Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
My Lords, you know the drill but, for the record, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as possible and resume after 10 minutes.
Merchant Shipping (Standards of Training, Certification and Watchkeeping) Regulations 2022
(1 year, 5 months ago)
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Baroness Vere of Norbiton
That the Grand Committee do consider the Merchant Shipping (Standards of Training, Certification and Watchkeeping) Regulations 2022.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)
My Lords, these draft regulations implement amendments to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978 into law. They update the training requirements for seafarers on specific types of ship and make further provision for the approval of training providers, including express powers to suspend or cancel approvals, and to make provision to allow the Government to charge for those approvals.
The STCW amendments came into force internationally on 1 January 2017 and 1 July 2018, and the draft regulations were laid before your Lordships’ House on 31 October 2022. They revoke and replace the current regulations implementing the STCW convention, the Merchant Shipping (Standards of Training, Certification and Watchkeeping) Regulations 2015. As such, they restate existing regulatory provision in this area, and make new provision.
The International Maritime Organization adopted the STCW convention in 1978; it came into force internationally in 1984. The IMO is a specialised agency of the United Nations and is responsible for facilitating the development of international rules for shipping. The STCW convention and code—an integral part of the convention—contain standards of competence for seafarers internationally. Because human error is recognised as the cause of a large percentage of maritime casualties and pollution incidents, the STCW convention addresses this problem by providing minimum standards of knowledge, experience and professional competence for seafarers.
The United Kingdom is a member of the IMO and a signatory to the STCW convention, to which there are a further 164 parties, estimated to represent the vast majority of global shipping. Being a party to the convention allows the UK to issue internationally recognised seafarer qualifications, which means that UK seafarers can work on ships that operate internationally. Since its entry into force in 1984, there have been a number of revisions to the STCW convention. These latest amendments came into force on 1 January 2017 and 1 July 2018. As a party to the convention, the UK is required to implement these amendments into UK law.
The STCW convention amendments being implemented in the draft regulations relate to training for seafarers serving on ships subject to the International Code of Safety for Ships Using Gases or Other Low-flashpoint Fuels—the IGF code—and seafarers working on passenger ships. These specialised ships require seafarers to have additional training and certification to demonstrate competency appropriate to the responsibilities undertaken by those seafarers on board. This additional training will allow United Kingdom seafarers to take up employment on these ships.
These updated and improved regulations will enhance the employment opportunities for UK seafarers by ensuring a modern training and certification structure that reflects the current and future needs of shipping. This includes: clarifying the definition of “seafarer” to ensure that all persons, including non-employed crew, engaged in the operation or navigation of a pleasure vessel of 24 metres in length or over—or 80 gross tonnes or over—are subject to the regulations; clarifying the position of the Secretary of State in relation to the approval of training providers, ensuring that approvals may be suspended or cancelled where appropriate to do so by providing express provision; introducing a charge for the approval of training providers to ensure that the MCA can approve and monitor training providers who deliver the training required by the STCW convention, in line with the principle of public authorities recovering money spent on services, which would otherwise fall to the taxpayer; and, finally, providing powers to approve equivalents and alternative certification, as permitted by the STCW convention.
Enhancing safety through improving the regulatory regime for seafarers’ training will complement the department’s nine-point plan to support seafarers and introduce new powers to protect maritime workers. Furthermore, these regulations allow the UK to grow its high-quality seafarer training brand worldwide, at the same time as supporting the Government’s Maritime 2050 strategy to support quality training initiatives that raise the standards for seafarers across the globe.
The Government fully supported the development of the STCW convention amendments in the IMO, and the UK shipping industry was consulted throughout their development to ensure that they are modern and fit for purpose. The Government’s proposals for implementing the convention amendments and additional regulatory provision by way of this statutory instrument were the subject of an eight-week public consultation. The MCA has refined the proposals based on the comments received, but no substantive changes have been required.
These regulations will be made under the safety powers conferred by the Merchant Shipping Act 1995, as well as prevention of pollution powers contained in the Merchant Shipping (Prevention of Pollution) (Law of the Sea Convention) Order 1996. The draft regulations also make amendments to the Merchant Shipping (Fees) Regulations 2018. This is the part that allows the MCA to charge for the approval of training providers. The draft regulations are subject to the enhanced scrutiny procedures under the European Union (Withdrawal) Act 2018, as they revoke the 2015 STCW regulations, which were made under Section 2(2) of the European Communities Act 1972. The regulations do not themselves implement any EU obligations.
These draft regulations implement amendments to the STCW convention for seafarers and improve the regulatory regime by raising standards of training and education. The draft regulations will continue to allow the United Kingdom to maintain its role as a world leader in seafarer training and education. I commend these regulations to the Committee and beg to move.
Lord Greenway (CB)
My Lords, I thank the Minister for outlining these new regulations that, as she has explained, implement amendments made to the STCW convention. I think we were all taken aback by the size of these regulations; in fact, if I took time to read right through them, it might take almost as long as these regulations have taken to reach this House. We are playing catch up again, but I am pleased that we are now getting on with it, and I have no real queries with the regulations.
I see that pleasure craft are included, and I think there are limits. I cannot remember what the length and tonnage is for pleasure craft, and I have not had the time to work it out, but could the Minister tell me if it brings the Thames Clippers operating on the Thames here into the remit of these regulations?
Lord Berkeley (Lab)
My Lords, I also congratulate the Minister and her officials. I think I should also congratulate the MCA, which has probably done most of the work and produced some amazing documentation; I think we are all very grateful to it. As the noble Lord, Lord Greenway, says, it has taken a lot of reading and I will not go through many of these things, but I have a couple of questions for the Minister.
First, concerning the heading “Application” in Part 2, the noble Lord, Lord Greenway, asked about the Thames Clippers. I saw that the minimum weight was 80 gross tonnes and the length 24 metres. Which ships on the Thames does this apply to, as he asked? We debated life jackets on ships some time ago and I trust that has all been sorted out.
I have another question on this section. We see that it does not apply to foreign- registered vessels, which we know, but in Regulation 5(2)(e) we get an exclusion for
“wooden ships of primitive build”.
Can the Minister say what a wooden ship of primitive build is? Does it have to be over or under 24 metres? Is it powered by sail or motor, and where does it go? The only criterion seems to be that it should have a UK flag, if it ever had one. I do not know about that, but I suppose my concern is that these regulations go into great detail. I notice that only 25 UK-registered ships are owned by small businesses, and you can understand why: if they have to plough through all this and comply with it, the answer is they probably will not. That is quite a worry.
I am not sure how much of these provisions will apply to foreign-registered ships in UK waters. Does anybody check on those? Do the other ports of registry for ships have similar requirements to this—let us hope they do—or will we have one law for the British ones and one law for the rest of the world? As the Minister said, we want to encourage UK-registered ships but if this is the only country of registration that requires 200 pages of documents to be gone through, that is hardly an incentive.
Finally, I have often raised the question of enforcement before on different things. The Minister mentioned human error in her introduction. There have been a couple of interesting accidents with ships this summer, including the MV “Alfred”, which seemed to hit an island in Orkney on 5 July. One has to question how, in broad daylight, that happened with safe manning. I am sure we will see the results of an inquiry into that. I hope that in implementing and enforcing these regulations, the MCA will be given enough staff and resources to do it properly—it will be largely down to them—so that we have a good reputation for following these regulations, rather than just publishing more bits of paper.
