Trade Bill

Lord Purvis of Tweed Excerpts

Committee: 4th sitting (Hansard): House of Lords
Monday 4th February 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, Amendment 45 is in my name and that of the noble Lord, Lord Purvis, for whose support I am very grateful. We are reaching the last quarter of our time on this Bill in Committee, and we have never touched, in any serious way, the question of services, which make up 80% of our GDP; they are an important part of our economy now and will be in the future. That curious absence of services has prompted this amendment; it is a probing amendment in the sense that I do not think there is any issue between the Government and us on this. We both recognise the importance of it and want to make sure that it is successful, but it is an opportunity for the Government to set out clearly what they intend to do in this area and to bring forward any thoughts they have about how the importance of services might continue, as the negotiations, which are currently with the EU and will return to the other place shortly, progress.

We hear a lot, importantly, about manufacturing and the physical goods that this country makes and imports. We do not hear nearly as much about services, and that is curious. It is important to be clear why that is. Direct trading of services across borders by purchasing or selling architecture, legal opinion or forms of insurance is a well-known measure of activity. This area has grown considerably and the UK economy is strong and strengthened by that. Business services, financial services and other aspects such as travel, including the tuition fees of foreign students who study in the UK, transportation and telecommunication information services make up the huge proportion of our activity in this area. Most trading of this type is with the EU. It is over 50% if Switzerland is included in the figures, but we also have considerable trade outside the EU and we should not forget that.

It is also important to recognise that, in some senses, exactly how this takes effect is hidden from plain sight. I should explain: we know a lot about the physical movement of things like car parts, because we are told, time and again, that the issue in modern-day trade is not so much the individual purpose of creating a particular object, machine or type of equipment; it is the assembly of the various parts. In the case of a car, bumpers, injectors and all sorts of things that go into the modern car cross the channel several times before being assembled, either here or elsewhere, in the final product, which is then sold. We are concerned about that and much of the Bill has this as part of its process, but the point is that this is not just about physical material. There is also a question about knowledge, intermediate input, services, financing and having the right people in the right place, which is necessary for this complicated pas de deux to work.

The single market, which underpins all this in the EU, plays a pivotal role in facilitating this process of increasing specialisation, because it includes as its basic point—this is derived from consideration within the GATS treaty under the WTO—the four freedoms for moving goods, services, capital and people. Hence, a focus on manufacturing the individual item sees only part of the story.

Why do services not feature more strongly in our discussion and debate? There are three reasons. First, services agreements are a relatively new form of trade negotiation. There are not that many around. They are difficult, because you have to negotiate and consider individual aspects, often regulatory and non-tariff barriers, to the way the trade happens. They cannot always be done by fiat from government; they have to involve large numbers of other companies and organisations. They are bureaucratic; they are not necessarily all organised from a particular aspect in government, such as BEIS or the Department for International Trade, because regulators and government departments will be involved in legal services and other areas. Finally, because different regulations belong to different bodies, it is more difficult to trade one sector, as it were, against another. There is not really an easy route through this, and that may explain why it is often left to the last.

I welcome the Government’s response on that, but it is a cynical response. We have done so well in services trade in recent years and our performance is one of the strongest in the world. We have more to lose in trade negotiations that focus on individual hardware and machinery parts if they do not also make sure that those trading in legal and other services are considered as well. We are in a quandary. We can argue the easy option of a goods-only agreement, because the rules for that are relatively straightforward: the tariffs are already very low anyway and we are not talking about substantial changes to the way in which we would do it. But if you include services then we are talking about a whole range of new activities, new players and the offering of new types of discretion. I will wait to hear the Government’s response, but it could be argued that we in Britain are not yet ready to engage with that successfully.

In that context, the opportunity is there for the Government to respond positively on how we are going to take forward this issue and how important it is to make sure that we get it right, and to make sure that we in this country do not suffer simply because the dog that did not bark—services—is still not barking. I beg to move.

[Lord Purvis of Tweed (LD)]

My Lords, I am grateful to the noble Lord, Lord Stevenson, for moving the amendment, which I happily signed. It will be no surprise that we on these Benches favour, still, the United Kingdom continuing as part of the single market of the European Union. However, in many respects this is a mitigating amendment on the basis that, if we are to leave the European Union, the most significant non-financial services sector for the British economy is, as the noble Lord, Lord Stevenson, said, the services sector. It is right, therefore, that we give proper focus to it in this Bill.

Up until this point, we have discussed the emerging elements of the continuity agreements. We have seen so far only one published, that of Switzerland, and are awaiting others. In the continuity agreement, Switzerland has components on services, and guarantees free movement of people for those providing services. That is beyond the elements in the immigration White Paper and in the withdrawal agreement from the European Union, and it is beyond what the Government have said. There are, however, some indications that the Government recognise that services are critical to the British economy. But it goes beyond that, as do our discussions with Switzerland, which are on the gold market and property.

