United Kingdom Internal Market Bill

Lord Stevenson of Balmacara Excerpts

Consideration of Commons amendments & Ping Pong (Hansard) & Ping Pong (Hansard): House of Lords
Wednesday 9th December 2020 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

Leave out from “12,” to end and insert “15, 16, 17, 18, 30, 31, 32 and 33 to which the Commons have disagreed for their Reasons 8A, 10A and 15A, do propose Amendments 8B to 8D and 8F to 8K in lieu, do propose Amendment 8L in lieu of the words restored to the Bill by the Commons disagreement to Amendment 12 and do insist on its Amendments 13 and 56—

8L: Clause 10, leave out Clause 10 and insert the following new Clause—
“Exclusions from market access principles: public interest derogations
(1) The United Kingdom market access principles do not apply to, and sections 2(3) and 5(3) do not affect the operation of, any requirements which—
(a) pursue a legitimate aim,
(b) are a proportionate means of achieving that aim, and
(c) are not a disguised restriction on trade.
(2) A requirement is considered to pursue a legitimate aim if it makes a contribution to the achievement of—
(a) environmental standards and protection,
(b) animal welfare,
(c) consumer standards, including digital and artificial intelligence privacy rights,
(d) employment rights and protections,
(e) health and life of humans, animals or plants,
(f) protection of public health, or
(g) equality entitlements, rights and protections.
(3) A requirement is considered disproportionate if the legitimate aim being pursued in the destination part of the United Kingdom is already achieved to the same or higher extent by requirements in the originating part of the United Kingdom.””

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank the Minister for his opening remarks and have listened carefully to his views. I will reverse the order in which he spoke and hope he will not mind and is able to follow.

I start with the question about powers, on which he ended. I thank him and his colleagues for the considerable time over the last few months—and increasingly the last few days—that they have provided to discuss this Bill and the wider context with which it engages. I confirm that we are happy to continue to talk in the remaining time. We agree with the stated aims of the Bill to ensure that our internal market works well for consumers in all parts of the United Kingdom for workers and businesses trading here and for importers. But we also support the DPRRC in its criticisms of the delegated powers which were initially included in the Bill. The DPRRC argued that they were not appropriate and were in excess of what was needed to ensure the continued operation of the UK internal market, so we are delighted that the Government said in their letter issued this morning that they have:

“listened closely to and acknowledged the strength of Peers’ concerns regarding the position of the devolved administrations in relation to the application of … delegated powers”.

Your Lordships owe a considerable debt of gratitude of my noble friends Lady Andrews and Lady Hayter for their work on this over the last few weeks. They have been tireless in their pursuit of the issue and it has resulted, as the Minister said, in three major concessions, which we welcome, and some other changes. The concessions require the Secretary of State to seek the consent of the devolved Administrations before exercising the powers, setting a time limit for that and a process if consent is withheld, and introducing a statutory requirement to consult with the devolved Administrations before issuing, revising or withdrawing guidance. We welcome these, and the statutory requirement for a review of these powers in Part 1 and Part 2 of the Bill within five years. Finally, on this issue, it is good to see the change in tone towards the devolved Administrations, which is reflected in these changes, in the speech today, and in the letter to which I have already referred.

I turn to Amendment B1 in my name, and the amendment in lieu, and look forward to the debate. I give notice as requested that I intend to test the opinion of the House at the end of that debate. We agree with the Government that, at the core of any approach to setting the rules for the UK internal market, there should be harmonised rules underpinned by a strong consultative process. We seek a combination of common frameworks on the one hand and market access principles on the other.

In the debate that has just occurred on the amendment in lieu offered by the noble and learned Lord, Lord Hope, the House has confirmed its position on the common frameworks process, which, as my noble friend Lady Hayter said and the Minister agreed, builds on substantial progress made to date. The Government’s main objection continues to be that as the common frameworks are, at heart, a voluntary and co-operative system, with all the strengths and benefits that brings to the devolution settlement, it could bring unnecessary uncertainty into the system. We acknowledge that, but we think that there are ways in which that could be tackled, some of which are based on powers that the Government already have in place. We remain willing to explore a possible solution to the Government’s concerns over the next few days—perhaps over dinner, if that is how things are done these days.

However, there is also a need for statutory underpinning of the internal market. The purpose of our amendment is to preserve the potential for managed policy divergence that is central to the devolution settlement. As the noble Lord, Lord Anderson of Ipswich, said on the first day of Report:

“That potential is squeezed out for the future, save in limited and inconsistent respects, by the non-discrimination and mutual recognition principles as they appear in the Bill.”—[Official Report, 18/11/20; col. 1508.]


My amendment provides the derogations to the market access principles. They are commonly available in devolved, federal and confederal states all over the world. Their purpose is more a safety valve than a threat to market integrity, and their use would remain subject to strict statutory controls. As currently drafted, the structure is unbalanced. The common frameworks incentivise co-operation and consensus, and my amendment would diminish in a strictly controlled fashion the crudely centralising force of the market access principles, provide balance and encourage innovation.

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[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank both speakers in this short debate. We have not had much buy-in from others, but that just shows that the issues are very clear, and I think that people may well have already made up their minds.

I was interested that the noble Lord did not really come back on the points that I made. His concern seems to be that the list is too expansive, although he does not seem to attack the principle on which it is based. I signal again, and reaffirm, that we would be very happy to discuss how such a list should be configured better to suit his interests and meet his concerns. I hope that I am not misreading the willingness to do that over the next few days—we would certainly be available to talk if he wanted to do so.

I think that we have covered the ground very carefully. We support and welcome the Government’s amendments in the area of delegated powers, but I would like to test the opinion of the House on my Motion B1.

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[Lord Fox (LD)]

My Lords, this has been, again, a short but important debate. I thank the previous speakers and I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, for his detailed proposal.

First, I will address the comprehensive and well-laid out response by the Minister on why your Lordships’ amendment has been knocked back. I will not come between the noble and learned Lord and the Minister when it comes to deciding whether it is a financial issue; I shall leave those two to have that argument. However, I will pick up on the second issue. The Minister painted a genuinely exciting picture of all this wonderful investment that will happen across the country—I am not being ironic—and I agree that there needs to be a response to what we have seen this year, and it needs to be comprehensive, co-ordinated and well organised. This cuts to the point made by the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Adonis: without working with the devolved authorities, the efficiency and the effectiveness of any investment are massively undermined. Leaving aside the devolution issue for now, the efficiency issue raised by the noble and learned Lord, Lord Thomas, is absolutely called into question here. The measures from the noble and learned Lord in Motion K1 bring the devolved authorities back into this process. It recognises the importance of the devolved settlement, as set out by the noble Lord, Lord Adonis, and makes sure that this investment, which will be so important to the future prosperity of this country—if indeed there is enough of it and it is delivered properly—can be made efficiently and in keeping with the needs of the people of that particular country.

As someone who comes from Herefordshire, which is a far-flung part of England, I wish that we had similar regional structures in England, whereby the same level of consultation that should be coming through this amendment could also be offered to the regions of England. While some parts of England have unitary mayors and some parts have negotiations directly with Government, places such as Herefordshire that are in as much need as some of the worst-affected places across the United Kingdom, do not have the benefit of that access. This is not the place, but going forward, I ask that when these proposals are brought, an approach towards the English regions that the Government have towards the devolved authorities would be appreciated.

With that, we look forward to supporting the noble and learned Lord, Lord Thomas, when he presses this.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank the Minister for her clear and concise introduction to this topic. Although she said she was relying primarily on the Commons argument that this issue engages financial privilege, she recognised there were other issues going on, and it was good of her to take the argument a bit further. We are, as the noble Lord, Lord Fox, has also said, completely cognisant of the restrictions placed on the House due to financial privilege being engaged. The noble and learned Lord, Lord Thomas, made a compelling case about the wider issues, and it is important to have those on the record. I will add to the list of points he made.

The Government clearly assert—and we believe them —that these will be additional to existing powers, and we should not be concerned, as we have been, that the devolved Administrations will have their responsibilities and authority challenged in this way. The Minister said that the driving force behind the shared prosperity fund is to add and complement existing arrangements. If she wishes to repeat it when she winds up, that would be helpful. In that sense, there should be no need for the concern that is currently in the devolved Administrations about that particular aspect of it. We do not have the detail, and I think she said the likely outcome for their consultation would not be before spring 2021, which seems a long way away in terms of what we are doing. We accept that existing programmes are currently running out—but they are running out; they are not being continued at the same level and, therefore, there will be a shortfall unless the Government are prepared to move a bit faster than the current timescale suggests.

The Minister also confirmed—and this is good news —that there will be engagement with the devolved Administrations. When she responds, perhaps she could explain a bit more about what that means. We have already heard from the Government today about programmes of engagement that have involved substantial change in previous views; it would be good to hear that language repeated when she talks about how the devolved Administrations might be engaged with this process.

The Minister has confirmed there will be some form of shared prosperity fund board, which is interesting. She may recall that at the previous stage of this Bill, we proposed a shared prosperity commissioner. I said at the time, and I still think, that that was code for a board, because we were trying not to engage financial privilege. We have clearly failed in that. Can she confirm the board will be independent and say more about the powers that might be invested in that board? Can she also talk a bit more about whether the programme itself, when it is brought forward, will be subject to guidelines? Will those be published and discussed before they are invented? Will there be themes to it, as there have been in previous rounds of the regional structural funds? Will the funds be competitive and open to all countries to bid for? Can she confirm, most importantly, that the plan will be for the funds under the shared prosperity fund to be separate from any Barnett formula calculations? That is not in the sense of making people not eligible for funding—that is not what we are about here—but a needs-based or different set of indicators to set out the ideas under which the shared prosperity fund will operate. I look forward to hearing her response.

[Baroness Penn (Con)]

My Lords, I thank noble Lords for this short but very useful debate. I think it might be useful to take the points of the noble and learned Lord, Lord Thomas, in turn. On the first point on financial privilege, I think the noble Lord, Lord Fox, was wise to stay out of that one. All I can say to this House is that the decision on financial privilege is made by the Speaker on advice from the clerks. It is the only reason, when invoked, that can be given. Though I have spoken to others, that is the process in the other place.

On the second point on the consultation of, and consent from, the devolved Administrations on spending on these matters, I have said before, and will again, since the noble Lord, Lord Stevenson, asked me to reiterate, that this is about an additional programme of spending to support the work of the devolved Administrations but also about taking a strategic look across the whole of the UK. It is important to remember that the main fund we are talking about, when it comes to the use of this power and the shared prosperity fund, replaces EU structural funds that were determined at an EU level for the needs of many different nation states. They were determined at an EU level and, while they may have been managed and delivered at a local level, the structure, framework and principles that people had to deliver were decided at an EU level.

The third point was about a principled basis for the funding. The Government set out, at the spending review, the heads of terms for the shared prosperity fund. Those have begun to outline how the shared prosperity fund will work. A portion of the SPF will target the places most in need across the country, such as ex-industrial areas, deprived towns and rural and coastal communities.

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[Lord Fox (LD)]

My Lords, as the Minister set out, this group relates to state aid, the Competition and Markets Authority and the office for the internal market. At Report, your Lordships removed a clause that changed the devolution statutes to specify that state aid powers are a matter exclusively for the UK Government. This was overturned in the Commons. Notwithstanding that, the Government have come back with the proposals set out by the Minister, which are welcome. My noble friend Lady Bowles set out where they have come from and should be congratulated for her work on this Bill.

Notwithstanding that, the noble Baroness, Lady Finlay, has tabled Motion L1, which would enable the devolved Administrations to appoint people to the CMA board. The Minister has stressed that the OIM, while being within the CMA, will be independently governed. One of the reasons for not allowing previous amendments was a financial rule. This indicates clearly that the CMA will be holding the OIM’s purse strings. In that respect, culture is one thing, but budget is something completely different. We have heard from the noble Baroness, Lady Neville-Rolfe, and from my noble friend Lady Bowles, and as I have said, we remain extremely concerned about the culture and role of the OIM. The Minister again stressed the technical expertise in the CMA, but the OIM is being asked to do something that is essentially different from the CMA. Frankly, this technical expertise, if deployed in the way the Minister hopes, is the problem we are warning the Government about. That accepted, one of the small ways of dealing with this issue is to support the amendment from the noble Baroness, Lady Finlay, and to make sure that there is at least some board-level representation from the devolved authorities.

Motion L2, from the noble and learned Lord, Lord Thomas, would insert a new provision relating to Clause 50, on state aid. As the Minister has acknowledged, it would create a common framework process whereby state aid is managed.

The noble Lord, Lord Liddle, and others have talked about the message all this sends to the devolved authorities, at a time of great fragility and change. To set this up in this way sends a bad and dangerous message to the devolved authorities. The noble and learned Lord, Lord Thomas, set out a reasonable response—a reasonable way of involving the devolved authorities centrally in the process of delivering the structures and frameworks for, and areas of, state aid. To simply consult with the devolved authorities on draft and not go back on the final decision is a little derisory, to say the least. The Government need to understand the message they are sending—a message clearly articulated in the Senedd vote today.

We are pleased that the noble and learned Lord, Lord Thomas, is going to test the mood of the House regarding his Motion, and we will support it when he does.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, this has been an interesting debate, covering a wide range of issues previously discussed in Committee and on Report. I will not go through them in detail but I will say three important things. First, I welcome the Government’s movement on the matters raised in the Minister’s opening address on the OIM: its membership, the review within three to five years of the potential location of the OIM, and the firm commitment to ensuring that the DAs are consulted and their views fed in to this report. That was not as much as we wanted, but it is certainly a positive step forward that we welcome at this stage.

Trade Bill

Lord Stevenson of Balmacara Excerpts

Report stage & Report stage (Hansard): House of Lords & Report: 1st sitting & Report: 1st sitting: House of Lords
Monday 7th December 2020 Lords Chamber

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, on the substance of this amendment, I have very little to add to the excellent speeches that we have already heard from my noble friend Lord Berkeley and the noble Baroness, Lady Neville-Rolfe, with additional support from the noble Baroness, Lady Kramer. As my noble friend Lord Berkeley said, we have watched his progress from Bill to Bill, from department to department and from Minister to Minister almost with affection as he wends his way around, receiving much the same answer from everybody: they all agree that this is a terrifically important thing to do, but, of course, supporting it is not their job or that of their Bill or department. I do not think that he should divide the House on this issue because it is not something that we can progress by amendment or Division but, at the very least, when the Minister comes to respond, he should commit to come back to my noble friend with a clear plan of what he needs do to get this protocol agreed. Clearly there is willingness and there are lawyers and opportunities; we just need a plan.

