Ecodesign for Energy-Related Products and Energy Information (Amendment) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Wednesday 9th December 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 13 October be approved.

Relevant document: 32nd Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 1 December.

Motion agreed.

United Kingdom Internal Market Bill

Lord Callanan Excerpts

Consideration of Commons amendments & Ping Pong (Hansard) & Ping Pong (Hansard): House of Lords
Wednesday 9th December 2020 Lords Chamber

Moved by

[Lord True]

That this House do not insist on its Amendments 1, 19 and 34 to which the Commons have disagreed for their Reason 1A.

1A: Because they will create legal uncertainty, which would be disruptive to business.

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Moved by

[Lord Callanan]

That this House do not insist on its Amendments 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 30, 31, 32, 33 and 56 to which the Commons have disagreed for their Reasons 8A, 10A and 15A, but do propose the following amendments in lieu—

Commons Reasons

8A: Because the omission of Schedule 1 by Lords Amendment No. 56 in consequence of replacing clause 10 with the new clause proposed by Lords Amendment No. 12 and the omission of powers to amend provisions of Parts 1 and 2 (including Schedules 1 and 2) by Lords Amendments Nos. 8, 9, 12, 17 and 30, would result in the Secretary of State being unable to respond quickly to the changing needs of the UK internal market.

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8K: After Clause 20, Insert the following new Clause—
“Duty to review the use of Part 2 amendment powers
(1) In this section “the Part 2 amendment powers” are the powers conferred by sections 17(2) and 20(7) (powers to amend certain provisions of Part 2).
(2) The Secretary of State must, during the permitted period—
(a) carry out a review of any use that has been made of the Part 2 amendment powers,
(b) prepare a report of the review, and
(c) lay a copy of the report before Parliament.
(3) In carrying out the review the Secretary of State must—
(a) consult the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland,
(b) consider any relevant reports made, or advice given, by the Competition and Markets Authority under Part 4, and
(c) assess the impact and effectiveness of any changes made under the Part 2 amendment powers.
(4) The permitted period is the period beginning with the third anniversary of the passing of this Act and ending with the fifth anniversary.
(5) If either of the Part 2 amendment powers has not been used by the time the review is carried out, this section has effect—
(a) as if the report required by subsection (2), so far as relating to that power, is a report containing—
(i) a statement to the effect that the power has not been used since it came into force, and
(ii) such other information relating to that statement as the Secretary of State considers it appropriate to give, and
(b) as if the requirements of subsection (3) did not apply in relation to that power.”

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, this group covers the exclusions to the market access principles and delegated powers-.

I turn first to Amendment 8L and other consequential amendments relating to the exclusions from the market access principles. These amendments, to which the other place have already disagreed, would replace the current Clause 10 with an expansive list of aims, which could be used to justify creating trade barriers for goods in the United Kingdom. The exclusions approach, as originally drafted, achieves a careful balance. It sits within the fundamental framework of the market access principles which protect the UK’s highly integrated internal market, but allows the Government to remove very targeted and specific policy areas from scope so that they continue to operate for the particular conditions where they are needed under the bespoke constraints relevant to those circumstances. This targeted approach provides certainty to businesses while ensuring that important or high-risk policy areas, such as chemicals, pesticides or sanitary and phytosanitary measures, can operate effectively.

However, the protections and benefits of the internal market proposals would quickly begin to fade with an expansive list of exclusions for part 1. This would allow unnecessary trade barriers and unjustifiable costs to businesses and consumers. The Government’s view is that a targeted list of exclusions in the Bill, combined with how the principles of mutual recognition and non-discrimination interact, is the best way in which to allow each part of the United Kingdom to meet its respective goals while avoiding unnecessary damage to the UK’s internal market.

The noble Lord’s amendment would not achieve that balance. Although the new list of exclusions that he has presented is slightly changed from his earlier amendment, the list remains very wide. It captures almost all kinds of public policy objectives, and only requires a new regulation “to make a contribution” to any of the aims in the list. This means that almost any regulation proposed by the UK Government or the devolved Administrations in future could be excluded from the scope of the market access principles. The Government reject the idea that a large list of exclusions is needed to preserve standards. The UK Government share with the devolved Administrations commitments to maintaining our existing high standards, whether environmental protection, animal welfare or consumer standards. We will continue to work together on these as a united kingdom as we leave the transition period. We should not forget that the Bill’s design will continue to allow all Governments to innovate, so that new ideas can emerge—as they did with plastic bag charges, for instance—to build better and higher standards for us all, including in the many social policy areas that the noble Lord clearly is concerned about.

I turn to the amendments relating to delegated powers, which underpin the realisation of these market access principles and make sure that they continue to function as effectively as possible. Noble Lords will be aware that the Government’s view remains that these key delegated powers are necessary. My colleague, Minister Scully, successfully argued in the other place that the amendments to remove these powers should be rejected. These powers will ensure that the system continues to evolve, facilitating frictionless trade across the United Kingdom. This will be necessary to react to developments in technology and regulation that cannot be foreseen at present. They also allow the Government to respond rapidly to business and wider stakeholder feedback—for example, to amend the list of exclusions, if implementation shows the need for adjustment.

It is important to note that any of these powers would require an affirmative procedure statutory instrument to be made in Parliament. This will ensure that there is full transparency on any changes and that MPs from all parts of the UK can scrutinise and vote on any changes. Furthermore, these powers are now supplemented by the comprehensive and reasonable package of amendments that we have proposed. This includes new amendments tabled ahead of this debate, giving more certainty on the role of the devolved Administrations in developing changes. I thank the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, for their constructive engagement on this matter.

We have listened to your Lordships’ House carefully. Indeed, at Report, we removed the power for the Secretary of State to amend the list of statutory requirements which are in scope of the mutual recognition principle for goods. In this case, having looked again after hearing from your Lordships, we changed our position, having assessed that the removal of the power will not substantially undermine the operation and flexibility of the internal market system.

We have also retabled the Government’s amendment from Report, removing the main affirmative power in relation to the exclusions to part 2. When the other place disagreed with this House’s amendment, removing the main affirmative power and the draft affirmative power, both parts of that power were restored to the Bill. I am happy to make the change that I proposed in my amendment at Report once again. We have also proposed new amendments that give an enhanced role to devolved Administrations in relation to these powers, building on the model proposed by the noble Baroness, Lady Hayter, at Report and ensuring that agreement across all Administrations to the use of the power is achieved whenever possible. The Secretary of State will be required to seek the consent of the devolved Administrations prior to any use of this power. If consent is not provided within one month, the Secretary of State will be able to proceed without that consent but must publish a statement setting out the reasons for proceeding in this way. As this adapts the model that your Lordships previously supported, I hardly need to stress the merits of this approach, which ensures that the devolved Administrations have a say but not a veto. I am hopeful that this time noble Lords will support it. The noble Baroness, Lady Hayter, is nodding; we are in a good place on this one.

Thanks to government amendments introduced at Report that are retabled today, the impact and effectiveness of any use of these powers will be subject to review within five years. A report setting out the conclusions of that review must then be laid before Parliament. I hope this offers comfort to this House that we are taking seriously the concerns that have been raised, and we are working to address them constructively. The uses of the powers to make delegated legislation contained in parts 1 and 2 of the Bill will be scrutinised, not only when they are being laid before Parliament, but also in a more holistic way, after a suitable period has elapsed. This review will again give an opportunity for the devolved Administrations to provide their views.

I briefly address the power to issue guidance, to which we have deliberately taken a more distinct approach. Clause 12 explains that the Secretary of State may issue explanatory guidance on the practical operation of the market access principles for goods. It is not a power to make or amend legislation and, therefore, it differs from other delegated powers in part 1 of the Bill. As part of this process, we will, of course, engage with all the relevant stakeholders, because we are committed to helping regulators and traders to understand the principles and make the best possible use of them. This includes the devolved Administrations, and we are including a legislative commitment to consult them before issuing, amending or withdrawing that guidance. Guidance will not change the rules themselves, so a requirement to seek the consent of devolved Administrations, as proposed for other powers, is not needed.

I urge your Lordships to support all the amendments to these powers, which I hope noble Lords will agree represent a reasonable approach. Crucially, they also enable the internal market system to remain up to date while ensuring the highest degree of scrutiny and accountability. I beg to move.

Motion B1 (as an amendment to Motion B)

Moved by

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[Lord Fox (LD)]

My Lords, like the noble Lord, Lord Stevenson, I will take the amendments in the opposite order to the Minister, if the House is happy with that.

The delegated powers issue has almost become a ritual in your Lordships’ House. A Bill is published and in it are many very draconian powers, which seek to change almost everything the Bill can do at the will of the Minister. There is then a report from the DPRRC which condemns it, and then there is a debate and we start to move towards a more reasonable situation. I hope, perhaps, that we can learn from this and maybe cut out a few of the steps, so that we can get to the reasonable situation. The Government have given considerable ground on this, and for that we should all be accepting and reasonable and, I suppose, grateful, although perhaps gratitude is the wrong word.

With respect to Clause 12, I think we will all be watching quite closely to see how those powers are exercised, because advice can come in many forms and we will be seeking to observe that.

The characterisation that these delegated powers are required in order for the Government to react and act with speed has been absolutely confounded by the way in which the Covid crisis has been addressed by the Government. There has been very rapid legislation and very rapid reaction. Looking forward, we have got to a better place than we were in when we started. I still do not think that we would call it perfect, but we have taken a long time to get there.

My reading of the amendment proposed by the noble Lord, Lord Stevenson, is that it is the return of Amendment 21, or at least most of it. Listening to his very reasonable presentation of the amendment and having listened to the debates on Report, I am somewhat surprised that the Government continue to dig their heels in. I can understand that the list in subsection (2) of the proposed new clause might have raised some concerns, and it can of course be subject to negotiation, but as the list now stands—with environmental standards and protection; animal welfare; consumer standards, including digital; employment rights and protections; the health and life of humans, animals or plants; the protection of public health; or equality entitlements—it seems that the Government could not possibly object to it, so I am surprised. The Minister has set out his concerns about an ordered market, but it is very clear that any market that did not observe these things would not be one that we wanted anyway.

With that response, I suggest that we will be supporting the noble Lord, Lord Stevenson, when this Motion is put to a vote. We hope that the Government will be able to have discussions with the noble Lord and others, so that next time they can come back with something much closer to what we have seen today.

[Lord Callanan (Con)]

I thank both noble Lords for a good, albeit brief, debate. To summarise, earlier I expressed my concerns about Amendment 8L and the expansive list of exclusions from the market access principles that it introduces. The list that we have included has been carefully drafted to strike what is, in our view, a measured balance. It protects the ability of the devolved Administrations and the UK Government to deliver policy, while avoiding harmful or costly barriers to trade within the UK internal market. The Bill does nothing to stop all nations working together to achieve mutual goals and build on our shared high standards.

On the delegated powers in the Bill, it is not proportionate to remove the Government’s ability to ensure that the list of exclusions and legitimate aims remains appropriate. The Government have already set out a comprehensive package of changes to the delegated powers in the Bill, including for the removal of certain powers and for reviews and reporting to Parliament, and new amendments on the role of the devolved Administrations. This provides for effective transparency and scrutiny of the remaining powers.

We believe that there is a reasonable middle ground here. Many noble Lords tabled and supported amendments to alter, but not remove, the powers in the Bill. We agree with those colleagues. These powers are necessary, and we believe that the changes we have proposed should address their concerns. I therefore hope that noble Lords will be able to support the Government’s approach to reinstating these powers in the Bill.

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Moved by

[Lord True]

That this House do not insist on its Amendments 14 and 52 to 55 to which the Commons have disagreed for their Reason 14A.

14A: Because they were consequential upon Lords Amendments Nos. 42 to 47 and so the changes they made are no longer needed as a result of the Commons disagreement to Lords Amendments Nos. 42 to 47.

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Moved by

[Lord True]

That this House do not insist on its Amendment 42 to which the Commons have disagreed for their Reason 42A.

42A: Because clause 42 protects Northern Ireland’s place in the United Kingdom’s customs territory, as provided for under the Northern Ireland Protocol.

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Moved by

[Lord True]

That this House do not insist on its Amendment 43 to which the Commons have disagreed and do agree with the Commons in their Amendments 43A and 43B.

43A: Clause 43, page 34, line 42, at end insert “, or
(i) is necessary for the purpose of dealing with a threat to food or feed safety in Great Britain.”

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Moved by

[Lord True]

That this House do insist on its Amendment 44 to which the Commons have disagreed for their Reason 44A.

44A: Because the regulation-making power conferred by clause 44 provides a necessary safety net to ensure Ministers can secure that qualifying Northern Ireland goods have full, unfettered access to the whole of the UK internal market.

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Moved by

[Lord True]

That this House do insist on its Amendment 45 to which the Commons have disagreed for their Reason 45A.

45A: Because it is necessary for the Secretary of State to have the power to ensure there is no confusion or ambiguity in UK law about the interpretation of Article 10 of the Northern Ireland Protocol.

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Moved by

[Lord True]

That this House do not insist on its Amendment 46 to which the Commons have disagreed for their Reason 46A.

46A: Because it is necessary to codify in legislation the existing practice, whereby aid is notified to the European Commission by the Foreign Secretary through the United Kingdom Mission in Brussels.

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Moved by

[Lord True]

That this House do insist on its Amendment 47 to which the Commons have disagreed for their Reason 47A.

47A: Because the Commons consider it necessary, in order to avoid confusion in domestic law about clauses 44 and 45 and regulations made under them and provide clarity for courts, businesses, and public bodies, for those clauses and regulations to have effect notwithstanding possible inconsistency or incompatibility with any relevant national or international law.

