Draft Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment) Regulations 2023
(6 months, 3 weeks ago)
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The Minister of State, Department for Levelling Up, Housing and Communities (Rachel Maclean)
I beg to move,
That the Committee has considered the draft Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment) Regulations 2023.
Good morning, Mr Robertson; it is a pleasure to serve under your chairmanship. Laid before the House on 20 July, the draft regulations amend the Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) Regulations 2012 and, by increasing planning application fees by 35% for major applications and by 25% for all other applications, will provide much-needed additional income to local planning authorities. Importantly, the regulations introduce, for the first time, an annual inflation-related increase, so that fees retain their value in the future, year on year, and they give local planning authorities greater certainty.
The measures in the regulations are widely welcomed by the industry. They are designed to boost the income to local authorities. We expect local authorities, in turn, to invest that income in their planning services to improve the speed and quality of their decision making.
To state the obvious, it costs money to run the planning application service. At the moment, the cost of the service is more—by an estimated £225 million across England—than the income from the fees charged. That means that local taxpayers have to contribute to dealing with the shortfall, while those who stand to benefit the most could be paying a greater share. Planning fees have reduced in value over the five years since the last increase, in January 2018, while the costs and demands on local planning authority budgets have increased. The regulations will address the issue by ensuring that applicants for planning permission contribute a higher proportion of the estimated £675 million cost of the application service, reducing the burden on the local taxpayer.
As well as reducing the shortfall, the regulations will create greater sustainability for local planning authorities when the annual increase comes into effect from 1 April 2025. Local planning authorities will be able to use the additional income to procure more resources, including planning officers and other specialists, which will enable them to provide an improved service to applicants. That will benefit the whole of society as good planning decisions are made more quickly, enabling development to proceed without unnecessary delay.
Respondents to our consultation on proposals to increase fees were generally supportive. They acknowledged that local authorities needed more funding, and supported higher fees, with the important caveat that that should lead to improvements in planning performance.
I will now turn to the details. First, the regulations introduce a much-awaited national fee increase of 35% for major applications and 25% for all others. The maximum fee for a large planning application will be £405,000, up 35% from £300,000. Fees for householder applications will rise from £206 to £258, an increase of 25%. The regulations also introduce an annual inflation-related increase in fees from 1 April 2025. That will be at the rate of the consumer prices index from the previous September. To prevent the annual increases from becoming too onerous, they will be capped at a maximum of 10%. This measure will ensure that fees do not lose their real-terms value.
In addition, the regulations remove an existing fee exemption that allows applicants, in certain circumstances, to submit a second application without having to pay another fee—colloquially known as the “free go”. The removal of that exemption will enable local planning authorities to charge for repeat applications, which will help to fund their costs for dealing with the applications, which we know are a demand on their resources.
Furthermore, the regulations reduce the planning guarantee period for non-major applications from 26 weeks to 16 weeks. That means that, in most cases, if their application is not determined after 16 weeks and no extension has been agreed, the applicant will be entitled to a full refund of their planning fee. That measure is intended to encourage faster decision making, which applicants will expect as a result of paying higher fees.
Lastly, the regulations introduce a new prior-approval fee of £120 for the permitted development right for development by the Crown on a closed defence site. That right was introduced through an amendment to the general permitted development order in December 2021 and requires that a fee be paid for prior-approval applications.
We estimate that the fee increase will raise an additional £65 million for local planning authorities in the first year. In future years, from 1 April 2025, income will increase further, as the annual inflation-related rises take effect. That will provide much-needed income to local authorities. Some may consider that this is not the time to be increasing fees, since there are considerable financial pressures on businesses and householders, but if we do not increase fees, the planning application service will continue to deteriorate, to the detriment of applicants and the wider economy.
We need to find a way to get more resources into the system. The fairest way is for applicants, who stand to benefit the most from planning decisions, to contribute more toward the costs to local planning authorities of delivering the service. We consider our approach to be proportionate, with the greater burden falling on applicants for major developments, who, as I said, largely welcome these measures and are considered more likely to be able to bear a larger increase. That leaves householders and small businesses, who are more sensitive to higher fees, with a smaller increase. Together, the increases will provide additional income for local planning authorities.