[Lord Grimstone of Boscobel (Con)]

My Lords, I turn to Amendments 1, 4 and 5, tabled by the noble Lord, Lord Berkeley. I acknowledge without reservation how much this topic means to him; no one could have worked more assiduously than he has on it.

The amendments before us would expand the scope of the Clause 2 power, creating a power to make regulations implementing private international law conventions as well as agreements that facilitate trade or trade financing. I thank the noble Lord, Lord Berkeley, for his engagement on this matter with DIT, the Department for Transport and the Ministry of Justice in relation to the private international law Bill.

In Committee, the noble Lord outlined that this amendment would allow the UK to implement the provisions of the Luxembourg Rail Protocol; for those who were not present, this protocol relates to the financing of railway rolling stock. Noble Lords will be pleased to know that the Government recognise the competitive advantages of ratifying the Luxembourg Rail Protocol. We have identified the benefits that this could bring to both the UK rail sector and UK financial services. Thus the Government support the ratification of this protocol; the challenge has always been finding an appropriate parliamentary time and a suitable vehicle to implement it, given the very significant pressures on parliamentary time—as your Lordships will be all too aware.

Turning to the appropriateness of this amendment, as we argued in Committee, we believe that the scope of the Trade Bill

“should not expand beyond essential readiness”—[Official Report, 29/9/20; col. GC 40.]

for trading as an independent country outside the European Union. I am afraid that the Trade Bill is not a suitable vehicle to provide powers for the implementation of this agreement. As previously explained, the powers granted by this Bill are limited but vital for the delivery of the UK’s independent trade policy.

In Committee, we argued that technical matters relating to finance and transport should be considered outside the Trade Bill in a way that is suitable to matters related explicitly to finance and transport. I was pleased to see Peers support amendments to the private international law Bill that will help to support the implementation of the Luxembourg Rail Protocol, but it is obviously disappointing that this is not a final solution. I assure your Lordships that the Department for Transport will continue to explore all available options and vehicles to implement the protocol fully.

As I have made clear, the Government fully support the implementation of the Luxembourg Rail Protocol. However, I repeat: we do not believe that this Bill is the appropriate place to achieve this. We will therefore oppose this amendment on this occasion, but I would be happy to work with colleagues across government and facilitate further conversations between the noble Lord, Lord Berkeley, and the Department for Transport to discuss our policy in this sector at greater length and see whether a plan can be put together.

Again, to be clear, we do not believe that this is the appropriate legislation for this amendment and we will not bring forward an amendment to the Trade Bill on this topic at Third Reading. I therefore ask the noble Lord to withdraw his amendment.

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[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure, as always, to follow the noble Baroness. I have a great deal of sympathy with the intention behind these amendments, which also relate to the fact that, from January onwards, the Bill will have to operate for agreements it was never intended to implement. The House does not need reminding that it was the Government’s categorical position in the past that there was no doubt that all continuity agreements would be signed by March 2019, then summer 2019, then the end of 2019—it goes on. The reality is that there are currently 13 countries outside the EU with which we will be trading on terms less favourable than we did before, because those agreements have not been rolled over. The status of those agreements, with regard to this Bill, is now in a degree of limbo. For example, we know that our agreement with Canada is a temporary continuity agreement because we expect the negotiations to roll on regarding an almost immediate successor agreement. It is justifiable for the Government to clarify what status that has with regard to these powers.

Some of the agreements that we did reach have run out of time for full ratification, so they will have to be provisionally applied. That means that the Bill will be used for implementing agreements as well as adjusting ones that are made and ratified, ones that have been made but not yet ratified, and ones to be made and to be ratified. This is a very broad scope for these delegated regulatory powers. In Committee, the Government said that these delegated powers had a purpose. The Minister was quite clear that they are simply for technical adjustments to things, such as the names of quangos or certain terminology, that you would not wish to reopen a treaty for. That has a degree of sense; they should be limited. However, we are in a different position now, even from where we were at the beginning of Committee, with the full knowledge that there will be very many agreements that have not been successfully rolled over and will have to be implemented, some of which will be initiating new agreements at the same time.

I am, therefore, glad that the noble Baroness has again asked the Government to be clear what the intended purpose of these powers is. We want to avoid them being used to implement agreements. We also want to completely avoid them being used for implementing part of a border operating model that we know the Government are not ready for. We want the reassurance that any implementation of a response to questions for our export procedures which are still outstanding will not be used under the Bill. It would reassure the House if the Minister gave the assurance that the intended purpose of these delegated powers remains technical and limited.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I am grateful to the noble Baroness, Lady McIntosh of Pickering, for raising this issue and, through her, to the Law Society of Scotland for reminding noble Lords of some of the detailed points which we often ignore when we put down amendments, particularly at this stage of a Bill’s progress. As the noble Baroness said, and as was picked up by the noble Lord, Lord Purvis of Tweed, some rather unforeseen issues are now arising, particularly in relation to the rollover agreements which were originally intended to be done and completed by 31 December but which, for a variety of reasons, are not going to be. Some of them are being done under emergency power provisions; some will not be done at all. We need to have on the record from the Minister where exactly these will fit in the structure of this Bill. I look forward to his response.

[Viscount Younger of Leckie (Con)]

My Lords, I turn to Amendments 2 and 3, tabled by my noble friend Lady McIntosh of Pickering, which seek to restrict the Clause 2 power so that it can only be used to implement agreements which are “wholly or substantially similar” to previous EU agreements. I can assure noble Lords that all the continuity agreements that we have signed to date have stayed true to our mandate of replicating the predecessor EU agreements, and that will not change for those that we are yet to conclude.

As noble Lords know, we have voluntarily published parliamentary reports for your Lordships’ reference alongside every continuity agreement, which outline any differences required to make the agreements operable in a UK context. As those reports show, none of our continuity agreements have diverged significantly from previous EU agreements. None of the debates in which these agreements have been discussed has resulted in a negative resolution. During the passage of this Bill, we have heard suggestions that the Government are delivering agreements which go above and beyond continuity, and that a more extensive scrutiny process is therefore required for them. The evidence is clear that this is not the case. We are seeking only technical changes to make agreements function in a UK-specific context, meaning that the current scrutiny measures are fit for purpose. I know that noble Lords will point to the recent UK-Japan CEPA. It is correct that that agreement goes further than the EU-Japan EPA in areas including digital trade. However, as your Lordships are aware, as the Government knew that this agreement would go beyond continuity, we provided enhanced parliamentary scrutiny of it.

Setting the UK-Japan CEPA to one side, your Lordships will appreciate that technical changes are required in some areas to allow agreements to work in a UK bilateral context. In these circumstances, the Clause 2 power could be used to make technical changes to UK domestic law to ensure the obligations under the agreement are met. The power in Clause 2 is therefore essential to allow us to implement in domestic law the obligations that arise from continuity agreements. The substantially similar wording is unfortunately ambiguous and could lead to uncertainty as to whether a trade agreement could be implemented via the Clause 2 power. The effect of this could be a possible disruption to concluding and implementing continuity trade agreements, potentially resulting in a gap in preferential trading relationships after the end of the transition period.

To paraphrase what the noble Lord, Lord Purvis, and my noble friend Lady McIntosh, said, they asked: “Why not put this on the face of the Bill, and if the power is not needed to transition trade continuity agreements, why do we need it at all?” As stated in the impact assessment and Explanatory Notes, the Trade Bill is not needed to transition trade continuity agreements themselves. However, the power will provide the implementing powers necessary to fully implement trade continuity agreements over time and in all circumstances. The Clause 2 power is intended to be used only to ensure that a limited number of obligations in these trade continuity agreements, particularly in relation to procurement and mutual recognition, are fully implemented in domestic law via secondary legislation.

I hope that with those explanations, my noble friend Lady McIntosh is reassured that our use of this power will be limited to continuity agreements that faithfully replicate predecessor EU agreements. As a result, I ask my noble friend to withdraw her amendment.

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[Baroness Finlay of Llandaff (CB)]

My Lords, I am sorry that technical difficulties meant that I could not come in just now. I support Amendment 6 in the name of the noble Lord, Lord Purvis of Tweed, who made the case for it comprehensively. In Committee, the involvement of the devolved Administrations in consultation over trade was stressed whenever UK Ministers wished to make an agreement that included issues that fall within devolved competences. Respect for, and consideration of, the devolved responsibilities and implications of agreements will result in clearer communication between Westminster and the Government, in better relations with the devolved Administrations, and in clear messages to the population overall. This amendment would bring agreement centrally into Westminster, not disrupted by protesting voices from devolved nations that fuel separatist movements. The noble Lord, Lord Wigley, has set out the benefits with arguments that I endorse.

On issues relating to health we discussed at length the importance of the Government’s commitment that the NHS is not up for sale. This country’s unique databases have enormous potential value. As health, whether human, animal or ecological, is a devolved responsibility, it is essential that anything touching on health in its broadest context is the subject of consultation with the devolved Administrations. The noble Lord, Lord Lansley, eloquently stressed that Ministers should not ratify an agreement that would not be approved by Parliament. In respecting the royal prerogative, the individual nations must not find themselves sidelined.

Amendment 6 is essential to consolidate, not destabilise, the united nature of the United Kingdom. To break up the United Kingdom would indeed be an “abject failure of statecraft”.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, we have had a good and wide-ranging debate today. I want to pick up on the speeches of the noble Lord, Lord Purvis, who introduced Amendment 6, which I have signed, and the noble Lord, Lord Lansley, whom I thank for his clear introduction to Amendment 12, which we also support. The noble Earl, Lord Caithness, is not a normal ally on many of the issues we have discussed in your Lordships’ House over the years. However, he made the point about the importance of trade so well that I wanted to endorse it. Trade is now central to our existence as a country and very important to the individuals who live here because it impacts on almost every aspect of our lives.

State Aid (Revocations and Amendments) (EU Exit) Regulations 2020

Lord Stevenson of Balmacara Excerpts

Wednesday 2nd December 2020 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

At end insert “but that this House regrets that the Regulations replace retained European Union State Aid rules with a yet to be defined new subsidy regime, and calls on Her Majesty’s Government to delay implementation of the regulations until (1) they have consulted widely on their proposals, (2) they have sought the agreement of the devolved administrations, and (3) the primary legislation detailing how the United Kingdom’s new subsidy regime will operate after the end of the transition period has received Royal Assent.”

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank the Minister for his introduction of the statutory instrument. My amendment calls on the Government to delay implementation of these regulations until they have consulted widely on their proposals; in particular, until they have consulted and sought the agreement of the devolved Administrations and the primary legislation detailing how the UK’s new subsidy regime will operate after the end of the transition period has received Royal Assent. I will listen very carefully to comments made during the debate, particularly to the response of the Minister, but I give notice that I intend to divide the House on this issue.

This amendment stems from three primary sources. First is the 30th report of the Secondary Legislation Scrutiny Committee, which, inter alia, said:

“The disapplication of EU State aid rules appears to be a reversal of the previous Government’s policy position, which sought a continuity approach in the case of a ‘no deal’ scenario”,


and that:

“This approach raises the question whether it would have been more appropriate to take forward such a policy change through primary rather than secondary legislation, enabling Parliament to scrutinise the new approach more fully”.


The second is an amendment in the name of the noble and learned Lord, Lord Thomas of Cwmgiedd, supported by a vote on Report deleting Clause 44 of the internal market Bill, which he said purported

“to make state aid a reserved matter by the device of expanding or extending the competition policy reservation.”—[Official Report, 25/11/20; col. 317.]

The third is the fact that the rollover continuity free trade deal with Japan, discussed in your Lordships’ House last week, replicates the restrictions on subsidies being repealed by this very SI. If we are still honouring international treaties, this will need to be legislated for, so why is this SI being progressed today?

The SLSC commented that when the previous Government laid the 2019 state aid regulations before Parliament, the plan was to transfer the EU’s enforcement functions to the CMA and to enable the continued application of state aid law in the UK in a domestic policy context in the event of no deal. However, these 2019 regulations were withdrawn in February without being made. The SLSC also points out that this new SI is being

“made under the Withdrawal Act which, according to the Explanatory Notes … ‘does not aim to make major changes to policy or establish new legal frameworks in the UK beyond those which are appropriate to ensure the law continues to function properly from exit day’ and commits the Government to ‘introduce separate primary legislation to make such policy changes which will establish new legal frameworks’.”

Why is this happening? Why is there no primary legislation? I hope the Minister will deal fully with the points made by the committee, particularly its general concern about using secondary legislation to introduce policy changes that should be done via primary legislation.

The noble and learned Lord, Lord Thomas, prefaced his introduction to his amendment proposing to delete Clause 44 of the internal market Bill by saying that

“the regime of state aid is plainly necessary, and it is necessary to have one for the whole of the UK”.—[Official Report, 25/11/20; col. 316.]

I agree with him. The Minister has previously made it clear that the UK needs to design a bespoke state aid, or what he calls a “subsidy control”, regime. He has also said he hopes that it

“will operate in a way that works best for all UK businesses, workers and consumers”,

and promises

“a consultation on whether we should go further than our World Trade Organization and international commitments, including whether further legislation … is necessary.”

So far, so good. However, with no supporting evidence, he asserts that:

“Reserving subsidy control is the best way in which to guarantee that a single, unified subsidy control regime could be legislated for in future.”—[Official Report, 25/11/20; col. 325-26.]


The noble and learned Lord, Lord Thomas, suggested that this was clear evidence that the Government want to use the internal market Bill to alter the devolution settlement. In the Third Reading debate a few minutes ago, the noble and learned Lord, Lord Garnier, spoke eloquently about the need for all unionists to tread very carefully when progressing legislation that affects the current rights and responsibilities of the devolved Administrations. I agree with him.

Whatever the truth here, this is a worryingly centralising Bill. As we learned in the Autumn Statement only last week, the shared prosperity fund which replaces EU funding for regional and local structural projects will in future be controlled and spent by UK government Ministers from Whitehall. The Minister might wish to clarify whether, under the guise of promoting competition, the Government are set on unravelling the devolution settlement.

There is a bit of a mystery about what the Government are up to here. Why are they currently spurning the sensible and pragmatic way forward suggested by the Welsh and Scottish Governments of using the well-regarded common frameworks process? Reinforcing as it does the need for all four nations to work together for mutually agreed solutions, it seems a complete no-brainer.

