Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019

Debate between Lord Purvis of Tweed and Lord Duncan of Springbank

Wednesday 23rd October 2019 Lords Chamber

[Lord Purvis of Tweed]

Would the Minister give way?

[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

Debate between Lord Purvis of Tweed and Lord Duncan of Springbank

Thursday 26th September 2019 Lords Chamber

[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.

--- Later in debate ---

[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.

Devolved Administrations: 20th Anniversary

Debate between Lord Purvis of Tweed and Lord Duncan of Springbank

Wednesday 22nd May 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Northern Ireland Office and Scotland Office (Lord Duncan of Springbank) (Con)]

My Lords, it has been a wide-ranging debate. I hope I can do it justice this evening but I will exercise ministerial priority in addressing two points which need to be drawn out of the overall discussion.

I address my first point to the noble Lord, Lord Hain. He raises important issues regarding our wider legacy question but also, specifically, about pensions for those who have suffered in the Troubles in Northern Ireland. I was genuinely privileged to meet the same group who he brought across and they made me think. We still await the views of the victims’ commissioner, which we anticipate imminently, but I give the noble Lord my word that we will act on them as quickly as we can. These people have waited too long and it is right that we begin the discussion tonight on that point. It is important that they hear clearly from us that they have not been forgotten and that we will move forward—within the constraints, of course, of the victims’ commissioner’s views—as best we can to address that issue.

The second issue concerns the points raised by the noble Baroness, Lady Harris, regarding police funding in the Province of Northern Ireland. I have some exact figures on that but I am aware of the late hour. It might be better to send, if I may—I see a noble Lord nodding—those figures to the noble Baroness. I will lodge the same figures in the Library, so that all can see exactly how the UK Government have responded to the needs of the security forces in Northern Ireland to address these issues. I believe they are of particular importance but I will not detain us too long this evening.

This has been a wide-ranging discussion and I will start on what is perhaps the darkest aspect of what your Lordships have touched on this evening. It concerns Northern Ireland, which is the part where devolution is not working as it should. We see the consequence of that failure of devolution day after day. I have stood here on a number of occasions and listened to noble Lords explaining and exploring the realities of an absent Executive and a dysfunctional Assembly. That reality is palpable and it is felt. It is a reminder of how important devolution is and of how important it needs to be to work well.

The noble Lord, Lord Bew, is right to remind us that there are challenges in the working of devolution. Not everything is full of smiles and roses and there is no doubt that some of the challenges in Northern Ireland bedevilled the previous Executive. A number of the big questions that they had the opportunity to address and resolve were left unresolved. I am thinking of issues around the wider abortion question and same-sex marriage, and of some of the legacy questions themselves. These were great challenges, which would have challenged the greatest minds, so perhaps it is not surprising that they have not been resolved. But it is a reminder that devolution itself does not offer a solution to all the problems, only an arena in which they can be addressed. Northern Ireland needs that arena now more than ever.

I am reminded again of the comments made on more than one occasion that had there been a functioning Executive, the comments on Brexit would have been quite different. The voices that we hear would have been different and the discussion on the elusive backstop may well have taken on a very different colour. We have missed that, which is a great tragedy not just for Northern Ireland but for everybody here in these islands. I will not comment too much on the talks, which are ongoing, but there is a hint of progress. There is a belief that we are perhaps on the track of reaching that elusive resolution to bring the Assembly and the Executive into being once again. We need to pay tribute of course to Lyra McKee. That is why the people of Northern Ireland have begun again to remind their politicians that they are but temps—that they are there for a short time and have a job to do, and that it is critical that that job be done.

A number of noble Lords have said that devolution is not a destination but a journey. It is important as we look at that journey to recognise how we came to be there. I shall not spend too long examining the history—a number of noble Lords have done that eloquently today—but it is important to remember the challenges that brought about the need for devolution: the belief that there was a disconnect between the people and those governing them. It was almost as simple as that. I listened avidly to the noble Baroness, Lady Adams, when she talked about the situation she encountered when there were only a handful of Conservative MPs in Scotland, who were at that point seeking to move things forward there. There were two ways to look at that. One was at the number but the other was at the proportion of the vote. A number of noble Lords today have noted that the systems of voting carry with them large responsibility for where we are. In the election of 1992, the SNP secured 21.5% of the vote in Scotland and got three MPs; the Labour Party gained 39% of the vote and got 50 MPs, and the Conservative Party won 25% of the vote and got only 11 MPs. So the voting procedures carry with them a high degree of problems.