Lord Jones (Lab)
My Lords, I too thank the noble Baroness for her helpful introduction and exclaim, as others have, at the huge challenge that these pages offer to those who have little or no expertise on what is clearly a vital matter. This is a doorstep of regulations, Explanatory Notes and, shall we say, additional pages. Taking into account the principle that the Executive are to be questioned and held to account, which in this instance is virtually impossible by what might be called a Back-Bencher, I want to ask the Minister about the importance of training, which is now a priority for all Governments in succession.
I am looking at page 37 and its references to nautical colleges. Might the Minister say who reports to her department regarding assessment and inspection there? Does she know, or is her department able to say, how many nautical colleges there are? Is it possible for her to say what the number of students is in the average nautical college? Where might they be located?
On that basis of attempting, in principle, to question the Minister, I say that time is of the essence so I shall sit down.
Baroness Randerson (LD)
My Lords, first, I thank the Minister for her introduction. I declare an interest as the chancellor of Cardiff University, which runs courses on maritime law, shipping, logistics management and transport education—all pretty intrinsic to the topic that we are looking at this afternoon. As has been said, these regulations relate to the updating of the STCW convention, which was the first international treaty to establish basic requirements and qualification standards for seafarers. However, we have come a long way since then, so the delay in this latest update is, as the noble Lord, Lord Greenway, said earlier, unfortunate.
The regulations update previous regulations; they are therefore important in enabling UK ships to trade and UK seafarers to work internationally. They are welcome because they broaden the scope of the 2015 regulations and, as has been said, now include pleasure vessels. Does this mean that the regulations will include people crewing their friends’ yachts, for example? If so, how large does the yacht have to be before it comes into scope? It has always surprised me that so little experience is required before people put to sea in leisure boats of one sort or another, because we require so much of individuals before they are allowed to drive on the roads. We require very little of people before they set off towards the horizon on what is basically a road that moves up and down unpredictably. However, being serious about this, if these regulations start to extend to new categories of people, they will of course have an impact on small businesses that build, sell and maintain boats.
There are very detailed specifications here for training providers, so my question for the Minister is this: where precisely does all this detail come from? Obviously, it comes via the IMO and is set out under the auspices of the MCA, but how exactly is it aligned internationally? Is it identical from one country to another, or are we able to vary our standards and specifications? In the past, we would have aligned ourselves with the EU rules, but of course that no longer applies, so how much freedom do we have to interpret the standards?
Paragraph 12 of the Explanatory Memorandum refers to a specific impact for the instrument of “£1.6 million per year”, but there is absolutely no detail as to how that figure was reached. What does it mean? How did those who write the EM get to that figure, because there has been no full impact assessment on the grounds that the instrument does not really affect small business? I would be interested to know the calculation, or at least the basis for the calculation, there.
Finally, I take the opportunity to thank the Minister for a copy of her letter to the noble Lord, Lord Hodgson of Astley Abbotts, the chair of the Secondary Legislation Scrutiny Committee. That sets out in detail, item by item, the overdue maritime legislation. I congratulate the Minister on making progress with this. It does not look good but it looks a great deal better than it did a few months ago, so clearly a lot of hard work has gone into it. I have a couple of questions about the ones we have not dealt with yet. For speed, I will refer to the itemised numbers on the Minister’s list. We are told that items 8 and 16 are expected in March next year and item 9 by mid-year—let us be generous and call that July—but items 11, 12, 13, 18, 19 and 20 all just say “2023”. I would be grateful if the Minister could give us a little more detail. Do we have a whole calendar year still to wait for those six important pieces of legislation that are already seriously overdue, or can we realistically expect them to come through mid-year? What will the Government do to ensure that we keep up with maritime legislation more efficiently in future?
Lord Tunnicliffe (Lab)
My Lords, I too thank the Minister for introducing these regulations. The Government are right to make further provision for the approval of training providers, including powers to remove that approval and to make provision to allow the Government to charge for approvals.
Across the world, 90% of global trade is made possible by the maritime sector, which is why it is so important that it is properly regulated. Highly skilled seafarers are incredibly important to the sector, and anybody with responsibility for safety at sea must be trained. I therefore welcome these amendments to the 1978 International Convention on Standards of Training, Certification and Watchkeeping for Seafarers.
However, I would appreciate clarification on three minor points. First—I think this question has already been asked—the Explanatory Memorandum says:
“The impact on business, charities or voluntary bodies is estimated to be £1.6 million”.
Can the Minister provide a breakdown of this? Secondly, has the department collected information on how many other parties to the 1978 convention have implemented these amendments? Finally, just yesterday the department published new merchant shipping regulations. Should the House expect further merchant shipping legislation next year?
One or two speakers have commented on the size and thickness of the document. I compare it with the similar regulations for an airline pilot; they are substantially the same volume. In his career a commercial pilot is required to understand them all and, essentially, absorb the basic principles. This is what keeps aviation safe, and I am sure this is what will keep seafarers safe. The hazards are very similar. Aeroplanes are in the air, and therefore are intrinsically dangerous because they might meet the ground in an unscheduled way, but they can usually avoid difficult situations by virtue of their speed. Ships are much more vulnerable, in a separate way, being at sea and subject to the weather and the elements and not having the provision to run away from trouble in nearly the same way as aircraft. The responsibilities that the senior people on ships have, particularly with the enormous numbers of passengers that some ships carry, are about right.
I also heard some words which might be taken to say that somehow these standards might be reduced to facilitate more ships accepting regulation under a UK flag. That would be totally wrong. I have not read them all, but I read the process that created them and it seems that they are the right standards and that we should not move from them. They will make shipping safer, and that is an entirely good thing.
Baroness Vere of Norbiton (Con)
My Lords, I am grateful for such a fine turnout in this short debate on maritime safety standards. I will, as ever, try to answer as many questions as possible and will write with further information in due course. I will start with the comment by the noble Lord, Lord Jones, about the size of the regulations because he is right: they are a weighty tome. The reason for this is that in our discussions with the industry it was felt that revoking the 2015 regulations and putting them all in one place would be the better option rather than having some sort of supplementary regulations to the originals, which, quite frankly, may have been confusing. As the noble Lord, Lord Tunnicliffe, said, it is expected that people will read and understand these regulations, and having them all in one place is beneficial. Many of the regulations will not have changed. Seafarers also have the support of merchant shipping notices, which come from the MCA, and of their professional associations in understanding the applicability of the regulations to what they do.
A second question raised by the noble Lord, Lord Jones, was about the number of nautical colleges. There are 160 UK approved training providers and nine nautical colleges: Plymouth, Southampton, South Shields, Fleetwood, Lowestoft, Glasgow, Portishead, Shetland, and Grimsby. They take about 1,500 people a year, so this is quite a significant industry and of great benefit to the UK maritime sector. In addition to the colleges and the approved training providers, tens of thousands of safety courses go on all the time.
On the applicability of the regulations, one of the things that might be slightly missing from the discussion, and perhaps I did not explain it well in my opening speech, is that the vessels need to be seagoing—so, of course, Thames Clippers do not count, unless they have got lost, but they have high standards and I am not concerned about the level of safety on Thames Clippers. The regulations apply to pleasure vessels. They were not included in 2015 regulations, which is one of the things that these regulations fix, as is right.
I will have to write to noble Lords about whether you can crew your mate’s 24-metre pleasure vessel. I do not have any friends with a 24-metre pleasure vessel. We will have to write about whether having ad hoc people on board to help out is okay or whether they too should have the right training.
I turn to the international nature of these regulations and maritime in general; this picks up point raised by the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Randerson. Shipping it is so amazingly global. It does not make sense for one country to set standards that are different from those of another country. The UK is very much at the forefront of improving safety and welfare for people at sea. That is why we speak to our colleagues in the IMO to make sure that these standards are appropriate.
