Oral Answers to Questions

Kelly Tolhurst Excerpts

Tuesday 8th January 2019 Commons Chamber

[Toby Perkins (Chesterfield) (Lab)]

3. What assessment he has made of the effectiveness of the pubs code and the Pubs Code Adjudicator.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

We will be undertaking a statutory review of the effectiveness of the pubs code and the Pubs Code Adjudicator. I welcome the recent publication by the adjudicator of arbitration decisions, which will increase transparency in relation to how the code is working in practice.

[Toby Perkins]

At a recent meeting of the all-party parliamentary group on pubs, we heard from many tenants who had attempted to avail themselves of the “market rent only” option under the pubs code, but whose attempts had been frustrated. Will the review to which the Minister has referred involve a full and open consultation to which members of the public will be able to contribute, and which we will all be able to read afterwards?

[Kelly Tolhurst]

I recognise the hon. Gentleman’s commitment to this issue. We are currently working out how we will carry out the review, and, under statutory regulation, we need to do that until the end of March. Of course we understand some of the concerns that have been raised by people who have been affected; we will take account of their views, and I will ensure that those views are heard.

[Dr Sarah Wollaston (Totnes) (Con)]

As the Minister will know, in the case of tenanted pubs the rent is partly set according to the volume of beer sold. However, there is a long-standing grievance about a discrepancy between the amount of drinkable beer in a cask and the volume of the cask itself. Will the Minister meet me—and some of my constituents, who are deeply concerned about the issue—to discuss the “72 pints” campaign?

[Kelly Tolhurst]

We recognise that a number of issues affect the pubs community. The Government have taken some important measures relating to beer duty and business rates to help pubs, but I should be happy to meet the hon. Lady and her constituents to discuss the position.

[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

Between April and September 2018, 33 pubs a week closed and were either demolished or converted to homes or offices. The pub industry is in free fall, and communities are suffering as they see their vital community hubs diminished. What strategy, if any, have the Government to secure a long-term sustainable future for the industry?

[Kelly Tolhurst]

The Government have taken action to secure the future of pubs. We have frozen beer duty, with the result that a regular pint of beer is 2p cheaper than it would have been if we had increased the duty in line with inflation. We have offered the business rate discount to retail properties, and we estimate that 75% of pubs will be eligible for it. That has cut pubs’ bills by a third for two years. We recognise the importance of pubs to our local communities, and we are taking action. For instance, as I have said, we will be reviewing the pubs code and the success of the Pubs Code Adjudicator.

[Danielle Rowley (Midlothian) (Lab)]

4. What steps he is taking to support new renewable energy technologies.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

T3. The Financial Reporting Council identified six areas that warrant further inquiry in PwC’s administration of Premier Motor Auctions, but delegated that inquiry to the Institute of Chartered Accountants in England and Wales—a trade body with limited powers. Will the Minister agree to meet me to ensure that this and any other insolvency practitioner issues are properly investigated?

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

It is right that the FRC refers any concerns it has relating to the insolvency case to the ICAEW, which is a recognised professional body that regulates insolvency practitioners. In this case, I understand that the ICAEW has considered the issues put forward and is investigating a number of matters. I will happily meet my hon. Friend to discuss this issue again, as I already have. It is right that we investigate any concerns that British businesses have about the regulations.

[Mr Clive Betts (Sheffield South East) (Lab)]

T2. Fracking activities in Lancashire have recently had to be suspended because earth tremors triggered the traffic lights system. As a result, the Minister has said that she is now looking at whether that system should be relaxed. Will she tell us what she is thinking, and will she give us an assurance that there will be full consultation with all stakeholders before any change is made, and that the matter will be brought back to this House for the approval of Members?

[Peter Aldous (Waveney) (Con)]

T4. With the high street undergoing a period of significant upheaval, will the Secretary of State confirm that he is working closely with the Chancellor and the Secretary of State for Housing, Communities and Local Government to ensure that high street businesses are able to compete on a level taxation playing field with their online competitors?

[Kelly Tolhurst]

We continue to work closely with the Treasury and the Ministry of Housing, Communities and Local Government to ensure that the needs of high street retailers are understood. In the 2018 Budget we announced a reduction in business rates worth £900 million over two years for small businesses. The digital services tax, a 2% tax on revenues specific to digital businesses, will ensure that they pay tax reflecting the value that they derive from UK users. We have also established the Retail Sector Council, which has now decided on its future work programme, as part of which business costs and taxation are one topic being considered.

[Laura Pidcock (North West Durham) (Lab)]

New research from the TUC shows that household debt is at its highest ever level, with average debt per household now at over £15,000. It is blatantly obvious that the cause is years of austerity and wage stagnation. Millions of workers are now reliant on borrowing, making up for low wages by increasing their debt—not for holiday or luxuries, but through using credit cards for everyday essential such as nappies and food. That is so stressful. Will the Minister please explain what the Government are doing to address this crisis, and why Conservative Members refuse to join the Labour party in advocating a real minimum wage of at least £10 an hour and a return to serious collective bargaining for workers in the UK?

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[Will Quince (Colchester) (Con)]

T6. Thank you, Mr Speaker. Will my right hon. Friend join me in welcoming the £900 million cut in business rates announced at the most recent Budget, which will benefit thousands of small businesses up and down our country, including in Colchester?

[Kelly Tolhurst]

I am delighted to join my hon. Friend in welcoming this recent measure, which has benefited small businesses so well. We have cut corporation tax to 19%. As a result of cuts made by this Government since 2017 through the small business rate relief, over 655,000 small businesses—the occupiers of a third of all business properties—pay no rates at all.

[John Spellar (Warley) (Lab)]

T5. I am sure Ministers understand that the new Euro 6 diesel engines are considerably more efficient and cleaner, and that encouraging uptake of diesel vehicles would be good for the environment, with both cleaner air and less carbon dioxide emissions. However, production of vehicles is down, partly because of the downturn in China and uncertainty over Brexit, but also because of the damaging, self-promoting anti-diesel campaign by the Secretary of State’s ministerial colleagues at the Departments for Transport and for Environment, Food and Rural Affairs. What is he going to do to get Government policy back on track in support of the British motor industry?

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[Marion Fellows (Motherwell and Wishaw) (SNP)]

The Association of Accounting Technicians’ recent survey found that 73% of MPs agreed with its recommended changes to the prompt payment code, which are making the code compulsory, ensuring that larger businesses pay in 30 days and implementing a penalty regime. Will the Minister introduce those changes in legislation, to help the many small businesses that will benefit?

[Kelly Tolhurst]

I thank the hon. Lady for her question. As she will know, we launched the call for evidence in October, and it finished in November. We are reviewing the evidence presented. In October we made announcements to underpin, secure and make better the prompt payment code. The small business commissioner has delivered £2 million of collections for small businesses over the first year in his position. We will continue to work to ensure that small businesses get the payments they need when they should.

[Maggie Throup (Erewash) (Con)]

Prior to Royal Assent for phase 2b of High Speed 2, will my hon. Friend consider establishing a cross-departmental taskforce with the Department for Transport, to provide businesses that are being forced to relocate with the necessary advice and support, including financial support?

Business, Energy and Industrial Strategy

Kelly Tolhurst Excerpts

Monday 17th December 2018 Ministerial Corrections

The following is an extract from the Third Delegated Legislation Committee on 5 December 2018.

[Kelly Tolhurst]

We have also assessed—working with the CMA, obviously—that the CMA might have to deal with between 15 and 30 extra merger cases over a year.

[Official Report, Third Delegated Legislation Committee, 5 December 2018; c. 9.]

Letter of correction from the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst):

An error has been identified in the response I gave to the Committee:

The correct response should have been:

[Kelly Tolhurst]

We have also assessed—working with the CMA, obviously—that the CMA might have to deal with between 30 and 50 extra merger cases over a year.

Draft Postal and Parcel Services (Amendment Etc.) (EU Exit) Regulations 2018

Kelly Tolhurst Excerpts

Thursday 13th December 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft Postal and Parcel Services (Amendment etc.) (EU Exit) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mr Rosindell. The draft regulations were laid before the House on 29 October. The Government are confident that an agreement on the EU exit will be achieved, but we must be prepared for all outcomes. If the UK left the EU without an agreement in place, the instrument would provide legal clarity and consistency for the regulator and postal operators.

The draft regulations are being introduced, under powers in section 8 of the European Union (Withdrawal) Act 2018, to correct deficiencies in the statute book associated with exiting the EU. They will make minor amendments by removing obligations that would no longer apply if no agreement were reached with the EU.

The regulations make no changes to the operation of postal and parcel services beyond those necessary to ensure the regime is fully functional on exit day. They will not change the six-days-a-week or “one price goes anywhere” universal postal service that continues to be relied upon by consumers and businesses throughout the UK. I will explain what the specific legal amendments are and why they are necessary if no agreement is reached with the EU.