This affects all parts of the United Kingdom. The UK is more dependent on services, especially non-financial, than perhaps any other country in the world. We export more in absolute terms than any country other than the United States. We have been able to get to that position because we have been doing so within an integrated market of the European Union. In many respects, we in the United Kingdom have been the driving force of the emerging integrated markets in the European Union. It is an irony that, as the architects of this approach to developing the services markets across the European Union to benefit our country, we are going to leave it.

If we are to have a future relationship, it is critical that we focus not only on tariffs and non-tariff barriers but on what is necessary to ensure that we can continue to benefit, at least to some degree, from a services relationship with the European Union. This applies particularly in digital services, as well as in the wider elements of research and development.

Many months ago, your Lordships’ committee reported on this, and in December 2017, in the name of the noble Lord, Lord Whitty, this House had an opportunity to debate the significance of the non-financial services sector to the British economy. Now, we have the Government’s clear position: we will be leaving it. We are choosing to leave an integrated market, which we have led, so how do we focus on some of the component aspects?

In the withdrawal agreement, we have seen some elements of mutual recognition of qualifications and some elements of professional standards being aligned so that those working in the services sector can be part of a wider operation on the continent and with the European Union. However, this is only a very small aspect of the overall need to have a much closer alignment. It requires government honesty: we may well be leaving the single market, but it needs to be clear what very close alignment would look like.

This applies to the discussions taking place this week and next week on the alternative to a backstop. The arrangements for the Northern Ireland backstop were as much to do with the continuity of the services sector for those providing professional and trade services from north to south and south to north as they were with the checking of the origin of goods at a border for tariff purposes. The all-Ireland economy is, by and large, an all-Ireland economy because of services. We are treaty-bound to protect that, so it is very important to have more clarity from the Government on what they expect to see as alternative arrangements to the Northern Ireland protocol if we are to protect the core elements of an all-Ireland services economy.

We know that we cannot rely on a much wider alternative, which is the WTO. In its last set of discussions, it could not even agree on a communiqué about taking forward future services agreements on a WTO basis. We know that the USA and China are in dispute not only on trade in goods, but also on services, and we know, as the noble Lord, Lord Stevenson, said, the complexity of even the European Union introducing services components to third-party trade agreements. If we know that it has been difficult, with the UK as the driving force, to secure agreements with other third countries, why do the Government think that it will be easy for the European Union to do it with us?

This amendment, therefore, is very important. I hope that it will allow the Government to be much clearer, because the services sector of the United Kingdom has, in many respects, been the driving force of growth in the UK, one that we cannot afford to put at risk.

[Lord Hamilton of Epsom (Con)]

My Lords, both the noble Lords, Lord Stevenson and Lord Purvis, have stressed how important the services sector is to the economy of this country and to the exports that we sell. However, anybody involved in the financial services industry would say that they have not been much helped by the single-market provisions of the EU, which have put up many non-tariff barriers, to which the noble Lord, Lord Stevenson, referred. It is probably quite ambitious, if we hope to have a free trade deal with the EU, to think that we are actually going to lower the non-tariff barriers that have been erected during our membership of EU, when the single market was supposed to provide a market for services as well as goods but effectively has not actually done so. I will be very interested to hear what the Minister has to say about this very important sector of the economy. We have not been much blessed by reciprocal agreements with the EU over financial services and very many other services in the past because of the non-tariff barriers that have been erected against them.

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[Lord Bates]

Yes, except that the political declaration was of course part of the withdrawal agreement negotiated with the EU 27, so one hopes that it will form the basis of our future economic partnership.

[Lord Purvis of Tweed]

The noble Lord, Lord Lansley, and I have referred to the WTO. My understanding is that there have been objections to the UK’s submission of services schedules to the WTO and therefore they are unlikely to be certified if we leave at the end of March. We can still trade on them, but they are likely to be uncertified. Can the Minister give a little context about what concessions we might make or what discussions we would have with those countries that have lodged their objections? Clearly, they feel that we will not provide the same kind of market access to UK services as under the existing agreements. We could be starting from a situation that is much worse than simply carrying on with where we are at the moment at the WTO. If the Minister cannot respond at the moment, perhaps he could write.

[Lord Bates]

I am very happy to give further detail on that in the general update between Committee and Report, but, as the noble Lord knows, the schedules were tabled in December followed by a 90-day consultation period. There can be a variety of perspectives on them before they are finally adopted. I will get an update as to where we are on that before Report.

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[Lord Bates]

I may not be able to get a categorical answer on that, but I am happy to undertake to write to the noble Earl ahead of Report to clarify that point.