The regulations do not introduce any new fees for applications for which there is currently no charge, such as applications for listed building consent, and they retain the existing exemptions, including for alterations to homes to provide facilities for a disabled occupant. I can reassure hon. and right hon. Members that we estimate that, in most cases, the cost of the planning application will still be less than 1% of the overall development costs, so we do not consider that it will be a burden or deter development.
The regulations do not contain any requirements for the additional fee income to be formally ringfenced. Hon. Members will note that we proposed in our consultation to ringfence the increase, and that proposal was strongly supported by some respondents. However, the primary legislation—section 303 of the Town and Country Planning Act 1990—requires a fee to be charged so that local planning authorities can perform the function of determining planning applications. As there is no surplus to planning fee income, there is logically no underspend that could be used to cross-subsidise other services. The Committee will note that there may be cases where other services are ringfenced. That is usually because they make a surplus; it is a different category of funding in this case.
We have made it clear to all local authorities that they are expected to retain the income from planning fees for direct investment in their planning services, and we will reiterate that expectation after the regulations are made. We recognise that the circumstances of each local authority are different. In line with our general approach to simplification of funding, which is widely welcomed by local authorities, we believe that our approach strikes the right balance.
Valerie Vaz (Walsall South) (Lab)
On a point of clarification, how many responses did the Government get to their consultation, as a percentage?
Rachel Maclean
I thank the right hon. Member for that point. I will have to write to her about that, if she will allow me.
As I was saying, local authorities have made it clear that they want and need this income so that they can build up the capability and capacity of their planning services and improve their performance. We expect them to do so, and we know that that is what applicants will expect in return for paying higher fees.
We need a planning system that supports appropriate development and functions effectively. The regulations will provide a welcome financial boost to local planning authorities, on top of the additional spending that we have already awarded to them through our planning skills delivery fund and other measures. These measures will generate additional income year on year. Local authorities will be able to invest the extra money in their planning services, including in staff and in digitising the service to make it fit for the present day and to improve their performance. Local authorities will be able to budget with more certainty and build up their capability and capacity.
I hope that Members will join me in supporting the draft regulations, which I commend to the Committee.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
It is a pleasure to serve with you in the Chair, Mr Robertson. I thank the Minister for that explanation of the instrument before us.
We welcome the regulations, which, as we heard, increase the fees payable for major and non-major planning applications for the first time since 2018, add an annual inflation indexation of those fees, and make changes to both fees payable for repeat applications and the planning guarantee period for non-major applications.
Local authorities play an instrumental role in efforts to meet housing need and demand, yet many are struggling to fulfil their responsibilities due to a lack of capacity, capability, skills and resourcing in their planning departments. As a report published last year by the House of Lords Built Environment Committee put it, we face an “evolving crisis”, with local planning authorities under-resourced and consequently unable to undertake a variety of skilled planning functions effectively. The resources dedicated to planning within local authorities, which were never particularly high by international standards even before 2010, have fallen dramatically over the past 13 years, primarily as a result of local authority belt tightening in response to central Government funding cuts.
The “Planning for new homes” report published by the National Audit Office in February 2019 found that between 2010-11 and 2017-18 there was a 37.9% real-terms reduction in net current expenditure on planning functions by local councils. Even when the income that authorities generated from fees, sales and charges or transfers from other public authorities was considered, the report concluded that total spending on planning had fallen by 14.6% in real terms between the dates in question—from £1.125 billion to £961 billion. Given that context, I would be grateful if the Minister could tell the Committee whether the Government are considering any other means, beyond the fee increases provided for by this instrument, to provide local authority planning services with additional funding.
Although the fee increases provided for by the regulations will not compensate fully for the sharp real-terms reductions in funding that authorities have had to cope with over recent years, they do have the potential to help enable local planning authorities to better deliver the service that applicants and the public rightly expect. I use the word “potential” deliberately, because there is a justifiable concern that increased revenue from planning application fees will not necessarily be allocated to planning departments or lead to improved performance. Although there is both a clear expectation and a requirement in primary legislation for planning fees to be used by local authorities to perform the function of determining planning applications, in practice many councils use planning fee income, despite the lack of surplus, to cross-subsidise other services. If they did not, the Government would never have felt the need even to consult on ringfencing in their “Increasing planning fees and performance” technical consultation earlier this year.
