Draft Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023
(1 year, 7 months ago)
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The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move,
That the Committee has considered the draft Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023.
It is a pleasure to speak with you in the Chair, Dame Angela.
The regulations, which were laid before the House on 26 April, form part of a series of secondary legislation needed to effectively implement the register of overseas entities. The register was created under part 1 of the Economic Crime (Transparency and Enforcement) Act 2022, which I will refer to as “the Act”.
The register will help crack down on dirty Russian money in the UK and corrupt foreign elites abusing the openness of our economy. Overseas entities owning or buying property or land in the UK must give information about their beneficial owners or managing officers to Companies House. Law enforcement agencies now have a wealth of new information to help them track down those using UK property or land as a vehicle for money laundering.
The register went live on 1 August last year, with the deadline for registering set for 31 January this year. There has been a high level of compliance, with more than 27,900 overseas entities registering to date. Entities that have disposed of their land are required to provide statements with information about their beneficial owners and details such as title numbers. More than 750 have provided details to Companies House, having disposed of all their interests in land before the end of the transition period. That means that just under 29,000 entities have complied with the requirements.
Although that likely leaves a few thousand entities still to register, some of them are believed to have been dissolved or struck off, and others have not kept their address details up to date with the land registries. That means they might not have received the letters that have been sent to them so far by Companies House. I know that Members want to be reassured that compliance and enforcement action is being taken. I want to reassure them that case preparation takes time, but is happening.
Companies House continues to work to increase compliance even further and is actively preparing cases for enforcement action. Any overseas entity that has failed to register is already restricted from selling, leasing or raising charges on the land it owns until it registers. Overseas entities are also unable to purchase any new UK land without registering. These are novel and severe sanctions—indeed, the most severe in the world.
It is worth reminding hon. Members that when the draft Registration of Overseas Entities Bill was scrutinised by Parliament, the Joint Committee on Human Rights warned of the severity of the restriction, in particular the “chilling effect” that it would have. The Government of course took seriously the concerns raised, but felt the sanction was proportionate given the policy objectives of the register. This shows the seriousness of the sanction and the need for the Government to get the balance right with the approach to enforcement so as not to deter legitimate investment in the UK.
Once the Economic Crime and Corporate Transparency Bill receives Royal Assent, a further enforcement tool will be added to the arsenal: a person who receives a financial penalty from the registrar or is convicted of an offence may be disqualified from acting as a UK director. Once the Bill receives Royal Assent, I will bring forward further regulations under new and amended powers that will further strengthen the requirements of the register.
The statutory instrument deals with two main elements: financial penalties arising from misconduct in relation to the register, and the treatment of land disposed of in Northern Ireland by overseas entities and rights of those acting in good faith.
The Economic Crime (Transparency and Enforcement) Act sets out that the registrar may impose a financial penalty as an alternative to criminal prosecution. The draft regulations set out the procedure for the imposition and enforcement of financial penalties. A financial penalty could be imposed on a variety of persons, depending on the offence—for example, where an overseas entity has failed to register, on a verifier who has knowingly submitted a false filing, or a person who has failed to respond to an information notice sent by an overseas entity.
If the registrar suspects that a person is engaged in conduct amounting to an offence, she may issue a warning notice in writing to that person giving 28 days to make representations about their conduct. If the registrar is satisfied beyond reasonable doubt that the person has engaged in conduct amounting to an offence, she may issue a penalty notice in writing to that person giving 28 days to pay the penalty. If a person fails to pay, interest will accrue at 8%, the statutory interest rate.
The instrument sets out that a financial penalty imposed by the registrar may be a fixed penalty, a daily rate penalty, or a combination of both. Where the criminal fine set out in the Act is a fixed penalty, the registrar may impose more than one penalty in relation to the same conduct if there is continued contravention. That means that a further penalty can be imposed if a person remains non-compliant despite having a penalty imposed. Subsequent penalties could increase to encourage compliance.
The instrument does not prescribe the specific amounts of financial penalties that may be imposed in relation to each offence. Instead, it states that a financial penalty
“must not exceed the maximum fine that could be imposed by a court…under criminal proceedings in the jurisdiction in which the offence was committed.”
That flexibility allows proportionate and effective targeting of non-compliant persons and penalties that can be adjusted according to the seriousness of the misconduct and the specifics of the case.
Given that penalties are an alternative to criminal prosecution, the registrar should bear in mind the process a court would follow. The goal of the financial penalty regime is to encourage ongoing compliance with the requirements. When deciding whether to prosecute and what sentence to give, courts follow sentencing guidelines to ensure that it is in the public interest to prosecute and that the sentence is proportionate to the seriousness of the offence. The registrar should also consider the public interest and be proportionate when imposing financial penalties.
For the failure to register offence, the Act sets out that the criminal fine that courts in England, Wales and Scotland can impose can be unlimited. That means that, in theory, the registrar may impose an unlimited financial penalty when an overseas entity has failed to register.
As an indication of the seriousness of the failure to register offence, the registrar will review the portfolio owned by an overseas entity that has failed to register. The registrar will use a range of sources to estimate the value of the portfolio owned, including the UK house price index and data on business rate bands. The registrar will apply different starting points for the financial penalty depending on whether the estimated value of each property or piece of land falls into one of three bands. If the value of the property or land is estimated to be in the lower band, the starting point for the penalty will be £10,000. If the value is estimated to be in the middle band, the starting point will be £20,000. In the higher band, the starting point will be £50,000.
Hilary Benn (Leeds Central) (Lab)
If an entity has broken the law and has been fined, does the UK have any powers to say that that entity cannot in future buy any properties in the UK, even if they then choose to declare the beneficial owner in that case? Is that fine followed up by any further sanction?
Kevin Hollinrake
If they have not registered properly, they cannot buy UK property.
If an overseas entity owns more than one property or piece of land, the penalty values will be added up to provide a starting point. Given that interest will accrue at the statutory interest rate of 8%, the penalty will rack up quickly if an overseas entity fails to pay. The registrar may also consider other aggravating factors, such as whether the person has committed the offence previously. When any financial penalty remains unpaid, it can be enforced as if it were a judgment debt, including by a charge being registered against property or land owned by an overseas entity.
The registrar will keep the model under review ahead of imposing financial penalties for failure to file the annual update on time. If the registrar finds that the level of penalties needs to be reviewed because they are insufficient to provide a deterrent, the instrument gives her the flexibility to do so. The instrument also gives the registrar the power to vary or revoke a financial penalty on a case-by-case basis—for example, if new information comes to light that may aggravate or mitigate the misconduct. The instrument also sets out the grounds for appeal and the court’s powers in relation to an appeal.
Companies House has been preparing to operationalise the regulations and will be ready to issue notices as soon as the regulations come into force. Companies House already includes in its annual report the details of financial penalties imposed in relation to UK companies, and the Insolvency Service publishes enforcement outcomes annually. The Government consider that those are appropriate places for these details to be published in relation to the register.