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Moved by

[Lord Callanan]

That this House do not insist on its Amendments 50, 57 and 61 to which the Commons have disagreed for their Reasons 50A and 57A, but do propose Amendment 50B in lieu—

Commons Reasons

50A: Because it would involve a charge on the public funds and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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50B: After Clause 40, insert the following new Clause—
“40A Duty to review arrangements for carrying out Part 4 functions
(1) The Secretary of State must, within the permitted period—
(a) carry out a review of the appropriateness, for the purpose of securing the most effective and efficient performance of the Part 4 functions, of—
(i) the provision made by section 30(1) and the amendments made by Schedule 3, and
(ii) any arrangements made under or in connection with that provision and those amendments;
(b) prepare a report of the review (see subsection (4) for specific requirements relating to the report), and
(c) lay a copy of the report before Parliament, the Scottish Parliament, Senedd Cymru and the Northern Ireland Assembly.
(2) The review must, among other things, assess—
(a) the way in which Part 4 functions have been carried out by the CMA through Office for the Internal Market task groups authorised under section 30(1), and
(b) any advantages or disadvantages of continuing with—
(i) the provision made by section 30 and the amendments made by Schedule 3, and
(ii) the arrangements made under or in connection with that provision or those amendments,
as compared with other possible ways of providing for the Part 4 functions to be carried out (including possible arrangements not involving the CMA).
(3) In carrying out the review the Secretary of State must consult the other relevant national authorities.
(4) Before finalising the report required by subsection (1)(b) the Secretary of State must—
(a) send a draft of the proposed report to each of the other relevant national authorities, inviting the authority to make representations as to the content of the proposed report within a period specified by the Secretary of State, and
(b) consider any representations duly made in response to that invitation and determine whether to alter the report in the light of that consideration.
(5) The Secretary of State need not consult the devolved authorities further if the draft is altered as mentioned in subsection (4)(b) (but is free to do so if the Secretary of State thinks fit).
(6) The permitted period for the review is the period beginning with the third anniversary of the day on which section 30 comes into force (or first comes into force to any extent) and ending with the fifth anniversary.
(7) In this section “Part 4 functions” means functions of the CMA under this Part.”

[Lord Callanan (Con)]

My Lords, I now turn to the amendments on the office for the internal market and the subsidy control grouping.

First, I want to emphasise that Part 4 establishes the office for the internal market within the Competition and Markets Authority, which is, in our view, a natural home for the OIM, given its existing technical expertise that is highly relevant to the operation of the UK internal market. But, as I have set out, the office for the internal market will be independently governed within the CMA, and Schedule 3 sets out a carefully balanced set of governance arrangements which guarantee that independence and ensure a meaningful role for the devolved Administrations through the appointments process to the OIM panel. This gives the devolved Administrations a proper voice, while guaranteeing that the OIM can operate without delay or obstruction if four-nation consensus cannot be reached on appointments.

The Government have listened carefully to the discussions in this House and have acted, tabling a number of pragmatic and constructive amendments throughout Part 4. These make it clear that the OIM will work in the interests of consumers and ensure that it will operate in the interests of all parts of the United Kingdom and on an equal basis towards the four UK Administrations. This is further to the significant change put forward previously, requiring the Secretary of State to seek consent from all Administrations within a one-month timeframe, based on proposals developed originally by the Welsh Government. This change provides yet another enhancement for the devolved Administrations in the appointment process, which, as I have explained, fully reflects the even-handed approach to governance that runs throughout Schedule 3.

I hope your Lordships can appreciate that the Government have listened and moved accordingly. However, I cannot support your Lordships’ Amendments 57 and 61, which go further than this, requiring direct devolved Administration appointments to the CMA board. As already set out here and in the other place, it is the OIM panel that will undertake the work of the OIM. The CMA board is responsible for the operations of the organisation as a whole, which otherwise fall wholly within reserved competence. It is therefore not appropriate for the devolved Administrations to make appointments to the CMA board, as those board members would, in consequence, be involved in a range of reserved matters with no relation to the OIM functions set out in Part 4.

With regard to Amendment 50, your Lordships will be aware that this has invoked a financial privilege claim and has not been agreed to by the other place. Although this of course is sufficient in itself, I will remind your Lordships’ House that there is a consultation forthcoming on this matter of subsidy control. It would be premature and unjustified to agree to confer specific regulatory functions on the OIM in respect of subsidies before the wider details of any legislative UK domestic subsidy control regime—including the appropriate mechanism for oversight and enforcement—have even been developed and brought before Parliament, let alone agreed.

However, I have listened to concerns regarding the decision to have the CMA perform these duties, and I am pleased to announce that the Government have tabled Amendment 50B, which will require the Secretary of State to review, after between three and five years and in close consultation with the devolved Administrations, the appropriateness of, effectiveness of and potential alternatives to the CMA carrying out its Part 4 functions. This will allow Ministers from all Administrations to closely consider the CMA’s performance and the pros and cons of continuing with the CMA as the delivery vehicle for the Part 4 functions. This proposal makes it clear that the Government are committed to ensuring due diligence on the CMA’s new functions and facilitating further scrutiny by all Administrations.

This amendment requires the devolved Administrations to be consulted as the review is carried out—but it goes further, giving the Administrations the right to consider and make representations on the draft report itself, and requiring the Government to fully consider those views. Subsection (5) rules out an unlimited obligation to consider repeated rounds of representations that could block the review, but I want to be clear that the Government will consider all views offered in good faith. I note for the benefit of noble Lords that this final point applies equally to Clause 50—to which I will now turn—which reserves to the UK Parliament the exclusive ability to legislate for a UK-wide subsidy control regime in future.

I was pleased to note in the debate on Report that many noble Lords did in fact recognise the importance of maintaining a consistent approach in what is a nationally significant area of economic policy. In addition, I welcome the devolved Administrations’ support for the principle of a unified approach to subsidy control throughout the United Kingdom. For these reasons, the Government believe it is right that we retain the provisions for the reservation of subsidy control in the Bill.

Now we have left the EU, it is important that we continue to take a coherent approach to the system that governs how public authorities subsidise business across the UK. I reiterate that this reservation is not about sources of funding or who makes decisions on individual subsidies across the UK. This reservation will ensure that any future system we put in place to regulate against the distortive or harmful effects of spending on subsidies then applies to the whole of the UK.

A unified approach to that overall framework will reduce uncertainty for UK businesses and prevent additional costs to supply chains and consumers. As such, continuing our UK-wide approach to subsidy control and confirming it in law remains the best way to ensure that we continue to take a consistent approach to regulating the harmful effects of subsidies across the United Kingdom.

To be clear, all UK public authorities are and will remain responsible for their own spending decisions on subsidies—how much, to whom and for what—within any overall subsidy control regime. This reservation is not seeking to change public authorities’ responsibilities for spending decisions. However, the wider rules which they operate should continue to be consistent across the United Kingdom.

I acknowledge the concerns that some of your Lordships have raised in previous debates regarding the principle of reserving a policy area in advance of the forthcoming consultation the Government have committed to publish. However, this reservation is a necessary step to ensure that, if a legislative regime were introduced, it would apply then to the whole of the UK. Given that this is a national issue, the future subsidy control mechanism should be the responsibility of the UK Parliament to determine.

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A very good way of showing the Government’s commitment would be, as the noble and learned Lord, Lord Thomas, said, to accept his amendment on asking the common frameworks group to come forward with a proposal for state aid. As he pointed out, there is time. It is not a pressing issue, because we know now that we are operating on the basis of the WTO rules in the interim. If that works, why should we not take the time to go forward with this? Let us test the commitment, resolve and enthusiasm for the common frameworks through this good process of operating a common framework for state aid in short time, and to completion. If that can be done, and if the offer made by both the Scottish and Welsh Governments to hold back on any measures that might interfere with it in the intervening period is attractive, the Government have a win-win situation and I recommend it.

[Lord Callanan (Con)]

My Lords, I thank all noble Lords who have contributed to what was another short but powerful debate. I have listened carefully to the points that have been made. I will set out in my closing remarks why I cannot support Amendments 51, 57 and 61 in the name of the noble Baroness, Lady Finlay. Turning first to the OIM, I emphasise that the Government have listened and responded directly to points made in this House. This is reflected in the meaningful changes made throughout Part 4. They include putting beyond doubt that the OIM will work in the interests of consumers, and making it clear that its functions will be available to the benefit of all parts of the UK, and for all Administrations, on an equal basis.

The Government have recognised the need for the devolved Administrations to be closely involved in OIM panel appointments. That is why the proposal for a one-month consent requirement on OIM panel appointments with the devolved Administrations is being introduced, providing them with an enhanced role in the process. This amendment originated with the Welsh Government.

Finally, the Government have tabled an amendment that will require a review and a report between three and five years after the CMA takes on the Part 4 functions. This will examine the way in which the CMA has carried out these functions, and the devolved Administrations will be closely involved throughout. The review and the report will provide the necessary assurances that the operation of the OIM within the CMA will be closely scrutinised, providing enhanced transparency and accountability to all four UK Administrations.

I will reply to the point made by the noble Baroness, Lady Finlay: in seeking to go further than a normal requirement to consult the devolved Administrations on the review of the OIM, the Government have included an additional and explicit requirement to share and allow for representations on the resulting draft report. As I have said, providing that the Government are not required to follow this operation an unlimited number of times is simply intended to prevent a procedural impossibility if no consensus is reached. I am happy to say again that all views offered in good faith will be considered by the Government in preparing their report, as required in the proposed clause. The amendment makes clear that the Government have the option of sharing as many drafts and considering as many rounds of representations as are appropriate and feasible in the circumstances.

I am happy to assure my noble friend Lady Neville-Rolfe that these proposed reviews would assess the pros and cons of the CMA as the delivery vehicle of the OIM, including whether possible arrangements not involving the CMA could carry out the Part 4 functions in the future.

I turn to the knotty issue of subsidy control. The purpose of this reservation is to provide stability and continuity as we move forward in forging a new UK-wide subsidy control regime. This Bill continues the UK-wide approach to subsidy control and confirms this in law. State aid has never been a devolved issue, as I have said on a number of occasions, and this reservation will ensure that we can continue to take a uniform approach to subsidy control across the UK. I reiterate that, in practice, nothing will change for the devolved Administrations. All UK public bodies, including the devolved Administrations and in the areas that the noble Lord, Lord Liddle, highlighted, will still have responsibility for spending decisions on subsidies and should make these in a way that is consistent with the overall approach taken across the United Kingdom.

In the coming months, we intend to publish a consultation on whether we should go further than our World Trade Organization and international commitments, including whether further legislation is necessary. We will take the necessary time to listen closely to the devolved Administrations and design a system that promotes a competitive and dynamic economy throughout the whole of the United Kingdom.

The proposed amendment makes clear that the UK Government are committed to involving the devolved Administrations in the forthcoming development of proposals for a UK-wide subsidy control regime. We recognise the importance of working constructively and co-operatively in this policy area, and it is in all our interests that a new regime works to the benefit of the whole country. That is why the Government cannot agree with Amendments 50C, 51, 57 and 61, so I urge noble Lords to accept Amendments 50B and 51B put forward in my name and reject the others.

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Motion M

[Lord Callanan]

Moved by

That this House do not insist on its Amendment 51 to which the Commons have disagreed for their Reason 51A, but do propose the following amendment in lieu—

Commons Reason

51A: Because it is necessary to reserve to the United Kingdom Parliament the right to legislate for a system to regulate the provision by public bodies of subsidies which are or may be distortive or harmful and to avoid the risk of inconsistent regulation of such subsidies in the different parts of the United Kingdom.

Prohibition on Quantitative Restrictions (EU Exit) Regulations 2020

Lord Callanan Excerpts

Tuesday 8th December 2020 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Prohibition on Quantitative Restrictions (EU Exit) Regulations 2020.

Relevant document: 35th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, these draft regulations were laid before the House on 8 November 2020. As I am sure noble Lords will recognise, it is important that we have full sovereignty over our regulatory regime for goods at the end of the transition period. This SI will help ensure that we are not challenged if we choose to diverge from EU regulations by removing retained EU treaty rights.

At the end of the transition period, EU treaty rights on the movement of goods stemming from Articles 34 to 36 of the Treaty on the Functioning of the European Union will be retained in UK law unless they are removed by this SI. The rights flowing from these EU treaty articles prohibit the imposition of quantitative restrictions or equivalent measures, such as regulatory requirements, on imports and exports by member states, unless justified under Article 36. This is to encourage the free movement of goods within the single market.

The UK will have its own regulatory regimes after the end of the transition period and the EU will not be treating UK goods as it would goods from a member state. Therefore, these provisions are no longer appropriate to retain, and could impede our ability to diverge from EU goods regulation in future. This is because the provisions prohibit quantitative restrictions or equivalent measures on imports and exports, meaning that divergence from EU regulatory requirements could result in a challenge from a business or importer if it resulted in being a barrier to placing its goods on the market in Great Britain.

Of course, I understand that there is a lot of interest in precisely what these new regulatory arrangements will be. First, I cannot emphasise enough to noble Lords that this instrument does not introduce any of these new regulatory arrangements or any divergence. Any measures relating to specific regulatory arrangements are being dealt with in separate regulations; nor does this instrument deal with other matters, such as the Northern Ireland protocol or the UK internal market, which I know are also of great interest to noble Lords.

I will, however, say a few words on the new regulatory arrangements. Different goods are currently subject to different regulatory regimes. Cosmetics, food products, machinery, et cetera, are all dealt with in their own way, and that will continue to be the case. So I cannot give a detailed overview here, especially as these matters are not themselves the subject of the regulations before the Committee. What I can say is that by and large the regulatory requirements for goods as of 1 January 2020 will remain largely the same as they are now.

The main changes for the end of the transition period are to reflect the fact that we are no longer part of the single market; for example, the CE marking, which denotes compliance with EU rules, will be replaced by the UKCA marking, which shows that a good meets UK rules and was tested, where needed, by a UK-recognised body. This Committee debated that SI a week or so ago. Of course, any further regulatory changes will be a matter for future consultation and future legislation as appropriate.

The Government have published detailed guidance on these new regulatory arrangements and published guidance on the movement of goods between Northern Ireland and the UK. While many of the new arrangements will not apply in Northern Ireland from 1 January next year due to the Northern Ireland protocol, the Government have been categorical in our commitment to unfettered access to the rest of the UK market for Northern Ireland goods. But, again, I stress that these are matters that fall outside the scope of the regulations before your Lordships.

I return to what this SI does. It will remove the aforementioned EU treaty rights so that they no longer apply in England, Scotland or Wales. As some areas of goods fall under devolved competence, my officials have engaged regularly with officials from the Welsh and Scottish Governments. The Government have written to counterparts in Wales and Scotland to formally seek their consent to lay this SI, which they have confirmed. This SI does not cover Northern Ireland as the treaty rights in question will continue to apply in Northern Ireland as of 1 January 2021 by virtue of the protocol.

