Service Address (Rectification of Register) Regulations 2024
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Lord Johnson of Lainston
That the Grand Committee do consider the Service Address (Rectification of Register) Regulations 2024.
Limited Liability Partnerships (Application of Company Law) Regulations 2024
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Lord Johnson of Lainston
That the Grand Committee do consider the Limited Liability Partnerships (Application of Company Law) Regulations 2024.
Registered Office Address (Rectification of Register) Regulations 2024
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Lord Johnson of Lainston
That the Grand Committee do consider the Registered Office Address (Rectification of Register) Regulations 2024.
Relevant document: 8th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, I beg to move that the Committee also consider the draft Limited Liability Partnerships (Application of Company Law) Regulations 2024, the draft Service Address (Rectification of Register) Regulations 2024 and the draft Principal Office Address (Rectification of Register) Regulations 2024, which were all laid before the House on 18 December 2023.
These regulations represent the first substantive tranche of a total of some 50 statutory instruments that will breathe life into the reforms being introduced by the Economic Crime and Corporate Transparency Act 2023, which I will refer to as “the Act”. It was my pleasure to help guide that Act through Parliament. I pay tribute to noble Lords for helping deliver a landmark piece of legislation; I am extremely pleased to see so many of them in their usual place today. The Act’s reforms will help bear down on the criminals, kleptocrats and terrorists who abuse our open economy, and will enhance the UK’s reputation as a place where legitimate business thrives.
I will begin by turning attention to the draft Limited Liability Partnerships (Application of Company Law) Regulations 2024. While the inevitable focus of the Act was on the reform of company and limited partnership frameworks, our policy is generally to apply company reforms to the class of entity established through the Limited Liability Partnerships Act 2000. That 2000 Act provides a regulation power to do so and, where appropriate, to modify the application to suit the limited liability partnership, or LLP, context. We intend to exercise the power through further instruments as necessary to ensure that Act provisions apply coherently as between companies and LLPs.
This instrument forms the first step in that process and serves to transpose the elements of the Act that commenced on Royal Assent in October 2023 and in January 2024 and, most significantly, those planned to commence on 4 March. I remind noble Lords that the intention is that many of these points will indeed commence on 4 March. That date is an important one, as it marks the point from which it is intended that many of the company registrar’s new powers will come into effect and from which significant new requirements will apply to companies and, by virtue of this instrument, also to LLPs.
Noble Lords will be pleased to know that I spoke this afternoon to the Registrar of Companies; I was very comforted by her encouraging words about how Companies House is ready for that date and looking forward to it. I am happy to cover further points later around its preparedness and the chronology of other activities feeding off the Act.
Those provisions include: establishment of additional controls around the name an entity chooses to register and that under which it conducts business; a statutory requirement to register an appropriate email address; an obligation annually to confirm that the entity acts with a lawful purpose; and, perhaps most importantly, the registrar’s new objectives under the Act to strive to ensure the integrity and accuracy of register information and, within the parameters of her functions, to prevent companies and others carrying out illegal activities. Elsewhere among those powers and requirements are those that relate to the addresses that corporate entities are required to file with the Registrar of Companies.
That brings me to the next instrument in this group, the Registered Office Address (Rectification of Register) Regulations 2024. Instances can arise in which an unsuspecting householder finds that a company with which they have no involvement has misappropriated their address, claiming it as that of the registered office they are required by law to file with the registrar. This not only causes alarm and inconvenience for householders but can be indicative of criminal intent on the part of the company in question.
Through the Act, we are strengthening the registrar’s powers to combat this practice by tightening the requirements around what constitutes an appropriate registered office address; streamlining and expanding upon existing avenues of redress for those impacted; introducing criminal sanctions for those who fail to take corrective action; and, ultimately, providing the registrar with the ability to strike from the register those companies that persist in offending.
The purpose of this supporting instrument is to establish a flexible framework within which the registrar can act to address this abuse. It puts flesh on the processes to be followed where the registrar believes it appropriate either to act unilaterally and expeditiously to change a company address or to provide it with the opportunity to object to a proposed change. It sets out how criminal penalties will apply to companies, and their officers, which fail to take corrective action where the registrar has replaced an erroneous office address with a default address. It also outlines the process the registrar can follow to strike a company off the register when corrective action is not taken.
These registered office address regulations apply these procedures and processes in the limited company context. The limited liability partnership regulations I introduced earlier serve to transpose them to apply with similar effect in the LLP setting.
I will now cover the Service Address (Rectification of Register) Regulations 2024 and the Principal Office Address (Rectification of Register) Regulations 2024. They are, so to speak, two further chapters in the same story. Just as companies are required to file particular address details, so are persons associated with them. It may be helpful if I set out in a little more detail what these requirements are and where they apply.
I turn first to service addresses. A service address must be filed in respect of all company directors, company secretaries and any individual registered as a person with significant control, or PSC.
I move on to principal office addresses. Certain companies have directors or company secretaries that are other corporate entities rather than individuals. Companies may also have what is termed a relevant legal entity, or RLE, which is a company or organisation that has a significant degree of influence or control over another. They are effectively the same as people with significant control but are entities, not individuals. A company must provide address details in respect of all three of these categories and, in doing so, has the option of filing either a registered office or a principal office address.
These two sets of regulations establish similar processes around the rectification of false or erroneous service and principal office addresses as the service address regulations referred to earlier. However, there is one material difference. Because these addresses relate to individuals or corporate entities other than the company itself, the ultimate sanction of striking the company at issue off the register for persistent non-compliance cannot apply.
All three sets of these address-related regulations are also applied in an LLP context by the draft Limited Liability Partnerships (Application of Company Law) Regulations 2024 that I presented at the outset. In combination, they will deliver a robust and comprehensive safeguard, encompassing, for example, instances in which an address is misappropriated for multiple abuses within the one company, as well as providing scope for much quicker redress for those who still fall victim. At present, the registrar can act only following an application from the victim, and she has to provide companies with 28 days in which they can challenge the claim that an address is being misused. These registrar powers are available only in respect of the registered address; they are not currently provided for service and principal addresses.
Once these improved mechanisms are in place, not only will the registrar also be able to change an address to a default address of her own volition but she will have the discretion to do so immediately, affording the company the opportunity to challenge only after the event. Therefore, in cases of prima facie abuse, it will be possible to deliver much quicker and more efficient resolution. I know that noble Lords on all sides of the House were particularly focused on that topic during the passage of the Act.
In conclusion, these measures are all crucial to the Act’s effective implementation. I hope that noble Lords will support them and their objectives. I beg to move.
Lord Bourne of Aberystwyth (Con)
My Lords, I thank the Minister for setting out clearly and crisply the details of the four sets of regulations. I declare my interests as set out in the register. It is certainly not my aim to do otherwise than to support these regulations, which are consequential from the Economic Crime and Corporate Transparency Act 2023, as the Minister explained, but I want to raise some brief points in relation to them.
I appreciate that, in relation to the address of a company’s registered office, one major concern is companies opting for PO box addresses or inappropriate addresses that are not the address of the company or any of its officers. I take the point about the importance of tackling this, particularly in relation to crimes of fraud, money laundering and so on. Does the Minister have any idea of the incidence of this type of misleading activity? If he does not have the figures to hand, I would be grateful if he could write to me.
I have two brief additional points. More widely, I wonder if the Minister can provide any details—he has given some indication—of when other provisions of the Economic Crime and Corporate Transparency Act 2023 will be brought into force. I appreciate what he said about 4 March but I wonder whether Section 60 of that Act, on confirmation of lawful purpose, is to be brought in on that date. I think it is but would be grateful for an identification in the regulations and any other regulations expected in that regard. It would be good to have that mapped out.
Lastly, is the Minister in a position to say something about a review of company law more widely? The last far-reaching review of company law took place in 2006. It was then the most far-reaching review we have ever had and led to the longest piece of legislation on any subject ever seen at Westminster, so it would be quite a task, but that was some 20 years ago and it is in need of some review and refresh. When the Minister responds, perhaps he can give some indication of when that might be tackled. I am most grateful.
Lord Johnson of Lainston (Con)
As always, I thank noble Lords for a very powerful and constructive debate around this essential legislation. I genuinely think it will make an enormous difference to the quality of Companies House activities and of our business activities, reducing crime in a magnitudinous way and making the data that companies provide far more valuable in terms of them being able to operate legitimate businesses, to borrow money and to give confidence to customers. Markets are based on trust, so the more the Government can do—and have done, I am pleased to say, with the support of all Peers in the House—the better the business operations underneath that framework.
I will briefly go through some of the significant points. If I have missed anything I will be delighted to follow up after this discussion, but I am keen to make sure that everyone is answered as broadly as possible. If I do not have specific data requested, I will write and copy in all noble Lords.
I thank my noble friend Lord Bourne for his contribution; I hope I understood his question correctly. I do not have to hand a number for the instances of PO boxes being used as registered addresses, but I would be comfortable supplying it to him. The whole point is that this legislation will end the practice of having PO boxes. I think that only about 21,000 or 22,000 addresses are classed as default; of course, that is in effect the registrar’s own address. If you think about the however many million companies that are registered—perhaps 5 million or so—that is a very small proportion. A lot of these figures sound high—when you talk about tens of thousands, it seems an enormous number—but the reality is that, in proportion, they are relatively small. A lot of these default addresses—I am covering several points at the same time—are not for nefarious purposes. They might exist simply because, for example, an individual who had a company has died or the accountant who was registering it has gone out of business. So there are administrative reasons why default addresses are used.
Forgive me but I cannot remember whether it was the noble Lord, Lord Vaux, or another noble Lord who made the point about advertising—that because it is a default address, issues around concern and risk may be raised. I have some sympathy with that, although it is not for me to say. A default address does not necessitate that there is nefarious activity; it is often administrative. Clearly, if noble Lords go on Companies House, they will be able to see the date on which an address became the default address, which would potentially give one an indication of the situation.
It is worth talking about the chronology here. I so enjoyed the passage of the Economic Crime and Corporate Transparency Bill. The time went by so fast; it feels like only yesterday that we finished it. It became an Act towards the end of last year. As I said, I am pleased that, following a helpful conversation with the registrar, Louise Smyth, she has been extremely co-operative with my office in promoting our ambitions for Companies House. I am sure that—the noble Lord, Lord Vaux, asked a question about this—it would be extremely helpful for us all to arrange an update. I found speaking to Louise today, ahead of this debate, very helpful. It is important that we have an element of checking to see whether the resourcing is appropriate and whether the speed of activity is there, but I have the fullest of confidence in Louise and her team.
Let us look at the chronology going forward. Assuming that everything today goes to plan, these powers will come into force on 4 March. That will in effect enable the registrar to have far more discretion over how she acts.
I turn to the points made by the noble Lord, Lord Leong, about multiple registrations, how the registrar will effect her duties and the appellate process around that. It is clearly listed in the statutory instrument that you will not have to have 21,000 to the power of however many different applications, as the noble Lord, Lord Vaux, may have suggested. The point is this: currently, people may register my address as their company address. This is one of the core sparks that lit the blue touchpaper, or the rocket, that was the Economic Crime and Corporate Transparency Bill—this iniquitous situation in which any of us could be registered as a director and our address could be used as a company address. It is a completely bizarre situation that will come to an end on 4 March.
It will then be up to the registrar to make those inquiries; at the stroke of a pen, she will be able to cancel out however many thousands of companies registered to one address. How are we going to do this? The registrar will use the intelligence hub; it is already in existence, as far as I am aware, and is being significantly resourced and expanded. I am encouraged that she will have—this is what we discussed in great detail as the Bill passed through the House—the discretionary powers to do the work and do what is clearly the right thing.
The noble Lord, Lord Leong, rightly mentioned the appeals process. It would be unreasonable to suggest that a single agent of the Crown should be able to, at their whim and discretion, change the fortunes of businesses; that is simply not the case. There is a clear appeals process and, ultimately, the courts would adjudicate. Let me be clear: it is not in the interests of Companies House or the registrar to strike companies off if they believe that they are doing legitimate business. That would be a highly unusual scenario, but there are safeguards and checks and balances around that.
I hope I have covered some of the questions asked by my noble friend Lord Bourne and the noble Lord, Lord Vaux. I will cover two other short points on the chronology. These powers will come into effect on 4 March. In May we will get the statutory instrument for the fees—I believe it is being laid in Parliament, in the other place, today—which will go to £50 for incorporation and £34 for verification at the end of every year. The increase is quite significant in percentage terms, but I think all noble Lords in the Committee will agree that, in real terms, that is not a significant amount of money for the incorporation of a company, with all that that entails. I think we have reached quite a good place there.
The all-important work on verification is the real meat of the additional hard work by the noble Lords, Lord Vaux and Lord Fox, and other noble Peers. Our friends the ACSPs hope, as do Companies House and the registrar, that by the end of this year they will have begun the process of ensuring that the verification process around ACSPs is well under way. They expect to bring in the appropriate processes for individual verification in 2025. As noble Lords know, these include photo identity card and passport verification and so on; we have done so much work on this.
Lord Fox (LD)
On chronology, am I right in thinking that there is a commencement statutory instrument that needs to be brought forward for the overall Bill? When might we see that being tabled?
Lord Johnson of Lainston (Con)
That will happen next week, I am told. I look behind me hopefully on questions like that, but we will do that next week and I hope we stick to this timetable. As I have said, various SIs relating to fees and so on are being laid in the other place today.
I believe I have answered most of the questions from the noble Lord, Lord Vaux, and my noble friend Lord Bourne. The noble Lord, Lord Sikka, made some important points about dividend payments and the stability of our company system. I would not necessarily say that they are relevant to the Companies House regulations that we are looking at today. They are separate from Companies House’s requirement to make sure that the proper accounts are filed. The noble Lord asked who the enforcer for company law is; the court system is. It is important to stress that.
There have been discussions about when company law will be reviewed. As far as I am aware, we have no specific plans to do a full review, but I am happy to take all the noble Lord’s comments and issues back to the Department for Business and Trade, which has particular responsibility over certain reporting areas, to make sure that he is content that the work we are doing is effective.
I believe I covered the points from the noble Lord, Lord Leong, related to ensuring that the Registrar of Companies can operate effectively and the appellate process. Very importantly, on his comment about the powers of the registrar, these are new powers, so we will have to see how they develop. It is absolutely right that the House and the Government continue to keep a close watch on Companies House and the team there to ensure that they have the necessary powers and resources to deliver on a truly transformative regime for how companies are registered and how Companies House operates. As the noble Lord, Lord Fox, rightly said, it needs to move from simply being a repository of information to becoming a truly dynamic activator in overseeing how companies operate. This is exactly what these statutory instruments allow.
I am happy to follow up with any noble Lords who have specific requests, but I very much hope that I have their support on these statutory instruments.
Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [HL]
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The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, I beg to move that the Bill do now pass. If I may, I will say a few notes of thanks to the participants and highlight a few core points. Other speakers may wish to do the same, but I gather that I should go first in the order of debate.
The Bill is a narrow one, focused on technical barriers to trade, intellectual property and government procurement, but it will help ensure that we meet our international obligations when we accede to the CPTPP. We will be the first new member to accede to the agreement. We have also, through our accession to this wonderful institution, in effect established a brand-new set of free trade agreements with Malaysia and Brunei.
This is also therefore a highly significant step, and taking this Bill through your Lordships’ House has been a pleasure and a privilege. I am delighted that the ambassadors and representatives from all 11 CPTPP member states—Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam—are here today to witness this historic moment. “Ocean’s Eleven” will become “Ocean’s Twelve”.
Lord Johnson of Lainston (Con)
I spent a long time working on that joke—it did not work the first time, but I thought I would try it at this final point.
This Chamber has seen productive debate, including following the Bill’s Second Reading, which was opened with profound style by the then new Foreign Secretary, my noble friend Lord Cameron of Chipping Norton.
I turn first to the Opposition spokespeople, the noble Lords, Lord McNicol of West Kilbride and Lord Purvis of Tweed. The scrutiny that they have undertaken has been thoughtful and thorough, and they have my sincere thanks for this.
I am indebted once again to my noble friend Lord Lansley and his ability to purposely probe legislation, this time in relation to geographical indications and government procurement. I also extend my gratitude to all members of the International Agreements Committee, led by the noble and learned Lord, Lord Goldsmith, for their continued engagement, particularly the noble Baroness, Lady Hayter, and the noble Lord, Lord Kerr.
It would also be right for me to express thanks to the noble Lords, Lord Alton of Liverpool and Lord Leong, who I hope are reassured by the robustness of our democratic processes around our treaty obligations and my undertakings to ensure that all future countries who wish to join the CPTPP, once we are a full member, will receive full and proper scrutiny.
I am also grateful to the noble Lord, Lord Foster of Bath, for his extraordinary knowledge of intellectual property law and his comments around artists’ rights. I look forward to seeing the findings of the consultation when it reports over the coming months. I also make a commitment to continue to work with all CPTPP countries to further the principle of artists’ resale rights, as recently discussed with the noble Earl, Lord Clancarty.
