Draft Statutory Auditors, Third Country Auditors and International Accounting Standards (Amendment) (EU Exit) Regulations 2019

Debate between Kelly Tolhurst and Bill Esterson

Monday 9th September 2019 General Committees

[Bill Esterson]

Thank you, Mr Sharma.

Now, to the matter at hand. We are faced with regulations and, as ever, the Minister did her best to make them appear to be a matter of minor change, but the House of Lords Secondary Legislation Scrutiny Committee said the

“range and magnitude of the changes are significant: the Regulations make changes to 15 items of legislation and include a sub-delegation of powers to UK regulators and extend a ministerial power of direction.”

The Minister did mention that.

[Kelly Tolhurst]

I did.

[Bill Esterson]

Well, the Minister mentioned the ministerial power of direction; I am not sure that she spoke about just how far reaching the changes are. The Lords Committee expressed its

“concern about the scale of the challenge facing financial services firms in adjusting to these changes.”

Yet when we turn to paragraph 10 of the explanatory memorandum, we find that no consultation was carried out with the financial services sector on these far-reaching changes, which will affect financial services firms. Sadly, that problem has bedevilled such statutory instruments, more than a few of which the Minister and I have considered, including the one she mentioned.

There is also a link to the 2013 report from the Parliamentary Commission on Banking Standards, which was chaired by members of the Minister’s own party. It was jointly chaired by a Member of the House of Commons—the then chair of the Treasury Committee, Andrew Tyrie—and a Member of the House of Lords. They found great concerns about the robustness of our audit regulations and called for wide-ranging changes. Those changes have not happened. The relevance of those points centres on the scandals surrounding companies the collapse of which related to a lack of audit, such as British Home Stores, Patisserie Valerie and Carillion.

The link to the regulations is important, because the Government are proposing to adopt the IFRS system, which is run by a private entity in Delaware in the United States and overseen by the European Commission. I wonder how the Government propose to accept arrangements whereby, once we have left the European Union, the European Commission will have oversight of our financial reporting standards. The Government are making a major change to those standards, tacked on to the regulations. Such a significant change clearly should be fully scrutinised, should have been the subject of consultation, and is very difficult for us to support.

I did some consultation of my own. I asked the Institute of Chartered Accountants in England and Wales for its assessment of the regulations. It confirmed the concerns I have just outlined regarding the Government’s proposed elimination of the exemption for EU companies with a UK-based subsidiary. It wants the Government to say what the timescales will be, because it is not clear from the regulations.

Beyond those concerns from the ICAEW, the proposed amendment is not just minor or technical. The controversies that I mentioned regarding audit mean that if such changes are to be made, they should be subject to much wider consideration. The consideration recommended by the 2013 report from the Parliamentary Commission on Banking Standards gives us a good place to start.

There are some significant concerns about the proposed changes, which are significant changes. It is simply not the case, as far as I can see from the commentary that I have received, that there will be no significant impact on the private, voluntary or public sectors. The lack of an impact assessment yet again is concerning. The Minister will no doubt say that the Government are preparing responsibly for Brexit, with or without a deal, but I am afraid that the lack of an impact assessment, the lack of consultation and the way in which standards have been tacked on to a set of regulations that are actually of a very different nature show that today’s statutory instrument should not have been introduced in its present form. For those reasons, we will oppose the regulations.

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[Kelly Tolhurst]

I will happily provide my hon. Friend with any advice that we have available. I point out to hon. Members that these regulations constitute an amendment to, and an extension of, the statutory instrument that was laid before and passed by this House at the beginning of the year. They particularly focus, as I outlined in my opening speech, on aspects to do with subsidiaries. They also correct an omission of three words, which it was important to do to ensure that the regulations expressed the true intention behind the original statutory instrument.

I emphasise that as part of the Department’s role in preparing for EU exit and making sure that we are in the best possible place to leave the European Union, with or without a deal, we have engaged continuously with stakeholders. Quite rightly, as Ministers, we have challenged our officials within the Department and our stakeholders, when we have had the opportunity to do so.

[Bill Esterson]

That is interesting, because I have a briefing note from the ICAEW here. It raises concerns, which I went through earlier, about regulation 4, on the loss of EEA subsidiary exemption, and regulation 6, on EEA qualification for auditors; I did not spend as long on that earlier. I mentioned some other concerns that had been raised with me by professional bodies. It does not seem, from anything that the Minister has said, as though she has had those discussions with the ICAEW. It does not seem to me as though she has had that note from the ICAEW, or those concerns have been raised with her. Perhaps she could clarify the situation for me. Did she receive those concerns from the ICAEW before this meeting?

[Kelly Tolhurst]

I can confirm that officials in the Department have been speaking to the ICAEW. As I outlined in my response to my hon. Friend the Member for Ochil and South Perthshire, we have made something explicit in these regulations on the back of our conversations with the ICAEW. Those conversations are ongoing and will continue, as I laid out in my opening speech, because we are to bring forward the assessment framework in a further statutory instrument.

The hon. Member for Sefton Central asked how we would cope with the fact that the European Commission was no longer making these opinions or decisions. The statutory instruments that we have made give these powers to the Secretary of State, thereby enabling parliamentary scrutiny of decisions and the ability to delegate responsibilities.

The hon. Gentleman is quite right that we have had many conversations about impact assessments in our debates on statutory instruments as part of the EU exit programme. He will notice that a de minimis assessment took place, because the level of impact was below £5 million. As I outlined in my opening remarks, the overall benefit from the statutory instruments will be a reduction of £2 million per year.

The hon. Member for Glenrothes asked why we are bringing this forward now, and why we did not do it in the original statutory instrument earlier in the year. The regulations before us were not needed for exit day, but because we have had the opportunity to extend our leaving date to 31 October, we have been able to consider them prior to exit day.

As the UK exits the EU, we are committed to maintaining the integrity of the UK system for regulatory oversight of audit. The regulations contribute to that by clarifying and building on the approach to oversight of the audit profession following our withdrawal from the EU that we began to set out in the original regulations at the start of the year. Like those regulations, this statutory instrument does not introduce a change in policy, as I have explained. The fundamental elements of the current statutory audit legislation will remain the same after exit. These regulations make only a small number of further amendments that are necessary to ensure that audit legislation remains operable in the UK following our withdrawal from the EU.