As I have already mentioned, these regulations will not result in any changes for businesses. However, they will give businesses greater certainty that when UK rules change they will not be rolled back after legal challenges based on treaty articles that no longer make sense once we have left the EU. A stable statute book is clearly in the best interests of businesses.

To be clear, this SI is not a pre-condition for divergence. As of 1 January, Parliament will have the ability to introduce new regulations—or not, as the case may be. Instead, is it about removing potential grounds for legal challenge based on retained treaty articles that have no place in our statute book once we have regained our full independence.

In conclusion, this SI will remove the rights flowing from Articles 34 to 36 of the Treaty on the Functioning of the European Union—reciprocal rights between member states that no longer have a place in a post-exit independent UK. This will protect our ability to regulate goods as we see fit and ensure that potential challenges do not require us to keep in line with EU regulations.

I reassure noble Lords that we have engaged with the devolved Administrations in Scotland and Wales on the changes that this SI makes, have ensured that they have been kept informed of its progress and have obtained their consent.

The safety of individuals, families and communities is a top priority for the Government. As I am sure noble Lords will recognise, it is essential that the UK is able to protect its sovereignty and that we can make our own rules to protect consumers and to prevent unsafe and non-compliant products entering the UK market. I commend these regulations to the Committee. I beg to move.

--- Later in debate ---

[Lord Callanan (Con)]

I thank the noble Baroness, Lady Ritchie, and the noble Lord, Lord Bassam, for their consideration of this statutory instrument and their valuable contributions and questions—I shall endeavour to deal with as many of them as possible.

I have set out today the importance of this SI and the importance of having full sovereignty over our regulatory regime for goods at the end of the transition period. I emphasise that this SI is not a precondition for divergence; nor does it introduce any divergence from our current rules. By supporting the SI, we will ensure that we are not faced with legal challenges that seek to keep us in line with EU regulations.

To recap: treaty rights provisions prohibit quantitative restrictions or equivalent measures on imports and exports. Therefore, future divergence from EU regulatory requirements could result in a challenge from a business or importer if it led to a barrier being created to placing their goods on the market in Great Britain. This SI will ensure that we have the freedom to regulate goods in Great Britain as we see fit, along with considering the impact on businesses and consumers, while ensuring that the UK product safety system remains among the strongest in the world.

As advised, these regulations will not result in any changes for businesses. However, they will give businesses greater certainty that, if UK rules change, they will not be rolled back after legal challenges based on treaty articles that no longer make sense once we have left the EU.

The noble Baroness, Lady Ritchie, raised the important subject of working with the devolved Administrations. I repeat what I said in my introduction: my officials have had a number of informal meetings with officials from the Governments of Scotland, Wales and Northern Ireland, all individually, on this SI. Officials have also hosted regular meetings with officials from the devolved Administrations to discuss progress in negotiations and the regulatory requirements for goods at the end of the transition period. I say again that consent to this regulation was given by all the devolved Administrations.

The noble Baroness also asked about goods moving from Northern Ireland to Great Britain. We are laying this legislation to ensure that we do not face challenges from manufacturers or importers if in Great Britain we decide to change our regulation of goods in a way that creates barriers to trade with the EU. This does not mean that there will be barriers for goods flowing from Northern Ireland into Great Britain. We have laid legislation to prevent such barriers, including the United Kingdom Internal Market Bill and the unfettered access legislation. This SI will not undo any of those protections. I shall write to both noble Lords on the definition of Northern Ireland qualifying goods.

The noble Lord, Lord Bassam, asked about the protection of rights. The vast majority of these changes will take place regardless of the agreement that we have reached with the European Union on our future trading relationship so that businesses can be confident that their plans and preparations to date have not been wasted.

We also recognise the impact that the pandemic will have had on industry’s ability to prepare. For that reason, we are taking a pragmatic and flexible approach to using some of our retained powers as a sovereign nation to allow businesses time to adjust.

The noble Lord also asked about legislative time. More than 150 SIs required by the end of the transition period have already been laid. Good progress is being made and we remain confident that all required SIs will be in force by the end of the transition period.

The noble Lord and the noble Baroness, Lady Ritchie, also asked about the important subject of business readiness. We are listening to businesses and recognise that they have faced many challenges, particularly from Covid-19. For goods with the new UKCA marking, we are permitting the use of the CE marking for goods in scope of the SI until 1 January 2022 as long as Great Britain and EU technical requirements remain the same. There are easements allowing the UKCA marking to be affixed to a label on a product or on a document accompanying the product until 31 December 2022, and we are allowing new importers of products from the EEA to set out their details on a document accompanying their products until 31 December 2022. Those are all ways in which we are helping to ease the burden on business.

Since the summer, the Government have also been providing support through an ambitious series of business readiness events. My department has published a range of guidance. However, I stress once again that this SI does not introduce any changes for businesses.

The UK will have its own regulatory regime after the end of the transition period and the EU will not treat UK goods as it would goods from a member state. Therefore, the provisions to which this SI relates are no longer appropriate to retain and could impede our ability to diverge from EU goods regulation in future. I commend the regulations to the Committee.

Motion agreed.

United Kingdom Internal Market Bill

Lord Callanan Excerpts

3rd reading & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords
Wednesday 2nd December 2020 Lords Chamber

[The Deputy Speaker (Baroness Henig) (Lab)]

I call the Minister to make a Statement on legislative consent.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I am required to inform the House that on 7 October the Scottish Parliament voted not to grant legislative consent because of its assertion that the Bill negatively impacts the devolution settlements. We have remained open to engagement with the Scottish Government on the contents of the Bill, and this offer still very much stands. The Senedd and Northern Ireland Assembly have not yet voted on legislative consent, but we have continued to engage with both Administrations on the Bill’s contents in recent weeks. This engagement has been fruitful, and the Government have listened closely to concerns. It has resulted, for example, in the Government tabling an amendment to ensure that the devolved Administrations have a strong role in appointments to the Office for the Internal Market panel, in light of Welsh Government proposals.

We appreciate the significance of the UK Government legislating without consent for this Bill. Our ambition, of course, remains to secure legislative consent Motions for the Bill. As I have said throughout the passage of the Bill, the UK Government remain open to discussions with all the devolved Administrations.

Clause 12: Modifications in connection with the Northern Ireland Protocol

Amendment 1

Moved by

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, my original Amendment 21 on Report, also signed by the noble Lords, Lord Anderson and Lord Wigley, and the noble Baroness, Lady Bowles, on which I spoke on 18 November 2020 and moved formally on 23 November 2020, replaced the original Clause 10 with a new clause listing public interest derogations from market access principles. I was pleasantly surprised and grateful that the Government accepted the amendment without a Division. The clerks subsequently advised us that the amendment required some consequential changes to the Bill to remove minor inconsistencies. These changes are set out in the amendments before your Lordships’ House today. Amendment 1 removes two subsections on page 8 and Amendment 3 removes Schedule 1 entirely. I beg to move.

[Lord Callanan (Con)]

The Government regret the changes made to the previous Clause 10 on Report, but I will not reopen that debate here. I appreciate the need for these amendments to tidy up the Bill text so the Government will not oppose them.

Amendment 1 agreed.

--- Later in debate ---

Moved by

[Lord Callanan]

That the Bill do now pass.

[Lord Callanan (Con)]

I thank noble Lords from across the House for the quality of the debates and the scrutiny provided throughout the passage of this Bill. I am grateful for the constructive engagement from many noble Lords from all parts of the Chamber that we have had both in and out of the Chamber, and hope that we can continue these discussions in the same spirit. I extend my thanks to other members of the ministerial team: my noble friends Lord True, Lady Bloomfield of Hinton Waldrist, Lady Scott of Bybrook and Lady Penn, as well as Shreena and the rest of the excellent civil servants on the Bill team.

I have said throughout the debates that this Bill is essential for guaranteeing the economic and political integrity of the United Kingdom. It will ensure much-needed certainty for businesses as we leave the transition period. It will preserve our ability to trade freely across all parts of the United Kingdom. Having listened to all the debates in this House on this Bill, I believe I can say that all noble Lords share this objective. While noble Lords and I may not have always agreed on every single point—to put it mildly—the challenges posed by noble Lords and debates we have had have always been conducted in a constructive and courteous manner—except, obviously, the noble Lord, Lord Foulkes, but we accept his contributions.

On a related note, I want to touch briefly on an amendment in the name of the noble Baroness, Lady Ritchie of Downpatrick, referred to by the Leader of the House. As I committed to do on Report, I facilitated and joined a meeting on this issue between my honourable friend Robin Walker, Minister of State in the Northern Ireland Office, the noble Baronesses, Lady Ritchie, and Lady Suttie, to discuss this in more detail. I thank the noble Baronesses for a good meeting, which assuaged their concerns on this issue.

For the benefit of the House, let me be clear: Article 2 of the Northern Ireland Protocol is vital, and the Government are fully committed to upholding it. I assure noble Lords that the rights for individuals in Northern Ireland captured within the scope of the Article 2 commitment will continue to be protected going forward, and will not be impacted by the workings of this Bill. I have explained this in greater detail in a letter to the noble Baroness, Lady Ritchie. To reassure noble Lords who may have similar concerns, I will place a copy in the Library. I beg to move.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, let me first thank all those who have contributed to the debate for their remarks. Again, all noble Lords have approached the subject in a timely and constructive manner, in the finest traditions of this House, as has been demonstrated throughout the passage of the Bill. It is now up to the other place to scrutinise the changes that this House has made to the Bill. It would be wrong of me to prejudge what will happen there, but I can say that should the Bill return for further consideration in this House, I look forward to working with all noble Lords in the spirit of constructive—well, sometimes constructive —co-operation that we have all shown so far.

Bill passed and returned to the Commons with amendments.

State Aid (Revocations and Amendments) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Wednesday 2nd December 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 29 October be approved.

Relevant document: 30th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, these draft regulations are made under the powers in the European Union (Withdrawal) Act 2018 as amended by the European Union (Withdrawal Agreement) Act 2020, which I will refer to as the withdrawal Act. The purpose of these regulations is to remove redundant EU state aid law from the domestic statute book after the end of the transition period. This is both appropriate and necessary to provide legal certainty for UK businesses and public authorities that EU state aid rules no longer apply in the UK, except where they apply directly under the Northern Ireland protocol.

I begin by explaining the European Union’s approach to subsidy control, which is known as state aid. State aid is support in any form, from any level of government, which gives a business or other entity an advantage that could not be obtained in the normal course of business. If this advantage has the potential to distort competition within the internal market and affect trade between EU member states, then state aid is present and the rules for state aid are triggered. The state aid rules were devised by the European Union to ensure that EU member states operate in a way compatible with the internal market, and the rules are of course very much a European Union concept. They derive from Articles 107 to 109 of the Treaty on the Functioning of the European Union, which, together with the EU regulations and decisions made under that treaty, control how and when member states can grant aid. Responsibility for enforcing the rules sits with the European Commission. However, having left the European Union and the single market, the UK will no longer be bound by EU state aid rules after the end of the transition period.

If changes to domestic law are not made in time for the end of the transition period, EU state aid law would become part of UK law, as retained EU law through the withdrawal Act, but the law would then contain some fundamental deficiencies. These deficiencies would make this retained EU law on state aid inoperable in the United Kingdom. Revoking the EU law on state aid will make it clear to businesses, courts and public authorities that state aid rules will no longer apply in the UK, except, as I said, where they apply directly under the Northern Ireland protocol. Instead, the UK has announced that we will have our own subsidy arrangements to support a competitive, dynamic market economy.

From 1 January, the Government will follow World Trade Organization rules on subsidies and other international commitments agreed in free trade agreements, and we will consult on whether to go further, including whether to legislate on this matter. We will, of course, work closely with businesses and public authorities across all parts of the United Kingdom to consider how best to design an approach to subsidy control that works for the United Kingdom economy.

In terms of the technical detail, this statutory instrument disapplies and revokes retained EU state aid rules that are preserved by Sections 3 and 4 of the withdrawal Act. As I mentioned earlier, Articles 107 to 109 of the Treaty on the Functioning of the European Union, together with the EU regulations and decisions made under that treaty, govern the state aid regime. Article 107(1), for example, defines state aid and sets out the general prohibition on giving aid. That prohibition operates by providing that aid is incompatible with the EU internal market in so far as it affects trade between member states, unless the aid has been approved by the European Commission.

Article 107(2) and (3) sets out when the Commission must give approval and those areas where the Commission has discretion over whether to approve aid or not. Article 108 sets out the Commission’s role in monitoring state aid and obliges member states to notify aid to the Commission in advance. Aid cannot be awarded until approved by the European Commission; this is known as the standstill obligation. While the Commission has exclusive competence to decide whether aid is compatible with the internal market, national courts can enforce the standstill obligation. In effect, national courts can suspend an aid measure until the Commission has considered whether the measure is compatible with the internal market. However, after the transition period, the UK will no longer be bound by EU state aid rules. The rights and obligations I have just described will no longer be relevant. This SI ensures that they are not retained in UK law by the withdrawal Act.

Other EU regulations that enable the EU state aid regime to operate across member states would, after the end of the transition period, become retained EU law through the withdrawal Act. These broadly consist of procedural and exemptions regulations. The procedural regulations, for example, set out how the state aid regime operates and make clear the roles and responsibilities of the Commission and the member states. They set out the procedures to be followed in notifications and investigations and give the Commission information-gathering powers. The exemptions regulations set out the conditions under which an aid measure is exempt from the requirement to notify the Commission in advance. Yet these provisions would not be able to be complied with or enforced in the United Kingdom because the Commission will not have a role in the UK’s domestic subsidy control arrangements. The SI will therefore revoke these now redundant provisions.

Removing retained EU law from the UK statute book that is both deficient and no longer relevant avoids any possible confusion about whether state aid rules must be complied with or not. Importantly, this SI also ensures that domestic legislation can continue to operate appropriately beyond the transition period, when EU state aid rules will no longer form part of domestic law. The SI does this by making consequential amendments to other retained EU law and UK domestic legislation which refers to state aid rules.