I thank my noble friend Lord Goldsmith of Richmond for his helpful input around the risks to the environment and continue to reassure noble Lords that we remain fully committed in this area when negotiating free trade deals. There is no derogation of our standards with our joining CPTPP. In fact, this forum allows us to drive change and further align our partner countries with our environmental values and ambitions.
Other important areas discussed during the Bill’s passage include food standards, the UK’s financial sector and parts of the Bill’s application in Northern Ireland. These issues were raised frequently and emphatically by my noble friends Lady McIntosh, Lord Holmes and Lady Lawlor, and the noble Baroness, Lady Willis. I pay tribute to each of them for this and the engagement that they afforded me.
Finally, it would be remiss of me not to thank my Secretary of State, Kemi Badenoch, for her skills in bringing this process to a conclusion. She led a first-class team who delivered a truly wonderful gift to this nation.
Behind the scenes, the extraordinary Bill team also put in an unbelievable amount of effort. All Peers in this House who have engaged in this or, indeed, any legislative process will be aware of the extraordinary effort by our officials to ensure sensible dialogue and great outcomes. My thanks go to James Copeland, Alistair Ford, Jack Collins and Jack Masterman, as well as Hope Hadfield, Neelam Mandair and Bayse Genc from the CPTPP team. I also thank my private secretary, Lisa Banks, and other officials who make up my private office, so ably led by Anthony Donaldson.
Finally, I thank the parliamentary staff, including the doorkeepers and the clerks, for their professionalism and continued support to your Lordships’ House.
British businesses and consumers alike are set to benefit significantly from our acceding to this trade group. It builds on the free trade agreements that entered into force between the UK and Australia and New Zealand in May last year, which I had the honour of taking through Parliament. It will result in new market access for our world-leading goods and services. We are removing tariffs, which will help our farmers, service providers and businesses export across the world to new, fast-growing economies and populations hungry for our produce. As Lord Haldane so wisely said, tariffs are not the answer; the only way to remain ahead of our rivals is to continue to be ahead of them in the quality of what we make. No tariff can keep out that quality which is the key to quantity.
The CPTPP is a gateway to greater growth and economic prosperity for all parts of the UK. I repeat the wonderful quotation from William H Seward:
“the Pacific Ocean, its shores, its islands, and the vast regions beyond, will become the chief theatre of events in the World’s great Hereafter”.
As the Bill travels to the other place and develops, it is important that we continue to work with the devolved nations to ensure that we have their appropriate co-operation and collaboration. With that, I thank all noble Lords in this House.
The Earl of Clancarty (CB)
My Lords, briefly, I thank the Minister for his active engagement on the artist’s resale right; I am encouraged by the direction of travel. In particular, I thank him for yesterday’s meeting on ARR, which he efficiently managed to schedule for before today’s Third Reading. I thank Reema Selhi of DACS, Oliver Evans of the Maureen Paley gallery, and my noble friend Lord Freyberg, who is in his place, for their valuable contributions to this discussion, particularly on how the international element can be better understood. I am grateful to the Minister for listening and for his active involvement in this area. Following ratification in July, I look forward to seeing how membership will help further these aims, in relation to both the countries concerned and other agreements.
Lord Kerr of Kinlochard (CB)
I too congratulate the Minister and thank him for the way he has handled relations, not just with the House but with its International Agreements Committee. He has been open, transparent and forthcoming with documents.
I also make a public service announcement. In the next couple of weeks, the International Agreements Committee will be publishing a full report on our accession. Let me reassure the House, as we pass this Bill, that the International Agreements Committee will not say anything which would imply that we should not pass it. We too very much welcome this accession.
Lord Johnson of Lainston (Con)
I appreciate all the comments made. I will revert back on the principles around legislative consent, but I can assure your Lordships that we are having very constructive conversations with all the devolved nations. I beg to move.
Regulatory Approval for New Products and Services
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Baroness Jones of Whitchurch
To ask His Majesty’s Government how they plan to support British innovators by tackling delays in getting regulatory approval for new products and services.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
In the Autumn Statement, we set out proposals to improve the performance and accountability of regulators through reforms to the growth duty. These include asking regulators to set targets on regulatory approvals and monitoring their performance against those targets, alongside offering a fast-track service for regulatory approvals in certain circumstances. Through this, we are committed to working with regulators to ensure that we offer a world-class service to British businesses to support economic growth and innovation.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the Minister for that reply, but does he accept that British innovators often face a mountain of red tape just to get started? In some cases, it can mean getting approval from up to 11 different regulators. For example, the British Healthcare Trades Association reports that medical equipment suppliers face a complex array of interrelated laws and regulations to get their products to market in the UK, with 95% of them calling for greater regulatory certainty. Those costs and delays are dissuading many from creating new products, which in turn is reflected in patient care and outcomes. So what are the Government doing to address these complexities? Does the Minister support our proposal for a new regulatory innovation office to hold the regulators to account for any delays? What action is being taken to speed up decisions in granting university research funding so that innovators can play their full part in driving up economic growth?
Lord Johnson of Lainston (Con)
I am grateful to the noble Baroness for her points. This is clearly a topic of much broader debate, and I am very grateful to have been given the regulatory reform agenda in my portfolio. We have three core priorities. The first is to minimise the regulatory burden and to future-proof regulations, which means looking at the current regulatory stock and seeing what we can do to make it more effective. The second is to work out the mechanisms that will allows us to better understand and establish how we can measure the cost of regulation on business when it comes through Chambers such as this. The third is to work with regulators to get them to promote the duty of growth and to look at regulation as a service, rather than simply a block, as we do sometimes.
I will answer two other quick points on the health side. My noble friend Lord O’Shaughnessy wrote an excellent report on getting clinical trials to operate more effectively; the Government have accepted most of those points. On innovation, my noble friend Lord Camrose pointed out to me, on the way in, the extraordinary number of initiatives he has taken with the various Bills we are bringing through and the co-ordinating function of the DRCF, which means that we are one of the most innovative regulatory environments in the world for AI and new tech.
Lord Fox (LD)
My Lords, we are grateful to the noble Baroness for bringing up the issue of innovation, which I know the Minister also considers to be very important. Last week, I spoke with representatives of the highly innovative UK tech industry. Worryingly, they reported that tech start-ups that should be starting up in the UK are being very effectively lured to France. I think the Minister will agree with me that this needs to be nipped in the bud, so can he undertake to dispatch his department to find out what France is doing and how it is getting some success here and to make sure that the UK is doing at least as well if not better?
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord for his comments and am always stung by comparisons with our near and dear neighbour. But I can reassure him that our global investment summit raised over twice as much in terms of commitments as the one in Versailles. There are three trillion-dollar tech economies in the world: one is the United States, one is China and one is the UK.
Lord Johnson of Lainston (Con)
We should celebrate the fact that we are raising more money for tech in this country than Germany, France, Spain and Italy combined in many sectors—but we are not complacent. I totally accept the need to ensure that organisations such as UKRI are given the firepower that we have given it to ensure that we can provide funding for these businesses. I personally take this very seriously and would be delighted to have further conversations with the noble Lord on how we can ensure that every tech company in the world sees this country as their international HQ.
Baroness Watkins of Tavistock (CB)
My Lords, will the Minister comment on the fact that, during Covid, we were able to get very swift licences for new medical products, including an innovative external ventilator that was developed with UCL? Some of those ventilators are still left, and my understanding is that they are to be destroyed because they no longer meet either need or requirements—but it also seems to be about getting the licence re-evaluated because it was produced as an emergency. Surely we could be much quicker, and will the Minister comment on how we could fast-track, in particular, medical devices?
Lord Johnson of Lainston (Con)
I am grateful to the noble Baroness for those comments. She is absolutely right: we can never move too fast as long as we can do it in a safe and appropriate way. My noble friend Lord O’Shaughnessy’s report was enormously helpful in driving change, particularly for clinical trials. We want to ensure we are the number one place for trials in Europe, if not the world, because it benefits the patients, the NHS and our economy. I will just touch on some of the reviews that have recently been undertaken; it is worth highlighting them and engaging with noble Lords on them. There were reports on digital technologies—that was published last year—on green industries, on life sciences, on the creative industries, on advanced manufacturing and, fundamentally, there was a cross-cutting report on how we can have pro-innovation policies.
I also refer back to my fundamental role, which is to bring smarter regulation into the Government. I ask Peers on all sides of the House to please come to me with their ideas. Let this not be Oral Questions but oral suggestions on how we can reduce regulatory burdens on business and boost our economy.
Lord Harris of Haringey (Lab)
My Lords, in that spirit, I refer to my interest in the register. The Minister said quite clearly that the Government are committed to regulating for growth and innovation. Will he also ensure that regulators have at the forefront of what they are doing ensuring that those they regulate are delivering services, facilities or products that are properly resilient and prepared for the various threats that as a nation we face?
Lord Johnson of Lainston (Con)
I completely agree with the noble Lord’s point and I absolutely take it to heart. The point is to see regulation as a service, where we have to take the appropriate action to ensure that the investors, the companies, the consumer and the broader environment of the body politic can work in harmony. It is that balance that we seek to achieve by promoting the growth agenda. Importantly, that is not at the expense of the protection of the consumer or of our overall habitats and environments. It is essential that people realise that we are looking for positive economic growth through better regulation, rather than derogating from our responsibility to ensure that regulation is truly to ensure that the consumer market functions properly.
Lord Naseby (Con)
Is my noble friend aware that, at this point in time, the very successful mutual movement—in other words, building societies, friendly societies, et cetera—is facing difficulties for growth, particularly in the raising of future capital, from the existing regulatory regime? Given the offer that my noble friend made a few seconds ago, would he be prepared to meet the leaders of that movement to go through where the challenges for the movement are in order that it may grow even faster than it has been growing recently?
Lord Johnson of Lainston (Con)
I am grateful to my noble friend for that point. I would be delighted to meet with any stakeholders he suggests are useful. The mutual movement is an ancient and important principle in our financial services industry in this country. It provides an incredibly valuable service and of course I will do anything I can to support it.
The Earl of Kinnoull (CB)
My Lords, a couple of years or so ago, the European Affairs Committee published a report on the EU-UK financial services relationship. One of our key suggestions was that UK regulators should be responsive, consistent and proportionate—three words that we have not yet heard from the Minister. Does he agree that being responsive, consistent and proportionate are three very important things that all regulators should be aware of?
Lord Johnson of Lainston (Con)
I am grateful for those important words and I absolutely agree. There are issues in ensuring that regulators’ mandates are properly focused. It is important to get a balance between, for example, investment, growth and the other regulator duties. I look forward very much to working with the regulators when we assess the responses from the consultation that is currently being undertaken—some were completed last week—to bring together a suite of solutions to ensure that we can continue to grow our economy and regulate it properly.
Let me just add that our regulators are some of the best in the world. From travelling around the world, I know that a number of jurisdictions literally cut and paste our regulatory texts so that they can copy what we do because they admire it so much. That does not mean we should be complacent, but it does ensure that we should focus very much on the opportunities that the growth agenda will give us.
Lord Sikka (Lab)
My Lords, perhaps I might urge the Minister to think about regulatory approval in a different way, by reminding him that Warren Buffett said:
“Derivatives are financial weapons of mass destruction”.
We have seen so many financial products mis-sold in this country. Can I urge the Minister to ensure that regulators road-test all financial products before they are unleashed on the unsuspecting public?
Lord Johnson of Lainston (Con)
I am grateful for that comment; of course, I would contact the Treasury about it, since that is its specific focus. I totally agree that we need to have trust in financial markets for them to function properly. That also entails significant responsibilities towards the consumer.
Lord Lamont of Lerwick (Con)
My Lords, what my noble friend the Minister has said is extremely encouraging and very much to be welcomed, particularly on the strong track record on investment into this country and small tech start-ups. However, I draw his attention to large tech companies, where the picture is slightly more mixed. Is he aware that the London Stock Exchange and the FTSE 100 are having great difficulty in attracting internationally mobile big tech companies for listing and, indeed, have recently lost a number of listings to New York? Is this not something that the Government ought urgently to have a look at?
Lord Johnson of Lainston (Con)
It is always intimidating for a junior Minister to receive questions from someone as significant as my noble friend. He is absolutely right: over the past year, the Government have been working extremely hard, through the Edinburgh reforms and the Mansion House compact, to ensure that domestic pension fund money flows back into the markets. My noble friend is also completely right that we need to look extremely closely at how the LSE functions in order to attract the new type of modern company that lists in a different way. Work is ongoing at the moment; it is a complete priority. On venture capital and private equity, I am glad to say that, at the new start-up level, the funding is doing extremely well. We are having a very strong year—perhaps one of the best years we have ever had—in those new start-up and investment areas in this country. We should celebrate that. We are too down on ourselves; it is time that we start rejoicing in our position as one of the key venture capital hubs not just in Europe but in the whole world.
Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [HL]
Lord Johnson of Lainston ExcerptsTuesday 16th January 2024
(10 months, 1 week ago)
Lords ChamberRead Full debate Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Act 2024 View all Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Act 2024 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 4-R-I Marshalled list for Report - (12 Jan 2024)
Lord Lansley (Con)
My Lords, this group and the next group of amendments follow debates that took place in Committee, and I am very grateful for the Minister’s response then and for his subsequent letters that have further amplified the discussion about this. I apologise for delaying the House—not for very long, I hope—simply, in the case of both amendments, not to make any point of principle contradicting what is in the Bill, but to try to ensure that the meaning of the Bill and its intentions are as clear as we can possibly make them.
The first two amendments, Amendments 1 and 2, work together to rewrite that bit of the Bill to state that the exempt contracts would be, in this instance, where they are “wholly or mainly funded” by an international organisation, or
“funded by an international organisation of which the United Kingdom is a member to a lesser extent”—
so that funding is to a lesser extent—and is “required to be” under a procedure adopted by that international organisation. Article 15 of the CPTPP has a requirement that we want to transpose into our legislation. It states that a procurement that is not covered by individual countries’ own procurement rules would be one that is
“funded by an international organisation or foreign or international grants, loans or other assistance to which procurement procedures or conditions of the international organisation or donor apply”.
What we are looking to do in this instance is to reproduce that, so that the exemption for contracts under our Procurement Act matches what is in the CPTPP.
The government view was that the CPTPP just says “funded”, while our general approach is to try to clarify, to a greater extent, that it should say “wholly or mainly funded”—namely, more than 50%—which is consistent with what we do in relation to the rule on the general procurement agreement. However, the point that I have now reached, which I put to my noble friend via these amendments, is that it is not necessarily the case that an organisation such as the World Bank has to be a majority funder in order for its funding—and that of others with which its funding is associated, which might be other providers of grants or loans, or the recipient country in one form or another—to be required to be conducted under its procedures. That being the case, should we reflect the CPTPP rules by saying that either a procurement is “wholly or mainly funded” by the international organisation, or, if it is funded to a lesser extent, that it is required to be subject to its procedures, and that that would give rise to an exemption under our procurement rules?
That is the point of the amendment. I am sure my noble friend will appreciate the rather fine distinctions, but I wonder whether he might agree that, at the very least, we want to be absolutely clear that, if a procurement has to be conducted under the rules of an international organisation, such as the World Bank, it should be exempt from our Procurement Act requirements. I beg to move Amendment 1.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, I begin by declaring my interests, which are very clearly listed on the Lords’ register. I have interests in limited companies and companies that are active in CPTPP countries, but I do not believe there is any conflict.
Baroness Kennedy of The Shaws (Lab)
My Lords, we cannot really hear the Minister; could he raise his voice?
Lord Johnson of Lainston (Con)
Yes, my apologies. Before I begin, I would like to declare my interests, which are very clearly listed on the Lords’ register. I have interests in limited companies and other companies active in CPTPP countries, but I do not believe there is any conflict of interest in this process today.
I will also say how excited I am about being back here today to cover Report stage of the CPTPP Bill. This incredible collective of millions of people, representing trillions of pounds-worth of trade, coming together will give huge benefit to us, and I am very excited about the opportunity for this great nation to add our trading muscle to what I think will be a phenomenal collective.
Importantly, I give a great deal of thanks to noble Members of this House who have contributed so much to the painstaking work which goes into crafting a Bill of this type and ensuring we come to the right conclusions in the right way. I know there have been a large number of you, many of whom are present today, but I particularly note the noble Lords, Lord McNicol and Lord Purvis, from the Opposition Benches, for their extremely collaborative and constructive input into the debates. My noble friend Lord Lansley, who we have just heard from, brings a wealth of experience, particularly on procurement. I am very grateful for his input. My noble friends Lady McIntosh, Lord Holmes, Lady Lawlor and a number of others, including the noble Baroness, Lady Hayter, and the noble Lord, Lord Kerr, have engaged with me. We still have one more stage after Report and I will be delighted to continue engaging with any Members of this House, or indeed any groups that noble Lords think it would be useful for me to engage with.
