CAPITAL REQUIREMENTS (AMENDMENT) (EU EXIT) REGULATIONS 2019
(5 years, 2 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 1232).
It is a pleasure to serve under your chairmanship, Mr Bailey. As the Committee will be aware, the Government had made all the necessary legislation under the European Union (Withdrawal) Act 2018 to ensure that in the event of a no-deal exit on 29 March 2019, there was a functioning legal and regulatory regime for financial services from exit day. Following the extension to the article 50 process, new EU legislation will become applicable before 31 October. Under the 2018 Act, that new legislation will form part of UK law at exit; further deficiency fixes are therefore necessary to ensure that the UK’s regulatory regime remains prepared for exit.
The regulations deal with one of the new pieces of EU legislation that has recently become applicable. They resolve deficiencies in the EU’s prudential regime that will be retained in UK law at exit. The regime sets out how much capital credit institutions such as banks and investment firms need to hold; these rules are currently set in the EU capital requirements regulation, as well as in UK secondary legislation to implement the fourth capital requirements directive. The CRR is a directly applicable EU regulation that has applied since 2013. A statutory instrument to correct the deficiencies in this retained law was laid before and approved by Parliament last year: the Capital Requirements (Amendment) (EU Exit) Regulations 2018.
Earlier this year, the European Council and European Parliament finalised a revised banking package, which included several amendments to the capital requirements regulation made by an amending instrument known as CRR II. This gives effect to some of the internationally agreed Basel reforms, which are the centrepiece of the post-crisis reforms aimed at making banking safer. Similar changes are expected in all G20 economies that follow the Basel guidelines. Through the UK’s membership of the G20 and the Financial Stability Board, we have committed to the full, timely and consistent implementation of the Basel III reforms.
Several of the amendments made by CRR II are already in force and will therefore become retained EU law on exit day. This retained EU law will contain deficiencies that need to be fixed and that have not been addressed by the 2018 SI because they relate to changes that have come into effect since it was made. There are three main areas in which fixes are required.
The first area is third-country treatment. Consistent with the approach taken in the 2018 SI to amend the CRR, the regulations remove the preferential treatment given to the largest banks and investment firms in the EU27 to reflect the fact that the EU and the UK will treat each other as third countries after exit. It must be stressed that this is not about the ability of EU firms to carry on doing business here after the UK has left the single market; through comprehensive temporary permissions and transitional regimes, we have done everything we can to support EU firms that already have business here to continue with that business while they become UK-authorised.
The second area is transfer of functions. In line with the Government’s approach to all onshored financial services legislation, the regulations transfer a number of functions currently within the remit of EU authorities to the appropriate UK bodies. Such functions, such as the development of detailed technical rules on certain provisions of the regulations, will now be carried out by the Financial Conduct Authority, the Prudential Regulation Authority or the Bank of England. That is appropriate, given the regulators’ responsibilities for prudential and resolution policy and the supervision of global firms, and the major role that they have already played in the EU to develop CRR technical standards. Where CRR II confers delegated legislation-making powers on the Commission, those powers are converted into regulation-making powers conferred on the Treasury. Their use by the Treasury will need the approval of Parliament.
The final area is updates to definitions. CRR II amended some definitions used in the CRR; the regulations correct those updated definitions so that they can operate in a UK-only context. Here, too, the approach is consistent with fixes that Parliament has already approved in the previous CRR SI.
In drafting the SI, the Treasury worked closely with the financial services regulators, and we have engaged extensively with the financial services industry, incorporating feedback from industry players that will be significantly affected.
Before I conclude, it is important to address the procedure under which the SI has been made. Along with three other financial services SIs, the SI was made and laid before Parliament under the made affirmative procedure provided for in the European Union (Withdrawal) Act. It is an urgent procedure that brings an affirmative instrument into law immediately, before Parliament has considered the legislation, but it also requires that Parliament must consider and approve a made affirmative SI if it is to remain in law.
The Government have not used that procedure lightly, and it must be remembered that, across Departments, we have laid more than 600 exit SIs under the usual secondary legislation procedures. As we draw near to exit day, however, it is vital that all critical exit legislation is in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute. Industry and our financial regulators need—and needed—legal certainty on the regime that will apply from exit. Without addressing the deficiencies in the new CRR rules, there would be significant legal uncertainty, disruption for firms and increased risk to financial stability.
The SI is essential to ensure that the prudential regime applying to credit institutions and investment firms works effectively if the UK leaves the EU without a deal on 31 October. I hope that colleagues will join me in supporting the regulations, which I commend to the Committee.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
May I, too, say what a pleasure it is to see you in the Chair, Mr Bailey?
The statutory instrument returns the Minister and I to our preparations for the country’s potential exit from the European Union without a deal. For the avoidance of any doubt, let me state that the Opposition believe that a no-deal Brexit would be extremely damaging and grossly irresponsible, and would return the Brexit process to square one rather than be the clean break that some would, erroneously, have us believe. However, we acknowledge, as we always have, the need for a functional regulatory regime in the eventuality that we have to fall back on it.
The issue relating to the capital requirements regulation was first addressed by the Minister and me in Committee on 12 December 2018. The Opposition retain our concerns about one of the central tenets of the instrument, which is the removal of the preferential treatment for EU sovereign debt. That raises the risk of a potentially costly, disruptive and unnecessary sale and repurchase of assets immediately upon a no-deal Brexit. The trade publication GlobalCapital expressed it succinctly last year as proposing
“a hit to UK bank capital ratios at the worst time imaginable.”
However, I am mindful that we have had that substantive debate before, and the Government and Opposition do not agree. Hopefully we will never have to find out who is correct on that point.
The explanatory memorandum highlights that the reason we are going round this matter again today is to account for changes that have occurred between the original proposed EU exit date of 29 March and the revised exit date of 31 October. However, that seems to be a convenient means of avoiding the resurrection of the Financial Services (Implementation of Legislation) Bill on in-flight files. To remind colleagues, the Opposition were put under significant time pressure on the in-flight Bill in March. We were given very short notice to scrutinise and table amendments to that piece of primary legislation. When it became apparent that the Bill would not be passed by Parliament unless it was amended to strengthen money laundering and anti-corruption provisions, the Government withdrew it.
Today’s instrument will seemingly implement some of those in-flight changes. The capital requirements regulation was named as one of the relevant files in scope of that original Bill. I ask the Minister whether he can clarify that point and, if so, how it can be that those changes have been demoted in importance from primary to secondary legislation. Is it the intention that the entire in-flight Bill will be broken up across several statutory instruments to conceal the fact that it cannot be passed on the Floor of the House of Commons?
The changes contained in the statutory instrument again give new responsibilities to UK regulators. The capital requirements regulation is an important part of the post-financial crisis regulatory regime, and I am sure that we all wish never to find ourselves in a repeat of the circumstances of 2008. Yet new requirements are being loaded on to UK regulators regarding macro-supervisory obligations that have previously been conducted at an EU level. Will the Minister assure the Committee that that is the right supervisory model?
Furthermore, in almost all the substantive changes to the capital requirements regulation—for example on internal modelling, reporting requirements and reporting on prudential requirements—there has been an important change of language. Where the original EU legislation states that the European Banking Authority “shall” make standards, that has become,
“The FCA and PRA may…make”,
on pages 11, 13, 15, 17 and so on.
I read that as a shift from mandatory action to optional action by the regulator. Why has that new distinction been made? The argument has always been that this process simply transfers responsibilities, with no policy decisions being taken, but surely this decision could lead to a change of regulation. Will the Minister elaborate on why that change of language was made, and on the Treasury’s intentions behind it?
Alison Thewliss (Glasgow Central) (SNP)
It is a pleasure to see you in the Chair, Mr Bailey. I very much agree with what the hon. Member for Stalybridge and Hyde said; the SNP shares the official Opposition’s suspicions about areas related to the Financial Services (Implementation of Legislation) Bill, which—as hon. Members will remember—did not even reach Report.
The regulations flag up the fact that this will be an ongoing issue. As the EU continues to make changes, we will have to make changes here to get any type of equivalence with it. I remind the Minister that equivalence determinations are akin to building a house on sand: they are very much at the discretion of the Commission and can be withdrawn at very short notice. If we do not match the EU’s regulations, that equivalence may end up being withdrawn, to the detriment of our financial services industry in the UK—particularly in Scotland, which did not vote for this but is being left to deal with the consequences and chaos that result from it. The Minister said that the regulations reflect a new piece of EU legislation that has recently become applicable. I suppose that that is part of the chaos that we now face: the EU is moving on without us, and we are left picking up the pieces.
On the financial services Bill and the suspicions of the hon. Gentleman, I must ask the Minister: are the regulations a workaround for the Bill? Are they a means of escaping the scrutiny and the amendments that I supported for the greater regulation that we need?
Will the Minister tell us more about the powers that are going to the FCA and the PRA and away from this House? How will the House maintain scrutiny of those institutions and of the rules and regulations? There will be a need for adaptation and change; how will he make sure that the House is given a full part to play—not just a statement or an update—in administering the regulations in the years ahead?
This all highlights our lack of voice and influence in future EU reforms. We will be abiding by the rules, because otherwise we will lose the opportunities for our financial services market, but we will not necessarily have influence in making them—in areas in which for many years we have had the advantage because we have a large majority in the types of industry that will be affected. We will end up in a weaker situation than we are in at the moment, particularly in a no-deal Brexit in which we cannot guarantee that we will have the equivalence or access to markets that we require.
Further to that sense of weakness, we have yet to see from this Government a full picture of what the financial services framework will look like. I have asked for that on all the Committees that I have been on, because we need to know what the framework will look like. This is being done with a hasty, piecemeal approach. We are being asked to come here not quite at the last minute, as the Minister pointed out, but with 24 days to go till Brexit, when we may end up with no deal. There are Committees sitting all the way along this corridor this afternoon and later this evening to get these last-minute preparations done, but we do not know what the picture will look like in the year ahead.
To give some degree of stability in planning to the organisations, institutions and people in the financial services industry, I urge the Minister to bring forward some kind of clear framework so that we can see where we are going. This piecemeal approach, this last-minute chaos of bringing things forward, this move towards more Brexit red tape rather than less, as I am sure the Brexiteers would want—none of it is adequate or particularly seemly. I urge the Minister to do a lot better on this, because it is absolute chaos.
John Glen
I will endeavour to address the points raised by the hon. Members for Stalybridge and Hyde and for Glasgow Central. The hon. Gentleman referred to our conversation on 12 December regarding preferential sovereign debt and preferential capital treatment. In the circumstances of no deal, the consequences will be the inevitable result of leaving the EU: the UK and the EU27 will no longer be part of the same overriding legal infrastructure.
It is Government policy not to provide unilateral preferential treatment, but the hon. Gentleman made a reasonable point about different scenarios that might ensue. In practice, the impact would be largely mitigated by the transitional powers that we have given through this process to regulators, enabling them to phase in the new requirements between now and 31 December 2020.
The hon. Gentleman asked about the provision of the changes with respect to the in-flight files Bill. Only legislation under the European Union (Withdrawal) Act can onshore legislation before exit. The IFF Bill would have been for new files after exit, but we are dealing with all the immediate risks prior to exit. Given that there was an evolution in the corpus of EU material and directives over the summer, it is within scope of this mechanism.
The hon. Gentleman asked about the “shall” versus “may” language, and whether action is optional for regulators. That fits with the UK’s existing regulatory framework. Parliament has already delegated responsibility to our regulators for technical rules. That approach has been accepted in the UK and is supported by industry. I am happy to look carefully at what he said and see whether there is an issue. I will write to him, but I do not think that we have changed anything from previous approaches.
Like the hon. Gentleman, the hon. Member for Glasgow Central made a number of wider political points that I will resist responding to now. However, I will try to address the specific points regarding the use of SIs. Again, it is completely consistent with the approach approved by Parliament, and it would not be feasible to use primary legislation for onshoring.
The hon. Lady asked about the future regulatory framework, and made some wider observations about the potential diminution of UK influence. Obviously, we will always be part of wider bodies globally in terms of regulation in this area, but the aim of the onshoring legislation for financial services has always been to ensure that we are at a base point in terms of a functioning regime in all scenarios. Onshoring is designed to provide continuity and to minimise disruption, as well as to provide time for the Government and Parliament to design a regulatory framework fit for the future.
The first step in that has already taken place with the call for evidence document of 19 July, which set out the context of a long-term review of the regulatory framework and the key issues that we will need to consider for a regime that operates outside the EU. The document also requests views for the Treasury and the regulators in terms of short-term changes, and how the co-ordination of UK regulatory activity can be improved to manage the combined impact of regulatory change on firms and their customers. The call for evidence ends on 18 October and is the first stage of a longer review. Obviously, the nature of our exit from the EU will determine the way that evolves in subsequent stages.
I hope that that addresses the substantive points that were raised. The Government believe that the SI is essential to ensure that prudential regulation of credit institutions and investment firms continues to work safely and effectively if the UK leaves the EU without a deal. I hope that the Committee has found the sitting informative and will join me in supporting the regulations.
Question put and agreed to.
Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019
(5 years, 2 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Committee has considered the Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019 (S.I. 2019, No. 1219).
It is a pleasure to serve under your chairmanship, Mr Hanson. I welcome Members to the Committee. The Government’s aim is to leave the European Union on 31 October 2019 with a deal that works for citizens and businesses. Until that final deadline, we will make every effort to reach an agreement with the EU, but we also have a duty to prepare and plan for all scenarios, and to prepare comprehensively for Brexit. Today we are considering a statutory instrument that is part of the Government’s package for preparing for the possibility of the UK leaving the EU without a deal.
I hope the Committee will allow me to set out the context of this provision, which the Government wish to introduce to manage the safety and security risk of goods entering and leaving the UK. The measures maintain many aspects of the current safety and security regime. They will facilitate the flow of trade, while working to ensure the continued safety and security of our borders.
In 2005, the World Customs Organisation adopted the SAFE framework of standards as a deterrent to international terrorism, to secure revenue collections, and to promote trade facilitation. As a result, safety and security declarations became required when goods moved across borders. Previously, as part of the EU, the UK required safety and security declarations only for goods leaving or entering the EU. If the UK leaves the EU without a deal, UK importers and exporters will be required to complete safety and security declarations for goods moving to and from the EU, as well as to and from the rest of the world, as happens at present.
The statutory instrument has four key purposes. First, Her Majesty’s Revenue and Customs has listened to industry concerns about the readiness of businesses to comply with UK-EU safety and security requirements on trade from day one, so the instrument gives businesses more time to prepare to start to submit declarations to HMRC for movements to and from the EU. The instrument introduces a 12-month transitional period until 1 November 2020, during which there will be no requirement for entry summary declarations for goods imported from territories where the UK does not currently require the declarations. That means that entry summary declarations will not be required for imports from the EU.
Entry summary declarations will continue to be required for goods imported from the rest of the world. The UK will therefore continue to receive the same safety and security import declarations in a no-deal scenario as it does today. The transitional period introduced by the instrument applies to declarations that the UK does not currently receive. As a result, there is no increased security risk to the UK from this approach.
Secondly, the instrument gives HMRC a discretionary power until 1 November 2020 to allow businesses to submit safety and security declarations for certain exports after the goods have left the UK. That is a contingency power, subject to HMRC’s discretion, and the specifics will be set out in a public notice. The power will be used, if required, in combination with a similar power granted in a previous statutory instrument to extend the period in which the export customs declaration has to be provided. Together, that will be used to allow more time, if needed, to provide the combined export customs declaration and export safety and security declaration. If needed, HMRC will use these powers to facilitate the movement of goods and assist with the continued free flow of trade.
Thirdly, the instrument removes until 1 May 2020 the requirement for exit summary declarations for empty containers, empty pallets and empty vehicles moving from the UK to the EU. They are also not required for any spare parts, accessories and equipment for pallets, containers and means of transport. Those declarations are not required at present, so the Government are giving businesses a longer time to prepare.
Finally, the instrument also clarifies that a combined export and safety and security declaration can be accepted when exporting goods, so that exporters are not required to submit separate exit summary declarations.
The instrument does not apply to movements of goods between Northern Ireland and Ireland. A previous statutory instrument set out that in a no-deal scenario there would be no safety and security declarations between Northern Ireland and Ireland. The Government are committed to supporting the all-Ireland economy by avoiding checks and infrastructure at the border between Northern Ireland and Ireland. Under no circumstances will we put in place infrastructure, checks or controls at or near the border between Northern Ireland and Ireland.
In conclusion, this instrument strikes what we believe is the right balance between giving traders time to prepare for new arrangements with the EU and maintaining the safety and security of the UK, and I commend the regulations to the House.
Peter Dowd (Bootle) (Lab)
As always, it is a pleasure to see you in the Chair, Mr Hanson. I was confused at the beginning of this Committee when the right hon. Member for Central Devon came into the room; I thought he was going to sit in the Minister’s place again, and that there had been a coup d’état, but alas, there has not.
The Minister spoke about the readiness of business. Well, business is not ready to exit the European Union; that is why we are considering these provisions. The Government have not prepared as they should have done. Instead, they have extended the time for business to prepare. Why? Because businesses are not ready. He said that there will be no safety and security declarations. He gallantly kept a straight face when he said that, but then he went on to talk about introducing this measure in order to avoid checks. The only thing it is avoiding is reality.