The regulations will mean that the UK system for regulatory oversight remains coherent and understandable, and they will enable us to do more on this over the coming months, irrespective of the outcome of the EU exit negotiations. I regret that the Opposition have decided that they are not prepared to support the regulations, which would give business and stakeholders consistency and clarity about how the market will work as we leave the European Union. I commend the regulations to the Committee.

Question put.

Retail Strategy

Debate between Kelly Tolhurst and Bill Esterson

Wednesday 10th July 2019 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Sir David, and I congratulate the hon. Member for Blaydon (Liz Twist) on securing today’s important debate. Like her, I have a family history in retail and shopkeeping: my great-grandmother ran a corner grocery store, my great-grandfather was a bootmaker and my father used to run a DIY shop.It is interesting that we are having this debate, because he closed that DIY shop after the retail sector changed. The likes of B&Q finished off some of our small, independent DIY shops. I hope I have been able to bring some direct understanding to my role as a Minister in this area.

As the hon. Lady and other Members have pointed out, the retail sector employs more than 3 million people and contributed £94 billion of gross value added to the UK economy in 2018. The retail sector is at the heart of our communities and our country. I reassure Members that I am extremely passionate and determined about the retail sector and that I care vehemently about it, much as everyone who sits in the House of Commons—not just those in the Government—cares very much about it and values it, the jobs it creates and the value it delivers to our communities.

Retail has always evolved to meet changing consumer demands, and it will continue to do so. Indeed, it is already thriving in many areas. For example, we have the most developed e-commerce market in Europe, with 48% of the estimated total of €198 billion in 2018. We recognise the high-profile pressures in the sector, but there are also businesses that are expanding and developing, as outlined by the hon. Member for Sefton Central (Bill Esterson) with his great plug for his local retailer Smiths TV. Amazon, Lidl, Aldi, Ocado and JD Sports are all companies investing in UK retail, which is a good sign for the future. Primark, which recently opened the world’s largest fashion retail store in Birmingham, is proving that a high street business can still be successful without a significant online presence. We have seen sales increase by 4% and increased profits. Organisations such as Pets at Home are taking on the challenge of changing consumer demand. In its stores, it is bringing in veterinary services and grooming services and investing in the workforce and apprenticeships. Many retailers are grasping the challenge of a changing retail sector and ensuring they are able to deliver services on the ground that consumers want.

We have heard examples from Members about local growth. It has been great to hear examples of local authorities working proactively with their high street forums and the opportunities available to them to try to grow and really focus on meeting the needs of the local community through the local retail offer. However, to continue to evolve, we need to innovate. I was therefore excited to see the UK Digital Retail Innovation Centre open in Gloucester in May this year, following a funding award of £400,000 from Gloucestershire’s local enterprise partnership. It will be a national centre for testing and developing disruptive digital innovations and will help shape and inform the future of cities with a special focus on retail.

Alongside those successes, we have seen some high-profile names struggle, including Woolworths, Toys R Us and, more recently, Debenhams and House of Fraser. We have been used to seeing those iconic names on our high streets, but in some cases they are no longer there. I do not underestimate the impact of those changes, which can be hugely difficult for the individuals and families involved and for communities. Indeed, I know the hon. Member for Blaydon met Toys R Us staff from the metro retail park when the store closed down. Some of them had been working there for 20 years, and I commend her for the support she showed to her constituents.

There is no doubt the sector is facing significant pressures, whether from uncertainty in the business environment or from changes in consumer expectations and preferences towards online shopping. Those challenges are reflected in retail across the world, not just in the UK. Our retail sector is still one of the best in the world, and we are well placed to deal with the challenges. Retail has a long history of responding successfully to change, of turning challenges into opportunities and of turning pressure into innovation. The Government are, and I personally am, absolutely committed to supporting the sector as it responds to change and strives to continue to serve the public so well, as it has in the past, and as it will in the future.

I am pleased, as part of my portfolio, to serve as the co-chair of the industry-led Retail Sector Council, alongside Richard Pennycook, the chairman of the British Retail Consortium. There has been confusion over the idea that the council does not meet very often and is just focused on the troubles of the past, rather than looking to the future, but I assure Members that we not only have Retail Sector Council meetings, but a number of sub-groups heading up the workstreams and meeting regularly. A lot of work goes on outside those meetings to reach targets. The workstreams are focused on future challenges and how we can drive the retail sector forward. It is not just a talking shop; if it were, I can assure Members I would want no part in it. I spent many a year before becoming an MP in talking shops, and I do not particularly want to do that as an elected Member of Parliament and especially not as a Minister.

[Bill Esterson]

I am glad the Minister has mentioned the Retail Sector Council. I am curious as to what it has achieved. Perhaps she can tell us, because if it is not a talking shop, it will have made a difference, and there will be some outcomes, deliverables and differences made.

[Kelly Tolhurst]

The hon. Gentleman is quite right. As he will know, when the Retail Sector Council was set up last year, we set its priorities. The six workstreams and the priority workstreams have been agreed. We are working for outcomes. The beauty of the Retail Sector Council is that it is the retail sector coming together with Government to find solutions to the future challenges. It includes not only the bricks-and-mortar retailers, but the online retailers and the small independent retailers. In the council, the sector is working with Government to move forward and bring forward plans and proposals that will benefit and aid the sector.

Businesses: Late Payments

Debate between Kelly Tolhurst and Bill Esterson

Wednesday 19th June 2019 Commons Chamber

[Bill Esterson (Sefton Central) (Lab)]

Unfortunately, I have only just received a copy of the Minister’s statement. I do not know why there was a delay, but it was not particularly helpful in preparing my response. [Interruption.] The Minister has just graciously apologised.

Late payment is believed to be the cause of 50,000 business failures each year, at a cost to the economy of £2.5 billion, along with thousands of jobs. Those are figures from the Federation of Small Businesses. The Minister is right to pay tribute to that organisation for the brilliant work that it does in advocating for small businesses on this issue and on so many others.