On international trade agreements, it is an open secret that level playing field issues are one of the main sticking points in the ongoing EU FTA negotiations. It is said that London has been strongly resisting demands from Brussels for the UK to remain in the EU state aid regime. It has even been suggested that this SI has been brought forward and modified from its original form to bolster the UK’s negotiating position. However, as we debated last week, the state aid provisions included in the UK-Japan free trade agreement are effectively the same as the current EU rules and include what one distinguished commentator called

“hard-edged commitments not to provide open-ended … support”

to UK companies. To give effect to these commitments, there will need to be legislation. I do not need to point out the irony if this SI has to be brought back in primary legislation to give effect to the Japan free trade agreement. Will the Minister comment on this? What are the plans for legislation to implement the Japan free trade agreement?

State aid has received little attention during the UK’s 47 year-long membership of the EU, but its importance has been highlighted repeatedly during the parliamentary stages of the internal market Bill, as well as remaining one of the sticking points in the EU-UK negotiations. We have no sense of where the Government want to take their policy on state aid, other than that it cannot be the same as it has been under the EU. Removing a well-understood policy framework that has been in place for half a century and replacing it with a reliance on WTO rules, which are widely discredited, seems a perverse way of making policy, even if the Government need more time before deciding what to do. There is no doubt that state aid can be beneficial. If deployed as part of a robust industrial strategy, it can help create decent jobs, kick-start businesses, rebalance regional inequalities and power the UK’s internal market. However, it can also be harmful.

The Secondary Legislation Scrutiny Committee said that this change

“is neither a welcome nor indeed acceptable use of secondary legislation”.

Scotland, Wales and Northern Ireland do not understand where they fit into this process, and it is complicated by the Northern Ireland protocol. In the internal market Bill, the Government stand accused of attacking the devolution settlement. Even if that is not the case, they have a lot of ground to make up before their proposals have buy-in from the devolved Administrations and are seen as legitimate and politically uncontroversial in all four nations. The criticism from the SLSC, the gaps in the IM Bill and the need for clarity following international trade treaty commitments suggest in combination that there is a powerful case for delaying this Bill until Ministers have consulted widely and sought the agreement of the devolved Administrations and the necessary changes to existing primary legislation have been agreed. This pause for reflection is what this amendment in my name would achieve. I beg to move.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, for context, I was originally going to introduce this debate on a different day—in other words, not on the same day as the Third Reading of the internal market Bill, but because of other pressures it was moved. I suppose that it was inevitable that the debate would be full of resonances from our recent discussions on the internal market Bill. If we wanted to take the optimistic view, this discussion on the amendment to the Motion could be treated as a sort of digestif after the main course of the Bill, but I shall come back to that point.

I thank the Minister for his full response to the debate. He might have worried about the wide-ranging issues that were raised, but at their heart, they were all about much the same thing. I thank the noble Baronesses, Lady Altmann, Lady Jones, Lady Wheatcroft and Lady Bowles, and my noble friend Lord Liddle for supporting the points I was trying to make. In addition, others have made good points that are relevant to the debate, in particular the noble Lord, Lord Dodds, who asked how companies in Northern Ireland can be expected to cope with both the internal market approach and the requirement under the state aid rules for limited use of the EU state aids that carry forward.

The underlying point that everyone touched on but was not really answered is how we are going to be aligned to the WTO rules for state aid while at the same time our growing number of international trade agreements are going to recognise state aid restrictions that will need to be taken into account as we go forward. The Minister is obviously not able to speak for another department on this, but there is an issue here that we need to resolve. We already have the idea that the Canada rollover agreement will be one set of state aid rules, but we know that the Japan FTA has a different set, which are much more like the current rules for the EU.

We do not yet have a satisfactory explanation from the Minister about why the choice was made to go for the reduction in the state aid rule continuation through secondary legislation. We need a debate on that, but on the basis of a proper consultation. If nothing else, I hope that will still happen. However, as I have just mentioned, we will gradually bring in elements of a state aid policy. It occurs to me that, although the Minister made a good job of trying to argue why this SI at this time is important, he did not really answer the question of why we could not retain the form and substance of the EU state aid rules, which have worked for 47 years, while stripping out any egregious issues that the Government do not like in relation to control by the EU or surrendering powers to the European Court of Justice, which of course is completely inappropriate post Brexit—we agree with that. But there are arguments on both sides that will not be resolved today.

A regret amendment is limited in its effect. It draws attention to points and provokes a good debate, which we have had today, but it has absolutely no effect on the Government unless they decide that it should. The Government should think seriously about the points made about the need for a delay, because there is a good case for that, but if they decide to go ahead, that is obviously their decision. However, as a prompt to their conscience, I would like to test the opinion of the House.

United Kingdom Internal Market Bill

Lord Stevenson of Balmacara Excerpts

3rd reading & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords
Wednesday 2nd December 2020 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

1: Clause 12, page 8, line 30, leave out subsections (6) and (7)

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, my original Amendment 21 on Report, also signed by the noble Lords, Lord Anderson and Lord Wigley, and the noble Baroness, Lady Bowles, on which I spoke on 18 November 2020 and moved formally on 23 November 2020, replaced the original Clause 10 with a new clause listing public interest derogations from market access principles. I was pleasantly surprised and grateful that the Government accepted the amendment without a Division. The clerks subsequently advised us that the amendment required some consequential changes to the Bill to remove minor inconsistencies. These changes are set out in the amendments before your Lordships’ House today. Amendment 1 removes two subsections on page 8 and Amendment 3 removes Schedule 1 entirely. I beg to move.

[Lord Callanan (Con)]

The Government regret the changes made to the previous Clause 10 on Report, but I will not reopen that debate here. I appreciate the need for these amendments to tidy up the Bill text so the Government will not oppose them.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

3: Schedule 1, leave out Schedule 1

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab) [V]]

I thank the ministerial team for their time and accessibility while we have been working on the Bill. Bills that span departments—three, in this case—are a nightmare to run. Credit is due to those involved, in BEIS, the Cabinet Office and the Treasury, for their seamless performance. We tried hard to find divisions between them, but we failed. I particularly want to thank the Minister from the Cabinet Office, Chloe Smith MP, at a difficult time for her. I am sure the whole House will want to join me in wishing her well for the next six months, and a speedy recovery.

Our team in the Lords is used to working collaboratively, and we have tried to blend our experiences and interests to good effect in working on the Bill. I thank in particular my noble friend Lady Hayter for her endless supply of wit and wisdom, and my noble and learned friend Lord Falconer, who must have been a terrifying vision when he rose at the Dispatch Box to take on the combined ministerial skills that he was dealing with. We have also worked closely with Commons colleagues, and we now pass to them the responsibility for defending the changes that we have made.

The Bill team has supported the parliamentary processes very well and has managed the large number of Zoom meetings and letters with huge professionalism. We thank them. We should also thank the technical teams who have supported the hybrid House so well. Last, but not least, I thank Dan Harris, our legislative support team member, who has absorbed huge amounts of work and juggled his other commitments so as to keep us on track, drafting all our amendments and dealing with the Public Bill Office to get us to where we are. He celebrates a big birthday this week, and he deserves the break that he is taking.

As the noble Lord, Lord Fox, said, it is customary to say that Bills that have been sent to us for consideration by the other place leave here much improved by the detailed scrutiny that your Lordships’ House brings to legislation. I am not sure that this Bill—with, as the noble and learned Lord, Lord Garnier, observed, its 65 amendments in all, and shorn of about one third of its original material—can qualify for that appellation. It still seems to have some problems and deficiencies. However, we think it has been improved.

My colleagues and I were heartened by the handover meeting we held yesterday with the ministerial team, involving Commons Ministers as well, which seemed to open up possible joint solutions to many of the remaining issues. Of course, external events may well intervene, but we are not far apart on many issues, and we remain willing to work together with the Government to resolve the outstanding issues over the next period.

Intellectual Property Rights: Affordable Drugs

Lord Stevenson of Balmacara Excerpts

Monday 30th November 2020 Lords Chamber

[Lord Grimstone of Boscobel (Con)]

As I said in answer to a previous question, there are flexibilities in the existing TRIPS Agreement. As I said, I encourage countries to take advantage of these flexibilities, because what could be more important than ensuring that supplies of the Covid-19 vaccine reach their citizens?

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, further to my noble friend Lord Reid’s question, we welcome the Government’s policy of affordable and accessible medicines for all, but how does that policy square with the parallel export ban of over 80 medicines earlier this year to help ensure that there is an uninterrupted supply of medicines for NHS hospitals treating coronavirus patients, which would effectively prevent UK companies sending even paracetamol to Covid-19 sufferers in other countries?

[Lord Grimstone of Boscobel (Con)]

As the noble Lord knows, nobody is a greater supporter of free trade than my department and me, but short-term considerations occasionally arise, particularly relating to public health emergencies, when those important general principles have to be put aside for very short periods of time to ensure that the NHS has access to the drugs it needs. I am sure most noble Lords would welcome this.

Supplementary Protection Certificates (Amendment) (EU Exit) Regulations 2020

Lord Stevenson of Balmacara Excerpts

Friday 27th November 2020 Lords Chamber

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I am grateful to the Minister for his clear introduction of what is turning out to be a rather complicated issue. I certainly felt that his remarks were a lot clearer than the Explanatory Memorandum, which I have been struggling through and which brought me to a stop around paragraph 7.7 or 7.8; I will ask a couple of questions about that, so the Minister has advance notice. Most of the points that I was going to make were made in the expertise displayed by earlier speakers —particularly the noble Lord, Lord Lansley, and the noble Baroness, Lady Wheatcroft—and in the supplementary questions asked by the noble Baroness, Lady Bowles.

The Explanatory Memorandum struggles to answer questions because it is trying to do the impossible: to make a rationale behind what is obviously a bit of a fudge in relation to requirements that could have been dealt with better in the Northern Ireland protocol—but that is easy to say with the benefit of hindsight. The issue that I get stuck on occurs when I get to paragraphs 7.7 and 7.8 of the Explanatory Memorandum. It concerns the same question that the noble Baroness, Lady Bowles, asked about. What do companies have to do to be sure that they do not run the risk of losing control of their intellectual property in relation to the need to have a set of regulatory approvals that faces the UK market but does not put them outside the ability to market the same product through Northern Ireland into the EU?

Paragraph 7.8 suggests:

“Products which are subject to regulatory approval before they can be placed on the market in Northern Ireland must … be assessed in accordance with EU law”,


but it is not at all clear to me what that actually means in practice. It goes on to say:

“Approval may be given by the UK regulator acting on behalf of Northern Ireland”.


What does that mean? It also says that such approval may instead be given

“by the European Medicines Agency.”

Obviously, we all understand and know about that process.

Paragraph 7.9 helpfully states:

“This means that products … may have a marketing authorisation granted under EU law.”


However, paragraph 7.10, which I was hoping would explain that, simply repeats this fact:

“A specific product may have two authorisations … in most cases, a GB authorisation and an NI authorisation.”


Is that the same as an EU authorisation? Are we hearing that this is a mutual recognition issue, as suggested by the noble Lord, Lord Lansley? I look forward to the Minister’s response on that.

My only other point relates to later on in the Explanatory Memorandum, under paragraph 9. I was grateful to see that the IPO will prepare some Keeling schedules, of which I am a great fan. Although the timing of this is complicated because the date of publication is a lot earlier than today, paragraph 9.2 states:

“The IPO has prepared, and will be making publicly available, informal consolidated texts of Regulations … which take into account all legislative changes for the end of the transition period.”


That is obviously very imminent. It goes on:

“A draft of this material has been laid in the Libraries of both Houses”.


In fact, when I checked in the Library, I could not find it. Can the Minister confirm whether we have gone past the draft stages and now have a final version? If so, would it be possible to circulate that to noble Lords who participated in this debate, as I would like to have confirmation that this has all been done properly?

Comprehensive Economic Partnership (EUC Report)

Lord Stevenson of Balmacara Excerpts

Thursday 26th November 2020 Grand Committee

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank all speakers for their contributions today. I welcome the noble Lord, Lord Darroch of Kew and congratulate him on his maiden speech. His reflections on the trade agreement before us after such a short time in your Lordships’ House illustrate that he will fit in very well, and we all look forward to his further contributions. I also welcome back my noble friend Lady Liddell and thank her for her contribution today. I extend my sympathy to the Minister on his recent eyesight problems and wish him a speedy recovery.

I welcome the report from the International Agreements Sub-Committee and thank my noble and learned friend Lord Goldsmith for his excellent introduction. From the comments of members of the committee who have spoken today, it is obviously a committee which is already working well in what is a new activity, which is probably just as well, as it seems to have quite a lot on its plate. This first substantive report from the IAC is, as its chairman pointed out, about the CEPA signed earlier this year between the UK and Japan, but it is also witness to the scrutiny process for trade treaties that the Government are bringing in. In that sense, it is an historic first for this House and for Parliament. We have had useful and insightful comments on both issues and, as was the case in the Commons when it debated the report of its Select Committee on International Trade yesterday.

Several speakers have mentioned that, notwithstanding changes relating to agriculture and data, and the inclusion of dedicated chapters on women’s economic empowerment and SMEs, CEPA almost entirely replicates the EU-Japan free trade agreement. I agree with the noble Viscount, Lord Trenchard—a rare occurrence—that there is a lot to commend the fact that a roll-over continuity deal is a good thing to have at this time of uncertainty, but the Government would do well to learn from the criticisms made today and elsewhere about their apparent overclaiming of benefits, unwillingness to provide accurate baseline figures and testable estimates of benefits. There is a sensitivity about gaps in the treaty, such as pointed out today, about the lack of an inward investment chapter and better and more targeted support for our creative industries.

I will not go through every issue raised by speakers today, but I would like to mention a few. First, it is obvious that there is an imbalance in the treaty. It is tilted very much in Japan’s favour with the final estimate, if we can believe the figures, revealing that about 83% of the projected increase in trade will go to Japanese exporters. Obviously, no Government should design a trade policy around the minimisation of trade deficits, given that that would lead to a protectionist rejection of imports. Nevertheless, these figures demonstrate that there much greater benefits in the deal for Japanese exporters. However, according to the impact assessment, increased imports from Japan will boost employment in certain industries. But the Government also estimate that there will be negative effects for employment in sectors where Japanese imports will provide cheaper alternatives to home-grown products. As the noble Lord, Lord Kerr, said, it is a bit ingenuous of the Government not to make it clear how much CEPA depends on a satisfactory deal with the EU on cumulation, rules of origin and zero tariffs. I hope the Minister will respond to this when he comes to reply.