[Lord Purvis of Tweed]

The Minister said that perhaps this amendment would be better placed elsewhere, but I wondered why, in the sequence of events, the UK did not agree a temporary arrangement with Switzerland on continuity, for example, in the case that I raised earlier in Committee. Instead, the Government have agreed a permanent relationship arrangement with the Swiss for free movement of people for three months a year if they are providing services. Clearly, the Government thought it was not sufficient to wait until we debated the Immigration Bill, when we could have considered that aspect of our relationship with Switzerland and others. But the Government have made a decision. So as my noble friend Lord Fox indicated, it is right that we press the Government much more. Why did the Government make a case for giving Swiss nationals a permanent right of visa-free travel and work for three months a year, but are taking a distinct approach to other countries, including our EU partners?

[Lord Bates]

Obviously, those are discussions that will have to be concluded in the future framework. On the specific point about Switzerland, however, the noble Lord suggested that the services elements were additional to the Government’s policy on immigration as set out in the Immigration Bill. That is not correct; it is not inconsistent with the provisions in that Bill.

On the point made by the noble Earl, Lord Clancarty, on onward movement for EU nationals, the UK pushed strongly for the inclusion of onward movement rights during the first phase of negotiations on citizens’ rights in the withdrawal agreement but the EU was not ready to include them at that time. I made that point about reciprocity earlier. We recognise that onward movement opportunities are an important issue for UK nationals in the EU and we remain committed to raising this during detailed discussions on our future relationship. That is the latest position we have at the present.

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Moved by

[Lord Purvis of Tweed]

67: Clause 6, page 5, line 4, after “in” insert—
“(a)”

[Lord Purvis of Tweed]

My Lords, I shall speak also to Amendment 68. These are probing amendments the purpose of which is to seek clarity not only about the Government’s intentions towards negotiations on the future relationship with the EU, but about the Bill and Clause 6 in particular.

Since Committee started we have seen one tangible example of what leaving the European Union means, because it also means that many European Union institutions are leaving the United Kingdom. When the flags were lowered and folded at the EMA headquarters last week, the director of the Wellcome Trust said that it was:

“A very sad day for the UK, a great day for the Netherlands”,


where the EMA will now have its temporary headquarters. I am fully aware that, in advance of our discussing this amendment today, many decisions have already been made at the EMA. I am also aware that, if we are leaving the European Union, our membership of EU institutions gives rise to significant complexities. However, that does not alter the fact that membership of the EMA is imperative to the United Kingdom’s medicines industry, our patients and consumers of pharmaceuticals.

The EMA is essential to the functioning of the single market for medicines in the EU, and the UK played a pivotal role in that process, not just in hosting the EMA for 23 years but also through the contribution of our scientists and researchers and our regulatory expertise. The agency’s work is vital and will continue to be so, providing EU citizens with effective, safe and high-quality medicines and maintaining a regulatory environment that fosters innovation and development of new medicines. It is vital that the UK continues to have a relationship, and my amendments seek clarity on how the Government see that relationship. We know that we are no longer able to engage as co-rapporteurs for new marketing authorisations applications—this will end regardless of what happens on 29 March 2019, agreement or no agreement. The only way we can stop this is if we continue our membership of the European Union, which is by far the most preferable of all the options, but on the basis that that will not happen, we also know that from March onwards the UK’s position will be considerably weaker.

Last April, the EU 27 completed the redistribution of the UK’s portfolio of more than 370 centrally authorised products to rapporteurs from the EU 27 plus Iceland and Norway. We know that significant damage has already been done. To put this in context, more than 40 million pharmaceutical packages are exported from the UK to the European Union every month, and more than 30 million are imported into the UK from the European Union. The UK pharmaceutical industry is integrated into the regulatory regime of the European Union, and separating this out has been a very painful process. The question remains: what will the relationship be going forward?

Paragraph 24 of the political declaration states—assuming this is still the Government’s position—the following:

“The Parties will also explore the possibility of cooperation of United Kingdom authorities with Union agencies such as the European Medicines Agency (EMA), the European Chemicals Agency (ECA), and the European Aviation Safety Agency (EASA)”.


What do the Government mean by co-operation? The Bill says—at the moment—that the Government should,

“take all necessary steps … to fully participate … in the European medicines regulatory network”.

It is for the Government to explain the disparity between the two. Why does the political declaration say simply,

“explore the possibility of cooperation”,

when the Bill says that the Government’s objective is full participation in the regulatory network? Why the disparity in language? Was this on the insistence of the European Union, or because the Government did not do what the House of Commons instructed it to do, taking a much stronger position in the Bill, with full participation as their intention?

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[Viscount Younger of Leckie]

I very much take note of what my noble friend has said. I have no doubt that that point, and so many others, will be taken into account when these negotiations commence.

I wanted just to clarify one point that the noble Lord, Lord Purvis, raised on the issue of “all necessary steps”, which is engrained in the clause to which his amendment refers. It is a point that the Government are reflecting on, but I absolutely reaffirm our objective of as close a relationship as possible with the EU in this particular subject. I hope the noble Lord will withdraw his amendment on the basis of those remarks.