It is important at this point for me to make it clear how these regulations will operate in light of the Northern Ireland protocol. While these regulations remove retained EU law from the UK domestic statute book, Article 10 of the Northern Ireland protocol will allow state aid rules to continue to apply after the transition period. The application of state aid rules under the protocol will be limited to measures relating to goods and wholesale electricity affecting trade between Northern Ireland and the EU. The regulations will not affect the application of the Northern Ireland protocol, which is given effect through Section 7A of the withdrawal Act made in 2018: they make amendments only to UK domestic law.

This SI is necessary to make corrections to domestic law, by revoking retained EU law on state aid from the UK statute book and fixing any technical deficiencies in other retained EU law and UK domestic legislation which refers to state aid rules. This instrument will ensure legal certainty for businesses, aid-granting authorities and the courts from 1 January 2021, when EU state aid rules will cease to apply in the United Kingdom. I therefore commend these regulations to the House.

Amendment to the Motion

Moved by

--- Later in debate ---

[Lord Callanan (Con)]

I thank all noble Lords for their interesting contributions to this debate. There have been many contributions on a range of subjects, very few of which had anything to do with this instrument. Fascinating though discussions were on the fate of the Austin Allegro, and Galileo, I say to my noble friend Lady Wheatcroft that they were totally irrelevant to today’s debate and nothing to do with the instrument being discussed.

The EU state aid rules were created to meet the needs of the European Union. With the UK’s departure from the European Union, we will no longer be bound by EU state aid rules after the transition period. We have been clear that we will not align with EU rules as part of any free trade agreement. My noble friends Lady Noakes and Lord Moylan were absolutely right to say that what subsidy control regime we have in future is an extremely valid debate. We will, no doubt, have that discussion in this House at great length, but it is nothing to do with the merits, or otherwise, of this statutory instrument. Many noble Lords who contributed seem to be confused about that. The point of this instrument is that businesses must have clarity on the UK statute book to plan for investments and to receive the support that they need to innovate and grow.

The noble Lord, Lord Stevenson, has moved an amendment expressing regret, as he is perfectly entitled to do. However, I hope that noble Lords can see that revoking retained EU state aid law is appropriate and necessary. Furthermore, consequential amendments to other retained EU law, and UK domestic legislation which refers to state aid rules, will ensure that these regulations continue to operate appropriately. I repeat: state aid is support in any form, from any level of government which gives a business or other entity an advantage that could not be obtained in the normal course of business. In the way it is defined in the EU, if this advantage has the potential to distort competition within the internal market and affect trade between EU member states, then state aid is present and the rules for state aid are triggered.

The state aid rules were devised by the European Union to ensure that EU member states operate in a way which is compatible with the internal market. The rules are very much a European Union concept. We will no longer be part of the European Union or the single market and the EU will no longer have any jurisdiction in the United Kingdom, and nor will the European Commission. At present, the UK Government or devolved Administrations proposing any form of state aid need to get the permission of the European Commission. In future, the Commission will have no jurisdiction in the United Kingdom. It makes no sense to leave these rules on our statute book, which is what noble Lords are proposing today.

From 1 January, the Government will follow the World Trade Organization rules on subsidies and other international commitments. Before the end of this year, the Government will publish guidance for UK public authorities to explain these commitments. As I have said before, during debates on the internal market Bill, we will also consult in the coming months on whether to go further, including on whether to legislate.

A number of noble Lords posed questions, very few of which had anything to do with this particular instrument. I will, nevertheless, endeavour to answer them. The noble Lord, Lord Stevenson, asked about legislating for the UK-Japan free trade agreement. In general, where implementation is required, the Government will use the European Union (Withdrawal) Act 2018. The Act ensures that existing laws which implement the EU-Japan free trade agreement continue to have effect.

The noble Baroness, Lady Wheatcroft, in another contribution that had nothing to do with this debate, asked what any new regime would mean for new subsidies. We are clear that we do not intend to return to the 1970s approach of government bailing out unsustainable companies. I shall say a little more about the negotiations later.

I was asked by the noble Lord, Lord Dodds, about the Northern Ireland protocol. It is important to note that after the end of the transition period the EU state aid rules will not apply to Northern Ireland as they do today. State aid provisions apply only to trade that is subject to the protocol, which is limited in scope to goods and wholesale electricity markets. Northern Ireland will enjoy new flexibilities with respect to support for its service industries, but let me be clear that the instrument that we are debating does not affect the application of the state aid principles in the Northern Ireland protocol.

My noble friend Lady Altmann, who I think was referring to our previous debates on the internal market Bill rather than to this statutory instrument, mentioned consultation with the devolved Administrations. Officials have been having technical discussions on this instrument with the devolved Administrations and other Governments’ departments at the official level and no concerns have been expressed about it by their officials. I recognise that on the general issue of a future state aid policy they wish to make a contribution, and we have said that we will consult them, but they have expressed no concerns about this statutory instrument.

The noble Baroness also referred to the shared prosperity fund. Again, that has nothing to do with the instrument that we are debating, but it will be consistent with the UK’s approach to subsidy control following the end of the transition period to ensure that it invests fairly in local economies. The noble Lord, Lord Stevenson, asked about common frameworks. Obviously, we debated these issues at length when considering the internal market Bill, but let me reiterate the points I made then. The devolved Administrations have never previously been able to set their own subsidy control rules, as covered by the then EU state aid framework. They will continue to have responsibility for spending decisions on subsidies within any future subsidy control system.

The noble Lord, Lord Stevenson, and my noble friend Lady Noakes asked why the Government are using secondary legislation to remove the state aid regime and whether this is a policy change. The answer is no. This is not a policy change and it is no more than is appropriate to revoke redundant retained EU law and make amendments to address deficiencies in other retained EU law and UK domestic legislation that refer to EU state aid rules.

The noble Lord, Lord Stevenson, also raised the UK-Japan agreement, on which I have already answered. My noble friend Lord Trenchard and a number of other noble Lords asked about the status of the negotiations. Obviously, they are ongoing literally as we speak and the future of state aid is, of course, an important subject within them. Noble Lords will understand that there are limits on what I can say about it, but perhaps I may refer to comments made by my noble friend Lord Frost when he spoke to your Lordships’ committee about our approach that might be helpful. He said:

“If subsidies are granted, for example, there must be clear statements that they must contribute to and be justified on public policy or market failure grounds. They must be proportionate. There must be openness and transparency about what they are. They must be aimed at bringing about a degree of change in behaviour. They must be the right instrument for the purpose, and you should not in general subsidise if there are negative effects on trade and investment. Those are all commitments that we are willing to make and that we think are important parts of a good subsidy system.”


However, as I said, the negotiations on this matter are very much ongoing.

The noble Lord, Lord Liddle, asked whether we are swapping an effective regime for a dysfunctional one. I have said why we cannot retain the current EU regime: there is no point in giving the European Union jurisdiction over state aid in the UK when we are no longer members of the EU. The ASCM is the appropriate standard for global subsidy control and is a more appropriate basis for regulating subsidies than the EU state aid regime, which of course is designed for the European single market which we will no longer be a part of. Some 164 countries follow WTO rules on subsidy control, showing that they are a well-recognised common standard.

I am running out of time to speak, but I hope that I have explained why the statutory instrument before us is worthy of noble Lords’ support and why it is essential to the clarity and well-being of the UK statute book. Noble Lords raised many concerns about other issues, to which I am sure we will return in the future, but in the meantime, I commend this statutory instrument to the House.

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

My Lords, I have one request to ask the Minister a short question for elucidation. It is from the noble Baroness, Lady Jones of Moulsecoomb.

--- Later in debate ---

[Baroness Jones of Moulsecoomb (GP)]

The Minister did not answer any of my questions, which I presume is because he felt they were out of order. At the same time, I did ask how we were going to make sure that public authorities understand the impacts of this statutory instrument. He did not answer that.

[Lord Callanan (Con)]

I answered many questions. It is not a matter of being in order; it is whether questions were relevant to this particular debate. I think I said in my reply that of course we intend to publish guidance for local authorities, the devolved Administrations and others active in this field before the end of the year, but the noble Baroness will understand that this is still very much a live subject in the EU negotiations. When we have a complete picture of how the regime will operate in the UK, any commitments that we may wish to enter into as part of those negotiations will be legislated for in the future relationship Bill, but we will ensure that guidance is issued before the end of the year.

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

My Lords, I have no further requests to speak after the Minister, so I call the noble Lord, Lord Stevenson of Balmacara.

Ecodesign for Energy-Related Products and Energy Information (Amendment) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Tuesday 1st December 2020 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Ecodesign for Energy-Related Products and Energy Information (Amendment) (EU Exit) Regulations 2020

Relevant document: 32nd Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, these regulations were laid before the House on 13 October 2020. The draft instrument serves several purposes, from fixing deficiencies in retained EU law to implementing the Northern Ireland protocol, which I will explain further shortly. Ultimately, it is necessary to ensure the continued operation of ecodesign and energy labelling policy in the UK after the end of the transition period.

Before I talk specifically about the instrument, it may be helpful if I speak briefly about how the EU framework for ecodesign and energy labelling has worked. In recent years, the EU has introduced, through the ecodesign directive and the energy labelling framework regulation, a suite of product-specific regulations. Ecodesign regulations are about minimising the costs and environmental impact of products used in both homes and businesses by setting minimum energy performance standards.

Energy labelling regulations provide consumers with information on a given product’s energy performance to allow them to make informed purchasing decisions. In 2020, these policies will save households approximately £100 on their annual energy bills and lead to greenhouse gas emissions savings of 8 million tonnes of CO₂, while also driving innovation and competitiveness among businesses.

This brings me to the instrument being debated today, which serves four purposes. It amends retained EU law to ensure that the ecodesign and energy labelling regime remains operable in the UK once the transition period has ended. It makes necessary amendments to the 2019 EU exit SI to account for regulations that have come into force between 29 March 2019 and 31 December 2020. It implements the Northern Ireland protocol and unfettered access for ecodesign and energy labelling policy. It also implements a change to replace energy labels’ use of the EU flag with a UK flag, and removes EU languages from these labels.

I turn to the amendments. First, amendments to retained EU ecodesign and energy labelling legislation are required to ensure that the legislation can continue to operate in the UK from 1 January 2021 without disruption. Fixes include, but are not limited to, removing EU-related references. For example, new energy labelling regulations for some products have come into force in the EU. These require suppliers of relevant goods to provide new re-scaled energy labels with their products from 1 November 2020. However, retailers do not need to display these until 1 March 2021. The SI ensures that the March 2021 requirements, which would otherwise not become retained EU law, will still come into force in March as intended.

Secondly, the 2019 EU exit SI for this policy area ensured that, in the event that no agreement was reached with the EU, existing minimum performance and energy labelling requirements would continue to operate and remain enforceable in the United Kingdom. The UK of course remains bound by EU law until the end of the transition period, and a number of EU ecodesign and energy labelling regulations have come into force since this first EU exit SI was laid. As a consequence of those new EU regulations, some aspects of our 2019 EU exit SI no longer work as intended. This SI makes amendments to the original SI to ensure that the new EU ecodesign and energy labelling regulations will be fully operable in the UK after 1 January 2021.

Thirdly, on legislative implementation of the Northern Ireland protocol and unfettered access, this instrument amends our 2019 EU exit SI and the underlying legislation so that certain UK-wide provisions are limited to Great Britain only. This will avoid confusion, as EU requirements continue to apply in Northern Ireland after the transition period, as per the terms of the Northern Ireland protocol.

This SI also allows relevant qualifying Northern Ireland goods that comply with EU ecodesign and energy labelling regulations to be placed on the GB market without undergoing additional checks. Qualifying Northern Ireland goods are defined in another instrument laid by the Cabinet Office. This SI will enable UK market surveillance authorities to ascertain whether a product came into the GB market from a Northern Ireland-based business through the information provided in a product’s declaration of conformity.

Fourthly, on labelling and marking requirements post transition period, this SI implements a decision to replace the EU flag on energy labels with the UK flag. Alongside this, we have removed EU language text from energy labels. As the UK is no longer part of the EU, the continued presence of EU logos and languages on energy labels would be inappropriate in UK legislation and could create confusion for consumers. UK energy labels have been made available to businesses free of charge through an online service to support compliance with this amendment.

Some UK trade associations wrote to the Secretary of State with concerns that they had had little time to prepare for these changes. Minister Kwarteng responded on 18 October, explaining that the change was a necessary fix to deficiencies in the law and that the Office for Product Safety and Standards would take a proportionate approach to market surveillance, as it has always done.

Officials in my department have undertaken the appropriate assessment of the impacts of this instrument on businesses and relevant bodies. It showed that the estimated cost to business was approximately £1.95 million, so a full impact assessment was not required. Nor was a formal consultation required under the legal powers used, Sections 8 and 8C of, and paragraph 21 of Schedule 7 to, the European Union (Withdrawal) Act 2018.

In conclusion, these regulations are necessary to ensure the continued functioning of ecodesign and energy labelling policy in the UK, while upholding our commitments under the Northern Ireland protocol, such that the UK, its consumers and its businesses may continue to realise the benefits of this policy. I commend the regulations to the Committee.

--- Later in debate ---

[Lord Callanan (Con)]

I thank noble Lords for their valuable contributions to this debate. The Government are committed to providing certainty for businesses and, of course, the public in any scenario from 1 January 2021 by ensuring that the UK has a functioning statute book after the transition period, and these regulations will play their part in helping to accomplish that. They will ensure continuity for our ecodesign and energy labelling regime, which has to date helped us to achieve significant savings on energy bills and carbon emissions, making a realistic and noble contribution to our national carbon reduction commitment.

In response to my noble friend Lord Moynihan, the noble Lord, Lord Grantchester, and the noble Baroness, Lady Bennett, who raised questions regarding the operation of the policy in Northern Ireland, we are confident that the rules in Northern Ireland are workable. This has been communicated to stakeholders via our technical notice, and UK market surveillance authorities are confident that they have sufficient evidence to ensure compliance with this. Qualifying Northern Ireland goods are goods placed on the GB market by qualifying Northern Ireland businesses and, as such, are entitled to unfettered access to the GB market. This means that they are free to circulate without any customs supervision, tariffs or restrictions. Qualifying Northern Ireland goods are defined in draft regulations laid under Section 8C(6) of the European Union Withdrawal Act 2018 entitled the Definition of Qualifying Northern Ireland Goods (EU Exit) Regulations 2020.