I will also set the scene briefly for the debates we are going to have on many of these respective issues. My noble friend Lady McIntosh is in her usual place, and I apologise, because I have been trying to reach her over the last few hours, but we have not had a chance to have a discussion. I reference this point because what happens today in terms of how we trade, or how we manage our own standards in this country, does not change tomorrow. I think it is important to summarise at the beginning of this debate that acceding to CPTPP in no way derogates our standards or our ability to control our standards and, indeed, our destiny. We have been very careful to ensure that the processes are indeed very separate.
I know that we will have these debates later, but it is worth re-emphasising this important point, which I think is sometimes lost in the excitement of CPTPP—the argument that somehow our standards, import requirements and so on change, when they do not. All food and drink products imported into the UK will still have to meet the respective food safety and biosecurity standards for the UK. We are not having to change any of our food standards as a result of joining CPTPP, and it is important to emphasise on these well-discussed points that hormone-treated beef and chlorine-washed chicken are banned in the UK and will not be allowed to enter the UK market.
I am very grateful to various agencies such as the Food Standards Agency, the Trade and Agriculture Commission, the International Agreements Committee and other groups that have been extremely focused on ensuring that these facts are properly reported. I am grateful to them for the backing that they have given me in ensuring that those statements are clear.
It is also worth pointing out that CPTPP preserves the right to regulate to protect human, animal and plant life and health. The TAC report says that the CPTPP does not require the UK to change its levels of statutory protection in relation to animal or plant life or health, animal welfare or environmental protection. I am well aware that noble Lords wish to cover these issues later in this debate, but it is important to set that scene.
There is one area I would like to draw on now, in advance of these discussions, regarding palm oil. I reassure the House that liberalising palm oil tariffs with Malaysia does not undermine the UK’s environmental credentials. We remain committed to supporting the sustainable production of palm oil. In 2021, 72% of UK palm oil imports were certified as sustainable, up from 16% in 2010.
Baroness Butler-Sloss (CB)
Perhaps I might add something before the Minister speaks. Having listened with interest to my noble and learned friend Lord Hope, and with my limited intellectual property knowledge, I am concerned about the use of the words “established by use”. As far as I know, they do not appear elsewhere and are certainly not part of existing legislation. To bring them into this legislation, almost by a side wind, would be somewhat unfortunate.
Lord Johnson of Lainston (Con)
As always, I thank my noble friend Lord Lansley and all contributors to the debate on this amendment. It is very relevant, in my view; however, I am comfortable keeping the words “established by use” in the Bill as printed, rather than using
“in use prior to that date”.
My reason is simple and was pointed out by my noble friend: a single use of a name could be construed as giving the same protections as a trademark which, through an effective accumulation of good will and the establishment of its use, has been protected under these laws. We are quite comfortable with the wording.
I am aware that there is no reference to the concept of “established by use” in the Trade Marks Act 1994— I am surprised that there is no lawyer in this House jumping up to support me at this crucial moment, just when I need one. They seem not to be in their usual places but they would say, were they here, that this is an extremely well-established part of trademarks law. As I understand it—I am comfortable to be corrected, but my officials assure me of this—elsewhere, in the amended legislation relating to unregistered trademarks, is the common-law tort of passing off, which relates to good will. I am also reassured that in GI legislation—for example, Article 14(2) of the assimilated regulation 1151/ 2012—the concept of “established by use” is written and codified.
From our point of view, it is important to ensure that we protect our trademarks and that we use geographical indicators where appropriate. I will come on to the point raised by the noble Lord, Lord McNicol, in a moment. Having spent a great deal of time working on this, I ask my noble friend to withdraw his amendment because I do not believe that by changing the phraseology we will give the greater protection that we want to our trademark-using organisations, businesses and people, and allow the system to function effectively. I am very convinced of that. We have a line in our next amendment that will allow us to discuss geographical indicators in slightly more detail, so I will cover the points raised by the noble Lord, Lord McNicol, at that point if he is content with that.
“1B. In a case where the protected designation of origin or protected geographical indication has been the subject of an application for approval of an amendment to the product specification under Article 53 which resulted in a change to the protected name, the reference in paragraph 1A to the application for registration under Article 49 is to be read as a reference to the application for approval of the amendment to the name under Article 49 as applied by Article 53(2) (or, in a case where there has been more than one such application, the latest of those).”Member's explanatory statement
This amendment clarifies the test for cancelling a protected designation of origin or geographical indication where the registered name has been the subject of a name change application; a cancellation will be possible only if the grounds for cancellation existed at the date of the name change application (rather than the date of the original application for registration).
Lord Johnson of Lainston (Con)
My Lords, Amendment 4 is a minor technical amendment that the Government have introduced. I will read out my brief to be clear, because it is quite technical. The Bill as currently drafted may lead to a degree of uncertainty for decision-makers over the date that should be used when assessing whether the new grounds for cancellation of a geographical indication apply in a case where the GI has successfully undergone a name change. Under the current drafting, it could be argued that, in such a case, the date on which the original application to register the GI was submitted under Article 49 of Regulation 1151/2012 should be the date used to carry out the assessment and not the date when the name change application under Article 53 was submitted. This amendment addresses that uncertainty by making it clear that the assessment should be carried out based on the factual position relating to the date when the name change application was submitted, rather than the date the original Article 49 application was submitted.
I will translate that a little. The provision is effectively looking at the date on which the name change is submitted, rather than the original name. If I have a GI—“Johnson’s Water” or whatever it may be—registered in 1990 and then change the name to “Lord Johnson’s Water” this year, then the reference would be made to the point at which the name change application was made, rather than the status at the time of the original GI. It is a clarification which we think is important, and I trust my officials’ view on that.
I will just answer briefly the very helpful comments raised about Japan and geographical indicators. I would be extremely grateful to my noble friend Lord Lansley for making representation to the authorities in Japan to speed the process up. We are fully committed to ensuring that our GIs are protected in Japan; it is part of the agreements we have undertaken, but these things take time to effect. We are doing everything we can to be sure that those indicators are protected. Anything that he can do to speed that process up will be gratefully received by this Government. I beg to move.
Lord Leong (Lab)
My Lords, as we have heard, this government Amendment 4 is really a relatively minor and technical amendment, so there is not much to add, except for some questions we hope the Minister will respond to. How often do the Government expect this test to be utilised, and are there any potential ramifications they will come across? What happens if the name change application is not successful—is that a possibility? Finally, if a name changes from a geographical indication into a generic term, does this amendment apply?
Lord Johnson of Lainston (Con)
I thank the noble Lord for that point. I am very comfortable having a more detailed discussion about GIs in principle. It is worth noting that many countries, including those in the CPTPP, do not have necessary GI processes. Sadly, too few do, so there is a great push on behalf of this Government to ensure that we advance the cause of geographical indicators to ensure that our rights are protected. It is correct that it is possible for a name change to be rejected; it is a process that takes time, as with any intellectual property issue. It is a detailed and thorough process to ensure that we can be comfortable that names, trademarks, GIs and so on are properly protected, and the research has been done. It can be six months or it can be a year, which is why we have built in this provision to ensure that it is the point of application rather than the point of approval that the data is referring to. That makes sense.
There have not been any cancellations of GIs undertaken by this Government, or indeed recently. I will check that, but I hope I am accurate; if I am not, I will certainly correct myself in the Library. The question from the noble Lord is about whether this is something that happens regularly, and is a constant and ongoing issue. Maybe there have been one or two exceptional examples but as far as I am aware, it is a relatively straightforward process; it seems quite uncontentious so far.
These regulations simplify the processes in respect of how we operate with the CPTPP. Often, we look at the activities that will take place in this country, which is right. How to protect our own GIs is what we are working on domestically. Really, this allows us to export the whole principle of geographical indicators—the wonderful concepts of Scottish salmon and Scottish whisky, to name just two enormously important and well-branded products. It allows us to work with our partner countries in the CPTPP to ensure that those brands and concepts are well protected, because a GI does not give us any strength unless it is domestically registered and the domestic legal system respects these principles. I therefore hope very much that the House will support me on this technical amendment and on the principle that it projects.
Lord Leong (Lab)
My Lords, I thank all noble Lords for their contributions and the noble Lord, Lord Alton of Liverpool, for presenting this amendment calling on the Secretary of State to publish a report assessing the potential impact of China’s accession to the CPTPP on the United Kingdom and saying that both Houses of Parliament must be presented with a Motion for resolution on the said report.
As the noble Lord, Lord Lansley, indicated earlier, we on this side of the House would have preferred this amendment to cover all new accession countries—but for the purposes of this amendment I will refer just to China. Several noble Lords spoke in Committee on the case for this amendment and I do not propose to repeat what was said. However, I will make noble Lords aware of China’s non-market trade practices and its history of using economic coercion against CPTPP members, which must be considered in any valuation of its prospective accession.
First, there are aggressive military exercises and drills in the Taiwan Strait that threaten peace and stability in the South China Sea. This could be destabilising to regional trade. In addition, China has ongoing territorial disputes with other CPTPP members, including Japan, Malaysia, Brunei and Vietnam. Its willingness to use coercion against countries that disagree with it has often strained relationships with several CPTPP members. For example, it halted imports of Canadian canola and meat products in response to the arrest of a Huawei executive in Vancouver. Japan was denied access to rare earth materials in 2010 and Australian exports have suffered from Chinese import bans. Furthermore, several CPTPP member states have expressed concerns that China’s subsidies of state-owned firms and arbitrary application laws would be likely to make it hard for the country to join the trade pact.
I wanted to quote two examples, but the noble Lord, Lord Alton, mentioned the Japanese State Minister, so I will leave it at that and bring in another example of our very own British CPTPP trade negotiator, Graham Zebedee. Without commenting specifically on China’s application, if a country’s economic rules are really quite far apart from what CPTPP says, inevitably there is quite a big question about whether they could undertake really massive reforms. These concerns alone seem to provide sound justification for the commissioning of a report and Motion for resolution, as required by this amendment, so that both Houses of Parliament have the opportunity to fully consider the case for and against China’s accession to the trading bloc.
Recent newspaper reports have shown the lengths to which President Xi will go to crack down on companies when strengthening his control of the economy. Business leaders in China are under immense pressure. Last year, more than a dozen top executives from sectors including technology, finance and real estate went missing, faced detention or were accused of corruption practices. China’s national security law, as mentioned by my noble friend Lady Kennedy, is dangerously vague and broad. Virtually anything could be deemed a threat to national security under its provision and it can be applied to anyone on this planet. This law has provided little or no protection to people targeted. Lawyers, scholars, journalists, pastors and NGO workers have all been convicted of national security offences, simply for exercising their freedom of expression and defending human rights. Business leaders may face the same treatment.
China’s current policies and practices are at odds with many of the provisions and requirements of the CPTPP, and it is unlikely to be able to conform to them unless current members agree to significant concessions in the negotiations. This is why concerns about coercion are particularly relevant. Without considerable concessions, it is hard to see how China would qualify for accession. Equally, China is highly unlikely to make the changes to its laws and regulatory systems that would be required to gain the acceptance of CPTPP.
We are obviously sympathetic to the arguments made by the noble Lord, Lord Alton, and others in support of this amendment. However, there is not yet any agreement for any other country to join the partnership. It would be improper to single out any one of the possible new members at this stage, including China. At Second Reading and in Committee, we put on record our strong concern about China’s human rights record, but we believe that our human rights concerns should be universal and that one country should not be singled out. Should the noble Lord, Lord Alton, decide to divide the House on this amendment, we will abstain.
Lord Johnson of Lainston (Con)
My Lords, I am grateful for this debate and I have the greatest respect for my noble friend Lord Alton, who, over the years, has demonstrated his significant level of passion on this very important matter, as have many other noble Lords today. I do not want to deviate from the important points I wish to make relating to this CPTPP Bill, so forgive me if I do not necessarily answer all the questions that have been presented in relation to some of the topics raised. However, I would like to say, very importantly, that I clearly personally strongly reject the sanctioning of our parliamentarians. We have made it very clear before that China’s attempts to silence those highlighting human rights violations at home and abroad, including, and specifically, their targeting of MPs and Peers here in the UK, are unwarranted and unacceptable. I begin discussion on this amendment with that very important statement.
I turn to the debate around the CPTPP. As I have made clear throughout the last few stages of this Bill, in joining CPTPP, we are securing our place in a network of countries that are committed to free and rules-based trade, which has the potential to be a global standard setter. CPTPP acts as a gateway to the dynamic and fast-growing Indo-Pacific region and delivers on last year’s integrated review refresh to continue to enhance our relationships in that region. I stress this point, which was raised, I believe, by the noble Lord, Lord Purvis. Expansion of this agreement’s membership will only bring further opportunities for British businesses and consumers.
On potential new accessions, there are currently six economies with applications to join the group: China, Taiwan, Ecuador, Costa Rica, Uruguay and Ukraine. China’s application, alongside the applications of the other five economies, is at the outset of the application process and has certainly not been determined. As noble Lords are already aware, the CPTPP is a group of 11 parties and will become 12 when the UK accedes, and decisions must be taken by consensus of the CPTPP parties. However, it has been agreed within the group that applicant economies must also meet three important criteria: they must meet the high standards of the agreement; they have to have demonstrated a pattern of complying with their trade commitments; and they must command consensus of the CPTPP parties. These are very strong criteria, and I hope that all Peers on all sides of the House hear this very clearly.
As a new member of the CPTPP group, it is right that we work within the principles of the group to achieve a consensus decision, rather than give our own individual narrative on each applicant, such as through the report proposed in this amendment. My kinsman and noble friend Lord Hamilton made a very strong point in support of that. As I indicated previously, the UK is already closely involved in discussions on this topic but will have a formal power to oppose an application only post-ratification. It is therefore crucial that we ratify the agreement and become a party, so that we can work with CPTPP members decisively on each current and future application. I stress that to be drawn in on individual applicants now, ahead of the UK becoming a party to the agreement, could risk significant repercussions to our own ratification, which is why this is such a sensitive and important issue.
The UK becoming a party of the CPTPP is dependent on CPTPP parties individually choosing to ratify the UK’s accession, so it is not in our interests to step outside the group on such a sensitive issue. As I have been clear throughout our debates, we must join first so that we are on the inside judging other applications, not vice versa. It is therefore crucial that the UK ratifies the agreement, which will in turn trigger other ratifications that will allow us to become a party.
I want to be clear that our own accession working group was successful because we are demonstrably a high-standards economy with a strong track record, we made a market access offer of the highest standard, and we garnered the support of every party for our accession. Our accession process has set a strong precedent: the robust experience the UK has been through has reinforced the high standards and proved the bar is not easy to meet.
Comments were raised about state-owned enterprises. I will give noble Lords an anecdote from the negotiating team, as I understand it. We received a great degree of scrutiny over the relationship between Channel 4 and the Government, which few people, I think, would necessarily equate with the concept of a state-owned enterprise. I hope that that demonstrates the sort of inquiry that was behind our own accession.
I also reassure the noble Lord, Lord Alton, and everyone else who participated in this debate, that the accession of new parties after the UK has joined will entail a change in the rights and obligations of existing parties. Any new agreement requiring ratification by the UK would therefore be subject to the terms of the Constitutional Reform and Governance Act 2010. So, if he will allow me, I push back against the noble Lord and his suggestion—I think the noble Lord, Lord Purvis, also suggested it—that there is no track for the CRaG process to be triggered should a new party be able or about to accede to the CPTPP.
Lord Alton of Liverpool (CB)
The Minister made an important point, so I will press him on it, as I did during the meeting we had with officials. Can he confirm that the CRaG process does not provide for a vote in either House of Parliament?
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord, but, if he will allow me, I will continue with my comments on what this process will involve. As noble Lords are aware, the CRaG process requires that the treaty text and an Explanatory Memorandum be laid before Parliament for 21 sitting days before ratification can take place. Under CRaG, either House can resolve against ratification of a relevant treaty within the 21 sitting days of the treaty being laid before Parliament. The House of Commons can continue, indefinitely, to resolve against ratification, in effect giving the Commons the power to block ratification. I hope that that answers the noble Lord’s question.
These are clearly quite dramatic actions to take on behalf of both Houses in relation to the CRaG process, but the point is that the levers are available. While there is no explicit up/down vote built into the CRaG process, there are multiple ways in which a debate can be brought to the Floor of the House. Should it be the will of the House to have a substantive debate, I am sure that Parliament would ensure that it would occur. I believe that that is referred to as the Grimstone principle.
Lord Purvis of Tweed (LD)
My Lords, on a point of clarification, the Minister told us that it would be wrong for a country to comment on another country’s application and gave reasons for that to be the case, but the Government sought in our application support from other countries, and indeed welcomed Japan’s public comments that it would welcome UK accession. Why did we previously seek and welcome support from other countries for our application if the Government are now saying it would be dangerous if we made any comment about China’s potential application?
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord, Lord Purvis, but it may surprise him to know that we are not yet fully acceded or party to CPTPP. As soon as we are, it is absolutely right that we make comment on other countries, but only after the process and we have joined. To include an amendment in the Bill now would be completely inappropriate, as I hope I have made clear. I think it would cause significant issues in this overall process.