I hope that Government Members will not take this personally, but it is not the same pleasure to see them as it is to see you, Mr Hanson, because of the out-of-kilter numbers on this Committee and their dominating effect. The Government have no majority, no authority and no hope, but they have stitched up and stashed out this Committee. The Government majority is fewer than 43, but the proportion of Members on this Committee is still out of kilter. When I was a councillor in local government in 1986, the Conservatives introduced legislation that made it illegal to have a committee on which the numbers were completely out of kilter, but this Committee is out of kilter. I must make that protest today.
The Chair
The hon. Gentleman has put that point on the record, but it is not actually within the scope of the Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019.
Peter Dowd
You have been completely indulgent in that regard, Mr Hanson. Notwithstanding that point about the nature of the Committee, I start by saying that this statutory instrument follows on from the broad powers that the Executive accumulated through the Taxation (Cross-border Trade) Act 2018 of fond memory, the Trade Bill and the European Union (Withdrawal) Act 2018, which allowed them to make shifts in policy via secondary regulations—powers that make Henry VIII look like a wilting flower. That method seemed designed specifically to undermine proper scrutiny. We are trying to undertake proper scrutiny today, but that is undermined by the lack of balance on the Committee that I referred to. We see the processes subverted time after time.
In recent weeks, there has been an excellent article that the Minister might find useful by Alexandra Sinclair and Joe Tomlinson of the UK Constitutional Law Association. It is called, “Eliminating Effective Scrutiny: Prorogation, No Deal Brexit, and Statutory Instruments”. There are several articles in the series.
As hon. Members are aware, these regulations relate to the Union customs code and Commission Delegated Regulation (EU) 2015/2446. I turn to regulation 2, as you will be pleased to hear, Mr Hanson. It is on the modification of the regulation laying down the Union customs code, and appears to smooth the seams between the Union customs code and the more recent customs Act, the Taxation (Cross-border Trade) Act 2018, which introduced far-reaching powers to amend the UK customs procedure that I mentioned. If I am right, regulation 2 seems to be a tidying-up measure to align UK legislation with the Union customs code. Specifically, it seeks to ensure that an export declaration, as defined by the 2018 Act, is included under the Union customs code definition of a customs declaration, and as we speak, there is an urgent question in the Chamber on the schedule of tariffs in the event of a no-deal Brexit.
Regulation 3, headed “Modification of Commission Delegated Regulation (EU) 2015/2446 supplementing certain provisions of the Union Customs Code”, perhaps provides more interest. Its first part, which inserts a new article 104(6) in the Commission delegated regulation, appears to gives broad powers enabling us to override EU legislation and apply import duty to pallets, which the Minister mentioned, spare parts, containers and means of transport. Can the Minister explain why that waiver is necessary, and in what circumstances he could see import duty needing to be applied to those goods?
Regulation 3(3) inserts a new paragraph after article 244(4) of the Commission delegated regulation. That paragraph proposes that the time limits that apply to pre-departure declarations on travelling by different means of transport should continue to apply until November 2020, as the Minister said. If I have got this right, 1 November 2020 will fall slightly before the end of the proposed transition period. Can the Minister explain why?
Regulation 3(4) inserts a paragraph after article 245(2) that extends the power to waive pre-departure declaration in certain circumstances. That paragraph creates a new class of goods for which a pre-departure declaration would not have to be lodged. Unfortunately, though, the class of goods created is
“goods that would benefit from the waiver”
and
“goods that would so benefit if Article 104(1)(e) applied to goods carried under a transport contract.”
That does not clarify matters. This appears to be a rather circular piece of legislation, allowing a waiver to be applied to any good that would benefit from it. I am afraid that that will provide little certainty for businesses that are trying to understand how the regulations will affect them. Where is the Government guidance on this proposal?
Perhaps the Government are too busy using taxpayers’ money to advertise the point that the UK is leaving on 31 October to do what they should be doing, namely pulling their finger out and giving useful or credible guidance that might, God forbid, actually be of some help to businesses. Perhaps the Minister could clarify how a business will know what is waived under proposed new article 245(3). Can he give examples of goods that would qualify for the waiver?
The final regulation, regulation 4, amends the date set out in earlier regulations. I am afraid that the Government appear to have bungled this. The original Commission delegated regulation said:
“Until 1 October 2019, the lodging of an entry summary declaration shall be waived in respect of goods which before then are in transit to or are brought into the customs territory of the Union from a place where, in relation to that territory, such a declaration was not required before exit day.”
As hon. Members will note, it is 7 October—6 days after the end date set out in the above passage. Perhaps the Minister can enlighten us. Has the waiver been dropped since last Tuesday, only to be re-introduced should these regulations be agreed to? What are the implications for this gap in the law for business? Could businesses be legally liable for not lodging an entry summary declaration over the last 6 days? Is this competent on the part of the Government? It is a wonder that they want to centralise all these powers when they get things wrong in doing so. With these regulations, the Government have sown more confusion in an environment where exactly the opposite is needed.
In conclusion, today’s process, aligned with the illegal prorogation of Parliament, the stifling of Opposition day debates in the Chamber, the unprecedented use of “no amendment to the law” clauses in, I think, the last four Finance Bills, the stitched-up Committee membership, the use of unbridled secondary legislation and a Prime Minister who, with the connivance of Conservative Members, cannot even have a veracious discussion with a 93-year-old woman—namely the Queen—is deeply worrying.
Kirsty Blackman (Aberdeen North) (SNP)
It is a joy to be here under your chairmanship, Mr Hanson, discussing customs once again. Along with the hon. Member for Bootle, the right hon. Member for Central Devon and many others, I have fond memories of going through the customs Bill in the House.
I have quite a few questions, mostly about the process that the legislation has followed and the logic behind our discussing the regulations today. I am very keen to know why this delegated legislation was not brought before the House in good time, before the Prorogation that did not exist. Given that we knew that the previous legislation, as the hon. Member for Bootle mentioned, took us up to only 1 October, why was this change not made previously?
Added to that, why was the change not introduced in good enough time for it to go to the sifting Committee, the European Statutory Instruments Committee, where it could have gone through the normal sifting processes and been looked at by that group of people? I am a member of the sifting Committee, and I have found it incredibly useful to go through the instruments that require sifting. We are able to give Committee members, and other Members across the House, a heads-up on things that require more scrutiny. More notice for Members is always a good thing. We have a ridiculous number of statutory instruments on the agenda today, and we have had a fairly short time to look at them. I would not imagine that the scrutiny that has been done is the best it could possibly have been, as we have not had as much time as we should have had.
The reason why I believe that the Government should or could have brought forward the information before now is the fact that they mention in the explanatory memorandum that an event was held with industry in January, when HMRC heard from industry that it did not have the capacity to comply with the security and safety changes as of exit day. The Government should have known at that point that changes would be required to the legislation, and should have made them much earlier. I would appreciate it if the Minister could let us know why that has not happened. I am focusing particularly on giving HMRC discretionary power to allow up to 12 months extra for a waiver to be granted to individuals.
Paragraph 13.3 of the explanatory notes states:
“Guidance will be published online and on social media platforms and HMRC have customer contact centres that can provide advice on what to do leading up to the UK departure date.”
Can the Minister confirm whether that guidance has already been published, seeing as this instrument was put forward in made affirmative form, and that the Government could therefore have assumed that it was likely to go through, given the choice of process? Has that guidance been published?
This morning, when I walked to school with my daughter, she asked me how many days until Halloween, because Halloween is much more important to her than Brexit day. I looked at my watch and said, “It’s 24 days.” That is 24 days for these companies to look at potential new guidance that may or may not be online at this moment in time. I do not think that that is enough time for companies to work out what they will need to do, or not do; as the hon. Member for Bootle said, there is not a huge amount of clarity about which goods, companies and organisations will be able to get the waiver, and which ones will not.
There are a huge number of instances, especially in the customs Act, but also in a number of areas around financial services, for example, in which HMRC has been given a huge amount of discretion on how to take things forward. It is being given a huge amount of power as to how to take things forward and write guidance. I understand that HMRC is the expert on this and needs a certain amount of discretionary power, but it seems to me that we are giving quite a lot of discretionary power to HMRC on this basis.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The hon. Lady is making an important point about an area of concern. The explanatory memorandum says,
“HMRC will only use the power if needed to respond to business un-readiness that is greater than anticipated.”
It is not clear how “greater than anticipated” will be determined, how transparent the use of the power will be, or who will not be granted an extension.
Kirsty Blackman
I absolutely agree with the hon. Lady. In reality, the legislation does not provide more clarity to businesses. In fact, it provides less, because they do not know whether HMRC will be able to grant them the waiver using this discretionary power. Businesses will still have to prepare to put in safety and security declarations because there is no clarity from the Government on whether they definitely will or will not be included in the new regime. It would have been sensible of the UK Government to lift the clauses from the Union customs code and use them to make the customs Act work, but they chose not to.
Peter Dowd
On readiness, as the hon. Lady points out, we are less than a month away from leaving the EU, which we have been told will happen come what may, ditches included. It says on Gov.uk:
“Contact your vehicle insurance provider 1 month before you travel to get green cards for your vehicle, caravan or trailer.”
How many of those who know that they are going away in less than a month have their documentation ready?
Kirsty Blackman
Certainly too few. In fact, I discovered relatively recently that France and Spain, for example, have different regulations for those taking caravans, trailers or cars abroad. If someone were planning to do some kind of tour around those countries—that is perfectly feasible, given that they have much warmer weather than us at this time of year—they would need different permissions, depending on the country that they are going to. I am particularly concerned that many individuals will not have contacted their insurer in good time.
More specifically on businesses and the waiver, we know that businesses are not prepared for Brexit. If the Government are setting out to try to make things easier for businesses, they are abjectly failing to do so. In reality, the Government chose not to lift and shift the Union customs code. Had they chosen to lift and shift from the code, they would have had to take out certain parts because of the way that it works, but when the customs Act was written—I made this point at the time—the Government chose to bodge some parts of it and do them completely differently, with no rhyme or reason about the way to take it forward. For businesses, that has made things much more complicated than they needed to be. The Government have chosen that route and made the nuts and bolts and red tape much more complicated for businesses.
In circumstances where HMRC does not decide to grant the discretionary waiver to businesses and requires them to submit two separate declarations of security and safety work, how much additional money will that cost businesses? I understand from the explanatory memorandum that an analysis of the cost to businesses has to be done if it is likely to pass a certain threshold. The explanatory memorandum does not state the amount that it would cost businesses to submit those two separate declarations if HMRC decides that it will not use its discretionary power.
The hon. Member for Feltham and Heston mentioned the “greater than anticipated” wording. What level of unreadiness is anticipated? Do the Government anticipate that 50% of businesses making declarations will fail to do so adequately? Does the power kick in only if 51% of businesses fail to do so adequately? What is the anticipated failure rate by businesses before the legislation kicks in for HMRC? I feel that this has been put together in a shoddy way, and that it could have been done much better. Better scrutiny could have been applied if the Government had chosen the better processes that the House agreed for the sifting Committee. The reason we are in this mess today—aside from Brexit in general—is that the Taxation (Cross-border Trade) Act 2018 was not good enough and did not give enough certainty to businesses. That is why we have had to amend it a number of times before exit day.
Stephen Timms (East Ham) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hanson. I have a question for the Minister that builds on those that have been asked. I understand that safety and security information will be required on all goods transiting between the UK and the European Union. That has not been necessary before; it is onerous, difficult and complex, and both entry summary and exit summary declarations would normally be required. I can well see the sense of the UK authorities deciding that they do not want those declarations for the first 12 months, or six months in some cases.
What I do not think the Minister has told us is whether the EU side will still require those declarations. When there is an entry declaration required of the EU, presumably the EU would require an exit summary declaration. Similarly, when the UK would require an exit summary declaration, the EU would require an entry summary declaration. It is a good thing that, at least for a period, the UK will not require all those difficult and costly declarations, but can the Minister tell us whether the EU will issue a similar waiver for the first 12 months, or will all that information still have to be compiled in order to satisfy the needs of the EU authorities, even if HMRC will not require it? That strikes me as yet another very damaging burden that is being imposed on UK firms—perhaps not for the first 12 months but certainly thereafter—if we leave the EU without a deal. Under these proposals, in a year, that damaging burden will be imposed anyway. That strikes me as another good reason why Parliament has determined that if we do not have a deal by the end of this month, the Government need to apply to the EU for an extension—precisely so we do not have to impose those costly and difficult burdens on UK firms.
Jesse Norman
I thank colleagues for the peppering of questions about this piece of legislation. Let me start, if I may, with the hon. Member for Bootle, who was very dismissive of business’s preparedness. He did not recognise the Herculean efforts made to assist businesses with that. If there had not been the delays to Brexit, business would take the current work of the Government more seriously. The Government are attempting to make people understand the reality of the departure from the EU on the 31st of this month.
The hon. Gentleman criticised the Government for making powers via secondary legislation. If the Labour party wished to eschew secondary legislation—if it ever came to power, God forbid—that would be an interesting declaration, and we would look forward to hearing it. Secondary legislation has been a very important part of our system of government for many a long year. It is particularly helpful in areas where regulations can be used to give effect to primary legislation, as in this case.
The hon. Gentleman raised a whole series of questions, which I will go through before turning to others’ questions. He asked why 1 November 2020; as I mentioned, hauliers and carriers have consistently told us that they require 12 months to prepare to submit safety and security declarations. They are increasingly asked to fill these things in directly themselves; they have asked for that extra time, and we are seeking to accommodate them. He asked why there should be a six-month waiver on applying security declarations for empty pallets on exit. The matter is relatively straightforward: if the pallets themselves, or the empty vehicles themselves, are not being exported, there are no goods being carried by them for which safety and security declarations would be required.
The hon. Member for Bootle and the hon. Member for Aberdeen North asked about guidance. There are two forms of guidance. As regards the SI, the guidance the hon. Gentleman seeks is in the explanatory memorandum. As regards the policy roll-out, HMRC has already set out that it will provide guidance and support to assist businesses when the time comes for them to submit declarations.
Kirsty Blackman
Will the Minister clarify whether HMRC has published that guidance already?
Jesse Norman
HMRC has published some guidance already, and plans to publish more in time for the moment when declarations may come into force.
The hon. Member for Bootle asked whether these powers have the effect of undermining scrutiny. He should be aware that of course Border Force will continue to run checks on goods in the way it does at the moment, and these declarations are independent of customs declarations that might be made.
Peter Dowd
I wanted clarity about the declarations because one has to be prepared in advance of the potential for a declaration. Rather than having the guidance only when one gets to the declaration, would it not be much more appropriate to have that guidance laid out clearly and unambiguously much earlier, in advance of the need to make the declaration?
Jesse Norman
I think the hon. Gentleman is making my point for me. The instrument introduces a 12-month transitional period until 1 November 2020, during which there is no requirement for entry summary declarations for goods imported from territories where the UK does not currently require them. That is precisely in order to allow people to adopt guidance as necessary.
Stephen Timms
I am grateful to the Minister for explaining that the UK authority is not going to require these declarations, but what about the EU side? Will the EU still require them? He makes the point that businesses need 12 months to prepare. Are they going to be ready to meet the EU’s requirements, which obviously are not covered by the SI?
Jesse Norman
That is true. The right hon. Gentleman raises the question he asked in his speech, so let me take that point out of order. The EU has indicated that it will still require declarations, and of course declarations are required already on goods imported from outside the EU. That structure is not changed as regards imports; as regards exports, exporters will need to adjust.
Stephen Timms
I am grateful to the Minister for that answer, but if the information and declarations are still required by the EU side, what is the benefit in not requiring them on the UK side?
Jesse Norman
The benefit is that we require, for imports, declarations of safety and security that are reasonably full and cover a whole variety of different elements, and we will need to assure ourselves in due course, if and when we introduce declarations following a no-deal scenario, that that data is being provided. Of course, not to have to provide that, and to give oneself the opportunity to put in arrangements that allow it, is a considerable benefit.
Stephen Timms
I think the Minister is telling us that businesses need 12 months to prepare for providing these declarations, but he is also telling us that, from day one of a no-deal Brexit, the EU is going to require those declarations from our businesses. How are they expected to cope with that?
Jesse Norman
It has always been built into the situation that we cannot control what EU countries may insist or demand. There have been plenty of other areas in which the EU has sought to give reliefs or allow easements for the first period. It has chosen not to do so in this case, but that does not bear on the question of what we require as a matter of import security declarations from our own hauliers and others. That is what the statutory instrument seeks to address.
The hon. Member for Aberdeen North asked about the timing and the process by which the statutory instrument was laid before Parliament. As she will be aware, it was laid on 4 September, which was in plenty of time before 31 October. It should be understood that it was thought at that point that Parliament was going to be prorogued, and that there would have been time to assess the instrument after that, but the timing reflects the reality.
The hon. Member for Aberdeen North asked how the SI relates to the earlier SI introduced by my right hon. Friend the Member for Central Devon. Being in front of him is like being a young priest being pushed up for ordination with the Pope sitting behind him in St Peter’s. It is a great privilege and honour to have him behind me. He will know better than anyone that the SI replaces the earlier one and will come into effect from day one if we have a no-deal scenario.