As such, what further assurances can the Minister provide today that the Government’s expectations—and ours—and the statutory requirements in respect of revenue generated from planning fees will be adhered to? In addition, can she confirm that the Department plans to begin actively monitoring how planning fees are generated and used, and evaluating whether they are having a beneficial impact on performance?
I would also be grateful if the Minister could provide further clarity on what other steps the Department is taking to ensure that local planning authorities are improving their performance. When the other place considered these regulations last week, Baroness Swinburne, speaking for the Government, referred to “a new framework” that will measure local authority performance across
“a wider set of criteria to ensure that local authorities are delivering on all fronts, for all users of the system.”—[Official Report, House of Lords, 17 October 2023; Vol. 833, c. 141.]
Can the Minister tell us when that new framework is expected to be put in place?
Lastly, increasing fees by the proposed amount or in isolation, even if supplemented by other funding sources, will almost certainly not be enough to address the capacity and capability issues faced by local planning authorities. As the Minister knows, difficulties in recruiting and retaining principal planners, and a shortfall of specialist skills, is another significant challenge. Although the Government have seemingly abandoned the proposals in the 2020 “Planning for the future” White Paper for a comprehensive resources and skills strategy, the policy paper that accompanied the Levelling-up and Regeneration Bill committed Ministers to bringing forward a planning skills strategy. Can the Minister tell us whether the Department still intends to publish one, and if so, when?
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
I rise briefly to raise concerns about the statutory instrument. Very often we sit on these Committees and wave things through without giving them proper consideration, but there are two issues that I wish to raise with the Minister.
The first is the issue of proportionality, which the Minister used to make a case in favour of the regulations. I would argue that the scale of the fees increase is potentially disproportionate, particularly on individuals who bring planning applications and those who may need to bring repeat applications—for example, those who live in conservation areas or those who run into challenges with planning officers and the system.
Secondly, there is the point raised by the hon. Member for Greenwich and Woolwich about ensuring that fees are tied to improved performance. Over the last week we have seen flooding throughout the country, and it has been very severe in my constituency and elsewhere in Suffolk. The failure of planning authorities in both Mid Suffolk and East Suffolk to adequately consider the impact of flooding and sudden storms on the drainage system exacerbated the problems that we experienced last week. Homes have been ruined, and we have seen many businesses closed for a long time.
As a result, there are concerns about the calibre and quality of the planning systems in place in Suffolk. If we as a Committee are going to support an increase in fees, we need reassurances about the improvements that will be put in place to ensure that local planners do their jobs more thoroughly in future. I have not heard anything from the Minister that reassures me on that.
On the issue of proportionality in the fee increases, of course the Minister is right that larger developers can absorb these fees, but households that are making individual applications for an extension or to make modest changes to their home—perhaps to adapt it for somebody they need to care for or an older relative—will potentially face a substantial increase in fees as a result of this measure, particularly if they bring repeat applications.
The Minister said that the fee scheme had accounted for that, and that there would not be a disproportionate burden on individuals who bring applications and the burden would fall on big developers. Can she outline what that will mean in percentage terms and what additional protections will be put in place for individuals bringing applications of a very modest nature about their own home? The danger is that if fees become disproportionate, people who need to adapt homes to care for an older relative or a disabled child, for example, will not be able to afford the cost of bringing an application.
If the Minister cannot reassure me on both those points, I would support the Opposition in voting against the regulations if they sought to divide the Committee.
Rachel Maclean
I thank Members for their contributions to the debate, and I will respond to the questions raised.
I can tell the right hon. Member for Walsall South that the consultation received 495 responses.
The hon. Member for Greenwich and Woolwich asked me about ringfencing. I set out in my opening remarks how we have approached this matter. We believe that our approach is the right one. As I said, the response we have had from local authorities on our overall strategy of funding simplification indicates strongly that local authorities want to see a simpler picture for funding the essential services that they provide to their residents and businesses. That is why we have taken this approach. As the hon. Gentleman acknowledged, primary legislation already requires a fee to be charged so that local planning authorities can perform the function of determining planning applications. There is no surplus to planning fee income, so there is logically no underspend that could be used to cross-subsidise other services, which means that ringfencing is not necessary.
