Northern Ireland Protocol Bill
Lord Purvis of Tweed ExcerptsWednesday 2nd November 2022
(2 years ago)
Lords ChamberRead Full debate Northern Ireland Protocol Bill 2022-23 View all Northern Ireland Protocol Bill 2022-23 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 52-III Third marshalled list for Committee - (31 Oct 2022)
Lord Purvis of Tweed
Member’s explanatory statement
This is part of a series of amendments based on recommendations from the Delegated Powers and Regulatory Reform Committee which states that a number of subsections in the Bill “contain inappropriate delegations of power and should be removed from the Bill.”
Lord Purvis of Tweed (LD)
My Lords, this is a very short group. I will be quick, because to some extent the case has been made—well, the arguments have been presented. I believe that the case has been made; the Advocate-General might consider it not proven, however, for the Scottish reference.
This is another area where it would be helpful if the Government could give some examples of where they seek these very broad powers. The Delegated Powers and Regulatory Reform Committee again has stressed that what is to replace the protocol has not been determined yet because the underlying policy has not been formulated. This is an opportunity to provide some examples and to say why, if there is the defence of necessity, it extends to this clause. I simply do not understand.
If Article 13 of the protocol is to be an excluded provision, it would also be helpful to know the mechanism to supersede it if the Government secure an agreement, or indeed any subsequent agreement, because that is a necessary element within Article 13 that would be removed.
The final point I want to ask concerns Clause 14(3)(a) and (b). I do not know what powers the Government envisage will be necessary to manage the red lane—the EU lane—because that is presumably under EU laws and procedures, and obviously not under a dynamic mechanism. I do not know how the Government envisage the responsibility of managing that process under the EU rules.
My query about paragraph (b) is that I fear that considerable doubt will be raised over how the EU position in the single market will be able to be considered by Northern Ireland Ministers, of whatever Administration. I do not know what the consequences of paragraphs (a) and (b) will be. As I understand the Bill—the noble and learned Lord, Lord Judge, might know if he has had an opportunity to look at this—regulations made under Clause 13(5) could reverse primary legislation that has been removed in Clause 14. We could be in a position where regulations can reverse elements in another clause of the Bill. I think the Government are tripping over themselves.
If the Advocate-General is responding to this, can he give some examples of these areas? That would go some way towards reassuring the Delegated Powers and Regulatory Reform Committee and me. I beg to move.
Lord Judge (CB)
I shall not help the noble Lord, Lord Purvis, out, but I will say that the next time we come to this Bill, I think we will find that Clause 22 is the most devastating of all the Henry VIII powers. As to this amendment, I hope the Committee will excuse me if I do not keep repeating what I have said and would go on saying. I thought of giving the Minister a sheet of paper for him to write on, but then I thought I had better take it away as he might keep it and write on it. That is my point.
The Advocate-General for Scotland (Lord Stewart of Dirleton) (Con)
My Lords, I thank all noble Lords who have participated in this debate, which was short because, as the noble Lord, Lord Purvis of Tweed, recognised in introducing it, much of the material has been covered before. Noble Lords will, I hope, forgive me if, brevitatis causa, I do not go over all the arguments already deployed and will accept, that, because they have not been deployed, we understand where they apply in the context of this clause, and will bear them in mind when considering our responses.
Amendment 22, in the name of the noble Lord, Lord Purvis, removes the power in Clause 14(4). Clause 14 prevents those necessarily more broad and conceptual provisions from being relied upon, in the different legal context that will prevail under the Bill, to undermine the legal regime that the Government are putting in place for traders. The power in Clause 14(4) is important because it will allow Ministers to ensure, subject to the appropriate parliamentary scrutiny, that the exclusions made under the Bill are coherent. It may, for example, be necessary to make alternative provision where any other provision of the withdrawal agreement or protocol so far as it applies or relates to those exclusions is excluded. It could also be used to provide clarity as to how the horizontal exclusions referred to in Clause 14(1) interact with other exclusions in domestic law.
The noble Lord, Lord Purvis, and the noble Baroness, Lady Chapman of Darlington, sought examples of how it would work out in practice. I ask the Committee to bear in mind that the position in which we are at present is one of anticipation of what will be required in relation to a dynamic situation.
The powers to make secondary legislation allow us to flesh out the precise technical or administrative details of the new regime. The powers also need to be broad to ensure that the Bill can address issues that will arise in future as EU rules continue to change. The Government submit that the powers are both necessary for the legislation to be operable and have been appropriately limited prior to their implementation. As I said earlier, I do hear the criticism in relation to breadth offered by various noble Lords in the debate today and at other stages.
The noble Lord, Lord Browne of Belmont, made points reminding the Committee of the context in which the Government bring forward this legislation, and I am grateful to him for his qualified support. The points he made were no less powerful for having been made before, in the course of various debates we have had at earlier stages.
The noble Baroness, Lady Chapman of Darlington, from the Opposition Front Bench, refers to the way in which more and more laws appear to be being cast in this fashion, with more and more use of delegated powers. I invite the Committee to consider that, in the case of this Bill, the Government are seeking to legislate in such a vital area, as the noble Lord, Lord Browne of Belmont, reminds us.
The noble Baroness speaking from the Opposition Front Bench posed a number of technical questions. The questions she posed perhaps require an answer in more detail than I am able to give from the Dispatch Box, and perhaps than would be desirable to the whole Committee—but, if she will grant me forbearance, I will write to her.
I have not yet addressed the question of Clause 14 standing part of the Bill. It will support the coherent functioning of the Bill. It is important to ensure clarity in relation to the interaction between excluded provision and any wider provisions in the protocol or withdrawal agreement to which such provision relates. Subsection (1) gives effect to this by confirming that any provision of the protocol or withdrawal agreement is excluded provision to the extent that it would apply in relation to any other excluded provision. Subsections (2) and (3) set out further the kind of ancillary provision that may be excluded.
I discussed subsection (4) in addressing the amendment proposed by the noble Lord, Lord Purvis of Tweed, but I provide further assurance that the Bill seeks to establish a coherent domestic regime and that regulations can be made under it in connection with any provision of the protocol or withdrawal agreement to which this clause relates. The Government’s position is that the clause is important to insulate fully any excluded provision from being subject to obligations arising from other provisions of the protocol and withdrawal agreement.
I think I am following the mood of the Committee by not expressing myself in as much detail as my noble predecessor, my noble friend Lord Ahmad of Wimbledon —or Wimbledon of Ahmad, as he was prepared to style himself earlier—dealt in, but the Committee as a whole will recognise that this provision is tied up with its predecessor.
I hope that, at least at this stage, I have said enough to persuade noble Lords not to press their amendments.
Lord Purvis of Tweed (LD)
My Lords, I am grateful to the Advocate-General and I will be brief. I welcome his offer to write to the noble Baroness and those who have taken part in the Committee. The extremely pertinent question that was asked about the Government’s estimate of the number of regulations under the Bill that may be necessary to bring about a new regime is really important, so it would be helpful if the Minister could include it in his response.
I found it very interesting when he said that part of the reason these powers needed to be so extensive was that they needed to be sufficiently flexible for the Government to bring forward regulations when the EU changes its rules. I do not know how that brings about a response to the democratic deficit. Under the dual regulatory regime that will be put in place, we will be in the almost farcical situation that whenever the EU changes any of its rules, Ministers will bring to this Chamber negative instruments that will then be nodded through. There may be a fig leaf because it has the Crown on top of it, but it is not necessarily meaningfully different as far as people having an input.
