United Kingdom Internal Market Bill

Lord Fox Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 26th October 2020 Lords Chamber

[Lord Naseby (Con)]

My Lords, it is worth reminding ourselves that we are talking about the Committee stage of an internal market Bill. I frankly do not see the relevance of the part of Amendment 1 which talks about the environment. We do of course have environmental laws. They are ever being strengthened and are an important part of our society. What they are not is anything specifically to do with an internal market.

We turn to look at consumers. I am a marketing man by profession. After university, having read economics, I joined the Reckitt and Colman Group as a marketing executive and later a marketing manager, in the UK, India and what is now Sri Lanka. I understand marketing. Marketing is about more than just the consumer. It is about those elements of a market that are all working within it. A whole host of bodies is working there. I share the view of my noble friend Lady Noakes. While the UK was in the EU, which I voted to stay in, we had all sorts of restrictions, some of which were very adverse to industry and commerce in this country—not all by a long way, but some were. We want an internal market where people who manufacture, sell, distribute, research and devise new products can succeed. We want that market there, without the stranglehold of having to agree with half a dozen other nations. That is absolutely key. It is not a simple matter of just worrying about the consumer. I think it was the noble Baroness who opened who spoke about driving competition to the lowest level.

Competition is very healthy but, of course, there must be safeguards. That is why in the Bill there is this new body, the office for the internal market, working alongside the CMA. I criticised the CMA at Second Reading and I believe those criticisms were valid. I want to see this office for the internal market really have teeth and really be able to operate. Reflecting on Second Reading, frankly, it is not right in the Bill to just have a review after five years. We have enough evidence in modern society to recognise that things move much more quickly these days than they ever used to. I put it to the Minister that Her Majesty’s Government should consider a three-year review of that body.

On Amendment 2, it is already part of our public law, so why does it have to be written here—if that is right? It comes later, under Part 5, but we cannot have a situation whereby all parts of the UK can have their own minor arguments on whatever product or service it may be. Then we would end up with everybody having a different viewpoint. That does not seem to me at all sensible. My plea to the Minister is that this is a very exciting time if you are a UK manufacturer, trader, in financial services, in hospitality, in the professions, a retailers or wholesaler, or an online trader. Certainly, in my former constituency of Northampton, they look forward to this internal market.

[Lord Fox (LD)]

My Lords, if the Ministers shepherding this Bill expected an easy ride, this gives a taste of things to come. It serves a purpose in setting the scene, and a lot of arguments and debates will come in other groups as we go through this process. I shall not labour those points. An overriding sense I got from my noble friend Lord Purvis is that the question everybody wants to know the answer to is: why have Her Majesty’s Government decided to turn away from a process of managing markets that has been extremely successful? It was successful before we joined the European Union and successful afterwards. This is the overriding question that hangs over this whole debate.

On Amendments 1 and 112, if ever we needed convincing that things such as the environment need to be written into the Bill, the speech by the noble Lord, Lord Naseby, convinced me that they do. This is because we cannot take things for granted. Governments come and Governments go, but the law stays, and we need to be sure that our public policy is being directed properly. I uncharacteristically find myself somewhat agreeing with the noble Baroness, Lady Noakes: we have to be careful not to constrain the nature of this Bill. We need to find a way to write in issues such as those of the consumer and the environment. I would add some of the points made by my noble friend Lady Bowles and food safety to that. We need to ensure that there is an assessment of the success of this internal market in some of those areas, including the environment, the effect on consumers, the effect on jobs, et cetera. I share the view of my noble friend Lady Bowles that perhaps more work is needed, but the issue is live and very important. I thank the proposers of the amendment.

Turning to Amendment 2, I do not think proportionality pops up anywhere in other amendments. We had a brief discussion of this extremely important subject from various speakers. I take my lead on this from the noble and learned Lord, Lord Hope, who understands the law, and my noble friend Lady Bowles, who knows a thing or two about regulation. If they are concerned about proportionality, so are we on these Benches. The Government need to find a way of writing that issue into the Bill.