The second part of the instrument sets out the grounds for registering dispositions in Northern Ireland that would otherwise be prohibited. Schedule 8A to the Land Registration Act (Northern Ireland) 1970 is amended to provide a mechanism to allow the Secretary of State to consent to the registration of a land transaction that would otherwise be prohibited.
If a third party transacts with an overseas entity at a time when the overseas entity is non-compliant with the requirements of the register, the third party will be prohibited from registering the transaction; for instance, if it has bought land from an overseas entity that is non-compliant, it will be unable to register itself as the new proprietor. The intention of that sanction is to disincentivise anyone from transacting with a non-compliant overseas entity, which I think was the point that the right hon. Member for Leeds Central was making.
However, in certain circumstances, it is possible that a third party may transact in good faith, without knowing that the overseas entity was non-compliant, resulting in its acquisition of a land title that cannot be registered with the Land Registry. The Act is not intended to penalise innocent third parties and so this mechanism is necessary to allow for the effective functioning of land transactions. A similar mechanism is already available in England and Wales, and Scotland.
In conclusion, I emphasise that the measures in the draft regulations are crucial for the effective operation of the register. I hope that the Committee will support the measures and their objectives. I commend the draft regulations to the Committee.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Dame Angela. This is a very important statutory instrument and one that I am sure the Minister will agree with me is well overdue; it was seven years ago that the then Prime Minister, David Cameron, made the first of many promises to introduce a register of overseas owners of UK property.
The SI implements aspects of the register of overseas entities by conferring a power on the registrar to impose a financial penalty on a person if they are satisfied, beyond reasonable doubt, that the person has engaged in conduct amounting to an offence under part 1 of the Economic Crime (Transparency and Enforcement) Act, and by allowing the Secretary of State to consent to the registration of a land transaction that would otherwise be prohibited in relation to Northern Ireland, bringing it in line with England, Scotland and Wales.
We should remember that the Act was passed last year as emergency legislation in the light of the situation in Ukraine and the need to sanction Russian oligarchs. Its primary purpose was to set up a register of overseas entities and their beneficial owners and require overseas entities who own land in the UK to register in certain circumstances.
Back then, we said that the Government had dragged their feet on stopping dirty money flowing through our economy. These steps were first promised in 2016, and since then £1.5 billion-worth of property has been bought by Russians accused of corruption or links to the Kremlin. In 2016, the UK implemented a register of beneficial ownership of UK companies that is called the people with significant control register and provides information to Companies House about who holds significant control of UK companies. However, there was ongoing concern about overseas entities owning property in the UK to obscure their identity when concealing illicit funds or laundering money through UK property.
The establishment of the register of overseas entities introduced a requirement for any legal entity governed by the law of a country other than the UK to register the details of individuals who own property in the UK who would otherwise hide their identity behind a foreign company. There is no doubt that we need it as part of our tools to deter and disrupt economic crime and money laundering, as well as to protect our financial systems and our economic security and, frankly, to know who owns what in Britain. During the passage of the Act, we debated at length the speed with which action was required, so it is utterly frustrating that going through these important SIs to ensure that the registrar has the necessary powers is taking so long.
The provisions of this SI are common sense and we support them, but the delays have had a cost. We want to see action stepped up against those failing to comply with the new legislation who have yet to face financial penalties, and we want the system to be robust enough to operate as a deterrent against further economic crime.
The register was set up on 1 August 2022, and overseas entities had a transitional period of six months to register. Failing to update the register, failing to respond to an information notice, responding with false information, or selling land before the transitional period ended without providing information about its status are some of the offences in the Act to which the penalties that we are debating could apply.
Transparency International claimed in February 2023 that almost half of the companies required to declare their ownership—more than 18,000 companies, which between them hold almost 52,000 properties—had failed to do so. Last month, I asked the Minister how many were yet to comply, and at that point around 7,000 companies had yet to register. In our last SI debate, the Minister sought to reassure me—as he does today—that
“Companies House is…preparing cases for enforcement”—[Official Report, First Delegated Legislation Committee, 24 April 2023; c. 8.]
against some of those companies. I will come back to the respect in which that enforcement preparation is under way, and how quickly some of the powers will be used.
This is important, because a BBC investigation noted a few days ago that 5,000 firms with property in England or Wales have failed to submit their details, three months after the January deadline. The Minister says today that the figure is more like 3,000 firms. He suggested some of the reasons why, and he may have evidence for that. He also suggested that around 750 overseas entities that sold their property before the end of the transition period had complied with legislation by sending their information through to Companies House. Are there some that did not do so? It would be helpful if the Minister could update me on that and provide more information; he can do so in writing after the Committee, but perhaps he can go back over some of the figures he provided.
The 2022 Act set a fine of up to £2,500 a day for overseas companies that own UK property but do not declare their owners. That was increased in Committee from a measly £500—that figure was challenged, and an amendment was accepted that made it £2,500 a day—but I understand that, because it has taken so long since the Act was passed to implement the power to impose financial penalties, no person or entity has been issued with a penalty. That includes firms that have been linked to oligarchs such as Roman Abramovich.
I would be grateful if the Minister could confirm that it is the case that no warning notices have gone out and, therefore, no financial penalties have been issued, and that no penalties will be able to be applied in respect of the three and a half months since January. Perhaps the Minister can clarify that, because there may be something in the legislation that I have missed that suggests that it may be possible for a fine to be retrospective. Estimates from the BBC investigation suggest that had we been imposing fines since the January deadline, they could have added up to £1 billion.
I will ask the Minister about the detail of the SI, so that we can all be confident that it will be fit for purpose. First, how soon after the passing of the SI will the registrar be able to issue financial penalties? I imagine warning notices will have to be issued first, unless there has been any provision for warning notices to be sent out in advance of the SI being passed, so financial penalties can be issued immediately.
Secondly, on the warning notices the dates of appeal suggest that a period of 28 days needs to be passed. We had some debate around that previously, and I was not very clear on it then. The draft regulations state that the period contained within any warning notices
“must be at least 28 days beginning on the day after the date of the warning notice”.
Is the period within which a company or entity would have to make a representation to the registrar if they disagreed with what was in the warning notice within 28 days or a minimum of 28 days? That was not very clear, and it is important for it to be clear.
If any warning notices have been issued—I am not fully clear on the detail of the legislation, which seems to imply that warning notices and financial penalties can be issued only after the SI is passed—have any written representations been received? Draft regulation 5(2)(f) in part 2 also refers to 28 days. It would be helpful to be clear whether any payments sought in relation to a penalty, whether it is a fixed penalty or a daily penalty, have to be paid within 28 days. Is that the case prior to the interest accruing? I would be grateful for clarity on that. For those who have billions to spare, is that just what will happen? Will it be 28 days, plus the interest accruing?