My final element is perhaps for the correspondent of the noble Lord, Lord Browne. I understand and appreciate the frustration, and perhaps our considerations in Committee are long and tedious, but I have the liberty of putting forward amendments. They may frustrate or bore Ministers, but I am lucky to have that liberty. We cannot do that with statutory instruments, which are unamendable, so we do not have the opportunity to ask questions, tease out, challenge and maybe get concessions or further clarifications. If that is the case for framing an entire new system, that is really problematic.
However, on the basis of the Minister’s welcome commitment to write, in the meantime I beg leave to withdraw.
Lord Purvis of Tweed
Member’s explanatory statement
This amendment would remove the Minister’s power to treat as excluded provision for a permitted purpose any provision of the Northern Ireland Protocol or any related provision of the EU Withdrawal Agreement.
Lord Purvis of Tweed (LD)
This is a variation on a theme, but this one goes even further—I can be even briefer. The DPRRC reserved its most withering comment for Clause 15. I quote from paragraph 56 of its report:
“Clause 15 contains a power of the sort we rarely see—a power that in essence allows Ministers to rip up and rewrite an Act of Parliament”
and then to retain powers, if any of those new primary legislative functions are, in the Minister’s view, not operating as they should, not to return to Parliament for new primary legislation but to bring forward further regulations. This also completely rips up the entire concept of post-legislative scrutiny, whereby we learn from elements and seek amendments. This is important because, under Article 15(3), three areas of the protocol are not excluded but all the others are, including processes in a joint procedure of dispute resolution, monitoring, evaluation, classification of goods and joint mechanisms designed to be under a process. If it fails, there are mechanisms under Article 16 for safeguarding and rebalancing mechanisms. These are all gone and we do not know what will be in their place.
I understand the arguments presented that anything will be better than what there is at the moment, which is one of the themes. We just cannot be sure, however, because there is nothing in here that offers that reassurance. The breadth of this power, which provides the ability to make primary legislation and then to effect primary legislation again, is really egregious. On that basis, I beg to move.
The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)
My Lords, I thank all noble Lords for their contributions. I hear what the noble Lord, Lord Hannay, said, and I will take that back to the department. As I have said, where we can, we will certainly seek to update noble Lords on our current engagement, negotiations and discussions with our partners in the EU. From our perspective, the end objective is that the protocol must work for all communities in Northern Ireland, as I have said repeatedly. Clearly, it is not.
I turn specifically and briefly to Amendment 24, in the name of the noble Lord, Lord Purvis of Tweed. I will take this together with Clause 15 as a whole, as he did in introducing this group. This amendment would effectively entirely remove the ability for Clause 15 to operate. From the Government’s perspective, Clause 15 is important to ensure that the Bill is flexible enough to tackle any unintended consequences or future issues that may arise and that threaten the objectives of the Bill, particularly considering the importance of the issues the Bill is intended to address. This means that Ministers can make regulations to adjust how the Bill interacts with the protocol, and to reflect which elements are disapplied.
I fully understand that there is concern about the breadth of the powers under this clause; we have had debates on this, and the noble and learned Lord, Lord Judge, has raised this repeatedly. I reassure noble Lords that the power is limited to a closed list of specified purposes set out in Clause 15(1)—the noble Lord, Lord Ponsonby, alluded to this—for example, to ensure
“the effective flow of trade between Northern Ireland and another part of the United Kingdom”.
We have also applied the stronger standard of necessity to this clause, given its content. This is clearly an area where Ministers should be asked to reach a higher bar and have less discretion, a point we have debated extensively already. Additionally, as has already been discussed—and just to reassure the noble Baroness, Lady Ritchie, on her amendments relating to Article 2—Clause 15(3) provides that this power cannot be used to terminate the “rights of individuals”, the “common travel area” and
“other areas of North-South co-operation”
in the protocol. Of course, these are not the only areas of the protocol left unchanged by the Bill, but they are specifically defined here to provide particular reassurance on these very sensitive matters. I hope noble Lords are therefore reassured that Clause 15 will be used only in the event that it is absolutely necessary to address the Bill’s core objective of preserving political stability in Northern Ireland, an objective that I know all Members of your Lordships’ House share.
I turn briefly to Amendment 32 in the name of the noble Baroness, Lady Chapman of Darlington. We have already talked about the terms “appropriate” and “necessary”, and I put on record that we believe there is an appropriate level of discretion for Ministers in this respect.
I turn to Clause 16, which supports the functioning of the Bill by granting the power to make new arrangements in any cases where it becomes necessary to use the powers contained in Clause 15. This means that new law can be made via regulations, if appropriate to do so, in relation to any element of the protocol or the withdrawal agreement that has been the subject of the powers in Clause 15. This clause can therefore be understood as the equivalent of Clause 15 to the other domain-specific powers provided in other clauses of the Bill.
From the Government’s perspective, it is vital to ensure the functioning of the Bill and to prevent any gaps in the underpinning arrangements. Without it, there is a risk that any new issues arising from protocol provisions would not be properly addressed due to an inability satisfactorily to make replacement arrangements. I therefore recommend that this clause stand part of the Bill.
Lord Purvis of Tweed (LD)
My Lords, I am grateful for the Minister’s response and for those of everyone who has contributed to this short debate. There is a fundamental disagreement of principle with the Government, in that, if they are seeking powers such as this, it should be as a result of agreement. These powers should be powers to implement anything that is agreed.
I say to the noble Lord, Lord Bew, that we should be legislating to implement the results of the negotiations. Legislation should not be tactical: that is not the point of legislation, and it will never be good if it is. Therefore, this is really quite important to bear in mind. If formal mechanisms have been exhausted, we legislate—but only after agreement or exhaustion of it. The noble Lord seems very confident that negotiations are taking place, but I agree with the noble Lord, Lord Hannay: we have not heard the Government say that they are negotiating; they are describing them as “technical talks”. These include the “technical talks” about the application of the protocol. Do noble Lords remember “to fix it, not mix it” and “to mend it, not end it”? They are not my words but Ministers’ words. So negotiations are not taking place; “technical talks” are taking place. Yet Parliament is being asked to give Ministers powers to make primary law under regulations as a result of “technical talks”; that is jarring.
Lord Dodds of Duncairn (DUP)
The 44% who voted to come out was a much higher figure than people had expected—but I accept what the noble Baroness says. But we are part of the United Kingdom and, just as Scotland and London and other parts of England voted in a certain way, we had to respect the overall vote. And if every single person in Northern Ireland had voted to remain—never forget—there would still have been a majority for Brexit and Northern Ireland would still have left the European Union, because we are part of the United Kingdom. The Belfast agreement did not create a hybrid situation in Northern Ireland. The sovereign UK Government are the responsible Government. We are United Kingdom citizens. Special arrangements were made for governance, but not for sovereignty, and that needs always to be borne in mind by those who try to conflate the two things. I think I have said enough on the specific detail.
Lord Purvis of Tweed (LD)
Before the noble Lord sits down, I am grateful. I understand his arguments. It is not a question with regards to the result of the referendum. My question is in the context of having scrutinised many trade agreements and treaties, and the deficiencies in the CRaG process. I agree with the noble Lord that there are challenges when it comes to agreements made by the Executive under their prerogative power to negotiate, and then what ability do we have, even quasi-representatives in an unelected Chamber such as this, to raise issues? I get that entirely. But, if the Government secure agreement as a result of these talks, has the noble Lord given any thought to the mechanism for seeking consent for what the Government bring forward?