The regulations make four sets of changes. First, they will amend the Postal Services Act 2000 and the Postal Services Act 2011 to remove or replace references to EU obligations that will no longer apply once the UK has left the EU. They will also remove provisions that impose duties to notify the European Commission. Secondly, they will remove from statute the Postal Services Regulations 1999, which implemented article 22 of the postal services directive. That directive requires member states to designate a national regulatory authority, or NRA, for the postal sector. Thirdly, they will revoke the European Commission decision of 10 August 2010, which established the European Regulators Group for Postal Services, or ERGP. Finally, they will revoke EU regulation 2018/644 on cross-border parcel delivery services.

The 2000 and 2011 Acts set out the minimum requirements of the UK’s universal postal service. The amendments made by the regulations to primary legislation governing postal services will not affect the UK’s universal postal service. The regulations will ensure that any remaining obligations under retained EU law are maintained in the 2011 Act and will remove redundant provisions. They will also remove obligations of the EU postal services directive, such as sharing information with the European Commission, because the UK will no longer be subject to the directive’s provisions or to the authority of the European Commission after we leave the EU.

The 1999 regulations designate Ofcom and the Secretary of State as the UK’s national regulatory authorities for postal services, which is a requirement of the postal services directive. The duties and functions of Ofcom and the Secretary of State relating to postal services are set out in the 2000 and 2011 Acts, so there is no longer a requirement to designate them the national regulatory authority under separate regulations for the purposes of the postal services directive. The 1999 regulations will become redundant when the UK leaves the EU and will be revoked in full by the draft regulations.

The European Commission decision of 2010 established the ERGP. Ofcom—the UK’s NRA—is a member. The group consists of member states’ NRAs, provides advice to the European Commission and aims to facilitate consultation, co-ordination and co-operation between NRAs of member states on postal services. As well as members, the group also consists of permanent and ad hoc observers.

The UK will not be entitled to participate formally as a member of the group after we leave the European Union, because membership is restricted to the NRAs of member states. The draft regulations will therefore revoke the EU’s decision, which contains a list of members, one of them being the UK.

The withdrawal from the ERGP was an issue of interest to the House of Commons sifting Committee when the draft instrument was first presented. The House requested further information on the effect of the UK’s non-participation in the group, and possible alternatives for future arrangements.

The ERGP does not make binding rules or take decisions, but occupies an advisory role and facilitates the sharing of best practice. Ofcom intends to seek permanent observer status after the UK has exited the EU, in the way that other NRAs of European economic area states, such as Switzerland, and EU candidate countries currently participate. Although observer status would remove Ofcom’s right to vote, the likely impact of that would be minimal, as this is more of a co-operative forum in nature. If granted observer status, Ofcom could still engage in strategic discussions, negotiations and the sharing of best practice after we exited the EU.

The aim of the EU regulation, which came into force in May, is to increase regulatory oversight and price transparency of cross-border parcel delivery services within the EU. The draft regulations will fully revoke the EU regulation, which requires regular submission to the European Commission of information on cross-border parcel delivery providers, with the aim of publishing tariff information on all member states’ cross-border parcel operators. That duty will no longer apply after the UK leaves the EU.

The principal information-gathering powers are provided for in the UK’s domestic legislation under the 2011 Act. Ofcom already draws on that as part of its regulatory monitoring of the postal sector. Ofcom is also able to carry out comparative overviews of the quality and price of postal services, with a view to publication in the interests of users of those services, following the receipt of information from the operators.

Similarly, the EU’s regulatory obligation on traders to provide consumers with certain information relating to their services is contained in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. For those reasons, the EU parcel delivery regulation will become redundant and will be revoked by the draft regulations.

The draft regulations will ensure that postal and parcel services can continue to operate effectively after the United Kingdom’s withdrawal from the European Union, and I therefore commend them to the Committee.

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[Kelly Tolhurst]

I thank the hon. Lady for her kind comments. I will try to answer her questions and give her some more information about what has been done.

Regarding co-operation, as the SI highlights we will not be able to continue as a member of the ERGP after we leave, but Ofcom has made it clear that we will be trying to obtain permanent observer status. I touched on this briefly in my opening speech, but I can reassure her that that group votes only twice a year, so the voting element is minimal. It is an advisory board, working together and consulting, and there are a number of countries with observer status in the group. Obviously, obtaining that status is a decision that will have to be taken at a later stage, but I do not see any reason for it not happening.

As the hon. Lady will know, we are already a member of the Universal Postal Union, which is a UN body that operates worldwide and is able to co-operate internationally. The potential impact of the measure will cross over to the impact with respect to cross-border issues. As she will know, we are in consultation with Royal Mail and other delivery operators regarding customs arrangements and requirements that will be necessary. That work is being undertaken by Her Majesty’s Treasury and Her Majesty’s Revenue and Customs, and that information is already being tested in the White Paper.

Regarding impact assessments, we believe that this SI has a very minimal impact. It is under the £5 million mark, so a full impact assessment has been judged not to be required. We are continuing to work with delivery operators and the Royal Mail as we move through the process, towards exit day, either with or without a deal, to make sure that we continue to address what needs to be addressed. We have assessed that neither the regulator nor the Department for Business, Energy and Industrial Strategy would require further funding to be able to operate under a no-deal scenario in relation to this SI.

To put it on record and to put the hon. Lady’s mind at rest regarding cross-border parcel delivery, we have a duty to co-operate with other countries with respect to the postal service and parcels. We will become a third country, but we expect that to operate in the same way with the European Union. We will retain European standards, which are widely shared. We have a great postal service here in the UK, and it has become more efficient in the past eight years.

[Nick Smith (Blaenau Gwent) (Lab)]

Does the Minister know whether Royal Mail anticipates that any customs changes that come about due to a Brexit in which we crash out will have any practical impact?

[Kelly Tolhurst]

I thank the hon. Gentleman for his question. We are continuing to work with Royal Mail and HMRC on the customs arrangements that will be put in place. That is a live issue, which continues to be consulted on. I cannot give him full details, because that is a piece of ongoing work.

[Nick Smith]

I thank the Minister for that response. Will she update us on the analysis she does with Royal Mail on the possible financial impact of the draft regulations in the event that we crash out?

[Kelly Tolhurst]

If there was to be a direct financial impact that was less than minimal, of course we would provide an update. As things stand, we have assessed that there will be a very minimal cost, but we continue to work on those customs arrangements. Let us be frank: in a no-deal situation, we will be dealing with customs for our postal and parcel services in some way, shape or form, so that will have to be monitored right up to our leaving date while we wait for our direction to be confirmed. That is as far as I can go on that point, I am afraid.

The draft regulations will be made under the powers conferred by section 8 of the withdrawal Act. Those powers will provide legal clarity in respect of postal and parcel services legislation after the UK’s exit from the EU by removing inconsistencies and inappropriate references from the statute book. I have addressed the concerns of the Commons sifting Committee about the effects of the UK’s non-participation in the ERGP as a result of our leaving the EU. The draft regulations do not represent a policy change in the operation of postal services; they preserve as far as possible the rights, responsibilities and protections offered by the existing system. I therefore hope the Committee will approve them.

Question put and agreed to.

Rural Post Offices

Kelly Tolhurst Excerpts

Thursday 13th December 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I congratulate my hon. Friend the Member for St Ives (Derek Thomas) on securing this important debate. He has been a passionate advocate for post office services in his constituency. We have spoken at great length about the post office network and have another meeting booked in for the new year. As he outlined, he has also met Lord Gardiner to discuss this topic. One of the best things about my role is being responsible for postal services—I know how important the post office is to all our communities, not just rural areas, so this is an important part of my responsibilities. For centuries, post offices have been the centre of social life in our communities, towns and villages. That is especially true in rural areas, which is why our 2017 manifesto committed to safeguarding the post office network and supporting rural services.

Between 2010 and 2018, this Government provided nearly £2 billion to maintain and invest in a national network of at least 11,500 post offices. The Post Office currently meets and exceeds all the Government accessibility targets at national level. Government investment has enabled the modernisation of more than 7,500 branches, added more than 200,000 opening hours a week and established the Post Office as the largest network trading on Sunday.

The Post Office’s agreement with the high street banks has enabled personal and business banking in all branches, supporting consumers, businesses and local economies facing bank branch closures, particularly in rural areas. The Post Office’s financial performance has improved significantly and, consequently, the Government funding required to sustain the network has drastically decreased and is set to decrease even further in coming years.

I encourage the House to look objectively at those facts, which clearly show that the network is as stable today as it has been in decades. We must remember that the post office network declined by 38% under the last Labour Government, with more than 7,000 branch closures.