On public procurement, we need to understand what the Government mean by what they seek to do in this legislation. The issue highlighted by my noble friend Lord Purvis is live and real: how will this legislation affect those issues? It is a probing amendment, but for it to work we need answers.

We have started. There are issues we shall return to, but proportionality and public procurement are two on which I hope the Minister will respond at length.

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

My Lords, let me open by thanking noble Lords for their contributions at Second Reading last week. Again, the contributions have demonstrated the tremendous breadth of expertise in this House. This is indeed a crucial piece of legislation. In this respect, I agree with the noble Lord, Lord Fox, and I look forward to providing the scrutiny it deserves and that I am sure it will receive from noble Lords, beginning today and in the days and weeks ahead.

Let me reassure, and to some extent disagree with, my noble friend Lord Cormack, which will not come as a surprise to him. We are not riding roughshod over the devolution settlements. The devolved Administrations will acquire dozens of new powers that they have not exercised before once we leave the EU transition period. The Bill is about ensuring that those powers are exercised in a non-discriminatory manner, but they will acquire new powers and new responsibilities. Before I address the specifics of Amendments 1, 2, 59 and 112, which we are discussing in this first group, I want to remind to noble Lords of why we need this Bill and the context of Part 1.

By opening with the purpose of the Bill, I hope to explain why these four amendments, which seek to alter the Bill’s core principles, are not necessary. The Bill aims to allow the continuing smooth functioning of our UK internal market at the end of the transition period. As we set out in the White Paper, and as I explained at Second Reading, the Bill will establish a market access commitment by enshrining mutual recognition and non-discrimination in law. Part 1 concerns itself with delivering this market access commitment for goods. The principle of mutual recognition is that goods and services from one part of the UK will continue to be recognised across the country. This will ensure the devolved Administrations will benefit from their additional powers and freedoms outside the EU. As the transition period ends, they will gain increased powers, as I said to my noble friend Lord Cormack, to set their own rules and standards across a wide range of policy areas within their competence. At the same time, it provides firm assurance to our businesses that their goods can continue to flow freely throughout the United Kingdom. Non-discrimination ensures that there is continued equal opportunity for companies to trade in the UK, regardless of where in the UK the business is based.

I say to the noble Lord, Lord Empey, that the measures in the Bill will also ensure that Northern Ireland qualifying goods benefit from the market access commitment and receive mutual recognition in the rest of the UK. The Bill will also affirm the principle that those goods are not subject to checks, controls or administrative processes as they move from Northern Ireland to Great Britain. I hope that I can reassure the noble Lord on that point. This means we will fulfil our commitment to legislate for unfettered access, as we promised to the people and businesses of Northern Ireland. This will ensure that businesses and citizens in the United Kingdom can continue to trade freely across the four nations.

With this context in mind, I turn to Amendments 1 and 112 together. These seek respectively to limit the purpose of Part 1 and the Office for the Internal Market’s statutory objective to the protection of the environment and consumer interests. Now, it goes without saying that the protection of the environment and consumers is hugely important, and something that we as a Government are already committed to. The UK, as I never tire of repeating, has some of the highest standards in the world, and we will continue to improve these ahead of others. We remain committed to being at the forefront of environmental protection and a leader in setting ambitious targets to prevent damage to our natural world, building on our already strong environmental record. For example, we have set out a range of new policies in the Environment Bill that are designed to drive up environmental standards in line with the UK’s priorities.

The statutory objective of the Competition and Markets Authority—acting as the Office for the Internal Market—ensures that the office is able to effectively operate as the monitoring body for the internal market, and that there is no confusion between the pre-existing powers of the CMA and those newly conferred on it as the OIM. Distinct objectives will prevent any operationally problematic blurring of functions.

As my noble friend Lady Noakes observed, the office will operate for the benefit of all those with an interest in a smooth-functioning internal market, whether that be regulators, businesses, professionals, the four legislatures or indeed consumers. Explicitly narrowing its focus to consumers would be to the detriment of all the others that I have listed.