Secondly, we need to do better on tariffs, and particularly on TRQs. The EU has 25 separate TRQs with Japan on agricultural goods, of which the UK has managed to secure partial access to 10. Of those 10, the UK gets only leftovers of what the EU has not taken up that year. When you learn that, in practice, Japanese importers have to secure a bank guarantee to import UK goods at the reduced tariff, with a higher tariff charged retrospectively by the Japanese authorities at the end of the year if the EU has taken up its full quota, that means that this bureaucracy and uncertainty will inevitably reduce what Japanese importers will opt for in terms of UK agriculture, which is surely a great pity. The Government have argued that UK exports will not lose out because, by the time the EU increases its use of the TRQs, we will have already joined the CPTPP, therefore securing zero tariffs. However, as others have said, that is hardly a proper response to the issue. Perhaps the Minister will comment when he comes to respond.

On labour issues, trade unions were not able to provide input on any text during the negotiations and drafting of the UK-Japan EPA. This is the latest of a long list of times when the DIT has brushed aside union concerns and rejected opportunities to consult them. Why is this? In many cases, the lack of trade union consultation shows. The labour provisions of the deal have not advanced on those agreed in the EU-Japan EPA, and they are weak and unenforceable. Alongside the missed opportunities to strengthen labour provisions, the UK-Japan CEPA rolls back civil society dialogue. The UK and Japan have to meet with civil society groups only two years after the deal comes into effect, rather than the one-year wait that was contained in the earlier agreement. Will the Minister comment on that?

On digital matters, raised by several noble Lords, including the noble Lord, Lord Oates, the Government say that CEPA will enable a free flow of data while maintaining high standards of protection for personal data. However, many of these elements of the UK-Japan deal are not new. Some are but, by not requiring each other’s companies to follow data localisation, disclose algorithms or hand over encryption keys used to guard proprietary tech and data, CEPA has removed some of the provisions insisted on by the EU to give it control over the activities of Japanese tech companies. Is this a good thing? As well as bringing benefits for UK firms operating in Japan, as it largely will do, these provisions will reduce burdens on and increase proprietary protections for Japanese digital firms wanting to expand business in the UK. However, is this light-touch approach really the way forward? I would be grateful if the Minister could respond when he comes to reply on whether this light-touch regulatory system does not run counter to the Government’s concerns over data protection or, indeed, the imposition of stricter controls on companies over the access to online content. What about the online harms Bill? Does the Minister believe that the positions taken on data localisation can be squared with getting agreement with the EU on the data equivalence issues, and will the position on net neutrality not cause difficulties with the US and Australia, where powerful media interests have been engaged in long-standing campaigns against the principle?

Finally, as others have said, this is a report on the new system of scrutiny, which the Government—sometimes somewhat reluctantly—are ushering in. The Japan deal is being ratified under the procedures laid down in the Constitutional Reform and Governance Act 2010, which dictates that all international treaties must be laid in Parliament for 21 sitting days before they become law. There is no obligation under CRaG for the Government to hold today’s debate but they are doing so, in part to nullify criticism from us, from the committee, the International Trade Select Committee, their own Back-Benchers and the House of Lords about the inadequacy of CRaG as a mechanism to allow scrutiny and approval of trade agreements.

We ought to do better on this. As the noble Lord, Lord Trees, and other noble Lords have said, today’s debate focuses on the signed treaty but ignores the other important steps in this process: the approval of objectives, the receipt of progress reports and the ratification procedure itself. We can do better, and I do not believe that we are far apart. The Government seem adamant that we should continue to operate under the royal prerogatives and leave the CRaG processes alone. I happen to disagree. In the interests of making progress, I suggest to the Minister that we use the time before Report to find a way forward which builds on the progress so far evident today and the experiences that we gain in the next few years, to sort out a proper process worthy of the importance of trade to our country.

United Kingdom Internal Market Bill

Lord Stevenson of Balmacara Excerpts

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th November 2020 Lords Chamber

[Lord Fox (LD)]

My Lords, once again, this has been a very widespread and high-quality debate. To the Minister, who has not had the benefit of the soap opera that you tend to have on Report, I say that we have reached the point that—here I agree with the noble Viscount, Lord Trenchard—is the meat of this Bill. At Second Reading, in Committee and on Report, many of your Lordships asked why this Bill was necessary. Of course, there was the political and negotiating posturing that came with Part 5, but I put it to your Lordships that one of the central, driving reasons for this Bill is exactly what we are discussing here today: it is so that central government can get its hands on this money and administer it through whatever means it sees fit, because there is no detail on that administration —here, again, I echo the point made by the noble Viscount, Lord Trenchard.

Some people called it pork-barrel; I would perhaps call it a hobby horse. We saw the benefit of the Prime Minister’s attempts at hobby horses when he was the Mayor of London: we saw the amount of public money that was spent on “Boris Island”, the green bridge and the Emirates wire crossing of the Thames. These are just small potatoes compared to what we could look forward to.

In her speech, the noble Baroness, Lady Noakes, characterised those of us on these Benches and in Her Majesty’s Opposition as, somehow, thinking that the Government are evil in this. I make it absolutely clear to the noble Baroness and the Minister that I do not think that she is evil, and we do not have a policy of thinking that the Government are evil. However, we do think that the Government are wrong, and we are allowed to do so. Many of the speeches on the Benches opposite have also been factually wrong on the subject of devolution, and I will correct some of those facts.

However, I will err on the side of giving the benefit of the doubt, because I do not believe that the people who drafted this Bill misunderstood devolution in the way that many of the speeches we have heard today have. I believe that there is a very deliberate attempt in this Bill to bypass the processes that have become normal in devolved government and, unless we see actual details as to how this will go forward, this suspicion will only get greater.

Very recently, the Government introduced the notion of the role of local councils. This has come along only in the last 24 to 48 hours in relation to their possibly getting involved in the process of disbursing. I can only assume that it is the antidote to the Prime Minister’s loose lips around devolution, but perhaps the Minister can explain what role the Government see in any future disbursement process for local councils—and, if there is not one, perhaps they can disabuse us of that as well.

My noble friend Lord Purvis set out how the multiannual financial framework works. In answer to the noble Baroness, Lady Noakes, who said that the devolved authorities are not having financial powers taken away from them, I say that they most definitely are, because they had functions under EU structural funds and state aid within the fiscal framework which are being withdrawn.

I am afraid that the noble Baroness was similarly wrong on the subject of public finance and tax. If you happen to live in Scotland, as my noble friend Lord Purvis will tell you on many occasions that he does, you pay Scottish income tax, which is set by the Scottish Government: it is a different tax. Perhaps the noble Baroness, Lady Noakes, would acknowledge that there are differences across this country in the fiscal arrangements for the people who live in the nations of the United Kingdom. Those differences arise through the devolved process, which, somehow, is now being withdrawn and pulled back by this Government under the misapprehension that, by being seen to spend this money, they will somehow become popular. That is not the way to be popular, and it will fail. The noble Lord, Lord Naseby, spoke about ferrets. My experience of ferrets is that they usually bite the people who are handling them—so perhaps he should be warned.

I have one final point, which is a question that I really do want an answer to—it is not a rhetorical question. The noble Baroness, Lady McIntosh, raised the interesting point about how the markets could get distorted. I would like the Minister to explain the role of the office for the internal market in this. As we have discussed in previous amendments, considerable powers are being vested in the OIM, not least Clause 31 powers, so can the Minister confirm that the OIM will be able to investigate the UK Government’s use of the powers that they seek in Clauses 42 and 43 to investigate whether this distorts the market? Can the Minister also confirm that devolved authorities will be able to request such an investigation from the CMA?

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I am going to say much the same things as the noble Lord, Lord Fox, but I will focus a little on my Amendment 65, which has been supported by the noble Baroness, Lady Finlay, as well as offering support from the Opposition Benches for Amendment 64 in the name of the noble and learned Lord, Lord Thomas, and—if it is treated as consequential—Amendment 68.

The last time she joined us, the noble Baroness, Lady Penn, responded to my amendment on the shared prosperity fund with a very full and useful speech, part of which the noble and learned Lord, Lord Thomas, has already quoted. It was helpful to hear, because it was so clear what the purpose behind the new approach to the shared prosperity fund was to be. Although she may have to slightly change the way she expresses it when she responds in a few minutes, she confirmed, stressing the collaborative nature of the future, that this would

“allow the UK Government to complement and strengthen the support given to citizens in Scotland, Northern Ireland and Wales, without taking away devolved Administrations’ responsibilities.”

That is all good stuff, but she went on to say—this was not quoted by the noble and learned Lord earlier—that

“the response to Covid has shown how the UK Government … can save jobs and support communities. This could only have been delivered strategically and at that scale by the UK Government.”

That interesting formulation has been much explored during this debate. I do not think the Minister will find much support across the House for that statement.

The Minister went on to say:

“The UK Government are uniquely positioned to level up across every part of the UK”. —[Official Report, 2/11/20; col. 596.]


That also needs to be challenged. It is the sort of thinking from which comes the “Westminster knows best” process, which has been criticised, and spending decisions being taken against the advice of those in the best position to know about them. As the noble Lord, Lord Fox, said, this may lead to follies of the type of the garden bridge and, perhaps, the much-mooted bridge between Scotland and Northern Ireland, which seems to be the answer to the Northern Ireland protocol problem.

I will talk a little about Amendment 65. I was grateful to my noble friend Lord Rooker for talking about the work done in your Lordships’ House on a critique of the Barnett formula. He is absolutely right: if that formula had been replaced by something of a different nature, the funding levels in Wales and Scotland would have changed, because of inward immigration to Wales and external emigration from Scotland. There has been a change in the population levels which has not been reflected in settlements. The system does not command much love and affection, let alone support.

The proposal in Amendment 65 challenges the Government to think again about how they might wish to do the shared prosperity fund. If it is not clear, because the drafting is somewhat complicated, it is based on a model to which the closest analogue would be the Low Pay Commission. Despite allegations to the contrary, it weighs heavily on subsidiarity and proportionality as the principles under which it might be set up. Under the proposal in Amendment 65, it is the Secretary of State who sets the level of the fund, it is clearly the Government’s funding and their authority to set a level every year for that is not, in any sense, taken away. What the amendment does is to mandate consultation and provide an alternative, needs-based basis for judging the bids. As set out in proposed new subsection (11), this approach looks at an area’s proportion of children below the poverty line, low income, economic weakness, the age structure of the population, the impact of the pandemic and the impact of climate change—something we might want to consider more fully, though it has also been picked up today.

I thank the noble Baroness, Lady Finlay, for her kind words. For anyone in the Official Opposition to be ruled as “intelligent and thoughtful” is almost too much to take, but it probably rules out any further consideration of my amendment. It would not do to be seen to be endorsing that, would it?

As the noble Lord, Lord Purvis, said, if Amendments 64 and 68 are passed, there will be a bit of a hole in the Government’s thinking on this area. They might want to think again about how do to that by looking at this amendment, certainly in the context of the responses to the now notorious box 3.1. I congratulate the noble and learned Lord, Lord Thomas, on being able to adapt his speech to take account of the fact that he could have had only a few minutes to look at that box. His critique of it was spot on. As the noble Baroness, Lady Finlay, said, box 3.1 is based on the assumption that the Government will receive the new financial assistance powers in this Bill—it says so straight out, at the beginning. It is also interesting that this is clearly a top-down approach:

“The government will develop a UK-wide framework for investment in places receiving funding and prioritising: investment in people … investment in communities … investment for local businesses”.


There is nothing exceptional or egregious about the list of things to do, but the idea that there is a top-down approach jars with everything we have been doing in the last 20 years to develop a much more responsive, local environment.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, the debate on this amendment has been relatively short, but the Minister should not conclude from that that it is unimportant. The reason why the debate has been short is that it crystallises points that have recurred since Second Reading, through Committee and in various discussions on other groups of amendments, around the basic suitability of the CMA as a home for the OIM. That is the central point.

I am pleased to follow the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, whose analysis of the concerns around the location of the OIM I completely concur with. They conclude that they do not necessarily like the full nature of this amendment, and I respect that point. This amendment is the culmination of several other attempted amendments but, without it, we will not get the focus on this issue that we need from the Minister. Even though it may be a bitter pill to swallow for the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, we need to get somewhere to concentrate minds—and this is the amendment.

It was ably set out by my noble friend Lady Bowles, and I know that the noble Lord, Lord Stevenson, will also set out a good case, so I will not point to any more issues. I simply say that this is a really important issue, which will colour the culture of the market in this country and how it is run. I had not considered the point brought up by the noble Baroness, Lady Noakes, that it may also jeopardise the CMA’s current role, which is a good point and well made. This is an important amendment to get behind. Noble Lords on the Liberal Democrat Benches will vote for this amendment when it is put, and I hope that other noble Lords, who find problems with some words in this amendment, will stave that to one side and consider that, without it, we cannot change the culture of how the market will be run in future.

[Lord Stevenson of Balmacara (Lab) [V]]

I am going to disappoint the noble Lord, Lord Fox, as I will not go through my arguments at length, because they have been made so well by the noble Baroness, Lady Bowles, and the noble Lord, Lord Wigley. I put on record my absolute support for the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, who, while they have comments about the detail of the amendment, support the principle of it. I am grateful to them for that.

It is a simple proposition: the internal market must work and be seen to work for all and, therefore, must have buy-in and support from all. It should not favour one geographical area or country over another. It is important that we do not upset the balance struck in the CMA and its functions. The noble Baroness, Lady Noakes, is right that there may be an adverse impact on the CMA, if it is forced to take on something that is not its primary purpose. Thirdly, the devolved Administrations need to be part of the organisation, its process and appointments.

There are reservations about proposed new subsections (3) and (4) in the amendment. It is beyond our hopes, but perhaps the Minister will consider bringing forward an agreed amendment at Third Reading. If he did, we would support it but, if he will not do that, we will support the noble Baroness if she tests the opinion of the House.

[Lord Callanan (Con)]

I thank noble Lords who participated in the debate, particularly for their brevity. This is, I suspect, a simple difference of opinion, but I will give it a go anyway.

In previous groupings we have discussed the detail of how the office for the internal market would be governed, including the composition of its board, and so noble Lords will be delighted that I am not going to go through all that again. I have set out consistently in this House why the CMA was chosen as, in our view, the most appropriate body to undertake the new UK internal market oversight functions. The CMA has an outstanding international reputation as an independent regulator and is already equipped with highly relevant economic expertise, necessary to undertake its new functions in the context of the operation of the UK market. Moreover, the CMA has well-established relationships with all the Administrations, with offices in London, Edinburgh, Belfast and Cardiff. This UK-wide presence will help ensure that the OIM will work in the interests of all parts of the United Kingdom.

However, we have made it clear that some bespoke arrangements for the OIM will be necessary, in recognition of the focus on devolved matters. As provided for in the Bill, the OIM will be able to benefit from the CMA’s existing expertise and operate within its overall framework, while having its own functions and powers, including distinct governance arrangements such as the OIM panel and task groups. The Government have recognised that some degree of separation is vital and have developed proposals for the OIM accordingly. I wish to strongly emphasise that the distinct statutory objective for the OIM, and for the targeted adaptation in the Bill of the CMA’s statutory framework, enshrines this separation from the outset.