We have been very clear with local authorities that they are expected to retain the income from planning fees for direct investment in their planning services, and we will reiterate that direction once the regulations are made. It is worth observing that in my considerable engagement with local authorities, the Local Government Association and others, they have all been very clear that they need this funding, they must spend it on planning and they intend to do so. That is the clear expectation.
Valerie Vaz
I have two points to make. First, I would like the percentage of the number of consultations that were returned—was it 1% or 100%? Secondly, how will the Government monitor whether local authorities are actually using the fees for the purposes intended?
Rachel Maclean
I will be happy to respond to the right hon. Lady on that point, but can I clarify what she means by the percentage? I am not quite clear on her question.
Valerie Vaz
The civil servants have helpfully given the answer that there were 495 responses to the consultation. What was the percentage of returns? Was that a 1% return of the total number of people who were consulted, or was it 100%? Is it 495 of 495? What is the percentage?
Rachel Maclean
I think what the right hon. Lady is asking is whether it was a binary choice either for or against ringfencing. Is that right?
Valerie Vaz
No. There are two separate points. The point about the consultation is that there were 495 responses, but how many people were consulted? What is the percentage—was it a 1% return or a 50% return? On a separate point, the Minister helpfully said that local authorities have to spend the fees on planning and planning officers. How will the Government monitor whether they are doing that? The intention and the direction are there, but how can the public—my constituents—be reassured that that money will not be used for other purposes?
Rachel Maclean
I will respond to the right hon. Lady’s second point, as I understand that question very clearly. I think it is better if I write to her on the first question. My understanding is that there were 495 responses, but I do not know how many people were actually asked. I think she is asking for a response rate—
Rachel Maclean
We may be able to provide a further breakdown and further detail on those responses, and what they were in favour of and against. I am sure we can provide that information to the right hon. Lady and any other Committee member who is understandably interested in that.
The point about planning performance is really important. It is feedback I always hear from industry and householders, as my hon. Friend the Member for Central Suffolk and North Ipswich has mentioned. Planning performance is an issue that is raised time and again. My overall conclusion and response is that when people are applying for these services, although they expect to get a good service, they have not always had that, which has led to overall dissatisfaction with the system. It also has a knock-on effect on the public’s confidence in the planning system more generally, which leads to a lot of the other issues that we see time and again. I am sure all Members have messages in their inbox about these sorts of issues, which are common across the country.
We recognise that the current metrics on planning performance, including the use of extensions of time, do not adequately reflect the performance of local authorities. We recognise that they do not capture the consumer experience either. We have therefore recently consulted on proposals to measure performance across a broader set of quantitative and qualitative measures, providing greater transparency of service delivery and enabling early action where local authorities are not performing. We will come forward with further details on those measures in due course.
Separately to that, my Department and civil servants in the relevant team have very granular information on local authorities’ performance in this area—as well as a number of other areas, of course—on which they regularly report to me. On that basis, other Ministers and I are able, where necessary, to exercise our functions and powers to intervene and to remove planning powers from local authorities, although we obviously only want to do that as a last resort. However, we do expect local authorities to be providing these services to their residents, which we monitor.
Before I come to my hon. Friend the Member for Central Suffolk and North Ipswich, I will address the point about funding raised by the hon. Member for Greenwich and Woolwich. As he rightly said, we have made available to the profession additional capacity funds, amounting to £54 million, to enable more planners to come into the profession. Also, on the back of the Secretary of State’s long-term plan for housing announcement this summer, we made £24 million available to the planning skills delivery fund. Local authorities will be able to use that fund to speed up planning applications and ensure that services flow faster, and that any backlogs are dealt with.
Dr Poulter
I remember bringing forward statutory instruments quite a few years ago. If we had a statutory instrument to improve performance, it was customary to introduce it at the same time as the SI that allocated extra funding for that improvement. I ask the Minister to reflect on the point that it is bad legislating to do what she is doing today—to bring forward one SI, but fail to bring forward another that is linked to it that has to do with an ambition for the future.