[Lord Purvis of Tweed]

I am grateful to the Minister for his characteristically thorough response, except that we still have Clause 6 in limbo to some extent. I am not sure how long the Government can reflect on the language of their Bill, which the Government brought to the House without stating whether they intend to bring forward amendments on Report to change it. I think the noble Lord, Lord Lansley, made a very good point: this is a very significant issue that requires a degree of forewarning on what the Government’s intentions will be. I suspect we may just have to wait; we have pressed the Government enough at this stage with regards to getting some clarity on that point. It is frustrating that we still have some question marks that are being raised over the language of the Government’s legislation.

On the second point, I understand what the Minister says. There will not necessarily be any easy answers to this, but my point was that there can well be a marked difference between co-operation with, and participation in, European institutions—I think this is the point the noble Lord, Lord Lansley, was making, and I share his view. The European Union has been clear on that in the past. Indeed, on the previous day of Committee, my noble friend Lord Foster took part in the debate on communications and the regulatory bodies in the European Union for that. More recently, the European Union has changed its position to make it even harder for third countries to participate in the European agencies. Our bodies co-operate with the Food and Drug Administration in the United States. We have co-operation which is very deep, but when it comes to the key elements of whether medicines or vaccines are licensed, whether the research will be accepted on a reciprocal basis, and whether data is shared and can be legally shared between the two regulatory bodies, there are still issues that need to be identified.

It is reassuring to know that it is the Government’s intent, from the White Paper onwards, that we would have active participation, but at the moment it seems as if the political statement trumps that because it is more recent. However, the Government have reissued their position on active participation and, in advance of waiting to see what they bring forward on Report—if, indeed, they do so—I beg leave to withdraw my amendment.

Amendment 67 withdrawn.

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[Lord Hannay of Chiswick (CB)]

My Lords, I support the amendment in the names of the noble Lords, Lord Stevenson and Lord Purvis, and the noble Lord, Lord Bowness, who asked me to mention that he is unable to be here but that he continues to support the amendments. The noble Lord, Lord Stevenson, introduced the amendments admirably and explained very clearly why those parts of the Taxation (Cross-border Trade) Act which we seek to change are either unnecessary or damaging. He is absolutely right to say that the least important is probably the European Research Group amendment passed at a very late stage in the Commons, which we had no chance to intervene on effectively when it came through this House because it was a money Bill.

However, one part of it makes collection of customs duties possible only if the European Union collects customs duties and gives them to us. The original idea was that we would collect duties on behalf of the European Union; this was an essential part of the—now lost in the mists of time and buried deep under the soil—Chequers plan. The European Research Group amendment, frankly, neutered the Chequers plan, but as the European Union was never going to accept it anyway and made it clear at Salzburg and later that it would not accept it, there seems no point leaving it on the statute book.

The last point made by the noble Lord, Lord Stevenson, relating to Amendment 80 about VAT is actually extremely important. Anyone who seriously believes that preventing the British Government maintaining a VAT union, if you would like to call it that—a system that enables trade across borders between us and the European Union without the need for extremely elaborate VAT calculations, inspections, payments and so on—and doing away with that which exists now and going back to where we were before that existed will not put a huge amount of friction on our trade simply does not understand the realities. The VAT aspect is just as important as the tariff aspect and is separate from it. Unfortunately, the European Research Group—in its usual extraordinarily constructive way—has managed to insert something here that would be really damaging to our interests if it is sustained when we go into negotiations with the European Union about future trade arrangements. The only sensible thing to do—I hope the Government will give careful thought to this—is to get rid of this now and take it out of the Taxation (Cross-border Trade) Act.

We cannot be certain now what the Government and the European Union will do when negotiating our future trade arrangements. The Government are quite right to say they cannot guarantee how that will go. But they can remove this great ball and chain around their ankle, put there by the European Research Group, which would be really damaging to us if it ever came to be a central part of our future trade relationship. To say that relationship will be frictionless if the VAT aspect is not dealt with is just a bad joke, frankly, if you have to have VAT inspections, payments and all that sort of thing on goods that are passing. After all, the VAT levels are different in every member state, and the current system enables us to live with that without slowing down or impeding trade; that would go. So I really hope the Government—if not tonight, at least before Report—could say that they will take out that amendment, which should never have been allowed in. This is the single most important amendment in this group of four.

[Lord Purvis of Tweed]

My Lords, I am very happy to have my name attached to these amendments. It shows the Government there is a degree of cross-party consensus that it is important that these aspects—which, as the noble Lord, Lord Stevenson said, did not get the level of scrutiny they deserved in the Commons—get scrutiny in Parliament. This is after the event, because in effect we are scrutinising legislation, but there is no harm in a bit of post-legislative scrutiny of the taxation Act. In an exchange the Minister and I had during the very brief proceedings in this House on the Taxation (Cross-border Trade) Bill, the Minister said there would be ample opportunities for scrutiny, such as during the upcoming Trade Bill, so we are taking him at his word and offering the Government a chance to give a full-throated defence of the ERG amendments passed in the Commons.