In her press statement, the Minister reported a fall in the scale of the problems facing small businesses, but let me caution her on that. She cited the excellent work of the Business, Energy and Industrial Strategy Committee, but it has suggested that it has evidence that payment terms are growing longer to mask some of these problems. Perhaps she can address that through some of the proposals that she has outlined.

We welcome the steps announced today as an important start in tackling the scourge of late payment. I tabled amendments to the Enterprise Bill that would have given the small business commissioner powers to insist on binding arbitration and fines for persistent late payment. The Government rejected those amendments, so we put the proposals in our 2017 manifesto, along with requirements for anyone bidding for a Government contract to pay their suppliers within 30 days. It is good to see the Government catching up with us today in their proposals.

The small business commissioner does great work with the £1.35 million in his revenue budget and, as I understand it, 12 members of staff at his disposal, but there are limits to what he can do. Although the £3.8 million recovered by the commissioner is important to the businesses affected, it is a fraction of the money withheld by late payers, which is in the tens of billions of pounds on any of the estimates available to us. What extra budget will the commissioner be given to discharge the additional responsibilities that the Minister is proposing, and what is the timescale for the consultation?

Accountability of company boards is a step in the right direction, but it will be important to compare the experience of the supplier with the reported practice in company accounts. How will the Minister ensure that what is reported is the time from the date of supply of goods and services rather than the date of recording the invoice, which any accountant knows can be significantly different and is often subject to delay when invoices are mysteriously lost or queried by accounts departments? How will this add to the existing duty to report? When will the consultation on giving the powers on the duty to report to the small business commissioner take place?

As the Minister told us, a number of companies that are members of the prompt payment code have been found not to comply with the code. The scandal of Carillion is an example of abuse of that code; we saw payment times of 120 to 180 days becoming the norm. Giving the policing of that code to the small business commissioner is a sensible idea, so will the Minister say what additional resources for these powers will be given to him?

The use of project bank accounts would have prevented the £2 billion loss to 38,000 suppliers in the Carillion fiasco. What consideration are the Government giving to extending the use of project bank accounts? I also note that the Government are pledging from 1 September to force bidders for Government contracts of more than £5 million to pay 95% of their invoices within 60 days. That is in line with the prompt payment code, but only with the lower end of its requirements. Why not make it a 30-day requirement?

One complaint of businesses is that the public sector is the source of some of the worst practice. The Minister mentioned the public sector in her statement. Another complaint is that smaller firms are often at fault in delaying payments. When does she expect action to be taken on public sector and other small business delays?

The problems of late payment need significant changes in practice. Today’s statement announces a series of measures which, if properly resourced, could make a significant difference. Businesses deserve a change of culture. The economy and the country need a change in practice. In broadly welcoming these measures, I hope that the Government’s delivery matches the rhetoric.

[Kelly Tolhurst]

I apologise to the hon. Gentleman for the fact that he did not receive a copy of my statement in sufficient time. That was not my intention at all. I hope that he will understand, following the many debates that he and I have had in the House, that that is not how I tend to work with him. I thank him for recognising that this statement should have an impact on the late-payment problems of many small businesses. One thing that has been made absolutely clear to me since I became a Minister—and actually prior to being elected, when I was a small business owner myself—is that late payment is always raised by companies that deal with large organisations. I am very pleased to be able to move forward on this matter.

The amount of money owed in late payments has halved. I wish to recognise the work that has been done by the small business commissioner since he took up his role one and a half years ago. He has collected more than £3.5 million in late payments. The hon. Gentleman is right to question his role and when the consultation will take place. We want that consultation to happen quite quickly. One of the key things that came out of the call for evidence was that people wanted more powers to be given to the small business commissioner. They saw his role as, in effect, an umbrella role encompassing a number of enforcement abilities for him to act on behalf of small businesses.

The consultation will happen soon, and I would like it to take place with speed. I reiterate that, as we seek views on whether we should allow the small business commissioner to apply sanctions such as binding payment plans and financial penalties, that would be a massive step change and step forward. The small business commissioner has been very vocal in requesting more powers to enable him to represent and help the small businesses that come to him.

We will also be seeking views on whether the small business Minister should have the ability to refer topics to the small business commissioner for investigation. The small business commissioner will currently investigate only once a complaint has come from a small business, so we are looking at other ways in which investigations could be carried out. Obviously, I am giving hon. Members just a sample of what will be included in the consultation.

The hon. Gentleman is quite right on the matter of boards. On the back of the Chancellor’s announcements in the spring, we are pleased to give audit committees the power to review payment practices and for that to be included in the annual report. We are working with the Financial Reporting Council and the frameworks department at BEIS to work out the best way for that to happen. The new strategic reporting requirement was introduced in January. We are asking the FRC how the payment reporting duty is covered by that new duty, if at all. I assure the hon. Gentleman that we will legislate to make that happen if necessary.

The Chartered Institute of Credit Management has worked hard on this issue over recent months, especially on the strengthening of the voluntary prompt payment code in October. We are pleased that cross-examining the data gathered under the payment reporting duty has helped with compliance with the voluntary code. We and the CICM believe that the best place for that duty is with the small business commissioner, so that the commissioner is, in effect, a one-stop shop and an easily identifiable pathway for small businesses.

The hon. Gentleman is right to talk about project bank accounts. Some hon. Members present, including my hon. Friend the Member for Bury St Edmunds (Jo Churchill), have lobbied me in the past on the matter of retentions. We have told the industry that we expect it to come to a consensus on a way forward, and we will take action if it does not.

As the hon. Gentleman knows, we have announced that from 1 September any company bidding for Government contracts over £5 million will be expected to pay 95% of their invoices within 60 days. If they do not achieve that target, they will not necessarily be able to bid for further contracts. In April 2019, we announced our new ambition that 90% of undisputed invoices should be paid to small businesses within five days.

Oral Answers to Questions

Debate between Kelly Tolhurst and Bill Esterson

Thursday 25th April 2019 Commons Chamber

[Kelly Tolhurst]

I would be very happy to meet women who are using all manner of tools. I met eBay yesterday, and it talked about the work it is doing to encourage women to start their own businesses. It particularly talked about how it is working with retail businesses in Wolverhampton. I am always available to speak about anything that will encourage women in business—in fact, not just women but all people.