Rachel Maclean
I thank my hon. Friend for his point, and the feedback is noted, but what I was talking about regarding planning performance is a policy decision that we are in the process of making. I am sure that further legislation will come forward in due course.
Matthew Pennycook
I appreciate the Minister’s giving way. She has provided some useful additional clarity on performance and funding. May I press her on greater transparency, and the Department’s monitoring of how the increased planning fees are used? Does it monitor how fees are generated and used by planning authorities across the country? If not, will it start to, and will it actively track whether the increased fees are contributing to the improved performance that we all want?
Rachel Maclean
Yes, I can assure the hon. Gentleman that that is one of the core activities that I carry out in my role, with the assistance of my civil servants and various teams that feed into this. I have already spoken about our powers to intervene where local authorities are not performing. On top of that, we expect that the additional funding that we are giving through the separate funding pots that I referred to, and this new broader funding, will be spent, and we can track performance. Notwithstanding the challenge put to me by my hon. Friend the Member for Central Suffolk and North Ipswich, we intend to bring forward details of how we will track performance. I know that every Member in this House is very interested in how their local authority performs on planning applications, because we are often the first to receive complaints when they not performing well.
My hon. Friend has indicated his concerns about the disproportionate impact of the fees. I obviously take that on board, and we have considered that carefully; that is why the fee for householders will rise only from £206 to £258. We consider that to be proportionate, given the need. Planning services do not make a profit from fees; the services are still subsidised through wider funding. It is not a cost-recovery fee. Applicants still benefit from what they pay, even with the increase. He raised the point about people making modifications for disabled residents of a property. They will still be exempt. The current set of exemptions will still apply, so people in that situation will rightly not be charged; he is right to say that.
Dr Poulter
The issue going forwards is that fees will be linked to inflation. That is of concern, because with compound increases, fees can rapidly escalate for people making modest modifications. Will people making smaller applications, such as single households making an application for an extension, now have to pay repeat fees if they have to go back and forth with the planning authority, and submit a second, third or even fourth application, as often happens if a house is in a conservation area?
Rachel Maclean
The changes that we are making have removed the “free go”; we debated that in the House in proceedings on the Levelling-up and Regeneration Bill. We made that change because the free go placed a disproportionate burden on planning departments, and added to their overall workload.
It is really important to look at this small increase in the round. We are talking about increasing capacity and providing a better service across the board. I have recent experience of making a planning application to my local authority, so I know how much work is involved. When people pay a fee, they want to get a good service. If we resource the system as a whole to a greater extent—I hope Members will be reassured, both by this instrument and by the other grants that we have mentioned, that we are doing that—small householders building an extension will see a better service overall, and that should minimise the need for repeat applications. The idea is to capture everything up front.
It is also important to note that we are embarking on an ambitious programme to digitise the whole system. Members will know how paper heavy the system is now. That is where mistakes creep in and things need to be repeated. By improving the whole system overall, we will remove the need for repeated applications and, I hope, provide a fairer service.
My hon. Friend the Member for Central Suffolk and North Ipswich asked me about flooding, so I will touch on that before I wind up. We have all seen the recent events, which I know have affected his area greatly. All our sympathies are with the people affected, and I hope that they can be back in their homes soon. He will know that the national planning policy framework—the planning system more broadly—already takes account of flooding. Work has been done on this matter by my colleagues in the Department for Environment, Food and Rural Affairs, particularly in setting up the Flood Re scheme and making sure that planning applications and local plans are made with flooding in mind.
We will be going further. My hon. Friend will know of the work that we have done through the national development management policies; we debated again yesterday on the Floor of the House when considering the Lords message how the planning system responds to climate change, of which flooding is one manifestation. We have been clear that we intend to strengthen our approach, to give planners and the country the reassurance that the planning system can respond adequately to climate change and help us achieve our net zero objectives.
Matthew Pennycook
The Minister has missed out one of my questions. Will we see the planning skills strategy that was promised in the policy paper that accompanied the Levelling-up and Regeneration Bill?
Rachel Maclean
I understand the hon. Gentleman’s eagerness to see that, and we will bring it forward in due course. If he will allow me, I will write to him with more details on the timeline.