On Monday, we had a good debate on the composition of the board and the role of the devolved Administrations in appointments. The Government have taken a number of reasonable and pragmatic steps to secure the appropriate balance between ensuring that the devolved Administrations have a real say and that the appointment process is not held up unduly—that would, of course, be risked by the amendment.

Finally, I would like to discuss in a little more detail how this amendment would seek to propose a new role for the OIM regarding subsidy control. I recognise that the amendment reflects a desire for reassurance on the enforcement of any future UK subsidy control regime. However, we believe that it risks undermining and prejudging the outcome of the forthcoming consultation that we have announced. This consultation will inform our future approach to subsidy control, including the role of oversight and enforcement.

The Government have been clear that the UK will have its own approach to subsidy control; we want a modern system for supporting British business in a way that fulfils our interests. The amendment is therefore premature, as it seeks to confer specific regulatory functions on the OIM in respect of subsidies before the wider details of any legislative UK domestic subsidy control regime, including the appropriate mechanism for oversight and enforcement, have been developed and brought before this House or the other place.

On another point that we will discuss in more depth in our next debate, the Government’s view is that state aid—the EU’s approach to subsidy control—is a reserved matter. Therefore, the effect of the amendment’s provisions for consent from the DAs would be to create unacceptable uncertainty over the extent to which subsidy control is a reserved or devolved competence. As an issue of national importance, it should be treated in the same way as other nationally significant areas of economic policy, which are reserved. Having a single unified approach to subsidy control across the United Kingdom is vital to ensure that we continue to have fair and open competition across our internal market.

Finally, proposed new subsection (4) would require a review of the OIM’s competences within two or three years after Clause 30 enters into force. I recognise the need to ensure that the CMA’s new functions are undertaken effectively, but the broadness of this proposed review is unprecedented and unhelpful.

For the reasons that I have set out, therefore, I am obviously unable to support this amendment. I ask—perhaps more in hope than in expectation—the noble Baroness to withdraw her amendment.

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[Lord Purvis of Tweed (LD)]

My Lords, it is a great pleasure to follow my noble friend, with the very great experience and knowledge that she has on this issue. Given the fact that all four speakers so far in this group have been from Wales, I thought that, to avoid a degree of market distortion across the United Kingdom, there should be a little bit of northern balance. All I wish to do is to endorse the points that they have so ably made.

I put my name to this amendment, and if the noble and learned Lord, Lord Thomas of Cwmgiedd, presses it and the House agrees, the Government have an opportunity now to bring back a more considered proposal as a result of some consultation. None of the speakers in this group has indicated that it is easy. If it was easy, agreement would have been reached at the outset. It is about being aware that the frameworks update highlighted that one of the four areas of dispute around where the competences lie with this power being repatriated is state aid. It is obvious that it was not a straightforward situation of saying that this had been uniquely a United Kingdom responsibility—so by definition, it is an issue.

It is also perfectly clear from all speakers that, without there being an understanding about the tests, de minimis levels, the administration and the type of ministerial direction that has existed up to now—without clarity as to how all that will go forward—any Minister in a devolved Administration will quite rightly be concerned about what impact this will have on the economies of the powers that they do have under the devolved competences.

I just wish to reinforce the point that the letter from Jeremy Miles to Alok Sharma, which I read, made a very fair offer. We share the concern that, without there being a further set of discussions to seek a degree of common ground on a framework agreement about how this will operate in the future—which there is time to do, because the Government have indicated that they are seeking to effectively have a window under the WTO approach, and there is consensus that that will be respected—this is potentially the way forward.

I hope that, although often it may not seem so, the Minister will see defeat as a bit of a silver lining in order for him to come back with a more considered approach, to take the Welsh offer and to allow us to consider the Government’s position from a degree of consensus and agreement. I support the noble Lords who have spoken on this group so far.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, like the noble Lord, Lord Purvis, I agree with the case that has been made so well by the previous speakers. I put my name to the amendment put forward by the noble and learned Lord, Lord Thomas, and we would support him if he chooses to divide the House.

It is very simple: we agree that there has to be a UK-wide policy on state aid—or subsidy, if that is what it is to be called. The question that hangs around but never seems to get answered is: why has it not yet been articulated what this policy would be? It cannot be a question of timing. This suggests yet another shroud of mystery that surrounds this increasingly perplexing Bill.

It is certainly a novel way of developing policy for a Government to remove policy that is in force and that everybody knows and understands, increasing the uncertainty and making it more difficult for businesses. However, as the noble and learned Lord, Lord Thomas, said in his opening speech, the statutory instrument removing the current rules—taking us out of the current system that has been operating for a great number of years—has already been laid and will be debated next week, and we will not be able to stop it.

We therefore seem to be heading towards WTO rules, which are not well respected and do not seem to be applied properly, and there is no policing or organisational structure in which they can be dealt with properly. If that is where we are, we would at least have a period of stability during which we can sort out how we want to set up the rules that will apply to the internal market and how, if necessary, they are to be policed. This could all be part of the yet-to-be-announced deal with the EU—and it may be that is the case, because it is clear that this is a significant area of interest within the negotiations. But without any further detail on that, it is hard for us to speculate.

However, as others have said, the Welsh Government have come forward with an extraordinarily generous offer to expedite work on a common framework that relates to state aid and make a voluntary agreement to pause any legislation that would impinge on that in the intervening period. That is almost too good an offer, and I hope that the Minister has an adequate response to it.

[Lord Callanan (Con) (Con)]

I thank noble Lords who have contributed to another admirably brief debate. We are making good progress this afternoon.

As I outlined in Committee, Clause 44 reserves to the UK Parliament the exclusive ability to legislate for a UK-wide subsidy control regime. I greatly enjoyed the many contributions on this matter. I particularly liked the suggestion of the noble Lord, Lord Purvis, that I should take defeats as a silver lining, which prompts the obvious response that the Liberal Democrats have been defeated in the last three general elections and therefore have some experience of that.

Our debate in Committee on this clause served to highlight that, while some noble Lords might disagree on the approach taken, we all recognise the importance of ensuring that the UK continues to take a clear and consistent approach to subsidy control as we move away from EU state aid rules. The Government have always been clear in their view that the regulation of state aid—the EU’s approach to subsidy control—is a reserved matter. The Government are clear that they want to maximise the economic opportunities available to us when we are no longer bound by EU state aid rules. To achieve this economic ambition, it is important that, as now, we take a coherent approach to the system that governs how public authorities subsidise businesses across the United Kingdom. Reserving subsidy control is the best way in which to guarantee that a single, unified subsidy control regime could be legislated for in future.

In previous debates, there has sometimes been a misplaced conflation between the devolved spending powers and the systems that regulate the potentially harmful and distortive effects of this spending. To be clear, these are two distinct and separate responsibilities. Although the devolved Administrations can and should make spending decisions on subsidies, the wider rules in which they operate are, and should continue to be, consistent across the whole nation. In response to the intervention from the noble Baroness, Lady Randerson, I reiterate that the reservation does not change the devolved Administrations’ position in practice. They have never previously been able to set their own subsidy control regime, as this was covered by the EU state aid framework, but they will continue to make their own spending decisions on subsidies as they do currently.

The effect of the amendment would be to create unacceptable uncertainty regarding the extent to which subsidy control is a reserved or devolved competence. That would potentially give rise to inconsistency if there were different regimes to regulate subsidies across the UK. Ultimately, it could undermine fair and open competition across our internal market and inevitably discourage investment in the United Kingdom, bringing additional costs to supply chains and consumers.

The reservation will enable the UK to design a bespoke subsidy control regime that meets the needs of the UK economy. The Government have been clear that any future domestic regime will operate in a way that works best for all UK businesses, workers and consumers. In the coming months, as I said in Committee, we intend to publish a consultation on whether we should go further than our World Trade Organization and international commitments, including whether further legislation on this subject is necessary.

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[Lord Fox (LD)]

My Lords, this has again been a high-quality debate. It is an honour to follow the noble Duke, the Duke of Montrose, who spoke with great wisdom. In offering Her Majesty’s Government support, that support was heavily nuanced with some important questions, which I look forward to hearing the Minister answer.

In the previous debate, on Amendment 69, the noble and learned Lord, Lord Thomas of Cwmgiedd, set the question of whether it was diktat versus consensus. It is the same with group. I am pleased to speak in a group which has heard the contribution of the noble and learned Lord, Lord Mackay, and I share in the admiration of the noble Lord, Lord Cormack, for his contribution. He painted a rather half-full picture of where we have got to in the Bill, and the noble Lord, Lord Cormack, was a little more half-empty. I am afraid that I side with the concerns of the noble Lord, Lord Cormack. Those concerns were further illustrated by my noble friend Lord Bruce, who set out the flaws and problems that remain with the Bill.

I am speaking to Amendment 75, in my name, and I am grateful for the support of my noble friend Lord Purvis of Tweed, the noble Baroness, Lady Bennett, and the noble Lord, Lord Wigley. Overall, my noble friends have been very clear and helpful in setting out the purpose of this amendment. It is essentially to help drive a process whereby the consensus that the noble and learned Lord, Lord Thomas, talked about in the last group can be delivered—an explicit process.

Why do we need an explicit process? One thing that has come through the Bill, and through amendments brought by both Ministers, is an acknowledgement of the need for consultation. However, as we heard from the noble Lord, Lord Empey, who was here just a few minutes ago and I am afraid is not here now, one Minister’s consultation is not necessarily one recipient’s feeling consulted. There is a process that is called consultation, whereby people are informed marginally before the general public, and then there is genuine consultation. All Governments practice both these forms of consultation.

Amendment 75 sets out a process whereby consensus is driven, rather than relying on the Minister or the Government of the day, whether this one or future ones, to deliver that consensus around the Joint Ministerial Committee. That process has been set out, as I said, by my colleagues. The purpose is, in a sense, to bookend the amendment of the noble and learned Lord, Lord Hope. After Part 5 discussions, we started these discussions with the amendment of the noble and learned Lord, Lord Hope, which pushed the common frameworks to the forefront of how the future internal market should be organised. Amendment 75 seeks to put in place a process by which this can happen and, as my noble friend set out, avoids the pitfall of a veto.

The noble Lord, Lord Cormack, said that he had concerns about the union. I have concerns about the union. It is only by delivering a truly consensual process that is seen to be transparent and set out, rather than optional, for people, that that danger can start to be averted. That is why I will be pressing Amendment 75 to a vote—unless, of course, there is a damascene conversion on the Benches opposite.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, like others, I congratulate the noble and learned Lord, Lord Mackay, on his campaign. The Government have listened to it and that has resulted in a number of good and important changes to the Bill. He exerts great influence on our work, and long may it continue.

I admire the thinking that has gone into Amendment 75, in the name of the noble Lord, Lord Fox, and his supporters. It proposes a response to another of the gaps that we keep encountering in the Bill—the need to reform the JMC system and the need for a mechanism for getting agreement, with particular reference, in this case, to the market access principles, about which we have different views. This may not be the time to bring this particular proposal in, but it shows us the way forward and I hope that that will influence the Government’s thinking in other ways and in other parts of our political consciousness.

Amendment 76, in my name, was intended as a fallback, in case our plans for ensuring that the common frameworks programme was made the centrepiece of the process for agreeing the rules required to underpin the UK internal market fell by the wayside. However, this House has strongly supported the amendments of the noble and learned Lord, Lord Hope, on the common frameworks, and we hope that, in time, we can persuade the Government that they can and should do likewise.

I am less sure that we have persuaded the Government about the damage they will do to the devolution settlement if they do not change tack on how state aid is to be organised and their current top-down plans for the shared prosperity fund. I urge them to reflect on the opportunity they have been given by the votes today, but I do not think Amendment 76 will actually take the trick that it was intended to in this case, so I shall not be pressing it to a vote.

United Kingdom Internal Market Bill

Lord Stevenson of Balmacara Excerpts

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Monday 23rd November 2020 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

21: Clause 10, leave out Clause 10 and insert the following new Clause—
“Exclusions from market access principles: public interest derogations
(1) The United Kingdom market access principles do not apply to, and sections 2(3) and 5(3) do not affect the operation of, any requirements which—(a) pursue a legitimate aim,(b) are a proportionate means of achieving that aim, and(c) are not a disguised restriction on trade.(2) A requirement is considered to pursue a legitimate aim if it makes a contribution to the achievement of—(a) environmental standards and protection,(b) animal welfare,(c) consumer standards, including digital and artificial intelligence privacy rights,(d) employment rights and protections,(e) health and life of humans, animals or plants,(f) cultural expression,(g) regional socio-cultural characteristics, or(h) equality entitlements, rights and protections.(3) A requirement is considered disproportionate if the legitimate aim being pursued in the destination part of the United Kingdom is already achieved to the same or higher extent by requirements in the originating part of the United Kingdom.”

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[Baroness Randerson (LD) [V]]

My Lords, I speak in support of the amendments. The internal market must be based on high environmental standards, as well as supporting progressive improvement, but there is nothing in the Bill to ensure that this happens—hence the amendment. There is no reference to common frameworks to support higher standards, and there is no non-regressive provision to prevent standards falling. Taken together, this could easily lead to a deregulatory race to the bottom, and have a chilling effect on attempts to improve environmental standards.

It is important to remember that improving environmental standards can be controversial in practice, even though there may be no debate about the science behind them. For example, in the early days of the pandemic, the Government very commendably made money available and encouraged councils to put in place new cycle lanes and pedestrianised areas—a policy which we would all agree is good for our health and for the climate. However, many councils found this very difficult to do in practice, and some backed down in the face of fierce opposition from motorists. Wandsworth council, for example, was one of those concerned.

So in this Bill, while devolved Administrations will not be legally prohibited from introducing new environmental standards, under the market access principles, incoming goods from the rest of the UK will not have to meet these new and higher standards—hence fundamentally undermining attempts at improvement. This is in contrast with EU law, which has created coherent shared mechanisms. The EU also allows countries to go beyond commonly agreed standards to protect the environment, such as by banning particular types of packaging. However, there is no possibility of derogation from mutually recognised requirements in the Bill, as envisaged by the Government.

Amendment 23 refers specifically to environmental standards, but the principle also applies to public health and to standards across the board. That undermines efforts at innovation, a key factor in all successful markets. In Committee, the Minister confirmed that exclusions are

“intentionally narrowly drafted, to ensure that there are no unnecessary trade barriers.”—[Official Report, 28/10/20; col. 339.]