Serving rural communities is at the heart of the Post Office’s social purpose. There are more than 6,100 post offices in rural areas, with nearly all the population in such areas living within three miles of a branch. Last year, Citizens Advice found that seven out of 10 rural consumers buy essential items at post offices and that almost 3 million rural shoppers visit a post office on a weekly basis. That is 31%, compared with 21% of people living in cities. Illustrating how important the post office is to such areas is the fact that almost half of rural post offices have community status. The post office is the last shop in some villages.

Rural branches, whether main branches, local branches or traditional branches, can offer the same products and services as urban branches of the same category. The Post Office recognises the unique challenge of running a community branch and supports such postmasters differently from the rest of the network. They receive fixed remuneration, as well as variable remuneration to reflect their special situation.

In addition, the Post Office delivered almost £10 million of investment via the community fund between 2014 and 2018, which enabled community branches to invest in their associated retail business. The Post Office has now launched a smaller community branch development scheme, which will benefit an anticipated 700 branches. Let me be clear that this Government and Post Office Ltd will continue to support rural post offices.

My hon. Friend will be interested to hear that network modernisation has led to the creation of 450 additional opening hours in his constituency, delivering greater convenience to consumers. However, I am aware that there have been a number of service issues in St Ives, and it is fair to say those issues have not been sorted as quickly as the Post Office would have liked. I fully appreciate how frustrating it is for a local community when post office services are interrupted.

In rural areas such as the St Ives constituency, when the shop in which the post office is based closes, there may be few other commercial premises from which services can be offered to consumers. In such instances, the Post Office explores how an outreach service run by a nearby postmaster can ensure the continuity of services for the community, such as via a mobile van.

For example, in my hon. Friend’s constituency the St Keverne postmaster will be extending the mobile visit timetable to provide services at—excuse my pronunciations if they are not correct—Heamoor, Gulval, Carbis Bay, Leedstown, Praa Sands and Crowntown over the coming months. Outreach and mobile services are highly valued by the communities they serve, as they offer all the same services as a bricks-and-mortar branch.

[Derek Thomas]

I thank the Minister for listing those places—she was not far off. Does she accept that it was the work that we have been doing as a local community to put pressure on the Post Office, and to bring this issue to the Minister and other Ministers, that finally got the Post Office even to consider that mobile service, which at the moment is not in place? Some of those villages have not had post office services for more than a year.

[Kelly Tolhurst]

I thank my hon. Friend for his point. He is right in what he says and I recognise that. I was going to come on to this later, but I will respond directly to his point now. The Government are the sole shareholder in the Post Office. It is right that we work with the Post Office, challenging it where necessary, and with constituency MPs and the community to make sure that we can deliver the right services for the community. As I always do when speaking about post offices at the Dispatch Box, let me say that we are committed to working with MPs and their communities, and we will continue to do so in order to maintain the branch network we have and to try to serve communities as best we can.

Outreach and mobile services are highly valued by the communities they serve, as they offer all the same services as bricks-and-mortar branches. They have been successful in taking key services such as everyday banking to customers, giving them vital access to cash in areas where there are no bank branches nearby. The Post Office directly contributes towards the costs of those outreach services, in conjunction with the postmaster running them, whose parent branch benefits from the transactional income accrued from the visits to outlying communities.

My hon. Friend raised important points about the specific challenge of running a post office in communities where seasonal trade and variation plays a significant role. I know that the Post Office listens to the community and the postmasters in St Ives by taking a more flexible approach to opening hours requirements across the year. That will allow branches to be more sustainable through the leaner, off-peak seasons, when their post office and associated shop has fewer customers. As he said, the issue was taken up by Lord Gardiner in his meeting with Paula Vennells, the Post Office’s chief executive officer, on 4 December. I understand that there will be a follow-up meeting with her in the constituency in the New Year to discuss this and other matters further. I am confident that this ongoing, frank and sustained engagement is the right way to proceed, so that the issues can be understood and a solution be provided for the benefit of postmasters, businesses and residents of St Ives.

Finally, I would like to take this opportunity to clarify some misconceptions about the Post Office’s franchising programme, particularly the assumption that franchising means closures and the downgrading of services. Those criticisms are misplaced. Post Office branches are not closing, but are being franchised, either on-site or by relocating to other high street locations. Franchising is nothing new; almost 98% of post offices across the UK are successfully operated by independent businesses and retail partners. Moving the directly managed Crown offices to retail partners has been instrumental in reducing losses in that part of the network.

My hon. Friend raised an important point on postmasters’ remuneration, especially for everyday banking services. As these services have developed and increased, I know the Post Office is looking at ways to better recognise the effort required of its postmasters for banking transactions. In fact, the Post Office has recently notified postmasters that their rates for banking deposits have been increased this year. I understand that the Post Office has now entered negotiations with banks on the next banking service agreement. The Post Office has reassured me that it will do all it can to ensure that postmasters are better remunerated for the vital services that they offer. I should add that the Post Office is picking up vital services in areas that banks have left. It is right that the Post Office does its best to make sure the banks accept the responsibilities involved and the work that post offices are doing on behalf of those communities and, we hope, properly remunerate them.

My hon. Friend also raised an important point about postmasters who cannot exit the business because of the absence of alternative operators to take over their branch. Although that is an operational matter, I assure him that the Post Office is taking it very seriously. As of November 2017, there were more than 450 branches of that type across the network. To help the remaining postmasters, the Post Office has extended the network transformation resignation timeframe to March 2020. That means that all parties can continue to work together to ensure that no communities are left without the invaluable post office services that they rely on. The postmasters affected will continue to receive both fixed and variable remuneration throughout that period. Where solutions are found, the postmasters concerned can leave while still qualifying for their leaver’s compensation.

My hon. Friend raised some particular issues relating to his constituents. I am not aware of some of the detail of those cases, but we are meeting in the new year, so I look forward to discussing those points and seeing how we can move forward.

I reassure my hon. Friend that all post offices across the network, including rural branches, are of the utmost importance to the Government. We recognise their value and importance, and we will continue to honour our manifesto commitments so that post offices can thrive and remain at the heart of our rural and urban communities. I thank my hon. Friend again for making his points, and for his hard work in support of access to post office services for his constituents. I assure him that I will continue to work with him and the Post Office to make sure that the constituents of St Ives receive the post office service that they deserve.

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

I am sure the House would like to wish all postal workers the best for Christmas and the new year, and to thank them for getting the parliamentary mail through.

Question put and agreed to.

Draft Accounts and Reports (Amendment) (EU Exit) REgulations 2018

Kelly Tolhurst Excerpts

Wednesday 12th December 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft Accounts and Reports (Amendment) (EU Exit) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mr Davies. Since the UK’s 2016 referendum decision to leave the EU, the Department for Business, Energy and Industrial Strategy has undertaken a significant amount of work on the withdrawal negotiations, preparing for a range of potential outcomes. We have been working, and must continue to work, to prepare for a no deal scenario.

The regulations aim to address failures of retained EU law to operate effectively, as well as other deficiencies arising from the withdrawal of the United Kingdom from the European Union, in the field of accounts and reports of UK corporate bodies. The law in the UK on the preparation and filing of accounts and reports for corporate bodies is compliant with the EU accounting directive. There is also a directly applicable EU regulation that relates to the preparation of accounts in accordance with international accounting standards—the so-called IAS regulation. Both the accounting directive and the IAS regulation apply throughout the European economic area. The Department intends to introduce a separate statutory instrument that will address how we intend to deal with the deficiencies presented by the IAS regulation after the UK’s withdrawal from the EU.

The fundamental elements of the current companies’ accounts and reports legislation will remain the same after exit. However, that legislation still needs to be amended to ensure that it works effectively once the UK has left the EU. An important component of the accounting directive, and therefore the UK’s company law, relates to reciprocal arrangements for company group structures—for example, exemptions permitted to businesses from producing consolidated accounts if the parent is registered anywhere in the EEA and is producing consolidated accounts that are compliant with EU law. In the absence of a negotiated agreement regarding the economic relationship between the UK and the EU, it would be inappropriate to continue with preferential treatment for EEA entities, or UK entities with EEA parents.

The statutory instrument will mean that businesses registered in EEA states will be treated in the same way as those from third countries. UK businesses with EEA parents will therefore no longer benefit from the exemption from having to produce consolidated accounts because their EEA parent company produces consolidated accounts. However, UK businesses with parent entities registered in the UK will not be affected by the changes.

The regulations do not create new criminal offences. However, the scope of the pre-existing criminal offences will be extended, in that some companies that previously benefited from an exemption will no longer do so. They will be exposed to the possibility of committing a criminal offence in a way that they were not before. Also, some businesses with links to the EEA will now fall within the scope of existing criminal offences in the UK for failure to file accounts and reports. For example, dormant companies with parent entities listed in the EEA will no longer be exempt from preparing and filing accounts with Companies House. Failure to do so would mean that they would be committing an offence, and they would be liable to incur fines and penalties. That is consistent with the approach for similar companies with parents outside the EEA.