I thank Members for their interest in this matter. I must reiterate that it is critical that we have well-resourced, effective and efficient local planning services so that development is not delayed. We need to build the right houses for our country, in the right places, and planning is critical to that. The regulations will contribute to that by delivering much-needed additional resources. As I hope I have said multiple times, we are clear that local planning authorities must invest the additional income from the increase in planning application fees in their planning service. Improvements will enable speedier delivery and the economic growth that our country needs. I hope the Committee will welcome these important and necessary regulations.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) (Amendment) Regulations 2023.
Draft United Kingdom Internal Market Act 2020 (Services Exclusions) Regulations 2023
(6 months, 3 weeks ago)
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The Minister for International Trade (Nigel Huddleston)
I beg to move,
That the Committee has considered the draft United Kingdom Internal Market Act 2020 (Services Exclusions) Regulations 2023.
The statutory instrument, which was laid before the House on 20 July, will help to ensure that seamless internal trade is maintained for the shared prosperity and welfare of people and businesses across the nations of the United Kingdom. It will enable effective operation of services regulations in the United Kingdom by adding, amending and removing service sectors excluded from the market access principles in part 2 of the United Kingdom Internal Market Act 2020. I will cover both the purpose and the impact of the instrument, starting with the former.
The UK internal market plays a vital role in maintaining equality of opportunity and certainty for businesses, no matter where they are in the UK. It does so by ensuring that there is an internal market in which the free flow of goods and services is protected across the whole United Kingdom. The UKIM Act was introduced to preserve the United Kingdom’s internal market as powers previously exercised by the EU were returned to the UK. The Act establishes two market access principles—mutual recognition and non-discrimination—in relation to goods and services.
The principle of mutual recognition means that service providers, such as businesses, that meet authorisation requirements to provide their service in one part of the UK can provide their service in other parts of the UK without having to comply with any additional authorisations or requirements.
Sir Greg Knight (East Yorkshire) (Con)
Paragraph 3.2 of the explanatory memorandum produced by the Minister’s Department states:
“Welsh Ministers consented to the instrument. However, consent from all Devolved Governments has not been provided within the period of one month…the Secretary of State may make the instrument without that consent.”
Could the Minister tell the Committee why that consent was not forthcoming? Was it to do with opposition to any part of the policy, or was it more to do with incompetence?
Nigel Huddleston
I thank my right hon. Friend for that comment. I am not here to speak on behalf of the devolved Administrations, but he is correct. I will come on to legislative consent in a moment. It is probably not unusual. I will not speak on behalf of the SNP but I understand that, while we have been co-operating and engaging with the devolved Administrations throughout, some of the opposition is more to do with the broader aspects of UKIM than the specifics of this statutory instrument. I will return to that in a few moments.
The other market access principle, the non-discrimination principle, prevents service providers from being discriminated against based on where they are in the UK. For example, if a regulator were to require a service provider to pay a higher fee because they were from another UK nation, that would be discriminatory.
The Act’s market access principles will apply only to new or substantively amended authorisation or regulatory requirements for providing services introduced after 31 December 2020. For example, a new licensing requirement for accountancy services would be in scope of both the mutual recognition principle and the non-discrimination principle of the UKIM Act if it were enacted on or after that date. However, service sectors listed under either or both parts of schedule 2 on services exclusions related to mutual recognition or non-discrimination are not in scope of those market access principles. Additionally, the market access principles do not apply where the requirement is a response to a public health emergency or has a legitimate aim, as set out in the Act.
There is a power under section 18(2) of the UKIM Act to amend schedule 2. During the Act’s passage, the Government committed to review and further develop the list of services exclusions after the Act received Royal Assent. That commitment was made because the list in schedule 2 is mainly based on exclusions in the most relevant pre-UKIM Act regulatory framework, the Provision of Services Regulations 2009, which is retained EU law. The exclusions in schedule 2 were therefore based on the sectors originally excluded with intra-EU trade in mind, rather than intra-UK trade.