[Bill Esterson (Sefton Central) (Lab)]

6. What assessment she has made of the potential merits of introducing a duty on employers to prevent workplace harassment.

Draft State Aid (EU Exit) Regulations 2019

Debate between Kelly Tolhurst and Bill Esterson

Wednesday 10th April 2019 General Committees

[Bill Esterson]

Oh, the hon. Gentleman does not have a legal background either—never mind. We are in danger of being diverted again.

In paragraph 6.10 of the explanatory memorandum, the Government say they will rely on EU case law in their application of state aid rules, but there is legal opinion that we may have to rely on case law from before we joined the EU—this point was picked up in the Lords—as we will no longer be bound by the treaties of the EU. That may be tested in the UK courts, and it may take years to resolve. That has been the case with other regulations passed in Committees like this, and Ministers have not been able to give a satisfactory answer—presumably because there are conflicting legal views about how it would be resolved. Before we joined the European Union, there was of course no comprehensive state aid regime to regulate what was and was not permitted, so the difference between the two options is very significant.

The information provided to us does not give us the evidence we need to make a reasonable judgment about the technical adequacy of the regulations. For a simple example of that, I refer Members to paragraph 6.14 of the explanatory memorandum. I have no doubt about the need to omit specific references to Germany in article 107(2)(c) of the EU regulation, but I also have no way of knowing whether such a technical change is appropriate. More to the point, we have no way of knowing whether all the necessary technical changes of a nature similar to those identified in paragraph 6.14 and a number of other paragraphs have been made.

A further example of our inability to form an opinion can be found in the wording of paragraph 6.28, which states that

“a large number of deficiency corrections were required to make the Procedural Regulation operable in a domestic setting.”

The explanatory memorandum does not describe in detail what that large number of deficiency corrections is, it does not say what the evidence base is for asserting the need for those corrections, and it does not give back-up expert witness evidence in support of that assertion. That sentence is a pretty fair indication that we have an impossible task and are being asked to approve something with a clear lack of evidence to support doing so.

The CMA is being asked to take on responsibility for oversight of the state aid regime from the European Commission. In paragraph 7.2 of the explanatory memorandum, the Government refer to

“the costs and benefits of setting up a completely new body or having an established regulator take this on”.

I note the information before us does not give the details of that cost-benefit analysis or why the decision was taken to choose the CMA rather than setting up a new body.

That takes me back to the points made in earlier interventions about the devolved Administrations. Paragraph 10.1 refers to the discussions with the devolved Administrations and the CMA. It sounded to me in those earlier exchanges as though the Minister was in danger of being right in the middle of a constitutional crisis. Without publication of the Secretary of State’s response to the letter from the Welsh Government, this dispute has not been resolved to anybody’s satisfaction. How can we judge what the outcome is or should be without sight of that response?

[Kelly Tolhurst]

I would like to clarify what I said earlier on that particular point, where I alluded to the fact that the Secretary of State had responded. I understood it to mean a letter that had been sent to the Secretary of State earlier in the year, which is known and has been published. I had not appreciated that the letter that the hon. Gentleman referred to was the letter sent to the Lords Committee, which my hon. Friend Lord Henley of the other House will respond to. I hope to clarify that point, since the hon. Gentleman raised it.

[Bill Esterson]

I am grateful to the Minister for that intervention, which tells us that we have not had the response from the Secretary of State. I am pleased that we got that on the record.

The Secondary Legislation Scrutiny Committee (Sub-Committee B) report, published on 7 February, refers to this issue and asked

“whether the Devolved Administrations were content with the approach”.

It is pretty clear that there has not been an answer to that question, let alone the more detailed letter published as evidence given to that Committee, which my hon. Friend the Member for Blaenau Gwent quoted from earlier and which I will quote from in more detail now. Not only are those responses not recorded, but it does not appear they have been made.

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[Kelly Tolhurst]

It is great to be able to answer a few of the questions put to me. I have faced the hon. Member for Sefton Central in Committee several times in recent weeks, but I hope that earlier he was not questioning my integrity by not understanding or believing what is in front of him. I hope he accepts that I always try to answer the questions as openly as they are put to me.

[Bill Esterson]

On a point of order, Mr Hanson. I am sure that had anything disorderly taken place or the suggestion the Minister just raised been made, you would have intervened and stopped it. May I have your confirmation that that is what would have happened, and that as it did not, nothing disorderly happened earlier?

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[Kelly Tolhurst]

My hon. Friend makes a fair point.

In many of our debates on no-deal regulation, the fact that we are where we are regarding the powers in the withdrawal Act and bringing in retained European law through secondary legislation has been a bone of contention for the hon. Member for Sefton Central. I understand that he wants further scrutiny, but I assure him that the reason we are here today, dealing with a no-deal SI, is that we are retaining EU law and bringing it over so that in the event that there is no deal on exit day, we have a functioning domestic regime. The regulations have been laid and there have been opportunities to read and examine them. I do not believe that the Government in this case are shirking their responsibilities or not giving Parliament the opportunity to scrutinise. We have been debating for an hour in this Committee. The withdrawal Act does not allow us to make big policy changes; we can make the changes required. We are debating a no-deal SI, which will come into effect if we leave the European Union with no deal. If we can reach agreement on a deal, the regulations will not be relevant.

[Bill Esterson]

That is interesting. I read the regulations and the explanatory memorandum in some detail several times. Although the Minister is right that the regulations will apply in the event of no deal, it is pretty clear that they will also apply if there is a deal. Indeed, I checked this point with the Library, and the regulations will apply whatever the arrangements for our exiting the EU. Will she confirm that that is the case?

[Kelly Tolhurst]

The hon. Gentleman makes a good point. If we entered into an agreement, we would go into an implementation period, and we would be bound by EU rules as they stand until the end of that implementation period. In any arrangement for our future relationship with the European Union, state aid would be subject to debate and to further negotiation and agreement. It would not be right for me to anticipate that. I am here to talk about a no-deal scenario and the legislation in front of us.

On the hon. Gentleman’s shopping list of state aid requirements—the things he would like to spend money on—I point out that the Post Office effectively does receive state aid. We subsidise the Post Office. We have maintained our network of 11,500 post offices, unlike previous Governments, who have undertaken programmes of closures. I am proud to stand here as the Minister responsible for post offices and say that the Post Office is in a much better place financially than it has been for many years. We are committed to delivering postal services in rural areas, and there are a number of funds to support that. I am determined that that will continue under these regulations.