My noble friend Lord Moynihan raised questions about the circular economy principles. They form a part of ecodesign requirements, and of course that is led by officials from Defra. In the UK, we will endeavour to support circular economy principles under ecodesign after the end of the transition period. My noble friend also asked about consultation. Formal consultation was not required, as I said, by the legal powers used, Sections 8 and 8C of and paragraph 21 of Schedule 7 to the European Union (Withdrawal) Act 2018. In addition to that, we concluded that no consultation was necessary as this SI makes the required changes only to ensure a functioning statute book in the UK, and the costs involved are minimal, as I said in my introduction.

On the issue of CE marking, the 12-month standstill approach was agreed by the Cabinet Office on advice provided by officials. Ministers are confident that this timeframe is sufficient. The Office for Product Safety and Standards is responsible for enforcement and has been for a number of years, and it is confident that it has the resources required to continue with those activities.

The need for QR codes has been communicated with stakeholders at many events over the summer and most recently in November. We have also published a technical notice on GOV.UK that supports business preparedness for the end of the transition period. Additionally, my department determined that this deficiency should be fixed from 1 January 2021 without a transition period to avoid creating potential confusion for consumers with the continued presence of EU flags on energy labels for goods designed to meet Great Britain ecodesign requirements from 1 January 2021.

I also thank the noble Baroness, Lady Bennett of Manor Castle, for her questions on whether businesses and traders are prepared for the changes brought in by this SI. We have communicated with a number of small businesses in the UK, through their various trade associations, that represent key sectoral interests in the UK. We have also responded to a large volume of direct communication from businesses, and we are confident that the majority of them are aware of the requirements. As I said in my introduction, a letter was written to the Secretary of State to this end on 14 September 2020, signed by a number of stakeholders, including the British Retail Consortium, Make UK, techUK, AMDEA, BEAMA, the Lighting Industry Association, GAMBICA and the British Home Enhancement Trade Association. However, as the market surveillance authority, the Office for Product Safety and Standards will take a proportionate and reasonable approach to market surveillance on this matter, we believe that the concern is somewhat mitigated. The noble Lord, Lord Grantchester, also raised a question on this point, and I hope that I have been able to reassure him on this matter.

The noble Baroness, Lady Bennett, also asked about the Manchester declaration. As recently announced in the Prime Minister’s 10-point plan, we will set out our world-leading product policy in 2021, continuing to work with international partners and across government to achieve the benefits of energy and resource efficiency.

The noble Baroness also asked a question on the Northern Ireland protocol. I covered that in my earlier response, so I hope that has already been answered. However, I would like to add that the Northern Ireland protocol has been implemented in such a way for ecodesign and energy labelling that it will continue to operate long into the future.

I thank the noble Lord, Lord Grantchester, for his concerns about the lighting regulations, on which officials have launched a consultation. We are closely monitoring amendments at an EU level. We will ensure that future policy meets our ambitions for high standards and consumer savings.

On the EU product database, there are no current plans to create a UK equivalent to the EPREL database. Businesses placing products on the market in Northern Ireland will, of course, have access to the EPREL database to comply with the relevant EU requirements, which they must do.

The noble Lord also asked how we will monitor and enforce the policy should requirements in the EU and the UK diverge. I reassure him that the UK market surveillance authority will continue to carry out its duties in Northern Ireland according to the relevant EU standards and in Great Britain according to the relevant UK requirements.

I hope I have been able to deal with all the questions that have been raised, and I will underline once more the four purposes of the instrument. It will use powers under Section 8 of the withdrawal Act to amend retained EU law to ensure that the ecodesign and energy labelling regimes continue to operate without hindrance in the UK after the end of the transition period. It will amend the first EU exit SI to take account of the new regulations that come into force at an EU level between 29 March 2019 and 31 December 2020, and therefore in the UK following the extension of Article 50 and the transition period. It will implement the Northern Ireland protocol and ensure the unfettered access of energy-related products that meet qualifying Northern Ireland goods requirements, as I outlined. Finally, it will enable labelling and marking requirements to take effect from 1 January 2021, replacing EU flags and language text with UK flags and text on energy labels, while implementing an end date to the recognition of CE marking 12 months after the end of the transition period. With that, I commend the draft regulations to the Committee.

Motion agreed.

Supplementary Protection Certificates (Amendment) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Friday 27th November 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 14 October be approved.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, this instrument was laid before the House on 14 October. It seeks to ensure that the UK’s supplementary protection certificate system takes account of regulatory changes arising from the Northern Ireland protocol.

Intellectual property plays a vital role in the UK economy; it supports creativity, ingenuity and innovation, and provides incentives for research and development. The life sciences sector is one of the UK’s most valuable industries and is crucial to our success as a science superpower. It has consistently been the largest investor in research and development in the UK, investing over £4.5 billion in 2018.

Supplementary protection certificates, or SPCs, are a particularly valuable IP right for this sector. They provide a way for the industry to recoup the costs of developing a new drug, which the Association of the British Pharmaceutical Industry has estimated may exceed £1 billion. The SPC system is designed to operate as a balance between supporting the development of new drugs and ensuring that those drugs become available more cheaply, through competition from generics, in good time. This enables the NHS to benefit both from innovative new medicines and the wide availability of existing treatments. It is important that the system is as clear and comprehensible as possible, so that rights holders and third parties have certainty about what they can and cannot do in relation to such a valuable right.

It may be beneficial if I explain briefly how the SPC system currently works, to set the context for the changes in this instrument. Before medicines and agrochemicals can be placed on the market, they must be approved for use by a regulatory body. Extensive testing of the product is required to demonstrate its safety, efficacy and quality, which of course takes time. If the product is patented, there can be a significant delay before the rights holder can benefit from the exclusive rights provided by their patent. SPCs are intended to limit the effect of that delay. In order to qualify for the additional protection of an SPC, the product must be protected by a patent and must have a valid authorisation that allows it to be sold on the market in the UK. The SPC system derives from EU law, which will be retained as domestic law at the end of the transition period. The Government have previously taken legislative steps to ensure that the system will function in the same way before and after that point. Noble Lords may recall that they approved the most recent of these after a good debate in early September.

However, the Northern Ireland protocol will result in changes to how medicines and agrochemicals are approved in the United Kingdom. This will have an indirect effect on the SPC system. The protocol means that products placed on the market in Northern Ireland must be approved in line with EU regulatory requirements. This ensures that they can move freely between Northern Ireland and the EU, avoiding a hard border. Approval to place a product on the market across the UK may therefore be provided by more than one authorisation, with different territorial and legal scopes. As I mentioned, one of the conditions to get an SPC in the UK is to have a marketing authorisation for the product which allows it to be placed on the market in the UK. The current SPC system assumes, however, that there will be a single authorisation across the whole of the UK; it is not designed to accommodate the arrangements that arise from the protocol.

This instrument therefore amends the two retained EU regulations on SPCs to fit the new regulatory arrangements into the SPC system. Let me be clear: an SPC will remain a UK-wide right. There will not be separate SPCs for Great Britain and Northern Ireland. If a patented product has been authorised for sale somewhere within the United Kingdom—whether in Great Britain, Northern Ireland or the UK as a whole—an SPC may be granted. However, the protection provided by the SPC will extend only to the territory in which the product has been authorised. This preserves the link between the SPC and the approval for the product. Up until the point the patent expires and the granted SPC takes effect, the protection can be extended further if another authorisation is granted for the product, covering additional territory. But, once the SPC is in force, no further changes will be permitted.

Taking this approach provides certainty for all parties. It would not be fair for a third party to find that a legitimate action they had taken, in a territory where the SPC did not provide protection, suddenly became an infringement at a later date. This is why the scope of protection is fixed in place when the SPC comes into force. Similar limitations will apply to the award of an additional six months of SPC protection, which is available for products that have been tested for paediatric use.

In terms of engagement with business on these changes, IPO officials contacted representative bodies and individual businesses in the pharmaceutical and pesticides industries as well as the IP legal profession, of course, following the publication of the Command Paper on the protocol. They set out the potential effect on SPCs and invited comments. Officials met with those who responded to discuss the proposed changes in more detail and get views on whether any additional issues needed consideration. At a later stage, these stakeholders were also invited to comment on a working draft of the legislation, providing valuable feedback to help finalise the wording.

Looking forward, the IPO is preparing business guidance to explain what the changes will mean in practical terms; this will be published shortly. Alongside the guidance, informal consolidations of the legislation will be provided, similar to the Keeling schedules, which were placed in the House Library. These were intended to allow noble Lords to see the amendments in context; I hope they were useful in that regard and that they will have the same benefit for businesses.

In conclusion, these regulations will ensure that the effect of the Northern Ireland protocol on the approval of medicines and agrochemicals is properly taken into account, while preserving the balance inherent in the current SPC system. I commend these regulations to the House.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, first, I thank all noble Lords for their valuable contributions to this short and simple—actually, not simple but complicated debate.

This instrument is vital to ensure that the SPC system is effective and operable from 1 January next year. The amendments take a pragmatic approach in providing protection which reflects the regulatory approval of a particular medicine or agrochemical. Failing to address these issues would put valuable rights at risk and force businesses to go to the expense of litigation to clarify what can and cannot be done.

As noble Lords will be aware from our debate just a few weeks ago, the World Intellectual Property Organization recently listed the UK as the fourth most innovative country in the world. Our ambition, of course, is to be the first most innovative country in the world. With that goal in mind, this Government have pledged to increase UK investment in research and development, with the goal being to reach 2.4% of GDP by 2027, and our R&D road map puts science and technology at the forefront of our economic and social recovery. As my noble friend Lord Lansley observed, intellectual property is a crucial part of that effort, so that great research and ideas can be turned into great businesses.

Innovation and creativity have never been more important or more valuable, especially in the life sciences sector. UK R&D in this sector is at the forefront of the efforts to combat coronavirus, with the Oxford Vaccine Group and AstraZeneca in particular leading efforts to develop a vaccine, with promising results emerging from clinical trials in recent days.

Of course, global access to a vaccine is critical to an effective response to the pandemic, ensuring that no-one is left behind, particularly the poorest and most vulnerable. We believe that the best way to provide equitable access to vaccines, treatments and tests is by fully funding the ACT accelerator. The UK is proud to have put in $1 billion of the global total of $5 billion raised so far.

Of course, I am also aware of the calls for greater flexibility on IP rights to create and enable equitable access. The Government’s view is that meeting the objectives of prevention, containment and treatment of Covid-19 is best achieved through the existing flexibilities within the Agreement on Trade-Related Aspects of Intellectual Property Rights.

Looking more broadly, I know that concerns have been raised about whether businesses adapting to the new regime may have to cope with further changes to regulation in the future. Of course, it is impossible to rule out that changes might be needed to regulations which affect the medicines or agrochemical sectors, but I hope the House will be reassured that any proposals for changes, and any effect they might have on the SPC system, would be subject to consultation with stakeholders and interested parties. I am also conscious of the concerns about whether drugs being available under different rules in Great Britain and Northern Ireland will cause any issues for trade within the UK, and whether the analysis of the impact of this SI took account of this.

In response to the point made by the noble Baroness, Lady Bowles, we believe that most SPCs will take effect UK-wide in the future, as the majority of SPC applicants will want regulatory approval for the whole of the United Kingdom. Although small numbers of SPCs may provide protection in only part of the UK, the right itself will not introduce a barrier to movement of goods. Marketing authorisations will be needed to put medicines or agrochemicals on either the Great Britain or Northern Ireland market.

In response to the point made by the noble Baroness, Lady Wheatcroft, about the costs and impacts—also raised by the noble Baroness, Lady Bowles—the purpose of the instrument is to incorporate the changes to the regulatory system into the existing SPC framework so that businesses will not have to do anything significantly different. They will file the same forms, pay the same fees and engage with the same authorities as at present. The only significant new element of the process would be the need to inform the IPO about any additional authorisations. The administrative and information requirements will be similar to existing processes and the numbers small, so the need for familiarisation will be limited.

Although the SPC system is linked to the regulatory regime, the direct effect of this SI does not cover any impacts or changes to the regulatory system itself. The changes to the SPC system are required to take account of all marketing authorisations that will be valid in the UK when the protocol takes effect.

The noble Lord, Lord Stevenson, raised what I think is a very valid point—this is a particularly complicated SI, and I confess that he is not alone in finding the drafting quite tricky to follow at times. But this is a complex area of IP law, and all the provisions are indeed necessary. This complexity was part of the reason behind the material placed in the House Library. The IPO will ensure that an informal consolidation of the legislation is available so that businesses can see, in one place, the legislation as it will operate, and I would be happy to place a copy of that in the House Library as well.

My noble friend Lord Lansley asked about the importance of SPCs in helping to keep the UK competitive—I completely agree with him on that. There are a number of factors which business should consider when deciding when to launch medicines in particular territories. R&D pharmaceutical companies are very clear that a strong intellectual property regime is vital to their business models, as this helps recoup their large up-front investment costs. The SPC regime is an important part of the UK IPO regime for these companies.

My noble friend also asked about our participation in the Unified Patent Court. In view of its withdrawal from the European Union, the UK no longer wishes to be a party to the Unified Patent Court system. Participating in a court that applies EU law and is bound by the CJEU would be inconsistent with the Government’s aim of becoming an independent, self-governing nation.

My noble friend also referred to the recently completed EU legal and economic analysis of the SPC system. These reports were comprehensive and looked at many different aspects of the existing SPC regulations. The implications of their conclusions are still being considered. It is important to consider the SPC regulations and other forms of IP protection holistically, so that amendments in one area do not have unforeseen consequences in another. Any future changes to the system would be carefully considered in light of evidence as to their potential impacts on the UK market.

My noble friend also asked about the recognition of UK SPCs in the EU. As he will be aware, SPCs are currently a national right and are granted separately in each member state. He also asked about the Bolar exemption; this was added, as I am sure he is aware, to the Patents Act in 2005. In 2014 we introduced a new exemption by way of a legislative reform order. The two exceptions are of similar scope but have different purposes. The Bolar exemption specifically relates to abridged authorisation processes, while the LRO exception ensures that clinical trial work is fully protected by the exception on experimental use of a patented product. It is therefore possible that some activities may fall within one exception but not the other, so it is important that both continue to function effectively.