As the noble Lord, Lord Hannay, said, there are perhaps some unintended consequences of these amendments that we now need to properly scrutinise. It is an extraordinary position we find ourselves in where Members of the Government’s party moved amendments to the Government’s Bill that would in effect render the Government’s then policy on the facilitated customs arrangement largely inoperable. Now those same Members are meeting the same Government today to breathe new life into the very systems of a facilitated customs arrangement that they themselves rendered largely inoperable by their amendments. I was struggling for an analogy on the way to the Chamber this afternoon. I could not find one as ridiculous as the position we now find ourselves in. If it is the purpose of the so-called alternative arrangements working group that is now meeting to try to find solutions to the problems that they themselves created, I do not think that any alternative arrangements will come out of this working group.

The ERG amendments now sit most uncomfortably with the process under way, so it is right that we give them proper scrutiny. The Government say one of the amendments they accepted—that there would need to be a stand-alone statute for any customs arrangement agreed with the European Union—is not necessary for any other trade agreements. If I understand it correctly, the positon of the Government is that the free trade agreement with the European Union would undergo a CRaG process, which is an affirmative process to be approved because there is a treaty, but a secondary customs arrangement that would come with that would have to have a stand-alone statute. Why? What is the Government’s rationale for that? In the Commons, the Government simply said they thought it would be appropriate that there would be a stand-alone statute. I do not understand why, so I hope the Government might be able to tell us why that would be the case.

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[Lord Bates]

My Lords, I rise more in hope than expectation of being able to persuade your Lordships. I pick up the sense from the Committee that this is probably something that your Lordships will want to return to in more depth on Report. Perhaps the best service I can offer at this stage is to put on record the Government’s position, respond to some of the precise points and then await further developments as they may unfold between now and Report.

Amendments 77, 78, 79 and 80 relate to changes passed in the other place during the passage of the Taxation (Cross-border Trade) Act 2018. This Act is important legislation as the UK leaves the EU. It enables the Government to create a stand-alone customs regime by ensuring that the UK can charge customs duty on goods, set and vary the rates of custom duty, and suspend or relieve duty in certain circumstances.

I turn now to the substance of the original amendments to the Act, which these amendments seek to remove. Amendment 77 relates to Section 31(5), which requires further parliamentary scrutiny in the event that the power under Section 31(4) is used to implement a customs union with the EU. The Government support the principle of further parliamentary scrutiny in this case. My noble friend Lord Lansley suggested that this was perhaps reflective of the politics of the movement. As a distinguished former Leader of the House in another place, he will be very familiar with how that side of things works. However, as this House is aware, the Government have made it clear that they are not seeking to be in a customs union with the EU as part of our future economic partnership—I say that without wishing to reopen the many debates we have had on “a” and “the”.

It is important to reflect why the Government have taken this view and to consider what leaving the EU means. It means the ability to strike out on our own to forge new trade deals. In order to do this, one important element is to have the ability to set our own tariffs. Being in a customs union would deny the UK this ability and fundamentally undermine our capacity to negotiate new trade deals with old friends and new partners.

The noble Lord kindly outlined, as he saw it, the way in which Amendment 78 arrived, referencing first the Bill and then the amendment. The Government have been clear in their White Paper that the arrangement they are seeking will ensure that both the UK and the EU get their fair share of the revenues from the rest of world trade. Section 54 of the Taxation (Cross-border Trade) Act is in line with the proposals that the Government set out with a view to achieving just that.

Turning to Amendment 79, Section 55 of the Taxation (Cross-border Trade) Act 2018 requires a single UK customs territory. This is a statement of government policy and ensures that the Government will not act incompatibly with the commitments made in the joint report of December 2017, where they committed to protect the constitutional integrity of the UK.

[Lord Purvis of Tweed]

I apologise for interrupting the Minister. I want to add perhaps another degree of lunacy to the several mentioned by the noble Lord, Lord Kerr. New Section 31 of the taxation Act, which Amendment 77 seeks to rectify, contains the following phrase:

“In the case of a customs union between the United Kingdom and the European Union”.


The Government said that that would not apply because the customs territory they are seeking to have will not be a customs union. So even if just to make the legislation neater, it should be taken out.

On defining the scope of the single customs territory, which we are seeking to do, the Government’s Legal Position on the Withdrawal Agreement, command paper 9747, says it is that,

“under which the UK aligns itself with the Union’s external tariff and there can be no tariffs or quantitative restrictions on imports and exports between the UK and the EU. The single customs territory therefore constitutes a customs union for the purposes of GATT19, but it is not the EU’s customs union as defined in Article 28 TFEU”.

It can either be one thing or the other, but the Government’s own document on the legal position says that the customs territory will be a customs union.

[Lord Bates]

I will make some progress, but I will come back to that point—when inspiration arrives.