I return to the point on which it is important to reassure the House. The House is looking for reassurance about whether any country can be sneaked under the wire to join CPTPP, and the clear answer is that it cannot. We have made clear commitments to clarify the process from the Dispatch Box to ensure that we know, as Members of this House and of the other place, that there will be a robust process around any new party joining CPTPP.
Lord Alton of Liverpool (CB)
I am very grateful to the Minister, but I am trying to get clarity to see whether we need to divide the House. He has not answered the question I asked. He has said that there could be a process by which there could be a debate on the Floor of the House if the Government permitted it. All that would be welcome, if it was permitted. My question was whether such a Motion would be divisible. Would there be a chance for Members of both Houses to vote? When I asked that question during the course of our meeting, the answer I was given was no.
Lord Johnson of Lainston (Con)
I thank the noble Lord for his comment but I feel he is being slightly unfair to me. I am describing the CRaG process, and the Grimstone principle makes clear what will happen if there is a desire for a debate and parliamentary time allows—I am obliged to use those caveats, as your Lordships can imagine, but frankly it would be astonishing if there was not a significant and strong debate over any country joining CPTPP. As I said, and as the noble Lord will know from his experience, the House of Commons can continue indefinitely to resolve against ratification, in effect giving the Commons the power to block ratification. I think that is a very significant and probably quite considerable device that would enable the noble Lord to feel reassured on that point.
The question is whether a new party joining CPTPP would trigger the CRaG process. In our view, it absolutely would, which gives enormous power and scrutiny to both Houses in ensuring that there is a proper debate on that. It is important to note, as I think was mentioned by the noble Lord, Lord Berkeley, that, in the event of the CRaG process being triggered, I would expect the Business and Trade Committee or the International Agreements Committee to request a debate, and that the Government would seek to facilitate this, subject to parliamentary time, as under the Grimstone principle, which we have covered.
I would like to come to a conclusion here. I note the important contribution made by the noble Lord, Lord Kerr, in Committee. He commented that he did not believe that this amendment was “necessary or desirable”, and recognised the importance of unanimity among members. I want to bring us back to that point. We are now part of a group that has attracted interest across the world.
Baroness Hayman (CB)
My Lords, I apologise for intervening, particularly when I have not taken part in these debates before, but I want to ask a question before the Minister leaves the issue of the CRaG provisions, which are very important for some of us who have listened to the debate and have an issue. He said clearly just now that the House of Commons could resolve against ratification, but the noble Lord, Lord Alton, was asking if it could have a vote. How would the House of Commons resolve against ratification without voting on the issue? That is what I struggle to understand.
Lord Johnson of Lainston (Con)
I am grateful to the noble Baroness for her point. There is no explicit up/down vote built into the CRaG process; we are aware of that. I am talking to a House that has far more experience of the CRaG process than I do, so we know how the process works. There are multiple ways in which a debate can be brought to the Floor of the House. For reassurance, I will go through this point again. The CRaG process requires that a treaty text and an Explanatory Memorandum be laid before Parliament for 21 sitting days before ratification can take place. Under CRaG, either House can resolve against ratification of a relevant treaty within the 21 sitting days of it being laid before Parliament. The House of Commons can continue indefinitely to resolve against ratification, in effect giving the Commons the power to block ratification.
To some extent, this is important, but it may be academic. As I said, the question is whether a new party to CPTPP can be snuck under the wire. We are very clear that this is not possible. The process is automatically triggered. Aside from that, there are also the reports written by the Trade and Agriculture Commission, and there has to be an impact assessment, and there has to be a significant amount of scrutiny and debate, as there is about the CPTPP Bill today. I am very reassured on the principles and mechanics around whether we have in this House the right level of control and security to ensure that we have control over our own destiny in relation to new parties joining a plurilateral treaty, which is of course completely different from the country-to-country FTAs.
Lord Lansley (Con)
I am grateful to my noble friend. As a former Leader of the House in the other place and as a member of the International Agreements Committee, I am pretty clear that, under CRaG, the International Agreements Committee here, and potentially the Business and Trade Committee in another place, might make a report to Parliament that could lead to a debate. That debate could be subject to a take-note Motion, but that would be amendable. If it were sought to be amended in the other place to say that a treaty should not be ratified, the Government could not continue to ratify the treaty if such a vote had taken place in the other House to say that it should not. I think that gives the comfort that the noble Baroness, Lady Hayman, is looking for.
Lord Johnson of Lainston (Con)
I am very grateful to my noble friend for that comment. He is absolutely right that the Business and Trade Committee and the IAC are able to request a debate, which, as I said, according to the Grimstone principle, we would always seek to facilitate, given parliamentary time.
I should like to come to a conclusion. I ask the noble Lord to withdraw his amendment. I have made extremely clear, I hope, the rigorous standards that CPTPP applies. This is a plurilateral trading group that wants to have the highest standards of trade among them. That is my first key point. The second is that we have a number of safeguards built into our own processes to ensure that, were another country to join CPTPP—it could be any of the countries applying or future countries over the coming years—there will be a proper process, as has been defined in the CRaG process. I would ask the noble Lord, given the complexities and sensitivities that I believe this amendment would present to our ratification process, to withdraw his amendment.
Lord Alton of Liverpool (CB)
My Lords, I am very grateful to the Minister and all noble Lords who have taken part in today’s debate. I felt we were quite close to agreement, as I felt we were during the course of the meeting that I had with the Minister. It comes down to the issue of whether or not such a report and Motion, were it to be laid in the House of Commons, as the noble Lord, Lord Lansley, just said in response to my noble friend Lady Hayman, would be divisible or not. It has been made clear that under the CRaG process that is not possible. That is why it was necessary to table this amendment.
As for some of the other arguments put before your Lordships, I entirely agree with the noble Lord, Lord Hamilton of Epsom, who raised the issue of the United States of America. If the USA were to seek to join—it is not even in the queue or the list of countries to which the Minister referred earlier—all of us would be very pleased about that. However, China is in the list referred to, so this is not hypothetical—China is in the list. We are not seeking to have the debate here and now as to whether or not China should accede. That is not what this amendment would do. Chronologically, we are getting ahead of ourselves. The amendment would simply empower this House, should we then be members of the CPTPP, to have the right in both Houses to query such an application on the grounds that I laid out at length, as did the noble Baroness, Lady Kennedy of The Shaws, and the noble Lords, Lord Rooker, Lord Purvis and Lord Leong, in their remarks about the nature of the country that we are dealing with. Is China different from the others? Yes, of course it is manifestly different, not least, as the noble Lord, Lord Rooker, mentioned, because of the products that we buy from Xinjiang. The House of Commons has declared not that there are human rights violations but that there is a genocide—under the 1948 convention on the crime of genocide—taking place in Xinjiang against Uighur Muslims, who are used as slave labour.
The noble Lord, Lord Rooker, is right about that, and we have this trade deficit that the noble Lord, Lord Purvis, regularly refers to, of £40 billion, which makes us very dependent on that country and does not contribute to our resilience. Will the CPTPP help us? Yes, it will, and I am glad that we are joining it. That is why I support the Minister in that objective and support this Bill but, as others have said in the debate, we need to be in a position not only to be able to voice our opinions in both Houses but to vote on those things as well. Otherwise, how will we express our view? Will it be done through telepathy? Will it be done as a result of people getting up and saying, “We don’t agree with this”? If there cannot be a vote, it is impossible. All of us in this House or who have been in the other place know that to be the case.
As for the views that have been expressed about the desirability of China’s membership, my noble friend Lord Berkeley of Knighton said that this is exceptional because it is appalling behaviour that we have never probed enough. We must probe. That is what this amendment seeks to do, to give us rights. Look at the amendment. There are two parts to it. The first simply says:
“Before any decision is made by the Government … on the accession … to the CPTPP under Chapter 30 of the CPTPP, the Secretary of State must publish a report”.
That is all well and good. The Minister has accepted that principle, so why not accept the first part of the amendment? What does the second part say? It says:
“Both Houses of Parliament must be presented with a motion for resolution on the report under subsection (1)”.
This is hardly revolutionary. It seems to me perfectly reasonable. We are being invited to tilt at imaginary windmills. I know that some will be under pressure from their Whips but, as I did during the debate, I commend the remarks of the former Leader of the Conservative Party, who has written to members of his party today to say that the amendment remedies the problem in a proportionate way that goes with the grain of government policy.
I would like to seek the opinion of the House, and I hope that those on the Government Benches in particular will vote for this amendment.
Lord Johnson of Lainston (Con)
My Lords, I thank all noble Lords who have participated in this debate, particularly the noble Lord, Lord McNicol, for his engagement, his very good summary of the various amendments and the points that he raised. If the House will indulge me, I will go through the different points quite carefully because there are so many elements. I beg forgiveness if I do not cover every point. My noble friend Lady McIntosh laid down a very great number of requests, which I am happy to answer outside this debate, with the broad provisions to be raised where I can.
Let me stress again how seriously this Government take parliamentary scrutiny of our FTA agenda. With this in mind, a full impact assessment for the UK’s accession to the CPTPP was indeed published at signature in July 2023, which is important to note, alongside the accession protocol text and a draft Explanatory Memorandum. This included assessments of potential economic impact on UK GDP and environmental impacts. This is important. I will refer back to the Section 42 report where relevant to reinforce and, hopefully, reassure Members of this House of the benign impact of CPTPP membership on our environment and border controls.
I want to pick up on a point made by my noble friend Lady McIntosh of Pickering about supporting our farmers and agricultural producers in this country. It is absolutely at the core of this Government’s policy to do that. The reason I am excited about the CPTPP is because of what we will be able to achieve when it comes to promoting our dairy industry: the additional quota access that we will have, for example, for cheese into Canada; the opportunities we will have to sell chocolate into Malaysia, reducing tariffs significantly; the opportunity to sell Scotch whisky into many of the CPTPP countries with lower tariffs.
We can combine these trade agreements with the extraordinarily strong work done by my noble friend Lord Offord of Garvel, who is in his usual place today, with regard to supporting exporters, and with the muscle of the Department for Business and Trade, the work of the agricultural attachés, and all that we are doing to promote exports around the world. This is why we are here. This is a positive and powerful expression of the extraordinary economic reach of the United Kingdom, particularly in its agricultural sector. I understand that there are concerns, and I will cover them, but let us understand why we are here in the first place: to promote our agriculture—an extraordinarily powerful sector in this country—to expand its interests abroad and create more wealth for farmers in the United Kingdom.
I want to touch on the monitoring report, which we will publish after two years, as well as a comprehensive evaluation of the agreement after five years. This will include an assessment as to the environmental impacts. An inclusive and participatory process will be at the heart of the evaluation, providing structured opportunities for a wide range of stakeholders to share their views and provide evidence; that is, basically, a proper assessment and review.
I do not think it would be helpful to be specific on every single checkbox. I am keen to make any review useful. But I would be surprised—that is the language I wish to use—if the evaluation and monitoring reports did not cover information on: trade flows under CPTPP; utilisation of the agreement; ISDS cases, which will be important to many speakers today; an overview of the work of the committees under the agreement to facilitate co-operation and implementation—that is particularly relevant when it comes to labour standards, environmental standards, reduction of the risk of deforestation and many other areas. There will be information on the environment covering many of the issues discussed today and on the impact of the agreement on all parts of the United Kingdom.
This is important. I have been asked to make commitments at the Dispatch Box, and I am very comfortable doing so. It is vital to me as a proponent of free trade that we promote the benefits of this extraordinarily powerful multilateral agreement; I hope that will be shown in the impact assessments and in the reviews after two years and five years. My principal point about the amendments that have been put forward on this Bill is that they are unnecessary because we are doing this anyway.
I turn to deforestation and the issue of palm oil. I am very grateful to my noble friend Lord Goldsmith for his amendment and for the passion that he brings to this vital subject. I believe that he is to be celebrated as someone who has truly brought to bear some significant changes to the legislation of this country following on from the Environment Act and the secondary legislation around the obligations on businesses relating to deforestation, which we will be bringing in; I am reassured by my officials that we are aiming for spring of this year. I want to applaud the work of my noble friend and say how important it is, and how vital for the future of this country and the world, that trade does not lead to a degradation of our environment and natural habitats.
My son came to watch some of this debate. He has now left; I think the third hour was the final straw for an 11 year-old. We are doing this in order that our children will have a world to inherit, as well as a strong economy in the United Kingdom. At no point have we ever suggested that we should separate our obligations to the future of this planet in relation to the importance of free trade. Those who do that are mistaken. In my view, they are inextricably linked. The positives of free trade are so significant and the opportunity for dialogue allows us to solve these problems.
I want to touch on the point about palm oil, which is very powerful. The Trade and Agriculture Commission, for whose feedback I am extremely grateful, has noted that the Malaysian sustainable palm oil certification had become a mandatory condition since January 2020 for the palm oil industry, as has been raised. The new 2022 version prohibits palm oil cultivation on land cleared after December 2019. This is very important. Provided that this new standard is fully implemented by January 2025 and compliance with it is effectively enforced, there is a
“low risk that Malaysian palm oil exported to the UK would come from land that was deforested after December 2019”.
It goes on to say:
“Moreover, the UK may be able to enforce Malaysia’s implementation of the 2022 MPSO standard if failure to do so has an effect on bilateral trade”.
That is extremely relevant.
My noble friend Lord Goldsmith was right to point out that we are signatories to the Glasgow Leaders’ Declaration on Forests and Land Use, which commits both parties—clearly, we are looking at Malaysia in this instance—to halt and, indeed, reverse forest losses by 2030. This is the whole point about the CPTPP. It allows us to align our values with our partner countries, to raise their standards, to enable and facilitate, through the power of free trade and the wealth that it creates, the opportunity to improve their environment. I am grateful to my noble friend for pressing us on these points and I hope that I have answered his questions to his satisfaction.
Lord Goldsmith of Richmond Park (Con)
I rise to intervene, but I have been caught by the House with a nut in my mouth, which is terrible timing—if I could have thought of some medical excuse, I would have done so. I thank the Minister very much for his passionate call for harmonisation of trade and nature. He is right; there should be no separation between the two. I was pleased by his commitment that the diligence legislation will come in the spring. I know that it is not entirely in his hands, but I am pleased if that is the assurance that he has had from officials. It is important that it should come through. Without that legislation, the risk remains. It will be like closing the last hole in the bucket. I am grateful for his reassurances. I encourage him to continue to push the other departments responsible, but I thank him very much for his words.
Lord Johnson of Lainston (Con)
I thank my noble friend for his comments.
I turn to Amendment 12 on pesticides, which have been raised by the noble Lord, Lord McNicol, and the noble Baroness, Lady Boycott—and I had conversations with the noble Baroness, Lady Willis, as well earlier this week. It is very important for noble Lords on all sides of the House to know about the work that I have personally been putting in to ensure that we have the right and appropriate border checks and security, and that the agreements allow us to ensure that we have control over our borders. I refer to my opening comments a few hours back that this free trade agreement—on implementation day plus one, or accession day, or on becoming a party to the CPTPP—makes no difference at all with regard to our import controls and our ability to control our own destiny. This is very relevant. It is essential, again, to return to the Trade and Agriculture Commission’s report, which says that the
“CPTPP has no effect on the UK’s existing WTO rights to regulate the import of products produced using pesticides that are harmful to UK animals, plants, or the environment”.
It is crucial to remember that. We would never derogate our responsibilities to our consumers. I am very grateful for the points raised by noble Lords today to ensure that they can feel a high degree of comfort that this is simply not the case, and that we have not done so by signing up to this agreement.
I want to touch on some of the comments made about the practicalities of administering our border controls. I took the liberty ahead of this debate of visiting our Thames Gateway port system and was shown the operations there in relation to risk-based assessments. I think that is the right way to manage our borders. It would be impossible to check every single thing coming through. It is very important to reinforce the point that the CPTPP does not grant equivalence on exporting parties. We are able—indeed, it is considered that we have increased our ability—to audit exporting parties’ mechanisms for their own domestic testing to ensure that there is robustness around the testing processes before food is exported to the United Kingdom. We believe that, fundamentally, compliance is high. Our ongoing monitoring programme provides assurance that food on the UK market complies with our rules and is safe to eat.
Lord Leong (Lab)
My Lords, I am speaking to Amendments 7 and 8, and I thank all noble Lords for their contributions.
Intellectual property, particularly copyright, plays a pivotal role in the global trade in creative content, with the UK music industry serving as a prime example of its significance. It is imperative to acknowledge the substantial impact of copyright on fostering innovation and ensuring the efficient operation of markets. Additionally, it is crucial to recognise existing obligations under international copyright treaties and ensure their full and correct implementation by the signatories of the CPTPP. While the fundamental rights encompassing reproduction, broadcasting, communication to the public and distribution are addressed within CPTPP, it is disheartening to note that member states retain the option to opt out of certain obligations. Furthermore, the non-recognition of copyright protection for the utilisation of recorded music in broadcasting and public performance remains a regrettable challenge. To comply with obligations in the CPTPP, as mentioned earlier by the noble Lord, Lord Foster, changes need to be made to UK legislation with regard to rights in performance. We share some of the concerns in the noble Lord’s contribution earlier, and we would welcome an impact assessment to help us understand some of these non-compliance cases.