Noble Lords may have noticed that we have included ambulatory references in the regulations. This is now becoming fairly commonplace when dealing with IMO-type regulations. It does not mean a lack of scrutiny; it means that we engage with the industry and reach agreement with the IMO to improve standards over time. I am afraid I do not have the number for the other countries that have already put this into place, but I will endeavour to find out. I will come on to the impact on the UK of the slight delay in getting these in place.
Lord Jones (Lab)
All credit to the department for furnishing this Committee with that magnificent detail.
Baroness Vere of Norbiton (Con)
The department is grateful, as is the MCA. I look forward to the next debate on maritime regulations.
Social Security (Class 2 National Insurance Contributions Increase of Threshold) Regulations 2022
(1 year, 5 months ago)
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Baroness Penn
That the Grand Committee do consider the Social Security (Class 2 National Insurance Contributions Increase of Threshold) Regulations 2022.
Relevant document: 19th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, in the Autumn Statement, the Government set out their prioritisation for taxation to be fair by following two broad principles: first, that we ask those with more to contribute more; and, secondly, that we avoid the tax rises that most damage business.
Noble Lords will remember that the National Insurance Contributions (Increase of Thresholds) Act 2022 increased the point at which class 1 and class 4 NICs are paid to align with the personal allowance for income tax. As a result of that legislation, almost 30 million working people are better off. We are here today to discuss the final element of the Government’s ambition to align national insurance contribution thresholds with the personal allowance for income tax.
I note that, in its 19th report, the Secondary Legislation Scrutiny Committee raised these regulations as an instrument of interest. The regulations introduce a new threshold within class 2 NICs from which self-employed individuals start to pay class 2 NICs. This will be known as the lower profits threshold. Class 2 NICs will now be due only if profits exceed the new lower profits threshold, set at £11,908 for the 2022-23 tax year.
The new lower profits threshold will be aligned with the personal allowance. However, the threshold is being set at £11,908 for 2022-23 to reflect the fact that personal NIC thresholds were increased from July this year, meaning that individuals will benefit from an increased threshold for nine months of the tax year. For 2023-24, the self-employed thresholds will be set at £12,570. This means that no one will pay a penny of income tax or national insurance contributions on their first £12,570 of income from 2023-24 onwards, allowing people to keep more of what they earn.
However, this measure goes further. Class 2 NICs are the mechanism by which the self-employed become entitled to certain contributory benefits, such as the state pension and statutory maternity pay. To ensure that individuals do not lose access to their benefit entitlement, the existing small profits threshold will be maintained as the point at which the self-employed gain access to certain contributory benefits. This means that individuals will benefit from the increased threshold for paying class 2 NICs without losing their entitlement to contributory benefits.
This measure will apply retrospectively from the start of the 2022-23 tax year, in line with the provisions made in the parent Act. This means there will be no delay in this measure benefiting around 500,000 self-employed individuals, saving them £163.80 a year. Changes will be delivered via the annual self-assessment process for the vast majority of customers, following the end of the tax year.
These regulations fulfil the Government’s obligation to increase the point at which the self-employed pay class 2 NICs. Importantly, they ensure that thresholds are aligned and our tax code is simplified. I beg to move.
Lord Davies of Brixton (Lab)
My Lords, as a supporter and fan of national insurance, I did not want these regulations to pass unnoted. I am a believer in the national insurance system—I guess there are not many of us left—where people pay contributions and that provides entitlement to national insurance benefits.
It has been understood, from the beginning, that there are people in employment and people who are self-employed. For practical reasons, different sets of rules have to apply to each group of workers. Nevertheless, the objective should always be neutrality in the financial impact, otherwise it is bound to give rise to issues of financial arbitrage regarding being employed or self-employed. That is all well understood. I will avoid going off down the IR35 track; there will be plenty of other opportunities to pursue that.
On the face of it—I would be interested in the Minister’s views—this change might be seen as a move towards reducing inequality between the employed and self-employed. However, in practice, it increases the difference. The tell is the fact that there is a cost, in a normal year, of £100 million. In the context of the figures we have seen in recent Budgets, that is not an enormous sum, but it suggests that this is a move away from neutrality and that it further increases the advantages that people perceive in being self-employed as opposed to being employed, with all the problems that flow from that. The background to this is clearly the extent of the acknowledged problem of fake self-employment for financial reasons. Perhaps the Minister would indicate, in broad terms, quite how this change fits in with what I hope is an understanding that there should not be excessive financial advantages in being self-employed.
I heard what the Minister said about the changes to entitlement to benefits. I emphasise that, in achieving neutrality between employed and self-employed contributions, there should equally be neutrality between the benefits paid to people who have paid the different types of contribution.
Lord Tunnicliffe (Lab)
My Lords, I welcome the Minister’s introduction of these technical amendments by His Majesty’s Revenue & Customs. As she outlined, the practical impact is to implement the self-employment element of the Government’s commitment to align the trigger points for national insurance contributions with the income tax personal allowance. The SI will also ensure that individuals with profits at or above the existing small profits threshold but below the lower profits threshold are treated as if they have paid class 2 NICs. This will ensure that those individuals continue to be eligible for the contributory benefits, which is hugely important. We will not oppose the regulations, as they provide some much-needed help for self-employed people in the face of the current inflation crisis and probable recession.
Baroness Penn (Con)
My Lords, I thank both noble Lords for their contributions to this brief debate. We discussed some of these issues when the parent Act was passed. We also discussed issues around the national insurance system with the introduction and then removal of the health and care levy.
In response to the noble Lord, Lord Davies of Brixton, the intention behind this change to the national insurance system, which I think reflects a longer-term ambition in the manifesto to align the income tax threshold and the NICs threshold, and the reason the measure was brought forward last spring, was to provide people with more money back in their pockets at a time when the cost of living was rising significantly. The most effective option to do this, particularly targeting it at lower-paid, self-employed people or workers, was an uplift in the NICs thresholds. Although it may not deliver on the wider ambition to have greater equality between NICs contributions from the employed and self-employed, none the less it had a very good policy rationale, one that the Government were keen to deliver on.
On that longer-term ambition, perhaps I should not have expressed it in that way because I do not think the Government have any intention at the moment to change how employed and self-employed NICs are treated. The raising of the threshold was a measure focused on helping people with the cost of living. It was seen to be an effective way to target resources at those further down the income scale. This SI seeks to complete the process that started with the Act, but we had to take the powers to do this last element because it was a bit more complicated and we needed a bit more time to work it through. I hope that answers the noble Lord’s question.
Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 3) Regulations 2022
(1 year, 5 months ago)
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Baroness Penn
That the Grand Committee do consider the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 3) Regulations 2022.
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, these regulations provide the legislative framework for tackling money laundering and terrorist financing and set out various measures that businesses must take to protect the UK from illicit financial flows. Under these regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries. These are countries identified as having strategic deficiencies in their anti-money laundering and counterterrorist financing regimes that could pose a significant threat to the UK’s financial system.
This statutory instrument amends the money laundering regulations to update the UK’s list of high-risk third countries. It adds the Democratic Republic of the Congo, Mozambique and Tanzania to the list and removes Nicaragua and Pakistan. This is to mirror lists published by the Financial Action Task Force, the global standard setter for anti-money laundering and counterterrorist financing.
This is the sixth time we have updated the UK list to respond to the evolving risks from third countries. This update ensures that the UK remains at the forefront of global standards on anti-money laundering and counterterrorist financing. In 2018, the Financial Action Task Force assessed that the UK has one of the toughest anti-money laundering regimes in the world. The UK was a founding member of this international body, and we continue to work closely and align with international partners such as the G7 to drive improvements in anti-money laundering and counterterrorist financing systems globally.