The hon. Member for Aberdeen North raises an important question about whether too much power has been given to HMRC. She will know that, more widely, I have asked HMRC, alongside Her Majesty’s Treasury, to conduct a serious investigation into the balance of its powers, and to make recommendations on how those can be adjusted. In this case, the power is relatively limited. To remind the Committee, it is a discretionary power, lasting for a year, that allows businesses to submit safety and security declarations for certain exports after the goods have left the UK. It is subject to HMRC’s discretion, but it is required to be exercised according to a public notice.
The broad point is that this is designed to be an intervention that allows HMRC discretion to give additional easements. HMRC does not believe that it needs to do that at the moment; it wishes to have the power to make those easements, conceivably for a 12-month period. In order to do that, it will have to consult Ministers and publish a public notice. It would be a matter of intense public interest if there was any suggestion that those easements picked out a particular subsection in a discriminatory or unfair way, so there are implicit constraints, both of time and of public pressure, on how those powers can be exercised.
Kirsty Blackman
I suppose my concern was not just about this SI, but about the fact that I have sat on so many Delegated Legislation Committees, and Committees scrutinising primary legislation as well, that have given additional discretionary powers to HMRC that it can exercise just by means of a public notice, potentially in consultation with Ministers. It seems that HMRC now has a huge amount of these powers that it did not have two or three years ago. I am concerned that it now has too much power, or that nobody is doing an assessment of the powers. I am pleased about the overview. It would be incredibly useful if the Minister could assure me that it will look at all the new discretionary powers that HMRC has gathered.
Jesse Norman
That is a very interesting suggestion. The work that is being done at the moment has to do with the way HMRC exercises powers in relation to UK taxpayers, particularly individual taxpayers. Once Brexit has taken place, it would be a very interesting idea to consider whether there should be a further piece of work to assess whether there has been a ratchet in some way that has granted HMRC powers that it ultimately should not have. If the hon. Lady is happy with this, I will take that away and reflect on it, because it is an interesting suggestion. I am grateful to her for it.
I was asked how much declarations and the full panoply of the costs associated with Brexit will affect businesses. The Committee will be aware that this has previously been estimated at £6.5 billion, a fact that has been in the public domain for some time. The impact assessment that has just been published has pushed the figure up to £7.5 billion. Although that is a significant increase of £1 billion, it appears to be related mainly to an increase in business activity and trade over the period measured, and also to a slight tweak to the methodology, rather than to any large rise in underlying costs.
The hon. Member for Aberdeen North raised the issue of the UCC. She will be aware that the Union customs code requires safety and security declarations. We are seeking to waive them and have clarified that we will continue the process of combining export and safety and security declarations. It has been deemed straightforward to incorporate aspects of this directly into our law, rather than to go via the UCC, but I am thankful for the question.
Question put and agreed to.
Resolved,
That the Committee has considered the Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019 (S.I. 2019, No. 1219).
Draft Passenger and Goods Vehicles (Tachographs) (Amendment etc.) Regulations 2019
(5 years, 2 months ago)
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The Minister of State, Department for Transport (Chris Heaton-Harris)
I beg to move,
That the Committee has considered the draft Passenger and Goods Vehicles (Tachographs) (Amendment etc.) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Davies. It is my first time, so I hope you treat me gently in your rulings.
The draft regulations will ensure that enforcement action can be taken against non-compliance with new tachograph rules that came into force in June 2019. They will update the provisions already in place for older tachographs so that they apply to breaches of the new smart tachograph requirements, which have applied from 15 June. The new smart tachographs are required in most large vehicles used for the carriage of goods or passengers by road that were first registered from 15 June, including most goods vehicles over 3.5 tonnes and passenger vehicles with 10 or more seats. The smart tachograph is intended to reduce fraud, allow easier enforcement and reduce administrative burdens on drivers through increased automation.
For the benefit of hon. Members who may not know the details, tachographs monitor and record the time that a commercial driver has spent driving; the data is then used by the Driver and Vehicle Standards Agency and the police to enforce the rules on drivers’ hours. The rules, which set maximum driving times and minimum break and rest times for most commercial drivers of lorries and coaches, mean in practice that a driver must take a 45-minute break after four and a half hours’ driving, and that their daily driving time is normally limited to nine hours. The consequences of driving any vehicle when fatigued can, of course, be catastrophic; the potential risks associated with heavy commercial vehicles are particularly severe.
Breaches of drivers’ hours requirements by drivers of vehicles fitted with the new smart tachographs are covered by existing enforcement provisions and will not be affected by the draft regulations. There are also existing rules for tachograph equipment relating to the new smart tachographs, which aim to reduce fraud and falsification.
The draft regulations will ensure that those who breach the new tachograph requirements face an unlimited fine in England and Wales and a fine not exceeding £5,000 in Scotland. Driver and Vehicle Standards Agency enforcement officials also have the option of issuing a fixed penalty of £300 or a prohibition notice.
Changes will be made to the Transport Act 1968 on exit day by the Drivers’ Hours and Tachographs (Amendment etc.) (EU Exit) Regulations 2019, which the House approved in February. Those regulations were drafted for an exit day of March 2019, so they did not anticipate that the changes in the draft regulations would be made until after the exit day changes had come into force. Consequently, the draft regulations will amend those regulations to ensure that they continue to operate effectively in the light of those changes.
Policy on drivers’ hours is devolved to Northern Ireland, where the devolved Administration have prepared equivalent amendments to Northern Irish law.
These rules are at the heart of the road safety regime for commercial vehicles, and I am sure that hon. Members share my desire to ensure that they can be fully enforced as soon as possible. I hope that hon. Members support the draft regulations, which I commend to the Committee.
Karl Turner (Kingston upon Hull East) (Lab)
It is always a pleasure to serve under your chairmanship, Mr Davies. The draft regulations concern tachographs—basically, they just put them into domestic law. The Opposition have absolutely no objection to this instrument; in fact, we support it. However, I had an email from a constituent, Mr Jamie Graves, who is a heavy goods vehicle driver. I think I know the answer, but he has asked me directly to ask the Minister about prosecution powers in the event of breaches of the regulations. Are the prosecution powers the same? I think they are, but my constituent asks the Minister to confirm that.
Chris Stephens (Glasgow South West) (SNP)
It is a pleasure to see you in the Chair, Mr Davies. I, too, will be short and sweet. I understand that the Government’s intention is to provide some sort of continuity, and—regardless of people’s views on the UK’s withdrawal from the European Union—that is what the draft regulations are designed to do. I have one question, which is from Unite the union: will the Minister confirm that in the event of a no-deal Brexit, the regulations will still apply?
Chris Heaton-Harris
I thank hon. Members for their questions. I have relatively quick and simple affirmative answers to both. In answer to the hon. Member for Kingston upon Hull and his constituent Jamie Graves, prosecution powers will remain the same. To the hon. Member for Glasgow South West, my answer is a simple yes.
I hope that the Committee has found the debate informative and will join me in supporting the regulations.
Question put and agreed to.
Risk Transformation and Solvency 2 (Amendment) (EU Exit) Regulations 2019
(5 years, 2 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the Risk Transformation and Solvency 2 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 1233).
It is a pleasure to serve under your chairmanship, Mr Wilson. The Government made all the necessary legislation under the European Union (Withdrawal) Act 2018 to ensure that, in the event of a no-deal exit on 29 March 2019, there was a functioning legal and regulatory regime for financial services from exit day. During the article 50 extension period, the Treasury has continued to work with UK regulators and the financial services industry to ensure our regulatory regime remains prepared for exit on 31 October. This statutory instrument ensures that our regulatory regime for insurance and reinsurance business will continue to work effectively from exit.
First, the instrument updates UK law to ensure that EU revisions to the Solvency 2 delegated regulation made since 29 March operate without deficiencies. Secondly, the instrument makes amendments to the UK’s domestic risk transformation regulations, which govern the UK’s regime for insurance-linked securities.
I turn first to the provisions that deal with revisions to the Solvency 2 delegated regulation. In January this year, the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 were approved by Parliament. Those regulations addressed deficiencies in Solvency 2 legislation as it will form part of UK law at exit. Since then, revisions by the EU to the delegated regulation made under the Solvency 2 directive have updated aspects of the approach to setting solvency requirements for insurance firms, including the simplification of capital calculations and greater alignment of capital requirements across insurance and banking legislation. Those revisions took effect across the EU on 8 July 2019 and will form part of UK law after exit.
The substance of those revisions will not result in deficiencies after exit, and the updated provisions will continue to operate in the UK as they do now. However, routine deficiency fixes, including removing references to the EU and EU institutions, will be needed to ensure Solvency 2 regulation continues to operate effectively in the UK. This instrument also replaces references to EU law with references to relevant UK law at exit.
I turn to the amendments to the UK’s risk transformation regulations. The Risk Transformation Regulations 2017 set up a new regime for insurance-linked securities. ILS are an innovative form of risk transfer that allow insurers and reinsurers to transfer risk to a special purpose vehicle. ILS are now an important and rapidly growing part of the reinsurance market, and the new regime for ILS was introduced as part of our efforts to help ensure that the UK remains a leading global centre for specialist reinsurance business.
As the risk transformation regulations were designed to follow Solvency 2 requirements, they rely on references to and definitions in EU law. This instrument fixes those by using references to relevant UK legislation and importing certain definitions into Solvency 2 as it will form part of UK law at exit, with those definitions adapted to work in a UK stand-alone regime.
Before I conclude, it is important that I address the procedure under which the SI has been made. This SI, along with three other financial services exit SIs, was made and laid before Parliament on 5 September under the made affirmative procedure provided for in the EU withdrawal Act. That is an urgent procedure that brings an instrument into law immediately, before Parliament has considered the legislation. However, the procedure also requires Parliament to consider and approve a made affirmative SI if it is to remain in law.
The Government have not used that procedure lightly. It must be remembered that, across Departments, we have already laid before Parliament more than 600 exit SIs under the usual secondary legislation procedures. However, as we draw near to exit day, it is vital that we have all critical exit legislation in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute. Industry and our financial regulators need legal certainty about the regime that will apply from exit. If we did not address the deficiencies covered by the SI—particularly the deficiencies in new Solvency 2 rules recently introduced by the EU—there would be significant legal uncertainty for firms and for our regulators, with the risk of serious disruption to the insurance sector.
The SI makes relatively minor fixes to new Solvency 2 legislation and to the UK’s legislation for insurance risk transfer to ensure that the legislation continues to operate as intended after exit. It does not alter the substance of requirements in either case, and the same Solvency 2 and risk transfer rules will continue to apply to firms. I hope that colleagues will join me in supporting the draft regulations, which I commend to the Committee.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a pleasure to serve with you in the Chair, Mr Wilson, and, as always, to sit across from the Minister in yet another Delegated Legislation Committee relating to financial services. I am grateful to him for that explanation of the statutory instrument, but it leaves a number of questions unanswered.
First, there seems to be a lack of clarity about the locus for application of the measures. The Minister referred at various points to the fact that the Government have laid before Parliament many such instruments in relation to no deal, but as the made affirmative procedure was used, the measures are already in place, regardless of the manner in which the UK will exit the EU. That is not very clear in the explanatory memorandum, which flits between no deal and circumstances where a deal has been reached.
I wonder whether that is an implicit acknowledgement that whatever deal the Government conclude, it will not explicitly cover some of the issues surrounding the co-ordination of financial services regulation. I have been looking closely at what the Prime Minister said last week and what has been released by the Government. There does not appear to be a clear indication of the regulatory regime for financial services. Perhaps the Minister could indicate whether that reflects a situation where all the previous SIs that we have looked at, including today’s, will be the legislative context even if there is a deal. Currently, it does not seem that a deal will cover financial services, at least from what I can see.
The most significant element of the Solvency 2 directive is the removal of the distinction between European economic area and non-EEA insurers and reinsurers. That is done through regulation 4, which amends the Solvency 2 exit SI, which we have talked about, through, as the Minister mentioned, the insertion of a new definition of “special purpose vehicle” in the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019, and regulation 5, which amends the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 so that the relevant Solvency 2 requirements in retained EU law apply to all UK special purpose vehicles, regardless of whether the insurer or reinsurer transferring the risk is regulated in the UK or elsewhere.
I would be curious to know whether the Treasury has conducted any risk analysis of the measure, and what it might regard as potential difficulties in removing that distinction and creating a single regime. Was any consideration given to retaining two separate regimes—one for UK insurers and reinsurers and those with equivalent regulations, and another for third-party countries without equivalent regulations? It would be interesting to hear about that. Also, what support is being offered to those in the financial services industry affected by the changes and the adoption of a single regime?
Returning to the fact that the SI amends FSMA, I asked the Secretary of State for Digital, Culture, Media and Sport when FSMA will be updated on legislation.gov.uk to ensure that the version available there accurately represents the legislation in its current form. I was told that it has been updated until the end of 2016. Since then, 951 amendments have been made to the Act; indeed, the Minister has discussed many of them with me in Committees similar to today’s.
I was informed that a fully revised version would be available only at the end of the year—clearly beyond when the Government say that they want to leave the EU. I am very concerned about this. It is now difficult for those who wish to comply with legislation to understand what is in that crucial Act, FSMA. It seems to be symptomatic of a piecemeal approach. In this SI, we have again had post-hoc amendments to legislation that has already been passed. Can the Minister make a commitment to the Committee that he will work with the Department for Digital, Culture, Media and Sport to ensure that this process can be sped up? I am very concerned about the impact on compliance if we do not even have an up-to-date version of that fundamental Act.
Martyn Day (Linlithgow and East Falkirk) (SNP)
It is a pleasure to serve under your chairmanship, Mr Wilson. I will be very brief; most of what I was going to say has been said already. The SI appears to be simply an attempt to patch up the damage to our financial services industry caused by a Brexit that my country did not vote for, and I am very disappointed with it. We already know that financial firms are voting with their wallets and have moved assets worth over $1 trillion from the UK to the rest of Europe since the 2016 EU referendum, according to figures that Ernst & Young produced. I do not believe that the SI will stop the tide of financial services, jobs and assets leaving the country.
John Glen
I am happy to address the points raised by the hon. Member for Oxford East, and the point made by the hon. Member for Linlithgow and East Falkirk. The SI follows the same process as all SIs. With respect to Solvency 2, the simple reality is that the legislation was amended between the previous presumed exit date and this one. We have simply brought that up to date, and the ILS-related mechanism derived from, and made reference to, the Solvency 2 provision. As a consequence of that relationship, which was something that we authored in the UK, it made sense to update both at this time, given that they are within the same category.
The hon. Member for Oxford East asked what would happen to this SIs if we got a deal. If a deal is secured, any withdrawal agreement Bill will make provision to defer any Brexit SIs that are not needed in a deal scenario until the end of the implementation period. We expect that the Bill will achieve this through a blanket deferral of Brexit SIs that come into force on exit day until the end of the implementation period. We expect that the Bill will also ensure that Ministers can revoke or amend any EU exit SIs as appropriate, so that they deal effectively with any deficiencies arising from the end of the implementation period. In the circumstances that we are talking about, following a hopefully successful conclusion of the deal-making process, we would have a 14-month implementation period, as per the plans at the moment, in which to make provision for the enduring solution. We will ensure that onshoring regulation is not commenced if there is a deal and a transitional period is agreed with the EU.
The hon. Lady asked about the difference between EEA and non-EEA firms. The UK special purpose vehicles are already subject to the same Solvency 2-derived requirements, regardless of whether they are accepting risks from EEA or non-EEA firms. The distinction in the Risk Transformation Regulations 2017 simply reflects the fact that EU law applies only to deals that involve EEA firms. This notional distinction will no longer make sense after exit, so it is being removed, but it will not affect any deals already in place. There is no distinction for these regimes in practice—all deals must comply with UK standards, so equivalence is not necessary.
The hon. Lady referred to her question to the Secretary of State for Digital, Culture, Media and Sport and to the update of FSMA on the gov.uk website. The National Archives is working to have FSMA updated in time for exit day, and the Treasury is helping with this work. I am not more familiar with the situation than that; obviously my officials helped me answer that question, but I would be happy to examine the matter closely and come back to her on that.
Anneliese Dodds
I am grateful to the Minister for making that commitment, because his answer contradicts what his Secretary of State said in an answer to me: that the updates would be ready only at the end of this year. I welcome that, and hope the Minister can try to reach towards the date he gave, because otherwise I really worry about people trying to comply with the legislation without having it in front of them.
John Glen
I do not try to contradict my colleagues in Government, but that is the information I have received. I will provide clarification as soon as I can.
Turning to the points made by the hon. Member for Linlithgow and East Falkirk, I recognise the distinction between the Government’s perspective on these matters and his party’s. All I can say is that the financial services industry, which is significant in Edinburgh and Glasgow, is made secure by this process. He may—and indeed does—disagree with the Government about what should happen, but I assure him that in a no-deal scenario, the interests of the financial services industry in Scotland will be looked after as best they possibly can.
I thank the Committee for its consideration of this SI, and the points made by hon. Members on the Opposition Benches. In conclusion, the deficiency fixes in this SI will ensure that the UK’s prudential regime for insurance and insurance risk transfer remains prepared for withdrawal from the EU in any scenario. I hope the Committee has found this evening’s sitting informative, and will now be able to join me in supporting these regulations.
Question put and agreed to.