Will the Minister respond to the following questions, as mentioned earlier by the noble Lord, Lord Foster? Why is the extension of rights in sound recordings and performance to foreign nationals not covered under this consultation? At the same time, can the Minister share with the House when the results of this consultation will be published? Will there be a statement on collective management organisations, given their importance for the income of composers, performers and rights holders? Can the Minister also confirm that UK musicians are able to tour throughout CPTPP member states without any barriers and checks?
Lord Johnson of Lainston (Con)
I am extremely grateful to the noble Lord, Lord Foster, for bringing this amendment, for the discussions and dialogue we have had, for the correspondence I have enjoyed with the noble Earl, Lord Clancarty, and for the excellent summation by the noble Lord, Lord Leong—I was about to say “my noble friend” because he is a good friend—who asked some key questions. I am afraid I do not have the answer to the final question that the noble Lord, Lord Leong, asked about the touring rights of artists. I will write to him on that; it is a very good point, and we very much hope that clearly the additional facilities that we have, in terms of temporary business entry for CPTPP countries, may include this. I hope it will and I will confirm this.
Some good points have been raised. In response, first, I will say that the desire to treat performers equitably is the right thing to do. Currently, there are a number of performers who are excluded from receiving the 50% mandatory royalty payment, simply because they come from another country or their work has not been registered in the appropriate fashion. The consultation, which started yesterday and will report on 11 March, is not specifically a consultation on the CPTPP, because we wanted it to be a far wider consultation around the principles of broadcast rights—but clearly it will reflect on the discussion we are having now.
Lord Dodds of Duncairn (DUP)
My Lords, I too thank the noble Baroness, Lady Lawlor, and congratulate her on bringing these matters to the attention of your Lordships’ House and highlighting once again the importance of transparency and lucidity in these issues and their effects on Northern Ireland.
Despite the Prime Minister’s attempts to claim the Windsor Framework as a success for his leadership and the Tory Government, it has not accomplished its main purpose: to restore devolution in Northern Ireland. One reason for that has been not just the lack of substantive change in the Windsor Framework compared with the Northern Ireland protocol—it purports to replace it but in fact there was just a decision of the joint council to rename the Northern Ireland protocol as the Windsor Framework in British law—but the overselling, spin and hyperbole, particularly by the Prime Minister but also others, when it was published. It was sold as a wonderful transformation that would erase the Irish Sea border and so on, but has done nothing of the sort and could never do so.
That lack of transparency, honesty and frankness with people about what the Government could and could not do and what they were putting forward is at the heart of the problem. If their new proposals are published, we will no doubt hear more of this in the coming days and weeks, but this Bill lacks transparency for the reasons set out by the noble Baroness in proposing her amendment.
Paragraph 53 of the Explanatory Notes includes an amazing new concept in legislation passed by this UK Parliament: laws that extend to parts of the United Kingdom but do not apply there. This is bizarre. It is not highlighted or made explicit in the Bill, as the noble Baroness has said, but hidden in the Explanatory Notes. In over 300 areas of law governing the economy of Northern Ireland, we are governed by laws made by a foreign polity—in its interests, not ours—which are not susceptible to amendment and in the development of which we have no role. It is an incredible concept, but it is not new. It was first flagged up in the main body of the withdrawal agreement and the original protocol when the Government told us that Northern Ireland would be a member of the UK customs union but that the EU customs code would actually apply.
This is a concept that is not only bizarre but inherently undemocratic and unsustainable. It a concept that is at the root of the lack of devolution in Northern Ireland. Despite efforts to browbeat, bully and otherwise people in Northern Ireland, UK citizens living there simply want the right to be able to make laws and send representatives either to Stormont or to this place to make the laws that govern them. That is an entirely reasonable position.
The Government really should now learn the lesson that they should be open and transparent about what they have created and what they are about in relation to legislation which is restricted for Northern Ireland. They cannot legislate any more; they have given away the power to a foreign body. Who would ever have thought that we would have reached such a position in this mother of Parliaments following Brexit, which was about bringing back control?
I would like to hear the Minister give a commitment that, in future, these amendments will be taken on board by the Government, and that, for as long as this iniquitous position pertains, legislation being brought forward falling within the remit of Windsor Framework provisions will be explicit and say so in such legislation.
Lord Johnson of Lainston (Con)
I am extremely grateful to my noble friends Lady Lawlor and Lord Jackson for Amendments 15 and 16, and to my noble friend Lady Lawlor for the very useful conversations we have had on this matter. Of course, the input from the noble Baroness, Lady Hoey, and the noble Lord, Lord Dodds, is always extremely welcome.
I am very sensitive to this matter. To be honest, I see my role as bringing a powerful trade deal to the whole of the United Kingdom. I am very aware of the points being raised by noble Lords in this House, but, I am afraid, at this stage of the proceedings I must concentrate on the specifics.
To answer the amendments specifically, I assure my noble friends that we will keep this under review once an Act and stakeholders in Northern Ireland will be an important part of that. Regarding the application of EU law in Northern Ireland, I remain of the view that the people of Northern Ireland are best placed to scrutinise the legislation applicable in Northern Ireland once the Northern Ireland Executive is restored. The Windsor Framework will provide them access to the Stormont brake, as noble Lords will well know. This will enable them to block specific laws impacting Northern Ireland. Furthermore, there will be regular opportunities for the people of Northern Ireland to have a say, via the consent vote. These are all points that have been well raised.
The CPTPP takes account of the Windsor Framework, and it is specifically noted that this is the case. Amendment 16 is superfluous, because under the Windsor Framework the EU’s GI schemes continue to apply to Northern Ireland. Our accession to CPTPP does not alter this. The treaty, accession and becoming a party to CPTPP do not change any of the discussions that noble Lords have had previously about Northern Ireland.
Additionally, the text reflects the recommended drafting practice in Bills for amending an assimilated EU regulation where the extent is to the UK, even if application is only to Great Britain. I have worked with my officials to see whether or not it is appropriate to include the phrase, and the reality is that it is not considered appropriate. It is felt that it would cause complications and confusion in the drafting of the Bill.
I hope noble Lords will be assured that I have spent a great deal of time discussing these points internally. I am very comfortable, as Investment Minister—as I am sure my noble friend Lord Offord of Garvel will be in his role as Exports Minister—to continue the work that we have done to promote Northern Ireland, following on from the success of the well-supported Northern Ireland Investment Summit and the work my colleague is doing to ensure that we have a strong export market for first-class Northern Irish produce. This will benefit from our trading relationships through CPTPP.
I look upon this Bill as an enormous positive for trade in Northern Ireland. We will do everything we can at the Department for Business and Trade to make sure that traders, businesspeople, farmers and citizens of Northern Ireland can get the most benefit from it. I recommend that the technical amendments that my noble friend Lady Lawlor seeks to place in the Bill are not pressed, because I do not think they will help in the promotion of CPTPP or in the clarity of the Bill. I am very grateful for this debate at this stage of Report.
Baroness Lawlor (Con)
I am very grateful to my noble friend the Minister for his constructive approach to our discussions. Though I confess to being a bit disappointed by some of things I have heard, I am heartened by the support of your Lordships and the contribution to the debate of noble Lords today.
It is very important that we should be transparent in our laws. I welcome the CPTPP—I think it is a wonderful treaty. I would like the fact that we are moving to our own laws on business and the economy to mean that this position applies to Northern Ireland, as part of our jurisdiction and as part of the UK’s entire economic area. However, I understand that that is not the purpose of this Bill. I understand what the Minister has been advised of on the conventions. I am not happy with the conventions but I hope that we can continue to work to do what we can to make sure that Bills in this House are more transparent. On that basis, I beg leave to withdraw the amendment.
Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023
Lord Johnson of Lainston Excerpts(11 months, 1 week ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Johnson of Lainston
That the draft Regulations laid before the House on 16 October and 7 November be approved.
Relevant document: 3rd Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the second instrument). Considered in Grand Committee on 13 December.
Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [HL]
Lord Johnson of Lainston ExcerptsThursday 14th December 2023
(11 months, 2 weeks ago)
Grand CommitteeRead Full debate Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Act 2024 View all Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Act 2024 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 4-I(Rev) Revised marshalled list for Grand Committee - (6 Dec 2023)
Lord McNicol of West Kilbride (Lab)
My Lords, I thank the noble Earl, Lord Clancarty, and the noble Lord, Lord Foster of Bath, for speaking to their amendments. I will touch on my amendment in this group. The detail the noble Lord has gone into raises a number of questions, and the detailed answers he seeks will cover all the amendments in this group.
My amendment is very straightforward; we have further groups later on seeking reviews of the negotiation. I understand the point made by the noble Viscount, Lord Trenchard, about this being within one year, but we are in a very new situation with the CPTPP. Learning lessons quickly, both positive and negative ones, is crucial to our making correct decisions in future on FTAs and other negotiations.
Amendment 24 seeks a review within one year of the day on which the Act is passed. The Secretary of State must publish both
“a review of the lessons learned from the negotiation of the CPTPP Chapter on intellectual property”—
as we have heard, there are still a large number of questions outstanding there—
“and … an assessment of how this experience might inform negotiations of future free trade agreements”.
It is very straightforward.
Like others who have spoken before me, I have had a number of representations from UK Music and the Alliance for Intellectual Property. I seek clarification from the Minister of one of the points made by UK Music. There is a concern that the CPTPP parties are allowed to opt out of some of the IP provisions—for example, not recognising protection for the use of recorded music in broadcasting and public performance, which was one of the issues touched on earlier. The AfIP’s point was that
“the rush to join CPTPP may result in the embrace of IP”—
intellectual property—
“standards that are significantly weaker than those present in UK law”,
and thus cause growth issues.
I turn to geographical indicators, which may well come up in some of the later amendments and was touched on during our first day in Committee. There is a specific issue concerning the UK-Japan deal, which was rolled over. Geographical indication brand protection was promised in the UK-Japan agreement but was never delivered on. When the agreement was announced in October 2020, the then Trade Secretary, Liz Truss, promised that 77 specialist UK food and drink products would be guaranteed protected geographical indication status, alongside the seven that were then carried over from the previous EU-Japan trade deal. The former Department for International Trade said that the protections would be in place by May 2021 for all 77 new products. I will not list them all, although I am more than happy to. They included some iconic brands: Scottish beef, the Cornish pasty, Welsh lamb and Wensleydale cheese, to name but a few.
The DIT also boasted that, thanks to Liz Truss’s agreement, the UK would benefit from a fast-track process for securing brand protection that would not have been possible under the EU-Japan deal. It said that:
“The EU must negotiate each new GI individually on a case-by-case basis.”
The EU has added an extra 84 products to the protected list since October 2020, including 28 fairly recently, and the number of EU GIs with Japan now stands at 291, while the UK is still stuck with only seven protected products, which we inherited from the EU-Japan deal. Given this, can UK producers of geographically identified products be confident in the measures in the CPTPP, and is there any danger of the same occurring now with British food and drink products, putting them more at risk? Finally, will the Government revisit the UK-Japan agreement and deliver on those originally promised protections?
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
I thank noble Lords for returning to this important discussion of the various ways in which they are looking to improve our CPTPP Bill. I hope I can give them some good answers, illustrating my belief that we have a very good deal, the integrity of which we should try to retain as much as possible.
I think the noble Lord, Lord Foster, who is an expert on many things, said that he had yet to come across an expert who could clearly explain artists’ and performers’ broadcast rights. I am well aware of this, as are noble Lords. I will try to do so today but, given that no one has so far managed to do so convincingly, I hope noble Lords will allow me to write giving further clarification and useful examples and anecdotes. It is certainly a complex point.
The CPTPP brings to bear on the United Kingdom an additional series of obligations regarding performers’ rights. Currently, if you are a performer of, let us say, British nationality, and/or your performance is in the United Kingdom, you are entitled to the performance rights. The CPTPP looks at performances and rights in a slightly different fashion. In the instance of a performance taking place in a non-CPTPP country—which is where the controversy of this issue has arisen—it could qualify for artists’ performance rights payments if it was released or produced in a CPTPP country or if there was another necessary association with a CPTPP country.
Lord Foster of Bath (LD)
I entirely take the point the Minister is making about the timescale for an impact assessment. Yet before we have even had the consultation on performers’ rights, the Minister is claiming that the impact will be minimal. I have not yet heard from him the justification for that claim. Also, while I am on my feet and to save interrupting him a second time, can he be absolutely clear that the details of the consultation on performers’ rights to which he referred will be available prior to your Lordships debating the Bill on Report? If we do not have those details and a clearer understanding of what is in the consultation and the implications of the Bill, we are put at a huge disadvantage.
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord for pointing out that I am already talking about the impact, while also saying that we should not have an impact statement after one year; however, I do not think that that is fair. We are trying to have a broad gauge—is this a significant, multi-million-pound issue that needs to be confronted with urgency, or a relatively manageable amount of capital change? The instance we are looking at is not significant in relation to the music industry overall—it was a few tens of millions. I do not have the figure in front of me, but the noble Lord will understand.
That is the reason why we are having a consultation. Our estimate implies that it would not result in significant distortions of the music market in this country. Remember, this is for broadcast media. It does not include streaming, which is how most people access their music at the moment. It will result in additional artists being included, but many artists already are.
We should be aware that we often talk in these debates about the issues facing us—it is always about us. I would like us to look at the opportunities our artists will now have in terms of being protected. British music is the greatest in the world, and among the most popular. The Beatles are at No. 1 again; that must mean something. All the great bands are reforming to take advantage of these new benefits of CPTPP and the enormous revenues they will be paid, so something must be working. We should not lose sight of that. I think that my noble friend Lord Cameron of Chipping Norton told me that Blur are getting back together again. He will know more about it than me.
This is a very important issue. We must not lose sight of the fact that on the whole, these measures tend to result in additional protections which did not exist for our artists in many of these countries. That is very important. We can get lost in the detail. I am not saying that the detail is not important, but we should keep things in perspective. I cannot answer the question from the noble Lord, Lord Foster, about when the consultation will be completed. It is unlikely that we will have the consultation back by Report, which is hoped to be the second or third week of January. I am aware of the time constraints and recognise noble Lords’ comments, but we will continue to work together to find a good solution. I am extremely comfortable having further conversations with the noble Lord and other interested Peers on how we can delve more deeply into this subject. I am very sensitive to the fact that we are trying to come to the right conclusion.
Turning to some of the other key points, the noble Earl, Lord Clancarty, made a very fair comment on artists’ resale rights. We have tried to propagate this position. It is a new concept globally and so far, 90 countries have taken up the opportunity to employ artists’ resale rights. Unfortunately, very few CPTPP countries deploy ARR in their legislation. The noble Lord was right to mention Mexico, and Peru is similarly beginning the process. However, it is at an early stage and has not functioned in a way that is advantageous to our artists, so while the systems have been set up, they have not started to yield the payments we were hoping for. Therefore, we are not in a position to introduce ARR into the CPTTP, because many of the countries simply do not have that legislation to hand. It would therefore not be appropriate for what is a collective multilateral treaty that we are joining.
The noble Lord rightly asks about our strategy. I am happy to come back to him on our plans for continuing engagement, but he should be reassured that we specifically negotiated this in the Australia and New Zealand free trade deals and that we are in negotiations with Japan to see how we can implement that.
The noble Lord, Lord McNicol, asked about Japan and geographical indications. I cannot make a significant comment in reply, other than to point to our commitment to continue negotiations on this. It was a very important part of the initial negotiations and the Secretary of State at the time was determined to ensure that these principles were magnified. I, my officials and the trade team will be happy to reassure the noble Lord, I hope, that we are moving forward.
I hope I have covered the questions raised. My noble friend Lord Trenchard kindly supported me with his point about impact assessments and timeliness, for which I am grateful. He also raised specific questions which I will answer in writing.
The Earl of Clancarty (CB)
My Lords, I thank the Minister for his reply on my amendment, which I found reasonably reassuring. As far as I can see, the Government are moving in the right direction on this. Time will tell by how much and with what enthusiasm they can persuade other countries to reach reciprocal agreement with us on this important right. I detected a suggestion for a possible meeting about this with interested parties; that would be really helpful.
On the other hand, I think many of us are much less convinced on the other concerns, particularly those about performance rights raised by the noble Lord, Lord Foster. He asked whether we could have the consultation before Report. It is really important that the consultation precedes any secondary legislation. The Minister has said that that legislation is technical, but the experts, including the Alliance for Intellectual Property and people in the music industry, say that we cannot be so sure what the effect will be of widening rights to foreign rights holders. We are asking the Government to tread carefully, and not recklessly in a way that will damage the UK’s creative industries. The principle of reciprocity is paramount, as the noble Lord, Lord Foster, pointed out. It should be a guiding light. Crucially, stakeholders need to see precisely what is intended to be in the secondary legislation before it is made. As we know, once secondary legislation comes before the House, it is too late to change anything. With that, I beg leave to withdraw my amendment.