No UK Government, regardless of their political leanings, could ever accept such a carving up of the United Kingdom—I am referring here of course to the division between Northern Ireland and the Republic of Ireland. Indeed, on 15 October, in another place, the Prime Minister said:

“We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom, and I am sure that the whole House shares the Government’s view on this. Indeed, the House of Commons set out its view when agreeing unanimously to section 55 in … the Taxation (Cross-border Trade) Act 2018 on a single United Kingdom customs territory, which states: ‘It shall be unlawful for Her Majesty’s Government to enter into arrangements under which Northern Ireland forms part of a separate customs territory to Great Britain.’ So the message is clear not just from this Government but from the whole House”.—[Official Report, Commons, 15/10/18; col. 410.]


Turning to Amendment 80—before I come to some of the points raised during the debate—the Government’s position is that they will not seek to be in a customs union with the EU. We have debated this issue in this House and in the other place throughout the passage of this Bill—leaving aside the very clear response that is on its way to the noble Lord; he should be prepared for that. As has already been highlighted to the House, at Report stage in the Commons, MPs rejected an amendment seeking to keep the UK in a customs union with the EU.

On the specific points relating to import VAT, it is clear that the Government are highly cognisant of the concerns raised. I will deal with that point now because the noble Lord asked some very good questions on VAT treatment, and it is good to have an opportunity to put the position on the record. Goods from third countries are treated as imports, with VAT due accounted for on import or by the 15th of the following month as duty of customs. This means that, unlike acquisitions, there is a cash-flow impact because traders have to pay the import VAT and potentially recover it later when they submit their VAT returns. It also means that there needs to be an option to pay import VAT on the border, as not all businesses have the necessary guarantee to defer payment until the following month. Generally, import VAT is paid sooner on goods from non-EU countries than on goods from EU countries. This provides a cash-flow benefit to companies importing goods from the EU compared to businesses that import from non-EU countries. Without an UK-EU agreement to retain this treatment, goods entering the UK from the EU would be treated as imports and would be subject to the same rules as businesses moving goods from non-EU countries. This would mean businesses paying VAT on imports from the EU sooner, affecting their cash flow. The Government published a series of technical notices in August 2018 to help businesses prepare for the unlikely event of a no-deal scenario. The VAT technical notice, “VAT for businesses if there’s no Brexit deal”, announced that the Government will introduce postponed accounting for import VAT on goods brought into the UK.

The noble Lord, Lord Stevenson, asked why we accepted Section 54—originally New Clause 36—of the Taxation (Cross-border Trade) Act 2018. The Government did so because it was consistent with our position. It requires the Government to negotiate a reciprocal arrangement for the collection and remittance of VAT, customs and excise duties. The Government have been clear that both the UK and EU should agree a mechanism for the remittance of relevant revenue. The Government set out in their July White Paper that they propose a revenue formula that takes into account goods destined for the UK entering via the EU and goods destined for the EU entering via the UK.

The noble Lord, Lord Purvis, asked whether the customs territory is a customs union under GATT, and he deserves a full answer to his detailed question, so I commit to writing to him. That should be very clear to the noble Lord and all Members of the House—well worth waiting for.

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[Baroness McIntosh of Pickering]

It will be hard, but I do not think we can let the matter go. That is why Amendment 101A should be on the Marshalled List and not consigned to room 101.

[Lord Purvis of Tweed]

My Lords, I wish to make two brief points in this large but important grouping. The first is in response to the point made by the noble Baroness and my noble friend Lord Fox. When the Secretary of State spoke at Second Reading of this Bill in the other place, he indicated that the Government’s position on the anti-dumping remedies regime would be public long before we considered this Bill. We are, to some extent, debating blind in not knowing what the Government’s proposals are. That is regrettable, so if the Minister can give some clarification, that would be very helpful.

The second point is really stimulated by the noble Earl, Lord Kinnoull, and the noble Lord, Lord Lansley: why are the Government continuing with Schedule 4 as it is currently drafted? As the noble Lord, Lord Lansley, said, the proposal would have been that the Secretary of State would appoint the chair of the TRA and then the chair would appoint the chief executive —that is in Schedule 4(2)(1)(a) and Schedule 4(2)(1)(c). If no chair had been appointed, the Secretary of State would appoint. In the Government’s Statement on 26 October, they announced the appointment of both the chair designate and the chief executive designate at the same time. I do not know how that interacts with this legislation, and on what basis the chief executive designate was appointed. I am not questioning those two individuals. If the intention was to have a truly independent body, the fact that the first chair had been the UK Trade & Investment representative raises some questions. I am not questioning the quality of the appointments. However, I am not sure how the fact that the announcement of both appointments was made on the same day interacts with the Bill, and on what basis both the chair and the chief executive were appointed as designate at the same time. As the noble Lord, Lord Lansley, said, either that is not consistent with the Bill, so the Government acted beyond how they said they would act, or perhaps we should just delete this aspect in its entirety for the sake of neatness.