[Ian Murray (Edinburgh South) (Lab)]

Will the Minister tell the Committee whether she anticipates, or has anticipated, more parent companies moving to the EEA from the UK as a result of the UK leaving the European Union?

[Kelly Tolhurst]

I do not have any indication of the number of companies that have stated that they would leave the UK after EU exit.

The accounting directive sets out the requirements for businesses to report payments to Governments worldwide relating to the extraction of natural resources by way of logging and mining. Alongside that, it provides a power for the Commission to grant equivalence to third countries for their systems of reporting payments to Governments regarding logging and mining activities. This statutory instrument transfers that power to the Secretary of State.

The Government have carried out a de minimis impact assessment of the regulations, because the overall costs to business were expected to be small. That confirmed that the impact on business would be minimal and that the resulting costs would be in relation to the company’s size. There is a small chance that certain second-order impacts may arise from changes to one of the exemptions. Currently, the ability to switch between accountancy frameworks—the requirements for the preparation of companies’ annual accounts—is limited to once every five years, unless the company de-lists from any regulated market in the EEA. The change made by this statutory instrument will mean that a company can only satisfy that condition by de-listing from the UK market.

Although we think the amendment is a minor one, it may provide an incentive for companies to de-list from the UK markets. Companies list their securities on capital markets primarily to access a larger capital and investor base—for example, because they are considering growing their businesses. They do not take de-listing decisions lightly. Given the scale of the changes introduced by this statutory instrument, it is very unlikely that they would do so to try to circumvent the reporting requirements.

The Government have worked closely with business and regulatory bodies to ensure that regulations achieve continuity wherever possible, while addressing the deficiencies arising from the UK’s withdrawal from the EU. My officials have benefited from the wisdom of our many stakeholders, and the statutory instrument incorporates their views. In the event that the UK leaves the EU without an agreement, the regulations will be critical in ensuring that UK accounting law continues to provide transparency and certainty to investors. The regulations will also ensure that companies operating in the UK have clear guidance for preparing and filing their accounts. I commend the regulations to the Committee, and I ask the Committee to support and accept them.

--- Later in debate ---

[Kelly Tolhurst]

I thank the hon. Member for Sefton Central for his usual thorough reading of the statutory instrument and preparation for the debate. I want to finish by reminding the Committee that the SI is being brought forward for a no deal scenario. As a Government, we are still working towards a deal, and that is what we hope we will have as we leave the European Union.

[Ian Murray]

I would hate to get into a debate about Brexit, because I am sure you would call me out of order, Mr Davies, but would it not be much better for the Government to rule out a no deal scenario? We could then spend most of our time in the House dealing with what we need to deal with, rather than preparing for no deal.

[Kelly Tolhurst]

Actually, I think it is quite right that as a Government we are preparing for no deal, and we will continue to do so. That is why I am here presenting a statutory instrument—so that in the event of no deal we will be able to give business confidence and clarity on what the outcome will be, whether it is liked or not, in a no deal scenario.

I will try to answer some of the questions that the hon. Member for Sefton Central posed about the statutory instrument. He asked about the total number of companies that might be affected. There are approximately 3.8 million active companies on the UK register as it stands, and 98.5% of them happen to be micro or small businesses. There are approximately 35,000 medium-sized businesses and 20,000 large entities on the register. We have assessed that fewer than 20,000 companies will be affected by the statutory instrument, with a range of sizes and set-ups.

I was asked what assessment we have made of de-listing. As I have outlined, we did not carry out a full assessment, because we established from the data we have that the burden and cost to business will be below £5 million. The burden on business will relate to the potential costs of having to file accounts and make preparations, where they had been exempt. Obviously, that is a small cost to a limited number of organisations.

Obviously the de-listing is very difficult to assess. It is very difficult to assess how many companies would take the decision to leave the UK based in a no deal scenario. As I have said, as a Minister I have not been made aware of any companies that have registered an interest in leaving the UK, based on the changes that we are considering. We estimate that the number of organisations that might decide to de-list would be very small, but it is a very difficult number to assess.

[Bill Esterson]

The Minister said that nearly 20,000 businesses would be affected by the regulations. The explanatory memorandum states that there is “no significant” impact on business. I just wonder whether she can tell me how many businesses it would take for the Government to decide that it was a significant number worthy of an impact assessment.

[Kelly Tolhurst]

As the hon. Gentleman knows, because I have just outlined it, we are talking about approximately 20,000 businesses that would be affected, out of the current 3.8 million businesses that are registered in the UK. That is a small number of businesses in relation to the total number of registered companies. However, we are talking about the cost, and the burden will relate to the potential extra costs in relation to accounting and reporting.

We must remember that, as Members will have read and as I have mentioned, dormant companies for example have been exempt. They will no longer be exempt, so there will be a cost to that under the regulations in a no deal situation.

[Ian Murray]

To follow on from my hon. Friend the Member for Sefton Central, there is an impact assessment that says that the cost to business is negligible, but will the Minister’s Department be producing an impact assessment of the cumulative cost to business of all the SIs that are going through in preparation for a no-deal Brexit, and when will we see it?

[Kelly Tolhurst]

I thank the hon. Gentleman for his question. We are assessing the impact as a Department in all ways, and we are doing that informally. We do it through working with stakeholders. These SIs are not just dreamed up. As I said in response to an earlier question, we have consulted our officials and worked with stakeholders. We have spoken to auditors and accountants—the people who will be responsible for imparting this information to the companies they work for and for understanding the true cost to business—so we are always assessing the impact of everything we do. Especially as a business Minister, one of my priorities is to make sure that when we do things around business, we reduce the burden when we can. The actual answer is that we need to prepare for scenarios, and in doing this we are aware of the potential outcomes and risks, which would affect 20,000 businesses.

[Ian Murray]

Will the Minister give way?

[Kelly Tolhurst]

Once more on this.

[Ian Murray]

The Minister is being incredibly generous, and I am grateful to the Chair for indulging me on this point, but it is incredibly important. The Minister quite rightly says that the Government have not just dreamed these SIs up. Of course they have not, because there is a process that has to be run through if the Government decide that they wish to go down the route of a no deal Brexit. What is the cumulative effect on business of all the SIs that are currently before her Department? They have not been dreamed up, but they are there, they are measurable, and they can be added together to show the impact of the SIs that are currently on the table and their cost to business.

[Kelly Tolhurst]

I will try again to answer the hon. Gentleman’s question. There is no policy change in this SI: it is correcting deficiencies in the retained EU law. If he is asking about the impact of no deal, I refer him to the work that has already been done by Government on the impact of a no deal scenario versus a deal scenario, rather than these individual statutory instruments. As he will know, there are a number of statutory instruments across all Departments that may well affect businesses in different ways, which do not come under my responsibilities as a junior Minister in the Department for Business, Energy and Industrial Strategy.

[Nick Smith (Blaenau Gwent) (Lab)]

I just want to press the Minister on this point about the overall cost to business of the no deal planning that she has talked about. My hon. Friend the Member for Sefton Central has mentioned the specialist media coverage of the accounting requirements that have already taken place in one sector of the economy, and this is the third Delegated Legislation Committee on this topic in this week alone. By when will we receive from the Minister the true cost to business of these extra responsibilities and regulations from her Department?

[Kelly Tolhurst]

As the hon. Gentleman well knows, the assessments of the effect on business have been well reported. With this particular SI, we are talking about the impact on a very small number of businesses, compared to the 3.8 million that are registered. The vast majority of UK-registered companies will not be affected by the SI at all, because we are not changing the policy; we are correcting deficiencies so that we are legal and can operate correctly and efficiently in the case of a no deal scenario. Quite rightly, if we are able to establish a future relationship with the European Union—if we are in a situation where we have a deal—this is one of a number of elements that would be part of those ongoing negotiations. However, I am unable to give the hon. Member for Blaenau Gwent clarity on the direct question he asked regarding the total cost to business for all the SIs that have been passed or are coming up.

[Nick Smith]

On this topic, in this Department.

[Kelly Tolhurst]

If the hon. Gentleman is referring to accountancy, we are talking about the accountancy SI today.

[Nick Smith]

Will the Minister give way?

[Kelly Tolhurst]

I am going to carry on, because I have given as full an answer as I am prepared to give.

As I highlighted in my introduction, and as I have reiterated, we are not changing the way in which we ask companies to report. We will work with Companies House, as we do already, to ensure that we identify all the companies that are affected by not having the exemptions, that we have the data, and that any guidance that is needed is issued well before the SI comes into effect.