Lord Dodds of Duncairn (DUP)
Well, there are a lot of “ifs” there. If I understand the noble Lord, he is asking, “If there’s an agreement, what should the Government do in terms of getting an endorsement of it?” I presume they would come to both Houses of Parliament and consult with the parties in Northern Ireland. As we learned from the original Brexit negotiations, the Government would be very wise to consult with the parties in Northern Ireland before any final arrangements are entered into.
I have a lot of sympathy with the view expressed by the noble Lord, Lord Hannay, that there is a lot of secrecy around the negotiations. Nobody is quite sure what is going on—technical talks, negotiations or whatever. However, I remember living through one particular week when the UK Government went off to Brussels and then came back again because they had not consulted properly. I would not like to see that happen again, because the whole objective here is to ensure that we can get arrangements which allow the devolved Government to get up and running again, with the support of nationalists and of unionists. So, before we came to any formal vote, I suspect that there would need to be quite considerable discussions and consultations with the parties in Northern Ireland.
Lord Purvis of Tweed
“(3A) A Minister of the Crown may not exercise the power conferred by subsection (2) before full consultations have been conducted on any proposed changes with—(a) the Northern Ireland Human Rights Commission,(b) the Equality Commission for Northern Ireland, and(c) the Joint Committee of the Northern Ireland Human Rights Commission and the Irish Human Rights and Equality Commission,and the Minister has published the outcome of such consultations.”Member’s explanatory statement
This amendment requires a Minister to consult with a number of human rights and equalities bodies before using the powers in subsection (2) of Clause 15 in relation to excluded provision.
Lord Purvis of Tweed (LD)
I rise to move the amendment in the name of my noble friend Baroness Ludford, to which I have also added my name. The brevity of my contribution should not be seen as representing any lack of seriousness in the intent behind them. It really is to seek assurance from the Minister at the Dispatch Box that the regulation-making powers in Clause 15(2) would not be exercised unless there has been consultation with the human rights bodies outlined in Amendment 26, and similarly that regulations will not be put forward under other elements of the Bill without similar consultation of the human rights bodies. I need not make the case as to why that is so important. It is simply a case of seeking reassurance from the Minister that, at the very least, consultation with these bodies will have been carried out before the Government bring forward any orders. On that basis, I beg to move.
Lord Caine (Con)
My Lords, I am very grateful to the noble Lord, Lord Purvis of Tweed—as opposed to Twiddle—for being very brief. I think that this is probably the shortest debate by far that we have had throughout this Committee.
I will address the two amendments together, if that pleases the Committee. As the noble Lord set out, these amendments would require Ministers to consult both the Northern Ireland and the Irish human rights and equalities institutions before making regulations under the powers in the Bill. As I set out—I hope fairly clearly—on Monday evening when I was addressing the amendments in the name of the noble Baroness, Lady Ritchie of Downpatrick, the UK remains fully committed to ensuring that rights and equality protections continue to be fully upheld in Northern Ireland, in line with the provisions of Article 2 of the protocol. I think that on Monday I referred to the fact that, given my own experience over many years in Northern Ireland, I completely recognise the importance of those human rights protections. I often cite them when I am defending and supporting the Belfast agreement, as one of the key pillars of that agreement. I hope that the noble Lord will accept that assurance.
This is why Article 2 is explicitly protected from being made an excluded provision in Clause 15. The institutions mentioned in Amendments 26 and 47 are, as I have just stressed, important and respected institutions, established by the Belfast agreement and the Northern Ireland Act 1998. They therefore deserve—at the risk of repeating myself—our full and strong support. They undertake important duties and any change to their remit should, of course, not occur arbitrarily.
I will try to assure the noble Lord: the Government do engage regularly with these commissions. I last met the Northern Ireland Human Rights Commission on 8 August. It has powers to provide advice to the Government on issues arising from Article 2 of the protocol, as things stand. Officials have already had meetings with the Northern Ireland Human Rights Commission and the Equality Commission for Northern Ireland regarding a number of these powers. I believe that a further meeting is being scheduled very shortly.
More broadly, the Government have engaged extensively on the issues created by the protocol with stakeholder groups across business and civic society, in Northern Ireland, the rest of the UK and elsewhere, and we continue to do so. This amendment would compel the Government to do what in many cases they already are doing and intend to continue doing. However, the situation in Northern Ireland is pressing. Therefore, it is essential that in certain circumstances powers might need to be used quickly. In normal cases, the Government would of course engage with stakeholder groups in Northern Ireland, but there may be occasions when we have to move very swiftly.
In that context, the requirements set out in the two amendments to engage with the Equality Commission and the Northern Ireland Human Rights Commission before making any changes to how the Bill operates or using any of the powers in the Bill—even though most areas of the protocol do not touch on the commissions’ remit—would be disproportionately burdensome and risk delaying the implementation of solutions for people and businesses in Northern Ireland.
However, I cannot emphasise enough the extent to which the Government are committed to no diminution whatever in human rights protections in Northern Ireland, an integral part of the Belfast agreement. As such, I invite the noble Lord to withdraw the amendment.
Lord Purvis of Tweed (LD)
My Lords, I welcome the Minister’s commitment. I hope he sees very clearly that we do not doubt his commitment or his work in this area. The challenge we all have is that there may be a situation where he is no longer the Minister. We hope he will have as long a ministerial life as his noble friend Lord Ahmad of Wimbledon next to him, but that is not guaranteed in this world, so this is about having statutory protections, which we will reflect on. We are considering the question because it does not necessarily delay, nor is it burdensome, to consult human rights organisations before bringing forward amendments.
On the basis of the Minister’s commitment, we will reflect on this. However, in the meantime, I beg leave to withdraw this amendment.
Lord Purvis of Tweed
“(3A) A Minister of the Crown may not exercise the power conferred by subsection (2) before full consultations have been conducted on any proposed changes with—(a) the Northern Ireland Chamber of Commerce and Industry,(b) the Confederation of British Industry Northern Ireland,(c) the Federation of Small Businesses Northern Ireland,(d) Trade NI, and (e) any other persons whom the Minister considers appropriate as representatives of business, trade and economic interests in Northern Ireland,and the Minister has published the outcome of such consultations.”Member’s explanatory statement
This amendment requires a Minister to consult with a number of trade and industry bodies in Northern Ireland before using the powers in subsection (2) of Clause 15 in relation to excluded provision.
Lord Purvis of Tweed (LD)
My Lords, we will build up a fair canter with the next couple of groups because their principles are similar.
Part of the thrust of the argument is that we should be considering how we approach a new regime regarding Northern Ireland as we would for all other parts of the UK. The amendments in this group would do exactly that. They would adopt commitments provided by the Government in other legislation for the implementation of other agreements, including trade agreements, the operation of the single market and consideration of how that market will operate.
For example, Amendment 31 seeks that when the Government wish to operate the framework, they do so informed by the statutory bodies that Parliament has placed in legislation that would operate for all other parts of the UK single market. They should therefore, similarly, consult the Trade and Agriculture Commission, a statutory body tasked with looking at what Governments propose for the operation across the whole United Kingdom, and the Competition and Markets Authority, in relation to the operation of the UK internal market.
These have not been considered burdensome or lacking in timeliness, since these are all provisions in other pieces of legislation. If the thrust of the argument is that there should be consistency in operation for these, surely the Government would want to put in place the consultation of the statutory bodies to inform and advise, on the same statutory basis as in the other pieces of legislation. These amendments should not be too troublesome for the Minister to accept. I beg to move.