[Baroness Neville-Rolfe]

On Amendment 101A, I agree with proposed new subsection 1(c), where you have,

“a chief executive appointed by the Chair with the approval of the Secretary of State or, if the first Chair has not been appointed, by the Secretary of State”.

The latter has already happened, so, as the noble Lord said, that becomes redundant. However, I am not convinced that all the executive members should be appointed by the chair without reference to Ministers. I have been involved in lots of appointments in different bodies over time, and the fact of the matter is that normally appointments are put forward and are approved ministerially, and this helps make the appointments sensible, enduring and independent.

For the same reason, I do not agree with the suggestion of the noble Baroness, Lady Brown, that we should require representatives of different groups. I can see exactly what she is trying to achieve, which is to have good, sensible people who would care about economics, people and devolved Administrations. However, my own experience is that if you restrain yourself in this way, you find that you are looking for somebody who has to be in a specific category, maybe there is nobody of quality at that time—especially as the pay rates in quangos are quite low compared with other opportunities for these people—and you get yourself into difficulty. I would favour simplicity, and independence achieved by having a separate agency, whatever my views may be on that.

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[Baroness Fairhead]

I am happy to take that back. I have heard the point. I asked whether there was a practice and was advised that this was the view we had arrived at, but I will certainly reflect on what the noble Lord said and take it back for further consideration.

On Amendment 104, tabled by the noble Lord, Lord McNicol, it is important that the Secretary of State has the ability to ensure that the TRA has the right leadership in place. Again, I reassure the noble Lord that the practices and procedures will be followed.

My noble friend Lord Lansley speculated on whether we could use an existing arm’s-length body rather than create a new one. There are two reasons why we believe we need to create a new non-departmental public body. First, no existing NDPB possesses the required pool of talent and expertise, or, secondly, offers the right balance of independence and ministerial oversight, to deliver the trade remedies framework as set out in the TCBT Act. I can confirm that we reached that decision following a thorough review of the arm’s-length bodies landscape.

Amendments 105 and 106 refer to the Secretary of State, rather than the chair, appointing executive members of the TRA board, and would therefore expand the Secretary of State’s appointment powers. We believe that might undermine the TRA’s independence. It would also be undesirable to include a statutory requirement to have regard to this set of criteria, as it might be unnecessarily restrictive. My noble friend Lady Neville-Rolfe has great expertise in this area. As she knows, it is important to have the right skills and the right blend on a board. For example, it may be important for some executive members to have HR or finance experience to ensure the TRA’s smooth operation. This would be a decision for the TRA chair.

Turning to Amendment 107, under paragraphs 9 and 10 of Schedule 4, the TRA chair is able to remove an executive member of the TRA board, and the Secretary of State a non-executive member, if they consider that person,

“unable or unfit to carry out the functions of the office”.

This already allows the TRA chair and the Secretary of State to determine whether to remove board members in the event that they become insolvent, receive a criminal conviction or are otherwise deemed unsuitable. We therefore do not believe that this amendment is necessary. In addition, all members of the TRA will be required to comply with the Cabinet Office’s Code of Conduct for Board Members of Public Bodies, which sets out the seven principles of public life that should govern the behaviour of public officeholders.

Turning to Amendment 108, let me assure noble Lords that the TRA will be required to follow the relevant provisions in Managing Public Money, which sets out that arm’s-length bodies must maintain a register of gifts. We would also expect the TRA to record in its annual report any gifts it receives.

I thank the noble Lord, Lord Stevenson, for tabling Amendment 109. We welcome the devolved Administrations’ interest in the TRA and understand the need to ensure that they are able to engage with it in the right way. I can confirm that the Secretary of State has committed to sharing the TRA’s annual report with the devolved Administrations once he has received it. I can also confirm that we have been in contact with, and will shortly be writing to, the devolved Administrations setting out further commitments.

On Amendment 110, tabled by the noble Lord, Lord McNicol, there are certain situations where the Secretary of State will need to issue guidance to the TRA. That is why it would not be appropriate to set out certain detail in legislation. Issuing guidance instead of legislation would give the TRA the operational flexibility it needs to be able to decide how to deal with matters on a case-by-case basis. However, to protect the TRA’s independence, and to ensure that this power is used only in appropriate circumstances, we have placed clear statutory restrictions on the Secretary of State’s ability to issue that guidance.

I am aware that I possibly have not fully answered the question from the noble Baroness, Lady Brown of Cambridge. We recognise the critical role played by producers and manufacturers: that is exactly why we have put a system in place and engaged extensively. We look forward to continuing to do so.

My noble friend Lady McIntosh suggested that it was not adequate that the Secretary of State was required only to have regard to the independence, impartiality and expertise of the TRA. The imposition of a duty on the Secretary of State is a common approach and can be found in other relevant legislation. For example, the Higher Education and Research Act 2017 requires the Secretary of State to have regard to the need to protect the institutional autonomy of English higher education providers when issuing guidance to the Office for Students. These are statutory requirements and cannot be ignored.