Lord Johnson of Lainston (Con)
My Lords, I thank noble Lords for their input on this group of amendments; I will try to cover them in thematic order. As always, we are looking to have a good debate here and reach sensible conclusions, so I would be delighted to follow up with any noble Lord who wishes to do so. Actually, I think it would be helpful if, in the new year, we celebrated 2024 by noble Lords making sure that their first meeting is with me to cover specific areas of the CPTPP.
We can refer to the CPTPP as the FTA, if noble Lords wish to. I like “CPTPP” because, of course, it is relevant—especially in terms of all the aspects being covered today, such as the importance of ensuring that the effects of the trade agreement align with our commercial interests and our values. As noble Lords will remember, it was originally called the TPP—the Trans-Pacific Partnership—but Canada added the concept of it being both comprehensive and progressive. Noble Lords should be delighted that I am facing that now, because it is precisely what they are discussing; they should be reassured that the principles of comprehensiveness and progressiveness are very much embedded in the title itself.
I am glad that my view of a two-year minimum window for an impact assessment has now been broadly accepted. I have always wanted something to be named after me, rather like the “Grimstone principle”. Can this be called the “Johnson term”? I am not quite sure whether we are allowed to do that. Just because the impact assessment amendment line has two years in it does not necessarily mean that we would accept it—but I will briefly cover the crucial first point, which is about the principle of understanding the impact of these free trade agreements.
In our last debate on a trade treaty, many noble Lords looked at it in some detail and some Dispatch Box commitments were made. I do not have them in front of me, but I would be happy to come back to noble Lords on them at the next stage. I want to be clear about which areas the Government would look to review. There is some reluctance for there to be a codified, formalised, legislated-for, mandatory impact assessment because, as we have discussed in the past, these can be unadaptable and may not necessarily fulfil the requirement that this Committee is looking for, which is a true impact study in the key areas. Also, things will change, of course. So it is better that there is a flexible approach to this, where we get the right information.
From the point of view of this Government, who believe passionately in free trade and the benefits of this agreement, an impact assessment is something that we want to do in order to show the country the power of these free trade agreements and what they will result in. We will certainly look at the trade in goods and services, investment flows, the effects on the nations and regions of the UK, the effects on consumers and the effects on businesses. We will certainly establish the effects on border activity and, importantly, we will look at the effects on agriculture and the environment. I can say that those will not be areas to which the impact review will be limited; as I said, I would be comfortable to have further discussions around this.
Like other noble Lords, my noble friend Lord Holmes of Richmond rightly referred to the opportunities of the CPTPP. I am not going to grandstand and dwell on the opportunities just for the sake of it, because this is an important debate that covers some of the risk mitigation around these free trade agreements and I am comfortable making those points the focus of parliamentary scrutiny, as they should be. However, it is also worth looking more positively at the opportunities that we have, how we manage our relationships going forward with CPTPP countries, the value we think we can add as a result of that and where we can make further gains.
Baroness Willis of Summertown (CB)
The point I was making, which I think is being followed up, is that there is a two-tier system. Right now, the Bill as constructed does not acknowledge that two-tier system. The problem lies in that two-tier system and the fact that all of these things that will be coming through with the pesticides on them will go through the risk assessment because they are not on the annexes, which they would be if they went into the first tier. It is those annexes that need to be looked at. I do not think that anyone is doing scare tactics, but I think there is a very big risk here that, as we get huge amounts of wheat coming in from Australia, there may well be pesticides on that wheat that we as consumers do not want to eat. I am not sure right now how the present system will address that.
Lord Johnson of Lainston (Con)
I am grateful to the noble Baroness for raising those points, and I am happy to provide further reassurance in terms of how we control our borders. We already import products from Australia and have done for many years; the Australia-New Zealand FTA does not make any difference to that. In fact, I can turn now to the protections we have for our agriculture sector. I follow on from comments I made in the Australia-New Zealand trade treaty debates that protecting our farming community is absolutely paramount for us. We are very sensitive to the effects that global trade flows can have on industries and communities, and it is completely right that we do what we can to ensure that we take a very gradual and phased approach to the changes of our quotas.
However, I would say that for the CPTPP, the impacts on agriculture are significantly less significant—I am sorry to have not presented a particularly clear sentence in that instance—than they are for the Australia-New Zealand trade deal, in the sense of the areas where we have increased the tariff rate quotas, in particular areas such as whole shell eggs, pork and other products, which are not at significant import volumes from countries such as Mexico, Vietnam and so on. We have phased in our tariff rate quota allowances over 10 years; we have taken a very measured approach.
I spoke recently to the president of the National Farmers’ Union, and she was very pleased. I asked whether I was able to repeat her sentiments, and she said I was. She felt very comfortable and pleased with the way we have negotiated tariff rate quotas at the levels we have ended up with. I will defer to my colleague, if she wishes to make an intervention.
Baroness McIntosh of Pickering (Con)
I am sorry to intervene. I do not have the Trade and Agriculture Commission report in front of me, but I think there may be a difference between food safety and food production standards. Will my noble friend take the opportunity to look at the ADAS conclusions and the conclusions of the Food Standards Agency on food production standards just to be absolutely sure before we proceed to the next stage?
Lord Johnson of Lainston (Con)
Yes, I will reply on that point. As I said, there will be differences in food production standards, production capabilities and so on because we are looking at having trade agreements with countries in different parts of the world which have different weather patterns. In many respects, the whole principle is to complement our production. We are talking here about ensuring that the safety of the British consumer is not jeopardised through FTAs, and I am comfortable expressing that very important point.
My final point is on deforestation and other standards and relates to production standards rather than simply importing goods, particularly agricultural goods. As noble Lords will know, as a result of the Environment Act, we are bringing in further protections such that companies above a certain level are obliged to ensure that their supply chain is compatible with the legal framework. I understand that that will include illegally occupied territories that have been deforested.
I am afraid that I do not have an update on the timing of that legislation. As I believe my noble friend Lord Benyon said recently, it will be taken through when parliamentary time allows. I know from my conversations with my noble friend that this is an area of great interest for him. That was not a light-hearted comment meant to play for time. Noble Lords understand that we have a parliamentary calendar and have to make sure that this is done appropriately. I cannot comment on that, but I can say that the Government are committed to ensuring that these things run in sequence as closely as possible. As I said, we are already doing business with many of these countries and, in my view, a delay of a relatively short or reasonable period would not make a significant difference to the timing. They do not have to run concurrently, as they are not linked together.
I hope I have covered all the points. I am very comfortable coming back to noble Lords—I see I have not so I shall take some interventions.
Lord Davies of Brixton (Lab)
I just press the Minister for some reaction to the fact that his department’s impact assessment shows a deleterious effect on our financial services sector. What is the department’s approach to those figures in its report?
Lord Johnson of Lainston (Con)
I thank the noble Lord for those comments. I can say firmly that our commitment to those conventions is firm and absolute. It is essential to us that we do not derogate our commitments to the supply chain. As the Committee is aware, a number of new policy frameworks have been put in place to ensure that the supply chain has the responsibility to ensure that it does not include poor practices. They are now in force, and I would be delighted to work with the noble Lord to reassure him that the CPTPP does not lead to a derogation of standards. In fact, we think that participation in this group will allow us even more influence to align other countries in the CPTPP with our labour standards. I am quite confident of that.
I will touch on one or two other points that were raised. The noble Baroness, Lady Hayter, rightly raised the importance of high standards in the UK in reference to the Leasehold and Freehold Reform Bill, which is currently going through the other place. I wholeheartedly agree with her that it is important that the UK retains its world-leading position as a country that respects the rule of law and property rights. I am sure that that Bill will do these things. I believe that a consultation is under way at the moment that will inform that debate, but I am not able to comment further on that.
The last point was about the impact assessment. If I remember rightly, it showed that there will be a growth in financial services exports and a more significant growth in financial services imports—if I have that right. The noble Lord, Lord Davies, must forgive me: I do not have his chart in front of me but I would be delighted to follow up on that. The impact assessment is a static one. It is not for me to criticise it because it says that there are several billion pounds-worth of additional trading opportunities that we can see immediately from CPTPP, which is to be celebrated. That is combined with the free trade agreement with Malaysia.
Is it worth our time today debating a multi-billion-pound benefit set out in a government impact assessment document? It absolutely is, but it is our convinced belief that not only will we have significantly more trade as a result of the CPTPP but it will give us the opportunity to do all the things that noble Lords opposite have been so particularly focused on: influencing the debates around labour standards, use of pesticides and how the environment functions, and how farmers can compete globally. Let us rejoice in the opportunities that it presents to our businesses.
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord for raising that point and I ask his forgiveness if I have failed to cover it. It is very important. I did look at his maths: the price of a banana, if it goes up 180%, goes to £1.70, not £90—I just point that out, if I may. Aside from that, it is very important to say that our developing nation commitments are not derogated by joining the CPTPP.
We are very aware of the importance of the prospect of preference erosion and it is quite right for the noble Lord to raise it. I am very comfortable writing to him in more detail about this, but we are very clear that our developing country trading programme is an important priority for this Government’s trade policy. We will ensure that any new trade agreements, including this one, are compatible with that policy agenda. I am very happy to write in more detail and have further discussions. If there is further detail where he believes that this is not the case, I again give my sincere apologies for that.
Lord Purvis of Tweed (LD)
I am grateful to the Minister for writing, and I look forward to it. I am sure that would agree that cumulative inflation of 180% since 1987 would mean that £1 then is £180 now.
Lord Johnson of Lainston (Con)
I will not get drawn into the debate on that, but I think that would be 1,800%, rather than 180%. However, the point is that the noble Lord is right to raise the matter of the estimated expected costs compared with the actual costs today, and the deflationary impact of global trade on some of our developing nation partners and the importance of ensuring that it can be mitigated in some way, regardless of the other trade deals that we are pursuing. I am grateful for his point.
Lord Holmes of Richmond (Con)
My Lords, this has been an excellent debate. I thank all noble Lords who participated and the Minister for his response. I was pleased that financial services and environmental concerns were grouped together, because that is, in many ways, the fundamental point that is often missed. There is no purpose in talking about financial services and finance without ESG being gold-threaded through it all. I can sum up today’s debate, in many ways, as: what purpose profit if no planet to spend it on? I again thank all noble Lords who took part and, with that, I beg leave to withdraw my amendment.
Lord Purvis of Tweed (LD)
My Lords, it is a pleasure to follow the noble Baroness, and I agree with what she said. I start by apologising to the Minister. My maths in my intervention on him were wrong. I admit that and want it on the record—that prevents him mentioning it in the letter he will write to me, which I look forward to.
I support the noble Lord’s amendment, and the context of what he said is very important. Together with the latter part of the contribution of the noble Lord, Lord Kerr, it means that we must have a wider public debate about UK-China trade in particular. I acknowledge that China’s accession is a very large “if”, and I will come back in a moment to the many reasons why, but that would have an even greater impact on UK trade, because China already has five bilateral FTAs with CPTPP members: Singapore, Australia, New Zealand, Chile and Peru. It is also part of the two plurilateral frameworks which the noble Lord mentioned. We are already, in acceding to the CPTPP, entering into trading relations through FTAs with China.
This is even more important because, in 2019, according to the University of Sussex UK Trade Policy Observatory—I shall source my figures on this now—approximately 20% of Chinese exports were already going to CPTPP members, of which 50% were in intermediate products. What does that mean? It means that it is linked with what we debated on the first day of Committee: that when it comes to rules of origin, many aspects of UK trade will be involved with goods from China. That is notwithstanding the enormous trade deficit that we have in imports in our trade with China already. The Office for National Statistics report stated that, in 2021, China was the UK’s largest import partner. That is not to the extent of 25%, but 13.3% of all goods to the UK are imported from China. What gives me concern is that we have a £40 billion trade deficit in goods with China. When we look at certain key sectors, this becomes a strategic issue, not just a trading issue or one of the importation of goods. Our trade deficit with China in goods is larger than our overall trade with Italy, Switzerland or Norway, so this is of great significance. When we consider that Germany has a trade surplus in goods with China, it is a valid issue to debate.
The increase in Chinese exports to CPTPP countries has grown very significantly, including in services, which on average has grown by 11% a year. When we have been debating UK trade, moving away from the single market into the fastest growing part of trade within Asia, we know that we have a combination: we are heavily dependent on imports from China, and growth in Asian trade has been as a result of their relationship with China too.
On that basis, if we look at the position of China, what does the UK do? We know that we are heavily reliant on it, that the Government say our future is in this area, and that those countries are heavily reliant on China. The growth trajectory is based on Chinese growth, so when we look at aggressive military exercises, human rights challenges and abuses, or increasing territorial disputes—including of course with Taiwan, another applicant country or customs area—this becomes geopolitical. We have also seen clear examples of Chinese economic coercion against other trading partners. It probably would lead a rational assessment to consider that, if it was a choice for the UK between Taiwan and China, it should be Taiwan. But how do you make such a decision when we are so intertwined with the Chinese economy, as I have highlighted?
We are debating the various chapters for the UK. On digital trade, which we debate quite a lot in this House, we discussed concerns around China complying with standards on digital trade. Chapter 17 is on state-owned enterprises. These areas were debated considerably during the procurement legislation. Chapter 18 is about intellectual property, which we have debated quite considerably. The noble Lord, Lord McNicol, raised chapter 19 on labour and chapter 26 on transparency and anti-corruption. All of these aspects may lead to the conclusion that the noble Lord, Lord Kerr, gave: that this is a hypothetical situation.
That may be correct, but nevertheless it has applied. We will be a member; we may form part of the commission to discuss this, and we may have a key role in those discussions about consensus for the application. Up until the point that China withdraws, I believe that our Parliament needs to have regular debates and we need to be informed. That is why I am sympathetic to this amendment.
Lord Johnson of Lainston (Con)
I thank noble Lords for their significant contributions to this important section of the debate. I will go through the key points one by one.
In joining CPTPP we are securing our place in a network of countries that is committed to free and rules-based trade, and which has the potential to be a global standards setter. The CPTPP acts as a gateway to the dynamic and fast-growing Indo-Pacific region, and expansion of this agreement’s membership will only bring further opportunities, in our view, for British businesses and consumers.
There are currently six economies with applications to join the CPTPP, including China, Taiwan, Ecuador, Costa Rica, Uruguay and Ukraine. As noble Lords will be aware, the CPTPP is a group of 11 parties and will become 12 when the UK accedes. It has been agreed within the group that applicant economies must meet three important criteria. They must meet the high standards of the agreement, have a demonstrated pattern of complying with their trade commitments, and command consensus of the CPTPP parties. It is very important that I clarify that for this discussion. These are strong criteria.
Our own accession was successful because we are demonstrably a high-standards economy with a strong track record, and we garnered the support of every party for our accession. This sets a strong precedent: the robust experience that the UK has been through has reinforced the high standards and proved the bar is not easy to meet.
As a new member of the CPTPP group, it is right that we work within the principles of the group to achieve a consensus decision, rather than giving our own individual narrative on each applicant, such as through the report proposed in this amendment. This is not a question about one particular economy. The UK is closely involved in discussions on this topic but will have a formal power to oppose an application only post-ratification, as I am sure the noble Lord, Lord Leong, will be aware. We joined first so that we would be on the inside judging other applications, not vice-versa. It is therefore crucial that the UK ratifies this agreement and becomes a party. This will ensure that the standards the UK has met and abides by are continually upheld under CPTPP, with every future applicant going through this same rigorous process.
I reassure the noble Lord and the noble Lord, Lord Purvis, who spoke so eloquently, that accession of new parties after the UK has joined will entail a change in rights and obligations of existing parties. Any new agreement requiring ratification by the UK would be subject to the terms of the Constitutional Reform and Governance Act 2010 as per the Government’s commitment surrounding the CRaG process.
I assure noble Lords that accessions will proceed only if applicants have met the rigorous criteria and have consensus of the CPTPP parties, of which the UK will be one only once we have acceded. We will continue to engage with the public and Parliament through the mechanisms I have just outlined, before any future negotiations. In this complex matter, I ask the noble Lord to withdraw this amendment.
Lord McNicol of West Kilbride (Lab)
My Lords, we are now on to the fourth group so we are getting there. We have been through the bulk of the detailed amendments, so these should be relatively straightforward. There are four amendments in this group, all in my name, so I will work through them. They all seek to have assessments of the impact of the implementation of the CPTPP after two years. If we come back to these on Report, we will look to change that timing to being from accession rather than from the Act being passed, which is eminently sensible. As the Minister has said, a review will take place on the four areas I have highlighted—local business, manufacturing, the job market and public services. I am sure that he will be more than happy to accept into it.
To go into a little detail within those four areas, we are concerned that the CPTPP could open up public procurement markets, restricting public authorities’ ability to support local businesses that recognise trade unions or pay the living wage, so there is a concern regarding the criteria provisions of the CPTPP and the fact that in some cases they are narrower than the UK procurement laws and could encourage more contracts to be based solely on lower prices rather than quality and access to integrity of service provision. On local businesses, we seek clarification from the Minister that this is not the case.