It is a matter for debate whether, how, where and how much money will be granted to other worthy schemes. It is not for us to decide today which schemes and which parts of the country will receive additional funding. This debate is about the regulations—the rules—and how those decisions will be made. I understand the hon. Gentleman’s wants, but this debate is about the rules for agreeing or disagreeing.

The hon. Gentleman spoke about support for the regions. As he will know, the regional growth fund and most of the regional support funds granted through state aid are covered by the block exemption regulations, so these measures do not stop the Government supporting local communities and regions where required. This Government operate a successful industrial strategy and are determined to continue to invest in research and development, regional growth and opportunities, particularly for small and medium-sized enterprises. Let us not forget the funding available from the British Business Bank, which is an example of where those regulations have been used to benefit SMEs and provide access to finance.

On the devolved Administrations, I repeat that the Government consider the regulation of state aid to be reserved to the UK Government. However, individual choices about how and when to give aid within that framework are for public authorities, including devolved Administrations, to make. The devolved Administrations will have full autonomy in state aid case management and in dealing with the CMA. As I outlined, I recognise that there is a difference of view about whether the regulation of state aid is a reserved matter. However, given that the UK Government are closely aligned with the devolved Administrations on the substance of the policy, and given the limited scope to depart from mirroring the EU regime using powers in the regulations, it is not necessary to resolve that question now. The Government will continue to work closely with the devolved Administrations on the development of state aid policy.

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[Kelly Tolhurst]

As I have outlined, we expressed our belief in the intergovernmental agreement on the withdrawal Act that state aid is a reserved matter. That is our opinion, as I have said a number of times. It is not for the Committee to debate whether we were in the right when we expressed that position. The SI in front of us concerns a UK-wide regime. It is a no-deal SI that transposes EU law into UK law and remedies the deficiencies within that law for the UK domestic system, so that if we leave the European Union with no deal we have a functioning state aid regime, which is extremely important for us to trade with the European Union without a deal. If we leave without a deal, businesses will still want clarity over trade opportunities with the European Union. Therefore, the regulations are an important part of ensuring consistency and continuity for the business community and aid givers.

[Bill Esterson]

I will repeat part of the quote that I read out from the Welsh Counsel General about clauses 7 to 9 of the withdrawal Act. It relates to the inter- governmental agreement that the Minister has just referred to, and states that

“the powers will not be used to enact new policy in devolved areas; the primary purpose of using such powers will be administrative efficiency”.

I put it to her that this is a million miles away from being just about administrative efficiency. By any definition, this is about new policy in devolved areas.

[Kelly Tolhurst]

I thank the hon. Gentleman for that, but the SI does not create new policy; it relates to retained EU law. As I said, if there are any future changes on state aid—I cannot answer hypothetical questions about what might be coming in future—we will continue to consult and work with the devolved Administrations. If we reach an agreement to leave the European Union with a deal, the devolved Administrations will have a greater opportunity, as outlined by the Prime Minister, who has been very clear that she wants to work with them on formulating the future relationship.

I reiterate that this would be a UK regime. The devolved Administrations would still be able to act as aid givers and make those decisions on where they want to put that aid; they will just have to notify the CMA rather than the European Commission. I highlight the fact that a number of aid options are covered through the block exemption, which I have already outlined; as I said in my opening comments, that covered 97% of the state aid given in the UK in 2017. I therefore believe that the regulations we have before us are sensible, valid and definitely required if we leave the European Union with no deal.

The hon. Member for Sefton Central also asked whether the CMA is the correct authority to take on the state aid function, and why another regulator would not be set up. Let us be clear that the CMA has an international reputation and is extremely well respected for the work it does within competition and markets. It also has relationships throughout the international community. I am absolutely assured that it is the right organisation to take on this function, because of its expertise, the respect it commands and its understanding of competition, which will enable it to ensure fairness while being able to guarantee that state aid is administered without restricting competition or giving unfair advantage. That goes to the heart of what our state aid regime will be. In my view, the CMA is the right organisation to take that on and it has the necessary expertise, so there is no need to create a new regulator.

The hon. Gentleman also asked how the CMA’s preparations are going. I have outlined already the funding that has gone to the CMA to enable it to prepare. I reassure him that we are indeed looking at the devolved Administrations; that is why the CMA has been strengthening its Edinburgh branch—it is expected that some state aid work will be happening in Edinburgh. I assure hon. Members that the CMA has done a great job so far with its recruitment and getting the numbers of people that it will require in place before exit day to manage the new state aid regime. There are only 24 people left to recruit and the CMA has made great strides in that respect.

The hon. Gentleman also talked about the guidance that is being reissued. The guidance that will be provided by the CMA on approving state aid will be issued prior to exit day. He talked about primary legislation and where the Secretary of State will be able to—[Interruption.]

--- Later in debate ---

[Kelly Tolhurst]

The hon. Member for Sefton Central mentioned paragraph 7.6 of the explanatory memorandum. He read out the passage relating to how the Secretary of State would enact primary legislation. The Secretary of State would do so, in the event that the state aid rules were too restrictive, to provide any state aid that was required. That would rarely be used, but it is an option detailed in the explanatory memorandum.

The hon. Member for Bassetlaw mentioned the motion of regret that was moved in the other place, which focused on the provision of aid rather than the rules governing it. It is important to note that the motion was withdrawn and not divided on. I want to touch on his comments about state aid and the WTO. I understand that he is a great supporter of Brexit and that he might have concerns about this SI. I would like to explain that we have a set of rules here that relate to a no-deal situation. I want to reassure him that the state aid rules in front of us, and the European rules as they stand, have vast flexibility. Over the past 40 years, we have had only six negative judgments against the UK. The decision on whether to offer state aid is a matter for the Government of the day. The regulations before us have not been a barrier to the use of state aid, and they have not restricted our ability to fund the British Business Bank or other projects.