How does the £2,500-a-day fine that was discussed during the passing of the parent legislation align with the bands that the Minister has talked about today? I think the amounts that he described were £10,000, £20,000 and £50,000. I think that would be significantly lower than a fine of £2,500 a day, but perhaps he can clarify how that will be calculated, and how the period since 31 January has been accounted for. What assessment has he made of the level of resources and whether they are sufficient for the analysis that needs to be done, the issuing of notices and financial penalties, and penalty enforcement, which, as he outlined, is also an important part of the SI?
As I have raised previously with the Minister, there are still issues with the register of overseas entities not covered by the SI. I thank him for responding to my concerns around the 25% threshold for beneficial ownership, on which I think we still disagree, but I note that in his written response to me dated 9 May he did not respond to my concerns about another major loophole: the use of opaque offshore trusts, which enable overseas entities to access UK property and markets behind a cloak of anonymity. I would be grateful if he came back to me on that point in my previous correspondence.
In summary, the Opposition support the changes introduced by the SI, but it is utterly vital that the Government get their act together on dealing with economic crime, tackling loopholes and ensuring that we can take action quickly. It is years since action was initially promised, and there is a financial and security cost to that delay. I look forward to the Minister’s response.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
It is a pleasure to serve with you in the Chair, Dame Angela. I wish to add three points to the excellent speech by my hon. Friend the Member for Feltham and Heston. The Minister knows that I am a fan of his work. In many ways, I wish that the Government had seen fit to appoint him as a Minister some years ago. If that had been the case, perhaps we would not be the talk of the world when it comes to money laundering and kleptocracy, but here we are, and the Minister is trying to make progress and we should support him in that endeavour.
The Minister said some significant things that I want to probe him on. First, I think he told us that 15% of overseas entities are still not registered. At the end of January, the estimate was that something like 30,000 or 32,000 overseas entities needed to be registered. At the end of January just 19,000 had registered. He told us that that number has now gone up to 27,000. The implication is that there are still 15,000 overseas entities that are not registered. Will he reassure us that that very large number of overseas entities are not all organisations that have dissolved or moved on, and update us on how many overseas entities are still in business and have not met the deadline?
The Minister made a second admission. If 19,000 had registered at the end of January and we are now up to 27,000, there are 7,000 or 8,000 that registered late, yet I think he told us that there has not been a single prosecution. That is an extraordinary admission. What kind of signal does that send to kleptocrats around the world—that if they want to join the ranks of the thousands of overseas entities that cannot be bothered to comply with laws in this country, they will get off scot-free? The Committee would be sympathetic if the Minister held up his hands and said, “We just do not have the resources to enforce the rules,” and of course that would be true. That is why many of us are continuing to press him to use the Economic Crime and Corporate Transparency Bill, which is in the other place, to ensure that there is a registration fee that provides a proper supply of finance to tackle the outrageous level of money laundering and kleptocracy that is centred on the City of London.
The final point, which I would be grateful if the Minister could enlighten us on, is about how the penalty regime that he set out tackles the problem of rogue proxies. Let us say that someone wanted to buy a £24 million house, which is the average cost of a house on Britain’s most expensive street, Phillimore Gardens. Very often, they would buy it through a company, which may well be registered in the British Virgin Islands, and may then be owned by a trust that is held in another tax haven, but it may be controlled by proxy directors who are somewhere else. If the penalty regime that the Minister set out takes aim at the entities, the risk is that the proxy directors get away scot-free. As my right hon. Friend the Member for Leeds Central said, it may well be impossible to carry on trading with entities under the regime that the Minister set out, but it may well still be possible to continue trading with proxy directors or the individuals who sit behind those proxy directors.
Finally, the Minister might also want to tell us how he is getting on with cracking down on tax abuse and bad behaviour in our overseas territories. I think there was some opposition in some of the overseas territories to the introduction of registers such as this one. If we are to crack down on the absence of beneficial ownership registers here in this country, as he is seeking to do, we want to ensure that our overseas territories are not simply a back door through which bad people can do bad things.
Kevin Hollinrake
It is a pleasure to respond to the important points raised in the debate. The shadow Minister, the hon. Member for Feltham and Heston, asked when the draft regulations come into force. The date they come into force is 21 June. Companies House will be able to impose financial penalties from that date forward. On warning letters, on different occasions Companies House has written to entities that have not registered—to the property of the address they own or to the service address provided to the registry.
The right hon. Member for Birmingham, Hodge Hill asked about the number of overseas entities that are not registered. We estimate that there are 32,000 entities and that 29,000 are now compliant, so it is 3,000. We think that a significant number of those might not have received the communications and might not be deliberately not co-operating. It is important that any enforcement action taken is proportionate. That is what Companies House is there for.
The right hon. Gentleman also made an important point about resources. As he knows, I am totally aligned with him on ensuring that Companies House has the right resources. We are undertaking a body of work with Companies House to determine what resources it needs and how we apply the right registration or incorporation fee—it will be a higher fee than the current £12. There are also annual fees—recurrent fees—for filing, which can also be used to ensure that Companies House has the right level of resources. We think that that is the horse before cart approach; we are seeing what resources it needs for this and its other work to ensure that the register is accurate.
The shadow Minister mentioned the £2,500—the daily fine for the failure to update offence. The other fines for failing to register are much more significant. The bands I set out earlier are based roughly on council tax bands: A to C will be the £10,000 fee, D to F £20,000 and G to H £50,000. That fine would apply to each property in the portfolio. If we imagine a portfolio of three properties in the mid-range, that would be an initial fine of £60,000, which could be doubled subsequently for non-compliance. The fines are not insignificant and we think that they are at the right level to encourage compliance.
The shadow Minister also made a point about the 750 who have provided the details as required by Companies House, in which they basically say that they no longer hold the properties—the properties have been disposed of—and we therefore feel they are compliant. The 28 days is the time to respond; that was the response time required after the request by the registrar.
On the proxy directors, I understand the point made by the right hon. Member for Birmingham, Hodge Hill, but that does not obviate the requirement for the beneficial owner to be named. Whatever proxy directors there might be, the requirement is for the beneficial owner to be named in any circumstance. That is in existing ownership or future ownership. Someone cannot technically hide behind the proxy director without being guilty of a false filing offence.
Liam Byrne
I am grateful for the clarification. Will the Minister also clarify whether, if the penalty regime stops people trading with an unregistered overseas entity, they could still trade with a beneficial owner who was standing behind an entity based overseas that had not fulfilled its obligations?
Kevin Hollinrake
Either way, if it were an entity established now or in future, it would be in breach of the legislation—it would be breaking the law by doing that, by not declaring who the beneficial owner was, in any circumstance. Whether that is through shareholders or directors, it is about the person with significant control. That person does not even have to have a shareholding to be a beneficial owner or a person with significant control, if they exert influence by other means. The legislation is in the right place, though enforcement is a different matter, of course, and we must ensure that the relevant enforcement agencies have the resources they need.