FATF has identified that the Democratic Republic of the Congo, Mozambique and Tanzania must each make a range of domestic reforms to address their non-compliance with FATF standards. These include improving their understanding of risk, increasing the effectiveness of their domestic supervision, supporting money laundering investigations and prosecutions and more effective implementation of sanctions.
FATF found that Pakistan and Nicaragua have made the necessary domestic reforms to improve their compliance with FATF standards, which have been confirmed through on-site visits to both countries. In its October public statement, FATF expressed concern at the potential misapplication of FATF standards by Nicaragua, resulting in the suppression of Nicaragua’s non-profit sector. Therefore, although Nicaragua has been removed from FATF’s list, FATF will continue to monitor this issue to ensure that Nicaragua’s oversight of the non-profit sector is risk-based and in line with FATF standards.
Lastly, this high-risk third country list is one of many mechanisms that the Government have to clamp down on illicit financial flows from overseas threats. We will continue to use other mechanisms available to respond to wider threats from other jurisdictions, including applying financial sanctions as necessary.
This amendment to the money laundering regulations will enable them to continue to work as effectively as possible to protect the UK financial system. It is crucial to protect UK businesses and the financial system from money launderers and terrorist financers. I therefore hope that noble Lords will join me in supporting these regulations. I beg to move.
Lord Tunnicliffe (Lab)
My Lords, I am grateful to the Minister for introducing the latest iteration of the Financial Action Task Force’s list of high-risk countries. As she outlined, this is a routine piece of secondary legislation. These Benches are pleased to support its passage.
I want to pick up on a couple of outstanding questions from the Commons debate on this instrument, which took place on Monday. The Minister’s colleague, Andrew Griffith, noted that the
“removal of Nicaragua and Pakistan does not bring to an end any monitoring of those countries, which are covered by a much broader set of arrangements.”—[Official Report, Commons, Delegated Legislation Committee, 5/12/22; col. 6.]
He talked of an “ongoing duty of care” to fight money laundering but did not go into any detail about what that looks like. My understanding is that the duty of care has often been found wanting. Does the Minister agree with that assessment? If so, what work is under way to strengthen the current arrangements? I appreciate that she may not be able to answer that today, so I would be happy for her to write with further details.
My colleague, Tulip Siddiq, raised the Government’s plans to make future versions of these statutory instruments subject to the negative procedure. We appreciate that parliamentary time is finite and that there is an ever-growing body of secondary legislation for us to consider, in part because the Government keep presenting skeleton Bills full of broad delegated powers. The Commons Minister committed to writing with details of how the Government will ensure that Parliament gets the information it needs to discharge its rightful job of scrutinising such decisions. Will the Minister see that such information is passed on to interested parties in this House?
We came across this problem before with the end of EU laws coming to some extent almost between affirmative and negative regulations. That was in the middle of the pandemic, so it got lost there, but there is a need for something more consultative than the negative procedure. The problem with negative procedures is that they are almost invisible. Unless the Secondary Legislation Scrutiny Committee picks up on them, it can be difficult to realise that the instruments are there. If the Government are to introduce a propensity to use negative procedures more, and we can obviously see some sense in that, I hope they will make sure that they have a rethink about how such negative instruments are brought in front of this House in particular.
Finally, I note that Gibraltar continues to feature on the list, despite assurances that the authorities there are making good progress on implementing FATF’s recommendation. Is the Minister able to offer any further comments on that?
Baroness Penn (Con)
I thank the noble Lord for his questions. I can probably expand on my answers in writing, if needs be. On his point about the procedure used for future updates to this list and parliamentary scrutiny of that, I will certainly ensure that any response from my colleague—I believe the EST took this debate—is copied to Members of this House and answers those points.
In this area, future updates to the list will continue to mirror the findings of FATF as an international standards-setter where it has identified countries as having weak anti-money laundering controls. FATF’s decision-making process is underpinned by a robust technical methodology and has a high level of scrutiny of the multilateral process, which the UK is involved in at all stages. We are committed to continue to provide written updates to Parliament on the outcomes of each FATF plenary, as these inform the list.
On this measure, we consider that the procedural change will have quite limited impact, given Parliament’s full support on all updates to the list so far. We can consider the attendance at this debate as perhaps an indicator of that, but I take the point that updates may not always be uncontroversial. Ensuring that Parliament is kept up to date with the outcome of FATF meetings, from which we derive our list, might be a good way to ensure that parliamentarians feel that they are kept abreast of the changes that might then flow through the negative statutory instrument procedure.
On Nicaragua and Pakistan having been removed from the high-risk third country list and the ongoing monitoring in these areas, I mentioned that the Government have concerns about allegations of misuse of AML powers by Nicaragua. We have agreed that Nicaragua should report in February to FATF members on how it is applying anti-money laundering powers proportionately to charities and civil society organisations. We will consider that report and next steps at the time.
In relation to both countries, the list of high-risk third countries is only one of many measures used to combat illicit finance. There are many other measures available to the Government. I am not sure that that completely answers the noble Lord’s point, so I will make sure I read Hansard and write with any further points that I should make.
Restriction of Hazardous Substances in Electrical and Electronic Equipment (Exemptions) (Fees) Regulations 2022
(1 year, 5 months ago)
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Lord Benyon
That the Grand Committee do consider the Restriction of Hazardous Substances in Electrical and Electronic Equipment (Exemptions) (Fees) Regulations 2022.
Relevant document: 18th Report of the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, the regulations were laid before the House on 18 October. The Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Regulations 2012, also known as the ROHS regulations, restrict the use of 10 substances that were commonly used in the manufacture of electrical and electronic equipment but which have now been proven to cause harm to the environment and/or human health. This is particularly the case when products become waste, with the potential for these harmful substances to be released into the environment or the workplace of those working in the waste treatment sector.
Businesses can apply for exemptions from the ROHS regulations if they need to use any of the restricted substances above the permitted threshold limits in order for products to function safely and reliably. Any such exemptions apply to the product rather than to the specific organisation that applied for the exemption. When the United Kingdom was a member of the European Union, applications for exemptions and the renewal of exemptions were submitted to and considered by the European Commission using delegated powers and the ROHS directive. On leaving the EU, this function was transferred to the Secretary of State by the Hazardous Substances and Packaging (Legislative Functions and Amendment) (EU Exit) Regulations 2020, bringing with it new freedoms to determine the outcome of applications as they apply to Great Britain.
The instrument makes provisions to transfer the costs of undertaking the necessary technical appraisal and public consultations associated with it from the taxpayer to business. This approach is entirely in keeping with the requirements of the Government’s Managing Public Money principles. The charge is set on a cost-recovery basis. Such an approach is common practice in circumstances in which industry is required to apply for regulations, authorisation and licensing to comply with regulatory requirements.
The fee will be £39,721 per application and will be payable on exemption applications received from 6 April 2023. Most of those costs reflect the cost to the Government in contracting with technical specialists to undertake the technical appraisal of each application. It is important that a full technical assessment is made when assessing applications to use restricted substances above the permitted level that could cause significant harm to human health and the environment. That technical assessment will, crucially, include an in-depth analysis of any potential less harmful substitutes that could be used to enable the Secretary of State to make an objective determination on each application received. Applications for exemptions are typically submitted by industry rather than individual businesses, because exemptions are granted to products rather than the organisation that submits the application. Historically, most applications for exemptions are made by trade bodies on behalf of a sector, and we anticipate this collaborative approach to continue, with associated costs being spread across the relevant sector.