With regard to WTO rules, there are rules that would still need to be adhered to. These regulations would obviously help us establish a future trading relationship with the European Union, and it would be helpful to us to have a clear regime in place, so that the European Union could have confidence in our ability to offer that trade. Quite rightly, as we would be a third country, WTO rules would still be used. They do not necessarily offer us any better protections or give us more flexibility in the long run, but I understand the concerns of the hon. Member for Bassetlaw.

I think I mentioned earlier that WTO rules do not stop any Government nationalising a service; the rules stop them paying more than the market rate for a particular asset. By the Opposition’s admission, they would like us to have a deal with the European Union rather than to go into a no-deal situation, so I would have thought that the Opposition would welcome these regulations to give assurances. Indeed, were we to move to a customs union—the policy favoured by Opposition Front Benchers and their leader—there would need to be some kind of state aid regime.

I could keep rabbiting on forever about state aid. We need to provide continuity and certainty for public authorities that grant state aid and their beneficiaries. This approach will maintain business confidence, particularly in the event of the UK’s leaving without a deal. The regulations safeguard competitiveness, and I commend them to the Committee.

[Bill Esterson]

On a point of order, Mr Hanson. In the light of the Minister’s inability to deal with the point about the response from the Welsh Government to the Secretary of State, is there a way for the regulations to be further debated on the Floor of the House as part of their passage? That would give the Minister time to get us the answers to that question and others, because this is very unsatisfactory.

Exiting the European Union (Consumer Protection)

Debate between Kelly Tolhurst and Bill Esterson

Tuesday 2nd April 2019 Commons Chamber

[Kelly Tolhurst]

Well, I hope that the hon. Gentleman is asking me that question because he wants to support me and my colleagues on the Government Benches. It is quite right that any responsible Government would prepare for a no deal, and that is exactly what we are doing. I must remind colleagues that this regulation came into force in December last year, and, where we have had to enforce it, there have not, as yet, been any complaints.

[Bill Esterson]

The hon. Lady demonstrates that she and I are in agreement about the benefits of geo-blocking and the current arrangements that we have as members of the EU. This regulation is about no-deal preparation, and we will lose those benefits if we leave with no deal. Perhaps she can tell the House what preparations she and her Department have made to ensure that, if we do manage to avoid no deal, there is a mutual recognition agreement that keeps these provisions in place.

[Kelly Tolhurst]

The hon. Gentleman’s question suggests that he is considering supporting the withdrawal agreement, because he is asking me about the preparations that we have made in the event of that happening. We have been quite clear that we have to agree the withdrawal agreement. As we have said in our technical notices, and as I have said in many SI Committees, we will be working with our neighbours to ensure that we are able to enter into mutual co-operation agreements if the withdrawal agreement is passed.

Draft International Accounting Standards and European Public Limited-Liability Company (amendment etc.) (EU Exit) Regulations 2019

Debate between Kelly Tolhurst and Bill Esterson

Wednesday 20th March 2019 General Committees

[Kelly Tolhurst]

I am grateful to the hon. Gentleman for his contribution. International financial reporting standards are a world-leading set of accounting standards, used by a large number of companies in the UK, the EU and other countries around the world. Their use helps inform decision making, improves transparency and promotes confidence in the business environment. As we leave the EU, it is vital we maintain the integrity of the UK system of accounting and reporting.

I remind the hon. Gentleman that we are talking about a statutory instrument that would transfer the current rules that we already work to within the European Union and how the EU applies those rules across member states. In the event of our exit from the EU, we are bringing together a UK framework. It is important to bear that in mind. This is about how we develop a successful framework that enables us to maintain our position as a great place to do business, and reassures investors and companies of that.

We are the biggest capital market outside the US and, therefore, it is right for us to have the regulations; I am sorry to hear that the hon. Gentleman has concerns about them. Having worked through them as a Minister, I think they are sensible and would enable the UK to carry on securely.

I will answer some of the points raised by the hon. Gentleman. The stakeholder group was established in April 2018 to look at the regulations, and it held six meetings. That group included investors, accountants, advisers and business representatives who took part in the meetings as independent individuals. They were asked to participate because of their knowledge, expertise and potential to help in this area, to work with us to look at the technical information and ensure that any regulations brought forward would be in good order.

As the hon. Gentleman mentioned, there was no public consultation on the regulations, but we held informal stakeholder meetings of those affected and interested parties over a long period, from 2018.

With regard to the hon. Gentleman’s comments on the FRC, we welcomed the review undertaken by Sir John Kingman and we will bring forward primary legislation on that point. I must point out that the endorsement board will be a subsidiary of the FRC. It is not currently constituted. The regulations will enable the Secretary of State to have those powers and he will be able to sub-delegate them to an endorsement board.

We are working with FRC officials, and the Secretary of State has full oversight of the development of the EB and its design. He will eventually appoint a chair, shape governance and have full political oversight. The EB will be run separately, as a subsidiary; it will have its own running costs and will be funded through a levy, which organisations that have to comply with FRC rules currently pay to the FRC.

One good thing about the endorsement board and its being structured within the FRC is the future thought leadership that the board will give. It will really be able to influence, on the international stage, any future developments in IFRS standards. That area will be key for the endorsement board going forward.

[Bill Esterson]

Earlier, I put to the Minister her Department’s statement to the House of Lords Committee that it was working with the FRC to have the new endorsement board ready in time for EU exit. I take it, from what she just said, that that will not happen. Will she confirm that? Will she also confirm the arrangements for the work that the new endorsement board will undertake once it is set up?

[Kelly Tolhurst]

I am sorry; I thought I had already outlined that to the hon. Gentleman. The Secretary of State has those powers, which will he will sub-delegate to the endorsement board. We are working to develop that board, and our intention is that it will be in place by the end of 2019. I thought I had made that clear.

The Secretary of State will have the power to sub-delegate, but he will also have the power to revoke powers sub-delegated to the endorsement board in the future. To clarify, and to give Members comfort that political oversight will continue, the hon. Gentleman was quite right that the Secretary of State will have to report to Parliament annually, and the endorsement board that carries out these tasks in the future will also report annually to the Secretary of State. Those reports will be placed in the Commons Library. Even when there is an endorsement board, the Secretary of State will still lay an annual report in Parliament, which will give an opportunity for parliamentary scrutiny and for the Secretary of State to be scrutinised and held to account for particular activities of the endorsement board when that sub-delegation has occurred.

