agency, the VMD recovers its assessment costs from the pharmaceutical industry. Until the data is available in a few months’ time to underpin a more accurate cost base, the VMD will administratively and significantly reduce the fee, to better reflect the actual cost of the assessment. Once a robust cost base has been established, the fee in the legislation will be amended, and that will be subject to consultation.
Medicines approved by the EMA—there are only 389 of them—account for a small percentage of all veterinary medicines in the UK, at 13%. However, they are often novel treatments and substances, so it is highly important for these medicines to remain on the UK market after we leave the EU. This instrument provides for their conversion to UK national approvals, with no charge for the conversion. Pharmaceutical companies will not need to take any immediate action to enable them to continue to market their products in the UK.
Lastly, this instrument makes minor consequential changes to the fee schedule charged by the VMD for the function it carries out. Apart from bringing over the existing MRL fees, which I have set out, these are minor corrections, and no new VMD fees are being introduced.
The amendments proposed to schedule 7 of the Veterinary Medicines Regulations 2013 are merely to correct deficiencies arising from us leaving the EU. Without these amendments, the UK would be unable to regulate the marketing and use of veterinary medicines effectively. That would have negative impacts on business, as well as on our ability to protect human and animal health and the environment. This instrument will maintain the existing high standards for the safety, quality and efficacy of veterinary medicines.
In line with the Government’s better regulation principles, and given the small costs involved, a formal impact assessment has not been carried out. The impact on business has been assessed as being well below the threshold requiring an impact assessment. Although a formal public consultation has not been carried out, the Government have proactively engaged with the animal health industry to discuss how we ensure that the regulatory regime continues to function effectively after exit day.
Lord Gardiner of Kimble has met the Veterinary Pharmaceutical Association and the National Office of Animal Health on a number of occasions, as part of our extensive engagement. Officials from the Veterinary Medicines Directorate continue to hold regular meetings with key industry representatives. The industry has welcomed our proactive and continued engagement with it. NOAH has expressed some concern that introducing a separate MRL-setting regime for the EU could increase burden and cost on industry. The Government recognise that MRLs are key to facilitating trade in animal produce, and will therefore look to align with international standards when setting MRLs.
Sandy Martin
In addition to the additional cost of this process, is there not a real danger that it will be difficult to carry out if there is a shortage of trained and professional staff?
David Rutley
The good news is that we have those trained and experienced members of staff available, and we are ensuring that, whatever the eventuality, we will have the resources available for the change. As the hon. Gentleman has intervened, it is important for me to answer his previous question about whether the rest of Europe would recognise new GIs from the UK. That would not happen automatically; new UK GIs will still need to apply for EU GI status, although the Government will support them in that. However, existing ones would be protected.
The steps I have outlined will ensure high-level protection for human health. MRLs must be based on sound science and data; the UK has a proud and growing reputation in the area of food, and GIs play an important part in that. The Government are committed to protecting and celebrating the success of those products and driving further market access to make sure that they and other great British food are enjoyed around the world. For the reasons I have set out, I commend this statutory instrument to the Committee.
Dr David Drew (Stroud) (Lab/Co-op)
I am delighted to serve under your chairmanship, Mr Austin, and to see the Minister in his place. We see an awful lot of each other at the moment, and will no doubt see each other again.
I start with our usual caveat: this is an incredibly complicated bit of legislation and, to be honest with the Committee, I have not completely got my head around it yet. It is very complex, bringing together a number of different issues that, in a normal state of affairs, we would look at separately and scrutinise in some detail. To make sure that we are all on the same page, GI refers not to an American serviceperson, but to geographical indication. That is quite important, because we will not have Cheddar cheese or various ciders if we do not get this right. We have to do our bit as an Opposition, despite the problems posed by the number and complexity of these SIs.
For this SI, I will start with something slightly different, and ask some quite complicated questions that I hope the civil service will be able to answer for the Minister or in tandem with him. If not, I hope that the civil servants will be able to write to me in due course through the Minister. Some quite separate issues have been conflated in this SI, so I am doing the best I can. I will start with some fairly complex, but nevertheless important, issues.
Paragraph 6.4 of the explanatory memorandum states that the maximum residue limits
“are set to protect consumers from residues of medicines in produce. These limits are used to establish withdrawal periods (the period that must elapse after the last administration of the medicine before produce from that animal may enter the food chain).”
My question is quite simple: how long are the withdrawal periods, and will those periods be the same length regardless of what happens next week?
Paragraph 6.5 states:
“This instrument provides for the conversion of veterinary medicines issued by the European Medicines Agency (EMA) to UK approvals in order for these products to remain on the UK Market.”
My question is whether UK approvals will be recognised in the EU market, or whether we will have to go through a different process.