Lord Dodds of Duncairn (DUP)
My Lords, as the noble Lord, Lord Purvis, said, I hope we are speeding up a little. I will speak very briefly to Amendments 27 and 28 in this group, in his name and that of the noble Baroness, Lady Ludford.
In relation to consultation with various organisations —not statutory bodies—such as the chamber of commerce, the CBI, the Federation of Small Businesses, Trade NI, and, as mentioned in Amendment 28, the UFU, Food NI and the Northern Ireland Food and Drink Association, I wonder why those ones were chosen. If you are a member of Hospitality Ulster, you might be feeling a bit left out. If we are putting this in statute, why are certain groups put into statute and others left out?
Also, picking up on concerns raised earlier—I listened very carefully—proposed new subsection (3A)(e) talks about
“any other persons whom the Minister considers appropriate as representatives of business, trade and economic interests”.
The Government could be consulting for a very long time. Is the noble Lord not concerned that that could give a very open-ended power to the Minister, and would maybe provide him with too much discretion? I am very concerned about anything given to Ministers that allows them an open-ended process. Surely that would be of concern. I agree with the necessity of consultation with bodies such as this, and statutory bodies and so on, but I do not think it is necessary to put it in statute.
Lord Caine (Con)
I am extremely grateful again to the noble Lord, Lord Purvis of Tweed, for proceeding at a canter. To some extent, as he said, we are, to borrow a line from “Wish You Were Here”, going over the same old ground—Pink Floyd, for the uninitiated.
I will address the amendments in the names of the noble Baroness, Lady Ludford, and the noble Lord together. Again, I will try to reassure noble Lords that the Government have engaged very broadly on the issues created by the protocol with groups across business and civic society in Northern Ireland, the rest of the UK and internationally. I remind the Committee of something that I think was raised on Monday: over the summer, in addition to routine engagement the Government held 100 bespoke sessions with more than 250 businesses, business representative organisations and regulators.
Within my department, Northern Ireland Office Ministers held discussions with a wide range of businesses and organisations, including a number of those not actually named in the amendments tabled by the noble Lord and his colleague, such as the Dairy Council, Hospitality Ulster, as mentioned by my noble friend Lord Dodds of Duncairn, the Northern Ireland Grain Trade Association, the Northern Ireland Meat Exporters Association and the Northern Ireland Poultry Federation, either individually or as part of the Northern Ireland Business Brexit Working Group. In fact, the noble Lord might or might not be aware that most Northern Ireland food and drink representative bodies—although not one of those listed in his amendment, Food NI—are members of the Northern Ireland Business Brexit Working Group, with which we engage regularly, as are the Federation of Small Businesses in Northern Ireland, the Northern Ireland Retail Consortium, the Northern Ireland Chamber of Commerce and Industry, and the CBI in Northern Ireland.
Alongside this engagement, we have made visits to a number of individual businesses. I reminded the Committee on Monday about a farm I visited between Newry and Armagh during the summer, where senior representatives of the Ulster Farmers Union were indeed present, and where we discussed a number of issues relating to the operation of the Northern Ireland protocol in respect of the dairy sector. So the Government have already been conducting a detailed programme of engagement to inform the specific design of the regime in Northern Ireland that will be created by this Bill, and I give every assurance that we will continue to do so.
The noble Lord’s amendments would compel Ministers to engage in consultation with specific organisations as set out in the amendment, but as I said, there are many others that we are in discussions with that are not mentioned in those amendments. In many cases, the consultations that would be set out in statute would not necessarily be pertinent or proportionate to the regulations themselves and would lead only to further delays in implementing solutions. For example, I think the Committee would agree that the Northern Ireland Food and Drink Association might not necessarily need to be consulted on VAT applied to domestic energy saving materials.
However, the powers in the Bill might need to be used quickly, and while in normal cases the Government would seek to engage with stakeholder groups, there may be occasions on which the urgency of a situation would make that unnecessary and therefore it should not be compulsory. Given the extent of the consultation we are already carrying out with business organisations and others in Northern Ireland, this amendment would risk tying the Government’s hands behind their back.
Regarding the publication of consultations, it is vital that we be able to have free and frank discussions in confidence with as many groups and organisations as possible, in which they can freely express their views to government, sometimes in forthright terms. I am sure the noble Lord would not want them to be constrained in so doing, but the amendment might well inhibit that. Of course, the outcome of our engagement will be considered and reflected in the final regulations, which the House, as has been mentioned in earlier debates, will have an opportunity to consider and scrutinise under the normal procedures. In our view, we do not need a statutory obligation to do something we are already doing with a far larger number of organisations and bodies than the amendment would have us commit to. In that spirit, I ask the noble Lord to withdraw the amendment.
On the government impact assessment set out in Amendment 74, I understand completely and sympathise with the desire for an assessment of the arrangements under the new regime. I will try to reassure noble Lords that while the Bill does not at present have an impact assessment, the full details of any new regime will be set out in regulations alongside and under the Bill, including the economic impact where appropriate. We do not, however, believe it would be appropriate to mandate by statute that the Government must in all circumstances produce an economic impact assessment before the Bill can be brought into full force. Conducting an impact assessment, while important, is not and never has been a statutory bar to making legislation, and for that reason I invite the noble Lord not to move Amendment 74.
Lord Purvis of Tweed (LD)
I am grateful for the Minister’s response and I am not entirely surprised by it. I mean no disrespect by that. There is a distinction between engagement—I welcome the engagement that is taking place—in how the Government are informed about the operation of the framework, and the regulations in the two parts: first, to change the exclusion areas, to alter them, to expand them and to diminish them; and, secondly, to bring forward regulations. When we in Parliament are then asked to approve them, our knowing that consultation has been carried out is an important factor when we are scrutinising them.
The second issue is consultation with the Trade and Agriculture Commission and the Competitions and Markets Authority. I will not labour the point, but it is certainly not tying hands behind Ministers’ backs to consult those organisations before bringing forward regulations, because that is a statutory duty in other legislative areas for the functioning of the UK single market. But I hear what the Minister has said, and I understand the engagement. It is reassuring that that engagement will carry on. I will, of course, reflect on the Minister’s comments in more detail, but in the meantime, I beg leave to withdraw the amendment.
Lord Purvis of Tweed
“(3A) A Minister of the Crown may not exercise the power conferred by subsection (2) before full consultations have been conducted on any proposed changes with the relevant Northern Ireland departments, including the Department for the Economy, and the Minister has published the outcome of such consultations.”Member’s explanatory statement
This amendment requires a Minister to consult with relevant Departments in the Northern Ireland Executive before using the powers in subsection (2) of Clause 15 in relation to excluded provision.
Lord Purvis of Tweed (LD)
The amendments in this group are slightly different. It is striking that, of the information provided since the protocol was first agreed and then more recently, the most robust has been from the statistics authority of Northern Ireland and the Northern Ireland Department for the Economy. HMRC, BEIS and others have been catching up in trying to find information about the functioning of the internal market. It is interesting, after all these years, how little data has been captured about the internal market, presumably because we have never really needed to do it. That was exposed, to some extent, when we considered the now enacted United Kingdom Internal Market Bill.