On the hon. Gentleman’s comments on whether we are lobbying the US to follow IFRS standards more closely, that is not something I am directly involved with. The draft regulations are very much about making sure that the UK is able to maintain its place in the global market. As an independent nation after EU exit, we will have the opportunity to make sure that we have a wider influence in the world on the adoption and formulation of standards.

As I have outlined, the draft regulations will provide continuity and clarity to business by ensuring that UK companies can continue to use IFRS, as adopted in the EU, when preparing their annual accounts. They also set out a future adoption framework for the UK that is robust and transparent, and that will act in the national interest. This framework has been developed in close consultation with stakeholders, as I have outlined, and represents the best way forward for the UK’s continued use of these international standards. I therefore commend the draft regulations to the Committee.

Question put and agreed to.

Oral Answers to Questions

Debate between Kelly Tolhurst and Bill Esterson

Tuesday 19th March 2019 Commons Chamber

[Kelly Tolhurst]

The hon. Gentleman raises an important point. Tax is a responsibility of the Treasury, but as he will know, including after our conversations yesterday—this was also alluded to earlier in questions—post offices are still an important part of our high streets, and the Post Office is currently negotiating a new banking framework. It is absolutely right that, when banks are pulling out of our high streets, the post offices that are delivering the services are remunerated correctly for that.

[Bill Esterson (Sefton Central) (Lab)]

The duty for large companies to report how quickly they pay their suppliers is of course welcome—80% of businesses that fail do so as a result of late payments—but to be effective, the new duty to report will need some teeth, such as binding arbitration and fines for persistent offenders. This Government’s use of sanctions against the poorest has been disgraceful, so how about using sanctions against some of the most powerful and making sure that large corporations treat their small business suppliers fairly?

[Kelly Tolhurst]

Late payments and the way that some large businesses have behaved in the past have been an issue for decades, and it is this Government who are prepared to make changes and bring forward policies to reduce them. We know that late payments can be incredibly damaging for businesses. That is the reason for the Chancellor’s announcement last week about the responsibility of committees to look at payment practices, and I look forward to making further proposals.

Oral Answers to Questions

Debate between Kelly Tolhurst and Bill Esterson

Tuesday 12th February 2019 Commons Chamber

[Kelly Tolhurst]

The hon. Lady is quite right. In October last year, we announced that we will bring forward legislation regarding tipping in the next Session. We are committed to doing that. It is this Government who have brought it forward.

[Bill Esterson (Sefton Central) (Lab)]

The Secretary of State for International Trade seems to be hell-bent on destroying our businesses, judging by his support for zero import tariffs. Can the Business Minister confirm that she understands the damage that unilaterally imposing zero import tariffs would do to businesses and jobs in this country? Will she confirm whether she or the Business Secretary will remain as members of the Government if that policy is adopted?

[Kelly Tolhurst]

I am glad the hon. Gentleman has raised this issue. We engage with the small business community, the wider business community and all business representation organisations on a weekly basis. It is quite right that we consult a plethora of businesses throughout the UK on any decision that will be taken on customs and tariffs. We will take into consideration their views when we set our policy, which will be announced in the near future.

Draft Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2019

Debate between Kelly Tolhurst and Bill Esterson

Monday 4th February 2019 General Committees

[Bill Esterson]

I am happy to help. Paragraph 7.8 says:

“This measure applies to very few companies, but transitional provisions have nevertheless been provided that will allow sufficient time for impacted companies to consider the impact of the change on their operations and take appropriate action”.

My question was about how many companies she means by the phrase “very few companies”, which refers to:

“Investment companies that only have shares admitted to an EEA market”.

[Kelly Tolhurst]

I thank the hon. Gentleman for that clarification; that was the area I was thinking of. As far as intermediaries are concerned, five companies would be affected, but our records show that no investment companies have been identified as being affected.

On consultation, as I outlined, we have consulted, worked with and used the expertise of Companies House to ensure that we are making the best provisions to enable UK companies to implement the regulations that we require for them to be legal if we leave the European Union without a deal. By working with those experts, we believe that we have devised the simplest and best way forward.

As I set out, the changes in the regulations cover a variety of amendments to the UK company law framework, so that, on exit day, the UK statute book is workable and coherent. It should be emphasised that certainty is crucial for business confidence. In some cases, the changes are not material and will have no impact on business; they are simply provisions to tidy up the Companies Act 2006 and related secondary legislation. The communication of pre-emption offers to shareholders is one example. The changes are no less important for that reason, however, and they will mean that UK statute is on a stable footing on exit day.

As I have set out, other areas will have an impact. They include the level-down approach for EEA companies in relation to certain filing requirements for the register, as well as the changes for some entities in relation to benefits that are currently based on access to EEA-regulated markets. The removal of the cross-border mergers regime is another example of where businesses will notice a change to processes that existed as a result of our membership of the EU.

The regulations cover many different changes, but, taken individually, their impact on business will be small. My officials are working with Companies House and others to ensure that the register will be operational for exit day, and that will significantly reduce the impact felt by companies that are affected by the changes. Overall, the regulations will ensure that the UK’s company law framework remains coherent, operable and under- standable for business, and I commend them to the Committee.

Question put and agreed to.

Draft Insolvency (Amendment) (EU Exit) Regulations 2018

Debate between Kelly Tolhurst and Bill Esterson

Thursday 24th January 2019 General Committees

[Kelly Tolhurst]

I thank the hon. Member for Sefton Central for his comments and contribution to the debate. We remain optimistic about reaching a deal of mutual benefit to the UK and the EU, but it is important to maintain our regulatory and legislative framework for dealing with insolvency should we leave without a deal. That is why we introduced this instrument.

The Department has consulted with the profession and spoken to some of the groups to try to ensure that that the statutory instrument will work as well as possible. Obviously, we have consulted R3, which the hon. Gentleman mentioned. As I outlined, we are very much focused on delivering a deal.

The hon. Gentleman is quite right that the statutory instrument relates entirely to things happening in the UK, but does not enable us to have any influence on or dictate to EU member states how they treat UK orders in the event of no deal.