In February 2021, the former Department for Business, Energy and Industrial Strategy publicly consulted on whether the existing service exclusions were fit for purpose in a post-EU exit context. The consultation had three main aims: first, to establish whether there were any instances in which regulators had previously disapplied the existing mutual recognition requirement to recognise authorisations under the previous retained EU law; secondly, to establish whether any other changes needed to be made to the services excluded in schedule 2 to better reflect the UK’s circumstances post EU exit; and thirdly, to ask for any other ways in which the internal market for services could be further strengthened.
Following the Department’s assessment of the consultation responses, including engagement with other Departments and the devolved Governments, this technical statutory instrument will make the following changes. First, it will add exclusions from the mutual recognition principle for services for the supply of gas, electricity and water, sewerage and waste sector services, services for the construction and operation of heat networks, and qualifications-awarding services. The change will mainly reflect how those sectors currently operate. The exclusions will maintain the status quo in areas where mutual recognition was not already in operation to reflect long-standing regulatory arrangements in the UK.
Without those exclusions, for example, regulators in the gas and electricity supply sector would not be able to regulate as they have done previously, as they would have to accept authorisations from another part of the UK. Evidence from the consultation responses highlighted that that could have a harmful impact on those sectors, causing consumer protection and public safety issues, due to the different standards and systems in parts of the UK. Not making those modifications to the existing exclusions schedule could also lead to higher regulatory costs, as it could instigate market framework changes that industry is not prepared for.
Secondly, the SI will amend the existing exclusion relating to social services. The change will not alter the scope of the exclusion, but will provide clarity that it applies to children’s social care and childcare services provided by both public and private providers.
Finally, the SI will remove the existing exclusions for financial services, electronic communications services, statutory audit services, postal services and services of temporary work agencies. Our view is that exclusions are not needed in areas where the UKIM Act market access principles will have little to no impact on how a service is actually regulated or provided in the UK because the sector is either reserved or already operates on a UK-wide basis. Removing the exclusions and making the services in question subject to the mutual recognition and non-discriminatory principles should have little impact on how they are provided in the UK. Details on these changes can be found in the Government response to the consultation, published in July 2022.
My officials have worked collaboratively and transparently with the devolved Governments and their counterparts on this policy over the last two years. I thank the devolved Governments for their engagement and for sharing the public consultation with their stakeholders. We received responses from stakeholders operating in Scotland, Wales and Northern Ireland, and we have continuously engaged with Ministers and officials in the devolved Governments on the proposals. We adapted the policy based on their feedback in cases where the evidence supported the changes and the integrity of the UK internal market was not undermined.
We sought the consent of the devolved Government Ministers to this instrument, as required under the Act. We have not received consent from the Scottish Government or Northern Ireland, but I am happy to report that the Welsh Government provided formal legislative consent. Under section 18(10) of the UKIM Act, the Secretary of State may make the instrument without consent from all the devolved Governments so long as an explanatory statement is published to state why they are proceeding without such consent. The Secretary of State for Business and Trade published a written statement on the Parliament website on 20 July—the same day this instrument was laid—explaining why the changes are being made without consent from the Scottish Government or the Department for the Economy in Northern Ireland.
Following an extensive public consultation and engagement process, I can assure Members that the instrument will ensure that the services exclusions in schedule 2 to the UKIM Act are appropriate and effective. The changes reflect how these services are currently provided and regulated in the UK. I commend the draft regulations to the Committee.
Rushanara Ali (Bethnal Green and Bow) (Lab)
It is a pleasure to serve under your chairmanship, Ms Elliott. I want to start by thanking officials for their hard work in trying to create the best possible outcomes from a difficult starting point. Members will be aware of the tortuous route that has led to this moment. On Second Reading, my hon. Friend the Member for Manchester Central (Lucy Powell) called it the “infernal market Bill”, and I am sure she spoke for a lot of people in doing so. However, we are where we are.
Two principles should guide us, and the Minister has referred to them. One is that we must support the various trades and businesses specified in the statutory instrument, from audio-visual to medical and healthcare services and legal and notarial services. This panoply of service-based businesses is essential to the functioning of UK plc. Each, in a way, helps the country to tick over, and they are essential to the growth and prosperity that we desperately need in our economy and have been lacking for too long. The UK internal market is crucial to ensuring equality of opportunity, preventing discrimination and ensuring certainty for business and mutual recognition, no matter where businesses or services are located in the United Kingdom.