On the extraction industries, the hon. Member for Sefton Central is right that currently the EU Commission has the power to grant equivalency to third countries. We are not changing any of the criteria for that; rather than the EU Commission having that power, the Secretary of State would have the authority to make those decisions in a no deal situation. As I outlined, the SI will correct the deficiencies in EU retained law.

[Bill Esterson]

Will the Minister give way on that point?

[Kelly Tolhurst]

I give way.

[Ian Murray]

It is called scrutiny.

[Bill Esterson]

I think my hon. Friend has anticipated my question. Will the Minister explain what the scrutiny process will be for the Secretary of State’s decision making in the event of no deal?

[Kelly Tolhurst]

I thank the hon. Gentleman for that question. As I outlined, the European Commission has the power to grant equivalency, and we are not changing any powers here. Having looked at this, we believe that it is small enough for us to have it in an Executive power. If the European Commission has those powers currently, it is right they would be transferred to the UK Secretary of State in a no deal situation. Scrutiny would operate exactly as it does currently.

[Bill Esterson]

Really?

[Kelly Tolhurst]

Absolutely, because the Secretary of State would make those decisions and grant those powers. Granting equivalency to third countries is obviously a small part of it.

Effective financial reporting underpins the success of every business. It helps to inform decision making, to improve performance and to promote confidence in a company’s future. As the UK exits the EU, it is paramount that we maintain the integrity of the UK system of accounting and reporting. The regulations will ensure that it remains coherent, operable and understandable for companies, users of accounts, and the general public, who rely on the transparency that it provides. I commend the regulations to the Committee.

Question put.

Draft Takeovers (Amendment) (EU Exit) Regulations 2019

Kelly Tolhurst Excerpts

Tuesday 11th December 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft Takeovers (Amendment) (EU Exit) Regulations 2019.

It is a pleasure to serve under your chairmanship, Mr Austin. The regulations will be made under powers in the European Union (Withdrawal) Act 2018. They amend part 28 of the Companies Act 2006, so that the United Kingdom’s corporate takeovers regime can operate independently in the event that the UK exits from the EU without a withdrawal agreement.

If the UK leaves the EU without an agreement in place, the instrument will provide legal clarity and certainty. The takeovers regime seeks to ensure that shareholders receive fair and equal treatment when the company in which they have invested is subject to a takeover bid. The effective operation of the takeovers regime is vital to business confidence.

Part 28 of the 2006 Act transposes the takeover directive 2004/25/EC into UK law. The directive was intended to harmonise certain aspects of takeover supervision across the European economic area. It created expectations of reasonable behaviour to which company shareholders could hold bidders. It also created a system of co-operation, in which member states’ regulators shared jurisdiction over a small number of cross-border takeover cases.

The 2006 Act requires the Takeover Panel to make rules to give effect to the directive in the UK. The panel has done so in the City code on takeovers and mergers. The regulations preserve the statutory underpinning of the code, and make only minimal changes to the way in which the UK regime functions. In developing the regulations, we worked closely with the UK’s supervisory authority, the Takeover Panel. The panel has published a consultation document on the changes that it will need to make the takeover code reflect the regulations.

The regulations make only three substantive changes to the way in which the UK takeovers regime functions. The rest of the regulations import and correct provisions from the directive that are necessary for the independent operation of the UK regime, but do not change how the domestic regime operates.

First, the EEA takeovers regime includes a system of shared jurisdiction for company headquarters that are listed in different countries. The supervision of a company captured by the shared jurisdiction system is usually done by two regulatory authorities: one in the country where the company has its registered office, and the other in the country where the company is listed. The shared jurisdiction regime ensures that there is clarity about which national takeover rules apply in such cases.

The shared jurisdiction regime works on a reciprocal basis. Since the UK will be outside that framework, the reciprocal arrangements will no longer apply after EU exit. The regulation will remove shared jurisdiction from the UK takeovers regime. The Act requires the panel to supervise UK companies with securities admitted to trading on a UK-regulated market. The panel may also choose to supervise companies that do not fall within that definition. The panel is currently consulting on the application of the takeover code in the light of the loss of the shared jurisdiction regime.

[Nigel Mills (Amber Valley) (Con)]

Will the Minister clarify what would happen if a takeover started before exit day, but had not been completed, and there was a co-operation arrangement, with two jurisdictions reviewing the proposed takeover? Presumably, after exit day, only one would be allowed to review it. Would a whole new process have to be started, or would one authority effectively just give up its scrutiny of the takeover?

[Kelly Tolhurst]

I thank my hon. Friend for his intervention; he raises a very good point. Although the statutory instrument will remove the shared jurisdiction, part 28 of the 2006 Act still places a duty on the UK to co-operate with any country or territory on mergers. While the SI will remove the reference to the EEA, we will not remove the continued co-operation of the UK regime with other countries and territories.

The panel is currently consulting on the application of the takeover code in the light of the loss of the shared jurisdiction regime. It proposes to supervise takeovers concerning only companies that meet the residency criteria set out in the takeover code.

The second feature of the draft regulations relates to the duty to co-operate. Section 950 of the Companies Act places a general duty on the Takeover Panel to co-operate with its counterparts and certain other regulatory agencies in any country or territory outside the UK. It also imposes a specific duty to co-operate with supervisory authorities in the EEA, which is derived from the takeovers directive 2004. After our exit, EEA member states will no longer be bound to co-operate with the UK under the directive. The draft regulations will therefore remove the specific obligation to co-operate with EEA supervisory authorities, as it will no longer be reciprocal. However, the Takeover Panel will still be required to co-operate with the authorities of EEA member states under the broader duty to co-operate with any international supervisory authority with an equivalent role. This change will not, in practice, constrain the panel’s ability to co-operate.

The final feature of the draft regulation relates to restrictions on the disclosure of confidential information. Section 948 of the Companies Act restricts the disclosure of confidential information obtained by the Takeover Panel during its duties and sets the conditions under which information can be shared. It applies to both the panel and the organisations with which information is shared. Breaching the section 948 restriction is a criminal offence.

The Companies Act provides an exemption from the section 948 restriction for EEA public bodies using confidential information disclosed by the panel for the purpose of pursuing an EU obligation. These EEA public bodies are bound by their own national laws and by EU law to prevent the inappropriate disclosure of information passed to them by UK authorities. After our EU exit, these reciprocal protections will no longer apply to the UK. The draft regulation will remove the specific exemption from the section 948 offence for EEA public bodies and ensure that there is a sanction to deter inappropriate onward disclosure of sensitive information.

[Mr John Baron (Basildon and Billericay) (Con)]

Just for clarity, once we leave the EU, will whatever duties there are on the UK to co-operate in a takeover situation be reciprocated by the EU, so that there is an element of co-operation on matters of this sort? In other words, will there be reciprocity across the divide?

[Kelly Tolhurst]

I thank my hon. Friend for his question. My understanding is that we are obviously bringing the EU regime as it stands into UK law, including the duty to co-operate with countries, and I expect that that will be the case.

[Mr Baron]

I thank the Minister; she is being very generous. I get that we will be taking EU law into UK law. We will co-operate, because we will have taken that legislation into our own, but I want clarity on whether the Minister is confident that there will be reciprocity when it comes to the EU co-operating with us? As the Minister well knows, takeovers can go both ways.

[Kelly Tolhurst]

It is my understanding that that will be the case. If I am incorrect, I will of course correct the record. As I have outlined, we currently have an obligation to co-operate, which is in the interests of those countries. However, we are talking about a small number of organisations that would fall under this requirement.

The regulations before the Committee are the product of close working with the Takeover Panel to provide a free-standing statutory underpinning for the UK takeover regime in the event of a no-deal exit. Corporate mergers and takeovers are an important part of a healthy economy. By encouraging efficiency gains, spreading knowledge and promoting innovation, they drive economic growth and job creation.

It is vital that we seek to safeguard the legal framework that gives companies and their shareholders the confidence to engage in merger and acquisition activity. The regulations achieve that goal by making only the changes needed to fix deficiencies in UK law arising from EU exit. They do not otherwise alter the operation of the UK’s takeover regime. They will have a negligible overall net effect on our economy. I commend the regulations to the Committee.

--- Later in debate ---

[Kelly Tolhurst]

I thank hon. Members for their contributions, and particularly the hon. Member for Sefton Central and my hon. Friend the Member for Windsor. This debate has highlighted that the absolute best outcome for us in exiting the European Union should be that we have a deal. We are now talking about a statutory instrument that relates to us leaving the European Union without a deal, so this is a no-deal SI.

These regulations will provide some legal clarity in respect of the takeover regime after the UK’s exit from the EU by correcting deficiencies and removing obligations that will no longer be reciprocated by EEA member states. The regulations do not represent a policy change in the operation of the UK takeovers regime; rather, they preserve as far as possible the rights, responsibilities and protections offered by the existing system.