Moreover, the functions set out in Part 4 of the Bill clearly establish that the office will consider the economic impacts of regulatory measures on the internal market. Although some of these will of course be environmental protection measures, it will not be authorised to opine on the extent to which these measures safeguard the environment, because this would risk duplicating the role of existing public bodies with a purely environmental focus. As such, given how much the Government are already doing in the area of consumer and environmental protection, I consider that these amendments, which seek to change the purpose of the Bill, are unnecessary, and I hope that I have been able to persuade my noble friend Lady McIntosh and the noble Baroness, Lady Hayter, to withdraw Amendment 1 and not move Amendment 112.

Amendment 2 aims to introduce the principles of proportionality and subsidiarity into the Bill as additional market access principles. These are European law principles. We have now left the EU and are free to organise our internal market in a way that is better suited to the UK’s unique constitutional arrangements and common-law systems. I agree with my noble friend Lady Noakes that the market access principles will protect seamless trade and jobs across all four corners of the United Kingdom following the end of the transition period in December 2020. They have been designed for the UK’s specific devolution arrangements and legal approach, and they already take account of the need for reasonableness and respect for devolution. In contrast, the proposed amendment would muddy the waters with EU concepts that in our view are ill-fitting in the UK. For these reasons, the Government cannot accept this amendment and I hope that noble Lords will not move it.

Amendment 59, on which there was considerable discussion, seeks to disapply the market access principles from the public procurement rules. I assure the noble Baroness, Lady Hayter, and the noble Lords, Lord Purvis and Lord Fox, that the principles proposed in the Bill will not typically operate in the area of public procurement, and indeed that we intend to legislate separately in this area via a wider package of procurement reform, on which we will shortly consult. The market access principles are not relevant to procurement as they are about how business is regulated. The procurement rules cover how public authorities carry out their procurement function. We believe that the risk of divergence can be effectively managed through a combination of close devolved Administration engagement and use of the common frameworks, and we are working to develop a concordat on expected public procurement practices and policies between the four UK nations.

--- Later in debate ---

Moved by

[Lord Fox]

4: Clause 1, leave out Clause 1 and insert the following new Clause—
“Purposes of Parts 1, 2, 3 and 4
(1) Parts 1, 2, 3 and 4 promote the continued functioning of the internal market for goods (see Part 1) and services (see Part 2), including the recognition of professional and other qualifications (see Part 3), in the United Kingdom by establishing the United Kingdom market access principles.(2) The United Kingdom market access principles are—(a) the mutual recognition principle for goods and services, and(b) the non-discrimination principle for goods and services.(3) Those principles have no direct legal effect except as provided by Parts 1, 2, 3 and 4, and only to the extent that they have been agreed in a memorandum of understanding by—(a) the Secretary of State,(b) the Welsh Ministers,(c) the Scottish Ministers, and(d) a Northern Ireland department.(4) The Secretary of State must lay before Parliament the memorandum of understanding, which must also set out—(a) how the agreed policy frameworks on the functioning of the internal market in the United Kingdom will operate,(b) any agreed exclusions from the market access principles,(c) proposals for the establishment of a council or councils, comprising representatives of the Secretary of State, the Welsh Ministers, the Scottish Ministers, and a Northern Ireland department to oversee the operation of agreed policy frameworks and the functioning of the internal market in the United Kingdom, and(d) proposals for the establishment of an agreed dispute resolution mechanism relating to the internal market in the United Kingdom for any disputes among the Secretary of State, the Welsh Ministers, the Scottish Ministers, and a Northern Ireland department.(5) A statutory instrument containing regulations under section 56(3) may not appoint a day for the commencement of Parts 1, 2, 3 or 4 until the requirement in subsection (4) is met.”

[Lord Fox (LD)]

My Lords, as I said in winding up at Second Reading, the eight hours of speeches broke the Bill down into three areas of serious concern: its illegality, its threat to the union, and its structural contradictions. As the noble Baroness, Lady Hayter, said, even if Part 5 is removed one way or another, there will still be great dangers lurking within the Bill. This amendment focuses squarely on putting the threat to devolution on ice.