I stress that the fee is being charged strictly on a cost-recovery basis, reflecting the appraisal work undertaken. The amount payable will be reviewed regularly. I hope the introduction of an application fee will encourage industry to fully explore the use of less hazardous alternative substances before submitting full exemption applications. Noble Lords do not need me to remind them of the potential harmful effects of lead and mercury on human health and the environment, so we seek to minimise their use.
In line with published guidance, there is no need to conduct an impact assessment as any direct impacts from this instrument are judged to fall under £5 million per year. In any event, the only costs on business arising from this instrument relate to Defra’s appraisal of exemption applications. Costs on public bodies such as these fall within the statutory exemptions for which impact assessments are required.
This instrument was subject to consultation, as it alters existing policy. Unsurprisingly, those likely to be subjected to an application fee in future did not support these proposals. Our proposals are consistent with Managing Public Money principles, but in response to those concerns we have committed to consider the merits of recognising exemption decisions taken by other jurisdictions that have similar ROHS regulations to those in the UK.
The territorial extent of this instrument is Great Britain. This is considered a reserved policy, but the devolved Administrations were engaged in the development of the policy and are content. The ROHS regulations fall within the Northern Ireland protocol; as such, businesses placing product on the Northern Ireland market are bound by EU exemption decisions and, under unfettered access provisions, can subsequently freely supply those goods to the GB market. This does not represent a loophole, as suggested by the Secondary Legislation Scrutiny Committee, but is about ensuring that businesses in Northern Ireland can trade freely in the UK. I commend this instrument to the Committee.
Baroness McIntosh of Pickering (Con)
My Lords, I am most grateful to my noble friend for presenting this statutory instrument. I read very carefully the conclusions of the Secondary Legislation Scrutiny Committee and will go through some of the issues with this Committee this afternoon.
The Explanatory Memorandum sets out very clearly at paragraph 10.1 that a six-week public consultation was conducted which closed on 26 August. That is normally considered a holiday period. Certainly it is when I have always taken my holidays, as I tend to go to northern Europe and that is probably the last bit of good weather and bright sunshine that we might expect. It was a short six-week consultation; I think they normally last 12 weeks. Was there any reason why the consultation was shorter and not carried through to September, which would have given people more chance to respond?
Fifty-three of the 54 respondents objected to the line that the Government took. I will not read it out because it is there and everyone will probably say the same thing this afternoon, but I wonder why the Government overruled those who bothered to reply.
My noble friend said of paragraph 16 of the Secondary Legislation Scrutiny Committee’s response that this is not a potential loophole. I would like to understand why he and the department think that. If Northern Ireland, which is still part of the single market, can export these products to the rest of Great Britain, which is not, and those in Great Britain have to pay the fee, that gives those operators in Northern Ireland a commercial advantage, if I understand this correctly. I would like to understand the background to why my noble friend thinks it is not a loophole or a commercial advantage to the Northern Irish.
Previously, in its conclusions, the Secondary Legislation Scrutiny Committee confirmed that there is no payment for Northern Ireland operators and that 53 of the 54 responses were negative towards the Government’s position. I underline the uncertainty in paragraph 14 of that scrutiny committee report, which says that the view the department has put forward
“creates uncertainty and may be inconsistent with the Department’s declared intention to have a GB-specific, cost-recovery based system for exemptions.”
I take this opportunity to press my noble friend on that.
I have one last question. What will the position of this statutory instrument be under the retained EU legislation Bill? Are we coming back to revisit this, or is this the last time we will look at this statutory instrument?
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introductory remarks on this statutory instrument.
Previously, applying for an exemption for the use of certain hazardous substances was handled and organised, and the cost was picked up, by the EU. After Brexit, the cost was picked up by the UK taxpayer. The Government are now moving the cost from the taxpayer to the businesses which are required to apply for exemptions. Not surprisingly, those businesses are balking at this additional cost where previously there was none for the same service.
As the Minister said, the fee that Defra is implementing to be payable is £39,721. At the same time, the Secretary of State will publish a charging scheme of fees and how they will be reached. The fee set out in the instrument will operate from April 2023, when the new scheme of charges will also become operable. There is no indication at this time whether those charges will be higher or lower, only that they will be on a full cost-recovery basis.
As the noble Baroness, Lady McIntosh of Pickering, said, Defra held a six-week consultation on the fee being introduced in this SI, which ended on 26 August. Of the 54 responses received, 53 disagreed with the consultation proposals. This is the first time that the businesses concerned have been expected to pay for exemptions.
The Secondary Legislation Scrutiny Committee, of which I am a member, asked a number of questions of Defra on the SI. The exemptions cover such items as the use of lead in portable emergency defibrillators and the use of mercury in intravascular ultrasound imaging systems. This is vital to the health service and a number of us at all levels, because of the effects on the health service, on which we are completely reliant.
The fee is to cover the cost of a consultant’s fee in assessing the application and whether the product is safe and fit for use. Regardless of whether the application is a renewal or a new exemption, the fee to be applied is the same. There are 23 existing exemptions that would require an application fee to be paid when they are next renewed.
Four businesses consulted were concerned that specialised items provided in low volumes but subject to the application of a fee might not continue to be supplied in GB due to the cost. This would have a significant impact on some medical technologies. Given that some of those businesses supplying this equipment and needing an exemption certificate are small and medium-sized businesses, the cost is likely to have a negative effect. Can the Minister comment on this?
The Northern Ireland market, as both speakers have said, is not subject to these regulations as it still operates under EU rules. No fee is therefore charged there. This SI applies to England, Scotland and Wales only. Can the Minister say whether it is likely that some devices might appear illegally on the Northern Ireland market, not subject to a fee, and then be sold on to England, Scotland or Wales? I understand the Minister says that this is not likely, but this is a loophole in the system whereby no fee would have to be paid for a separate GB exemption; the noble Baroness, Lady McIntosh, also referred to this. Would it not be better if the same system applied to the whole of Great Britain, including Northern Ireland? Would the Minister care to comment on that?
Baroness Hayman of Ullock (Lab)
My Lords, I thank the Minister for his detailed introduction to this statutory instrument. We have heard that previously, when we were part of the EU, applications around hazardous substances were dealt with in Brussels so did not attract an application fee, which is why this measure will be very new for businesses to deal with.
Much of what I want to say has been covered by other speakers but there are a few things to look at. First, there is the application fee of £39,721. The Secondary Legislation Scrutiny Committee’s report commented that it is a “surprisingly precise” figure. Can the Minister give some information on where this surprisingly precise figure came from? That would be helpful. He stressed that it has been calculated on a cost-recovery basis, with applications made between Brexit and now being covered by the taxpayer. It was good to have that clarification.
The Minister also said that the cost per business is high because of the low number of applications likely in the coming years. I understand that the information given to the JCSI said that only one application for a new exemption has been submitted since Brexit and that there are only 23 live exemptions, which may be renewed in future. The SLSC’s report states:
“Defra expects that most applications in GB will be made by international trade associations and industry organisations on behalf of a specific industry, rather than by individual businesses.”
It would be helpful if the Minister could explain where that expectation has come from and how that structure is likely to work in order to give individual businesses some kind of reassurance as to what the expectation on them is likely to be. We know that businesses have been facing supply chain issues and increased costs, so it would be extremely helpful to understand that.
On the refund of fees under Regulation 5, there is mention of partial refunds in the SI and the SLSC’s report. Again, it would be useful to understand how that works and what “reasonable costs” means in this instrument. What are considered to be reasonable costs that the Secretary of State could take into account?