The amendments in this group are similar to the extent of seeking the transparency that the devolved Administration have been formally consulted and asked for reports on the likely impact on the functioning economy of Northern Ireland. The reason we would put forward the argument that this is of value is that, if we are going to be—as the Government intend—operating in a dual regulatory regime, the necessity of having the Northern Ireland Executive and officials within the relevant departments in the Northern Ireland Executive having published information as to what the impact will be of how that will operate, will be very important.
If the Government are sincere that they want to have a sustainable solution to some of these challenges, we need better data. Therefore, the best organisations to provide that data would be the ones listed in these amendments, in partnership with the CMA and the Office for the Internal Market. If the desire of the noble Lord, Lord Dodds, and others is that this is much more rationalised into the internal market processes, the regulatory-making power under this Bill should basically be brought into the operation of the UK Internal Market Act. At the very least, more transparency, openness and involvement of the relevant departments of the Northern Ireland Executive would, I hope, be constructive. These are probing amendments, again seeking reassurance from the Minister at the Dispatch Box. I hope that they are seen in a positive manner. I beg to move.
Lord Ponsonby of Shulbrede (Lab)
My Lords, the continued absence of a formal budget for the coming year is a pressing problem. While there may be a draft budget, departments are unable to plan ahead, and this undermines both consumer and business confidence at the worst time. As-yet unspecified changes to the protocol are a risk to the Northern Ireland economy, which is one of the reasons why we, and many business organisations, would like to see a detailed impact assessment from the Government, alongside indicative regulations. Engaging with those departments in the weeks and months ahead is very important, as they know the Northern Ireland economy far better than any Minister in Whitehall. Can the Minister outline how frequently these discussions are taking place in Northern Ireland? Have the Government shared detailed proposals with their Northern Ireland counterparts? If they have, why should not Parliament see what those plans are as well?
Lord Purvis of Tweed (LD)
My Lords, it is a similar issue. I think we are approaching the same issue from the wrong angle. My point is that, if the Government are putting this forward as their framework, it is important that the framework and the regulations—which will not be just in one go; there may well be a constant churn—are informed in a transparent and public way, as the noble Lord, Lord Ponsonby, said with regard to judging what impact there might be. In order for us to scrutinise them, we should have a view from the Northern Ireland statistical department of what the long-term impact will be. It is not a case of engaging, which is what government should do anyway—and I welcome the clarity with which the Minister is doing it.
No doubt we will return to these issues when it comes to further pressing on what should be in the Bill about the expectations of who is consulted, how, and how we know they have been consulted. In the meantime, I beg leave to withdraw.
Lord Purvis of Tweed
Member’s explanatory statement
This is part of a series of amendments based on recommendations from the Delegated Powers and Regulatory Reform Committee which states that a number of subsections in the Bill “contain inappropriate delegations of power and should be removed from the Bill.”
Lord Purvis of Tweed (LD)
My Lords, I have a 25-minute speech on VAT and tax, but I might just summarise it for the benefit of the Committee. Again, the Delegated Powers and Regulatory Reform Committee has highlighted an inappropriately wide delegation of power. Here, it is on what would genuinely be an extremely controversial and sensitive issue of tax powers, excise and tax policy. The Government have said it is “not possible” to make such provisions in the Bill. I am just testing why it is not possible to state what a framework would be for provision of taxes, VAT and excise duties.
Everywhere else, what the framework would be is in the Bill—and for good reason. People need to know what the tax powers are and who holds them, and of course it is of controversy that the protocol has these linked elements. So I am simply seeking for the Government to fill in the gaps, state in clear terms why it is not possible and give a bit more information about what they consider to be their proposed framework when they move away from the protocol in these areas. This is the first attempt to get some more information from the Government—because the memorandum was not clear—in order for us to consider it, review it and perhaps return to this issue.
I would be happy for the Minister to write to me on my final point, rather than answer at this stage, because it is genuinely a probing question. Noble Lords may well recall that there had been successful attempts to amend the cross-border trade Act in Section 54, which is the prohibition on the collection of certain taxes or duties on behalf of country or territory without reciprocity. That includes in Section 54(2) that it shall be unlawful for HMRC to account for any duty or customs or VAT or excise duty collected by HMRC to the Government of the country outside the United Kingdom unless reciprocal.
The Government seem to be proposing a breach of Section 54, because the regime that they seem to be proposing is that we would be accounting to the European Union for taxes which we have set ourselves. I am happy to be contradicted about that and similarly happy if the Minister wishes to write on that point. I beg to move.
Lord Dodds of Duncairn (DUP)
My Lords, I rise to speak to Amendment 35A in my name on VAT and excise. I do not wish to prolong the debate at this hour. Very briefly, noble Lords will remember back in March when the then Chancellor Rishi Sunak announced measures in the fiscal event—mini-budget, estimate, whatever it was—that there was a zero VAT cut for households installing energy-efficiency measures, which would apply throughout Great Britain, but not to installation in homes in Northern Ireland of materials such as solar panels, insulation or heat pumps.
Consumers in Northern Ireland could not benefit from that VAT cut because of the protocol. Something that was warmly welcomed across the rest of the United Kingdom provoked concern and outrage across the communities in Northern Ireland. Mr Sunak announced that there would be extra money provided by way of Barnett consequentials to make up for it, but, as people with experience of the operation of the Executive know, sometimes the direct tax cut is the most effective and efficient way of getting these things done.
I have tabled this amendment to explore and seek the Government’s reasoning on their approach to the VAT issue. They have not gone down the route that they have in relation to state aid in Clause 12 of excluding Article 10 and annexes 5 and 6 of the protocol. They have not decided to exclude the relevant article of the protocol which applies the VAT rules. Instead, they have adopted the approach of saying there are large areas where we simply disapply that article and we can make provision by regulations in relation to the VAT excise duties and other taxes.
It is more akin to the situation that we find ourselves in with the protocol itself in relation to customs: Northern Ireland is nominally within the UK customs regime, but all the rules of the EU apply. What is the impact of the Government taking this approach in relation to VAT? Why are they not taking the same kind of approach to VAT as they have to state aid? What are the implications? It says clearly in the subsections what steps can be taken in relation to differences in VAT and making sure that the situation that we saw in March may not arise in the future, but what are the implications of not taking out the relevant article in the protocol completely?
Lord Ahmad of Wimbledon (Con)
I think that I have answered that question. I am sure that when the noble Baroness reviews the debate, she will find that I have sought to give a specific reason why the Government have a different approach in this respect. However, if she has further specific questions, I am of course happy to discuss them with her.
In conclusion, as I have said, I have justified Clause 17 to the Committee. In short, it provides Ministers with the ability to ensure that VAT, excise and other relevant policies are aligned across the whole of the UK, including in Northern Ireland. We believe that this clause is imperative in lessening—or indeed eliminating—the unacceptable tax discrepancies that exist between Northern Ireland and Great Britain, and I recommend that it stand part of the Bill.
Lord Purvis of Tweed (LD)
I am grateful for both the Minister’s response and the probing questions. In a way, it is a shame that this is the last group of amendments this evening, because we will need to return to this issue due to its significance.
The Minister said that it is the Government’s position that people in one part of the United Kingdom will still be using a foreign power’s tax regime. The Government propose that the difference is that, unlike at the moment, where that is directly enforced under the protocol, they are seeking powers under the Bill for us to bring forward orders to do it. But the net difference is zero. I fear that this will just build up more resentment and more concern, because there will be the expectation of the correspondent of the noble Lord, Lord Browne, that we have power over this now. Instead, as the Minister said, the Government will still be applying EU VAT rules in Northern Ireland for—as some will see it—a very justified reason, because it prevents the need for hard checks on the border with the Republic of Ireland. We are almost back to square one as far as the consideration is concerned, and there is little elucidation for it.