The Minister was right when he said that the devolved authorities get new powers through the Bill, but these new powers are heavily constrained—more so than they were before when there was EU flexibility. We have heard some of this debate already. More importantly, both Ministers have omitted to mention that, at the same time, the Government are taking significant powers away. These losses are far more significant than any notional gains. This has already been correctly characterised by the devolved authorities as rolling back the devolution settlements.

The Governments of Wales and Scotland need only look over their respective borders to see how the UK Gossvernment are treating their regions and cities—where there is only piecemeal devolution—to conclude that taking power back to the centre is not an accident; it is a pattern of behaviour. As an aside, this is not a unique pattern of behaviour. My Scottish friends tell me that the Scottish Government are very enthusiastic about centralising power away from their local councils.

Returning to the Bill, we should not worry when it comes to Westminster’s reputation in Scotland. I read in the press that Michael Gove is heading up a new unit to tackle the secessionist movement in Scotland. What could go wrong there? Perhaps a better way of dealing with the unpopularity of Westminster is to deal with the central devolution issue in the Bill.

There are many later amendments concerning parts of the problem with the Bill. This amendment seeks to deal with it all in one go, taking it head on. It is driven by a central principle which we on these Benches share. We do not believe that it is only the UK Government or this Parliament that should dictate how the future internal market should work. It has to be a collaborative effort between Westminster, Edinburgh, Cardiff and Belfast. To achieve this, Parts 1 to 4 of the Bill need to be rewritten by consensus, not imposed, which is why this amendment seeks to halt the progress of Parts 1 to 4 until a joint process has created the future market structure. In essence, it will put on ice the Bill’s implementation until agreement is reached on the operation of the internal market frameworks.

In order to do this, the amendment rewrites the purpose of the Bill. What stays is the promotion of the continued functioning of the internal market for goods, in Part 1, and services, in Part 2. It includes the recognition of professional and other qualifications in the UK—in Part 3—by establishing the UK market access principles, including, as now, the mutual recognition and non-discrimination principles for goods and services. It adds the important rider that those principles have to be agreed in a memorandum by the Secretary of State, the Welsh and Scottish Ministers and a Northern Ireland department. This memorandum would cover how the agreed policy frameworks on the functioning of the internal market in the United Kingdom would operate and any agreed exclusions from market access principles. It would establish a council or councils, comprising representatives of the Secretary of State, the Welsh and Scottish Ministers and a Northern Ireland department to oversee the operation of the agreed policy frameworks and the functioning of the internal market in the United Kingdom. The current Joint Ministerial Council would need to be strengthened to achieve this objective.

The amendment would also establish an agreed dispute resolution mechanism, relating to the internal market of the United Kingdom. It requires the Secretary of State to lay this memorandum before Parliament. In short, this amendment makes the Government do what it should already have done. Amendment 4 requires them to consult and reach agreement with the devolved nations of the United Kingdom. By pausing and putting this on ice, Her Majesty’s Government can then create the consensus that is needed. It can also address the holes in the Bill, including the role of the common frameworks, which will be discussed in much more detail later, and it can put in place a process of dispute resolution. The deliberate absence of detail around dispute resolution can be viewed with great suspicion by those who are so minded. It seems that in the end, the Westminster-based UK Minister will decide disputes if the Bill remains unamended.

Why should the Government agree to this amendment? The first reason is due process. I met the noble Lord, Lord Callanan, on Friday. His key anxiety was about discipline and time in order to get through all this. If he were to accept this amendment, he would, at a stroke, remove large portions of the subsequent debate up to, but not including, Part 5 of this Bill. He would then meet his time objectives. Much more seriously, by accepting this amendment, the Government could step back from a truly appalling act of political vandalism. To say that this Bill drives a coach and horses through devolution is not hyperbole. This cynical approach to the balance of powers established between Westminster and Scotland, Wales and Northern Ireland, is calling down issues that, once started, will not easily be halted. This amendment seeks to avert this disaster, creating a role for the devolved authorities, including the operation of the internal market frameworks, robust dispute resolution, agreed exclusions from market access principles and representation for all four nations on oversight councils. I beg to move.