[Lord Purvis of Tweed]

I do not wish to make a glib point, but the Minister has referred to the Office for Students. The episode in relation to that office should remind us why we take seriously these aspects about the recruitment of those who will be the most senior in the TRA office. The Office for Students should be a good example for the Government of how an appointment process, while it might be prescribed in legislation, can be conducted very badly in practice. We are trying to avoid a repeat of what happened with the Office for Students.

[Baroness Fairhead]

I am grateful for that clarification, but that is one example that was just plucked out and it has a clear statutory requirement.

On the basis of the information I have given and my commitment to take some of these points back for reflection, I ask noble Lords not to press their amendments.

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[Lord Stevenson of Balmacara]

By this stage of the proceedings the Minister is usually tearing up her notes and packing her bag while the team are leaving the Box, and the Committee is allowed to descend into a sort of torpidity at the end of a long and heavy day—day four, in this case—while we heave a sigh of relief. However, I have always wanted to table an amendment about the commencement of a Bill because it is something that we always forget to look at.

I was mulling this over a few weeks ago and thinking about what aspects of commencement one could look at. It is all very straightforward, although Clause 7(1) has a strange thing where it says:

“Regulations under section 1(1) or 2(1) may … make transitional, transitory or saving provision”.


I was wondering what on earth they were and thinking about a suitable probing amendment when I happened to run into the noble Lord, Lord Hannay, who said, “I’ve been thinking about commencement and we ought to do something about it”. Out of that we hatched this wonderful amendment, which is the last one that we are going to move tonight, and I hope the Committee will accept it as it stands. It provides a sensible and clear exposition about what position Ministers should be in before they begin to implement these procedures. It is very simple, inserting a new clause further to Clause 15(2), which says that the powers that would otherwise,

“come into force on such day as a Minister of the Crown may by regulations made by statutory instrument appoint; and different days may be appointed for different purposes”,

Those are two quite clear conditions that have to be met. I beg to move.

[Lord Purvis of Tweed]

My Lords, I am happy to contribute to the successful realisation of the noble Lord’s ambition to have an amendment on commencement.

I want to make two final comments because I know the Committee has been working hard in offering scrutiny to the Bill, but before I do so I wish to thank the Ministers, and indeed the whole team, who have tried to answer on what was on some occasions an impossible situation. Earlier the noble Lord, Lord Bates, aptly commented on how fast things have been moving, and I think the Ministers have had a degree of sympathy from the Committee. However, this is serious. As the noble Baroness, Lady Neville-Rolfe, said, businesses need urgency as they operate. They need urgency in their day-to-day practices but also when it comes to knowing what the Government’s position is.

In advance of the next stage, if there is one, it is helpful that all the usual channels are here. I do not think the Committee needs any reminding of the decision of this House, very clearly stated, that greater information is needed on both the Government’s policy and intentions on how it sees trade agreements being put in place, as well as the relationship with the devolved Administrations. If that is not forthcoming, the House has sent a clear signal that there will not be a Report stage. However, on the basis that there will be, the information that is needed on the current position on the intended trade agreements needs to be forthcoming. There also needs to be clarity on—if we are going to be crashing out on WTO rules—the position of operating on non-certified WTO rules.

The relationship with the devolved Administrations, while a little clearer, needs more fleshing out. This is not just about constitutional courtesies with the Scottish and Welsh Parliaments and Northern Ireland authorities. Trade agreements could disproportionately affect parts of the United Kingdom, which will affect livelihoods and public services in those areas. They need to be not just consulted, but involved. Contrary to the Government simply wanting continuity agreements for trading relationships, we also want to see the rolling over of the same amount of parliamentary scrutiny that the European Parliament would afford trade agreements, which this Parliament will be denied unless this Bill is amended.

Finally, we need to be looking forward to the future. The noble Lord, Lord Lansley, and others, have made very constructive contributions. If we are to have a customs arrangement—which, if it covers the majority of our trade with our biggest market, will be a customs union—then the clarity about how that will be conducted will be important. While we are at the end of the Committee stage, I hope that the Minister has received strong signals that there are still questions that need to be answered. Those answers need to be forthcoming before this House will consider the Report stage.

[Lord Hannay of Chiswick]

My Lords, I am not sure that the noble Lord, Lord Stevenson, did me a great favour by alleging that I had partial paternity of this amendment, but I will leave that to one side. It is a very simple amendment, setting in statute the view that has been expressed twice by this House, by massive majorities, and once in the House of Commons last week: that leaving the European Union on 29 March by default without an agreement should be excluded. That is what this amendment proposes to do. It does not prevent this Act, as it would be, coming into effect in the event of the meaningful process being successfully completed in the other place. Nor does it do so if the other place should, in the extraordinarily unlikely circumstances, actually decide that we should leave without a deal. However, it rules out leaving by default as a condition for the entry into force of the provisions in this Act. No more needs to be said, and I have a feeling that we may wish to debate that rather more decisively on Report.