My noble friend Lord Lansley and the noble Baronesses, Lady Wheatcroft and Lady Bowles, raised the paediatric extension. This is a six-month extension of SPC protection for a medicine which has been tested for use in children. The protocol does not require EU law covering this to apply in Northern Ireland. The paediatric extension will instead be provided in UK law with conditions set by the Human Medicines Regulations. These will apply whether the medicine has been approved under EU or UK law. The paediatric extension will provide protection only in the territory in which the SPC does. Equally, if the conditions are met in only part of the territory protected by the SPC, it will provide protection in that territory.

The noble Baroness, Lady Wheatcroft, raised her favourite subject: the end of the transition period. The Government continue to deliver the necessary primary and secondary legislation required to ensure a functioning statute book at the end of the transition period so that we can seize the opportunities as an independent sovereign nation, something I know she passionately believes in. She also asked about the erosion of SPC rights, giving them shorter protections. The Government still consider their approach entirely reasonable, as it keeps the current way of calculating term in place and delivers a level of protection which is seen as one of the most generous in the world. In addition, under the protocol, authorisations granted under EU law continue to have effect in part of the UK. It therefore makes sense for the term calculation to take that into account.

The noble Baroness, Lady Bowles, and the noble Lord, Lord Stevenson, asked what would happen if UK SPC law diverges in future from EU law. UK SPCs will continue to be granted according to UK domestic law. The protocol does not require EU SPC law to be followed in Northern Ireland. The SPC will remain a single IP right which may provide protection in Great Britain, Northern Ireland or across the UK. Any divergence would not lead to different outcomes in different parts of the United Kingdom.

The noble Baroness, Lady Bowles, took us back to our discussion earlier this week on the internal market Bill, asking whether this would have any implications for IP. This is a reserved area of policy that applies UK-wide, so the internal market Bill is not expected to have a significant effect where the market access principles set out in the Bill apply to goods and services.

The noble Baroness, Lady Bowles, asked whether SPCs will restrict the trade of medicines and agrochemicals within Northern Ireland and Great Britain. We expect that the majority of SPC applicants will want marketing authorisation across the UK for their innovative goods, so most SPCs in the future will take effect across the whole of the UK, as they do now. Although small numbers of SPCs may provide protection in only part of the UK, the right itself will not introduce a barrier to the movement of goods. Marketing authorisations will be needed to put medicines or agrochemicals on the Great Britain and Northern Ireland markets. The SPC changes simply reflect the marketing authorisations which exist for Great Britain and Northern Ireland.

The noble Baronesses, Lady Wheatcroft and Lady Bowles, asked why the SPC is not enforceable in the whole of the UK. It is because it is not right to give an enforceable right if the medicine has not been authorised; that is how the bargain of the SPC system currently works.

Finally, the noble Lord, Lord Stevenson, asked about the regulatory system and the effect of the Northern Ireland protocol. The very final version will be available in the Library, as I said earlier, and we shall make sure that he receives a copy for his bedtime reading. I hope that he will enjoy benefiting from discussing that in the future.

To remain world leading on IP we must be at the forefront of understanding how advances in technology affect the IP framework—whether that is personalised medicines, artificial intelligence, efforts to achieve net zero or something as yet unknown and still over the horizon. We must continue to lead on international discussions on these issues and more, so that the global IP system works effectively for British businesses.

With that, I think I have answered all the queries that were put to me, so I commend these regulations to the House.

Motion agreed.

Product Safety and Metrology etc. (Amendment etc.) (UK (NI) Indication) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Friday 27th November 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 13 October be approved.

Relevant document: 32nd Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, this SI is one of a series of SIs that amend the previously laid 2019 regulations. Those original regulations, the Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019, were drafted in the event that a deal was not agreed and will need to be amended before coming into force at the end of the transition period.

The SI we are debating today is needed to take account of the withdrawal agreement, in particular the requirements of the Northern Ireland protocol. This amending instrument—the sixth in the series—will do a number of things to complete the picture on how goods from the EU and from Northern Ireland will be treated on the market in Great Britain and provide businesses with certainty about these arrangements.

The aim of the original product safety and metrology EU exit regulations 2019 was to bring the existing EU system of essential requirements, standards and conformity assessment into our domestic law. It made some changes that are needed by virtue of the UK leaving the EU—regardless of any deal—while retaining the fundamental elements of the product safety and metrology regulatory regime.

As I am sure noble Lords will recognise, the UK product safety and legal metrology system is among the strongest in the world. Alongside the original EU exit regulation, which left that framework largely unchanged, this amending SI will ensure that we continue to have a robust product safety framework in place to prevent unsafe and non-compliant products, whether that is toys, cosmetics, lifts or machinery, entering the UK market. Specifically, this SI will allow for continued acceptance of CE-marked goods into the market of Great Britain for 12 months, before making the new UKCA mark mandatory from January 2022. It will introduce a number of transitional arrangements to help minimise costs to economic operators and give them time to prepare. It will provide for unfettered access for Northern Ireland to the rest of the United Kingdom, and introduce and implement the UKNI marking for certain goods on the Northern Ireland market.

By making these amendments, this SI will ensure that the UK is able to provide continued robust protection to UK consumers, giving confidence that only safe and compliant products can be placed on the market, maintaining a robust product safety and legal metrology framework from the end of the transition period. There will, of course, be interest in what the new UK regulatory regime will look like going forward. This SI does not set out what that future regime will look like; it sets out the building blocks that will be a matter for future consultation and future legislation. On this matter, I will simply say that the Government are committed to ensuring that consumers are protected from unsafe products and we will look to deliver a future product safety regime that is simple, flexible and fit for the opportunities ahead of us.

What does this SI do? It does a number of things to complete the picture of how goods from the EU and from Northern Ireland will be treated on the market in Great Britain, as follows. It provides greater legal certainty about the date by which companies need to comply with new regulatory requirements for the market in Great Britain, specifying that the new UKCA marking will become mandatory from the start of 2022. It amends domestic legislation to take account of the withdrawal agreement, implementing the Northern Ireland protocol with respect to product safety and legal metrology. On the protocol, this SI provides for unfettered access to the rest of the United Kingdom market for qualifying Northern Ireland goods, subject to product safety and metrology legislation.

This SI will introduce and implement the UKNI marking, which will accompany the CE marking for certain goods when placed on the market in Northern Ireland. This includes the introduction of an appropriate set of sanctions should the UKNI marking be missing or misused, in line with the penalties that apply when other product safety rules are broken. I shall address each of these areas in more detail, starting with the GB regulatory arrangements.

In respect of amending domestic legislation, this SI will ensure that provisions in previous EU exit legislation are updated to reflect the Government’s approach to phasing in new GB regulatory requirements. The previous product safety EU exit SI introduced a domestic regulatory regime, with the UKCA marking replacing EU conformity markings, including the CE marking, alongside a system of UK approved bodies to replace EU notified bodies. That system will come into force at the end of the transition period. This original SI also set out that goods meeting the EU’s requirements, including the CE marking, could still be accepted in Great Britain, in order to give businesses time to prepare. However, the original SI did not put a specific end date on how long the CE and other conformity markings could continue to be accepted. Now that we have greater certainty, due to the withdrawal agreement and the end date for the transition period, this amending SI now introduces a 12-month end point for goods in scope of this instrument.

We now have a clear date for independently approving goods for sale in our market, rather than relying on the EU. We believe that this will give businesses clarity on when they should be ready for the new regime. However, we do appreciate that business will still need time to prepare, so we have also gone further than the original SI by increasing the number of easements for businesses. This includes offering the option to affix the UKCA marking on to products using labels, or on accompanying documentation, rather than on to each individual product. This will be allowed from the end of the transition period for 24 months and will help to reduce costs to businesses for retrospectively changing their marking and labelling mid-production. It will also allow new UK importers of products into Great Britain—those from the EEA and Switzerland—to place their contact details on accompanying documents, again for a period of 24 months from the end of the transition period—which is an increase on the 18 months’ timeframe established in the original SI. This measure will give businesses more time to implement the labelling requirements for the GB regime, again saving them time and money.

This SI will also ensure that all GB authorised representatives must be based in the United Kingdom from the end of the transition period, helping to ensure that any legal entity that has been authorised to act on behalf of the manufacturer can be held accountable here in the UK.

Turning to the issue of unfettered access, the Government committed to legislating by 1 January 2021 to guarantee unfettered access for qualifying Northern Ireland goods to the rest of the United Kingdom market. That commitment is intended to be delivered through both primary and secondary legislation, with the Government having already laid a draft affirmative SI to define qualifying Northern Ireland goods. This SI references that definition in order to implement unfettered access provisions with respect to product safety and legal metrology. The changes made by this SI will be interdependent with other required protocol work—for example, to establish a Northern Ireland-facing product safety and legal metrology system. This SI must be in place to ensure all aspects work coherently from day one.

Finally, I turn to the UKNI marking, which noble Lords will find as an illustration in Schedule 1 to the instrument. This SI makes provisions in respect of two aspects of the UKNI marking: its introduction and the implementation of the product marking requirements in respect of the Northern Ireland protocol. It sets out the design of the marking and implements the approach to sanctions should the marking be missing or misused.

The UKNI marking will be used alongside the CE marking to indicate that a UK-based conformity assessment body has undertaken third-party testing against EU requirements and approved it for placing on the Northern Ireland market. This will also mean that such products cannot be put on the market in the EU. This is a vital part of the operation of the protocol. Not proceeding with this legislation would mean not fully implementing the protocol, causing businesses uncertainty about the UKNI marking and what exactly they must do to comply after the end of the transition period.

In conclusion, this SI will retain a regulatory framework that business is familiar with, alongside delivering important updated elements of the product safety and legal metrology regime in both Great Britain and Northern Ireland to implement the requirements in the withdrawal agreement of the Northern Ireland protocol. I can reassure noble Lords that we have engaged with Northern Ireland colleagues on the changes this SI makes and ensured that they have been kept fully informed of its progress. It ensures that provisions in previous EU exit legislation are updated to reflect this Government’s approach to allowing goods in the scope of this SI to continue to be accepted on to the Great Britain market, having followed EU rules for 12 months after the end of the transition period, and it forms part of the legislation to deliver unfettered access for qualifying Northern Ireland goods to the rest of the UK market.

The safety of individuals, families and communities is a top priority for the Government. As I am sure noble Lords will recognise, it is essential that the UK continue to have a robust product safety framework in place to protect consumers and prevent unsafe and non-compliant products entering the UK market. I therefore commend these regulations to the House.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their valuable contributions to this debate on what is a complicated issue, as a number of noble Lords have accepted. I have set out today the importance of this SI for completing the picture on how goods from the EU and from Northern Ireland will be treated on the market in Great Britain. This will provide businesses with certainty about the arrangements in place at the end of the transition period, and easements to give them some more time to prepare. It will do so in the following ways.

It will allow for the continued acceptance of CE marked goods in the scope of this SI on the market of Great Britain for 12 months after the transition period, before making the new UKCA mark mandatory from January 2022. It will introduce transitional arrangements to help minimise costs to economic operators arising from any uncertainty and give them time to prepare by clarifying the obligations they are required to comply with at the end of the transition period. It will provide unfettered access for Northern Ireland to the rest of the UK, which means no new regulatory checks or additional approvals for Northern Ireland businesses to place qualifying Northern Ireland goods on the Great Britain market. It will also, by setting out the rules in relation to the UK(NI) marking, provide clarity for businesses wishing to supply products to the Northern Ireland market that use UK-based conformity assessment bodies.

Along with the business easements that this SI introduces, a number of other steps have been taken to help businesses get ready for the end of the transition period. These include the rollout of an ambitious series of events, including sector-specific webinars and business adviser training sessions, giving the most up-to-date information on general readiness actions to be taken. The Office for Product Safety & Standards has also published a suite of sector guides, explaining product by product the changes made and how businesses need to comply.

In supporting this SI, we will ensure that the UK is able to continue to provide robust protection to consumers, ensuring that only safe and compliant products can be placed on the market. Without it, we risk disruption and confusion for businesses and enforcement authorities.

Turning to some of the specific questions that were raised, I can reassure my noble friend Lord Moylan that I was not involved in the design of the UKNI logo—which is probably to everybody’s benefit. However, it is intended to be easy to print and to read, and I can assure my noble friend that we discussed the design extensively with a range of manufacturers to ensure that they can apply it if they need to. It was delivered in close consultation with businesses, which rejected a number of alternative options that were put to them.

I can assure my noble friend Lady McIntosh, the noble Baroness, Lady Bakewell, and the noble Lord, Lord Foulkes, that we have engaged extensively with businesses on these regulations. We held informal discussions with over 4,000 businesses, including manufacturers, trade associations and industry representatives, by means of a series of structured interviews.

A number of noble Lords, including the noble Lords, Lord Dodds and Lord Empey, raised the issue of the Northern Ireland protocol and unfettered access. This instrument deals with unfettered access arrangements for certain manufactured goods such as toys and gas appliances. Together with other statutory instruments, as well as the UK Internal Market Bill, this instrument will guarantee unfettered access for qualifying Northern Ireland goods to the rest of the UK market. Highly regulated goods, including cosmetics, which can pose a more serious risk to consumers and the environment, will be subject to some minor transparency requirements that ensure that the GB regulator has the necessary information to protect UK consumers and the environment.

The noble Baroness, Lady Ritchie, and the noble Lord, Lord Dodds, also raised the issue of whether products tested in Great Britain can be sold in Northern Ireland. The UK Government are clear that, as set out in the text of the protocol, Article 7 allows for assessments, registrations, certificates, approvals and authorisations issued or carried out by the competent authorities in the United Kingdom or by bodies established in the United Kingdom to be valid in Northern Ireland. The EU’s technical notice on industrial goods states that only bodies in Northern Ireland carry out this activity. Let us be clear that we do not agree with this interpretation.

My noble friends Lord Lilley and Lady McIntosh, and the noble Baroness, Lady Bakewell, raised the issue of recognition. Obviously, the final free trade agreement is not yet agreed, but we have proposed a comprehensive mutual recognition agreement with the EU to recognise each other’s conformity assessment test results, which would mean that UK testing houses could test against EU rules and affix the relevant CE mark, although this is still a matter for negotiation. However, as I said, the UK Government are clear that, as set out in the text of the protocol, Article 7 allows for assessments, registrations, certificates, approvals and authorisations issued or carried out by the competent authorities of the UK or by bodies established in the UK to be valid in Northern Ireland.