I will now try to answer Members’ comments and questions, and if I miss some, they should feel free to intervene on me. Hon. Members have raised the question of what happens on exit day in terms of a situation of straddling jurisdiction and continued co-operation. As I outlined in my speech, we already have a duty to co-operate with countries that are not in the EEA, but that does not preclude us from co-operating with the EEA. It does not stop the EEA from co-operating with us bilaterally, in the way it would co-operate with any country that was not part of the EEA.

In regard to the number of companies, from my current figures, 25 companies have a registered office in the EEA and have traded securities in the UK. Eleven companies currently have a registered office in the UK and have traded securities in regulated markets in EEA countries. We are talking about a small number of organisations. Another statistic that may interest the Committee is that in 2017-18 there were 57 bids, and in the UK the panel dealt with 13 takeover cases relating to £1 billion. That demonstrates the importance of having the regulations in place. I believe I have answered hon. Members’ questions about the duty to co-operate, but they are welcome to question me further if not.

My hon. Friend the Member for Windsor asked what would happen to the draft regulations if we remained in the EU or reached a deal. In such an instance, the Government would lay a further statutory instrument before the House to take into account any deal that had been made that changed the position currently on the table.

The hon. Member for Sefton Central asked about the consequential amendments set out in paragraph 7.1 of the explanatory memorandum. As he will know from previous debates, we need to amend UK instruments to correct any deficiencies. I did not mention this in my speech, but the draft regulations make changes that relate to section 949 of the 2006 Act and criminal offences, and the references to the EEA have obviously been changed in this instrument. So a number of smaller elements have had to be changed through the law.

I think I have answered most of the questions that hon. Members have asked. The Government are committed to ensuring continued business confidence in takeover supervision. The draft regulations make only those changes that are required to effect the UK’s exit from the EU. The UK regime should therefore continue largely unchanged, and the net overall effect on the economy will be negligible.

I have just remembered a question that I have not yet answered about impact assessments, which the hon. Member for Sefton Central is particularly concerned about. An impact assessment was not carried out in this instance because the costs that companies are expected to incur as a result of this change are negligible. It affects only a limited number of companies, and the costs would relate directly to the compliance regimes within the other organisations, where they will have to get the supervisory authority. We assess that the financial obligation on businesses will be relatively small, so in this case an impact assessment was not carried out. I therefore urge the Committee to approve the regulations.

Question put and agreed to.

General Affairs Council: Cohesion Policy

Kelly Tolhurst Excerpts

Thursday 6th December 2018 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

My right hon Friend the Parliamentary Under-Secretary for State for the Department of Business, Energy and Industrial Strategy (Lord Henley) has made the following written ministerial statement:

I attended the General Affairs Council (Cohesion) on 30 November 2018. The meeting was held in Brussels and chaired by the Austrian presidency.

The meeting was dedicated to deliberations around the legislative package for post-2020 cohesion policy.

A provisional report of the meeting and the conclusions adopted can be found on the Council of the European Union’s website at:

https://www.consilium.europa.eu/en/meetings/gac/2018/11/30/

The General Affairs Council discussed the future direction of cohesion policy in the next multiannual financial framework. Ministers and their representatives from member states presented their positions on the legislative proposals for post-2020, with a view to influencing the Commission’s proposals and commenting on the views from the Austrian presidency.

Member states particularly focused on efforts for simplification, harmonisation, the strategic framework for future cohesion policy, and intervened on the partnership agreement and mid-term review. I intervened to support a link to the European semester, for further simplification and harmonisation, as well as outlining the UK position on the partnership agreement, the mid-term review and the proposals on European territorial co-operation.

The Austrian presidency provided an update on non-legislative and legislative items.

[HCWS1151]

Draft Competition (Amendment etc.) (EU Exit) Regulations 2019

Kelly Tolhurst Excerpts

Wednesday 5th December 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft Competition (Amendment etc.) (EU Exit) Regulations 2019.

It is a pleasure to serve under your chairmanship for the first time, Sir Christopher. Competition law exists to foster competitive markets to the benefit of consumers. Specifically, anti-trust law prohibits companies from engaging in anti-competitive agreements and abusing a dominant market position. Merger rules exist to ensure that mergers do not substantially lessen competition and harm consumers. The UK has a world-renowned competition regime, but currently the domestic system is highly integrated with the European Union competition system.

The primary aim of this statutory instrument, therefore, is to remove provisions in domestic legislation that are associated with being part of the EU competition system. Although the draft withdrawal agreement with the EU sets out separation arrangements on competition, the Government are preparing for all contingencies. Should we leave the EU without an agreement in place, this SI would minimise litigation risk for the Competition and Markets Authority and provide legal clarity and certainty for businesses and consumers. The SI has been the subject of extensive consultation with stakeholders, including the CMA, the Competition Appeal Tribunal and specialist competition lawyers. The views expressed were taken into account in developing the content of the SI.

The SI revokes the retained versions of EU competition legislation and switches off directly effective treaty rights contained in European economic area and EU treaties. They will become part of UK law as retained EU law at the point of exit, but they will be redundant, as the UK has its own competition regime, which will continue to protect consumers from anti-competitive behaviour. The SI makes amendments to the Competition Act 1998, the Enterprise Act 2002 and other primary and secondary legislation containing competition provisions. An impact assessment was not undertaken for the SI, as the impact for business and the Exchequer will be minimal.

The 1998 Act sets out the prohibitions against anti-competitive conduct in the UK and empowers the CMA and UK sector regulators to investigate and take enforcement action against infringements of those prohibitions. Under EU law and that Act, the CMA and sector regulators also have the power to investigate and take enforcement action against infringements of EU competition law. The Act also provides for investigation co-operation among the UK, the European Commission and member states’ national competition authorities. This SI amends the Act to remove the CMA’s power to investigate anti-competitive agreements under EU competition law, as it will investigate solely under UK law after exit.

Currently, section 60 of the 1998 Act provides that competition regulators and UK courts must interpret UK competition law in a manner consistent with EU competition law. This SI repeals section 60 and introduces a new section 60A. It provides that UK courts and regulators will continue to ensure consistency with pre-exit EU competition case law when interpreting UK competition law. However, they may depart from that case law, where appropriate, in specified circumstances.

This approach aims to provide consistency and clarity in the law for courts, regulators and businesses that look to legal precedent when interpreting the law. It also allows the competition regulators and UK courts to depart, where appropriate, from EU case law. Currently, claimants can pursue private damages claims in UK courts, based on enforcement decisions of the European Commission and the CMA. After exit, claimants will still be able to bring private damages claims in UK courts. However, UK courts will not be bound by the European Commission decisions. This approach aligns with the European Union (Withdrawal) Act 2018, which provides that UK courts will not be bound by decisions of EU courts after exit.

The European Commission makes block exemption regulations, which exempt certain categories of agreements from EU competition law where they are believed to have a beneficial effect on competition. Agreements which benefit from an EU block exemption are also exempt from UK competition law. At exit, all of the seven current block exemptions will be incorporated into UK law as retained block exemptions. Agreements that meet the terms of the retained block exemptions will continue to be exempt from domestic competition law. The SI amends and retains block exemptions so that they operate effectively in domestic law. It also empowers the Secretary of State to vary or revoke the retained exemptions.

The Enterprise Act 2002 contains the rules on mergers. Currently, the CMA is responsible for investigating mergers, to ensure that they do not have anti-competitive effects in the UK market. However, if a merger triggers the turnover thresholds set out in the new EU merger regulation, it is reviewed by the European Commission, including the UK aspects of the merger. After exit, the EU merger regulation will no longer apply in the UK, and the UK dimensions of mergers will be reviewed solely by the CMA. The SI amends the 2002 Act to remove references to the EU merger regulation and other provisions related to being part of the EU’s one-stop shop for merger clearance in the single market.

The SI also makes transitional arrangements for CMA anti-trust and merger cases that are live at the point of exit, so that those cases can continue to be managed effectively. It also makes minor amendments to two pieces of Northern Irish legislation, including removing references to the EU anti-trust prohibitions and amending a reference to section 60 of the Competition Act 1998. These changes align with changes being made to the 1998 Act and have been agreed with the permanent secretaries of the relevant Northern Ireland Departments.

Anti-trust law protects consumers from anti-competitive behaviour. The amendments contained in the SI provide legal clarity and continuity to businesses. Similarly, mergers are an important component of our healthy and growing economy. It is vital that we safeguard the legal framework that gives companies the confidence to engage in mergers in the UK. It is also important that consumers continue to be protected from mergers that diminish competition. This SI achieves those goals by maintaining the strength of the UK’s current competition system, while making only those changes designed to separate the UK competition system from that of Europe in a no-deal scenario.