My hon. Friend the Member for Ipswich has already picked up on the issue of costs. As NOAH has intimated, there is certainly some concern about the fee structures, because we are changing the mechanism by which these medicines are being regulated. If there are additional costs, are the Government aiming to defray those in any way? Again, we received no regulatory impact assessment, which is always very sad, because those assessments are supposed to provide that kind of information. We therefore have to rely on the Government to give us some indication of what those additional costs may be; there is certainly no such indication in the explanatory memorandum.
Paragraph 7.7 of the explanatory memorandum states:
“All GI applications will go through a single UK scrutiny and opposition process, rather than the two-stage process for applications”
that currently exists under the EU scheme. Will the Minister say something about whether that is sufficient? Could it limit scrutiny for geographical indications? Again, it is a matter of not just what is allowed, but what is not allowed. We all know the arguments about who claims Cheddar cheese and so on. These things can get terribly complicated if we are not careful. Producers get very hurt when their particular product is undermined by something that claims to be something that it clearly is not, yet people are able to sell it.
Sandy Martin
Does my hon. Friend agree that where such controversies arise around geographical indications, we currently have recourse to debate, consultation and reconciliation processes in the EU, but we will no longer have recourse to them once we have left?
Dr Drew
Of course. At the moment, I am not quite sure what is in place and what is not. That brings me to my next point, about the appeals provisions for those who have made an application. The provisions say that those who have a legitimate interest can appeal to a first-tier tribunal. Is that tribunal set up, and who will be part of it?
Then we come to the logos. Logos matter here because they are the only way the general public can tell exactly what they are buying. Currently, the Government intend to introduce a new UK process, whereby geographical indications for a product will be clearly labelled in this country, but what ability does this country have to then negotiate with the EU over the acceptability of those logos in what will be a different marketplace?
I could go on at great length, but I am trying to get to the kernel of what the Government are trying to do with this legislation, albeit that it is largely a cut and paste from existing EU regulations. Paragraph 10.3 of the explanatory memorandum states:
“Respondents were happy with the proposed three year adoption period until logo use becomes mandatory on food and agricultural products.”
Why was a period of three years chosen, and will that period begin on 29 March or some date thereafter?
Finally in terms of my detailed questions, paragraph 12.2 states that changes to packaging requirements are the only ones
“introduced by this instrument that present significant cost implications”.
That brings us back to the issue of cost. Clearly, if we are changing logos and the way in which those logos are regulated, an additional cost is implied, at least in terms of the logo and the packaging. Why is there no mention of that in the legislation?
As the Minister rightly said, my friends at the National Office of Animal Health will be the ones mainly concerned with this legislation, because they are the representative body for veterinary medicines. I have to say that they are largely happy with it and with the way it is being carried through. The Minister was right that they had some questions about how it is going to work in practice. I certainly looked at the time periods, which is where NOAH is most quizzical regarding the changes in our relationship with not only the EU but third countries. Clearly, products will come to this country that will then be sold on to the EU. It would be interesting to know what discussions the Government have had, within and without this country, to ensure that this process is as seamless as possible.
This is one of those complicated SIs. Trying to struggle through it is very difficult. In terms of what it does, it is very important to so much of our agricultural produce, because that produce will be branded—it will have its own logo and its own statement of what it really stands for. We have to hope that the disruption is as limited as possible, but it is something we will have to watch.
It would be interesting to know what scrutiny the Government intend to carry out when and if there are complaints, and how they will handle those complaints. How can we be sure that food products, and particularly veterinary medicines—which are the bit that is most about safety—are being properly regulated? If there is a new system, such as a tribunal to which appeals will go, we will need to know that it is transparent and up and running. Those involved in making food products and veterinary medicines need to be sure that they will be able to sell them as far afield as they have in the past. That is something that has to carry on, rather than being threatened by huge disruption.
Deidre Brock (Edinburgh North and Leith) (SNP)
Like you, I am sure, Mr Austin, I have sat on what feels like hundreds of these Committees where the purpose of the secondary legislation has, by and large, been writing back into UK legislation provisions that are being lost as a result of Brexit. This SI is an unfortunate exception, as it fails to maintain the provisions that protect our food and drink sector in trade deals around the world.
The EU’s protected geographical indicators have helped to protect the branding of our food and drink products. They have helped producers here to market their goods across the EU and wherever the EU has done trade deals, and they protect our overseas and domestic markets against cheap and inferior imitations. Cornish pasties cannot be made in Paris, Arbroath smokies cannot come from Budapest, Caerphilly cheese is always Welsh, and Comber new potatoes have to come across the sea from Northern Ireland. The same goes for Scottish salmon —both wild and farmed—Stornoway black pudding, Scotch beef, Scotch lamb, Orkney beef, North Ronaldsay sheep, Shetland lamb, native Shetland wool, Orkney cheddar, and of course whisky.