Can the Minister explain how the Government have come to the conclusion that setting higher environmental standards or higher standards of public health creates a barrier to trade?

In the other place, the Government created an exclusion for pesticides, which was not initially in the Bill. Can the Minister explain why this is important, but not other environmental factors? Just as over the decades we have become increasingly aware of the dangers of pesticides, so we have been on a similar journey of discovery over plastics. Well over a decade ago, the Welsh Assembly voted to introduce a charge for single-use plastic bags. The reason was that there was concern that they did not break down in the environment, that they lasted for hundreds of years and that animals died after getting tangled up in them. After some protest, England followed, because it saw the success in Wales of that policy. A decade on, we know so much more about plastic and the microscopic particles that we all ingest, either directly from plastic bottles, or indirectly, for example from fish which have themselves ingested particles.

My point is that yesterday’s experiment becomes today’s norm. Wales wants to ban nine different types of single-use plastic next year, and England—via the UK Government, of course, but the Government for England in this case—seems to be thinking of banning only three. If the Bill is passed without amendment, the efforts in Wales to lead in this field will in practice be totally undermined.

I will finish with another example. Next year the UK Government want to ban the sale of house coal in England. This Bill would mean coal from Wales could still be sold in England and would thus undermine standards that the Government wish to set for England. It is important to remember that what applies to one nation applies to another. I support the amendment.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, this has been a very interesting debate for a number of reasons, which I shall come back to as I conclude. The noble Baroness, Lady Noakes, as she often does, focused on the key issue in play here: where we best situate the balance in an internal market that is as integrated as we currently have, which needs and respects clearly harmonised rules but also allows for joint processes which allow individual parts of the market to develop at different rates in different places. I think we agree that that is the key issue but differ on where the balance must lie and whether it has to be uniform as much as the Bill seems to suggest it will be.

The main interest in this debate has been in focusing our minds on areas that we have not really touched on in recent groups. We have looked at goods and services and at qualifications and how they might be harmonised, and we are coming back to services and qualifications later in our debates this evening. The points made by the noble Lord, Lord Wigley, about whether current policy might be adapted because of the impact of this Bill when it becomes an Act need an answer, and I would be grateful if the Minister could respond in particular to that point. Is there a particular hook in this Bill that will cause difficulties across the devolved authorities?

Secondly, on the point made by my noble friend Lord Hain, could it have an adverse effect on current processes so that, for instance, we would lose the local benefit policies to which he referred? Thirdly, on the point raised by my noble friend Lord Liddle, if there are good and valuable initiatives on local growth and support for sectors that are perhaps subsets of the national economy that are appropriate and best organised and run from a local point of view, how will they be affected by the way in which the Bill imposes a straitjacket on the various initiatives that we want to see come forward? I look forward to hearing from the Minister.

[Lord Callanan (Con)]

My Lords, as the Government set out in Committee, we intend to consult shortly and deliver measures on procurement through a wider package of procurement reform. The aim is for primary legislation to be made in the second Session. Therefore, I hope that this will offer some reassurance to noble Lords that this amendment is unnecessary, because the market access principles will not typically operate in the area of public procurement, as they are about how business is regulated. The procurement rules cover how public authorities carry out their procurement activities. Therefore, I reassure the noble Lords, Lord Wigley and Lord Liddle, the noble Baroness, Lady McIntosh, and others that there will be no impact on public procurement.

Turning to Amendment 23, we have obviously had these debates before; in fact, I recall having them during the passage of the various Brexit Bills with many of the same speakers. As we explained on previous occasions, the exclusions we have drafted for goods in Schedule 1 are narrow and tightly defined to protect the functioning of important policy areas. This protects the ability of the devolved Administrations and the UK Government to preserve the proper functioning of important policy areas, while at the same time avoiding any harmful or costly barriers to trade within the UK internal market.

More generally, I understand that this amendment is designed to strengthen the devolved Administrations’ ability to take different approaches to public policy related to aspects of the environment. We have made it clear that the Bill contains derogations for the protection of the life of humans, animals and plants, which aligns with protection of the environment in many cases.

Secondly, the Government support and respect the devolved Administrations’ right to set policy in their areas of devolved competence. The Government also recognise the benefits of locally targeted policy and the potential for policy innovation. For example, on the environment, between 2018 and 2019 the UK nations all introduced a ban on microbeads in rinse-off personal care products, working together to take a landmark step in the fight against plastic waste. There is no reason why the provisions in this Bill would hinder similar collaborative initiatives.

However, it is important to acknowledge the unprecedented and significant flow of powers to the devolved Administrations, as well as the incoming ability of the UK legislatures to create new policy in areas previously overseen by the EU. This Bill aims only to ensure frictionless trade, movement and investment between all nations of the UK. The policies that different parts of the UK choose to pursue in future is a matter for each Administration.

A number of noble Lords, including the noble Baronesses, Lady Boycott and Lady Randerson, raised yet again the sale of coal across the English-Welsh border, and my noble friend Lord Randall introduced the new issue of peat. The same thing applies in both cases: there is a clear distinction between sale and use. Under mutual recognition, the use of coal or, indeed, peat—it is probably a form of coal, is it not?—could be banned, regardless of its origin in the UK. Requirements related to the use of goods are not within the scope of the mutual recognition principle. If the requirement instead relates specifically to the sale of coal or peat, the interaction with mutual recognition is slightly more complex and depends on whether the requirement in question counts as a relevant requirement for the purposes of mutual recognition. Broadly speaking, mutual recognition captures requirements that are intrinsic to the good itself, such as requirements for the composition of the good, whereas non-discrimination captures, among other things, requirements for the circumstances or manner in which a good can be sold. I clarified these matters in detail in a letter to the noble Lords, Lord Purvis and Lord Fox; it is in the House Library, I think, if Members require further details.

My noble friend Lord Randall asked me about the situation in the EU and whether we could ban the sale and use of such things. As noble Lords know, the machinery in the EU is wholly different: for example, there are technical notification requirements through which a member state may be delayed in implementing its legislation; or, indeed, the European Commission may step in and open negotiations on a harmonising measure. Any derogation applied by a member state is open to challenge, of course; the Scottish Government had to fight very hard to get their minimum unit alcohol pricing accepted.

The system established under this Bill is different. Pricing and other manner of sale requirements are totally out of scope. Furthermore, requirements governing how a consumer can use a good that may originally have been caught by Article 34 of the Treaty on the Functioning of the European Union are also totally out of scope.

The noble Baroness, Lady Ritchie, asked whether the Bill is a threat to devolution. No: the proposals are designed to ensure that devolution can continue to work for everyone. All devolved policy areas will stay devolved. The proposals ensure only that there are no new barriers to UK internal trade.

The noble Baroness also asked about the Interparliamentary Forum on Brexit. Of course, the clue is in the name: it is an interparliamentary forum. Such decisions are for the legislatures rather than the UK Government to take forward directly, so it is not my place to comment on that.

For all the reasons I have set out, I hope the noble Lord feels able to withdraw his amendment.

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This leads me to my final point, which has been raised before but has not been sufficiently clarified. Enterprises not based in the United Kingdom, or that “brass plate” in the United Kingdom as service providers, can use some of these measures to challenge the legislation in Wales, Scotland and Northern Ireland. I do not think the Government have made it sufficiently clear that the only persons able to use the powers in this legislation are UK persons. If that is not clarified with absolute certainty, I fear that the many loopholes in the legislation will be seen by many enterprises outside the United Kingdom. I am therefore grateful to the noble Baroness, Lady Neville-Rolfe, for bringing this issue to our attention again, and I hope the Minister can finally clarify the position.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, this has been an interesting debate. It has revealed many gaps in our knowledge and understanding of the Bill, which, perhaps, is very comfortable for the Government. I would go a bit further than some of the previous speakers and say that the Government are making heavy weather of this part of the Bill, not displaying to their best advantage the knowledge and understanding they should have in this area. I presume that the starting point must have been that if there is to be an internal market, it must be regulated so that it works well. It is therefore necessary for the legislation to have regard to our services sector, which, as the noble Baroness, Lady Neville-Rolfe, said, accounts for some 65% of our economy. If that is right and it is such an important part of our economy, why is this Bill so sketchy about it? Do the Government not know much about our services sector? Is it not important that we get that right? The noble Baroness, Lady Noakes, again put her finger on it: is this just a protection against possible future unknowns? If so, does that explain why there is so little in the Bill itself to reflect that?

Others have made these points very well. The noble Lord, Lord Purvis, was right to say that we have to think harder than the Bill does about the way modern companies operate in providing goods. Companies are rarely without a service component, and the Bill does not deal with that bipartisan, hybrid approach. The noble Baroness, Lady Bowles, asked about services that are licensed or rented. In the virtual space of the internet, one is rarely talking about purchase. One is talking about usage, and there is nothing here about intellectual property, copyright or associated interests. What about those companies? Do they get affected by this legislation?

What sort of world are we living in if our Bills cannot embrace the fact that, in the digital world, services are not delivered by companies based in specific parts of the UK? That point was made by a number of speakers. Most operate in more than a single place, and it would be difficult to drill down to a point where the physical geography can be identified—the “brass plate” question that was raised earlier.

At the end of the day, it would be more helpful to the House if the lists given in Schedule 2 did not try to discriminate against services. The services listed in the schedule are not covered by the Bill, and it would be more of a challenge but more interesting for us if the Bill listed the services to which the Bill does apply, thereby making it easier to discuss this issue. I challenge the Minister to write to us before Third Reading with a comprehensive list of the services he believes are caught by this Bill and to explain to us, in simple language that we can understand, the impact the Bill will have if implemented.

[Lord Callanan (Con)]

I thank my noble friend for tabling this amendment, which seeks to clarify the extent to which we have considered how the provisions of the Bill in respect of services will work in practice. I shall endeavour to do my best to answer my noble friend’s concerns, because I know that she appreciates and promotes just how critical the services sector is to the United Kingdom, and I share that view. It is vital, constituting more than 80% of our GDP and four out of five jobs nationwide.

The principles of mutual recognition and non-discrimination in Part 2 underpin an internal market framework which will limit the emergence of new barriers following the return of powers from the EU. This will support UK businesses trading services in other parts of the UK, and authorities regulating these services. The Bill will complement the existing services regulatory framework while building in certainty for businesses and regulators.

The mutual recognition principle means that businesses authorised to provide services in one part of the United Kingdom will not need to satisfy further authorisation requirements to provide those services in the other parts of the United Kingdom. This principle of mutual recognition applies to authorisation requirements. It does not cover matters such as non-mandatory membership of organisations, which cannot prevent a service provider from offering a service but which might be desirable to join for other reasons.

A similar form of mutual recognition already operates as part of the existing UK-wide regulatory framework for services under the Provision of Services Regulations 2009. Regulators complying with that legislation will already be subject to the principle of mutual recognition. Similarly, the non-discrimination principle is a fundamental safeguard for businesses, ensuring equal opportunity for companies trading in the UK regardless of where in the UK that business is based, from where it provides services or where its staff are based.

As my noble friend Lady McIntosh highlighted, with the non-discrimination provision, regulators have until now had to follow rules in the Provision of Services Regulations 2009 which prevent discrimination towards service providers from other European Economic Area states. These rules will be revoked at the end of the year when the transition period comes to an end, as they will no longer be relevant to the UK’s situation. It is only right that rules that have previously prevented discrimination towards businesses from the other EEA states should now be applied to ensure the continued flow of services across our United Kingdom.

To help provide clarity, Clause 16 sets out a list of requirements and provisions that are neither regulatory nor authorisation requirements and therefore are not covered by the principles in Part 2. First, those requirements dealt with in other parts of the Bill—namely the mutual recognition principle in Part 1, which relates to goods, and provisions covered by Part 3, on professional qualifications—are not within scope of Part 2. This is because it is not desirable for one set of requirements to be subject to several rules from different parts of the Bill.

Secondly, existing requirements are out of scope because Part 2 applies only to new or substantively modified requirements that come into force, or otherwise come into effect, after this section comes into force. However, for the mutual recognition principle only, existing requirements will be brought within scope of the Bill where a corresponding authorisation requirement in another part of the UK introduces a new or substantively changed requirement.

Thirdly, a requirement which applies both to service providers and non-service providers is not in scope of Part 2. This part of the Bill is concerned only with the requirements which seek to regulate service providers and not all requirements which might affect service providers.

Finally, there are administrative requirements on service providers that we consider are reasonable in all circumstances, and therefore they are also not in scope of this part. Such administrative requirements could include, for example, where a service provider may be required to notify a local regulator of their presence, or where they are required to provide proof that they are in fact authorised to provide that service in another part of the UK. These requirements are necessary for regulators to continue operating effectively under the rules in this part, but it is our view that they are limited enough in scope so as not to create any unnecessary barriers to trade.

I can therefore assure my noble friend that the Government have considered carefully how the provisions in Part 2 will work in practice, and that Clause 16 is an essential part of their operation.

My noble friend asked whether penalties apply to businesses that are excluded from the Bill. If a given matter is out of scope of Parts 1 to 3, it is also by definition out of scope of the OIM’s functions and responsibilities.

My noble friend Lady McIntosh raised the four weeks’ consultation, as did a number of other noble Lords. The consultation followed the principles for a government consultation and represented an ambitious plan to engage businesses of all sizes across all four nations, as well as many academic experts and representatives of the devolved Administrations.

My noble friend Lady Neville-Rolfe asked also about Schedule 2, which lists a number of services with the aim of reflecting those outside the scope of the Provision of Services Regulations 2009, which is the current services framework. The Government also recognise that it is appropriate for legal services to be excluded from the provisions on the mutual recognition of services to reflect the separate legal systems in England, Wales, Scotland and Northern Ireland.

The noble Lord, Lord Purvis, asked whether service providers from the Isle of Man were subject to the measures in Part 2. The answer is no. Part 2 applies only to businesses and individuals that a have a permanent establishment in the United Kingdom as defined by the Corporation Tax Act 2010, which does not include of the Isle of Man. It is also the case for all Crown dependencies.

The noble Lord also asked when the services principles apply and when the goods principles apply. The services principles apply only where the goods principles do not. Only one set of principles will apply as to a particular requirement.

I hope that I have answered the questions of noble Lords and of my noble friend. I hope that she feels able to withdraw her amendment.

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[Lord Purvis of Tweed (LD)]

My Lords, I am grateful to those who have spoken in this debate, because we have all narrowed into one area on which we are seeking some clarification: the distinction between the language in the Minister’s email referring to the teaching profession and that in this amendment, which are not the same.