--- Later in debate ---

[Kelly Tolhurst]

I was wondering whether I might be able to start by answering the hon. Member for Saffron Central.

[Bill Esterson]

Sefton Central.

--- Later in debate ---

[Kelly Tolhurst]

I apologise; I often get annoyed when people refer to my constituency as Rochester and “Stroud”, rather than “Strood”.

The hon. Gentleman asked what we would do with the regulations if we entered into a deal, bearing in mind that we are talking about this statutory instrument as a no-deal SI. This SI is about retaining EU law. Were we to enter into a deal, we would bring further SIs to the House to modify the current regulations.

The hon. Gentleman expressed concern about how we would work cross-jurisdictionally and is unsatisfied with the explanatory memorandum. The CMA, our regime and how the UK has dealt with competition law over the years have a high regard internationally. We co-operate and are part of a number of international bodies. We are regarded as having a world-class framework and operation. There is absolute commitment from the Government to ensuring that, where we can, we co-operate with other states and the EU. Even in a no-deal scenario, the intention will be to ensure that regulators at that level will be able to seek to enter into co-operation agreements bilaterally to ensure that consumers are protected. Ultimately, the European Union and the UK are committed to protection for consumers, as I have said a number of times over the past few weeks in Committees.

[Bill Esterson]

Is the problem not that, if there is no deal, by definition there will not be an agreement to ensure that co-operation? How does the Minister envisage the CMA and our competition framework coping in that situation?

[Kelly Tolhurst]

The hon. Gentleman is right: if we enter a no-deal situation, we will not have a deal with the European Union. However, our world-respected bodies, such as the CMA and other regulators, are communicating on a daily and weekly basis with their counterparts in not only Europe but other parts of the world. There is nothing to suggest that that co-operation, communication and co-working would change, and we would seek for it to be continued. We still want to co-operate with our international partners, and I cannot foresee a situation, with or without a deal, where that would not happen. That is my understanding.

With regard to the hon. Gentleman’s question about whether it is right that we are debating this big SI in a short Committee, I highlight that the SI changes two big pieces of legislation. Remember that we are retaining EU law, so the SI is not a change in policy; it is about retaining what we have, to make it fit so that on day one, were we to leave the European Union without a deal, our statute book would function.

The first piece of legislation is the Competition Act 1998, and the SIs that sit under it. We have all sat through a number of SI Committees. In the years I have been a Member of Parliament, many small statutory instruments have altered larger pieces of legislation. The second piece of legislation is the Enterprise Act 2002, and other SIs that have been introduced that relate to the EU, and to the block exemption that I mentioned. The “etc.” refers to the other pieces of legislation, consideration of which we have all sat through. From looking at a hard copy of the Bill, a number of minor changes are clearly being made. That gives Members an idea of why we are discussing this matter in Committee, as opposed to having a wider debate.

With regard to whether the CMA is capable of continuing to do its job given the potential increase of work in a no-deal scenario, we expect that the CMA might have an increased case load of between five and seven antitrust cases in a year. We have also assessed—working with the CMA, obviously—that the CMA might have to deal with between 15 and 30 extra merger cases over a year.[Official Report, 17 December 2018, Vol. 651, c. 4MC.] The National Audit Office has looked at the CMA and believes that it has robust plans in place to operate and function after we leave the EU.

As Members will know, in 2017 in the spring statement the Chancellor put £3 billion aside over a two-year period for funding our EU exit. In the spring statement of this year, the Chancellor announced just under £24 million extra for the CMA. The CMA is going through a recruitment process to increase its number of workers. That will constitute a substantial increase in the size of the CMA, and I am reliably informed that the CMA is working to plan, and recruitment is on target at the moment.

State aid is not part of today’s SI, but I am sure that the hon. Member for Sefton Central will be pleased to hear that the Government will soon lay an SI on that issue. I look forward to having greater conversations with him about the merits—or not—of state aid, and what he would like to see in the future.

Regarding divergence, as the hon. Gentleman explained and as I understand it, post-exit decisions in the European courts will be notable by UK courts, but not binding on UK courts. The idea that previous case law becomes part of UK case law history has come about because businesses need certainty and decision makers need to be able to look at that: it is quite right that pre-exit case law remains the bank of case law. However, as we have determined, UK courts will not be bound by that case law, although they will obviously have regard to it. Going forward, we need businesses to have assurance that previous case law has set the precedent, but as we have outlined in the SI, UK courts can diverge from it.

As regards the guidance that we will be giving on that point, it is case law: obviously, it will be defined by judgments. As the hon. Gentleman knows, markets, competition and things are changing all the time, so the guidance will also change over time. At that point, if necessary, we will give guidance to the relevant individuals. The hon. Gentleman mentioned bringing claims in the UK for things happening within the jurisdiction of the European Union. That is true: they will be brought here in the UK. I believe we can do so under UK law in UK courts. Also on that point, there is an ability to bring a civil, private claim in the UK under foreign tort law anyway.

My hon. Friend the Member for Harrow East asked what we will do to make sure that the UK protects its consumers from the big corporate organisations that are perceived to potentially cause restrictions and competition issues in the UK. As I outlined, our competition law in the UK is world renowned; we are respected internationally for the way we deal with such cases, and we already have great co-operation with international organisations.

To give one example, in the Google investigation a UK market was one of the main ones being investigated, and most of the claimants came from the UK market. I hope that gives my hon. Friend some comfort that, even if we are in a no-deal situation, if this SI is agreed we will be more than ready to take on those challenges and we will continue to maintain co-operation with our international partners and the European Union to make sure that the protection of UK consumers is at the heart of what they are doing.

[Bob Blackman]

I thank my hon. Friend for the explanation she has given. One aspect of European competition law is the economic assessment of what constitutes a monopoly. We could be in a position where something would not constitute a monopoly in the UK, but would be a direct threat to UK consumer interests, and would still be a monopoly in the European Union. What would be the position under the SI for consumers to gain protection as a result?

[Kelly Tolhurst]

My hon. Friend is right when he talks about the thresholds. Obviously, for the UK to take a particular action, the monopoly would have to meet our threshold abilities. It would, however, be down to the CMA to take forward cases, based on a number of different assessments. We do not expect—I do not expect—that the regulations will put the UK in a worse place. In fact, we could argue that there are benefits: under the regulations, the UK will make those decisions directly for UK consumers, rather than the decisions being taken at a distance. I hope that reassures my hon. Friend.

I thank the Committee for its consideration of the regulations. I thank the hon. Member for Sefton Central for his contribution and for the questions that he has asked me. He is absolutely right to do so, because it is an important debate and we are talking about the protection of UK consumers.

The amendments in the regulations are essential. If they were not passed, businesses would lack clarity as to how to act, and the CMA’s decisions would face a considerable litigation risk. It is vital that consumers continue to be protected from anti-competitive behaviour in the event of no deal.

As I have outlined several times, the UK has a world-renowned competition system. The regulations make no change to that system beyond correcting the deficiencies in retained EU law. We can all agree that it is essential that the regulations are in place in the event of a no-deal outcome. The amendments will ensure legal clarity for businesses, reduce litigation and protect consumers. They will also provide a smooth transition from the current system in the EU to a stand-alone UK competition regime in the event of a no-deal exit. I trust that I have answered all the Committee’s questions and I hope the Committee approves the regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Competition (Amendment etc.) (EU Exit) Regulations 2019.

Draft Package Travel And Linked Travel Arrangements (Amendment) (EU Exit) Regulations 2018

Kelly Tolhurst Excerpts

Tuesday 4th December 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I beg to move,

That the Committee has considered the draft Package Travel and Linked Travel Arrangements (Amendment) (EU Exit) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mr Hosie. The draft regulations, which were laid before the House on 29 October, will be made under the powers conferred by the European Union (Withdrawal) Act 2018. They form part of the wider programme of work to adjust our legislative framework in readiness for leaving the European Union.

If a withdrawal agreement is reached between the UK and the EU, the implementation date of this draft statutory instrument could be changed by any Bill that the Government introduce to implement the withdrawal agreement in UK law. However, it is sensible to prepare for all scenarios, and that is what we are doing by bringing this instrument before the Committee today.

The Package Travel and Linked Travel Arrangements Regulations 2018 came into force in the UK on 1 July this year. They implemented the European Union’s 2015 package travel directive, and expanded the definition of “package” to ensure that it encompasses modern methods of purchasing package holidays, online in particular. They also created the new concept of linked travel arrangements, which are looser combinations of travel services, and introduced limited protection for consumers who purchase them.