Even where some of the trades listed in part 1 of schedule 2 to the UKIM Act might require close regulation and transparency—for example, debt collection and gambling services—those businesses have a right to operate under the law, with proper regard for ethical considerations, and they need to be covered by the wider framework without friction in terms of their operation. We wish to see all the services listed in part 1 free from unnecessary barriers to trade within the United Kingdom.
The second principle is that we support devolution within the framework of the United Kingdom. It was the last Labour Government who accelerated the devolution settlement, which has served us well for over two decades. Devolution is a process, not an event, as the late, much missed Donald Dewar dubbed it, but it must never be a process that leads to the break-up of the United Kingdom. The UK remains stronger for its unity between Scotland, Wales, England and Northern Ireland, and nothing should endanger that. We do not support anything that creates unnecessary barriers to trade within the United Kingdom. As such, we will not oppose the Government on this matter, but we will keep a close eye on the real-world consequences for businesses in the coming months and years.
The Minister said that there has been some dialogue with the devolved Governments but there are outstanding issues. I urge the Government to seek consent from all the devolved authorities, to ensure that we maintain unity and fluidity throughout the UK internal market and that there is proper co-operation and dialogue between our Government and the devolved authorities.
Richard Thomson (Gordon) (SNP)
It is a pleasure to serve under your chairship, Ms Elliott. As the Minister said, my party did not support the United Kingdom Internal Market Act. The powers that ought to have gone to devolved Governments in the aftermath of Brexit —which, again, we did not support—seem to have found themselves stuck in Westminster, largely due to the Act. Many of our fears have been borne out in the way that the Act has operated, particularly with regard to how the UK Government have used it to interfere utterly unjustifiably in things such as a simple deposit return scheme. That is not how we would wish an internal market to work, and the Act has not helped in that respect.
The lack of legislative consent motions is largely academic. I say that for two main reasons. First, the UK Government have shown over the last few years—this one have, anyway—that even if they do not have a legislative consent motion, they will just go ahead anyway. Secondly, in this case, as the Minister said, there has been constructive engagement with the devolved Administrations, even if some issues remain. Nevertheless, I welcome the fact that there has been constructive engagement.
I draw Members’ attention in particular to two areas—heat regulation and the exclusion of the education sector, particularly qualifications-awarding services—where the UK Government have recognised that there are sound policy objectives for having different regulatory approaches in different parts of the UK. I very much welcome that. Of course, it is well known and well understood that Scotland and the rest of the UK have different education and qualification systems, and—if I may be so bold as to say so, Ms Elliott—long may that remain so. Next time the Minister has the ear of the Prime Minister, who has been talking enthusiastically about his British baccalaureate, which he wishes to replace A-levels, he might wish to try to prevail on the Prime Minister to refer to it as what it is: an English baccalaureate. We will be keeping our system in Scotland, so long as the internal market Act does not get in the way of that.
Nigel Huddleston
I should say, Ms Elliott, that it is a pleasure to serve under your chairmanship for the second time.
I thank hon. Members for their contributions to the debate. Revisions of the UKIM Act, as we have just seen, naturally bring up historical opposition, for reasons that I think we all understand, but I hope that the regulations will be considered on their own merits in relation to protecting the UK internal market. As the hon. Member for Gordon mentioned, there has been constructive dialogue, which is much appreciated, and there have been changes to this SI as a result.
This instrument is a direct result of a public consultation, and therefore a rare amendment to the exclusions list, following the intention to make the scope of the UKIM Act better to support intra-UK trade. I trust that hon. Members recognise the need for the instrument, and I assure the Committee that the Government are more committed than ever to facilitating a workable system of domestic services trade that achieves our strategic business and trade objectives. We believe that the instrument will foster exactly that outcome, making the internal market arrangements for the UK services sector simpler and more workable in a post-EU context.
I will endeavour to pass on the message that the hon. Member for Gordon asked me to pass on next time I have a brush-by with the Prime Minister, or perhaps he can do so himself—but that is probably straying slightly beyond the scope of the regulations. I thank hon. Members again for their contributions and commend the regulations to the House.
Question put and agreed to.