I turn to the manufacturing sector, where again we have concerns that the CPTPP could pose threats to jobs as it would make it easier, to take an example, for Vietnam to export goods to the UK that could include cheap Chinese steel or other manufactured goods such as tyres, cement and glass deliberately routed through Vietnam to avoid remedies and tariffs. The Trades Union Congress is concerned that this could increase the rate of trade dumping in the UK manufacturing sectors, putting thousands of jobs in steel and related supply chains at risk.
In 2017 the European Commission found that China had been shipping steel from Vietnam to evade tariffs, which led to dumping in the UK steel sector. The risk of increased dumping from Vietnam, as well as other countries, is compounded by the fact that the UK trade remedy system is currently too weak to be effective. The TUC is part of the Manufacturing Trade Remedies Alliance with the Unite, GMB and Community trade unions as well as a number of manufacturing employers’ associations. They are calling for stronger measures to deal with dumping from countries such as China and Vietnam in legislation and the removal of the public interest and economic interest tests, which prevent effective trade remedies being applied.
I turn to the job market. Following conversations with the TUC, I know there are concerns that the CPTPP may lead to job losses in some sectors due to increased imports from CPTPP countries. Of course there will be benefits from increased trade, but how do we ensure that important sectors of UK manufacturing are protected? I seek some reassurance from the Minister on that.
I turn to the public sector. CPTPP accession could also expose public services to further privatisation as it takes the negative list approach to service listings. This means that any services not explicitly exempted will be opened up to further privatisation. In the past, the Government have not adequately excluded services in trade deals to offer that protection. Meanwhile, the Government’s ability to exempt public services adequately in the CPTPP would be severely restricted as the UK would be joining the existing agreement with the 11, rather than at the start. This weakens and reduces our power to alter it. I beg to move Amendment 19.
Lord Johnson of Lainston (Con)
I am grateful, as always, for the debate we have had around these important points. I hope noble Lords will agree that I have covered in previous groups the importance of reviewing these free trade agreements and how they impact our economy. As I say, I passionately believe that they will be enormously positive. The noble Lord, Lord McNicol, may be overestimating the threats in areas such as privatisation, steel dumping and so on. We have strong protections from the TRA protecting our economy in areas such as steel. This free trade agreement does not affect our ability to control that area of our economy.
I am afraid that I cannot see how this FTA would lead to increased levels of privatisation. We have been very careful about protecting key areas of our economy. To some extent, my job as Investment Minister is to encourage flows of capital into the UK, and we were asked earlier for impact assessments around that. I would be comfortable with seeing flows of capital from CPTPP member countries into the UK: we are aligned with them, and they are our allies—we want to do more trade with them—but I do not think it will lead to the negative consequences to which the noble Lord alluded. However, I am comfortable to have further discussions. As I said earlier, we should look carefully in these debates at the sorts of areas that we wish to review to make sure that the impacts around FTAs are properly understood, but I would be very reluctant to have them codified in amendments to this Bill, for obvious reasons.
Lord McNicol of West Kilbride (Lab)
I thank the Minister for his response. As he outlined earlier, there will be an opportunity to review the implementation of the CPTPP in two years. The point of these probing amendments was just to put on record the importance of the sectors in these specific areas. He has put in Hansard, in his own words, that there will be no derogations in those areas, and I look forward to holding him to that. With that, I beg leave to withdraw Amendment 19.
Lord Johnson of Lainston (Con)
My Lords, I thank noble Lords for this important series of amendments and the discussion that we have been able to have around them. Since this relates to investor-state dispute settlements and I have investments in CPTPP countries, I declare that and direct all noble Lords to my entry in the register of interests—although I do not believe that I have any specific conflict and I am always happy to answer questions on any of those points.
For me, ISDSs are a very important element of protecting our businesses’ investments overseas. I spend a lot of my time talking to companies that make significant investments in many countries and, where they do not feel that they have protections, it creates a far higher level of work for the Government in trying to support them when they have disputes and clearly increases the hurdles for the necessary rate of return. So, from our point of view, having mechanisms where investors feel protected when investing into the UK economy by the consistency of the rule of law and the application of that law is very important. We are very comfortable with signing up to investor-state dispute settlement mechanisms.
The question from the noble Lord, Lord Purvis, on whether the FTA or signing up through the CPTPP is linked to ISDS, is perfectly reasonable. My view is that it would not make any difference. I am very happy to confirm that in writing. You would not pursue an ISDS case according to a specific route: from the investment point of view, the country either has that relationship or does not.
To the noble Lords, Lord Davies and Lord McNicol, I say that an important element of our system is that we have protections for our businesses when they invest internationally and that international businesses investing in the UK can have a high degree of confidence. It does not, at any point, derogate or hinder our right to regulate in the public interest, including in areas such as the environment and labour standards. In fact, this right to regulate is recognised in international law, and CPTPP expressly preserves states’ rights to regulate proportionately, fairly and in the public interest.
The noble Lord, Lord McNicol, is right to say that we have received a claim from investors relating to an ISDS. I do not think that that came from a CPTPP country, and it was in conjunction with another country. That is a fact, but not one that is necessarily in contradiction with the point that we have never singularly, acting on our own basis, had a successful claim made against us. That is important. We have nothing to fear without ISDSs, and I reaffirm that our flexibility to enact the legislation and frameworks that we want to run our country is not impeded if we stick to the rule of law and understand and respect the rights of investors putting their money in the United Kingdom.
Lord McNicol of West Kilbride (Lab)
I thank the Minister for giving way. The bit I am struggling with is the contradiction, and I do not think that he has answered that yet: we signed side-letters excluding ISDS with New Zealand and Australia, yet the Minister says how important they are. How does he balance these positions?
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord. We did accede, in terms of their negotiating priorities, to do that. We have long-lasting relationships with Australia and New Zealand, and we are comfortable allowing that to be the case as part of the negotiating process. The point is whether we are willing to sign up for them, and my point to noble Lords is that we are. Clearly, we need to make sure these processes are properly followed and that they suit us into the future—but currently, today, we are very comfortable signing up for them. I think it gives us, and our businesses, benefit, and creates an overall higher level of investment confidence within CPTPP countries, and within the UK.
Lord McNicol of West Kilbride (Lab)
I would like to thank my noble friend Lord Davies for his detailed explanation of this. It may well be something we come back to on Report.
I thank the Minister for answering the question regarding the side-letters, who was pushing, and how they came to fruition. I think that was important. The Minister’s position is that this is about protecting our companies. The amendment proposed by the noble Lord, Lord Davies, is a bit more detailed, but my Amendment 26 is simply calling for a review of the financial risks. I think that works well with the Minister’s position, so at this point I withdraw my amendment, but I am well come back to this on Report.
Baroness Lawlor (Con)
My Lords, my Amendments 36 and 37, to which I speak, relate to the proposed arrangements for geographical indications and conformity assessments for Northern Ireland.
First, I shall say a word on the background as to why I proposed the amendments. The Explanatory Notes to the Bill say:
“The GI and Technical Barriers to Trade … provisions in this Bill will extend to but will not apply in Northern Ireland. This is because, under the terms of the Windsor Framework, EU legislation relating to geographical indications and conformity assessment of goods, as listed in Annex 2 of the Windsor Framework, continues to apply in Northern Ireland. Article 15 of the Accession Protocol ensures that the UK can fulfil its obligations under the Windsor Framework”.
I have not been able to discover an accessible UK Government-consolidated version updating the withdrawal agreement and its Northern Ireland protocol with the changes under the Windsor Framework in Annex 2. This may well exist somewhere in Whitehall, but it is not clear how to find it. However, the EU has a consolidated version on its website, with Annex 2 in respect of decisions taken by the Joint Committee under the withdrawal agreement. The most recent version from September sets out these arrangements to which we refer in respect of the Windsor Framework.
Articles 15(2) to 15(7) of the CPTPP accession protocol deal with Chapter 29 of the treaty, on exceptions and general provisions, which provides for an exemption for the Windsor Framework clauses in respect of CPTPP where there is an inconsistency. There is also provision in Article 15 for the commission to review the implementation of the CPTPP.
I hope that noble Lords will forgive this tour of the relevant documents, but it is difficult to see from the Bill that its procedures in respect of geographical indications and conformity assessment procedures will not apply to Northern Ireland. It will instead be subject to EU law, as is clear from what I mentioned. I therefore have two reasons for tabling these amendments.
We do not know how the application of Section 4 on GIs and the designation of origin will work out for businesses in Northern Ireland by comparison with the rest of the UK in its trade agreements with CPTPP countries, nor do we know how it will affect businesses in respect of internal UK trade west to east. I therefore suggest that it is fair and proportionate to require such a review as I propose in Amendment 36—with a new clause after Clause 5—to assess the impact of EU legislation relating to geographical indications and conformity assessment of goods listed in Annexe 2 to the Windsor Framework and to assess the impact of Northern Ireland being subject to different GIs from those in the rest of the UK. Although the Minister made a fair point about the timing of such reviews in general, might he remain open to a shorter period of regular reviews for the assessment of the impact of EU legislation? This would not be a demanding exercise, given the proportionately small size of the economy.
It is important that the questions raised about the comparative impact of EU legislation on GIs and the conformity assessment of goods are a matter not of speculation but of fact, in so far as it can be established. We pride ourselves on consulting widely before laws are made, commissioning assessments on a range of areas potentially affected and measuring and reviewing the impact of a law once it is in operation. If Northern Ireland is to remain under EU law—itself a matter of some concern—it matters for Northern Ireland’s overseas trade, the smooth functioning of the internal UK market and the wider economy there that we have scope for such a review.
My Amendment 37 to Clause 6 is for the purpose of making it clear in the Bill that the arrangements for designation of origin and GIs extend to but do not apply to Northern Ireland. I suggest to my noble friend that inserting this at the end of Clause 6 would make for transparency and clarity and would remove the danger of appearing to brush under the carpet the non-application of arrangements in Clause 4 to Northern Ireland. With that, I beg to move.
Lord Johnson of Lainston (Con)
I thank my noble friend Lady Lawlor for her Amendments 36 and 37. I can assure her that exporters in Northern Ireland will benefit from CPTPP in the same way as exporters across the United Kingdom. It is also right that the people of Northern Ireland have a say in how EU laws apply in Northern Ireland. I would be delighted to have further discussions with her; this amendment was tabled quite late in the day, I am afraid, so I would like to explore further and see whether there are any nuances I could assist her with to give her a degree of comfort about how the CPTPP will apply to the whole United Kingdom, particularly Northern Ireland.
Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023
Lord Johnson of Lainston Excerpts(11 months, 2 weeks ago)
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Lord Johnson of Lainston
That the Grand Committee do consider the Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, these regulations were laid before the House on 16 October 2023 under the Retained EU Law (Revocation and Reform) Act 2023. The retained EU law Act brought about significant changes to the domestic body of law named retained EU law. First, it provided that EU interpretive effects would cease to apply to UK legislation at the end of 2023. Secondly, it provided the Government with powers to revoke, reform and amend retained EU law more easily. Finally, to reflect the loss of interpretive effects, it provided that “retained EU law” would be renamed “assimilated law” at the end of 2023. Therefore, the Government are bringing forward this instrument to ensure that references to “retained EU Law” in primary legislation are changed to “assimilated law”, and to make related consequential changes.
The SI will enact consequential amendments to 107 pieces of primary legislation in order to implement the renaming of retained EU law as assimilated law and to make related textual changes. These changes reflect what has already been agreed to by Parliament as part of the passage of the REUL Act. This SI simply implements consequential changes that both Houses have already agreed. For example, the SI states that, in Section 4B(3A) of the International Organisations Act 1968, “retained EU” should be substituted by “assimilated”. The changes are necessary to ensure that the statute book reflects the REUL Act and to provide legal clarity and accessibility to users of legislation.
The SI will make technical amendments to Acts of Parliament containing areas of devolved competence, including making changes to Northern Ireland primary legislation. I am pleased to confirm that the Welsh and Scottish Governments have provided consent, as has the Northern Ireland Civil Service in the absence of an Executive and Assembly. I thank officials for their close working and collaboration on this matter.
It is worth noting that this SI is a standard example of using a consequential power. These powers are common in many Acts. They simply allow the Government to make consequential amendments to legislation that both Houses of Parliament have already passed. The fact that we are debating such technical changes as this demonstrates the Government’s commitment to ensuring proper scrutiny for all statutory instruments laid under the REUL Act.
Finally, although this SI does not enact reform or make any policy changes, the Government’s commitment to reform remains unchanged. Our priority is to bring forward reforms that will unlock innovation, reduce burdens for business and ensure that our regulations are the best fit for the UK. I am the Government’s lead on smarter regulation, so reforming our regulations is a personal priority for me. I look forward to sharing additional reform SIs with the House in coming months.
With all that in mind, the principles behind the changes we are proposing today have already been agreed by both Houses as part of the passage of the retained EU law Act. These changes are necessary to ensure that the statute book reflects the provisions enacted by that Act and to ensure that the terminology is consistent throughout primary legislation on our statute book. Nothing that this SI does will enact policy changes. I beg to move.
Lord Leong (Lab)
My Lords, I confess I struggled to find the controversy in this statutory instrument. All it actually does is bring into effect the use of the phrase “assimilated law” instead of “retained EU law”. Paragraph 7.1 of the Explanatory Memorandum states:
“This instrument does not result in any change in policy effect, but rather provides clarity to users of legislation that the specific changes made by the REUL Act have taken effect—thereby helping to further modernise our statute book and improve its clarity and accessibility for businesses and consumers alike”.
It is basically a linguistic update. We on this side of the Committee very much welcome any bit of clarity and assistance that can be offered to business. From what we can see, it certainly is not a controversial statutory instrument. On that basis, we will support it.
Lord Johnson of Lainston (Con)
I thank the noble Lord, Lord Leong, as I always do, for his wise words. I will say no more than that.
Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023
Lord Johnson of Lainston Excerpts(11 months, 2 weeks ago)
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Lord Johnson of Lainston
That the Grand Committee do consider the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023.
Relevant document: 3rd Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, on 12 May 2023, the Government launched a consultation on three areas that could benefit from reform and where we could remove unnecessary bureaucracy: record-keeping requirements under the Working Time Regulations; simplifying annual leave and holiday pay calculations in the Working Time Regulations; and consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations—the TUPE regulations. The consultation sought views on proposals for these areas of retained EU employment law to ensure that they are tailored to the needs of the UK economy.
I turn first to the record-keeping requirements. The Working Time Regulations are derived from the EU working time directive and create various entitlements for workers, including minimum rest breaks and maximum working hours, as well as an entitlement to paid annual leave. While the regulations provide important protections to workers, they can also place disproportionate burdens on business in relation to recording working hours and other administrative requirements. That is why we consulted on removing the effects of a 2019 judgment of the Court of Justice of the European Union, which held that employers must have an objective, reliable and accessible system enabling the duration of time worked each day by each worker to be measured. Our proposed regulations make it clear that employers will not be required to keep burdensome and disproportionate records of daily working hours of each worker. Instead, employers will need to keep adequate records to demonstrate compliance with their working time obligations—I stress that point. This clarification could help to save businesses around £1 billion a year, without changing workers’ rights.
I assure noble Lords that people will continue to be able to enforce their rights under these regulations. Workers can take a case to an employment tribunal where they feel they have not been permitted to exercise their rights under the Working Time Regulations, including the rights to annual leave and to daily and weekly rest. The Health and Safety Executive, other state enforcement bodies and local authorities can also directly enforce maximum working hours and record-keeping requirements. It is important that employers comply with the Working Time Regulations and that they are held to account if they do not.
I turn to the Transfer of Undertakings (Protection of Employment) Regulations 2006. Before a TUPE transfer, the current employer and the new employer need to consult the affected workforce’s existing representatives or arrange elections for employees to elect a new representative if they are not already in place before the transfer. We want to simplify the process for businesses where worker representatives are not already in place. Currently, micro-businesses have the flexibility to consult directly with workers rather than hold elections. The SI would extend that flexibility to small businesses, with fewer than 50 employees, undertaking a transfer of any size and to businesses of all sizes involved in transfers of fewer than 10 employees if there are no existing employee representatives in place. That means that they will not be required to undertake the time-consuming process of arranging elections for new employee representatives.
This reform will simplify the TUPE process, while ensuring that workers’ rights continue to be protected. It does not erode the role of trade unions in the work- place. We are only proposing changing the consultation process in instances where businesses do not have employee representatives to consult. Where employee representatives, including trade unions, are in place, employers will still be required to consult them. I make it clear that the reforms will not change the requirement for businesses to consult employees on transfers; they will only change the requirement to elect employee representatives if they are not in place. Clear guidelines remain in place for employers regarding what they must consult employees on. Employers who fail to properly consult their employees about TUPE transfers could be taken to an employment tribunal.
The regulations also introduce reforms to holiday entitlement and pay. We have defined irregular-hours and part-year workers in these regulations to ensure that they are clear to employers and workers to whom some of the reforms apply. How a worker is classified will depend on the precise nature of their contractual working arrangements. We encourage employers to ensure that working patterns are clear in their workers’ contracts. We recognise that there are a vast number of different working patterns. The definitions seek to take all of these into account, so that the regulations are relevant for modern working practices. We will keep them under review.