The 2018 regulations require the provision of information to travellers, so that they have clear information about their package holiday or linked travel arrangements and their statutory rights. They also require that organisers put in place adequate insolvency protection to cover the refund of payments made by passengers and, if necessary, their repatriation.

If approved, the draft instrument will make amendments to deal with deficiencies that arise from a possible UK withdrawal from the EU on a no-deal basis. The 2018 regulations implemented the mutual recognition requirement of the EU directive. That requires member states to recognise the insolvency protection put in place by traders under the law of the member state in which they are established. In consequence, the 2018 regulations exempt traders established in other member states from having to comply with UK insolvency protection rules. Upon EU exit, the UK will become a third country, and so will no longer benefit from the mutual recognition provisions of the directive. In consequence, member states will no longer recognise the UK’s insolvency protection under the 2018 regulations.

The draft instrument will remove the exemption that allows European economic area traders to sell in the UK as long as they meet the insolvency protection of the member state in which they are established. If they sell or offer for sale package holidays or linked travel arrangements in the UK, they will be required to comply with UK insolvency protection rules on the same basis as UK traders—and, indeed, traders established anywhere else in the world. That change is necessary, first, to ensure that UK travellers are fully protected by the 2018 regulations if they purchase a package from EU traders that choose to trade within the UK market; and, secondly, to ensure fairness for UK-based traders. EU-based competitors should not have the advantage of an exemption that is no longer reciprocal.

The 2018 regulations also required member states to establish central contact points, the main purpose of which is to facilitate information sharing between member states in relation to insolvency protection. The Civil Aviation Authority is the lead central contact point in the UK. Should the UK leave the EU without a deal, the role of the central contact point would become redundant. The draft instrument will revoke the function of the central contact point to reflect that. It does not affect the Civil Aviation Authority’s other enforcement functions in relation to the 2018 regulations.

The draft instrument will also change the obligations on UK retailers that sell packages put together by a non-UK organiser. Regulation 27 of the 2018 regulations requires UK-established traders selling a package put together by an organiser outside the European economic area to be responsible for the performance of the package. They must meet the insolvency protection obligations of the 2018 regulations, unless they can provide evidence that the organiser complies with those requirements. The draft instrument changes regulation 27, so that this responsibility is placed on UK-established retailers when selling a package put together by any organiser established outside the UK, including organisers established in the EEA. This change is important to ensure that UK travellers purchasing packages combined by EEA established organisers can continue to be confident that they would be protected by adequate insolvency cover in the event of the organiser’s insolvency.

[Sir John Hayes (South Holland and The Deepings) (Con)]

The Minister may be familiar with the role that I played when I was Transport Minister in doing exactly the sort of work and supporting the kinds of businesses that she is talking about. As she will know from the explanatory notes, one of the principal objectives will be to get those kinds of businesses, voluntary bodies and charities, to understand the changes. She is a competent and extremely diligent Minister, so I know that she will want to find means by which the Government can support that growing understanding. Will she agree to make provisions to get the word out among those kinds of businesses about what the changes mean?

[Kelly Tolhurst]

I thank my right hon. Friend for that point. If the draft statutory instrument is agreed to, and we move into a no-deal situation in which this piece of legislation is required, the Government are committed, as we have always made clear, to ensuring that consumers’ rights are protected. We are and will continue working with the industry, and with consumer representative bodies, to make sure that consumers are aware of what they need to be looking at, and that businesses operating in this area make sure that people are fully aware of the consequences of the draft instrument.

Finally, the draft instrument makes other technical changes to deal with references to EU legislation, for instance replacing references to EU directives with references to the relevant saved domestic legislation. Importantly, the instrument does not otherwise change the 2018 regulations, so that after EU exit, travellers will continue to benefit from all the protections in those regulations. Officials from the Department have undertaken the appropriate assessment of the impacts of the draft instrument. That has shown that there is likely to be a small impact on business in cases where UK businesses have to provide the relevant insolvency insurance.

The draft instrument is a sensible and necessary use of the powers of the European Union (Withdrawal) Act 2018 that will ensure that our consumer law continues to function effectively on exit day. I commend the regulations to the Committee.

--- Later in debate ---

[Kelly Tolhurst]

First, I reassure the hon. Lady that the 2018 regulations were implemented in July; we are making an amendment today based on a no-deal scenario. I thank her for her comments about the SI and the protections that we are trying to establish.

I will try to answer the questions raised by the hon. Member for Newcastle upon Tyne Central about the SI. As she will know, if a deal is agreed by this House, the Government will enter into a future economic partnership with the EU. This Government have been clear in their technical notices that consumer protection is at the forefront of what we are doing. Particularly in my role in the Department for Business, Energy and Industrial Strategy, consumer protection and what we are doing to support consumers is always at the forefront of our mind. I said it twice in two debates last week, and I say it again today: we are committed to continuing to deliver the highest consumer protections possible for the people of the United Kingdom.

The hon. Lady talked about consumer rights and different mechanisms as we move this statutory instrument forward. I alert her to the fact that in future weeks we will lay before the House an SI about mechanisms that we are working on for cross-border co-operation and redress in the event of no deal.

The hon. Lady talked about the impact assessment and mentioned a figure of £21 million. I am afraid I do not recognise that figure. Our assessment is that the potential cost to business is between £1.4 million and £1.8 million. As that falls below £5 million, a full impact assessment was not undertaken. I may need to make the Committee aware that the impact had already been established prior to 1 July, when the 2018 regulations came in, because UK businesses already had to provide protection for other holiday packages sold in the UK. We are pretty sure that our estimate of the burden on business will be at that level. In actual fact, we estimate that even if 70% of retailers currently supplying package holidays or linked travels arrangements in the United Kingdom were affected, it would still fall below the £5 million mark. More than 70% of retailers would need to be affected for that amount to be larger, and we think that the burden and the number of businesses affected will be reduced.

The hon. Lady also spoke about trading standards and enforcement. I take issue with her saying that trading standards have been decimated, and that the Government have not wanted to fund and have not taken seriously the enforcement of consumer rights. That is quite simply untrue. The priority given to trading standards locally is decided on at local level. Trading standards already enforce current regulations. We are committed to enforcement. We have National Trading Standards, and this year we put in the Office for Product Safety and Standards, which works very closely with National Trading Standards, and which obviously shows our commitment to delivering on product safety. We will continue, as ever, to maintain our trading standards capability.

As the hon. Lady knows, there was a Green Paper on consumer protections and enforcement. The Government are looking at that, and at how we can better our consumer protection and enforcement. I assure her that, as the Minister with responsibility for this area, I am committed to that. I reiterate that commitment, as I have in previous such Committees when consumer protections and enforcement have been raised.

I also highlight to the hon. Lady that, under the draft regulation, the CAA is still responsible for enforcement when flights are included. The Department for Transport is confident that even with the increased workload, it will be able to discharge its responsibilities under the draft regulation sufficiently well.

The hon. Lady also asked about the campaign that I agreed to. I did not agree to a marketing campaign; I do not think I spoke about a marketing campaign. I said that we will continue to work with consumer protection groups such as Which? and stakeholders. We have roundtables. We will also make sure that if there is a change and we are in a no-deal situation, the Government will work with our stakeholders, industry representatives, Citizens Advice, trading standards and all our usual stakeholders to make sure that the information is out there as prominently as possible. My right hon. Friend the Member for South Holland and The Deepings made the point that we have already had significant discussions with the industry and with stakeholders prior to laying this SI before Parliament.

We remain confident that we will reach a deal with the EU. However, it is of course important that we prepare the legislative framework to protect consumers and businesses in case we leave the EU with no deal. That is what this draft instrument will do. It does not make any substantial change to the regime for the protection of consumers purchasing package holidays or linked travel arrangements, or to the standards that travel operators are already expected to meet.

The draft regulations are essential to ensuring that the retained EU legislation that sets out those requirements continues to work effectively in the UK immediately after exit day. That is what they are designed to do. We need to make sure that we have the right regulatory and legislative framework to provide travellers with adequate protections, irrespective of the outcome of the negotiations. I therefore hope that the Committee approves the draft regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Package Travel and Linked Travel Arrangements (Amendment) (EU Exit) Regulations 2018.

General Affairs Council (Cohesion)

Kelly Tolhurst Excerpts

Thursday 29th November 2018 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

My right hon. Friend the Parliamentary Under-Secretary for State for the Department of Business, Energy and Industrial Strategy (Lord Henley) has made the following statement:

A meeting of the General Affairs Council (Cohesion) will be held in Brussels on 30 November 2018.

The General Affairs Council will discuss the legislative package for cohesion policy in the next multiannual financial framework. Ministers from member states will present their positions on the strategic context and priorities set out in the legislative proposals for post-2020, with a view to influencing the Commission’s proposals.

The Austrian presidency will provide an update on non-legislative and legislative items.

[HCWS1120]