A number of voting systems can be used. There is no doubt that some are more believable than others. In these islands, I think people quite like to vote people out; they like to get rid of politicians they feel have wearied them for too long. I found myself standing for the Scottish Parliament in the early 2000s. Of the six candidates, I was the only one who did not enter the Scottish Parliament; the other five did—I felt a little left out.

When I was a clerk in the Scottish Parliament, I remember an MSP telling me that he had been elected by STD. I thought, “That means sexually transmitted disease and I am nearly certain that we were not elected by that method”. STV is a complicated system; I do not think the people of the country fully understand how it works. If we are to move forward on reinvigorating devolution, we need to make sure that the process and procedures that put people into office are understood and believed in by the people. That is critical. I think it is sometimes not understood and we end up with a challenge.

It would be wrong of me to suggest that devolution has not carried with it consequences that were not perhaps foreseen. One touched on by several noble Lords today is the impact on local authorities. Across this kingdom, there have been significant impacts on local authorities as a consequence of the functioning—sometimes the dysfunctioning—of some of the Administrations. A number of noble Lords have spoken about the centralising instinct of certain Administrations, who draw in to their capital city the very thing that they have sought to take away from the capital city of London. As someone who comes from Perthshire, which is approaching the Scottish Highlands, I was always lamenting the fact that all the good things happened in Edinburgh and never seemed to get across the Tay to where I lived. Then I remember my mother telling me that everybody in Blairgowrie had something but the people in Alyth did not. It is just a matter of scale—people are always fearful that something is going on—but it is a reminder that local authorities have been squeezed in this process. We need to consider that carefully as we examine the wider devolution question.

My noble friend Lord Lindsay raised an important point: the notion of intergovernmental and inter-parliamentary connection. He strikes a chord. These are things which, on a parliamentary basis, we could take forward now. There should be opportunities not just for Members to exchange views but for members of staff, who can experience the different methods of the different institutions, also to begin that journey. There is much to be learned by that conversation. As a former MEP, I have a strong memory of how important those shadowing systems were and how important it was to be able to trade different members of staff so that they could explain to Members, who were sometimes —as we often are—a little in the dark, how an institution worked. It is important to bring about that sort of intergovernmental and inter-parliamentary approach. Much can be learned and we can avoid some of the bigger problems.

I want to touch on the wider questions of where we go next, because a lot of the discussion today has been historic, and rightly so—we are celebrating a 20th anniversary—but the question is what comes next. A number of noble Lords made the point that the devolution framework broadly existed within the EU context. There is no doubt that, as the noble and learned Lord, Lord Hope, said, things might have looked different had there not been the EU, giving a certain permission for things to be devolved and others to be retained. Again, we will have to begin to think afresh. The Government have begun this approach, we have looked at these common frameworks, and there will need to be, across a whole range of areas, functional relationships between the different Administrations to make sure that there is seamless government and that the best policies are able to be achieved and the best outcomes delivered. We are working on that process; it is not always easy.

Without wishing to delve too far into the politics, certain Administrations are less inclined toward co-operation for very difficult and very distinct reasons, and it is not always easy to bring them alongside. That is why, when we have been seeking the legislative consent Motions, we have had greater success with the Welsh Government than with the Scottish Government. We should be able to see that for what it is, and not be dismissive of the reason behind it. It is hardly surprising that a nationalist Government in Scotland would wish to see things quite differently from a more unionist-minded Government in Wales. But we need to recognise that that creates a tension within the various fora and within the different structures. We need to be aware of that and not see it as a failure of the system but recognise that, in fact, it is because different individuals in a room see an outcome quite distinctly and differently.

A number of noble Lords asked whether the British state can survive. I am much more optimistic about that. I know that we are bedevilled by Brexit just now; the challenges are real and there is no point in pretending otherwise. But the UK has undergone fundamental constitutional change over the last 20 years, and sometimes we forget how resilient it has been. We often talk about the fact that that there is no single UK written constitution, and of course that is accurate, but in truth there are a number of written documents from which our powers and our rights are drawn. That can be remarkably flexible in the way we move forward.