The noble Baronesses both mentioned the shortness of the consultation at six weeks; that would be useful to understand. I am sure the Minister knows that I am quite interested in consultation. Best practice is 12 weeks, so I wonder why it was concertinaed to just the six weeks. The noble Baronesses talked about other areas around the consultation so I will not go into those details.
On the exemptions, it would be useful to have an example of what an exemption is and whether it is possible for a business to move away from the use of hazardous materials. Is that something that certain businesses could do? If that is the case, is Defra able to support or give advice to businesses that want to do that? I think that would be quite helpful.
Finally, on Northern Ireland, I completely agree with the points made about the potential loophole. I ask for reassurance on exactly how that will work with Northern Ireland. It is a bit concerning if that does not work as smoothly as expected.
Lord Benyon (Con)
I thank noble Lords for their valuable contributions to this debate. I will address the points that have been made.
The noble Baroness, Lady Bakewell, asked why the fee is being introduced when so many respondents to the consultation did not support it—a point made by both other speakers as well. If I am in business and not facing a cost that is being picked up by somebody else, and I am asked whether I would like to pick it up, I am likely to say no. I am not surprised that they did not want to do this, but there are two reasons for doing it. One is to relieve the poor, overburdened taxpayer from picking up the cost of this. The second is to drive behaviour change and to drive companies to look at the alternatives where possible; I will come on to talk about that. I assure the noble Baroness that introducing the fee is entirely consistent with the Government’s Managing Public Money principles and is based strictly on a cost-recovery basis. It is also worth noting that charging is common practice in circumstances in which industry is required to apply for registrations, authorisations and licensing to comply with regulatory requirements.
Existing guidance on how to submit an application for an exemption is available on GOV.UK and will be updated to reflect the requirement to pay an application fee well in advance of the April 2023 date when the fee will be introduced. I assure the Committee that in granting exemption applications, the Government are not acting to constrain the development of alternative, less harmful substances. A fundamental requirement in considering an exemption is to do a detailed technical appraisal of substitute substances. In circumstances where an application is granted, it will be done for a time-limited period only.
I will address some of the other points. A short consultation was required to ensure that this statutory instrument could be laid using powers that expire at the end of this year, using the EU withdrawal Act. While it was short, key stakeholders were contacted and encouraged to respond. I suspect the noble Baroness and I were on the same side in the referendum, but I can assure her that this gives more accountability for the decisions that are taken. When I was last at Defra, this would just have been rubber-stamped. It would come have from the Commission and we would have had no say over it. At least we can now drive standards and do things in the right way. I hope that responds to the first and second points made by my noble friend Lady McIntosh.
The points raised by the Secondary Legislation Scrutiny Committee are important, but I reiterate that there is no loophole. Products placed on the Northern Ireland market must comply with the EU ROHS and EU exemptions. Unfettered access means that such products can then move freely into Great Britain. They are not required to submit a GB exemption application, so there can be no loophole in avoiding paying the necessary application fee. I hope that satisfies the Committee’s concerns.
Points were made about the REUL Bill. Ministerial colleagues and I are in the process of analysing Defra’s REUL stock and determining what should be preserved as part of domestic law, as well as REUL that should be repealed or amended. This work will determine how we use the powers in the Bill and, therefore, inform assessments of the Bill’s impact.
It is important that we consider whether recognition of exemptions in other jurisdictions with similar ROHS regulations to ours could work. There is no guarantee that we will proceed even after that assessment, but any proposal to proceed will be subject to consultation. It is therefore sensible to proceed now on the basis that no alternative to the current arrangements will be in place.
A number of people asked questions about the fees. The fee will be £39,721, as I said. This is made up of the technical consultant’s fee of £36,625 plus £3,096, which covers the cost of other administrative tasks such as publishing the consultation. The fee will be payable from April 2023. Exemptions last up to five years, or seven years for medical devices such as those mentioned by the noble Baroness. Exemptions are granted to products rather than to the applicant. This reduces the impact on business because, very often, the applications are made by trade bodies and huge multinational companies for which this figure is loose change down the back of the sofa. For an SME it would be a substantial cost, but that cost is very likely to be picked up by a whole range of different SMEs operating together through a trade body.
Since January 2021 we have received two applications for exemptions for Great Britain.
Baroness Bakewell of Hardington Mandeville (LD)
I am sorry to interrupt the Minister. Is he saying that if, for instance, an MRI scanner received an exemption certificate, it would not matter who manufactured it and it would have the same exemption certificate?
Lord Benyon (Con)
The exemption is on the product, not the applicant, so yes. Some of these would be multinational companies based overseas wanting to export their products here. They would have to get this to do so.
I think that addresses the main concern of the noble Baroness, Lady Hayman. Trade bodies will be the vast majority of the applicants, not businesses. It is crucial that we drive behaviour change where it can be achieved. The application process requires the applicant to have looked at alternatives before securing an exemption.
The noble Baroness, Lady Hayman, asked for examples of recent exemption decisions. Lead in solders in portable emergency defibrillators is one. Mercury in components of intravascular ultrasound imaging systems and lead in hexavalent chromium used for civil explosives in mining and quarrying are other examples of where this requirement will be used.
The Secretary of State could grant exemptions without the need for an application if the sale of essential equipment were jeopardised because of the non-payment of a fee. For example, if the supply of essential equipment was required for the health sector and was jeopardised because of the requirement to have an application, the Secretary of State could overrule it and give that exemption. I think that gives a lot of assurance to people who feel that, for example, our NHS could lose out on getting a vital piece of equipment.
The final question, quite rightly put, was whether this drives business away from the UK. It is normal for businesses to be charged fees for registrations and applications if necessary. As I say, it is important to note that the fees apply to the product, not to individual businesses. There is a track record of businesses working together to submit applications.
Baroness McIntosh of Pickering (Con)
Can I just clarify that point for my noble friend? It is about whether there would be a commercial advantage in what we are pursuing, thus giving Northern Ireland a benefit.
Lord Benyon (Con)
In Northern Ireland, our wish for there to be unfettered access is absolutely paramount. As things stand, businesses in the European Union will seek applications from here, as will businesses from beyond the European Union. It is vital that we maintain that unfettered access while we sort out the implications of the Northern Ireland protocol, which are very familiar to Members of this Committee.
I hope that I have answered all the questions. If there are further points that noble Lords wish me to comment on, I would be happy to contact them. I commend these draft regulations to the Committee.
Motion agreed.
Agricultural Holdings (Fee) Regulations 2022
(1 year, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Benyon
That the Grand Committee do consider the Agricultural Holdings (Fee) Regulations 2022.
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, I beg to move that the draft Agricultural Holdings (Fee) Regulations 2022, which were laid before the House on 20 October, be approved. I declare my farming interests as set out in the register and point out that I am a member of the Royal Institution of Chartered Surveyors. I speak for England only. However, I highlight that we have worked closely with the Welsh Government on this instrument, and the same composite instrument was debated and approved by the Senedd on 22 November.
This Government believe in a vibrant and flourishing tenant farming sector. We believe that it is vital for the future of agriculture. A third of farmland in England is tenanted, with 14% of farms wholly tenanted and 31% of farms with a mixed tenure—that is, both owning and renting land. This variety in land tenure and the ability to rent land on a flexible basis is important as it enable tenants and owners to grow and adapt their farm businesses. It also provides a route into farming for new entrants, bringing new skills and ideas into the sector.