Scotland has one in six of the UK’s protected products, so Scotland, I am afraid, is once again being unfairly penalised by a Brexit we never voted for. Those protected products are also some of our most lucrative: our top food export is salmon, and our top drink export is whisky. Without the economic muscle and political might of the EU protecting those products around the world and across the EU, there is a real danger that their market share will slip and income from them will decline, with jobs and businesses at risk. All of that will be on top of losing the easy access to the EU market that we currently enjoy. The UK simply does not have the clout to protect those products in the way that the EU does.
There are also, I am afraid, examples of UK Government Ministers—it is difficult to tell whether they are still Ministers, but they are certainly Ministers who have served under the current Prime Minister—saying that some of those protections would be used as bargaining chips in trade negotiations. When giving evidence to a Holyrood committee in September, the then Minister for Trade Policy—he might still be Minister for Trade Policy; I am not sure—said:
“The GI issue is not…straightforward”
and that some countries see these protections as “barriers to trade”. That is why it is so worrying that this dubious piece of legislation gives up the protection of the EU system in favour of a system dreamed up by someone who has delusions of UK adequacy, but no grounding in what our food and drink sector will need to survive and thrive. I have absolutely no idea why anyone thinks it is a good idea to give up using the EU system, which we could have continued to participate in after Brexit, in order to try to build one of our own, which will at best be a pale and powerless shadow of the former.
We are lucky that the EU sees those trade protections as important, and will continue to respect UK indications after Brexit. The downside is, of course, that it will not enforce UK indications in third countries with which we have trade deals, and it will insist on the UK recognising EU protections. I quote a written answer given by President Juncker to a question lodged in the European Parliament:
“The European Union schemes for the protection of geographical indications…within the European Union territory apply, without discrimination, to European Union and non-European Union GIs.
After leaving the European Union, the United Kingdom…is expected to protect the GIs of EU-27 according to its domestic legal order and in compliance with its international obligations, including those of the World Trade Organisation (WTO). The same will apply in the European Union in respect of UK GIs.
It remains to be determined in the framework of negotiations whether any specific measures or agreement for the protection of GIs between the EU-27 and the UK would be appropriate following the United Kingdom's withdrawal.”
Admittedly, that was in September 2017, but attitudes in Brussels may no longer be as forgiving as they were, after the recent shambles.
We are walking away from a perfectly decent and fully functional set of protections to set up a whole new system for protections that cannot be as effective, will never be as powerful and will not have the reach or influence to do the job—it will not be as good but we will have our own system to do it. How ironic that those who complained the loudest about EU red tape are now setting up whole new bureaucracies in the name of taking back control. It is like a “Carry On” film. The SNP cannot support the regulations and I cannot allow them to pass unchallenged with anything like a clear conscience. I will be pressing them to the vote and voting against them.
David Rutley
I thank Committee members for their contributions. I will seek to answer as many questions as I can, so they should bear with me. I seem to be spending more time with the hon. Member for Stroud than my wife at the moment, along with the other three musketeers on the Opposition Front Bench. I am sure that I am spending more time with SNP Members as well. These are important times, however, and we need to get through these SIs because of the momentous changes happening around us—or the potential for them to happen.
The hon. Member for Stroud asked an important question about withdrawal time periods, which are individual to products and the active substances within them. Existing withdrawal periods will not be affected by EU exit. To give some examples, the withdrawal period is seven days for eggs, 28 days for meat and seven days for milk. Hopefully that gives him some assurance.
The hon. Gentleman also talked about MRL fees. The important point to recognise is that the VMD works on a cost recovery basis, so it is looking to do all it can to ensure that it reduces the costs associated with MRL fees in future. I highlighted the cost of those fees, as does the SI, and I assure him that they will be significantly lower once the cost base has been established. That will be done administratively to start with, and put into legislation in due course. They will be much lower, which will of course be welcomed by the pharmaceutical businesses and producers involved.
Another important point I made earlier was that the instrument will ensure that the conversion of the medicines approved by the EMA—there are only 389 of them—to the UK approvals process will take place and that there will be no charge for the conversion. We are taking every possible step to ensure that the transfer of powers takes place and that the costs are lowered, to be more in line with the costs associated with them. In relation to conversions, the hon. Gentleman asked whether the products would be recognised in the EU market. EMA products are already approved in the EU; all other products are authorised on a national basis in the individual member state. As now, companies will need to apply to market products in the EU.
The hon. Gentleman raised a number of questions about geographic indications and whether single-step scrutiny was sufficient. I assure him and other hon. Members that the reduction to a single step will not reduce the rigour of the process. The EU process has two phases because it needs to allow for a national and an EU-level step—that is the way it has been set up. In future, we can do the same job in a single phase, but no less diligently. In fact, having a single-step process will reduce the burden on applicants, which can be considerable. I hope that addresses some of his points.