The former Foreign Secretary, Liz Truss, said that the UK should never have to notify another power—that is, the European Commission—on any decision about setting tax. Yet the Minister has said that that is going to carry on, even after the “technical talks” and this legislation. We will be returning to this issue, because what the Minister has said worries me. I hope that at some stage, he might be able to provide the information the noble Baroness, Lady Chapman, requested and clarify what the framework will be, because the democratic deficit could be compounded rather than resolved. In the meantime, however, I beg leave to withdraw the amendment.
Northern Ireland Protocol Bill
Lord Purvis of Tweed ExcerptsMonday 31st October 2022
(2 years ago)
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Lord Dodds of Duncairn (DUP)
My Lords, these amendments relate to Article 2 of the protocol. However, it is clear that Articles 1 and 2 subject that protocol to the prior treaty, the Belfast agreement. That is the fundamental point that must not be overlooked. There is merit in examining in detail what, for instance, Article 2(1) says, because it lends weight to arguments that we have advanced on our side and that have been advanced very eloquently by the noble Lord, Lord Bew. Article 2(1) specifically places an act of duty on the UK Government. That duty is as follows:
“The United Kingdom shall ensure no diminution of rights, safeguards and equality of opportunity as set out in that part of the 1998 Agreement entitled Rights, Safeguards and Equality of Opportunity results from its withdrawal from the Union”.
However, the operation of the protocol, as it is currently being operated and is designed to operate, is diminishing the rights set out in
“that part of the … Agreement entitled Rights, Safeguards and Equality of Opportunity”
and in the Belfast agreement, which sets out
“the right to pursue democratically national and political aspirations”.
That applies right across the whole remit of lawmaking in the Northern Ireland Assembly. Up until 31 December 2020, the people of Northern Ireland were represented in all the lawmaking to which they were subject.
However, since then, more and more laws are being applied that have been developed by the European Union, in which Northern Ireland representatives have absolutely no representation whatever. It is helpful that we are looking at Article 2. The operation of the protocol is therefore actively diminishing the Belfast agreement’s
“right to pursue democratically national and political aspirations”.
People in Northern Ireland can currently not do that—by standing for election or electing someone to the relevant legislature, whether here at Westminster or at Stormont—because they cannot make any laws. They have no say in any laws to which the people of Northern Ireland are subject in over 300 areas, hence the need for the Bill, which will return lawmaking powers for goods destined for Northern Ireland to a legislature within the United Kingdom.
I have listened to the outrage—as the noble Lord, Lord Bew, described it very well—that has been expressed about the powers that will be taken by Ministers. However, there seems to be little or no outrage felt at all about the absolute lack of any democracy whatever when it comes to whole swathes of laws over the economy in Northern Ireland. Never mind giving the powers to Ministers, or bringing forward regulations or statutory instruments capable not of being amended but at least of some scrutiny in a United Kingdom legislature—these are laws being brought forward on a dynamic basis, aligning Northern Ireland to EU law, different from UK law in many cases, with no scrutiny, say, vote, or anything else by anyone elected in Northern Ireland.
Where is the outrage about that? Where are the fulsome expressions of how this is a travesty of democracy, the like of which has not been seen—I cannot count any kind of precedents for it. The noble Baroness, Lady Ritchie, referred to the idea of a stool that has legs being cut off it. It reminds me of the description of the Belfast agreement as amended by the St Andrews agreement: a three-legged stool, with strands 1, 2 and 3; strand 1 being the internal affairs of Northern Ireland, the Assembly and so on; strand 2 being north-south; and strand 3 being east-west. When you interfere and cut the leg of the east-west relationship, which is what has happened as a result of the protocol, and you also interfere with the cross-community voting mechanisms of the Assembly itself in order to undermine any kind of unionist opposition to the protocol, you are cutting away at the legs of the Belfast agreement as amended by St Andrews. That is the reality, and, as the noble Lord, Lord Bew, said, we need to focus on the fundamental problem, which is that the Belfast agreement is being undermined by the protocol. Until it is sorted out, there will not be proper functioning of that agreement.
Lord Purvis of Tweed (LD)
My Lords, I want to rise very briefly in support of these amendments and also to say that my noble friend Lady Ludford made an extremely clear and very good case. I just want to add three very brief points.
The first is that I refer the noble Lord, Lord Dodds, to Hansard in 2019 and my contributions, among others from these Benches. We debated these issues and highlighted them, and he knows that. I am sure this evening it is just rhetoric in our Committee. He knows we have raised the concerns that he just outlined now. They are why we opposed it. So I do not think he can present that fact towards these Benches.
The second is that in my view Article 2 of the protocol should not be seen in a static form. Article 2(1) states:
“The United Kingdom shall ensure that no diminution of rights … results from its withdrawal from the Union”.
This is a permanent agreement, a permanent commitment, and therefore it cannot be seen that those that were in place in 2019 are now kept in aspic. So my noble friend is absolutely right that if you are taking away what is case law and when those rights and freedoms protected by Annexe 1 powers are adapted, unless they are dynamic, there is a diminution of those rights, by definition. The Bill proposes retaining them in aspic. The noble Baroness, Lady Ritchie, is absolutely right to highlight the fact that those Article 2 rights need to continue to be dynamic.
I know the hour is late, but I want to remind the noble Lord, Lord Bew, and others of Northern Ireland Protocol Bill: UK Government Legal Position, which is the founding basis upon which this Bill has been brought for our consideration. The final sentence of the penultimate paragraph is:
“The UK urges EU Member States to provide a new negotiating mandate to the Commission, wide enough to change the terms of the Protocol to respond to the full range of issues addressed by this legislation.”
So far, I have not heard a squeak from any Minister saying that the position of the Government is still that there should be a new negotiating mandate from the Commission to EU member states. I have not heard that; I am willing to be intervened on, or, if not, I want to hear from the Minister whether that is still the position. That was the legal position of the Government: that they are seeking a new negotiating mandate from the Commission. It is there in black and white, but I have not heard whether that remains the same. When it comes to putting faith in the negotiations, what is the basis of these negotiations if the Government’s legal position is that there has to be a new mandate and that is not forthcoming?
Lord Caine (Con)
My Lords, as ever, I am grateful to the noble Baroness, Lady Ritchie of Downpatrick, for her amendments, which have provoked a wide-ranging debate at this late hour. I put on record my acknowledgment of her forthright defence of human rights in Northern Ireland over very many decades.
I note that some of the amendments that have been debated this evening follow on from briefings and comments made by the Northern Ireland Human Rights Commission and the Equality Commission for Northern Ireland, both of which are important institutions that were established under the 1998 agreement and were set out in the Northern Ireland Act 1998. They perform a hugely important function, as noble Lords have pointed out, as part of the dedicated mechanism under Article 2 of the protocol. I do not think there is any difference between us on that point.
I therefore reaffirm at the outset that the Government are committed to Article 2 and to ensuring that rights and equality protections continue to be upheld in Northern Ireland. If noble Lords will forgive me, I think I have long enough experience in Northern Ireland itself to understand the importance of those protections. That is why Article 2 is explicitly protected from being made an excluded provision by Clause 15 in the Bill. To be clear, the Government will not do anything to undermine the provisions of Article 2. We believe that the Bill gives us all the powers we need to ensure that we can protect it. The noble Baroness’s amendments therefore seek to address problems that we do not envisage arising from the Bill.