[Baroness Neville-Rolfe (Con) [V]]

My Lords, I refer to my interests in the register as this is the first time I have had the honour of speaking in Committee. Amendment 4 introduces an expanded purpose for the Bill. The noble Lord, Lord Fox, has explained the rationale for his wide-ranging proposal. I can understand his wish to refer to services at this introductory point in the Bill, given that they comprise over 80% of GDP, and to professional and other qualifications, harmony on which is so important to the UK’s single market.

I accept that the changes to subsections (1) and (2) merit consideration. However, I am very uneasy about the proposed new subsections (3) and (4). I fear that they make this a wrecking clause. They give the devolved Administrations a veto over the way internal market arrangements will work, in addition to the substantial powers and money that they have already been given in the various devolution settlements and EU exit Bills. This is a recipe for the politics of national resentment, chaos and delay, at a time when we need rapid agreement on the new order so that the country can move forward and make the EU exit work, difficult though this may be.

Resources are already massively redistributed out of London and the south-east to other parts of the UK, with Scotland alone having a fiscal deficit of £15 billion—namely, a subsidy from richer England—according to a recent article by David Gauke, who served in the Treasury for seven years. We do not want yet another stand-off at this moment in time with the devolved nations, able to hold things up. There has been quite enough of such delay in the exit negotiation process, now more than four years long, I remind noble Lords.

Where I have more sympathy with the noble Lords, Lord Fox and Lord Purvis of Tweed, is on the fact that we need clarity now, before the Bill takes effect. Perhaps I can explain why by way of analogy.

When I was at Tesco, one of the key reasons for success was a clear understanding of who had responsibility for what and a readiness to accept the rules for the greater good. Procurement was done centrally by buyers, who could work with the supply chain, such as British food producers, understand their needs, strengths and innovations, agree a reasonable deal and ship goods to the stores in line with customer demand. When it came to other areas, such as who to hire as employees and how to schedule their hours, that was locally determined. The key was that everyone knew and accepted the division of labour because it contributed to the success of the whole. There was no council where everyone could waste hour after hour arguing the toss, as appears to be proposed in this amendment.

Let us have clear divisions and let us decide them now, not leave them for a great fight over a memorandum of understanding or yet more devolved government bodies backed up by dispute resolution. That is just an invitation to politically motivated folk to stop the country adjusting to the new norms and getting ahead with economic recovery and international ambition.

The proposals in the Bill are a good start, and, as noble Lords can see, I am uneasy about this particular amendment. I served for nearly three years as the single market Minister in the EU and for years as a British official negotiating in Brussels and Luxembourg, and the truth is that, subject to some minor subsidiarity, internal market rules for goods were set at the EU level in the interests of the efficient functioning of the market. By analogy, rules for the UK single market should be set at the UK level. EU services were less streamlined, but we all recognised that and wanted to bring about improvement, which was one of the main objectives of the UK presidency in 2017, but that never happened. I look forward to hearing from my noble friend the Minister, but I will take a lot of convincing that subsections (3) and (4) make sense.

--- Later in debate ---

[Lord Callanan (Con)]

The purpose of the office for the internal market is to provide advice, reports and monitoring to all four Governments and legislatures. It will have no direct role in dispute resolution, which will be a matter for the Joint Ministerial Committee to discuss.

[Lord Fox (LD)]

My Lords, I apologise to the Deputy Chairman of Committees for having jumped in so soon. I thank all noble Lords for their contributions; the subsequent questions were worth waiting for, so I am glad that I did not plough on.

This has been an interesting debate; however many more hours we will have in Committee, it has uncovered above all else how half-baked—how completely undercooked—this Bill is. It is not worked through. The point of this amendment was to highlight, and give the Government, an opportunity to step back and admit that there are so many open questions and so many issues. I feel sorry for the Minister—I rarely do, but on this occasion I do—because he is having to respond to things that have not been properly locked down in this legislation. So I will look at Hansard, but it is quite clear that, one way or another, we will have to come back on Report to these absolutely central issues. Having said that, I beg leave to withdraw Amendment 4.

Amendment 4 withdrawn.