Trade in Animals and Animal Products (Legislative Functions) and Veterinary Surgeons (Amendment) (EU Exit) Regulations 2019
(5 years, 2 months ago)
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The Minister of State, Department for Environment, Food and Rural Affairs (George Eustice)
I beg to move,
That the Committee has considered the Trade in Animals and Animal Products (Legislative Functions) and Veterinary Surgeons (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 1225).
This statutory instrument serves three purposes. First, it makes a number of technical changes to existing statutory instruments, to ensure that retained EU law continues to operate effectively after the UK leaves the EU. Secondly, it ensures that our statute book is closely aligned with the EU initially, to support our application for third-country listing for live animals and products of animal origin. Thirdly, it makes a minor correction to an earlier EU exit SI.
The SI was made under the urgency procedure, as it will be required to support the UK’s application to the European Commission for third-country listed status for animal health purposes, which is currently being considered by the EU’s Standing Committee on Plants, Animals, Food and Feed—SCoPAFF. As the Government have made clear, we seek a negotiated withdrawal from the EU, but we are also taking all responsible steps to prepare for all scenarios, including a no-deal exit.
The European Commission considered the UK’s request for third-country listing at the SCoPAFF meeting on 9 April, and based on guarantees and the relevant animal health and hygiene legislation being in place on that date, it agreed to expedite that third-country listing so that it was available from day one. However, another vote is now required, on 11 October, and this SI must be ready and on the statute book to provide the EU with the necessary assurances to be able to expedite that third-country listing. We are making an offer to the European Union, which it has agreed to previously and, we hope, will again, to align certain sanitary and phytosanitary regulations for a period of nine months, in return for its expediting that third-country listing so that it will be available from day one.
This statutory instrument, as with all such instruments, has a rather long title. I will refer to it simply as the animal imports SI, which I think will be easier for everyone. The animal imports SI transfers legislative powers that give the Secretary of State, with the consent of Ministers from the devolved Administrations, the power to amend, vary or add to the list of third countries that can export animals and animal products into the United Kingdom—a function previously carried out by the European Commission.
The SI also gives the UK the power to align with the EU by being able to add new countries to the list for commodities permitted to be imported once the relevant veterinary and scientific risk assessments have been made. Previously, this power was not considered urgent, since we have many alternative powers in other legislation to prevent trade from countries where there is deemed to be either an animal health or a food safety risk. However, this additional power makes it easier to align directly with the EU during that nine-month transition period, in accordance with the undertaking that we have given in order to expedite that third-country listing.
The SI also amends previously made EU exit SIs regarding animal and animal product imports. This is linked to that first power and will simply allow the Secretary of State, again with the consent of the devolved Administrations where appropriate, to publish lists of animals and products that require or are exempted from border veterinary checks outside of the legislation. This will mean that we can vary both the countries on that register and the products that each of those countries are able to export to the UK.
Maria Eagle (Garston and Halewood) (Lab)
Can the Minister explain why he is amending regulations that had already been made under the EU exit procedures in the European Union (Withdrawal) Act 2018 before we had even got to exiting? Was a mistake made the first time round or has there been a development? Why does he have to amend statutory instruments that were supposed to prepare us for a no-deal exit?
George Eustice
There are two reasons: first, as I said, the EU SCoPAFF’s April agreement has expired and it is considering the matter again on 11 October. Although the ability to amend and update the list in a quick and expeditious way was not considered essential the first time round, given more time we believed it would be helpful to put it in there to place beyond any doubt the fact that the EU would have all the assurances it needed to expedite third country status.
There was also an error, which I was coming on to. The statutory instrument amends the Veterinary Surgeons and Animal Welfare (Amendment) (EU Exit) Regulations 2019 by correcting a reference to the Recognition of Professional Qualifications (Amendment) (EU Exit) Regulations 2019 to enable certain EU, EEA and Swiss veterinary surgeons to register with the Royal College of Veterinary Surgeons. The error was simply that the previous SI referred to paragraph 43 of a regulation regarding professional qualifications that had been laid before the House by the Department for Business, Energy and Industrial Strategy. The relevant paragraph in its final iteration became paragraph 44, so there was an error in cross-referencing to the wrong paragraph, and this SI simply corrects it.
Part 1 of this statutory instrument contains relevant definitions used in the instrument. The legislative powers to amend the list are transferred from the Commission in parts 2 and 3 of this instrument. In parts 4 and 5, amendments are made to a previously made EU exit statutory instrument, and to domestic regulations in England and Northern Ireland relating to the trade in animals and animal products. No policy changes were made by those amendments; they are simply technical.
The final purpose of this SI is to correct a genuine but minor error in referencing a paragraph that turned out to be wrong in the final iteration of the regulations that I have mentioned. The devolved Administrations were fully engaged in the development of this statutory instrument, and it applies to the whole of the UK. I therefore commend the regulations to the Committee.
Sandy Martin (Ipswich) (Lab)
I will not take issue with the wording or the provisions in the statutory instrument, but I will take issue with a lot of the implications and the way in which it has been brought forward. When we considered a whole raft of these statutory instruments back in April, we warned that the greatest danger to animal and plant health might come from imports from third countries that came through other European Union countries on their way to the United Kingdom, but that were no longer being checked by the European Union on the grounds that we were no longer a member. That still very much remains the case.
From reading this statutory instrument, it is clear that it is an attempt to shore up our defences against that danger, but I am not at all clear how that will happen. How will we have enough qualified staff to make all the inspections necessary when we have relied on the European Union to make checks and to set the criteria for those checks, and even relied on EU nationals being most of our veterinary surgeons and carrying out much of our other agriculture and animal-related work? Have the Government set aside any funding to increase the recruitment and training of scientists and inspectors for doing this work? On what basis can the United Kingdom assess the safety of third countries, when most of the labs, assessment procedures and criteria have until now been located, set or carried out in the European Union, with its far greater resources for so doing?
What assurance can the Minister give that the United Kingdom will not be bludgeoned into accepting dangerous imports as part of an unbalanced trade deal with the United States, China or any other large power? What would be the implications of losing recognised third-party status with the EU, which is a real possibility if we do end up having a trade deal with a third party that involves our importing things that the EU would not consider safe? Is there any intention of adding to our list importing countries that are not yet recognised by the EU as third-party countries? If so, why would we be more likely than the EU to recognise that they were a valuable and safe importer, given that the EU has far greater facilities and capacity for assessing whether a third party would be safe to import from? All those questions show the difficulty of this country suddenly starting to do for itself something that we have done co-operatively with the rest of the European Union for many years until now.
There is a real issue about the use of the made affirmative process, especially in this case. The Minister says that it is an urgent case, but the process does not allow for careful reflection. Over and over again with such SIs, we have seen small errors that could, and in some cases probably would, result in serious holes in our legislation that would allow serious breaches of this country’s plant and animal safety. Doing it this urgently does not allow for the sort of careful reflection that we need to get these statutory instruments right. It is not necessary to do this using the made affirmative process in any case, because we are meeting here today on 7 October, according to my watch, which comes before 11 October. I would be grateful if the Minister could explain why it is necessary to do this using the made affirmative process.
In any case, as my hon. Friend the Member for Garston and Halewood pointed out, if the Government were serious about doing a deal, and having a deal for us to leave the European Union, it would not be necessary to cover these statutory instruments today. If the Government are not serious about doing a deal, surely they are still serious about abiding by the European Union (Withdrawal) (No. 2) Act 2019, which would rule out a no-deal Brexit on 31 October.
Alex Chalk (Cheltenham) (Con)
I am grateful to the hon. Gentleman for giving way. The former Prime Minister had a deal that dealt with the money, citizens’ rights and the transition period. If the hon. Gentleman was so keen on a deal, which part of that package did he, in truth, disagree with?
Sandy Martin
I thank the hon. Gentleman for raising the same question that members of his party have raised over and over again. There are lots of things that I disagreed with in the former Prime Minister’s deal, but this is not the time or place to go into them. That is not within the scope of the regulations; what is within scope is the real danger we are putting this country in on animal health and the possibility of the spread of disease as a result of the determination to go for a no-deal Brexit.
John Mc Nally (Falkirk) (SNP)
It is always a pleasure to serve under your chairmanship, Mrs Ryan.
The Scottish National party is committed to the welfare of all animals during transport, whether within the United Kingdom or for export purposes. Live animal transportation remains important for Scottish agriculture, especially for our island communities. The Scottish Government work to ensure that that is done as humanely as possible, and that the highest possible animal welfare standards are upheld. Animals should be exported only in line with strict welfare standards that ensure freedom from harm and sufficient rest and nourishment. The current EU legislation contains many measures that provide such protection. The Scottish National party remains committed to ensuring that livestock in Scotland are reared, transported and treated throughout their lives humanely, with respect and to the highest possible welfare standards. With that in mind, may I bring the Minister’s attention to a point that needs total clarification?
In the Operation Yellowhammer statement, the Chancellor of the Duchy of Lancaster stated:
“Hundreds of vets have...been trained to issue those certificates and additional personnel certified to support them.”
For me that figure is far too vague. Is it 100, 200, 300, 400, 500 or 600? How many additional personnel have been certified to support the vets? It is very unclear and is exactly the opposite of what it should be. It should be reassuring to producers and to members alike that everything is in place. That does not seem to be the case, and I want an answer about the figures today.
Adam Afriyie (Windsor) (Con)
I welcome this statutory instrument. Two things occur to me. It seems that fears are being raised about the effect on standards overall. Perhaps the Minister will confirm this in his closing remarks, but this is not just an opportunity to ensure that we have control of the third countries from which we import and of the standards of the products that they provide to us. We may also have control over improving those standards in future. Will the Minister confirm that this statutory instrument gives the UK Government the ability to improve standards, or to perhaps remove countries from the approved list, which the EU may otherwise not have done?
George Eustice
I shall try to deal with as many of the points that have been raised as possible. Starting in reverse order with the point raised by my hon. Friend the Member for Windsor, it is indeed the case that these powers, having been brought across, give the UK Government the power and the ability to change the list should, for instance, the European Union have a more lax state of affairs than us. Should it take unnecessary risks with food safety or public health, we would have the option to change the list to have a more stringent approach should it be necessary.
The purpose of amending the regulations now is, in the initial instance, to give the European Union the reassurance that we have all of the powers that we need dynamically to align our regulations on some of these SPS issues with the EU so that it can be reassured that we are not going to depart during that transitional period from the inspection regime that it currently has.
The hon. Member for Ipswich, the shadow Minister, raised the issue of goods from third countries. He is concerned that they may not be checked or inspected at all, but that is not the case. Currently, goods that come into the European Union will be checked in accordance with European standards. Goods that come into the UK on the day after we leave the European Union will also be checked, as they are now, on behalf of the European Union, in exactly the same way that they are now. Where we have transit goods—goods that are landed in another EU country but are destined for the UK market—they will be checked in exactly the same way as they are now when they come into the UK.
So it is already the case that goods in transit are inspected in the UK when they arrive, not at the port of entry. In so far as they are not coming through as goods in transit, but are simply landed in another EU port and then re-exported to the UK, they would undergo the same checks as they do today through the EU’s own system.
The other point I want to make is about rapid alert systems. The EU system is called RASFF: ports in member states can alert one another to problems that they have encountered at the border. The UK contributes the vast majority of the data to that, far more than any of the other countries. I think that for some items, as much as 75% of the intelligence on the system comes from the UK. We have to understand that the EU does not have its own inspection taskforce; it relies on member states. Currently, this task is performed at border inspection posts by the Animal and Plant Health Agency on our behalf, which does a very thorough job. That is where the expertise comes from; it does not come specifically from the European Union.
It may be the case that more goods have to go through the transit route to get to the UK. We anticipate an increase in the number of transit goods, which could mean up to around 8,000 extra checks at UK border inspection posts compared with now. However, we believe that we already have the resources to manage what is a small increase, based on the number of checks that we already do.
The hon. Member for Ipswich asked why we need to use the urgent procedure for this regulation. A European Union SCoPAFF meeting is taking place on 11 October, a few days away; that is not long. It has been a rather moving date: at one point it was going to be earlier in October, then at another point it was going to be 18 October, and it now seems to be moving again to 11 October. Given the importance of getting that third-country listing, we believed it was important to ensure we had done everything possible to provide the EU with the reassurance it wanted to be able to expedite that listing. That is why we made this regulation under the urgent procedure.
The hon. Gentleman ventured into a number of other areas, including the so-called Benn Act—the European Union (Withdrawal) (No. 2) Act 2019. However, when challenged on some of those points, he also pointed out that they were outside the scope of what we are discussing today, so I will not be drawn into those issues save to say that this Government are working very hard and energetically to get an agreement, and have come forward with a sensible proposal to replace the so-called Irish backstop.
Sandy Martin
Why is it necessary to bring this SI forward now if there is no chance of our leaving without a deal on 31 October, and if there is a chance of our leaving without a deal on 31 October, how does that square with the European Union (Withdrawal) (No. 2) Act? That was the point I was making about that Act.
George Eustice
I am sure the hon. Gentleman will be aware that the European Union (Withdrawal) (No. 2) Act does not say there cannot be a no-deal Brexit. It requires the Prime Minister to send a certain letter on a certain date. We do not yet know whether the European Union would agree to extend; we do not know what terms it would demand or extract; and we do not know whether those terms, and any counter-offer it made, would be acceptable to the Government, Parliament or anybody else. There are still many uncertainties here, and we are clear that we will leave, with or without a deal, at the end of October. That remains the Government’s position, and it is therefore prudent to prepare for all eventualities, which is why this SI is necessary.
Finally, I will deal with a point made by the hon. Member for Falkirk about vets and veterinary capacity. This particular regulation is more about the inspections that APHA would conduct on behalf of the Government on imports from third countries, and less about the export health certificate. No veterinary capacity is really relevant to those inspections, other than the APHA port inspections that we already carry out. As I said, I believe we have sufficient capacity to manage that small increase in load.
However, the hon. Gentleman has raised a point about export health certificates, where goods going the other way would need some veterinary attestation to say that the goods are what they said they were. We have been offering free training for official vets to sign EHCs. Some 736 have registered with APHA, and 564 are already enrolled on that course. I am told that 152 have qualified, and the number of official veterinarians who can sign EHCs for food products has increased by 200 since 8 February, to 835. We are also looking at additional approaches, such as having certification support officers so that this work can be done by people other than fully qualified vets. We are conscious that there will be an increase in burden when it comes to export health certificates, and we have been working to build capacity in that area.
I hope that I have managed to address most of the issues that have been raised, and therefore commend the regulation to the Committee.
Question put and agreed to.
Air Services (Competition) (Amendment and Revocation) (EU Exit) Regulations 2019
(5 years, 2 months ago)
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The Minister of State, Department for Transport (Chris Heaton-Harris)
I beg to move,
That the Committee has considered the Air Services (Competition) (Amendment and Revocation) (EU Exit) Regulations 2019 (S.I. 2019, No. 1224).
It is a pleasure to serve under your chairmanship, Mr Wilson. Obviously, the Government are working with energy and determination to secure a new deal with the European Union. However, if we have to leave without a deal, the Government are committed to preparing for that outcome. As the Department responsible for civil aviation, the Department for Transport has already conducted intensive work to ensure that there continues to be a functioning legislative framework and an effective regulatory regime for that critical part of the UK economy. In fact, as we leave the European Union, a successful UK aviation sector will be an essential part of a successful global Britain. This new instrument will ensure that the legislative framework and regulatory regime for the sector remains on a well-functioning basis.
The Government have given careful consideration to the appropriate procedure for progressing this instrument. For reasons that I will briefly outline, it is important to have the instrument in place by exit day. That is why we have gone for the “made affirmative” procedure, which will ensure that outcome while allowing for parliamentary scrutiny.
The regulation amends Regulation (EU) 2019/712, which sets out an approach to safeguarding competition in air transport. Fundamentally, this instrument ensures that, when responding to anti-competitive practices, the UK will have the same powers to protect UK airlines as will be available to the EU to protect EU airlines. Previously, Regulation (EC) No. 868/2004 provided for redressive measures to be imposed when subsidisation and unfair pricing practices by third-country airlines cause injury to EU airlines. The previous statutory instrument on this subject introduced corrections to that regulation to ensure that it would apply when the UK left the EU.
However, since the extension to the UK’s departure from the European Union, Regulation (EC) No. 868/2004 was repealed and replaced with Regulation (EU) 2019/712. The reason given was that the previous regulation was judged to be ineffective in respect of its underlying general aim of fair competition. For instance, there was a lack of definition of the initiation and conduct of investigations, or the criteria for doing so.
Michael Fabricant (Lichfield) (Con)
That all makes incredible sense to me, but what discussions has my hon. Friend had with British Airways, easyJet and other major UK carriers regarding this measure, and are they in full support?
Chris Heaton-Harris
I have had conversations with the sector, but not with some of the individual airlines that my hon. Friend mentions. In general, the sector is very supportive of the measure coming into UK law.
The new EU regulation provides the European Commission with the power to conduct an investigation when there is prima facie evidence of anti-competitive practices causing, or threatening to cause, injury to European Union air carriers. Areas where discrimination could occur include the allocation of slots, administrative procedures, and the arrangement for the selling and distribution of air services. If such evidence is found, redressive measures can be taken in order to offset any injury. Such measures could include financial duties.