The final point was on concerns about trusts. The Economic Crime and Corporate Transparency Bill, which is going through the Lords, includes some additional mechanisms to ensure that we get behind trusts so that they are not used as a vehicle for non-compliance or to avoid the rules. His Majesty’s Revenue and Customs has a great deal of information that is not publicly available for good reason—some people have trusts to protect individuals, such as minors.
To conclude, the draft regulations will complement the measures in the Economic Crime (Transparency and Enforcement) Act 2022 to ensure that the register is as effective as possible. I commend them to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023.
Energy Bills Discount Scheme Regulations 2023
Energy Bills Discount Scheme (Northern Ireland) Regulations 2023
Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023
Energy Bills Discount Scheme Pass-Through Requirement Regulations 2023
Energy Bills Discount Scheme Pass-Through Requirement (Heat Suppliers] Regulations 2023
(1 year, 7 months ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)
I beg to move,
That the Committee has considered the Energy Bills Discount Scheme Regulations 2023 (S.I. 2023, No. 453).
The Chair
With this it will be convenient to consider the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 (S.I., 2023, No. 454); the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 (S.I., 2023, No. 464); the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 (S.I., 2023, No. 463); and the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (S.I., 2023, No. 455).
Amanda Solloway
It is a great pleasure to serve under your Chairmanship, Mrs Latham. The regulations were laid before the House on 25 April 2023, and I will refer to them collectively as the EBDS regulations.
The Government responded decisively to the unprecedented rise in energy prices caused by Putin’s brutal invasion of Ukraine by delivering critical bill support to households, businesses and other non-domestic energy consumers. More than £7 billion of support has been delivered by the energy bill relief scheme alone. That equates to approximately £35 million a day, and it has helped many businesses to keep the lights on.
The Government’s emergency legislation paved the way for the support package to be delivered rapidly across the entire United Kingdom. The Energy Prices Act 2022 was introduced in Parliament on 12 October 2022 and provided the legislative footing needed to ensure that the Government could deliver much-needed support to UK businesses through the energy bills discount scheme.
These regulations are needed to implement and operationalise the energy bills discount scheme. That follows the energy bill relief scheme, which ended on 31 March, and it ensures continuity of support to cover energy consumed between 1 April 2023 and 31 March 2024. Although wholesale energy prices have fallen since their peak, many consumers may still be exposed to higher bills and be in need of support, and the scheme takes that into account. The purpose of the regulations is to reduce the charges for electricity and gas supplied by licensed and licence-exempt energy suppliers to eligible non-domestic customers, and to make payments to suppliers in respect of those reductions in Great Britain and Northern Ireland.
Each statutory instrument is a replacement for an earlier set of regulations that implemented the original EBRS. They ensure that any end user receiving energy that is supplied with the benefit of these schemes through an intermediary will get a “just and reasonable” share of that benefit. Without such intervention, non-domestic customers would no longer be provided with support. Instead, they would be exposed to the full impact of high wholesale market prices. In order to protect all eligible customers from excessively high energy bills, the EBDS will run for a 12-month period from 1 April 2023 to 31 March 2024.
I will now turn to the detail, starting with the Energy Bills Discount Scheme Regulations 2023.
Dan Carden (Liverpool, Walton) (Lab)
I want to raise an issue that has come up a number of times in my constituency. Residents in social housing are having to pay more for the electricity and gas that fuels things in communal areas, such as lighting. That is because housing associations have to buy that at a commercial rate. They then pass the cost on to residents, and sometimes it is four or five times higher than the rates that residents pay for their personal energy consumption. Is there anything in the regulations to address that? If there is not, will the Minister write to me to say whether the Government are going to do anything about the extortionate rises for residents in social homes in my constituency?
Amanda Solloway
I thank the hon. Member for that good point. I will come on to exactly what this Bill is hoping to address, but I encourage him to write to me. I am also happy to have a face-to-face meeting.
I turn to the detail. The regulations set out that, with a few exceptions, all domestic customers with electricity and gas contracts from both licensed and licence-exempt non-domestic energy suppliers will be eligible for a discount when the wholesale element of their contract is above a certain level. Licence-exempt supply includes energy taken from the public electricity or gas grid, or received via wire or pipe from a licence-exempt provider, where the customer is charged prices pegged to wholesale prices.
The Energy Bills Discount Scheme regulations for Great Britain and the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 provide for three elements of the scheme for end users of licensed suppliers, and the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 replicate them for end users of licence-exempt suppliers.
The first element is a baseline per-unit discount applicable to all non-domestic customer energy bills throughout the scheme’s duration. That discount will be applied if wholesale prices are above a certain price threshold.
The second element is that a higher rate of relief will be provided to non-domestic customers that carry out a substantial part of their UK activities in certain energy and trade-intensive sectors, following a review of the operation of the previous energy bill relief scheme. Those industries have been identified as being less able to pass through their increased energy costs to customers because of international competition. As with the baseline element of the scheme, the discount is applied if wholesale prices are above a certain level.
Kevin Brennan (Cardiff West) (Lab)
I thank the Minister for giving way. I raised this in the House some time ago at business questions. Am I right in saying that the energy-intensive element will cover things such as libraries, museum activities, the operation of historical sites and buildings, and similar visitor attractions such as botanical and zoological gardens, but not recording studios, which use a great deal of energy and are subject to international trade and competition? If that is the case, why is the Minister favouring making penguins eligible but not Arctic Monkeys?
Amanda Solloway
I thank the hon. Gentleman for the question. I know of his keen interest in production studios, because we have had conversations about this before. This is for the energy and trade-intensive industries that will be receiving the additional payment. However, I am of course really happy to have a conversation, and I can assure him that I have been meeting with all stakeholders to discuss such matters.
The EBDS regulations cover the process by which the energy supplier is reimbursed by the Secretary of State for discounts that it gives. The EBDS (Northern Ireland) regulations prevent end users who are outside Northern Ireland from receiving the discount to their bills.
The EBDS regulations cover essential operational matters, including information and reporting obligations, enforcement powers and powers to impose civil penalties in respect of missing or defective declarations. The EBDS (Non-Standard Cases) regulations support the operation and delivery of grant funding to customers that receive gas or electricity from licence-exempt suppliers. They provide the Secretary of State with powers to obtain information from those involved and imply some terms into the contracts to help the scheme work more smoothly. Additionally, the regulations allow for revised EBRS terms, which expand eligibility under the EBRS to include the cohort of non-standard customers who receive their licence-exempt energy via private wire or pipe at a price pegged to wholesale rates.
The Energy Bills Discount Scheme Pass-through Requirement Regulations 2023, the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 and the EBDS (Non-Standard Cases) regulations require certain intermediary businesses—often landlords—that receive a benefit under the scheme, but in turn provide energy to others, to pass a just and reasonable amount of the benefit that they receive to their end users.
The regulations set out obligations on the intermediary, including calculating the amount, providing end users with information about that, and passing on the benefit, as soon as reasonably practicable. They also set out the dispute mechanisms available and provide for a robust enforcement and compliance regime.