The noble Lord, Lord Foulkes, showed a worrying interest in the subject of pyrotechnics, which should be extremely alarming for those of us on the Government Front Bench. I can tell him that we have allowed approved bodies on pyrotechnics to be based outside the UK from 1 January 2021 because, as the noble Baroness, Lady Bakewell, pointed out, currently there is no UK-approved body in the UK. It should be noted that any approved body requirements need to be approved by the Secretary of State.

My noble friend Lady McIntosh addressed the impact assessment. I can tell her that the withdrawal agreement Act sets out an impact assessment on the provisions governing the UK’s exit from the EU, including the terms of the Northern Ireland protocol. This SI is the detailed implementation of that policy, which has already been assessed by that impact assessment, so no new burdens need to be assessed.

In response to the question from the noble Baroness, Lady Ritchie, about UKNI indication and misuse penalties, the UK has high levels of product safety to protect the public from potentially dangerous products. When our market surveillance authorities find that a business has misused a product conformity marking, such as the UKNI, our starting position will be to help businesses to understand and comply with the rules, unless it is a particularly serious breach of product safety. There will usually be a period of time for the business to correct the non-compliance before we take any action.

The noble Baronesses, Lady Bennett and Lady McIntosh, raised the subject of business readiness. Further guidance has since been published and more than 3,000 people have attended government webinars to help them to get ready for the end of the transition period, with 86% of those polled saying that they would take action to prepare their business as a direct result of these sessions. A second phase of webinars is running throughout November and December, covering key issues that could affect businesses in multiple sectors, including personal data and regulations on manufactured goods.

Coming back to the impact assessment, we have assessed the changes related to setting out the time limits to end recognition of the CE mark as below the de minimis threshold of £5 million per annum; an impact assessment is therefore not required, according to the Government’s better regulation framework. I say that to the noble Baroness, Lady McIntosh, and the noble Lord, Lord Bassam.

The noble Lord, Lord Empey, raised the subject of unfettered access if standards diverge between Great Britain and Northern Ireland. Under unfettered access qualifying, Northern Ireland goods can be placed on the Great Britain market without the need for further approvals. This means that goods that are valid on the Northern Ireland market will be valid on the market in the rest of the UK. We have been clear that unfettered access will not cover goods travelling directly from Ireland or the rest of the EU being imported into Great Britain. Northern Ireland businesses will need to label goods that are placed on the market in the rest of the UK with their own contact details, in common with UK businesses placing goods from outside the UK on the GB market.

I am running out of time. I have a number of other queries to respond to so I will be happy to write to noble Lords, with my apologies. With those comments, I commend these regulations to the House.

Motion agreed.

United Kingdom Internal Market Bill

Lord Callanan Excerpts

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th November 2020 Lords Chamber

Moved by

[Lord Callanan]

62: Clause 39, page 31, line 30, leave out “such” and insert “—
(a) each relevant national authority, and(b) such other”Member’s explanatory statement
This amendment would provide that the domestic administrations must be among the bodies consulted by the CMA in relation to its policy on enforcing information-gathering notices.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, during the Bill’s progress through Parliament, we have engaged extensively to ensure that it, and the Office for the Internal Market in particular, work for all parts of this country. We have always been clear that the Competition and Markets Authority will ensure the devolved Administrations are consulted on all important matters relating to the OIM. Following significant discussions with our devolved counterparts and noble Lords, we are pleased to introduce these two amendments, which will underscore the importance of the devolved Administrations in the operation of the OIM. The Government have emphasised throughout the introduction of the Bill that the UK internal market needs to work for all parts of this country, and these amendments are a testimony to this aim.

Amendment 62 ensures the CMA must consult the devolved Administrations when preparing or revising its policy on enforcing information-gathering notices. Alongside this, Amendment 63 will require the Secretary of State to consult the devolved Administrations over the level of fines that can be placed on bodies that do not comply with a CMA request for information. Both amendments give the devolved Administrations a significant say in the key operations of the OIM. These amendments will put beyond doubt this Government’s commitment to ensuring that the interests of the devolved Administrations are reflected in the governance of the OIM and that the OIM will continue to meet the interests of all parts of the United Kingdom.

I turn now to Amendments 62A, 63A and 63B, which seek to alter the CMA’s ability to effectively gather information. I reassure the House that, as highlighted in previous debates on the Bill, these penalty powers in Part 4 will not be commenced unless there is a clear and credible need for them—for example, to ensure that the OIM can gather credible and accurate information for its reporting and monitoring purposes. I believe this goes some way to addressing many of the concerns of the noble Baroness, Lady Bowles, regarding the design of the information-gathering and enforcement regime. This will ensure that such a regime will be well considered, based on clear evidence of need and proportionate to fulfil the OIM’s duties. I emphasise that the need for accurate, and up-to-date information is essential to ensure that the OIM’s reports and advice are credible, evidence-based and meaningfully capture the UK internal market landscape.

--- Later in debate ---

Moreover, the Common Frameworks Scrutiny Committee is aware that, in the process of completing the task of making the frameworks, some—such as nutrition––are already coming up against the requirements in this Bill. No doubt there will be future examples of that emerging in the next few weeks. Will the Minister say, before the Bill progresses further, whether he will seek the advice of the Common Frameworks Scrutiny Committee on this emerging evidence of difficulties, so that we really do make sure that this Bill is not going to undermine but will support the work of the common frameworks?

[Lord Callanan (Con)]

I thank all noble Lords for their interventions on this subject; I understand the sincerity with which Peers have addressed it. However, as I said in my opening remarks, the amendments on which we have been able to get agreement put beyond doubt that the OIM will closely consult and work with the devolved Administrations on an equal basis, in the interests of all parts of the United Kingdom. These important changes ensure that the OIM’s policy on information-gathering and enforcement, including the level of penalties, will be carefully considered in consultation with the devolved Administrations. This will ensure greater transparency in decision-making and will help ensure that the OIM will be able to gather the accurate information it needs to independently assess and monitor the UK internal market. Of course, the Government have made it clear that reports carried out by the OIM each year will be made available both to this Parliament and to the devolved legislatures.

I reiterate a point I made in previous debates: to be clear, the penalty powers in Part 4 will not come into effect unless there is clear evidence that there is a need to do so in order for the CMA to fulfil its internal market functions. I believe that this provides the necessary assurances that any penalties regime will be proportionate and transparent.

In addressing some of the points made in the debate, I turn first to those made by the noble Baroness, Lady Bowles, and the noble Lord, Lord Fox, on precedent. I can certainly reassure noble Lords that the Bill sets out clearly the maximum limits to the level of financial penalties in Clause 40(6). They do not exceed those which the CMA can currently impose. Penalties and the enforcement regime are based on precedent, as set out in the Enterprise and Regulatory Reform Act 2013. As I mentioned in my opening speech, the justification for these powers is that, without such a deterrent in place, there is an incentive not to comply with information-gathering requests, and that runs the risk of not having completely accurate information supplied to the OIM.

My noble friend Lady Altmann gave the example of the Pensions Regulator. I can say that excluding an entire class of business from information-gathering requirements such as these does not have as firm a standing in precedent as the she suggests. The CMA acting as a reasonable public body will, of course, in all cases, take into account all relevant factors, whether on the face of the Bill or not, in considering how to act and whether to pursue penalties, if they have been commenced at all.

My noble friend Lady McIntosh asked about reasonable excuses. I am not sure whether it was she who asked me a similar question on Report on Monday, but as I said then, the CMA would set out in its statement of policy the clear steps and procedures regarding the enforcement of its information-gathering regime. The penalties will not be commenced until there is evidence that they are called for, and even then they will not be used except as a last resort, whatever the size of the business. The CMA will consult all relevant persons regarding its statement of policy. I am happy to confirm to my noble friend Lady Noakes that, as I said in Committee, the CMA will not be able to issue a financial penalty against—I am pleased to say—either this Government or any UK Government, or indeed the devolved Administrations.

My noble friend Lady McIntosh mentioned consultations. The Bill requires that Ministers should consult as a matter of fact before they exercise their delegated powers. As is normal for such legislation, it does not spell out in great detail how this must be achieved, but we will engage with the devolved Administrations as part of the process of normal policy development, by, for example, sharing draft SIs and publications, and co-operating on public-facing events wherever that is possible, and, in any case, more formally before a decision is made.

For all of the reasons that I have set out, I hope that noble Lords will accept the amendments that I have tabled and that the noble Baroness will not press hers. However, for the benefit of the noble Lord, Lord Fox, and to be absolutely clear and to put the matter beyond doubt, I am afraid that I have gone as far as I can go on these matters and I will not be reflecting further before Third Reading. Therefore, if the noble Baroness wants to test the opinion of the House, she should do so now.

[The Deputy Speaker (Lord Lexden) (Con)]

My Lords, I have received no request to ask the Minister a short question. I shall therefore put the Question.

--- Later in debate ---

Moved by

[Lord Callanan]

63: Clause 40, page 32, line 19, after “CMA,” insert—
“(aa) each other relevant national authority,”Member’s explanatory statement
This amendment would provide that the other domestic administrations must be among the bodies consulted by the Secretary of State about regulations setting the level of penalties for contraventions of information-gathering notices issued by the CMA.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab) [V]]

I am going to disappoint the noble Lord, Lord Fox, as I will not go through my arguments at length, because they have been made so well by the noble Baroness, Lady Bowles, and the noble Lord, Lord Wigley. I put on record my absolute support for the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, who, while they have comments about the detail of the amendment, support the principle of it. I am grateful to them for that.

It is a simple proposition: the internal market must work and be seen to work for all and, therefore, must have buy-in and support from all. It should not favour one geographical area or country over another. It is important that we do not upset the balance struck in the CMA and its functions. The noble Baroness, Lady Noakes, is right that there may be an adverse impact on the CMA, if it is forced to take on something that is not its primary purpose. Thirdly, the devolved Administrations need to be part of the organisation, its process and appointments.

There are reservations about proposed new subsections (3) and (4) in the amendment. It is beyond our hopes, but perhaps the Minister will consider bringing forward an agreed amendment at Third Reading. If he did, we would support it but, if he will not do that, we will support the noble Baroness if she tests the opinion of the House.

[Lord Callanan (Con)]

I thank noble Lords who participated in the debate, particularly for their brevity. This is, I suspect, a simple difference of opinion, but I will give it a go anyway.

In previous groupings we have discussed the detail of how the office for the internal market would be governed, including the composition of its board, and so noble Lords will be delighted that I am not going to go through all that again. I have set out consistently in this House why the CMA was chosen as, in our view, the most appropriate body to undertake the new UK internal market oversight functions. The CMA has an outstanding international reputation as an independent regulator and is already equipped with highly relevant economic expertise, necessary to undertake its new functions in the context of the operation of the UK market. Moreover, the CMA has well-established relationships with all the Administrations, with offices in London, Edinburgh, Belfast and Cardiff. This UK-wide presence will help ensure that the OIM will work in the interests of all parts of the United Kingdom.

However, we have made it clear that some bespoke arrangements for the OIM will be necessary, in recognition of the focus on devolved matters. As provided for in the Bill, the OIM will be able to benefit from the CMA’s existing expertise and operate within its overall framework, while having its own functions and powers, including distinct governance arrangements such as the OIM panel and task groups. The Government have recognised that some degree of separation is vital and have developed proposals for the OIM accordingly. I wish to strongly emphasise that the distinct statutory objective for the OIM, and for the targeted adaptation in the Bill of the CMA’s statutory framework, enshrines this separation from the outset.

On Monday, we had a good debate on the composition of the board and the role of the devolved Administrations in appointments. The Government have taken a number of reasonable and pragmatic steps to secure the appropriate balance between ensuring that the devolved Administrations have a real say and that the appointment process is not held up unduly—that would, of course, be risked by the amendment.

Finally, I would like to discuss in a little more detail how this amendment would seek to propose a new role for the OIM regarding subsidy control. I recognise that the amendment reflects a desire for reassurance on the enforcement of any future UK subsidy control regime. However, we believe that it risks undermining and prejudging the outcome of the forthcoming consultation that we have announced. This consultation will inform our future approach to subsidy control, including the role of oversight and enforcement.

The Government have been clear that the UK will have its own approach to subsidy control; we want a modern system for supporting British business in a way that fulfils our interests. The amendment is therefore premature, as it seeks to confer specific regulatory functions on the OIM in respect of subsidies before the wider details of any legislative UK domestic subsidy control regime, including the appropriate mechanism for oversight and enforcement, have been developed and brought before this House or the other place.

On another point that we will discuss in more depth in our next debate, the Government’s view is that state aid—the EU’s approach to subsidy control—is a reserved matter. Therefore, the effect of the amendment’s provisions for consent from the DAs would be to create unacceptable uncertainty over the extent to which subsidy control is a reserved or devolved competence. As an issue of national importance, it should be treated in the same way as other nationally significant areas of economic policy, which are reserved. Having a single unified approach to subsidy control across the United Kingdom is vital to ensure that we continue to have fair and open competition across our internal market.

Finally, proposed new subsection (4) would require a review of the OIM’s competences within two or three years after Clause 30 enters into force. I recognise the need to ensure that the CMA’s new functions are undertaken effectively, but the broadness of this proposed review is unprecedented and unhelpful.

For the reasons that I have set out, therefore, I am obviously unable to support this amendment. I ask—perhaps more in hope than in expectation—the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, like the noble Lord, Lord Purvis, I agree with the case that has been made so well by the previous speakers. I put my name to the amendment put forward by the noble and learned Lord, Lord Thomas, and we would support him if he chooses to divide the House.

It is very simple: we agree that there has to be a UK-wide policy on state aid—or subsidy, if that is what it is to be called. The question that hangs around but never seems to get answered is: why has it not yet been articulated what this policy would be? It cannot be a question of timing. This suggests yet another shroud of mystery that surrounds this increasingly perplexing Bill.

It is certainly a novel way of developing policy for a Government to remove policy that is in force and that everybody knows and understands, increasing the uncertainty and making it more difficult for businesses. However, as the noble and learned Lord, Lord Thomas, said in his opening speech, the statutory instrument removing the current rules—taking us out of the current system that has been operating for a great number of years—has already been laid and will be debated next week, and we will not be able to stop it.