The first-tier tribunal is administered by Her Majesty’s Courts and Tribunals Service and was set up to handle appeals against administrative decisions made by Government regulatory bodies, among other things. Appeals on GIs are therefore part of its core business and experts can be appointed by the court. I hope that answers the hon. Gentleman’s question.
Dr Drew
I accept what the Minister has said, but this is very different work for the courts and tribunals system—very specialised. Will it be looking to appoint people who have particular knowledge of food and the food chain? Otherwise, it is going to be very difficult to arbitrate on some of these issues.
David Rutley
I will get back formally to the hon. Gentleman on that point, but my understanding is that the court can appoint experts to help with particular issues. It is important to recognise that this SI also introduces additional appeals provisions as a result of the UK assuming the responsibility and functions previously belonging to the EU. In short, a person who thinks that the Secretary of State has got a decision or application wrong can go to this first tier tribunal to appeal against that decision. The appeal processes will cover all four regimes: agri-foods, wines, spirits and aromatised wines. The appeal provisions ensure that we comply with our obligations under the European convention on human rights. I will get back to the hon. Gentleman on his specific point.
A number of points were made about geographical indications. The hon. Gentleman asked when the three-year period would start. It will start from the day of exit. The whole point of having a three-year period is to enable time for the producers to adjust themselves and their packaging to the new situations. Protection of UK GIs in the EU will continue automatically after exit. They have been through the EU scrutiny process and they have earned the right to their place on the EU’s registers. To remove UK GIs from its registers, the EU would have to change its rules. If the UK GIs are removed from the EU registers, the Government will support UK GI holders in reapplying for EU GI recognition.
The key point here, certainly from the Government’s perspective, is that we should not lose sight of how important securing a deal is, for some of the very reasons we are talking about here, but we have processes in place should we find ourselves in a no-deal scenario.
Deidre Brock
Can the Minister give us a little more information about how long reapplying to the EU to be on that register would take, and what kind of support he will give businesses to do that? Businesses have told me they are worried about the length of time and the cost involved before they can be back on that register.
David Rutley
With the hon. Lady’s permission, I will return to that point in a minute. I am sure I will get some inspiration to answer those points specifically, and if not, I will write to her.
I have answered several questions on the situation that we find ourselves in. I think that the hon. Member for Edinburgh North and Leith made an important point about Scotch whisky. When I was appointed to this role, one of the first things I did was to meet with the Scotch Whisky Association in Edinburgh, to understand its views on the matter. As she rightly said, it is vital for our export business, for the Scottish economy and, of course, for the UK economy as a whole. I respect the important work that it does.
As I said, the protection of UK GIs will continue in the EU, unless and until the EU decides to change its rules to remove UK GIs.
Deidre Brock
I made a point about third countries in future trade deals and how protections might be dealt with in those circumstances. I am thinking particularly of evidence that we received in the Scottish Affairs Committee from Dr Maria Garcia of the University of Bath. She used Scottish whisky as an example. She said:
“Recognition of Scottish whisky and protection of that GI in trade negotiations will be much more difficult for the UK acting alone. It will have much less success, probably, in getting its demands met, than it would as part of the EU.”
What assurances can the Minister offer Scottish whisky producers and all the other people who are part of the PGI system in the UK that they will be protected in those sorts of trade deals in the manner needed?
David Rutley
I understand the hon. Lady’s point. The Government are working with their global trading partners to transition EU free trade agreements and other sectoral agreements. That includes commitments on the recognition and protection of UK GIs. We are working to have bilateral agreements in place, ready for when we need them. If there is no deal, the Government will seek to bring into force bilateral agreements from exit day, or as soon as possible thereafter.
We have already signed a trade continuity agreement with Switzerland to continue trade worth £32.1 billion in 2017. We also signed a mutual recognition agreement for certain wines and spirits with the USA that will guarantee ongoing protection for Scotch whisky there. The UK has also signed trade continuity agreements with Chile, the Faroe Islands, Palestine, Israel and eastern and southern Africa states.
I can now answer the request for more information on the time and support available. An application could be made very quickly or old applications could be largely recycled. It is not possible to say how long the EU would take to consider an application but the UK would not charge any fees and nor does the EU. We would want to support businesses and work with them. I can talk to the hon. Member for Edinburgh North and Leith afterwards about some of the details because she has raised some important points.
To conclude, the Government are committed to ensuring effective arrangements are in place to protect GIs in the UK after we leave the European Union, enabling new registration to take place. The instrument is essential to achieve that. There are no substantive policy changes and only minimal modifications from the current EU regime. It includes the UK assuming powers that had been undertaken by the European Commission.
The instrument ensures continued levels of protection for this collection of GIs and assures consumers that they will still be able to procure products that meet the high standards to which they are accustomed. For those reasons, I commend the legislation to the Committee.
Question put.