The Chair
Order. We have a Division. If Members will come back as soon as possible, I will suspend this sitting until the Division is over and we are all back.
Amanda Solloway
To conclude, the EBDS will be a source of critical support for non-domestic customers in the UK, particularly those in energy-intensive sectors, many of which are essential to the national infrastructure. These regulations are crucial for the establishment and effective operation of the schemes. The scheme complements the existing large-scale support that the Government have provided during the energy crisis. I hope the Committee will support the measures and their objectives.
Dr Alan Whitehead (Southampton, Test) (Lab)
We have been around these houses quite a few times, between us. I cannot remember exactly how many SIs we have had on the energy bill support scheme pass-through requirements—the non-domestic element of the original scheme—but I think it is well into double figures. During that period we have debated a whole range of things relating to those SIs, both positive and negative. The overwhelmingly positive aspect of the SIs has been that they provide the support people need for their bills in these times of great uncertainty and difficulty.
Today we are debating five SIs, which, secure the energy bill discount scheme for non-domestic businesses in Great Britain and Northern Ireland for a further year. The Minister will not be surprised when I repeat my concerns about the likelihood of some people getting the money they are entitled to, in view of the requirements of the SIs. She will recall our discussions about whether there should be a strict legal liability on the intermediaries responsible for the pass-through arrangements. There has been a further development in the arrangements for the energy ombudsman to become involved in matters of dispute, but he or she has no legal recourse to enforce payments. We still lack a strict legal liability for those whom the legislation makes responsible for passing through payments to the right people. I do not think we will profit greatly by having a long debate about that— I do not think we will resolve it further—but I note that I am still not entirely satisfied.
I am puzzled about how the new scheme fits in with paragraph 5 of schedule 6 to the Energy Prices Act 2022, which provides for reduced energy charges for non-domestic customers in Great Britain. It is right that the secondary legislation should concern itself with a one-year scheme, particularly for non-domestic customers, bearing in mind that the contracts they enter into do not fall strictly within any particular six-month period. One problem we had in our previous discussions about non-domestic customers was that someone might take out a contract for a non-domestic service that started before the support period and finished halfway through it, or that they might take out a contract halfway through the support period that finished outside it. There could be problems at either end. Those issues seem to have generally been resolved, but a period of a year is a more approachable proposition.
The Energy Prices Act sets out a two-year window within which support is to be provided, and states that that support
“may only provide for the reduction of charges for electricity supply that takes place during a period of six months or less;”.
As the explanatory notes to the Energy Bill Discount Scheme regulations state,
“The EBDS takes us up to the end of the third of the four successive periods.”
That means that the Act envisages a maximum of two years in four different tranches of six months. It then states:
“Support under EBDS will be provided for a year (divided into two six month periods), reflecting the limits in the Act.”
Dividing the support into six-month periods reflects the limits in the Act, but it does not make it clear—it is certainly not clear in the secondary legislation that we are debating—whether the superior legislation so limits the provision of support for a period of six months or less that putting forward a proposal that support should be provided for one year does not necessarily count, for legislative purposes.
It may be perfectly in order for the Government to set an aspiration that support should be for one year, but that may not necessarily accord with what the Act says. In order to make that right for a year, we may have to be here, yet again, in six months’ time re-legislating for the second of those two six-month periods.
I would like to know whether today’s proceedings really will be the last word on that support, or whether the proposal for a year’s support is an aspiration that will require us to go around the houses with legislation in six months’ time. If the Minister can clarify that, I will be very happy to support these regulations. In fact, I am happy to support them for the reasons I have outlined; I will not make my support conditional on the Minister’s doing that, because I am sure it will take some clarification. It is important, however, that we make it clear that we have finished legislating to give that certainty, and that as a result of today’s proceedings, we have put to bed for another year the question of price support for non-domestic customers.
Kevin Brennan
It is a pleasure to serve under your chairship, Mrs Latham. I want to go back to a point that I made in an intervention on the Minister and emphasise that I am a little bit befuddled about why particular sectors have been chosen over others. I have read the impact assessment and the explanatory notes, and I have tried to work out why that should be the case. I am focusing on recording studios because I take an interest in and have some knowledge of them, although my questions may well apply to other sectors.
I asked the then Secretary of State for Digital, Culture, Media and Sport on 26 January 2023 about support for the financial viability of recording studios. They have been through some very difficult periods, particularly after covid. I give credit to the Music Producers Guild for their work, and to the Government for their response, to try to enable studios to work through that period. The Minister of State, Department for Culture, Media and Sport, the hon. Member for Hornchurch and Upminster (Julia Lopez), responded to my written question with the sorts of support that might be available, and she said—this is the bit that is pertinent to today’s SIs:
“Since then, the Government announced a new Energy Bills Discount Scheme to help support businesses, like recording studios, to tackle rising energy costs.”
The Minister said, in terms, in her answer, which was submitted at 14.38 on 26 January 2023, that this scheme would be of assistance to recording studios.
I suppose that in a broad sense we could say that about any business, because in the baseline support that the Government are offering, pretty much any business —and, indeed, other non-domestic energy consuming organisations—could be eligible for support under the scheme if energy prices rise above a certain threshold. For the most part, however, that is not what is anticipated in the impact assessments or the explanatory notes, because it is expected, although we cannot be certain, that prices will not rise to a threshold sufficient to trigger that support. That is why the new scheme will offer a lower level of support than was previously available to businesses.
The implication of the DCMS Minster’s answer was that recording studios would be supported, however, and it would seem that that is not the case. As I indicated earlier, although there is no list in the impact assessment or the explanatory notes, if we dig around a bit we can find a list of industrial sectors that will be eligible for the energy and trade-intensive industries scheme under these SIs. I hope that it is up to date; the Minister for Energy Security and Net Zero can correct me if I am wrong. It is a very long list, and it includes all sorts of things that we might expect, such as the mining of hard coal, the manufacture of sugar, the manufacture of beer, the manufacture of other knitted and crocheted apparel, the manufacture of ceramic household and ornamental items, the cold rolling of narrow strip, the processing of nuclear fuel and the casting of steel.
I have worked in the steel industry myself, and I understand why such sectors are likely to be supported. Then there is a sequence of activities eligible for this higher level of support, including the list that I mentioned in my intervention earlier. They include things like libraries, archive and museum activities, the operation of historical sites and buildings and similar visitor attractions, and botanical or zoological garden and nature reserve activities. I am sure that those sectors will be very pleased to be eligible to apply for the higher-rate scheme; that is the one that is not automatic—it has to be applied for. However, I do not understand why those particular sectors are eligible but recording studios are not.
I took the all-party parliamentary group on music to the AIR recording studios in north London some months ago. Just to provide some context, that is one of the largest recording studios in the country; it is along the lines of Abbey Road. It was founded by the late, great Sir George Martin. It is a very major earner of export currency for this country, and a very major consumer of energy; by their very nature, recording studios have a lot of equipment that uses a lot of energy. Furthermore, human beings work in them so they have to be kept cool.
