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.