The policy content of the retained regulation will remain substantially unchanged. The changes that are being made are primarily technical and necessary to ensure the correct application of these measures after the UK leaves the EU. As part of those changes, the UK’s Civil Aviation Authority will assume some of the responsibilities previously placed on the European Commission. For instance, it will examine and investigate any complaint of that nature. The Civil Aviation Authority will report its findings to the Department for Transport, where the Secretary of State will take a decision on whether to adopt any redressive measures. Such measures will be adopted by statutory instrument, using the affirmative procedure.
In the event of leaving without a deal, the EU could apply its regulation to the UK or its airlines if they are engaged in practices described in the regulation. The changes made by this SI therefore ensure that, in addition to other countries, EU member states and their airlines will be within the scope of the UK’s investigatory and redressive measures. That will preserve the level playing field from exit day. That is why we have selected the “made affirmative” procedure, which ensures that this important measure can, if required, be in place on 1 November.
Therefore, although obviously we would all like to leave with a deal, this SI will ensure that, in any scenario, the UK and UK airlines will have equivalent access to the types of measures that EU member states and EU airlines can take against anti-competitive actions. I hope that colleagues will join me in supporting the regulations, and I commend them to the Committee.
Karl Turner (Kingston upon Hull East) (Lab)
It is always an absolute pleasure to serve under your chairmanship, Mr Wilson. These changes are mainly technical—they change the word “Union” to “United Kingdom”, and the Civil Aviation Authority is also mentioned as a technical change to the relevant authority. The Opposition have no objection to those changes, which we support.
At the outset of his remarks, the Minister said that the Government are working with “energy and determination” to achieve a deal. I suspect that neither of those things are correct and that the Prime Minister is not very determined. He is certainly not being very energetic about achieving a deal—I wish he was.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Wilson. Like the shadow Minister, the SNP does not oppose these technical regulations since they make sense no matter what our views are on Brexit. If it is so important to have these regulations in place by Brexit day, it seems surprising that the SI was tabled during a period when Parliament was originally meant to be prorogued. If this is what we are dealing with, it makes me think that wider no-deal Brexit preparations are in chaos and not that advanced.
The Minister mentioned looking at how slots are handled at airports, and possible measures for investigation at the European Commission. Will he confirm that public service obligation arrangements will still be able to function as they do? For example, will the new Heathrow runway PSOs be in place to protect flights to Scottish airports? Will that still comply with the new regulations?
Chris Heaton-Harris
I thank hon. Members for their contributions. The regulations will have absolutely no impact on PSOs, and the SI has been tabled now because this is the first opportunity to do so—we would have been first up had we prorogued for the expected period, and the Committee would have sat just a tiny bit later. I assure my friend the hon. Member for Kingston upon Hull East that, as the Prime Minister would say, he is going “like gangbusters” and with energy and determination for a deal, but that is a political point on which we can politely choose to differ. The Committee agrees that the SI is an important, if technical, measure, and that it addresses a number of matters on which we can all concur. I hope that colleagues will join me in supporting the regulations, which I commend to the Committee.
Question put and agreed to.
Specific Food Hygiene (Regulation (EC) No. 853/2004) (Amendment) (EU Exit) Regulations 2019
(5 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Health and Social Care (Jo Churchill)
I beg to move,
That the Committee has considered the Specific Food Hygiene (Regulation (EC) No. 853/2004) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 1247).
It is a pleasure to serve under your chairmanship, Dame Cheryl. I am confident that we all share the intention to ensure that the high standards of food and feed safety and consumer protection that we enjoy in this country are maintained when the UK leaves the European Union. As my hon. Friend the Member for Winchester (Steve Brine) stated previously, this instrument and the original instrument, which it amends, seek only to protect and maintain those high public health and food safety standards. Changes are limited to the necessary technical amendments to ensure that the legislation is operable on exit day. I stress that no policy changes are made through these instruments and we do not have any intention of making any at this point.
This instrument amends a previous EU exit SI: the Specific Food Hygiene (Amendment etc.) (EU Exit) Regulations 2019. Further clarity was required in setting out the authorisation process for approving products that can be used to remove surface contamination from products of animal origin. The clarification will ensure that the process is robust and can be applied clearly in assessing the risk in respect of new products.
This instrument needed to be in place to support the UK’s application for third-country listed status with the EU, so that the UK can continue to export animals and animal products to the EU. We anticipate that that is due to be voted on by the European Commission on 11 October.
This instrument has been made using the powers in the European Union (Withdrawal) Act 2018 to make necessary amendments to UK regulations to prevent, remedy or mitigate deficiencies in retained EU law that arise as a consequence of the UK’s withdrawal from the EU. The instrument was made on 9 September under the urgent “made affirmative” procedure, which was considered appropriate to meet the deadline for the European Commission’s third-country listing vote on 11 October.
As hon. Members know, the Government have made it clear that our priority is to seek a negotiated deal with the EU, but we are taking sensible action to ensure that we prepare for every eventuality. The UK’s third-country listing application was a particularly important part of our no-deal preparations. Third-country listed status guaranteed that the export of animal products and most live animals from the UK to the EU could continue. That market is worth approximately £5 billion to the UK annually.
I shall expand on the specific detail of the minor and technical changes made by the instrument. The primary purpose of this legislation is to refine an amendment to retained EU law made by the Specific Food Hygiene (Amendment etc.) (EU Exit) Regulations 2019. We considered that the regulation would benefit from further clarity in describing the authorisation process and the appropriate authority responsible for the process to approve substances that may be used to remove surface contamination from products of animal origin. Lack of clarity might affect implementation and has the potential to undermine the responsibilities for authorisation; this instrument rectifies that.
The new instrument makes it clear that the responsibility for approval of substances that may be used to remove surface contamination from products of animal origin rests with the Secretary of State for Health and Social Care and the appropriate Minister in each of the devolved Administrations. This measure introduces no substantive policy changes to what has already been successfully made and passed in Parliament in March 2019.
Food business operators are not permitted to use any substance other than potable water—or, where permitted, clean water—to remove surface contamination from products of animal origin unless that has been approved. This relates to business establishments that handle products such as meat, eggs, fish, cheese and milk and that do not supply to final consumers.
Currently, approval for such substances is given by the European Commission, but after EU exit this responsibility will be carried out by Ministers. The amendment to Regulation (EC) No. 853/2004 made by the Specific Food Hygiene (Amendment etc.) (EU Exit) Regulations 2019 is being further amended to make it absolutely clear that Ministers will be responsible for prescribing the use of any other substances and that the process of consulting the food safety authority is retained. That decision will be based on independent food safety advice from the Food Standards Agency and Food Standards Scotland.
If after EU exit any additional substances are proposed to be approved for this purpose, they will be subject to risk analysis by the FSA, which has established a rigorous and transparent risk analysis process for assessment and approval of any such new substances. Any request for substance approval would be subject to thorough scientific risk assessment and risk management, before being put to Ministers for a final decision.
Let me be clear that neither this instrument nor the instrument it amends introduces any changes for food businesses in how they are regulated and how they run, nor does it introduce extra burden. The overall changes to the food hygiene regulations will ensure a robust set of controls, which will underpin UK businesses’ ability to trade domestically and internationally.
It is also important to note that we have engaged positively with the devolved Administrations throughout the development of this instrument. Further, this ongoing engagement has been warmly welcomed. The devolved Administrations in Wales and Northern Ireland have provided their consent for this instrument; the Scottish Government have been made aware of these regulations, but have not yet had the opportunity to scrutinise them.
I would like to stress that we would not normally make EU exit regulations under this Act, where the policy area is devolved in competence, without the agreement of all of the devolved Administrations. However, as I have explained, this is a very minor drafting change to the regulation, which the Scottish Parliament has previously agreed. Regrettably, the potential impact should the instrument not be in place before 11 October on the third-country listing vote does not constitute a normal situation and could affect the farming industry across the whole of the UK, including Scotland.
Finally, I draw the Committee’s attention to the fact that, in line with informal communications, which the Food Standards Agency has had with the Joint Committee on Statutory Instruments, the FSA will, in accordance with the terms of the free issue procedure, be making this instrument available free of charge to those who purchased the earlier exit SI, namely the Specific Food Hygiene (Amendment Etc.) (EU Exit) Regulations 2019.
The Government accept that this instrument should have been made available under the free issue procedure at the time it was first made, but that did not happen. That situation will now be remedied. I apologise for that oversight and confirm to the Committee that this will be corrected and the Food Standards Agency will, together with colleagues in the national archives, be taking action to ensure that anyone entitled to a free copy of the instrument under that procedure will, where appropriate, be able to apply for a refund or otherwise obtain a copy.
Sir Geoffrey Clifton-Brown (The Cotswolds) (Con)
Can my hon. Friend confirm that by laying this instrument the Government are demonstrating, beyond peradventure, that they will not tolerate any reduction in food safety standards as a result of the UK leaving the EU, contrary to what was asserted by some on television yesterday?
Jo Churchill
Indeed, that is so.
The action taken will allow one to obtain a copy of this instrument for free on request, in accordance with the usual terms of that procedure.
In conclusion, this instrument constitutes a minor—technical, but necessary—measure, to ensure that our legislation relating to food safety continues to work effectively after exit day. I urge hon. Members to support the amendment proposed, to ensure the continuation of effective food safety and public health controls. I commend the regulation to the Committee.
Several hon. Members rose—
The Chair
Order. I call the hon. Member for Washington and Sunderland West to speak for the Opposition, but I note other Members standing.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
I am grateful, Dame Cheryl; I was not sure what order we would speak in. It has been a while since I have done one of these Delegated Legislation Committees; it was probably before the summer recess, when we did quite a few. I am very pleased to serve under your chairmanship, Dame Cheryl, and I thank the Minister for introducing the statutory instrument and providing a summary of it.
As the Minister said, the SI was discussed earlier this year by the hon. Member for Winchester (Steve Brine), and a lot has changed. We have had not just our summer holidays, but a full remake of the Government—we have a totally new Government. Nevertheless, we still have uncertainty about whether the UK will leave the EU in 24 days, with or without a deal, and about the impact that could have. As legislators, we have to get this right, and I deeply regret that once again we find ourselves back in this room debating necessary SIs and having to rush this legislation through in case of a no-deal Brexit, which none of us in the Opposition wants. I know some Members on the Government side do not want it either.
I move on to the legislation before us. As we all agree, the safety of our food is of the utmost importance to our health and wellbeing, and we cannot get it wrong. Food safety must be protected at all costs. I share the Government’s commitment to ensuring that there is no change in the high-level principles underpinning the day-to-day functioning of the food safety legal framework. Ensuring continuity for business and public health bodies is of the utmost importance and in the interest of the public.
The Minister will not be surprised that I have a few questions about the SI. First, why was this missed from the SI in March? She might have touched on that. Has any assessment been made of what would have happened had the UK left the EU in March without a deal and without the SI in place? What exactly will the Minister’s responsibilities be under the SI? Finally, what additional substances can be approved by Ministers if needed, and how will that impact food safety? I see that the SI gives some leeway for Ministers to approve substances that can be added to our food. I would be interested to hear how confident the Minister is that a high standard for food safety will be maintained from day one of Britain’s exit from the EU.
The safety of our food is hugely important, and we cannot get this wrong. With those few brief comments, and not wanting to delay the Committee, I look forward to the Minister’s response.
The Chair
We do have one and a half hours for this debate, if people wish to take it. I call the hon. Member for Paisley and Renfrewshire North, who speaks for the Scottish National party.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
It is a pleasure to serve under you in the Chair, Dame Cheryl. I, too, will be very brief—not least because the hon. Member for Washington and Sunderland West has asked the two questions that I was going to ask the Minister. I eagerly await the answers.
It is regrettable, to say the least, that we are discussing this SI—notwithstanding the apology that the Minister has given—before the Scottish Parliament has been able to approve it. However, I readily accept that there are no substantive policy changes in the SI before us. I have to reiterate that the instrument is necessary to enact a decision that Scotland did not vote for. It is our view, and that of the industry, that the UK should remain aligned with EU standards in this area, as any future dual regulation system will impact on imports and exports, and on agriculture more widely. Reports of the Department for International Trade pressuring the Department for Environment, Food and Rural Affairs to lower standards are deeply concerning to everyone. It should concern all hon. Members if those reports are true.
In conclusion—I did say I would be brief—the best solution for us and for Scotland would be to remain in the single market and the customs union, as suggested by the SNP Scottish Government as far back as December 2016 in the compromise document “Scotland’s Place in Europe”. Given the Government’s predicament, I urge them to look at that again.
Ms Angela Eagle (Wallasey) (Lab)
It is a great pleasure to serve under your chairmanship, Dame Cheryl. We came into the House at the same time and we were the first two female members of the House of Commons cricket team to play. We have a lot in common from that time.
Will the Minister reassure me about a couple of things? First, she seemed to say that, because there is £5 billion of trade in agriculture and food between us and the European Union, it is obviously in our interest to maintain aligned standards, notwithstanding the technical changes. I presume—I hope she will confirm it in her response—that they were put in place to reassure the European Union, ahead of the third-country listings vote on 11 October, that we are not going to try to somehow undercut standards, which might cause our export trade some difficulty. We have seen what that is worth.
Perhaps the Minister could confirm that that is why we are rushed in a way that has meant that none of the devolved Administrations has had time to look at the instrument in the way that would be expected. She graciously apologised to the Committee for that. I am interested to check that my suspicion about what she said is the reality.
Secondly, could the Minister say a few words about whether the view that we should maintain the same standards to protect our export trade in those areas is helped or hindered by No. 10’s weekend briefing? It said that if this country did not get what it wanted in the EU discussions, it would disrupt EU business, and that if there was a delay it would clog up the EU’s workings and generally make a huge nuisance of itself, up to and including suggestions in the papers that Nigel Farage would be appointed as a Commissioner. How does she think that kind of destructive briefing from senior sources in Downing Street, which appeared in all the weekend papers, builds confidence so that we can maintain reasonable trade connections and reassure our EU partners that, even if we become a third country, we will not seek to undermine or undercut regulations and standards to gain some kind of advantage?
Thirdly and finally, it is explicit in the new Government’s general approach, and in some of the published documentation on the Prime Minister’s proposals, that there is the view that, in future, we should disengage and disalign with EU standards and protections to have what I view as a race to the bottom, and that, in trade talks with the US, we may have to accept even chlorinated chicken and a range of other things that, until now, have been banned by the EU standards that we align with.
The public and those who have come to rely on our standards, which have been underpinned by EU regulations to date, would be horrified if they thought that that was the Government’s view, so it is good that the Minister said on the record that that is not what the Government intend, at least in this sector. Perhaps she can say it more strongly, because there are great suspicions that the opposite is the case.
The Chair
Unless anybody else is seeking to catch my eye, I will call the Minister, but I hope that she will refrain from commenting on the joint sporting prowess of me and the hon. Member for Wallasey, which I had not expected to be raised under food hygiene regulations.
Jo Churchill
Thank you, Dame Cheryl. I will resist the temptation to say “Howzat!”
I will first go over some general points that address several of the questions, and then I will address a couple of the specifics. The importance of food safety is paramount, and leaving the EU does not change that. Food safety in all cases remains our key priority; that means that business will carry on as normal. It is important that we acknowledge that, in many areas, food standards in this country are above those of other member states. Hon. Members commented that there will potentially be a race to the bottom, but actually we are trying to spread some of the good practice that goes on in all four parts of the UK in order to get others to raise their standards.
Sir George Hollingbery (Meon Valley) (Con)
The hon. Member for Wallasey implied that there is some sort of mercantilist imperative for us to drop standards so that we can sell our goods around the world, but does the Minister agree that to do so would be to shoot ourselves in the foot? It is quite clear that our food standards are what sell our goods overseas. The quality of British produce means that, for example, 35% of Chinese consumers surveyed said that they would particularly buy British products because they are of a higher standard.
Jo Churchill
I could not agree more. It is a great tribute not only to producers in this country but to the Food Standards Agency that people feel that our food and brands are to be trusted. I hope that will continue.
On the point raised by the hon. Member for Washington and Sunderland West, this was not missed. This instrument is purely to give clarification—hopefully that is what it does—to make doubly sure that everybody is clear. The devolved Administrations in Wales and Northern Ireland have said that they are fine; it is only Scotland that has not. Once again, I apologise for that. Scotland produces some of the finest quality products that go out of this country, so making sure we have done this properly is important to all the devolved nations.
Ensuring continuity of trade is important, and ensuring food safety here is hugely important. Mostly, we must ensure that we are open and transparent. The hon. Member for Washington and Sunderland West wanted clarification about the system. If there were to be any other form—the hon. Member for Wallasey alluded to chlorinated chicken, but it might be something else that is brought forward—it would first be risk-assessed by the FSA and would go through its very rigorous programme. It would then come to the Minister, and would come before the House by way of an SI. If there are any issues, that process must be walked through to ensure a degree of safety.
Specifically on chlorinated chicken, any substance used to remove surface contamination from chicken carcases must be specifically approved. Chorine has not been approved, and so cannot be used and could not be approved until it had walked through those processes. Each devolved Administration would then have individual responsibility for it. I feel that the concerns expressed in the media have perhaps over-egged the situation—we are all used to that—because those safety nets are in place. This SI simply helps to ensure that we are ready for Brexit on 31 October, whatever the circumstances, and that we are ready for all eventualities. Making sure we are prepared is the key job.