I turn now to the holiday accrual method for irregular-hours and part-year workers. The regulations respond to the 2022 Harpur Trust v Brazel Supreme Court judgment. This resulted in part-year workers being entitled to a larger holiday entitlement than part-time workers who work the same total number of hours across the year. To address this disparity, the regulations introduce a simplified method to calculate holiday entitlement for irregular-hours and part-year workers. This will be calculated as 12.07% of hours worked in a pay period, in the first year of employment and beyond. This accrual method was widely used before the Harpur Trust judgment and better reflects what workers actually work in a leave year. The introduction of this accrual method could save businesses up to £150 million over the long term.
The regulations also introduce a method to work out how much leave an irregular-hours or part-year worker has accrued when they take maternity leave, family-related leave or sick leave. Introducing a 52-week reference period will allow employers to look back and work out an average of hours worked across that period. Employers will need to include weeks not worked and not on maternity leave, family-related leave or sick leave so that leave is proportionate to the time actually worked. This will ensure that workers are not unfairly disadvantaged when on maternity leave, family-related leave or sick leave. For example, if an irregular-hours worker goes on maternity leave, her holiday entitlement is reflective of how much she worked in the 52 weeks prior to going on maternity leave.
We are also legislating to allow the introduction of rolled-up holiday pay for irregular-hours and part-year workers. Rolled-up holiday pay is where an employer includes an additional amount with every payslip to cover a worker’s holiday pay, as opposed to paying holiday pay when a worker takes annual leave. We consulted on introducing rolled-up holiday pay for all workers. However, taking into account stakeholder feedback, rolled-up holiday pay will be introduced as an additional method of calculating holiday pay for irregular-hours and part-year workers only. Employers do not have to use rolled-up holiday pay for these workers if it does not suit their business; they can continue to use the 52-week reference period to calculate holiday pay.
Employers that use rolled-up holiday pay will calculate it based on a worker’s total earnings in a pay period. This will avoid the complexity of applying the rolled-up holiday calculation to different rates of holiday pay. Despite the fact that it has been unlawful since the 2006 European Court of Justice case of Robinson-Steele v RD Retail Services, rolled-up holiday pay is already used in a lot of sectors due to the simplicity that it offers to calculate holiday pay for irregular-hours workers. Allowing holiday pay to be paid as an enhancement to a worker’s pay at the time that the worker performed work instead of when they are on holiday will ensure that the worker’s holiday pay is as closely aligned as possible to the pay that they would have received. Rolled-up holiday pay also ensures that a worker receives the holiday pay that they are due even if they work for that business for only a short period of time. For example, an irregular-hours worker who works for a company over a period of three months will receive holiday pay as part of each payslip.
We note the concerns that allowing rolled-up holiday pay may disincentivise workers from taking leave. Compared with full-time workers, people who work irregular hours and part-year contracts are already likely to have periods when they are not working and, as a result, these concerns are less applicable. We also consider that existing safeguards are proportionate in addressing these concerns. For example, employers are already required to provide an opportunity for workers to take leave and we have heard through our stakeholder engagement that this is taking place. We also have safe- guards in relation to the 48-hour working week, where a worker cannot work more than 48 hours a week on average, unless they choose to opt out.
I turn now to the issue of retaining two rates of holiday pay and distinct pots of leave. We consulted on a further reform: the introduction of a single annual leave entitlement with a single rate of pay. We will not introduce this as part of the package. These regulations maintain the two distinct pots of annual leave and the two existing rates of holiday pay, so that workers will continue to receive four weeks at the normal rate of pay and 1.6 weeks at the basic rate of pay, totalling 5.6 weeks. Following a review of case law in this area and engagement with stakeholders, we are legislating to restate the case law in respect of the four weeks of leave. This is to ensure that workers continue to receive pay for those weeks at their normal pay rate, rather than having the whole pot paid at the basic rate, which for some workers can be a reduced amount. The intention is for workers to continue to enjoy the same rates of holiday pay from 1 January as they do now. We would like to assess the take-up of rolled up holiday pay and then consider more fundamental reforms to the rate of holiday pay. This will allow employers to continue with their current payroll systems, while providing clarity on what elements form part of normal remuneration.
I turn to restatements and revocations. In addition to these reforms, the statutory instrument revokes the European Cooperative Society (Involvement of Employees) Regulations 2006 and the Working Time (Coronavirus) (Amendment) Regulations 2020. The main European co-operative society regulations were repealed in 2021 and the regulations on involvement of employees therefore no longer have any effect in practice. The Covid regulations referred to in the statutory instrument were introduced as temporary legislation intended to prevent workers from losing annual holiday entitlement if they were unable to take it due to the effects of Covid. Therefore, these regulations are clearly no longer needed.
The scope of the statutory instrument is limited to Great Britain, other than the revocation of the European Cooperative Society (Involvement of Employees) Regulations 2006, which extends to Northern Ireland. Employment law in Northern Ireland is a transferred matter.
In addition, the statutory instrument mitigates the risk that the removal of interpretive effects on employment law could lead to a reduction in workers’ rights by restating the following three principles: the right to carry over annual leave where an employee has been unable to take it due to being on maternity or other family-related leave or sick leave; the right to carry over annual leave where the employer has failed to inform the worker of their right to paid annual leave or enable them to take it; and the rate of pay for annual leave accrued under regulation 13 of the working time regulations.
Northern Ireland has its own employment legislation. Accordingly, any secondary legislation on this would be for the Northern Ireland Executive, or the Northern Ireland Civil Service in their absence, to decide, with support from the UK Government to legislate if needed.
Although interpretive effects will cease from the end of 2023, the Government’s position is that the UK will remain in compliance with our international obligations under Article 2 of the Windsor Framework. The REUL Act’s restatement powers are available until June 2026. Therefore, the UK Government and the Northern Ireland Civil Service will keep all decisions on restatements under continuous review in both Northern Ireland and Great Britain.
As mentioned, the Government’s approach to restatements seeks to mitigate the risk that the removal of interpretive effects on employment law could lead to a reduction in workers’ rights. We undertook an analysis of the employment law, including domestic and EU legislation and case law, to assess the full extent of the risk that certain principles would be lost. Our assessment concluded that the three principles we are restating carried a high level of risk of being lost because they are largely or wholly dependent on the special features of EU law that are removed by the 2023 Act with effect from 1 January 2024. Therefore, the instrument will restate the three principles before the end of 2023 to ensure these employment rights continue, notwithstanding the removal of the special features of EU law by the 2023 Act. We are confident that these changes comply with our international legal obligations, including those in the EU-UK Trade and Cooperation Agreement.
In conclusion, under this Government we have seen employment reach near record highs. The number of payroll employees for September 2023 was 30.2 million, 370,000 higher than this time last year and 1.2 million higher than before the pandemic. Through Brexit we regained the ability to regulate autonomously, and we are using these new freedoms to ensure that our regulations are tailored to the needs of the United Kingdom economy. In addition to providing cost and administrative savings for businesses, these reforms aim to provide clarity on complex holiday pay legislation so that it is simpler for employers to follow and comply. Approximately 5.1 million workers will be affected by the holiday pay reforms. By simplifying the legislation, workers will receive the holiday entitlement and holiday pay that they are entitled to, and the restatements of the three principles mentioned above will retain existing rights. I beg to move.
Lord Hendy (Lab)
My Lords, this draft statutory instrument is the tip of the iceberg which noble Lords on this side of the House warned would appear over the horizon during the debates on the Retained EU Law (Revocation and Reform) Act 2023. Workers’ rights are on a collision course with it. We said that the Act would be used to remove workers’ rights. We moved amendments to try to protect those rights, but they were all rejected by the Government. For example, the then Minister, the noble Baroness, Lady Neville-Rolfe, said:
“I should say straightaway, as my noble friend Lord Callanan already has, that this Government have no intention of abandoning our strong record on workers’ rights, and nor are the delegated powers intended to undermine the UK’s high standards on workers’ rights.
Our high standards were never dependent on our membership of the EU. Indeed, the UK provides for stronger protections for workers”.
She then gave some examples.
Lord Leong (Lab)
My Lords, I thank the Minister for introducing the regulations, and all noble Lords who contributed to this debate. It is a pleasure to see my noble friend Lord Stansgate and welcome him to the chair.
As we have heard, this instrument does three main things. It reduces requirements under the working time directive, simplifies annual leave and holiday pay calculation and streamlines the regulations that apply when a business transfers to a new owner. This results from the retained EU law Act removing the interpretive effects of EU law on the UK statute book.
As my noble friend Lord Hendy mentioned, during its passage through the House, many of us on these Benches made it absolutely clear that the Act should never be a vehicle for the removal of important existing rights of British citizens. The Government seek to assure us that these changes do not amount to that, and that they simply remove extra bureaucracy. However, in my relatively short time in this place, I have learned to be wary of such assurances. It is said that the devil definitely lies in the detail. However, accurate records leading to accountability surely should not be seen as an evil in itself.
First, I turn to the change to the working time regulations. This represents the greatest risk to workers’ protection. It means that businesses will not have to keep records of their workers’ daily working hours if they can demonstrate compliance without doing so. Will the Minister accept that removing the requirement for accurate record-keeping, tilting the balance of power away from workers to the employer, in fact removes workers’ rights, not unnecessary bureaucracy?
The Explanatory Memorandum says that the instrument will “remove the uncertainty”, without quite explaining what this actually means. The Government argue that the obligations were disproportionate and could damage relationships between employers and workers. Can the Minister expand on how removing clarity could damage this relationship and do anything but actually increase uncertainty? Can he also explain how businesses will demonstrate compliance without records and how a lack of compliance could be evidenced or enforced? Can he expand on the implied relationship between recording working hours and reducing economic activity, or is he prepared to accept that such a correlation does not in fact exist?
Secondly, the instrument provides a simplification of annual leave and holiday pay calculations. In all my years of owning and managing businesses and employing thousands of employees, I have never seen such a complicated system—so much for reducing unnecessary bureaucracy. Can the Minister guarantee that, as a result of this regulation, no workers will lose out on the annual leave and holiday pay to which they are currently entitled?
Finally, I turn to rights under the Transfer of Undertakings (Protection of Employment) Regulations —TUPE. My noble friend Lord Davies of Brixton eloquently set out why this change is totally unnecessary. As TUPE transfers currently stand, employers must inform and consult with representatives from a trade union or, if there is none, other employee representatives. Employers can inform and consult directly with employees only if there are fewer than 10 employees in the organisation. This instrument will amend TUPE consultations so that they can take place directly with employees in the absence of existing representation, if either the company has fewer than 50 people or the transfer involves fewer than 10 employees. This clearly represents a reduction in the existing rights of workers in such organisations. Can the Minister confirm whether ACAS has been consulted on these changes? I look forward to his response.
Lord Johnson of Lainston (Con)
As always, I thank noble Lords for their valuable input in this crucial statutory instrument debate. I also join in the thanks to the noble Viscount, Lord Stansgate, and welcome him to his position.
I will try to go through the various points raised, beginning with those of the noble Lord, Lord Hendy; by answering some of his questions, I will have a chance to answer others as well. The point about rolled-up holiday pay is important because, if you are an irregular-hours contractor and you work for an employer for a very short period of time, for example, it would be impractical for you to take a fraction of a day’s holiday paid in that way. It is much more reasonable, useful and suitable for the employee to have their holiday pay rolled up into the work they are doing.
This is important, and we consulted on whether we should bring it in for all employees in the UK. We decided that that was very much not the right thing to do, precisely for the reasons raised by the noble Lord: it is essential, in many respects—in order to have a good and functioning workforce—that holiday is taken at the right time and that people have the right level of rest, let alone in relation to the implications for health and safety. As a result, this only applies to part-year and irregular-hours workers. Whether the employees wish to receive their pay in that way is at the discretion of the employer, in consultation with them. From my point of view—I have been an employer—this strikes me as eminently reasonable. It does not necessarily change anything significant; it just clarifies the important point about how that can be rolled up. We also brought in important clarifications between part-year workers’ holiday entitlements and irregular hours workers’ holiday entitlements, which now bring them into line. Again, this is about fairness, which I know that the noble Lord is keen on.
On record-keeping, it is relevant to mention the court case that has been referred to: CCOO v Deutsche Bank—I will use the acronym “CCOO”, rather than try to pronounce the full name. It is important to note that we are not changing anything at all. I am not sure whether noble Lords realise that this was never implemented in the UK, so the point is that we will not implement it in the UK and it is currently not implemented. Tomorrow morning, or whenever the statutory instrument comes into effect, there will be no change in employment systems for any company—no one would see any difference—because we are not implementing this necessity to track every minute of every worker’s day. Instead, employers will have the rights that they have today, so if we are comfortable—which we are—with the obligations that employers have to confirm under the working time directive, we should be very comfortable with where we are.
We believe very firmly that bringing in this necessity would in many instances be unnecessary. This does not relate to making sure that irregular-hour workers, workers in part-time roles or those who work complex shifts, and so on, have worked the right amount of time. In most instances, this is for regular office-hours workers who work roughly nine to five; to have them clocking in and out, and having complex systems monitoring them, is entirely unnecessary. We do not do it now and do not see why we should do it. We think that the cost to industry in this country could be much as £1 billion in terms of new systems and familiarisation.
The noble Baroness, Lady Brinton, mentioned Ukraine. The consultation referred to the fact that in a cost of living crisis, and with other global headwinds and challenges, it would seem unnecessary and wrong to impose burdens on businesses that we are not already imposing on them. There is nothing to lose. It is important to be reassured that employers’ obligations have not been changed. There are no changes as a result of this instrument. It simply ensures that we do not have to conform to unnecessary and restrictive paperwork-oriented activities.
The noble Baroness, Lady Brinton, also raised an important point about the use of AI and technology. I completely agree with her raising those points. I do not think it is in doubt that employers will want to use AI to ensure that they are conforming to their obligations and that their workforces are properly managed, but we should not forget that it is important that we respect small businesses in this country, which may not have the time or capital to invest in such systems. In most of these instances, we think it is unnecessary. I believe that, collectively, we are doing a sensible act in not implementing this judgment, by keeping things as they are and ensuring that workers are protected. Employers have obligations and we are allowing the system to function appropriately.
The third point covered by noble Lords was on TUPE. I know that the noble Lord, Lord Hendy, has been described as the barrister champion of the trade union movement, and it is a title of which he should be proud, but this relates to organisations with fewer than 50 employees—currently, it relates to organisations with fewer than 10 employees—who do not have a representative force in place. While he is indeed the barrister champion of the trade union movement, it may surprise him to know that some companies do not have trade union movements or representative organisations in them. We find ourselves in a bizarre situation where small companies with few employees are obliged to have elections for representative organisations that do not exist. Even in the world of the noble Lord, that would seem bizarre, unnecessary and indeed unkind to small businesses. It does not at any point derogate the rights of employers when it comes to TUPE transfers where there are representative organisations.
The noble Lord, Lord Leong—perhaps it was the noble Baroness, Lady Brinton, or the noble Lord, Lord Davies—rightly raised whether this can be used as a way round, so that large companies transferring small units to other companies could do it piecemeal, say 10 employees at a time. I do not believe that that would be the case. The obligations of an employer under TUPE regulations—the liabilities accruing to them—have not changed in any material way whatever. Tribunals where they could be found at fault would clearly see through such a plan. I am sure noble Lords know that when you buy businesses that are relevant in terms of team transfers to other companies, it simply does not work in that way, so I do not believe there can be an abrogation of rights.
Let me give an example, which I am sure noble Lords will agree is common sense: if you are transferring a small unit of two people, I understand that you are currently obliged to have an election and a representative for two people who are not members of a union and do not have a representative organisation. That does not mean they cannot receive external advice; of course, we would always advise people to receive the advice they need. In this instance, we are clarifying the situation, simplifying it and making it completely reasonable. At no point are we rolling back on any of the workers’ rights that we hold so strongly in this country and which we are committed to, either through trade agreements with Europe or any agreements that we have undertaken.
Genuinely, I have looked very carefully at each aspect of this statutory instrument and think it is a welcome tidying-up of paperwork and bureaucracy, alleviating burdens on businesses while at the same time simplifying the rights of workers and ensuring that the economy can function effectively. I commend this instrument to the Committee.
Lord Hendy (Lab)
I wonder whether the Minister would care to say something about the trade and co-operation agreement. If he does not want to, that is for him.
Lord Johnson of Lainston (Con)
I am always delighted to talk about the trade and co-operation agreement, as it is one of my favoured specialist areas, but I am not sure what the noble Lord wants me to refer to. If he is relating this back to the relationship with the CCOO v Deutsche Bank SAE case, the important point is that we have not brought this into effect as it stands, in any event, so I am not sure what the relevance there is. I cannot really see how his comments on the need to protect workers’ rights in terms of derogation of input production capabilities in relation to our European colleagues are relevant here. These are paperwork changes; they do not negatively change the rights of any workers in the UK.