Many tenants and landlords work collaboratively and progressively to resolve issues that may arise during their tenancy agreement. However, sometimes, that is not possible. In those cases, our agricultural tenancy legislation enables either party to the tenancy agreement to apply to a professional authority to appoint an independent arbitrator to help resolve a dispute. It also enables the professional authorities to charge a small statutory fee to cover the administration costs of delivering an arbitration appointment service.
The current fee that can be charged for the appointment service was set in 1996 at £115. Inflation since then means that this level of fee no longer covers the costs incurred by the professional authorities in delivering the arbitration appointment service. The purpose of this instrument is to update the statutory fee on a cost recovery basis to £195 in line with His Majesty’s Treasury’s guidance, Managing Public Money. The increase was supported by 73% of the respondents to the Government’s consultation on this issue.
Although I recognise that this increases costs for tenants and landlords, it remains a relatively small statutory fee that is necessary to sustain the continued delivery of an important independent appointment service. The costs of running the service include staff time to assess each application for the arbitration skills and knowledge required to make a relevant match with a suitably qualified arbitrator, as well as conducting the necessary checks for any conflicts of interest to ensure independence.
This instrument also updates the regulations in line with changes we made in the Agriculture Act 2020 to include a wider list of professional authorities that can now offer an arbitration appointment service. This now includes the president of the Central Association for Agricultural Valuers and the chair of the Agricultural Law Association, alongside the president of the Royal Institution of Chartered Surveyors. This means that tenants and landlords now have more choice between different service providers, which will help to drive continuous improvement in the provision of an efficient and quality service.
In addition, this instrument includes a new duty to review the regulations every five years. Reviews will be carried out in consultation with industry to check that the level of the statutory fee is appropriate and in line with cost-recovery principles.
I am aware of the recently published report on tenant farming led by my noble friend Lady Rock. It includes recommendations on the operation and oversight of dispute resolution. I thank my noble friend and members of the working group for producing this report. I welcome it and its focus on supporting a vibrant tenanted sector. The Government are considering its recommendations and will publish a formal response in due course.
I also highlight that the professional authorities delivering arbitration appointments have responded positively and proactively to requests for improvements. For example, the Royal Institution of Chartered Surveyors is in the process of implementing the recommendations made in the recent review by the noble Lord, Lord Bichard, to improve governance structures, deliver greater independence of its regulatory functions and focus on its public interest remit. In addition, the professional authorities delivering arbitration appointment services have transparent and high standards of professional conduct that they expect their arbitrators to comply with.
I hope I have assured noble Lords of the need for this instrument, which will ensure that tenant farmers and landlords continue to have access to the appointment of an independent arbitrator when they need it, funded by an appropriate statutory fee on a cost-recovery basis. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I welcome the content of these regulations and thank my noble friend for presenting them. I pay tribute to the work of my noble friend Lady Rock and all those who contributed to the review that she conducted.
It is a little disappointing that my noble friend says that we will have a response only “in due course”. We owe it to the tenanted sector to have a response in real time and a date when that might be due. I regret that I cannot remember whether it is Agricultural Holdings Act 1986 tenancies that are for one year only or more, but I know that the Tenant Farmers Association has expressed concern that where a tenancy agreement is for only three or five years, it is simply not long enough for tenant farmers to make the required investment.
This is an issue very close to my heart. I grew up in an tenanted area in the Pennines where there are smallholdings—mixed farms with not a great deal of land. At one stage my brother and I farmed two fields, but I could not stand the excitement so he now farms them in his own right. My late father is no longer there to look after all the admin for us, so my brother is in sole charge as the owner of those two fields. These smallholdings are very dependent on spring lamb and stall cattle, that is bringing young beef on and fattening them up. Marts such as at Middleton-in-Teesdale, Kirkby Stephen, Thirsk and Skipton are very dependent on this.
I argue that, if anything, there will be more call on these advisers. I accept that there has not been a review for five years. It could be argued that the fee is almost double, but I think it is a reasonable level. No one has corresponded with me to say that they will not be able to pay this.
I understand that 60% of all land in England is farmed by tenant farmers. Certainly in North Yorkshire, where I was an MP for 18 years, 48% of the farms are tenanted. This is a very big sector, so I would like to press my noble friend by asking whether the fees will cover all eventual disputes in this area. For example, will they cover potential eviction from the tenanted farm if the fee could be used to be represented in an arbitration procedure?
Similarly, the landowner may seek to take back the farmland if they wish to plant trees, for example. I know that my noble friend and the department are very keen on that but, from what we have seen in Cumbria and Wales, it is not always ideal to be taking land that has been actively farmed—particularly when our food supply chains are under pressure of being in an emergency situation, as we hear this morning, with the NFU calling on the Government to take urgent action in that regard.
My heart goes out to tenant farmers at this time. The fees proposed in this statutory instrument are affordable given the increase that the Government are seeking. I welcome the fact that there could be a five- yearly review; I think I saw that in paragraph 7.6 of the Explanatory Memorandum. Can my noble friend say in precisely which circumstances the fee would be applied and assure us that the tenants will have recourse to a professional authority in the circumstances that I outlined?
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introductory remarks on this statutory instrument. The essence of the instrument is to increase the fee charged when a dispute arises around a tenancy agreement between a landlord and an agricultural tenant. This is then referred to the Agricultural Holdings Act 1986 for arbitration where the fee is charged.
I note that the requisite fee has not been increased since 1996 and agree that it is necessary to set it at a realistic level. I also agree with the regulations and, I assume, the fee being on a cost-recovery basis, to be reviewed every five years. This seems sensible. The previous fee was £115; however, the proposed fee of £195 seems to have been set in 2019 by Defra. If that fee is intended to be on a cost-recovery basis, it is already three years out of date and inflation has not stood still in the intervening years.
The consultation undertaken by Defra received a favourable response, with 73% of respondents agreeing to the update and the proposed fee. The Explanatory Memorandum refers in paragraph 12 to the impact as “a relatively small increase”. This is somewhat true in that £195 is not a huge sum but it is, nevertheless, a 70% increase on the fee previously paid. If the fee were to go up by 70% every five years and be linked on a cost-recovery basis, those involved might not be quite so keen to agree to it.
Given that some holdings will have cross-border implications, can the Minister say whether the devolved Administrations are likely to be charging the same level of fee for arbitration as England? I was not entirely sure from his remarks whether that was the case. If not, and there is a difference in fees, that would cause some problems.
Lastly, like the Minister and the noble Baroness, Lady McIntosh of Pickering, I refer to the Rock review on farm tenancy. There is evidence that in some cases the slow rollout of the sustainable farming incentive grants has led to tenants being refused permission by their landlords to apply for this scheme. This may cause an increase in the numbers coming forward for arbitration. Can the Minister tell the Committee how many cases of arbitration there were last year and how many there have been this year? Are there sufficient staff in the arbitration service to deal with increased demand, if that should prove to happen?
I believe that this is the right way forward and I support this SI.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the Minister for his introduction to what is, on the face of it, a fairly non-contentious amendment to the fees paid for the appointment of an arbitrator to resolve disputes or make certain records about agricultural tenancies under the Act that we have referred to. Other noble Baronesses have talked about the increase in the fees and whether it is still appropriate considering when it was set, so I will not go into detail about that.
I want to focus on the concerns raised by the Tenant Farmers Association about the increased costs that are in this SI, and about tenancy arrangements more generally. The TFA has said it is worried there has been a lack of contact between it and Defra, and the Secretary of State, around the report on the Rock review. The noble Baroness, Lady McIntosh of Pickering, has referred to this. She asked a question yesterday in the Chamber and the Minister basically gave the same response as he has today, which is that the Rock report is very interesting, the Government are benefiting from it, it is being reviewed and had lots of recommendations, and that they will report in due course. I think what we would all like to see is a little more information about what that looks like going forward. Clearly, it is a very important report.