In closing, I hope I have answered hon. Members’ questions. As I said, the Government are working to agree a deal with the EU, but while we do that and until we have a finalised agreement, it is important that we prepare for the possibility that we will leave without a deal.
Ms Eagle
I thank the Minister for her responses, but could she address my question about the speed with which this instrument has had to be dealt with? She mentioned the meeting on the 11th. Is there scepticism about the state of our current law, and does that mean that this statutory instrument had to be dealt with quickly to help us with that meeting? Could she explain whom she is trying to reassure and why?
Jo Churchill
I suppose it was belt and braces. We felt that clarification was sensible to make it clear to all audiences that we are maintaining the highest standards. That is why we have done it. Given that we trade £5.4 billion of food and feed with the EU, ensuring that we have clarification before 11 October for third party status is paramount.
To reiterate, this instrument makes no changes to policy or to how food businesses are regulated and run. It is limited to drafting refinements and will ensure that the regulatory controls for food continue to function effectively after exit day if the UK leaves the EU without a deal.
Question put and agreed to.
Product Safety, Metrology and Mutual Recognition Agreement (Amendment) (EU Exit) Regulations 2019
(5 years, 2 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 Product Safety, Metrology and Mutual Recognition Agreement (Amendment) (EU Exit) Regulations 2019 (S.I., 2019, No. 1246).
It is a pleasure to serve under your chairmanship, Sir Gary. Since the referendum decision to leave the EU, the Department for Business, Energy and Industrial Strategy has undertaken significant work on withdrawal arrangements, preparing for a range of potential outcomes, including no deal. The regulations amend no-deal legislation made earlier this year, predominantly as a result of the article 50 extension. We need to make changes to have an effective and up-to-date system for product safety and legal metrology on exit. The safety of consumers is a key priority for the Government, and I know that priority is shared by Members of all parties.
The instrument will ensure that the drafting in previous regulations will function as intended, and so help to maintain the continuity of product safety protections if the UK leaves the EU without a deal. Primarily, we are making the changes needed to reflect the change from a March to an October exit, but we are taking this opportunity to extend certain transitional arrangements, already agreed by Parliament in respect of products from the European economic area, to certain imports from Switzerland in the event of the UK leaving without a deal.
On the back of our ongoing engagement with stakeholders, the regulations include some minor fixes that they identified and brought to our attention since the previous no-deal product safety regulations were made. The focus of the instrument is not to introduce significant policy changes, but to clarify and simplify the current position. It will not change the system or the approach we take in the UK’s rigorous and robust product safety regime. Instead, the changes the instrument makes will ensure that the UK’s product safety and legal metrology framework continues to deliver the protections we want.
I turn now to the detail of some of the amendments that the regulations will introduce, starting with the updates to the no-deal product safety legislation already agreed by Parliament. The regulations will amend three previous regulations. First, they will amend a number of product schedules in the Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019, which were laid in March 2019. Secondly, they will amend the Pressure Equipment (Safety) Regulations 2016. Thirdly, they will amend the Conformity Assessment (Mutual Recognition Agreements) Regulations 2019.
A change in exit day created confusion for the personal protective equipment sector about which regulations to follow. As originally drafted, there was provision for a period between exit day and 21 April 2019 during which particular provisions applied. The new SI will make changes that provide legal clarity for the industry, now that the date has passed. For cosmetics, the regulations will clarify the drafting in relation to the use of data from animal testing that was carried out before such testing was banned. That historical data can be used now, and these regulations retain that position. Let me be clear: there is no intention to change our position on new animal testing, which is rightly banned and will remain so. A further provision ensures that the UK will be able to update the list of prohibited and restricted substances to show what can or cannot be included in cosmetic products, and subject to what conditions. The power to update the list has been transferred to the Secretary of State and would be used only following scientific evidence. This change will ensure ongoing protection for consumers.
The SI restores the position before the unintentional removal of the option for pressure equipment materials to have their manufacturing processes of base materials certified by a competent body. This reinstatement will ensure continuity and certainty for business. The instrument also makes minor amendments to clarify certain provisions to ensure that no-deal legislation works as intended if the UK exits the EU without a deal. Those changes occur in relation to outdoor noise, recreational craft, toys, electromagnetic compatibility measuring instruments and accreditation. An example is an amendment to the electrical equipment provision to change a reference to “safety component” to a reference to “electrical equipment”.
A further important provision in the instrument expressly implements the UK’s obligations as an EU member state with regard to certain goods being imported from Switzerland. That builds on the main Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019 and the subsequent Conformity Assessment (Mutual Recognition Agreements) Regulations 2019. The end result is that, if we leave without a deal, the transitional provisions for goods entering the UK from the EU and the EEA will be extended to certain goods from Switzerland. That will provide further clarity and continuity for business by making it easier to import certain products from Switzerland by allowing UK importers to put their details on accompanying documentation, rather than the product itself, for 18 months after exit, and by extending the recognition of authorised representatives established in Switzerland to those appointed in relation to noise emissions from equipment used outdoors, in line with the existing EU-Swiss mutual recognition agreement.
An impact assessment has not been prepared for the instrument, because the impact for business is expected to be low. It is limited to familiarisation costs to understand the operability fixes and drafting improvements made to the legislation. It has been confirmed that those costs fall below the £5 million de minimis threshold.
The Department did not undertake a public consultation, given that the provisions relating to EU exit are limited to making changes to no-deal legislation to ensure that it operates effectively on exit. However, our ongoing engagement with stakeholders has proved useful in highlighting some inconsistencies in the previous drafting. We recognise that wider consultation would have been helpful, but the objective of the instrument is to ensure that there is no reduction in consumer protections in respect of product safety after EU exit. Some of the minor changes improve clarity for business, and we welcome and are encouraged by its engagement with the development of the legislation.
I recognise that our product safety exit SIs are unique, particularly in their size and breadth, which has presented challenges to Parliament’s scrutiny of them. We have learned lessons and are grateful to the Joint Committee on Statutory Instruments for its comments and input throughout the scrutiny process, including comments highlighted in its report on the drafting inconsistencies in the SI that related to the coming-into-force date. The report draws special attention to defective drafting in the instrument, which is “acknowledged by the Department” and which was flagged up in our voluntary memorandum to the JCSI. It accepted our argument that the commencement provision should still work and that the mistake is unlikely to have had substantive consequences.
The amendments made by the instrument ensure that the drafting of previous regulations functions as intended, which will help to maintain the continuity of product safety protections if the UK leaves the EU without a deal. As I am sure hon. Members recognise, it is essential that the UK has a functioning product safety framework in the event of no deal. Approving the instrument will also contribute to maintaining a positive trading relationship between Switzerland and the UK.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
It is a pleasure to serve under your chairpersonship, Sir Gary. As per the explanatory memorandum, the instrument amends some provisions of an earlier no-deal instrument that was brought to the House in March ahead of the no-deal scenario that the former Prime Minister, the right hon. Member for Maidenhead (Mrs May), threatened us with—leaving the EU on 29 March, deal or no deal. Thankfully, we averted that crisis.
Called a “beast of an SI” by The Times on 12 February, that instrument was 636 pages long, weighed 2.5 kg and put together 11 issues that would usually be in separate documents to be sifted through. The Secondary Legislation Scrutiny Committee was damning of the length and scope of that instrument and the Government’s approach to bringing it to Parliament. This instrument amends that legislation. In particular, it
“makes amendments to previous no deal legislation in light of the extension to exit day agreed under Article 50 of the Treaty on European Union”
and
“seeks to extend transitional provisions for imports from the EEA to imports from Switzerland and to ensure other provisions operate effectively and as intended. The instrument also amends certain EU-derived legislation, to expressly implement certain provisions of the mutual recognition agreement between the EU and Switzerland, related to importers and authorised representatives, and to make a small correction to legislation implementing the EU safety regime for pressure equipment.”
It also includes the amendments and the inconsistency that the Minister kindly referred to.
The instrument has been introduced through the made affirmative procedure under paragraph 5 of schedule 7 to the European Union (Withdrawal) Act 2018, which means that when matters are deemed urgent, an instrument can be made before it is laid for the House to approve or scrutinise. Why has the Minister introduced the instrument using that procedure?
In passing the Benn Act, the House of Commons has been explicitly against a no deal, which has in fact been legislated against. Why is the Minister proposing the new exit date when that has been explicitly rejected and legislated against by the House?
The product safety regulations made provision for the creation of an independent UK system for checking that products meet the requirements and of a framework for UK marking, so that a manufacturer can indicate if a product conforms with those requirements. Can the Minister enlighten us about the system’s progress and when it will come into place?
Consumer bodies such as Which? have been clear that a no-deal Brexit would be a catastrophe for consumer protections and would water down 40-plus years of progress in that respect. I would welcome the Minister’s comments on that.
Martyn Day (Linlithgow and East Falkirk) (SNP)
I do not wish to say much. Regardless of my opposition in principle and in its entirety to the UK’s withdrawal from the EU, I understand that continuity is important and that instruments need to be in place to preserve the framework around the status quo. I make the point, however, which I have made before in several such Committees, that the Government should have done the sensible thing from day one and ruled out no deal, so we did not have to go through all this nonsense and this process. They continue to refuse to do that, despite a majority in the Commons having instructed them to do it.
Kelly Tolhurst
It is nice to be back in Committee opposite the hon. Member for Sheffield, Brightside and Hillsborough debating statutory instruments, as we have many times. I thank her for her constructive questions, as always. I confess that I missed her second one, so I am happy for her to repeat it, but I will answer the others.
The hon. Lady is absolutely right that we debated the big 600-page product safety statutory instrument, but I must highlight that a third of that—200 pages—was made up of long annexes that were transferred. There was synergy in the subjects that were brought together in one instrument because of cross-cutting issues.
The hon. Lady asked why the urgency, given the existence of the Benn Act. As we have made clear—as the Prime Minister has made clear—we intend to leave the European Union on 31 October. We have used these powers less than 35 times in a legislative programme of more than 600 instruments, which is not very much.
If this legislation were not in place, the UK’s product safety regime would simply not work as effectively if the UK left without a deal agreed by both sides. The cosmetics changes in the instrument enable us to implement changes in UK law regarding chemicals in cosmetics that have been banned or restricted. If we were to leave the EU without that ability, the UK could be at risk of the dumping of products that would not be satisfactory in the EU and that we would need to restrict over here.
Grahame Morris (Easington) (Lab)
I hope the Minister will forgive me for seeking some clarification on the scope of the SI. I listened intently to her comments on chemicals and cosmetics and on the issues to do with Switzerland. On product safety, does the statutory instrument cover the safety of imported domestic electrical appliances? Is that within its scope? Specifically, there have been issues with tumble dryers being responsible for many domestic fires, and a major product recall of imported dryers has been widely publicised. Does that come within the scope and purview of the SI?
Kelly Tolhurst
I thank the hon. Gentleman for his question. The SI that we are debating relates to amendments to the bigger SI, which covered some of the areas to which he referred. These are amendments to the current regulations, so yes, his comments are relevant in the broader scope of things. He will hopefully be aware that, as the Minister with responsibility in this area over recent months, the issues with tumble dryers, fridge freezers and so forth have been at the forefront of my mind, particularly as we have been scrutinising the legislation coming forward and these amendments. The hon. Gentleman is right to address that.
It is crucial that we have functional legislation if we leave the EU without a deal. The SI ensures that previously laid instruments can serve their intended function. It is vital that we protect consumers by making these changes. We can better ensure that we continue to be in step with the latest scientific advice, thus reducing the risk of cosmetic products with chemicals that are banned at EU level being dumped on the UK market. Without this legislation, there could be additional burdens on business, as some of the provisions address burdens or barriers to trade that could be problematic if not amended.
Additionally, the instrument explicitly implements provision in the existing EU-Swiss mutual recognition agreement and allows importers of certain goods from Switzerland to place their contract details on a document accompanying the product, rather than on the product itself, for a period of 18 months if we leave the EU without a deal. The SI will provide continuity and certainty for business, and maintain consumer confidence in the safety and accuracy of products as the UK exits the EU. I urge the Committee to approve the regulations.
Question put and agreed to.
Animal Health and Genetically Modified Organisms (Amendment) (EU Exit) Regulations 2019
(5 years, 2 months ago)
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The Minister of State, Department for Environment, Food and Rural Affairs (George Eustice)
I beg to move,
That the Committee has considered the Animal Health and Genetically Modified Organisms (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 1229).
This statutory instrument was made under the urgent made affirmative procedure. That is because it supports the UK’s application to the European Commission for third-country listed status for animal health purposes. That application will be considered at a meeting of the EU’s Standing Committee on Plants, Animals, Food and Feed, or SCoPAFF, due to take place on 11 October.
While we are working hard to secure a deal with the EU, we should prepare for all scenarios, including that the EU would not accept any request for an extension or that the terms of any extension would be unacceptable to the UK. The European Commission considered the UK’s third-country listing application at a meeting of the relevant SCoPAFF committee on 9 April, based on the relevant animal health legislation in place on that date. The UK was able to assure the Commission that all relevant legislation had been made, and member states voted unanimously to list the UK as a third country.
Following the article 50 extension, another vote must now be held; as I said, that will be this Friday, 11 October. To ensure that we are fully prepared for that listing, this SI should be on the statute book to provide the EU with the necessary reassurances that they have said they want in order to expedite the process of listing the UK as a third country. The Government have taken care to rely on the urgency procedure contained in the European Union (Withdrawal) Act 2018 in as few situations as possible, but we considered use of that procedure to be appropriate in this instance, for the reasons I have described.
The instrument makes a number of technical operability changes to existing instruments on animal by-products, or ABPs; transmissible spongiform encephalopathies, or TSEs; and genetically modified organisms, or GMOs—I hope members of the Committee will forgive me for relying on the abbreviations of all those terms. Those changes ensure that the laws in these policy areas will operate correctly after the UK has left the European Union. The instrument takes into account three recent, highly technical changes to the EU’s ABP and TSE legislation that were published in the EU’s official journal too late to be included in earlier EU exit SIs.
Mr Robert Goodwill (Scarborough and Whitby) (Con)
Does this instrument have any bearing on the issue of carcass splitting and the specified risk material, namely spinal cord, that needs to be removed from certain lambs? I think both the Government and many sheep farmers wish to move from a system of aging the sheep through their dentition to one of using a date in the calendar.
George Eustice
My right hon. Friend mentions a request that, as a former incumbent of my post, he will know the industry has been making for some time. It is under consideration, and is something that we progressed with the European Union during my previous time as Minister. I do not think that this particular change addresses that topic; it is much more about the use of certain animal by-products, which are not category 1, in fertilisers or soil improvers. This amendment covers a much narrower issue.
The instrument amends the provisions regarding harmonisation of the lists of approved or registered establishments, plants and operators and the traceability of certain animal by-products and derived products. The Commission introduced new legislation to create a transition period for those to come into force, and those lists were due to be altered by the Trade Control and Expert System—TRACES—an IT system run by the EU. This instrument simply changes those provisions to give us the flexibility to use either TRACES or our own, new import system, depending on the scenario we end up in.
The second change amends provisions to permit the export of products containing processed animal protein derived from ruminants and non-ruminants. In June 2018, the European Food Safety Authority updated the quantitative assessment of the bovine spongiform encephalopathy risk posed by processed animal proteins, and concluded that the total BSE infectivity posed by processed animal protein was a quarter of that estimated in 2011. Following the opinion delivered by EFSA related to processed animal protein, it was felt appropriate to include organic fertilisers or soil improvers containing processed animal proteins derived from ruminants in the derogation laid down to permit export, and the EU regulation on transmissible spongiform encephalopathies was amended accordingly.
The third change makes technical changes to the provisions as regards the imports of gelatine, flavouring innards and rendered fats. The amendment adds Egypt to the list of third countries from which gelatine may be imported into the European Union; aligns the list of third countries eligible for the import of flavouring innards with a reference to the list of third countries authorised for the import of wild game meat for human consumption; and allows imports of rendered fats to be used for the production of renewable fuels using a method that has been assessed by EFSA.
In addition, regulation 5 of the instrument corrects minor inconsistencies in the language used in an earlier EU exit instrument, the Genetically Modified Organisms (Amendment) (EU Exit) Regulations 2019, as identified in 50th report of the Joint Committee on Statutory Instruments. To exemplify the change in language recommended by that Committee, where the word “countries” was used in some references, it has been amended to “constituent nations”, and where the word “notification” was used, it has been amended to “consent”.
Martin Whitfield (East Lothian) (Lab)
I am glad to see the Minister back in his place. With regard to the minor errors contained in those earlier regulations, is he assured that there are no minor errors in these regulations?
George Eustice
As I have made clear many times, this is a complex set of regulations. Some 80% of all the Department’s legislation comes from the European Union, so it has been a huge task for officials to bring it all across into retained EU law. I pay tribute to them for the huge amount of work that has gone into that. It is inevitable that, in such a complex operation, there will be occasional errors, oversights or changes. That is why the European Union (Withdrawal) Act 2018 provided for the ability, in the event of drafting errors being made, for them to be corrected for a period of time after we leave the European Union.
I have answered that as honestly as I can; I hope this is the final word. I did many of these statutory instruments the first time round and my right hon. Friend the Member for Scarborough and Whitby did many more after I left the post, so we are returning to familiar issues to update the legislation.