I will give an example. While we were there at AIR studios, we witnessed preparations for a major orchestral session. It might surprise some hon. Members to know that the session was to record not a piece of classical music or even a film score, but the score for a video game. That video game was being produced by Sony. In the control room during our visit, there was an executive over from Los Angeles, visiting AIR to help to set up the whole of that recording session. I asked that executive, “Why would you come to London to do this? You could do it in Los Angeles or in some other jurisdiction. This is not cheap. All of these people are union members. These are very expensive facilities you’ve got here.” His answer, which I think should encourage us all, was, “Because it’s the best place in the world to do this. We like coming here, and we know that what we get here will be of the highest quality.”
Those activities are significant for our trade figures. There is an industry that makes a significant impact on our trade figures—one of the few industries in the country that is a net exporter and earner of foreign currency. We are one of only two countries in the world of which that is true in relation to the music industry. It spends millions and millions of pounds yet is ineligible under the Government’s scheme, despite the high energy costs involved in running a major recording studio of that kind, that we are discussing here today in relation to these statutory instruments.
What I want to understand from the Minister—[Interruption.] I hope the in-flight refuelling will help her explain this to me. What I want to understand is why she would not include recording studios if these other cultural-type businesses are included. All the energy-intensive manufacturers are included on the list and the cultural activities, such as libraries, archives, museums, historical sites, visitor attractions and botanical and zoological gardens, all qualify, but recording studios do not.
If the Minister was able to give me an answer to that question, it might help me to decide to support what, apart from what I have pointed out, could be seen as reasonable actions by the Government to support businesses with their difficult energy bills.
Amanda Solloway
I thank hon. Members for their contributions to this debate. First, I address the question of whether these instruments are the end of the legislation in this area. I sincerely hope so. However, if there is anything to add when we meet tomorrow, I will of course let the hon. Member for Southampton, Test know, but it is very much my clear understanding that they are the end.
I turn to the point made by the hon. Member for Cardiff West about the music industry. I understand his great passion. He indicated very clearly why the industry is so important to the whole United Kingdom. He mentioned that he is very proud of our music industry—I am as well. I will attempt to explain the reason why we have these schemes. If I am unable to give a full enough explanation, as always I will be happy to offer a further meeting. Within the discount scheme, there is the universal level, which I believe is the level originally mentioned by the Department for Digital, Culture, Media and Sport Minister, my hon. Friend the Member for Hornchurch and Upminster. On that level, support will be given across all of the non-domestic industry. That is my understanding of the support that the music industry will be receiving.
Clearly, the energy-intensive industries needed more support based on the energy that they use, and the fact that a lot of the work is international was also taken into account. The list that the hon. Member for Cardiff West referred to was the standard industrial classification list, known as the SIC list. That is the standard that we used to define the energy-intensive industries that were to have the additional discount. If I have not explained that fully, I am happy to have a meeting with the hon. Member at a later date.
Dr Whitehead
The Minister mentions the so-called SIC list. That is an interesting list in so much as it provides, as my hon. Friend the Member for Cardiff West said, a number of categories of energy-intensive industries. Some of those categories are very narrowly drawn, and some are very widely drawn. His point, at least in part, was that some of the categories within the energy-intensive classification for the higher level of funding are very tightly drawn, and therefore they come into that level, whereas others are very widely drawn.
I mentioned the discrepancy between ornamental or leisure gardens and horticulture, which is often very intensive, and between horticulture and agriculture. Clearly, agriculture is outside the energy-intensive industry classification, but because horticulture is classified within agriculture it does not get in, even though it has similarities with things in the energy-intensive list. I wonder whether the Minister will find time, at some stage, to look at the SIC list to see whether it does the job that we think it does when it comes to ensuring that people get the assistance. Energy-intensive industries should be well enough drawn to ensure that we do not have the sort of anomalies that my hon. Friend the Member for Cardiff West thinks we have.
Amanda Solloway
The hon. Gentleman makes an interesting point about the SIC list. That is obviously the list we are using at the moment. We have taken a consistent approach to identifying the most energy and trade-intensive sectors with all the sectors that meet the agreed threshold to be eligible for this support. The Government are committed to continuing to provide essential energy bill support to eligible UK businesses, charities and public sector organisations until April 2024, to help avoid unnecessary financial pressures and job losses resulting from the ongoing situation in the wholesale market.
In addition to the baseline discount for all non-domestic consumers, the new scheme also provides, as we have discussed at length, much-needed targeted support for energy and trade-intensive industries and consumers on heat networks. That additional support will ensure that those most exposed to volatile energy prices and international trade are supported while limiting the fiscal burden on the taxpayer. The methodology ensures that the scheme captures those industries that have been identified as being less able to pass through their increased energy costs to customers because of international competition, as demonstrated by the level of trade intensity, and require an additional level of support. The pass-through requirement sets out how the benefit is passed on to end users in a reasonable and just way. The delivery of this calculation has been designed to ensure that it is not prescriptive but supports all scenarios.
By replicating existing civil enforcement mechanisms, we hope to avoid any complications for end users and provide clarity on how disputes can be raised. My Department has published clear guidance on gov.uk, both for intermediaries and for end users, that provides detailed information to help those affected. We are keen to ensure that all end users, including those who are vulnerable, receive the benefits of the schemes to which they are entitled. We will continue to review our pass-through requirement communication strategy, including reviewing guidance on gov.uk and offering engagement sessions to ensure that intermediaries understand their obligations and that customers receive the benefits to which they are entitled. I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the Energy Bills Discount Scheme Regulations 2023 (S.I. 2023, No. 453).
ENERGY BILLS DISCOUNT SCHEME (NORTHERN IRELAND) REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 (S.I., 2023, No. 454).—(Amanda Solloway.)
ENERGY BILLS DISCOUNT SCHEME (NON-STANDARD CASES) REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 (S.I., 2023, No. 464).—(Amanda Solloway.)
ENERGY BILLS DISCOUNT SCHEME PASS-THROUGH REQUIREMENT REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 (S.I., 2023, No. 463).—(Amanda Solloway.)
ENERGY BILLS DISCOUNT SCHEME PASS-THROUGH REQUIREMENT (HEAT SUPPLIERS) REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (S.I., 2023, No. 455).—(Amanda Solloway.)
Draft Medical Devices (Amendment) (Great Britain) Regulations 2023
(1 year, 7 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Health and Social Care (Maria Caulfield)
I beg to move,
That the Committee has considered the draft Medical Devices (Amendment) (Great Britain) Regulations 2023.
It is a pleasure to serve under your chairmanship, Mr Stringer. Medical devices are currently regulated by the Medicines and Healthcare products Regulatory Agency in the United Kingdom, which helps to ensure that they are safe and perform as intended. The past few years have been a time of great change for medical devices. The covid pandemic saw huge advances in life sciences and diagnostic tests, and the UK’s decision to leave the EU has presented a great opportunity to strengthen our regulatory regime. We in this country are lucky to have a dynamic and pioneering medtech sector, and the MHRA is a renowned regulator with an established track record of innovation-friendly regulation.