I could go into great detail now but, given the lateness of the hour, I will say that we will continue to look at these issues as we consider plans for secondary legislation under the Bill. We will be particularly mindful of any interactions with Article 2, given the interest of the Committee. In that spirit, I look forward to receiving the detailed questions from the noble Baroness in writing. Of course, I give her an undertaking that we will provide her with very detailed responses, which will be placed in the Library well in advance of Report so that noble Lords have a chance to consider them.
On the noble Baroness’s specific question, Article 2 is not excluded and cannot be. Section 7A of the European Union (Withdrawal) Act 2018 will always apply. None of the provisions that the noble Baroness mentioned ceases to apply to Article 2 under this Bill, including Article 13(3), the arbitration provisions, Article 5 of the withdrawal agreement and Section 7C of the European Union (Withdrawal) Act. As I say, I am happy to put this down in much more detail in writing so that all noble Lords will have a chance to consider the responses.
On the point made by the noble Lord, Lord Purvis of Tweed, regarding the EU negotiating mandate, I am happy to confirm that the Government are still engaging with the EU in talks, and we are clear that movement from the EU is needed that goes beyond its 2020-21 proposals. We need to be able to make changes to the protocol.
To conclude—
Lord Purvis of Tweed (LD)
I know that it is late; it is very kind of the Minister to give way. Just so we are crystal clear, that means that we have formally sought EU member states to seek a new mandate from the Commission.
Lord Caine (Con)
I am sure that the noble Lord will forgive me if I do not give a running commentary on the negotiations. I have set out the Government’s position, and I do not really want to be drawn beyond it.
Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019
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The Earl of Clancarty (CB)
My Lords, at the beginning of this debate, the noble Lord, Lord Stevenson, said that parliamentarians are talking about this issue. The noble Lord, Lord Oates, and others, said that EU citizens are talking about this issue, and indeed, the British living and working in Europe are doing so too. They are all very worried. There is something about this issue to which the noble Lord, Lord Greaves, referred. It is a confidence issue, a trust issue and a perception issue. That is very important. There is a sense that a safety net is being removed in preparation for worse to come, despite the Minister’s assurances.
I would be appalled by any legislation that attempted to reduce the rights of EU citizens to run businesses or be self-employed in this country under a no-deal scenario. Such legislation should surely be in an immigration Bill, not presented to the House in this form as a fait accompli. As the noble Lord, Lord Stevenson, noted, we are talking about a wide variety of industries being affected. The so-called gig economy, the NHS, IT and the creative industries would be hit hard if EU citizens felt forced out, and we would be culturally impoverished as a result. However, as the noble Lord pointed out, it is not only the livelihoods of EU citizens that will be at risk, but the livelihoods of British citizens living in Europe.
It is a widely held view, but a misconception, that most British abroad are retirees. Of the 1.24 million UK citizens in Europe, Britain in Europe estimates that only 20% do not work. Many of those in work are self-employed, in as wide a variety of service industries as in the UK. It feels, however, as though the Government do not care enough about the British living in Europe, or about their livelihoods, which will without a doubt be threatened through any reciprocal effect. A number of us in this House have repeatedly asked the Government to protect the rights of the British working in Europe. This is not the right way to go about it, and that is apart from the message being sent through this legislation to EU citizens who run businesses or are self-employed in this country.
Lord Purvis of Tweed (LD)
In the absence of an impact assessment, I have four questions for the Minister. In many respects, they support the points raised by my noble friend Lord Oates.
The first is linked to the questions asked by the noble Lords, Lord Anderson and Lord Pannick. Can the Minister be clear with the House about what the Government consider the current preferential trading environment to be? If we offer a preferential trading environment to those providing services to a national of a country with which we do not have a trade agreement, we fall foul of the WTO. The Minister said that there would be no difference to those providing business services in the UK if they were EU, Swiss or EEA nationals. If that is the case, there should be no difficulty with the WTO, because we would not be offering any preferential arrangement. At the same time, if the WTO considered it a preferential trading agreement, and therefore discriminating against third countries other than EU countries, what would that preferential trading environment be for those that the WTO considered the UK to be falling foul of?
Given our consideration of the Trade Bill, we also looked at the draft services schedule presented by the UK to the WTO. There was no reference to that in the Minister’s remarks. Given that the services schedule has been lodged at the WTO for nearly a year now, what is the interaction with that services schedule? The Minister will know that there is a specific reference in it to those providing financial services, yet there was no reference to that in his remarks today. Will there be a difference for those EU nationals currently providing financial services products to UK citizens? I see the Minister nodding his head from his sedentary position, but that is contrary to the understanding of others. If the operation of the European financial single market ended on a no-deal Brexit, such people would not have the same level of protections. I would be most grateful if the Minister could clarify that.
My second point is linked to that. We also considered a continuity treaty with the Swiss Confederation. That treaty has specific clauses providing for elements of those who would be offering services. There was no mention of that in the Minister’s remarks so I am interested to know whether he can clarify something on the interaction with the treaty that Parliament has agreed, which offers, on a no-deal basis, a preferential level of support for those Swiss nationals. With this instrument, it seems as though things would contradict that because mentions of Swiss nationals run throughout it. If the Minister can clarify the point on how this will interact with the treaty that we agreed with the Swiss Confederation, I would be grateful.
Lord Duncan of Springbank
No, I will make some progress if I may. This is complicated enough, and I fear I have to answer noble Lords’ questions before they ask new ones.
The noble Lord, Lord Oates, was very clear in some of the points he raised. That is why I am trying to be as unambiguous as I possibly can. He sought explicitness, and I am trying to give that. The self-employed will be unaffected if they are EU nationals. Those providing services will be unaffected, and their continued ability to provide those services will go undiminished. Those operating businesses will be able to do so going forward undiminished. The laws that underpin them remain as they are, both in our domestic law and in the retained EU law. There are no new restrictions whatever placed upon these individuals in this. That is why I am trying to point out that the limited impact is just that—a limited impact.
This will have no impact on the settled status of anybody coming in; for those noble Lords who are concerned about migration, this suite of statutory instruments explicitly carves out any issues of migration to ensure that they are considered carefully during the passage of the immigration Bill, which is primary legislation and will afford this House and the other place the full rights and abilities to inquire into that. So again, there is no attempt to pull the wool over anyone’s eyes—quite the reverse. In seeking to move this into primary legislation where it touches upon immigration, we are ensuring that this House has the full panoply of opportunity to explore this, as it will need to do going forward. That is why I refute the point of the noble Lord, Lord Oates, that this is a clear breach. I do not believe that it is.
The noble Lord, Lord Pannick, is quite right when he says that this places upon us no new obligations. There are no new obligations which rest upon EU citizens; they can enjoy the rights that they have been able to do so to date. The question is whether the disapplication materially impacts on, for example, the ability of the gentleman mentioned by the noble Lord, Lord Campbell-Savours, to do his business. It does not. The noble Baroness, Lady Bull, raised the question of the restaurateur who operates a Turkish restaurant and whether it places material changes upon them. No, it does not. It is important to stress that we are not seeking in any way to erode the rights currently enjoyed by these EU citizens. However, I should say that this would be far better addressed through an implementation agreement, and ultimately by that future relationship, whereby we can put to rest any suggestion that this Government are seeking to undermine the rights of EU individuals to undertake their legitimate exercises.