Mr Ranil Jayawardena (North East Hampshire) (Con)
With regard to GMOs, may I confirm that the regulations as amended will make sure that only truly safe GMOs are released and that the UK will still have the right to stop them being used in this country if we, this Parliament and the British Government, will that to be the case?
George Eustice
Yes, the changes in relation to GMOs are a few minor changes in language, following the recommendation of the Joint Committee.
The regulations mean that we are bringing across the EU regulatory system exactly as it is; the processes will be exactly the same. The EU system is sometimes criticised, not necessarily because of the thoroughness of the process that people go through, but because politics often gets in the way, so some applications have been left in limbo for up to 20 years. That has been criticised, but the procedures, the methodology, the thresholds and the evidence required will be exactly the same as before, after we leave the European Union.
This instrument applies to the whole UK, and the devolved Administrations were closely engaged in its development and have given their consent for it to be laid. I therefore commend this regulation to the House.
Sandy Martin (Ipswich) (Lab)
Nobody who was aware of events in this country in the late ’80s is relaxed about the danger of allowing the reappearance of bovine spongiform encephalopathy in this country, so I am sure that the Minister would want to do everything necessary to ensure that it is not introduced from outside. European Council Regulations No. 999/2001 and 1069/2009 and the associated Commission decisions have been vital in dealing not only with BSE but with scrapie in sheep and other transmissible spongiform encephalopathies. By strictly regulating the import and export of all sorts of animal by-products, the EU has managed to control these diseases. I wonder how we would have fared if the EU had not existed at the time, or if there had been the same attitude to regulations that we see in some quarters now.
We are very worried that any deviation from EU regulations in this area, or reduction in the level of compliance, might lead to increased risk of importing or incubating BSE and other TSEs. Clearly, this SI is an attempt to ensure full alignment with EU regulations, and we are not going to argue with that, but we believe, as I mentioned with the previous SI, that driving this forward under the made affirmative process runs the very real risk that there might be mistakes, or gaps.
Mr Goodwill
Is it not the case that the mistakes that were made and the changes in the process that allowed BSE to develop happened while we were members of the European Union and under EU regulations? The idea that leaving the European Union will make that sort of thing more likely seems a rather spurious argument.
Sandy Martin
That is one for the historians, but the right hon. Gentleman overlooks the fact that the European Union managed to contain what was a very nasty and difficult outbreak, and to reverse a situation that might well have been extremely difficult to reverse in the context of international trade in animal products at the time. We have seen other animal diseases that were far more difficult to stamp out, over a much longer period of time, in the past. Clearly, no organisation will be an absolute guarantee against something new occurring, but learning from the problems that occur and ensuring that they do not reoccur must surely be one of the main objects of any organisation, whether a trade organisation or any other co-operative organisation.
As I said, the made affirmative process removes much of the depth of scrutiny that these instruments ought to have before they are made, and that risk is exacerbated by the speed at which some of these regulations are having to be driven through. I would like the Minister to reassure us that there are no plans to move away from adherence to these regulations once we have left the EU.
Will we be able to use the European trade control and expert system to ensure that the regulations are being complied with, if we leave the EU without a deal? Are there genuine plans to replace the TRACES system with a home-grown one for use in this country, and if so, why? It seems to me that a system that is used by every country in Europe is far more likely to be effective than one cobbled together in a single country, which then may or may not fit with what its trade partners are doing.
As for the amendments in regulation 5, dealing with genetically modified organisms, it may be the case that this SI does not make any changes in policy, but how likely is it that, once we are no longer members of the EU, this Government will maintain the same stance towards GMOs that the EU currently does? Will the Government maintain equivalent regulations to the EU on GMOs? If not, how will that affect our ability to export agricultural products to the EU, not to mention the possible effects on the environment? Whatever the limited scope of these SIs may be, the very fact that we are having to introduce them demonstrates the extent and complexity of the protections for our health and the health of our agriculture, which are being put at risk by the threat of a no-deal Brexit.
George Eustice
I will try to address some of those points as best I can. I completely share the view of the shadow Minister that we must never again take the sorts of risks in livestock husbandry that led to the BSE crisis. That crisis cast a long shadow over our beef industry. Indeed, even today, after all these years, when we are trying to open and negotiate access to markets such as the United States, China or Japan, the issue of BSE is still key and we have to give assurances.
I reassure the hon. Gentleman that there is no prospect of this Government weakening our regulations in this area. Even when, in some instances, the science suggests that an approach in certain areas might be more precautionary than is necessary, there is an issue of confidence in international markets. That is why in my time in this post I have always been cautious about departures from the flagship TSE regulations. I am sure that any future incumbents would take the same approach.
As my right hon. Friend the Member for Scarborough and Whitby pointed out, the area of EU law relating to animal health and feed restrictions has been under the EU’s remit for some time, including during the BSE crisis. As the hon. Member for Ipswich says, it is a matter for historians, but when the Government of the day were confronted with that terrible crisis, they moved quickly to impose necessary restrictions.
The hon. Gentleman will be aware that this change has been recommended by the European Food Safety Authority; I hope that reassures him. In previous debates he has had a tendency to trust things that the European Union has said and to be sceptical of things that our own technical advisers say. Others, like me, value our own technical advisers as well. Our TSE experts—the group of technical experts we have in the Animal and Plant Health Agency—have peer-reviewed and assessed the work that EFSA did. They are content with the assessment and that it has reached the right conclusion.
The hon. Gentleman asked about TRACES. If we become a third country, the European Union’s approach is that we would not have access to TRACES. Over the last 18 months we have been developing our own import system. We have designed it so that it looks like TRACES and feels familiar to the relatively small number of importers who have to use it. The system has been running in a beta format for some time and a number of key importers who will need to use it have been familiarising themselves with it. We will have our own replacement system, but it is not impossible that in a negotiated settlement, with a withdrawal agreement, there will be information sharing provisions between our system and the EU’s, or some kind of ongoing access to TRACES, in order to ensure that all of us are doing everything we can to protect the food system.
Finally, on GMOs, the hon. Gentleman raises the issue of exports to the EU and asks if we would still be able to export to the EU were there to be a change. These regulations envisage no change at all. The EU regulatory requirement, as it stands, would come across. A small number of GM crops are authorised for cultivation in the European Union, including a variety of maize cultivated in Spain already.
More to the point, there are many crops that are not authorised for cultivation in the EU but that the EU is happy to import from other countries. The majority of animal feeds that are imported to the European Union from third countries are GM feeds already. The European Union allows those feeds to come in because to ban them would put a huge cost on livestock producers in the EU. That being the case, the decision that we might take as a country—or as a constituent part of the UK in England, for example—to grant an authorisation for a particular crop, given that it would have been done in the same way as the EU authorisation process sets out, is highly unlikely to have any impact on trade, when put in the context of other imports that the European Union makes.
I hope I have managed to cover many or all of the issues that the hon. Gentleman raised. I commend the regulations to the Committee.
Question put and agreed to.
FINANCIAL SERVICES (ELECTRONIC MONEY, PAYMENT SERVICES AND MISCELLANEOUS AMENDMENTS) (EU EXIT) REGULATIONS 2019
(5 years, 2 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019, No. 1212).
It is a pleasure to serve under your chairmanship, Ms Buck. As the Committee will be aware, Parliament has now approved well over 50 exit statutory instruments for financial services. They have included three on miscellaneous provisions, which are sometimes necessary to make isolated deficiency fixes, which do not fit easily into more thematic instruments. Those miscellaneous SIs have sometimes been used to correct minor errors or omissions made in earlier exit legislation. The one before the Committee also makes some minor corrections, as well as updating some earlier exit provisions to account for the article 50 extension.
Some hon. Members have been critical of the SIs, arguing that the correction of errors shows that we are putting rushed, poorly drafted legislation before Parliament. I want to make it clear that that is not the case. Errors have been few and minor and I applaud and thank my colleagues in the Treasury—particularly Lee O’Rourke and his team—for the work that they have undertaken in difficult circumstances over many months.
Financial services onshoring has been an unprecedented legislative challenge and I think we should acknowledge the constructive and effective collaboration that has taken place between the Treasury, our regulators and our industry stakeholders. I can tell the Committee that the regulators and the industry do not think our legislation has been poorly thought through—quite the opposite. In my time as Minister responsible for financial services exit legislation, the message from our regulators and from the industry has been clear: the legislation is essential to ensure that our regime is prepared for exit in any scenario and it is vital to underpin confidence in our regulatory regime.
In contrast to the previous miscellaneous provisions instruments, the SI makes substantive changes to earlier exit legislation in two key areas: the contractual continuity and temporary permissions regimes for payment services; and transitional arrangements for financial benchmarks. Those changes are not to correct errors but to strengthen our readiness for exit, and I make no apology for that. We are continually reviewing our exit arrangements to ensure that they are as robust as they can be. In those two areas, we decided that it is right to do more to protect UK consumers of payment services and to prevent disruption to firms and markets that rely on financial benchmarks.
First, an important part of our onshoring programme is to provide a range of temporary permissions and contractual continuity schemes to minimise disruption to UK consumers and businesses currently serviced by European economic area firms. Part 3 of the instrument supplements provisions for the temporary permissions and contractual continuity regimes for EEA payments and e-money firms. A review of that legislation has identified a limited number of provisions that should be amended to ensure that the temporary regimes are as robust as possible.
The amendments fall into two categories. The first category is to ensure that EEA firms in contractual run-off can continue to carry out various payment-related activities, as intended. That will include provision of payment and e-money services by EEA credit institutions such as banks. The second category of amendments applies to the temporary regimes for EEA payments and e-money firms. Those amendments clarify and make more explicit the full range of permissions and obligations of firms that enter those regimes. For example, the amendments make it explicit that an EEA firm in a run-off regime can legally redeem outstanding electronic money. That clarifies the fact that they can return any balance on an account to UK e-money holders.
Also, in a limited number of areas, the instrument makes Financial Conduct Authority powers more consistent with the powers it has with respect to credit institutions in the run-off regimes, such as by making it explicit that the FCA may publish a register of firms in contractual run-off. Those changes ensure that the FCA has proportionate powers to take action to protect UK consumers.
The second substantive set of provisions in this SI covers changes being made to the onshored benchmarks regulations. As they currently stand, those regulations contain a transitional regime for third-country benchmarks, allowing UK entities to use non- registered third-country benchmarks up until 31 December 2019. However, since the regulations were made it has become clear that there will be a damaging cliff-edge when the transitional regime expires at the end of 2019—a point highlighted by the Secondary Legislation Scrutiny Committee in its report published on 3 October. Very few third-country benchmark administrators have made applications to be registered, and only two equivalence determinations have been made by the European Commission, covering only seven third-country benchmarks.
If we leave the EU without a deal on 31 October, benchmark administrators outside the UK will have insufficient time to make an application under the UK regime by 31 December 2019. That would mean that UK firms would no longer be able to use those benchmarks for new contracts and products, causing considerable market disruption. For example, loss of access to third-country foreign exchange rate benchmarks could prevent firms from carrying out important risk management functions, such as hedging their currency risk. This SI extends the period in which the transitional regime applies by three years, from the end of 2019 to the end of 2022, ensuring that benchmark administrators outside the UK have an appropriate period of time to make an application under the UK’s onshored third-country regime.
I also want to explain the amendments that the SI makes to our onshored equivalence framework. Those amendments are purely for legal clarity and do not change the policy approach to equivalence that Parliament has already approved. When making an equivalence determination after exit, the law needs to be clear on the aspects of the UK regime for which a third country has equivalent provisions. If Parliament approves a decision on a third country having equivalent insurance regulation to the Solvency II directive, UK law will be clear that that refers to the UK’s implementation of Solvency II as it stands when the equivalence decision is made.
Before I conclude, it is important that I address the procedure under which this statutory instrument has been made. This, along with three other financial services exit SIs, were laid before Parliament on 5 September, under the “made affirmative” procedure provided for in the European Union (Withdrawal) Act 2018. This is an urgent procedure that brings an affirmative instrument into law immediately, before Parliament has considered the legislation. The procedure also requires that Parliament must consider and approve a “made affirmative” SI if it is to remain in law.
The Government have not used that procedure lightly. It must be remembered that, across Departments, we have already laid over 600 exit SIs under the usual secondary legislation procedures. But as we draw near to exit day, it is vital that we have all critical exit legislation in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute: industry and our financial regulators need legal certainty on the regime that will apply from exit. Without addressing the deficiencies covered by this SI, there would be significant legal uncertainty for firms and our regulators.
To conclude, this statutory instrument makes important additional deficiency fixes that will improve our state of readiness for exit. Regulators and the industry support our approach. This SI will help reinforce the message that Government and Parliament will not take any chances with the safe and effective operation of the UK’s regulatory regime. I hope that colleagues will join me in supporting these regulations, which I commend to the Committee.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
It is a genuine pleasure to see you in the Chair, Ms Buck. It is good to be with the Minister for the second time today to discuss our contingency plans in the event of a no-deal Brexit. While this statutory instrument appears to address payments primarily, as the Minister said, actually it covers a wide range of financial regulation, including statutory instruments from previous months in which there have been omissions and where there have been subsequent changes to EU law since the exit date was postponed.
I know, and I hope all my colleagues acknowledge, that Treasury civil servants have worked exceptionally hard on the hugely difficult task of drafting the sheer volume of secondary legislation that has been required—often at short notice—by the Government. Given the scale of that task, it is understandable that some degree of corrections has been needed to address previous omissions. Our criticisms relate to the political decisions not taken that have required that process to come about—there were different ways this could have been done. I think it is fair to say that a lot of Government Ministers, although not this Minister, frankly under- estimated Brexit as a process. That has led, at times, to very difficult decisions, including on some of the processes that we have had to do together as statutory instruments, so I think it is reasonable to ask the Minister whether he is now confident that all drafting errors and omissions have been identified and addressed.
To give one example, in one instrument, references to the European market infrastructure regulation and the markets in financial instruments directive were mixed up. That may seem like minor semantics—fair play—and most people do not really appreciate what those regulations do, but they are huge and entirely separate pieces of legislation. We are discussing critical financial regulations, so there is no room for error. This is not legislation that can be rushed through or made without due care. Everybody was aware what using the secondary legislation process would mean if it was to be the mechanism to do this. I reiterate that this is not a criticism at all of the civil service, but rather a reflection of the gargantuan task expected of it, which was bound to bring about errors.
One principal attraction of the UK, particularly in financial services, has been its relatively stable legal and regulatory framework. The fact is that Brexit has cost us some of that reputation, which is one of the most regrettable things of all. During another recent statutory instrument Committee, a gap I identified and highlighted with the Minister was the apparent lack of permission for EEA institutions to make payments in the UK after exit. I am pleased to see that that has been clarified in this statutory instrument, and that such payments will be covered under the temporary permissions regime, given that they will be exempt from the specific Payment Systems Regulator authorisation. That will provide much-needed assurance to EEA institutions seeking to continue to operate in the UK should we crash out with a no-deal Brexit. I always say that the Opposition are always here to help.
I will ask some specific questions about some remaining items in the statutory instrument. I am curious to know why a further stipulation on the capital requirements regulation has been added to this instrument, when we addressed that regulation an hour ago in a separate piece of secondary legislation. I know it is a reference to cross-referencing, but it might have been reasonable to expect that all such references would have been included in that other piece of secondary legislation.
On the issues that the Minister raised relating to the benchmarks regulation, what exactly is causing the delay for third-country benchmark inclusion on the FCA register? Does further work need to be carried out to promote awareness and understanding of the existence of the register in third countries, or is there a resource issue on the UK side that needs addressing?
On a broader, final point, I do not believe that it is conducive to good legislative scrutiny to bundle together such different items of legislation under one SI. I appreciate the time constraints, but each of these items needs separate and thorough consideration. Equally, although some of these items pertain to changing references, due to the altered deadline, some simply relate to errors and omissions. Are we to anticipate another raft of changes in six months’ time, after these statutory instruments were all rushed through today? Given where we are with the timescale, what assurances can the Minister give us on the viability of the regulatory regime as it stands today, should a no-deal Brexit occur?
John Glen
I would like to respond to the points made by the hon. Member for Stalybridge and Hyde, and I thank him for the typical courtesy and care in his remarks with respect to this process. He made a number of points around the challenges of this approach, and I think we could both agree that this has not been an ideal process. We have worked through it, as a Committee, on probably nearly 40 occasions over the last 12 months.
The hon. Gentleman raised concerns around, in essence, the mistakes. I reassure him that there is no casualness to our approach. All SIs pass through quality control procedures, and we have engaged extensively with regulators and industry, where appropriate, in drafting them. We publish them in advance of laying them, in order that a degree of familiarity can be gained. However, as with all legislation, drafting errors occur from time to time, and we put them right as soon as they are discovered. When considering the volume and complexity of the financial services legislation made under the European Union (Withdrawal) Act 2018, drafting errors have been minor and small in number. We have grouped them under the miscellaneous provisions and have worked closely with regulators to get them right.
The hon. Gentleman asked me to speculate on the nature of future amendments, should any be needed. Obviously, I cannot give an absolute assurance. He asked about the inclusion of the capital requirements regulation in this particular instrument. That is so because this is a collective, miscellaneous capturing of small and essentially legally significant but inconsequential changes.