The main objective of the instrument is to give the medtech sector additional time to transition to our post-EU exit regime for medical devices. To achieve that, it extends the time during which manufacturers and importers can place CE-marked medical devices on the GB market.
Since January 2021, to place medical devices on the GB market, manufacturers have had the choice of either following the UK route to market introduced after the UK’s exit from the EU and marking their devices with a new UKCA mark, or following EU legislation and affixing a CE mark. Without this statutory instrument, that flexibility would cease on 30 June 2023, and manufacturers would only be able to follow the UKCA route. That would impact an estimated 11,000 businesses that have registered devices with CE marking and not UKCA marking. To be clear, this instrument has no impact on medical devices already on the market with a UKCA mark.
The MHRA is working to implement an extensive reform to future regime medical devices, and the intention is that that core aspect will be applied from July 2025. Therefore, this SI will give the industry flexibility to continue to use CE or UKCA markings on medical devices until that date. This instrument will not only help to minimise any loss of medical devices from the market, but will ensure that patients can continue to access safe, high-quality medical devices and to smooth the transition to future regulatory requirements until 2025.
I will summarise some of the key changes. First, the instrument provides that medical devices compliant with the medical devices directive or active implantable medical devices directive with a valid declaration and CE marking can be placed on the GB market up until the expiry of the device certificate or 30 June 2028, whichever is sooner. Secondly, in vitro diagnostic medical devices compliant with the EU IVD directive can be placed on the GB market up until the sooner of the expiry of the device certificate or 30 June 2030.
Thirdly, medical devices, including custom-made devices, compliant with the EU medical devices regulation and IVDs compliant with the EU IVD regulation can be placed on the GB market up until 30 June 2030. That is in keeping with the Government’s response to the consultation on the future regulation of medical devices in the United Kingdom, which took place from September to November 2021.
By supporting these regulations, we can help to ensure that patients and the wider public benefit from continued access to quality, safe medical devices, that the UK therefore remains an attractive market for manufacturers of medical devices, and that the wider medtech industry has adequate time to prepare for transition to the future regulatory framework for medical devices planned for 2025. I commend the regulations to the Committee.
Karin Smyth (Bristol South) (Lab)
It is a pleasure to serve under your chairmanship, Mr Stringer. This is one of those fairly innocuous-looking SIs that hides a multitude of problems and incompetence. Many people in our constituencies rely on these medical devices—some 600,000 every day—so it is important that they remain available on the UK market.
The Minister did not outline the range of devices that we are talking about. This is not some technical issue; devices range from blood tests to wheelchairs, contact lenses and scalpels. I am sure that hon. Members have all taken a chance to look at the list of non-invasive, invasive, surgically invasive and active devices. I will not delay the Committee by detailing all of them, but it is a long list, so it really is shocking that we are here once again. Although we have plenty of time, the Committee is being rushed by the Government to approve the draft regulations as some sort of last-minute extension of the existing regulations to mitigate the Government’s failure over exiting the European Union, some seven years after the vote. We are talking about plasters today, so the draft regulations are opportune: yet another sticking plaster over the problems that the Government have encountered and their inability to negotiate a settlement that took account of these important devices.
We will support the draft regulations because, without them, people across our country would suffer greatly from not having access to things coming on to the market and so on, but we need to ensure continuity of supply. I have a number of questions on which I hope the Minister will be able to shed some light, because I am sure she does not want to have rushed, unquestioned legislation. Turning to paragraph 7.3 of the explanatory memorandum, it would be helpful if the Minister could provide some detail on the steps being taken to build the approved body capacity to meet the demand for UK conformity assessments. With regard to paragraph 6, can the Minister share any details on the “significant amendments” that we should expect to the UK medical devices regulations, which have been discussed in this place before? Any details would be very welcome, because it is not only patients who could be affected if we fail to extend the legislation.
The Minister alluded to the number of businesses involved in this work, but manufacturers of these devices—both in the EU and here in the UK—need to have some sort of certainty. The lead-in time for some of this work is massive, as is the research and development capability needed to produce the devices. This last-minute rush is no good for businesses, and although the Minister tried to say that the draft regulations provide certainty, we contend that extending them for another few years, without a clear indication of the route to the full UKCA marking, does not provide certainty. Beyond the consultation, what conversations are the Government having with manufacturers to ensure that we have some realistic timescales about the future? As I said, this is a real worry for our constituents as well as medical professionals, people involved in prescribing the devices and those accessing them.
In paragraph 13.3 of the explanatory memorandum, the Government indicate that they do not
“expect a significant cost impact on small and/or micro businesses”,
because the draft regulations are a continuation of the “status quo”. Again, that is not good enough, because it contradicts the statement that the extended period is a “transition”. I am sure we all know that small businesses operate on tight margins. It is difficult to run a small business, so small businesses would welcome further details about what action will be taken to assist them in transitioning from CE marking to UKCA marking. I understand that there may be working groups looking at this issue, which is to be welcomed, but it would be very welcome if the Minister could inform us about that point.
It is vital that we get this right as we look to the future, so I ask the Minister: what is the Government’s long-term plan to ensure the success of the UKCA regime for medical devices? If this is the route we are going down, we want to make it a success. If the Minister could indicate—[Interruption.]
Karin Smyth
To complete the point that I was making, we are interested in what the Government’s long-term plan is to ensure the success of the UKCA regime for devices.
It would also be helpful if the Minister indicated the Government’s view on alignment. What is their intention for future alignment with the EU? Is it their intention for us to be aligned with anyone but ourselves? What impact will that have on our future businesses?
The extension of acceptance of CE-marked medical devices will act as a transition, and we would all welcome clarification from the Minister of what that transition will look like. What steps will the Government take, in the time that we are allowing them, to support the manufacturers and supply chains that are indispensable to all those who rely on medical devices, to support jobs, and to preserve our global reputation for research, innovation and high standards?
Patrick Grady (Glasgow North) (SNP)
I will echo a lot of what we have heard from the hon. Member for Bristol South on the Labour Front Bench; there were some very fair points, well made. These innocuous-looking regulations actually cover a very wide range of devices, many of which our constituents find essential for going about their daily business and daily lives.
Here we are, in a Commons Committee Room, not taking back control, not doing things differently, but extending regulations that have already been in place and operating very successfully across the European Union for many years—but now with the added Brexit bonus of all the bureaucracy and resources necessary to approve a statutory instrument that has the effect of maintaining the pre-Brexit status quo. I am sure that that is what all the Conservative Back Benchers who campaigned so hard for Brexit were looking forward to when they were out knocking doors and then found themselves elected to this place. The necessity of these regulations demonstrates exactly the kind of policy and legislative cliff edge that the Government were repeatedly warned about, particularly as they brought forward the Retained EU Law (Revocation and Reform) Bill, which of course they are now having to retreat from in the face of amendments made by the House of Lords.