The question of what happens for UK citizens who work abroad is more challenging. Again, we cannot insist upon such reciprocity, since it rests with each individual member state, and we cannot offer guarantees on their behalf.
Statutory Auditors, Third Country Auditors and International Accounts Standards (Amendment) (EU Exit) Regulations 2019
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)
It is like I have never been away. Noble Lords will be aware that regulations were laid before Parliament earlier in the year to address deficiencies arising in the fields of accounting and audit from the withdrawal of the United Kingdom from the European Union. They did not implement new policy but granted new powers and responsibilities to the Secretary of State and the Financial Reporting Council. Further regulating adjustments are now required.
The EU accounting and audit directive, together with the EU’s international financial reporting standards regulation—to the extent that they are not repealed—will form part of the retained EU law under the European Union (Withdrawal) Act. The accounting and audit directives set out the requirements on the accounts and audit of most incorporated businesses, as well as a framework of standards. The directives also set out the responsibilities of the competent authorities.
The EU’s international financial reporting standards regulation sets standards for accounting by parent companies of groups. The audit regulation sets additional requirements on the statutory audit of those businesses defined as public interest entities. These are banks, building societies, insurers and issuers of shares or debt securities on regulated markets.
Our aim is to ensure that the framework for accounting and audit regulation works effectively following the UK’s withdrawal from the EU. The statutory instrument under discussion takes some further steps to help facilitate this. With regard to the audit directive, this instrument will ensure that equivalence or adequacy status decisions will be granted by negative resolution regulations. It makes sure that, irrespective of whether a withdrawal agreement is reached, the Secretary of State can make regulations after our exit from the EU to set out the framework for future assessment of equivalence and adequacy by the UK regulator. It will also enable us to grant equivalence and adequacy status to some third countries that have had applications under consideration in the EU during the period since March this year.
This instrument also completes the process of extending powers to the UK’s competent authority, the Financial Reporting Council. It extends the FRC’s ability to regulate third-country auditors to include EEA and Gibraltarian auditors. It also puts beyond doubt that those EEA auditors who have already registered in the UK as statutory auditors will retain that status after exit. The instrument makes an important change to the audit exemption framework. In common with the exemptions in the accounting framework for subsidiaries, the subsidiaries audit exemption will not be available unless the subsidiary has a UK parent. Finally, on audit, the instrument corrects an error in the previous audit statutory instrument affecting the frequency of audit inspections required for auditors of public interest entities.
On accounting standards, the instrument revokes some EU regulations relating to the adoption or amendment of IFRS within the EU. Without revocation, these regulations would be brought into domestic law by the European Union (Withdrawal) Act. However, the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 have already made provision for what will be the international accounting standards for the UK at exit day. These revocations remove any duplication and potential confusion. The revocations here also reflect changes in EU adopted international accounting standards issued or identified since the earlier accounting statutory instruments were made.
What will the impacts be? The Government have carried out a de minimis impact assessment of this instrument as the overall costs to business are anticipated to be small. This confirmed that the additional impact on business of the changes in this instrument is a cost of approximately £930,000 per year. Only limited sectors are affected by each of the changes. This limited impact is counterbalanced by the beneficial effect of the changes in the first audit EU exit statutory instrument, which was assessed as saving businesses approximately £2.96 million per year.
In conclusion, these amendments aim to provide continuity for businesses operating in the audit sector wherever possible and to ensure that UK companies will continue to benefit from global trade and investment. If the UK leaves the EU without an agreement, the measures contained in these regulations will be critical in ensuring that the audit regulatory framework in the UK works effectively. I commend these draft regulations to the House.
Lord Purvis of Tweed (LD)
Is the Minister able to indicate a little more why it was a de minimis consultation? There has been briefing, but companies that operate on a cross-border basis have to register with the country in the EEA that they will be doing business with. This means that, effectively, there will now be British businesses doing duplicate processes after exit—a UK one and an EU one. These points of principle on the additional burdens on British businesses having to operate in two entities were raised repeatedly during the passage of the Trade Bill. It is even more complex for those in Scotland, where the Minister and I both live, which is under the ICAS registration process. What information does the Minister have about how many British businesses will have to have these dual processes? Why was there no consultation on the regulatory impact on those businesses, which will be a cost to the British economy?
Lord Duncan of Springbank
The impact assessment was conducted on a de minimis basis and it established that the cost is £0.93 million—£930,000. I am happy to write further to the noble Lord on this matter to set out exactly how this figure was reached and who is affected by it and will place a copy in the Library.
Lord Duncan of Springbank
My Lords, this is quite an exciting issue when you get into it—more so than I anticipated. I will attempt to tackle each of the questions raised in turn. After that, perhaps I may make some general points.
In reference to the points made by the noble Lord, Lord McNicol, the first thing to note is that the passage he quoted refers to the 58th report of that committee and not the 59th. In that report, the committee described the SI as being of interest, but the reports are quite different in the way they tackle the elements themselves. On the noble Lord’s specific points about the EEA auditors losing their exemption and to what timescale, that will happen at the point at which the changes come into force on exit day. Regulations 4 and 7 amend the Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019, which will also come into force on exit day. He asked whether the EEA qualification of auditors will be recognised up to December 2020 and the answer is yes, it will.
I hope noble Lords will bear with me because I am trying to make sure that I give all the answers that they expect. On the question asked by the noble Lord, Lord Liddle, about the implications of this, the impact assessment that was undertaken was able to show that the impact was modest. But the question he asked echoes the points made by the noble Lord, Lord Purvis of Tweed, so if the noble Lord, Lord Purvis, will allow, I will copy him into the answer that I will lodge in the Library. Noble Lords should have all the information that I have. I have no problem with that.
As to the wider philosophical questions of potential conflicts of interest and so forth, I am probably less equipped to answer those specifically. However, the Government will always maintain the highest levels of integrity, as noble Lords would expect. I have no reason to suspect any reason why I should be discomfited by what I am putting forward today, whether there are ethical or indeed wider accountancy considerations. It is not the intention of the Government in any way to create further ambiguity in this, but rather to ensure continuity as we move this matter forward. However, I will take away the issue about consultation, which is useful. I will reflect on that. I would not wish there to be an issue where noble Lords were uneasy because of the absence of information. I want noble Lords to have as much information as I have. I will reflect on that and make sure that in future I am able to bring noble Lords information that might help them.
Lord Purvis of Tweed
It would not be the first time that Ministers at the Dispatch Box during consideration of statutory instruments or Brexit-related legislation have said that they will reflect on the lack of consultation. To set my mind at rest on this aspect, what consultation was carried out on this measure with the Institute of Chartered Accountants of Scotland? What consultation was there with the Scottish Government? As the Minister will well know, the implications of this measure affect all parts of the United Kingdom, including those that have distinct history and presents, not just England.
Lord Duncan of Springbank
I am happy to write to the noble Lord, Lord Purvis of Tweed, answering each of those questions—if he will permit. Again, I will ensure that the answer is laid in the Library as appropriate.
I use the term “reflect” because it is the only term I can use in this instance. It is not just my own views that might reflect on the wider questions. My view right now is that I do not wish to stand before the House when these questions are raised when the answer is not adequate for noble Lords’ consideration. I wish all noble Lords to be able to see that we have taken every possible measure to assess the correctness of the approach and I want noble Lords to have comfort and confidence that that has been done adequately. I will give a guarantee that I will do that very thing. On that basis, I wish to move forward with the instrument.