The hon. Gentleman asked about the benchmarking issue. Not many firms have gone through the process of applying, which is why so few have gained permission. We have aligned the instrument with what we have done with many of the transitional regimes by making a three-year provision. That will allow greater certainty in the marketplace. I acknowledge his broader concerns about the process, but we have done all that we can to ensure that we are in the best possible position in the undesirable outcome of no deal at the end of October. I think that I have dealt substantively with the hon. Gentleman’s points.
I accept that the supplementary measures and provisions included in the instrument will help to ensure that the UK’s financial services regulatory regime remains prepared for withdrawal from the EU in any scenario. I recognise that considerable work will need to be done if we leave with no deal, and that we would have to bring that before the House. I hope that the Committee has found the sitting informative and will join me in supporting the regulations.
Question put and agreed to.
Draft Human Medicines and Medical Devices (Amendment etc.) (EU Exit) Regulations 2019
(5 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Health and Social Care (Ms Nadine Dorries)
I beg to move,
That the Committee has considered the draft Human Medicines and Medical Devices (Amendment etc.) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Bone. Hon. Members will be aware that in March this year the House considered and approved the statutory instruments that aim to ensure that our national regulatory system for medicines and medical devices continues to function appropriately in the event that the UK leaves the EU without a deal. Before us today is a draft statutory instrument that makes additional changes to that legislation in areas that my Department has identified would benefit from further clarification. This is being done in response to comments from stakeholders, including the industry and the life sciences sector, and from internal review.
I reiterate that the Government’s position remains that the UK would prefer to leave with a deal, and we continue to work towards that. However, the Government are also committed to preparing for an outcome in which a deal is not reached and we have to leave the EU without a deal.
I reassure all hon. Members that, as the former Minister said in March, the Government are fully committed to a system of medicines and medical devices regulation that intelligently balances patient access to new, innovative and world-leading products with protecting UK patients from harm. The Medicines and Healthcare Products Regulatory Agency, as part of these measures, will have in place a suite of licensing routes for medicines and vigilance systems for medicines and devices. The UK Government also place enormous value on the contribution to public health of research charities, the industry and the life sciences sector as a whole. The MHRA will therefore continue to support innovation in the life sciences through its innovation office and scientific advice. We are committed to offering a competitive regulatory environment to ensure that the UK has access to the safest and most effective medicines and medical devices.
The fundamentals of how medicines and devices are regulated will remain the same, in terms of the UK’s regulatory system. Where possible, we have sought to maintain existing arrangements rather than to create any new ones. However, there are a few areas where it has been necessary to add a new requirement, and we have consulted the industry and other stakeholders on our proposals in those areas. These regulations will ensure continuity in the area of medicines and medical devices in a no-deal EU exit. This legislation does not prevent future changes that we may wish to make to ensure that the UK maintains an appropriate regulatory environment and remains one of the best places in the world for science and innovation.
The Department’s priorities have been to ensure that timely availability of safe and effective medicines and medical devices continues, while minimising disruption to patients and businesses, and ensuring that the UK regulator is able to continue to protect public health. That continues to be the case with this SI.
I will now give hon. Members some more detail about the arrangements set out in these regulations. I must emphasise that the proposed changes are technical in nature and do not represent any change to underlying policy. The instrument corrects minor drafting errors and seeks only to ensure that the original policy intention is delivered. Specifically, for medicines it includes the following. First, it clarifies that the requirements for a responsible person for import and wholesaler’s licences apply to hospitals importing human medicines for their own use directly from a country on an approved list.
Secondly, it clarifies that UK generic applications can rely on data supplied in relation to medicinal products whose EU marketing authorisations were cancelled pre-exit on grounds other than safety, quality and efficacy.
Thirdly, it introduces additional detail in relation to the process by which companies may make representations to the Commission on Human Medicines about decisions on rare disease medicines and paediatric matters.
Fourthly, it includes the provision of a temporary exemption, subject to specific conditions, from the obligation to maintain a UK pharmacovigilance system master file for companies whose UK authorisations are included in an EU file. That also includes the condition that information required by the licensing authority is provided by the marketing authorisation holders on request.
Fifthly, it includes the clarification that the temporary exemption as to the geographical location of an appropriately qualified person for pharmacovigilance applies to all the marketing authorisations and herbal registrations a company holds, whether granted before, on or after exit day. That is provided that they are covered by a single pharmacovigilance system in respect of which there is the same qualified person.
Finally, it includes the addition of the Republic of Korea to the approved list of countries with equivalent regulatory standards for the manufacturing of active substances on exit day, which reflects updates to the EU list since the no-deal SI was made.
For medical devices, some changes result from the amendments made by the EU to the underlying EU medical devices regulations via the recently published corrigendum since the no-deal SI was made. The changes are minor or technical corrections. Two further changes are inserted to ensure that products used mainly for cosmetic purposes are required to comply with common specifications and to require the information registered with the MHRA about medical devices to be updated by the manufacturer.
In conclusion, in the event of a no-deal exit, the regulations will minimise any impact on patients and business to ensure the timely availability of safe and effective medicines in the UK market by putting in place changes that will ensure that the UK’s legislation in these areas continues to function effectively from day one.
Julie Cooper (Burnley) (Lab)
It is a pleasure to serve under your chairmanship, Mr Bone. I thank the Minister for outlining the detailed changes in the new regulations and for underlining their importance.
The regulations certainly are important, given that we are only 24 days away from a potential no-deal Brexit. A parliamentary majority has three times voted to oppose the UK crashing out of the EU with no deal. Hon. Members, including me and others on the Opposition side of the House, did not do so on a whim or as part of some political game, but because all the evidence, including the Government’s impact assessment, makes it clear that leaving the European Union without a deal would be catastrophic for the UK in general.
Indeed, no area gives greater concern than the provision of medicines and medical devices. There can surely be no issue more important than ensuring that patients have timely access to the safest and most effective medicines and medical devices. Some 60% of prescription and over-the-counter medicines supplied in the UK come from or via the EU. It is vital for patients that that access is uninterrupted, so it is exceptionally worrying that the Government’s Yellowhammer papers warn that medical supplies could be delayed for up to six months.
The British Medical Association is worried about the provision of medicines and medical devices in the event of a no-deal Brexit. It has urged the Government to consider that:
“Many medicines, including life-saving agents for cancer diagnosis and therapy, cannot be stockpiled and for those that can, stockpiles could run out”;
that such delays can lead to fatalities; and that
“No responsible government should take that risk.”
Can the Minister respond to that point and outline some of the specific contingency plans that the Government have put in place for medical supplies that cannot be stockpiled, such as radioisotopes used in the treatment of cancer patients? What guarantees can she give that radioisotopes will continue to be imported into the UK without delay in the event of no deal? What further contingency steps has the NHS taken to ensure that radioisotopes will be supplied uninterrupted to hospitals across the UK?
Given the importance of the legislation, one has to wonder why it is not in place at this late hour. I have a sense of déjà vu because, as the Minister said, it was only in March that the Human Medicines (Amendment etc.) (EU Exit) Regulations 2019 and the Medical Devices (Amendment etc.) (EU Exit) Regulations 2019 were debated. At that time, my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) put on the record our grave concerns about the widespread and totally inappropriate use of secondary legislation for such important and potentially controversial matters. Secondary legislation is not fit for this purpose, not least because it does not provide the opportunity for detailed scrutiny.
Back in March, my hon. Friend the former shadow Minister warned that the process was not robust and that rushing through the legislation with inadequate scrutiny would lead to mistakes and omissions. Here we are today, required, according to the Government’s accompanying explanatory notes,
“to correct drafting defects and omissions in the Human Medicines (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/775) and the Medical Devices (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/791).”
My hon. Friend was absolutely right. The situation is extremely worrying. It begs the question of how many more omissions and defects in this regulation are yet to be revealed.
I know everyone on both sides of the House is keen to ensure that all aspects of retained EU law in relation to human medicines and medical devices operate effectively and are not deficient after exit day as a result of the UK’s withdrawal from the EU. The stakes are high, and this legislation will have far-reaching effects on the multi-billion-pound pharmaceutical industry, medical device companies, wholesalers and all those in the supply chain. If we do not retain a close working relationship with the countries of the EU that closely emulates the one that we have enjoyed for many years through the European Medicines Agency, opportunities for research, innovation and access will be restricted. Most importantly, this could have a devastating effect on our NHS, potentially affecting the lives of millions of patients.
We support the Government’s desire to give the UK protection in all these areas, so we will not oppose this SI, but we want to put on the record our grave concerns about the way they have gone about this. We are appalled by the Government’s late attention to this most serious of matters. The Government have known since 2016 that there were risks, and for much of the past three years they have taken no action. We are horrified by the shambolic process that has led us at this late stage to be addressing omissions.
These regulations go beyond technical corrections and the correction of key acronyms; they clearly make substantive amendments and raise more questions than they answer. Let us look at some of the specific corrections. I hope that the Minister can clarify some important points.
There is provision here for a mechanism for companies affected by proposed decisions of the licensing authority in relation to orphan medicines to have those decisions reviewed by the Commission on Human Medicines. The question is how long that process will take. Where the criteria are satisfied, how long will it take for supplies to be sanctioned? How will timely supplies be guaranteed? What protections will be in place to protect patients in the UK from fake medicines?
In relation to the treatment of rare diseases, can the Minister clarify what provision she has made to support UK patients who rely on the European Research Network for the diagnosis and treatment of their rare diseases, if a no-deal Brexit leads to our expulsion from the network? What will the Government do to ensure that the UK can continue to participate in EU-wide clinical trials in the event of a no-deal Brexit?
The changes to the regulations allow for the introduction of a transitional period relating to the system for pharmacovigilance. Effective pharmacovigilance must be at the heart of the new arrangements, ensuring the health and safety of patients and, crucially, increasing the benefits of medicines. I understand that businesses will need time to comply with the new regulations, but what protections will be in place for patient safety during this interim period?
What estimate has the Minister made of the cost to the industry of establishing the presence of a qualified person responsible for pharmacovigilance for those companies that do not already have a UK presence? That will inevitably involve costs for establishing premises, familiarisation and administration to ensure compliance with the new legal requirements. Does she intend to ensure that the Government meet those costs? While answering that point, perhaps she could also take this opportunity to advise on the planned provision for extra resources that will be needed by the Medicines and Healthcare Products Regulatory Agency to enable it to carry out its extensive new responsibilities.
The new regulations deal with the very important matter of medicines for children. These are not mere technical changes. The regulations introduce paediatric investigation plans. Can the Minister explain exactly what these will entail and how long the process will take? Will it lead to delays in supplying medicines and medical devices? Will additional training for staff be required? What extra resources will the process require and where are those resources coming from? Will it mean any delay in the development or availability of medicines?
The Chair
Order. I am sorry to interrupt the hon. Lady. I know that this room is not ideal for a Committee, but officials are not supposed to pass notes directly to a Minister.
Julie Cooper
These points all prompt a question: why are these changes not accompanied by a new impact assessment? Our constituents will be listening to this debate and fearing that these changes will lead to poor or delayed supplies. They will be worried, and they are right to be. For some people this will be a matter of life or death. This is not “Project Fear”; this is a genuine fear that patients will be put at risk. The BMA has said:
“Disruption resulting from the UK crashing out of the EU without a deal on 1 November will cause ‘irreparable harm’ to the NHS and catastrophically exacerbate the challenges posed by a winter pressures crisis.”
It went on to say:
“We are not ‘the doubters, the doomsters or the gloomsters’ the Prime Minister described on the steps of Downing Street. Nor is this ‘Project Fear’. We are doctors who day in and day out provide care for patients in the face of challenges that will only be made worse by a ‘no deal’ Brexit in the critical winter months following 31st October. We have a duty to speak out about matters that can harm patient care and we will continue to highlight the dangers Brexit presents in the weeks and months ahead.”
We will not oppose these regulations today, but we will record our grave concerns and seek answers to the specific questions that have been put. I agree with the medical professionals, and for the sake of the health and wellbeing of the citizens of the UK I urge the Minister to join me in heeding their warning, and I urge the Prime Minister to avoid a no-deal Brexit and instead work on constructive transitional arrangements in the context of an organised exit.
Ms Dorries
I will not comment on the hon. Lady’s opening comments about a no-deal exit, because obviously we are where we are, we all stood on a manifesto to honour the result of the referendum, and it is not my position to comment on a no-deal exit.
I will answer the hon. Lady’s more specific points. It is important to make the point that at any one time in the UK there is a shortage of over a hundred medicines, and that has absolutely nothing to do with Brexit, as I am sure she knows. It can be to do with fires in factories, or a downturn in supply from abroad. At any one time there are shortages, and any shortages today have nothing to do with Brexit.
Julie Cooper
I absolutely agree with what the Minister has just said. I have personal experience of pharmaceutical provision in the UK and I know that what she has just said is true. However, does she not agree that exiting the EU with no deal will exacerbate existing problems?
Ms Dorries
The hon. Lady will not be surprised to know that I do not agree, because I believe—I cannot guarantee, but I believe—that all efforts are being made and all arrangements are in place to ensure a supply of drugs into the UK. Under just-in-time arrangements, drug companies would have a stockpile of a week’s supply, but now all drug companies have stockpiled six weeks’ worth of medications to be used in the UK, and I do not envisage a shortage of any drug that is required.[Official Report, 14 October 2019, Vol. 666, c. 1MC.] Obviously, I cannot guarantee that—that cannot be done—but every effort has been made by every Department and every official and in every negotiation with drug suppliers and pharmaceutical companies to ensure that they have a six-week supply ready for a no-deal Brexit. We do not see any problem with that.
The hon. Lady referred to drugs with short shelf lives, which cannot be stockpiled. In that instance, arrangements have been made for those drugs to be air freighted into the UK. She mentioned isotopes in particular. They cannot be stockpiled, but they will be airlifted into the UK, so we will see absolutely no shortage of isotopes either. I am sure that we can provide further information on that, but I hope that, now that hon. Members are aware that drugs that have no shelf life will be airlifted, we will not hear those stories. What worries me, and what worries many people, is the public perception when they hear stories that there will be no isotopes because they cannot be stockpiled. We must take our responsibilities very seriously here.
Julie Cooper
I can assure the Minister that I take my responsibilities in this very seriously. I know that many hon. Members here do too—including her, I am sure. But this is not just a case of political to-ing and fro-ing, trying to create a sense of panic in the community about this. When the medical professions are leading the voices of concern, surely the Government should be listening to their worries.
Ms Dorries
I assure the hon. Lady that we do, and I hope that they will see today’s debate and be reassured that there will be no shortage of drugs with short shelf lives, because they can be airlifted in.
The hon. Lady also asked how we can be confident that there are no more mistakes. I think she is referring to the grammatical errors and various technical errors that occurred in the previous SI, which was 700 pages long and very technical in its content. Those issues were not identified at the time by any party or any individual, but they have now been identified. The amendments that this new SI makes to the previous SI are minimal and include updates to the underlying EU regulations that have been brought forward since the original SI was finalised.
This particular SI has also undergone legal checking and been scrutinised by the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee, and we are confident that it will ensure that these regulations operate effectively after exit day. If the hon. Lady does not feel that she has had enough detail, we will provide anything in writing as a back-up.
The hon. Lady asked what paediatric investigation plans mean. This SI does not introduce paediatric investigation plans; they are already required by EU legislation. The previous no-deal SI simply transferred functions relating to those plans from the EU to the MHRA. She also asked why there was no impact assessment. There are no new policies in this SI, so there is no need for a further impact assessment. The MHRA ran a four-week public consultation and published an impact assessment on the previous SI. This SI ensures that the policies implemented are in line with the consultation and the responses to it.
On the protection of patients, the hon. Lady asked about an interim period relating to a transitional period for a pharmacovigilance system. The new proposed transitional period is for the pharmacovigilance system master file, which will be held in the UK. Companies will be required to operate a pharmacovigilance system from exit day. The master file is in the description of the pharmacovigilance system and the amending SI, which includes statutory contributions associated with a temporary exemption, to ensure supervisory capability of the companies, the QPPV and the MHRA.[Official Report, 14 October 2019, Vol. 666, c. 1MC.] I think that she also mentioned the safety aspects. Each pharmaceutical company will be required to have safety staff in the UK in line with this.
The hon. Lady asked whether new and innovative medicines would be delayed in the UK under a no-deal scenario. The MHRA intends to provide free scientific advice for UK-based small and medium-sized enterprises and has introduced a new targeted assessment procedure to authorise medicines as soon as possible following an EMA-positive opinion. In addition, it will often accelerate an assessment route to enable licensing more quickly than in the EU. The MHRA would monitor application volumes in a no-deal scenario.
I thank the hon. Lady for her valuable contribution to the debate. As promised, we will get back to her with further information in writing if she requires it. I am confident, as was the case in March, that we have a shared intention to protect and improve the safety of patients using medicines and medical devices, while enabling their access to the most innovative treatments.
Our regulator, the Medicines and Healthcare Products Regulatory Agency, has more than 30 years’ experience as a leading regulator in the EU. That expertise and experience is globally recognised and respected, and we want to ensure that continues, to the benefit of all UK patients. It is with that at the forefront of our minds that the UK’s plans for the regulation of medicines and medical devices in a no-deal scenario have been developed.
Question put and agreed to.