The Minister says that the Government want to bring forward their own framework for regulating medical devices, so perhaps she can give us a preview of her vision for that and how it will diverge from the European Union’s. Will the United Kingdom have higher standards than the European Union for the production and manufacture of medical devices? I am sure that she will also want to reassure us that the Government have absolutely no intention of allowing poorly made, poorly tested or otherwise substandard devices to enter the UK market, and certainly not as part of any trade deals that they might be looking to make with non-European countries.
In the meantime, we will have to continue to consume time and energy and much passion—as is visible on the Conservative Back Benches here today—dealing with these kinds of extensions, carry-overs and all the rest, because Brexit has not been the great liberation that was promised. It has made many aspects of life more difficult, more complex, more bureaucratic and more precarious for many people—particularly, in this case, people who rely on access to medical devices and want confidence in and assurance of the quality of what they are going out to access through the NHS or on the UK market. The statutory instrument is yet another example of how Brexit has not lived up to any of the promises that were made.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
These are hugely significant regulations. As co-chair of the all-party parliamentary group on surgical mesh, I want to focus my contribution on vaginal mesh.
The Minister will be aware of how medical devices have harmed and disabled tens of thousands of women, leaving them in excruciating pain and unable to live the lives that they lived previously. It has been a national scandal. I recognise a previous Prime Minister’s interest in this area: the right hon. Member for Maidenhead (Mrs May) commissioned the work by Baroness Cumberlege that culminated in the report entitled “First Do No Harm”, which looked at the scandal of the use of vaginal mesh. It feels like the regulations could have been an opportunity to address some of the difficulties that her report found.
As I said, the use of vaginal mesh, due to the plastic that it is made from, has harmed tens of thousands of women. I know that the Minister is aware of the issue, because I have corresponded with her at length on it. The use of mesh was suspended in 2018, but the problems inherent then are still inherent now. The yellow card system for reporting difficulties with medical devices still is not working in the way it should, and not enough women or people are aware of it. There is concern that some medical devices are being approved based on previous approvals and therefore they are going through on the nod, without the detailed scrutiny they require.
The Government could look at creating a database of everyone with permanently implanted medical devices, including details of the device type, so that they could be tracked. We have a system at the moment whereby many different medical devices are used in our bodies. The women I have been referring to were treated like guinea pigs. These products were tested inside them and then, when they reported problems, they were ignored and belittled. There was no way of identifying the exact type of medical device that was inside each woman. No information was available about the composition of the plastic that was used.
Paragraph 6.9 of the explanatory memorandum is about the MHRA’s public consultation on the future regulation of medical devices. Are we going to start looking at barcodes or tracking numbers on devices that are put inside people, so that when someone reports a problem they can be told, “Okay, we know exactly what you have inside you and exactly what it is made of,” and we can therefore identify groups of women, in this case—or of anybody—that have been impacted by the specific device?
Another issue is how to report a problem with a medical device. At the moment, it is a lottery what ends up inside you, because different things are approved, and it is a lottery whether you are told about the yellow card system and how to report. In the future regulation of medical devices, are we looking at an automatic reporting system where people are given the information? Personally, I want to get rid of the yellow card system altogether. Those are the kinds of questions that I would like the Minister to respond to.
Maria Caulfield
I will do my best to respond to the points made by hon. Members. The hon. Member for Bristol South asked a number of questions. She is right: there is a long list of devices, which fall into various classes of device that the MHRA regulates, and there are different rules for the different types of devices. The MHRA has taken a wide-ranging approach in consulting with the industry and the medtech sector. The consultation that was developed between September and November 2021 is still being looked through. That is why we have this SI: because the MHRA has taken on board some of the concerns and suggestions of the industry.
The final regulations will be operational from 2025. We have set that date so that we have a lead-in period, and then a transition time up to 2030. The MHRA regularly engages with trade associations, for the very reasons that the hon. Lady set out. The recent consultation received more than 900 responses. The explanatory memorandum includes a contact at the MHRA; any industry people listening who have concerns or suggestions and did not manage to take part in the consultation can still make contact with the MHRA, which will be able to give guidance and support on the plans. When we are further down the road to 2025, the MHRA will issue guidance to the industry as well.
Further regulations will be introduced later this year in relation to the long-term changes, and we will keep Members updated on that. This is a big change and the MHRA is doing a significant amount of work in this space. It is taking steps to ensure that, in implementing the further changes to medical devices regulations, it has the capacity and capability to continue to perform, as it always has, to the highest level, putting patient safety first but supporting the industry as well.
The hon. Lady talked about future realignment. As part of our wider work to reform medical devices regulation and take advantage of Brexit opportunities, we will make provision for alternative routes for medical devices to reach the GB market. That will involve possible recognition of devices with approval from other trusted regulators. We will keep Members updated on that as we work towards it.
Emma Hardy
I am concerned about the point about other trusted regulators. Different countries have completely different rules for medical devices. I will not mention vaginal mesh again, but the rules in the USA are quite different from those across the European Union. The community would be incredibly concerned if we were to accept other countries’ criteria for what is considered safe or not. I hope that the Minister will explain that we will have a stricter and more thorough system for regulating what goes inside our bodies.
Maria Caulfield
I take the hon. Lady’s point, and that is exactly the point that I wanted to make: we want to have the safest regulations possible. However, that does not close the door to recognising the work of other regulators. As I say, we will keep Members fully informed of those decisions as we go forward.
I know that this is slightly out of scope, Mr Stringer, but on the use of mesh, that was done while we had the existing EU regulations for CE-marked devices. There is now the possibility to track devices—they have barcodes on them—such as breast implants or replacement hips, and we have certainly accepted almost all the recommendations of the Cumberlege review, which looked specifically at mesh. I do not wish to test the Chair’s patience by going outside the scope of the draft SI, but that is why it is important that when we set the new UK mark, we learn lessons from the past. The CE mark has served us well, but there were instances of safety being compromised.
Emma Hardy
I thank the Minister for giving way again, and I thank you, Mr Stringer, for your generosity. Will the Minister indulge me by commenting quickly on the yellow card system and on how people can report more effectively?
The Chair
Order. I have allowed the debate go beyond the scheduling and timing of the draft regulations, because I did not want to restrict it, but if hon. Members now focus on what the statutory instrument says, that will be helpful.
Maria Caulfield
Absolutely, Mr Stringer. I am happy to follow up on the yellow card outside the Committee, because it is outside the scope of the regulations.
The aim of the draft regulations, as we move away from the CE mark to the UK mark, is to give businesses time to transition to the new regulatory regime, which we are planning to introduce in 2025, with some transitional arrangements after that date. The MHRA is working hard with industry and is in regular contract with trade associations. We want to make the transition as smooth as possible, and the draft SI will allow the sector leeway so that we can introduce the changes at pace.
Question put and agreed to.