Some of the biggest changes we have seen in our lifetime are indeed the devolution approaches that have happened. Again, recognising the distinctions between the different parts of this kingdom, the same was not applied to each. They were allowed to grow and evolve in ways that were particular to those areas and entities. I think, therefore, that it is indeed a process; it is a journey, and we will not reach the end point. We have to ask ourselves how, then, those entities work together to make sure that the United Kingdom continues to survive and thrive and prosper, and of course allow for those who would wish it to exist in a very different format to make their points known carefully and comfortably within the systems we have created.

I am aware of a number of individuals who have constructed the system we have today. I am always reminded of Donald Dewar. I met Donald Dewar once and he was an extraordinary individual. He was very unhappy that day because fishermen had just dumped a very large bundle of rotting fish just in front of the Parliament. He was not overly impressed at meeting me because I represented Scottish fishermen. At the same time, he recognised that we were trying to make a particular point. “There shall be a Scottish Parliament” was his oft-repeated statement, but my favourite part of his opening speech to the Scottish Parliament was what came next: “I like that”. That was a nice way of putting it. It was a recognition that there was now a different way of doing things.

It is right that we are critical. We cannot and should not simply accept and celebrate devolution as if it has been a unified and wholesome success. The noble Lord, Lord Foulkes, has made a number of interventions in this House regarding the British Transport Police and he and I have been overt allies in this regard, recognising that devolution itself does not need to be a great stake through the heart of co-operation: sometimes it is about working together to find the right solution, but being accountable to the democratic bodies, whether it be in Edinburgh, Cardiff, Stormont or indeed here. If you approach the argument with a simple position, which is that, irrespective of the argument, we must have it separate, with a wall around it, you are always going to get the same outcome, which will never be satisfactory within the devolution settlement.

That is one of the great failings that we experience on a daily basis: if you simply believe that independence is the answer to every question, you are never really going to get the functioning devolution you want. If all you have is a hammer, everything looks like a nail. If all you believe in is independence, every answer will give you the same outcome. Trying to marshal that is one of the greater challenges, particularly when we are seeing some of the great difficulties that Brexit has cast on us. I am fully aware, as a number of noble Lords here will be happy to attest, that the time ahead will be most challenging. There is no point pretending otherwise. We have in our devolution structure enough robustness to allow serious debate to take place. That is important, but we must recognise that it will be tested to the extreme. That is simply a statement of fact.

I have a couple of minor points on the ongoing intergovernmental review. It is important to recognise that this is a collaboration between each of the devolved Administrations and the UK Government. That is an important point, because we are trying to find the right way of creating the right sorts of structures. As a clerk in the Scottish Parliament, I always found the JMC structures frustrating because they were so secret; you could never find out what was going on behind closed doors. I am now on the other side of the doors and I wish that there was a secret. Sometimes it is not actually as exciting as it would seem. The reality is that the JMC structures will be one of the evolving aspects of this. People need to have greater confidence that their elected representatives are doing the right thing, and transparency and accountability will be at the heart of that.

That will be particularly important as we look at the common frameworks going forward. On the magical date when we move from this limbo world to the next stage, they will become critical as we try to make sure that our United Kingdom remains united and that we are able to focus on the bread and butter issues, as we know people want. Time and time again as I stand here representing Northern Ireland I am fully aware that those issues have been set aside because the devolution settlement of Northern Ireland is not working. We are ultimately tested on how we deliver well-being and results for the people we represent. It is important that we get the right system and that we get it working well.

[Lord Purvis of Tweed]

I do not wish to detain the Chamber, nor bring in any kind of division, and it is very welcome to hear that this relationship is progressing at an executive level. But would the Government be open to entertaining the possibility that there could be Members of the legislatures also involved in some of these discussions about what comes with the accountability to some of these ministerial or cross-executive discussions? Even if there are other intergovernmental relationships, there are still very few formal links between the parliaments, either in Cardiff, Edinburgh or Westminster, for parliamentarians. I know that the noble Lord cannot speak on behalf of the legislatures, but if these discussions are ongoing and the Government are willing to be open to the idea of like-minded parliamentarians, that may be positive.

[Lord Duncan of Springbank]

The noble Lord is right to raise the point, but I am probably not the right person to answer it. That is a parliamentary issue, which I imagine can be taken forward if the noble Lord is minded to write to the parliamentary authorities. That might be an approach. I know that noble Lords will be very pleased to hear that I am drawing my remarks to a close—or at least I was drawing my remarks to a close.