I am sure the Minister will know George Dunn from the Tenant Farmers Association. He has raised some real concerns. If the Minister will bear with me, I would like to go through them because his response to these concerns is important. George Dunn says the TFA is objecting to these proposals, and he cites the recommendations of the Rock review, which expresses concern about the way in which agents operate in general and how arbitration is in need of oversight and reform. The report also highlights the need for a commissioner or ombudsman to oversee the operation of arbitration and the Tenant Farmers Association’s view is that this needs to be implemented, preferably before or alongside any decision to increase the appointment fee. I would be interested in the Minister’s response and comments on that proposal.
George Dunn also says that the increase in the fee would land much better with his members if they had some sort of indication or assurance that Defra would be taking seriously the recommendations set out in the Rock review about the appointment of a commissioner or ombudsman with a role to look at the operation of arbitration. In addition, he comments that most of the costs associated with the accreditation, assessment, training and continuing professional development of arbitrators fall to the arbitrators themselves. He believes that the cost of using arbitrators already reflects increasing costs, as the arbitrators pass on those costs to the parties involved in the process. I hope that is clear. What is unclear is what costs RICS and others incur in the appointment process, because none of that is on the record.
It would be very helpful, ahead of any formal response to the Rock report, to know that Defra and the Minister were listening carefully to the concerns being expressed by the Tenant Farmers Association, so that we can work with it going forward to ensure this process works as it should and is effective. At the end of the day, that is what we want it to be.
Lord Benyon (Con)
I am grateful for the noble Baronesses’ views on this instrument. I believe we all recognise the importance of the tenant farming sector and the need for tenants and landlords to have access to independent arbitrators to resolve any disputes when they arise. I also believe that it is right for the professional authorities delivering arbitration appointments to be able to recover their costs through an appropriate statutory fee. The improvements this Government have made, including widening the choice of professional authorities that tenants and landlords can go to and the introduction of a regular review clause, will drive continuous improvement in delivery of the service going forward.
I am actually someone who has attended one of these tribunals. I was a trainee at the time. It was in Wales. I remember being struck by one thing: the complete breakdown of the relationship between the landlord and the tenant. That is very rare. Mostly, there is a good working relationship. Where disputes occur—even the best relationships can be tested at times of rent reviews and suchlike—there needs to be a mechanism in place for this.
The only issue on which I differ from my noble friend Lady McIntosh is her feeling that we should have somehow given our response to the Rock review by now. That review has taken many months and was published just over a month ago. The Farming Minister, Mark Spencer, and I have spent many hours going through its nearly 80 recommendations. We also have officials working through them. I do not want to prejudge, but noble Lords will be pleased to know that many of them have “agreed” next to them, while there are also some where we need to do some more work. But with all that is going on—and to do my noble friend Lady Rock and her review panel justice—it is not possible just to publish a response that does not respect the work that has gone into the review and thoroughly respond to the important points it makes.
To answer my noble friend’s other point, this instrument relates principally to the Agricultural Holdings Act, which is a succession tenancy law. There are of course many other types of tenure that can be the subject of disputes, such as farm business tenancies. My noble friend is entirely right that the best type of tenure is a long-term tenancy where there is a commitment to invest and improve. In extreme cases, some short-term tenancies have the effect of little or no investment and a lot of extractive activities, so the natural environment and natural capital involved in the farm are depleted. In most cases, longer-term tenancies are better, but we want to create flexibility for certain circumstances where, for whatever reason, for the landlord or the tenant’s advantage, there is the possibility of short-term arrangements.
Of course, there are many other types of tenancy; my noble friend referred to her family but it could be a grazing tenancy or many others. On our uplands we see how farmers work together with commoners’ rights, which also need to be respected. My noble friend is absolutely right that small farmers need to be supported. I believe passionately in that; I want to see coming through our transition in agriculture a real attempt to understand that small can be beautiful. Small farmers can adapt in a way that some bigger farmers cannot. Some of them will be able to access government support when they were not able to do so before. People who were not able to use the basic payment scheme will be able to access our environmental land management schemes.
My noble friend Lady McIntosh asked about the cases that could be taken to such an arbitration. I remember from my chartered surveyor training something called the “seven deadly sins”. One of them was the failure to pay rent. Another was poor husbandry, which is incredibly difficult to prove. There are a number of other issues that could go to arbitration. The Royal Institution of Chartered Surveyors reports that it receives an average of 195 requests for the appointment of an arbitrator each year. When you think how many thousands of tenants and farmers there are in this country, that is a very small percentage, but it is vital that they have access to a good arbitrator. About 25% of those requests come from tenants, and about 75% from landlords.
The Government recognise that farming is often a long-term business. We are interested in exploring ways of encouraging more landlords and tenants to consider longer-term tenancy agreements. I applaud organisations such as the Duchy of Cornwall, which, by and large, gives 20-year farm business tenancies; that kind of commitment is very valuable. As we transition to new farming systems, there will be more certainty and encouragement for landlords and tenants to enter into a longer term agreement.
There is also a role for industry leadership and best practice guidance in setting out the options and benefits for tenants and landlords of longer term arrangements. A tenant of a small family farm can request the appointment of an arbitrator for all circumstances, such as notice to quit on land resumption, where they have a case to dispute that, as well as for other matters such as tenancy compensation, maintenance and rent reviews. The thorny issue of tenant rights when a tenant vacates land is also sometimes the subject of dispute.
I think 70% over nearly 30 years is probably affordable. We will review it every five years, and I hope it will be considered on a cost basis. We came to the figure working with the CAAV, RICS and the Agricultural Law Association; we did not pluck it out of thin air. It is important that we keep this as a cost-recovery activity for the small number that use it. The noble Baroness, Lady Bakewell, made the point that it is three years out of date. After nearly 30 years, I do not think it is an unreasonable figure; in five years’ time, we shall see what it is like and how this is working.
I turn to the points very properly made by the noble Baroness, Lady Hayman. First, on lack of contact with the Tenant Farmers Association, nobody has more respect for George Dunn than me. The Tenant Farmers Association operates out of a village next door to where I live. He is somebody with whom I have had the pleasure of working. His contribution to the Rock report and to the welfare—mental, financial and in business terms—of tenants over many years is exemplary. It was a great pleasure to go to an event at the Farmers Club to celebrate a milestone in his commitment to the Tenant Farmers Association.
When we respond, soon, to the Rock review, I hope that he will feel that we have considered the points that he makes. I will not pre-empt that response by saying where we are on issues such as a commissioner. We will not agree on everything, but I state absolutely that it is the Government’s intention—the intention of my colleague Mark Spencer, the Secretary of State and me—that we see a vibrant tenanted farmers’ sector. As I said in the House yesterday, without it, the only way that people can get into farming is by buying land or inheriting it. We think it is vital that we see new entrants being able to get access to farming businesses. We have developed our exit scheme for those who want to exit the farming industry with dignity, and we are also working on a new entrants scheme, which will encourage skills, support and the availability of land for new entrants.
We hope to create more mobility within the sector; we can do that only if we have the right systems in place, the right tenure and, as and when issues result in dispute, a proper mechanism for their resolution. We think that that lies within this SI; it is a small part of it. We will be working with noble Lords as we develop the thinking in the Rock report and other measures in environmental land management to make sure that we are supporting farmers—owner-occupiers, tenants and the large number who are both. We have to recognise that they all have a place in our farming system. With that, I commend this instrument to the Committee.