We therefore seem to be heading towards WTO rules, which are not well respected and do not seem to be applied properly, and there is no policing or organisational structure in which they can be dealt with properly. If that is where we are, we would at least have a period of stability during which we can sort out how we want to set up the rules that will apply to the internal market and how, if necessary, they are to be policed. This could all be part of the yet-to-be-announced deal with the EU—and it may be that is the case, because it is clear that this is a significant area of interest within the negotiations. But without any further detail on that, it is hard for us to speculate.

However, as others have said, the Welsh Government have come forward with an extraordinarily generous offer to expedite work on a common framework that relates to state aid and make a voluntary agreement to pause any legislation that would impinge on that in the intervening period. That is almost too good an offer, and I hope that the Minister has an adequate response to it.

[Lord Callanan (Con) (Con)]

I thank noble Lords who have contributed to another admirably brief debate. We are making good progress this afternoon.

As I outlined in Committee, Clause 44 reserves to the UK Parliament the exclusive ability to legislate for a UK-wide subsidy control regime. I greatly enjoyed the many contributions on this matter. I particularly liked the suggestion of the noble Lord, Lord Purvis, that I should take defeats as a silver lining, which prompts the obvious response that the Liberal Democrats have been defeated in the last three general elections and therefore have some experience of that.

Our debate in Committee on this clause served to highlight that, while some noble Lords might disagree on the approach taken, we all recognise the importance of ensuring that the UK continues to take a clear and consistent approach to subsidy control as we move away from EU state aid rules. The Government have always been clear in their view that the regulation of state aid—the EU’s approach to subsidy control—is a reserved matter. The Government are clear that they want to maximise the economic opportunities available to us when we are no longer bound by EU state aid rules. To achieve this economic ambition, it is important that, as now, we take a coherent approach to the system that governs how public authorities subsidise businesses across the United Kingdom. Reserving subsidy control is the best way in which to guarantee that a single, unified subsidy control regime could be legislated for in future.

In previous debates, there has sometimes been a misplaced conflation between the devolved spending powers and the systems that regulate the potentially harmful and distortive effects of this spending. To be clear, these are two distinct and separate responsibilities. Although the devolved Administrations can and should make spending decisions on subsidies, the wider rules in which they operate are, and should continue to be, consistent across the whole nation. In response to the intervention from the noble Baroness, Lady Randerson, I reiterate that the reservation does not change the devolved Administrations’ position in practice. They have never previously been able to set their own subsidy control regime, as this was covered by the EU state aid framework, but they will continue to make their own spending decisions on subsidies as they do currently.

The effect of the amendment would be to create unacceptable uncertainty regarding the extent to which subsidy control is a reserved or devolved competence. That would potentially give rise to inconsistency if there were different regimes to regulate subsidies across the UK. Ultimately, it could undermine fair and open competition across our internal market and inevitably discourage investment in the United Kingdom, bringing additional costs to supply chains and consumers.

The reservation will enable the UK to design a bespoke subsidy control regime that meets the needs of the UK economy. The Government have been clear that any future domestic regime will operate in a way that works best for all UK businesses, workers and consumers. In the coming months, as I said in Committee, we intend to publish a consultation on whether we should go further than our World Trade Organization and international commitments, including whether further legislation on this subject is necessary.

--- Later in debate ---

[Lord Liddle (Lab)]

Can the Minister reflect a bit more on what he has just said about treating this issue as a matter for common frameworks? It sounded as though he wanted a co-operative solution to this problem, one that would bring all the devolved Administrations into a common framework. However, at the end, he said that it is not appropriate—but why not? He has not given a satisfactory answer to that question. I remember challenging the noble Lord, Lord True, in an earlier debate at Report, on whether the Government had changed their policy on common frameworks and were no longer taking them seriously. I got a very vigorous shaking of the head from the noble Lord, Lord True. Would this not be a perfect example of how common frameworks were still being taken seriously by the Government, and would it not resolve a real problem that the Government have had?

The Minister talked about unacceptable uncertainty, but frankly, the unacceptable uncertainty about state aid has come from this Government. Mr Dominic Cummings had one view of state aid, as against the traditional Conservative view. That is where the uncertainty came from. Now that he has gone and now that he is out, thank goodness, we have an opportunity to create a sensible common policy. There is a need for balance, and it must be sensible. The best way is through a common framework in co-operation with the devolved Administrations.

[Lord Callanan (Con)]

I am not sure whether that was a question or a speech in the wrong place—but I take the noble Lord’s point. I think he is getting issues conflated. The common frameworks programme of course is a programme of work with diffuse levels of power and ultimately it is not clear where regulation lies. To resolve those matters on a cross-UK basis, there is no doubt in our mind where the proper operation of these powers is—state aid, or rather subsidy control, is a reserved matter for the UK Government. However, we have said that we want to work collaboratively. We want to work with the devolved Administrations and of course, as we have said, we will consult closely with them on any new policy that we develop and indeed on whether legislation is necessary. But, given my general support for the framework and the Government’s support for the framework programme, I do not believe that it is appropriate for this matter to be included in the framework programme.

[Lord Thomas of Cwmgiedd (CB) [V]]

I will be brief, as obviously it would be very unfair if the Welsh were totally to outnumber everyone else in the number of speeches delivered this evening. I thank all noble Lords for their contributions to an interesting, though short, debate.

First, it is very encouraging that there is complete consensus on the need for a single subsidy regime for the internal market. There is no doubt about that. Secondly, there must be a consensus that at the moment this is not something that the UK Government have power over—otherwise this clause would be unnecessary. It is not a reserved matter and therefore under the devolution schemes it is a matter for all the devolved Governments. Thirdly, it is clear that there is no uncertainty. The Government are taking us out of the EU regime, assuming the instrument is passed, and we will go into the WTO regime—so that is the regime for the foreseeable future.

The real question is: are we going to go forward by diktat from Whitehall and Westminster or are we going to go forward by consensus? An obvious way of going forward is a common framework. I regret to say that I cannot agree with the Minister that a common framework is inappropriate. It is absolutely appropriate, because it will cater for the kind of divergence that will be allowed in the subsidy regimes. This is a matter of acute importance to people such as fishermen and those involved in agriculture. We need to know what level of divergence is permissible and negotiate that.

Finally, a decision has to be made on the role of the CMA. I moved amendments earlier this week in relation to the CMA simply because I imagine it will have to be the policeman of this regime. But what is it to be? Is it to be an adviser? Is it to have a central role? Or are things to be laid out in a common framework?

I therefore say that this clause ought to be removed. Get the policy right first. Try it by common framework and let us go forward on that basis. Therefore, I want to take the opinion of the House on the appropriate means of going forward—and the appropriate means is taking this clause out of this Bill.

Travel Agents

Lord Callanan Excerpts

Monday 23rd November 2020 Lords Chamber

[Baroness Clark of Kilwinning]

To ask Her Majesty’s Government what assessment they have made of the future of high street travel agents; and what plans they have to appoint a Minister to be responsible for the travel sector.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, we are regularly assessing Covid-19’s impact on tourism businesses. We recognise that these are extremely challenging conditions for those in the sector. High street travel agents have, of course, been able to access the Government’s comprehensive economic support package. While we have no current plans to appoint a new Minister for the travel sector, a cross-government global travel task force has been established to consider what steps the Government can take to enable a recovery of international travel.

[Baroness Clark of Kilwinning (Lab) [V]]

I declare an interest as a member of the TSSA parliamentary group. In the summer, nine out of 10 holidays were either cancelled or changed. ABTA said in August that 90,000 people’s jobs were either at risk or had already been lost. That figure increased to 164,000 people by the end of October. Will the Government look at a specific strategy for this sector and specific support? The TSSA and many businesses are asking for one Minister to have specific responsibility to put forward a strategy for this area because responsibilities lie across a number of departments—some are with the Department for Transport, some with other departments, and some fall between. Is this not something that the Government could look at and perhaps discuss with industry and the trade unions?

[Lord Callanan (Con)]

We have many consultations with the industry and we have put in place a strong package of financial support that businesses in the sector can access, including government-backed loans, various grant schemes and the extended furlough and self-employed support schemes.

[The Lord Speaker (Lord Fowler)]

I call the noble Baroness, Lady Wheatcroft. No? We will move on. I call the noble Lord, Lord Moynihan.

[Lord Moynihan (Con)]

My Lords, I declare an interest as someone whose holiday was understandably cancelled due to Covid. Does my noble friend the Minister agree that it is unacceptable that some travel agents should still be holding back on refunding customers and using customer payments as interest-free loans to their business without customer consent? Should not the ending of such practices be a condition precedent of eligibility for government support schemes, as well as future certification as fit and proper travel agents?

[Lord Callanan (Con)]

Companies have a legal obligation to ensure that they treat their customers fairly and that they pay refunds when they are due. Where disagreements exist we encourage customers and businesses to seek to find a solution that is mutually acceptable to both.

[The Earl of Clancarty (CB)]

My Lords, while the imminent threat to the travel and holiday industry is the pandemic, can the Minister say what support the Government intend to give from 1 January to British holiday firms and the thousands of British workers, permanent and seasonal, including young working-class people, whose jobs and job opportunities are at risk following the UK leaving the single market?

[Lord Callanan (Con)]

The noble Earl makes a good point. We have published lots of information for the travel sector to access. As I said, we are putting in place a comprehensive range of support to help the sector through this difficult and challenging time.

[Lord Snape (Lab)]

I draw noble Lords’ attention to my entry in the register of interests. Would the Minister accept that the call for a dedicated Minister is no reflection on the way he carries out his own duties? Such an appointment might help to bring sector-specific support for the travel industry, where, as I am sure he is aware, the number of redundancies is now expected to exceed 160,000. Would he agree that such an appointment would enable the Government to offer a cost-effective Covid-19 testing system to allow holidaymakers to travel and to shorten quarantine periods for those who return?

[Lord Callanan (Con)]

There is of course a Minister for Tourism: Mr Huddleston, in DCMS. He is currently convening a cross-ministerial task force on the travel industry. The noble Lord can look forward to announcements tomorrow on that.

[Baroness Doocey (LD)]

My Lords, the Government are currently developing a tourism recovery strategy to rebuild the £30 billion of export earnings that inbound tourism generates for the UK. What financial assistance are the Government providing to UK tour operators to enable them to get through this year and next year to deliver the tourism strategy that the Government want?

[Lord Callanan (Con)]

I outlined the measures that we put in place for individual travel businesses, but bigger operators have been able to access extensive loan and grant schemes. However, I readily accept that it is a very difficult time for businesses in these areas.

[Baroness Pidding (Con)]

My Lords, all aspects of the travel industry, international and domestic, have been hit as a consequence of the pandemic. With the continuing uncertainty in making foreign travel plans, would my noble friend the Minister agree that there is a unique opportunity for our domestic tourism and hospitality sector to be restored and to flourish? However, for this to happen, we first need to ensure these sectors survive what are likely to be an incredibly challenging few months ahead. Can my noble friend outline what steps the Government are taking to assist with this, especially in the hospitality sector?

[Lord Callanan (Con)]

I agree with my noble friend. She is absolutely right that there is a unique opportunity for our domestic travel industry and hospitality sector to flourish once they get through these extremely difficult and challenging few months. She will be aware that the furlough scheme extension and the tourism and hospitality VAT cut extension both run until March next year. We hope that they will help the industry.

[Lord Bassam of Brighton (Lab) [V]]

My Lords, the Transport Salaried Staffs’ Association has said that the Government have “ignored calls for help” from our travel trade and that the buck

“has been passed from the Department of Business to the Department of Transport and back again.”

Can the Minister explain why that is the case and why the travel sector has slipped between departmental cracks during the pandemic? Can he explain what support the Government will give because of the existential threat to high streets and travel agencies in particular? What additional help could the Government consider giving to this sector so that good companies do not go out of business or have to make people redundant?

[Lord Callanan (Con)]

It is nice to see that the TSSA is well represented in today’s questions from noble Lords. As I said, there is a Minister for Tourism. A cross-departmental tourism task force has been set up and, as I said to the noble Lord, Lord Snape, there will be an announcement tomorrow.

[Baroness Altmann (Con)]

My Lords, following on from the previous question, could my noble friend look into the somewhat misleading, confusing and contradictory statements applied to travel agents? On 31 October, all non-essential retail was ordered to close. On 5 November, the Chancellor said in the other place that

“Travel agents’ businesses … will benefit from business grants”,—[Official Report, Commons, 5/11/20; col. 513.]


but when the regulations and guidance were published, travel agents seemed to be excluded. I urge my noble friend to clarify what the situation is, especially since florists and pubs, which can do click and collect, have qualified for support that seems not to have applied to high street travel agents.

[Lord Callanan (Con)]

I will certainly have a look at the issue that my noble friend refers to, but I think the guidance has been very clear and most sectors of industry have been rigorously applying it.

[Lord Bradshaw (LD) [V]]

I believe that the advent of a vaccine gives a real glimmer of hope that the people working, as travel agents are, to the future have a lot to look forward to, provided they can get through the probably three months that we will have to wait until the industry starts to recover. I am quite happy that, if the Government believe they have made things clear so that people know what help is there, they have in fact done all we can ask.

[Lord Callanan (Con)]

I thank the noble Lord for his support. The developments on the vaccine are encouraging. It is not my area of responsibility, but we all have our fingers crossed that the vaccine will prove successful, and that we will be able to help the industry through its current short-term difficulties and that it has a bright future ahead.

[Lord Balfe (Con) [V]]

My Lords, I draw attention to my interest in the register. I ask the Minister to urge on his friend convening the cross-departmental tourism task force the need to take on board the genuine concerns of the trade unions, and in particular pilots, who, because they have a need for a certain amount of flying hours, are being quite challenged on keeping their flying credentials up to date. I hope the Minister will be able to encourage his friend to look across the whole spectrum of problems in the travel industry.

[Lord Callanan (Con)]

I will indeed pass on my noble friend’s concerns. As I have said, I cannot predict what will be in the announcement tomorrow, but we have been looking very closely at all the problems that exist for the tourism sector, in particular for those who want to travel abroad. I will certainly pass on my noble friend’s remarks.

[The Lord Speaker (Lord Fowler)]

My Lords, all supplementary questions have been asked. We now come to the fourth Oral Question.