[Bill Esterson]

indicated assent.

[Kelly Tolhurst]

I see the hon. Gentleman understands that point.

As the hon. Gentleman will know, in what we have laid out as our future economic relationship in a deal, our focus is on ensuring that we are able to deal with mutual recognition and reciprocal status going forward if a deal is to be had. We recognise, with the profession, that if we can come to an agreement in this area in a deal situation, that would be in everyone’s best interest. With a deal, we would continue our civil judicial co-operation, including on cross-border insolvency. That is in the best interests of both the UK and the EU, as he outlined. However, it is not possible for us to unilaterally continue with the co-operation on cross-border insolvencies; we can achieve the benefits that both sides currently enjoy only through a mutual recognition agreement with the EU. The declaration on the future relationship was clear that it would include wide-ranging agreements on trade, including trade in professional and business services and the framework necessary to support that.

We will continue in those endeavours, but this SI is intended to ensure that, in a no-deal situation, UK law provides clarity for the profession and that we are able to operate on day one. After that date, it would be down to us to bring any further changes to our insolvency regulations that are not in the scope of the draft regulation to the House, as we see fit. After leaving, there may be things that come up that we might need to change, but that would be done in the course of standard business.

Regarding the hon. Gentleman’s concerns about the Pension Protection Fund, I assure the Committee that the Prime Minister and the Government have been clear that we will not row back on workers’ rights through the withdrawal Act. Employees living and working in the UK for a company registered here or in the EU will continue to receive redundancy-related payments from the national insurance fund where their insolvent employer cannot make them, as they do now. The draft regulations ensure that the law in this area is clear and can operate correctly when we are no longer an EU member state. One of the limitations is that within this SI we cannot guarantee for workers in EU states, how EU member states will deal with the employees working in those states. What we can do, as laid out in this SI, is to ensure that people working in the UK, be it for EU companies operating in the UK or UK companies, will still have those protections as they are now for UK workers.

On the hon. Gentleman’s questions about the impact assessment, we have been in this situation many times over recent months and I know it is a particular concern for him. However, for this particular SI we have assessed the direct cost of to business in terms of the costs of insolvency and have estimated that the direct cost would be £2.7 million, due to the extra costs that may arise when practitioners need to open cases in EU member states, which they do not currently have to do under EU regulations.

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

Debate between Kelly Tolhurst and Bill Esterson

Wednesday 12th December 2018 General Committees

[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.

--- Later in debate ---

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

Debate between Kelly Tolhurst and Bill Esterson

Wednesday 5th December 2018 General Committees

[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.

Ending Seasonal Changes of Time (Reasoned Opinion)

Debate between Kelly Tolhurst and Bill Esterson

Monday 12th November 2018 General Committees

[Kelly Tolhurst]

I do not have the particular detail of how many respondents there were from the UK, but I am more than willing to share that afterwards with my hon. Friend.

[Bill Esterson (Sefton Central) (Lab)]

In her statement the Minister said that the Government have many concerns, but I did not pick up what they were. She mentioned some of the things that the Commission said, but could she spell out the Government’s concerns about the proposed change in time rather than the procedural stuff?

[Kelly Tolhurst]

My statement clearly laid out the Government’s concerns. First, the proposed timeframe is not acceptable. Secondly, we are not proposing to change summertime. Thirdly, it should be for member states to make such decisions, but this directive starts from a position of harmonisation. Those are just some of the many concerns.

[Kelly Tolhurst]

Currently we do not intend carry out a consultation. We are working with other member states to block the proposal. Obviously, we will respect the implementation of EU rules while we are still a member but at this moment in time we do not want to consult because we are fundamentally against the proposed clock changes.

[Bill Esterson]

To clarify: with my previous question, I hoped that the Minister would tell us the Government’s concerns about the impact of the change on the economy, society, business, the voluntary sector, schools and other areas. Could she spell those out?

[Kelly Tolhurst]

I thank the hon. Gentleman for his clarification. He raises an incredibly important point. One of the reasons that we are against the proposal is that we do not know what its impacts will be. The European Commission has not, as far as we are concerned, properly assessed them, and we have not been able to do so, either, in such a short timeframe. To implement this change in such a short timeframe would not be practical when we do not know the impact it would have across the country.

--- Later in debate ---

[Kelly Tolhurst]

First, it is not the timetable I have set out, but the European Commission’s timetable. Fundamentally, that is one of the reasons we object to the proposal, because we do not feel the timeframe is workable. That is obviously backed up by other member states. I have written to the devolved Administrations to get their position. Given the short timeframe, we need to work. It has been accepted by many that a delay of two years would be preferable for member states to do the necessary consultation to implement any potential new directive that comes from the European Union. At that time, once a decision is made, we will look to ensure that we communicate with people.

[Bill Esterson]

Following on from the initial question that my hon. Friend the Member for Walthamstow asked, can the Minister spell out for us what the procedure is for this proposal being blocked, if the reasoned opinion is supported by the Committee today? How does that get support? Is it a system of majority voting, do we have a veto or is it another system? Can the Minister tell us how this would be allowed to go through or stopped, whichever is more likely, and give us a few scenarios?

[Kelly Tolhurst]

Obviously, we at the stage where member states are debating the proposal and making their positions clear. What I have already outlined is that we are working with other member states to get the European Commission to change its proposals. At such time, there will be a position where all member states will either agree or disagree with the proposal.

Oral Answers to Questions

Debate between Kelly Tolhurst and Bill Esterson

Tuesday 16th October 2018 Commons Chamber

[Kelly Tolhurst]

Fundamentally, the Government absolutely support the post office network, and we are determined to make sure that it is provided across the country. As the Minister with responsibility for post offices, I have taken a particular interest in that since taking up my role. I am determined to make sure that we keep the network running across all parts of the country to benefit our communities.

[Bill Esterson (Sefton Central) (Lab)]

First, I welcome the Minister to the Dispatch Box.

The British Business Bank is simply not reaching most businesses that need support. Only 12% of members of the Federation of Small Businesses apply for external finance, and two thirds of those applications are rejected. In the spirit of cross-party co-operation, how about setting up a network of regional development banks to deliver business finance where it is most needed? The Government have stolen a number of our policies—why not that one?