If the Government’s intention with the amendment is that they wish to exclude the teaching profession from the provisions, that will be universally welcomed. At this stage, therefore, from these Benches I thank the Government for listening to the debate in Committee and for acting, and also for engaging with the various stakeholders, primarily in Scotland and Wales. I am also grateful to the Ministers, the noble Lords, Lord Callanan and Lord True, for listening and acting on meetings that I and my noble friend Lord Fox had with them, at which we raised these matters, on which we had been in correspondence.

That said, some further clarification on specific points would be helpful. As my noble friend Lord German indicated, the reference in the government amendment to the profession of “school teaching” is not really language that is used. It is certainly not used by the General Teaching Council for Scotland in registering teachers, and clearly it is not used in England, although I thought that perhaps it was. I searched “school teaching” on legislation.gov.uk, but, to my knowledge, it is not used in any legislation, although I am sure that officials in the Box can clarify that for the Minister. It does not seem to be a term, so we might find ourselves inadvertently creating a new term or definition in this legislation. I am sure that this can be tidied up but, if we agree to this amendment, as we will, I will be grateful to know how the Minister intends to do so.

To give an illustration, the General Teaching Council for Scotland registers those who seek to be teachers in primary or secondary education, those who want to be registered as teachers for additional support needs or in named schools only, and, since 2017, college lecturers and those who teach in independent schools. Therefore, in the categories of teaching within the overall teaching profession, at no stage does the term “school teaching” apply.

I will give the Minister an example of why “school teaching” is problematic within the context of Scotland. Innovations that the Scottish Parliament brought in when I served on the Education Committee meant that there is now much more blended learning in Scottish secondary schools. Students who are nearing the end of their time in secondary school can now start to study for further education qualifications on practical courses provided by college lecturers within the school setting. That is very progressive and is working. An inadvertent difficulty might be that we create a false distinction between those who simply teach within a school setting and those who are in the profession of school teaching.

I hope that the Minister will be able to clarify the points that have been raised about the difference between the categories and that she will set out the intention behind the amendment. If it is the intention that the registry bodies—in their functions of carrying out the registration of teachers and in setting standards and qualifications—are excluded, that will be reassuring. I think that that is the intention behind the amendment. I hope that it is, and if the Minister is able to confirm it, that will be reassuring for many of us.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, the key word of this debate has been “clarity” and the fact that clarity is required. I think that the Minister needs to get to the Dispatch Box and answer as many of the questions as she can, but I assume that government Amendment 51A is intended to answer the points raised by the noble Baroness, Lady Bennett of Manor Castle. But questions have been raised that do not seem to point in the same direction, so I look forward to hearing from the Dispatch Box that the amendment does what it is required to do. If not, perhaps the Minister will confirm that she will come back at Third Reading with a better version of it, to make sure that the doubt is removed.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I will start with some of those questions, particularly because there was a common theme from the noble Lords, Lord Purvis and Lord German, and the noble Baroness, Lady Bennett, about the definition of teachers and why we have excluded them. By referring to “school teaching”, it is intended that primary and secondary school teachers, as well as teachers in maintained nurseries in England, will be within the scope of the amendment. Where further education teachers are employed to teach in a school, we suggest that they too are likely to be covered by this exclusion. However, it is not intended to cover further or higher education teachers in institutions that are not schools.

The exclusion is worded to refer specifically to school teachers rather than teachers more generally. In answer to my noble friend Lord Naseby, we do not intend to include pilates teachers or flying teachers in the scope of this. The latter is a much wider term that could be interpreted so broadly that it could be difficult to establish what would be within the scope of this exclusion.

In response to the noble Lord, Lord German, on care workers, social care workers are in scope of Part 3 as they are not included in the list of excluded professions. If the competent authority believes that the automatic principle is not appropriate, it can adopt an alternative recognition system.

I shall go back to my speaking notes. I begin by reassuring noble Lords that this Government are committed to maintaining excellent teaching standards across the UK. Given the attention dedicated to the issue in this House and representations from interested parties, we have given further consideration to the status of school teachers in Part 3 of the Bill. As part of this, it is important to note that, under the alternative recognition process in Clause 24, relevant authorities are able to assess individuals’ qualifications and experience on a case-by-case basis and can refuse access to the profession if they do not meet the required standards. This means that relevant authorities in each part of the UK will still be able to set and maintain professional standards, and are able effectively to hold professionals to those standards.

However, having taken into account the representations that have been made and the long history of differences in the regulation of teaching in schools across the UK, the Government have now decided to exclude school teachers from the scope of Clause 22. To this purpose, Amendment 51A seeks to add school teachers to the list of professions excluded from the recognition provisions in Part 3 of the Bill in the same way as legal professions are excluded. As government Amendment 51A meets the intended purposes of Amendment 50, I reassure noble Lords that Amendment 50 is now duplicative and unnecessary.

I shall explain why Amendment 37 is also unnecessary. The amendment would add “teaching services” to the list of services in Schedule 2 that are excluded from the mutual recognition principle in Part 2 of the Bill. However, the amendment does not address the noble Baroness’s concerns. I understand from Committee that the noble Baroness, Lady Bennett, is concerned that the Bill will allow individuals to teach in a part of the UK even if they do not meet the required standards in that part. However, the recognition of qualifications and the ability to practise a regulated profession such as teaching are wholly governed by Part 3 of the Bill.

Clause 16(5)(b) excludes from the scope of Part 2 provision that limits the ability to practise a profession by reference to qualifications or experience. Additionally, services provided in the exercise of a public function, including education services, are already excluded from the scope of Part 2 by virtue of the entries in Schedule 2 in respect of

“services provided by a person exercising functions of a public nature.”

Most aspects of teaching services are therefore already covered under this public function exclusion from the mutual recognition and non-discrimination principles in Part 2. For example, the exclusion covers most activity carried out within state-funded schools and further education colleges, so they would not be affected by the amendment either. The amendment would therefore have an effect on only a very limited number of service providers.

My noble friend Lord Flight asked, as did the noble Lord, Lord German, why other professions were not excluded. Legal professions, as we know, have been excluded from the Bill’s provisions because they carry out roles that rely on their expertise in the underpinning legal systems, which are different across the UK. School teachers have been excluded after considering the representations on the matter carefully and taking into account the long history of differences in their regulation across the UK, and to put beyond all doubt that teaching regulators will retain control over who can teach in a part of the UK.

So, in answer to the noble Lord, Lord German, the devolved Administrations will still have control over who can have access the profession in their jurisdiction. A relevant authority may consider that automatic recognition is not appropriate for that profession because of a difference in policy environment or specific regulatory needs in that part of the UK. If so, it is possible for it to disapply automatic recognition by putting in place an alternative process to recognition that complies with the principles set out in the Bill.

The noble Lord, Lord German, also asked about common frameworks. We continue to work constructively with the devolved Administrations on developing a common framework. We are working to make sure that any arrangements sit alongside the work to review the regulatory landscape for regulated professions, as set out in the call for evidence on the recognition of professional qualifications and the regulation of professions.

I do hope that I have managed to answer most of the questions, but I will look at Hansard and if there is anything else that I need to reply to I will of course do so in writing. I hope that the Government’s Amendment 51A will have allayed the noble Baroness’s concerns on this matter and that she will feel able to withdraw her amendment.

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[Lord Purvis of Tweed (LD)]

My Lords, I have only one element to ask the Minister about; it refers to some questions that were asked in Committee with regards to regulations that have no effect. Is it the entire regulation or the component part of that regulation that would be considered to have no effect? As my noble friend indicated, many regulations are fairly extensive and will have many component parts to them; the Government or the legislation may consider that the direct discrimination part could be only one part. Is it the Government’s intention that the entire regulation would have no effect? Indeed, how would the process be carried out to identify the specific element of that? The questions raised by the Law Society of Scotland and put forward so well by the noble Baroness, Lady McIntosh, justify a very clear response. As we have said previously in Committee, the scope for those seeking legal redress within this legislation is huge, so ensuring as much clarification on this element as possible would be very helpful.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, the general theme here, I suggest, is that we need the Minister to respond very clearly and precisely on this matter. My noble friend Lord Foulkes used the rather nice and elegant Scottish word “fankle” to describe where we are at, suggesting that this needs to be undone. I was going to use the Gaelic word “bùrach”. I suddenly thought that Hansard might have difficulty with it, so I checked it on a handy electronic device close to me—and came up with a rather interesting extension, which I leave with the Minister. You can use the word “bùrach”, which in Gaelic means a “right mess”, but I think a more appropriate term in this case is a “clusterbùrach” which, as the article on my device goes on to say, is

“a Scottish term for a hopelessly intractable mess made by hapless politicians.”

[Lord Callanan (Con)]

The noble Lord, Lord Stevenson, has been very helpful, adding to my knowledge of grammar. The north-east version of that would be “cluster”, followed by a word I cannot use in the House, which would not be “bùrach”. If only I had known, I would have brought my thesaurus along to aid noble Lords in their pursuit of these matters.

These amendments seek to ensure that the drafting of the non-discrimination clauses means that the discriminatory requirement is of no effect only to the extent that the requirement discriminates against the service provider in question. However, I am pleased to tell my noble friend Lady McIntosh that Amendment 39 is already addressed by this clause and is therefore unnecessary. In the case of Amendment 40, as this clause concerns indirect discrimination in the regulation of services, the amendment as drafted would make Clause 20 entirely inoperable and leave indirect discriminatory requirements to take effect.

I start with Amendment 39, which obviously concerns direct discrimination. Direct discrimination is where a regulatory requirement treats a service provider less favourably than other service providers; the reason for that is their connection, or lack of connection, to a certain part of the United Kingdom. Clause 19 already limits the application of these measures—this addresses the point made by the noble Lord, Lord Purvis—so that only the affected service provider may benefit from the requirements having no effect. While I understand my noble friend’s concern, the definition of a regulatory requirement already ensures that only the offending requirement is of no effect. This amendment therefore replicates what is already drafted in Clause 19, so I am sure she will understand that I am unable to accept it.

Turning to Amendment 40, the test for indirect discrimination requires that a requirement is not directly discriminatory, and the amendment would mean that indirectly discriminatory requirements are of no effect only to the extent that they directly discriminate. This would render Clause 20 entirely ineffective. Therefore, I am sure that my noble friend will accept that I cannot accept either of her amendments for the reasons I have set out, and I hope that she will agree to withdraw them.

United Kingdom Internal Market Bill

Lord Stevenson of Balmacara Excerpts

Report stage & Report stage (Hansard): House of Lords & Report: 1st sitting & Report: 1st sitting: House of Lords
Wednesday 18th November 2020 Lords Chamber

The noble and learned Lord, Lord Hope, said that actions speak louder than words. He also said that these amendments reset the relationship with the four nations, which is why noble Lords on these Benches will support these amendments if they are pushed to a vote.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, this has been an excellent debate, despite the fact that it is decidedly one-sided—although the noble Baroness, Lady Noakes, did her best to redress the balance—and I look forward to the Minister’s response. I said to him in an earlier meeting that this might be one occasion—perhaps the only one—when the House would be happy to hear a full response from him to the points made by the noble and learned Lord, Lord Hope, and his distinguished co-signatories and supporters.

I say that because, as the noble and learned Lord said, although the amendments sensibly address the rules for the mutual recognition of goods in Part 1, services in Part 2 and professional qualifications in Part 3, their underlying, ancillary purpose is to support and enhance the relationship between the Governments of the four nations of this United Kingdom. They focus on the key question raised by the Bill: is this to be a single market under new rules created and imposed from Westminster or is it to be all four nations working together, managing appropriate divergence, as they are currently doing through the successful common framework process?

I hope the Minister will give us a full answer to the important questions raised by this debate. I also hope that he will reaffirm his Government’s commitment to our devolution settlement, because, as we have heard, our current settlement is under pressure—not least because of recent comments from the Prime Minister. This is not confined to the devolved Administrations. The virus, the recession and recent spats over local lockdowns, who manages public health and welfare best and who pays have exposed a centre that seems unable to listen and outlying areas that do not feel they are being consulted. As we will come to in later amendments, these are bodies with far greater knowledge of what is happening locally, but which lack the resources to solve the problems they identify. It can be argued that the Bill is actually about gathering powers which should be devolved to an insensitive centre which is trying to imprison a multinational country composed of vibrant, diverse regions with diverse histories and needs into a straitjacket of a unitary state. We can and need to do better than that.

As many noble Lords have said, the most striking aspect of this debate so far has been the wide cross-party support for these amendments, coupled with the fact that no fewer than seven members of the Select Committee considering common frameworks have made it clear beyond peradventure that the common framework process is alive and well, doing the job that the Government say they need done: supporting frictionless trade across the UK, improving standards, managing divergence and strengthening the union. Why is this process not at the centre of the Bill?

We support these amendments and will support the noble and learned Lord if he decides to test the opinion of the House. However, we heard from the Minister in earlier stages of the Bill and in separate meetings that his mind was not closed on this issue. Obviously, other interests are at stake here. However, the case made today by virtually everyone who has spoken has been strong and formidable in the arguments deployed. I urge the Government to give the House an assurance that they accept the principle that lies behind the amendments and that they will come back at Third Reading with amendments of their own which give effect to it. If so, we would support that.

It is clear that there is more that unites us on this issue than divides us, and it is clear from the tone and content of the debate that this would be the preferred solution of your Lordships’ House.

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, in preamble, I say again that I agree with those who would like to see our old proceedings back; as long as I am trusted and have the privilege to answer to this House, I will seek to do so from this Dispatch Box. However, I say to my noble friends on the Liberal Democrat Benches that if they want to have heckling from the noble Lord, Lord Foulkes, they should be careful what they wish for.

In reply to the noble Lord, Lord Rooker, I try always to be in a conciliatory mood. Particularly after a debate such as this I am mindful of the wise advice of the Emperor Marcus Aurelius: “Accept modestly; surrender gracefully.” Unfortunately, however, as noble Lords who have had the privilege of serving in office will know, conciliation does not mean that one must accept specific amendments.

This debate was rooted in a passionate and sincere spirit, almost universally shared, of concern for the union and respect for devolution. As I say, that unites almost all of us who have spoken, including the Member now on his feet. The noble Lord, Lord Foulkes of Cumnock, made a fascinating and thoughtful speech, which of course I will study carefully. Those of us who care for the union and support devolution should be cautious in echoing the separatist claim that this or that action is being done to undermine devolution when it is not. The debate about effect and perceived effect is legitimate. The claim of bad intent that we have had from some is risky, if not perilous.

The UK Government and the devolved Administrations all have a clear stake in a smooth-functioning internal market, as my noble friend Lady Noakes pointed out. However, the Government have been clear—we have made no secret of this in the Bill—as my noble friend Lord Naseby said, that the right place for final decisions on the internal market should be the United Kingdom Parliament, where parliamentarians from all parts of the United Kingdom can debate and vote on legislative proposals.

I was asked a specific question by the noble Baroness, Lady Andrews; the noble and learned Lord, Lord Thomas of Cwmgiedd, touched on it also. New restrictions on the sale of goods, including goods made from plastic produced in or imported into one part of the UK, will be subject to the mutual recognition principle for goods unless an exclusion in Schedule 1 applies. The Bill will preserve the devolved Administrations’ ability to regulate in line with their own strategies and regulate production of goods in their territory. However, goods, including ketchup, sold lawfully elsewhere in the United Kingdom will not be denied access to other parts of the UK market unless an exclusion applies. Consumers are of course not required to buy them.

The noble and learned Lord, Lord Hope of Craighead, in his powerful opening speech claimed that the Bill “destroys divergence”—that it is not possible under the Bill. I want to make it clear that to say it is not possible is incorrect. The Bill will apply only where divergence would create a market barrier under the conditions set out in the Bill. Domestic producers will have to conform to local regulation, and devolved Administrations will be able to regulate the use of all goods.

My noble friend Lord Callanan and I have welcomed positive engagement with a number of your Lordships across the House on the common frameworks programme— some noble Lords have been kind enough to allude to that. This issue and the concerns raised in our debates are important. I hope we will be able to draw lessons from these discussions in the constructive spirit that they have taken on to date and find ways to set at rest some of the concerns expressed that we believe are unjustified.

As I have said before to your Lordships’ House, we, along with the devolved Administrations, remain committed to the common frameworks programme. We recognise the importance of the issue and the need to underline unequivocally the Government’s continued commitment to the frameworks programme, before and after the passage of the Bill. An iron curtain will not fall. For all the profound respect I have for the noble Baroness, Lady Finlay, I do not believe that that sort of language is helpful.

Our commitment has been made clear to your Lordships’ House at every stage in our debates and discussions on this to date, as the noble Lord, Lord Stevenson of Balmacara, said, and in the regular publication of framework analysis, which has been in circulation since 2008. The pursuit of this aim must respect the interests of the other parties involved in the common frameworks programme. There is no indication at present that the devolved Administrations would support placing common frameworks on a statutory basis. Indeed, when I had the privilege of giving evidence to a Welsh Senedd Select Committee last week, that was not the impression I received. However, in any case, common frameworks have not been designed to carry legal force.

The Government have made it clear—yes, I will use the word—that the frameworks programme and the UK internal market are two complementary undertakings. The devolved Administrations will continue to be able to innovate and regulate in devolved policy areas, but the UKIM Bill will create limits on the extent to which they can enforce new requirements against traders from other parts of the United Kingdom. The market access principles will ensure that any divergence does not damage the ability of UK companies or investors to trade with every part of the United Kingdom. I appreciate the feeling across the House on this matter, but the Government view retaining the flexibility and voluntary nature of the programme and respecting market principles as important and viable complementary objectives.

I acknowledge that there may be an appropriate way to put frameworks into the Bill while retaining the flexibility and the voluntary nature of the programme and respecting the market principles. However, I respectfully suggest that the approach proposed here to make these amendments to the Bill is not the right one, and I will seek to explain why.

The approach proposed in these amendments would significantly change the nature of common frameworks, giving agreements within them primacy over the market access provisions in the Bill, as acknowledged and argued by the amendments’ signatories. Although I understand the intention of these amendments in seeking to define the relationship between the common frameworks and the market access principles, they are problematic in a number of respects. The approach would automatically disapply the market access principles and mutual recognition of authorisation requirements in relation to regulations or requirements that implement agreements reached under common frameworks. I disagree with my noble and learned friend Lord Garnier; this creates a risk of legal uncertainty. On this I agree with my noble friend Lady Noakes in her powerful speech about the interests of business and consumers, particularly in the smaller economies of the United Kingdom—an aspect ignored by the signatories to the amendments.

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[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, the noble Baroness, Lady McIntosh, and my noble friend Lord Foulkes have made the case clearly around the issue raised in Clause 5(3), and I hope the Minister will be able to respond. I join them in thanking the Scottish Law Commission for its considerable work in scrutinising some of the detail of the Bill—as always, it has been very helpful. I put on record our thanks to the noble Baroness, Lady Ritchie, for her very comprehensive and clear explanation of Amendment 24 in her name, and to others who have spoken.

We on this side had the benefit of a presentation by the Equality and Human Rights Commission and the Northern Ireland Human Rights Commission on this point, and I was seized by the fact that this is very important indeed to them and a matter that really has to be dealt with. The ground has been covered very fully and I just want to make sure that it is clear that we support this important amendment. It is designed to ensure that the non-discrimination principle in Clause 5 cannot be used to challenge the statutory provisions introduced in Northern Ireland after the end of the transition period to fulfil the obligation set out in Article 2 of the Northern Ireland protocol. That is relatively easy to say, but it is rather difficult to see how it translates into legislation. I hope that, when he responds, the Minister will be able to give us clarity on this.

As my noble friend Lord Hain said, the stakes here are very high. If you have not been to Northern Ireland, it is sometimes very difficult to get why it is so important to the people there and to the institutions that have to operate within Northern Ireland. There is a very widespread respect for human rights and equalities issues in Northern Ireland; it is something that comes up in conversations wherever you have them, in relation to employment, services, goods and operating in the commercial sector in Northern Ireland. Once you have had that conversation, and once it has been explained to you why it is so important, it is very clear that this is a matter that cannot be left. It is up to the Government to explain now how it is going to happen, and I look forward to hearing from the Minister.

[Lord Callanan (Con)]

My Lords, I thank all noble Lords who have contributed to this debate.

Amendment 6, in the names of my noble friend Lady McIntosh and the noble Lord, Lord Foulkes, seeks to clarify the meaning of Clause 5(3). This subsection explains that

“A relevant requirement … is of no effect in the destination part if, and to the extent that, it directly or indirectly discriminates against the incoming goods.”


This wording was chosen by the Government because it targets discrimination, while leaving intact other elements of a regulation that may be perfectly useful or serviceable. For example, consider the case of one requirement covering two products. One of those products is not discriminated against, but the other faces indirect discrimination due to the particular market structure for that product. Clause 5 ensures that the regulation of the product which is not facing discrimination continues. This would not be the case if the requirement were struck down in its entirety when any part of it is discriminatory.

This amendment gives rise to a risk that a court would read this as attempting to oust its jurisdiction on normal grounds of challenge. That is clearly not the intention of this provision, which is to target the mischief of discrimination without going further or interfering with other legislation. I am sure that it goes without saying that we would not want to invoke any such confusion, nor do I think that that is what my noble friend and the noble Lord are trying to achieve. For these reasons, I hope that my noble friend will feel able to withdraw her amendment.

On Amendment 24, from the noble Baroness, Lady Ritchie, and others, I am very happy to accept a letter from the noble Baroness, and I will ensure that it gets a full reply. The Government are fully committed to Article 2 of the protocol—that goes without saying. We have demonstrated this by making the necessary amendments to the Northern Ireland Act to establish the dedicated mechanism and by working closely with the Northern Ireland Human Rights Commission and the Equality Commission for Northern Ireland to operationalise the dedicated mechanism, ready for the end of the transition period.

The Article 2 commitment is about protecting the specific rights that individuals are afforded under the Belfast/Good Friday agreement and non-discrimination in this regard. It is supported by six EU equality directives that are all designed to tackle discrimination because of specified protected characteristics of individuals and to promote equal treatment. It will be part of the role of both commissions, through the dedicated mechanism structure, to monitor, advise, report on and enforce the Article 2 commitment and report to the Government and the Executive Office in Northern Ireland in this regard.

As I have said, we have already delivered the relevant legislative measures to give effect to Article 2 of the protocol, and no further amendments are required in this regard. I can assure noble Lords that the rights for individuals in Northern Ireland captured within the scope of the Article 2 commitment will continue to be protected going forward and will not be impacted by the outworkings of this Bill.

In reply to the noble Baroness, Lady Suttie, I can say that, for statutory requirements to be relevant requirements under Clause 6, they must be requirements that apply to, or in relation to, goods sold in the nation in question. If the employment law requirement were to meet that test, they would not be disapplied because they had discriminatory effects.

I hope that, with those assurances, that the noble Baroness, Lady Ritchie, will not press Amendment 24.

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Moved by

[Lord Stevenson of Balmacara]

10: Clause 8, page 6, line 47, at end insert—
“(c) the protection of consumers;(d) the protection of environmental standards;(e) the promotion of social and labour standards;(f) the protection of public health;(g) the protection of animal health.”

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, In moving Amendment 10, I also speak to Amendments 21, 41, 48 and 49, which together deal with various exemptions and derogations that we believe should be appropriate in the case of the market access principles. I thank the noble Lords, Lord Anderson, Lord Young and Lord Wigley, and the noble Baronesses, Lady Bowles and Lady Jones, for their support, and I look forward to their contributions.

Now that we have accepted by a majority Amendment 1 from the noble and learned Lord, Lord Hope, and the Government have said they will not oppose Amendments 38 and 51, I hope we can assume that the common frameworks process will be at the centre of our future concerns about the internal market. We think it will ensure that the devolved nations will be able, within the limits of UK law, to formulate and apply policies that best suit their local circumstances, working together in order to enable the functioning of the UK internal market. Each devolved Administration will retain the ability to diverge from the harmonised rules in their territory within the mandate given to them by the devolution settlement, but only after consulting the relevant policy group to see if a common outcome can be reached and agreed to.

We fully accept that there have to be backstop powers retained by the UK Parliament that are subject only to the normal “consult and seek consent” modality, and we accept that that brings into play the market access principles system set out in the Bill. However, that does not operate by agreement. It is hard-edged; it is a set of strict statutory rules that do not permit any real divergence. For example, my noble friend Lord Foulkes mentioned in the last group that Clause 8, on the non-discrimination principle, refers to “legitimate aims” and limits them to

“the protection of the life or health of humans, animals or plants”

and/or

“the protection of public safety or security.”

So it is very tight—but does it have to be that way? Surely we want exclusions to permit various exceptions from the lists, as set out in our Amendments 10 and 41. Others will make the case for the extension of the legitimate aims in Amendments 21 and the rest, affecting services.

The Welsh Government put around a note, which they prepared in response to the papers put around last night by the Government. They argue that the Bill’s limitations have been too tightly drawn and that they go much beyond current international regulations, and effectively put new restrictions on devolved competence. One of the policy statements issued yesterday by the Government said:

“Each part of the UK will be obliged to follow a rigorous process to justify an exclusion. This will include suitable evidence and a risk assessment shared between UK administrations, to confirm the nature of the threat posed and the effectiveness and proportionality of any proposed measure in response.”


This is hard-edged. This is not the language of consult and seek consent, let alone of a Government trusting in the common framework process.

Our amendments seek to add significant exclusions to the market access principles for goods and services and in relation to the recognition of professional qualifications. We think they are justified, we think they are proportionate and, otherwise, will not have an adverse impact on the powers we think the UK Government must retain. I beg to move.

[Lord Anderson of Ipswich (CB) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Stevenson, and to have put my name to five of the six amendments in this group. The purpose of these amendments is to preserve the potential for legitimate policy divergence that is inherent in the devolution settlement. That potential is squeezed out for the future, save in limited and inconsistent respects, by the non-discrimination and mutual recognition principles as they appear in the Bill.

The scheme of these amendments is to provide for derogations from the applicable market access principles, to be available on a consistent basis across Parts 1, 2 and 3 of the Bill. Such derogations would be safety valves against the pressures that build up when central and local interests clash—safety valves of the sort that the member states of the European Union were sensible enough to gives themselves in their treaties, and that exist in devolved, federal and confederal states all over the world. Their purpose is more than merely political. The exercise of devolved powers has, in the past, produced creative and positive results in fields ranging from the requirement of fire suppression systems to the sale of electric shock collars. Noble Lords drew attention in Committee to the potential for similar action in future, if not prevented by the Bill, from measures against obesity to bans on the sale of peat.

The amendments are not a recipe for pointless and obstructive barriers to trade, which I strongly agree are to be avoided, because the use of those exceptional powers would remain subject to strict statutory controls. If challenged, rationality and the absence of protectionist purpose would have to be demonstrated, much as when the Scottish Government were put through its paces on minimum alcohol pricing. Yes, there will be cases in which compliance has to be demonstrated in the courts. Who, if not the courts, can be the arbiter of whether public authorities, whether central or devolved, have exceeded the limits of their legal authority? Litigation is always an inconvenience, and I would not wish it on my best friend, but the universal fact that the scope of a legal power must, in the last resort, be determined by the courts is no sort of justification, I would suggest, for withholding or removing that power from the devolved Administrations.

As for cases that last 10 years, as a barrister I can only dream enviously of such a durable source of income. Urgent cases can be quickly resolved, and the major source of delay will be removed once we move outside the jurisdiction of the Court of Justice of the European Union. Without its intervention, the time occupied by the Scottish case on minimum alcohol pricing —which delayed the introduction of that measure—would have been very much shorter.

The common frameworks incentivise consensus. Among their many advantages, therefore, is a likely reduction in recourse to litigation. So I welcome Amendment 1, which, if it remains in the Bill, will prioritise the common frameworks, and significantly narrow the circumstances in which the market access principles apply. For as long those principles remain in the Bill, it seems to me that something in the nature of these amendments is needed, if only and the noble Lord, Lord Stevenson, as a backstop. These amendments would diminish, in a controlled fashion, the crudely centralising force of the market access principles. They would also help to preserve the mutual respect between nations that the perpetuation of our union requires.

--- Later in debate ---

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

My Lords, I have received no requests to ask the Minister any short question, so I call the noble Lord, Lord Stevenson of Balmacara.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank everyone who has spoken in this debate for their thoughtful and often powerful contributions. It has been a wide-ranging debate and a very interesting one. It has raised new dimensions in our debate today, and for the ones we will have in succeeding days on Report.

It made me think of two things that I want to share with the House in concluding. A lot of the problems with the Bill arise from the accelerated timetable it has gone through. The feeling I am left with after this debate is that if there had been more time for debate prior to its publication, we would not be facing the rather uncomfortable tension between the wish to maximise consumer benefit and reduce barriers to trade, which has been expressed by a number of speakers and which we fully support, and being unable to respond to local wishes in parts of the country on issues that matter to local people. We want there to be competition not only in raising standards but in innovation and finding new ways of dealing with issues of public policy that may arise.

Interestingly, various derogations and exemptions that appear in the amendments in this group mimic the concerns expressed during the Trade Bill, which we will return to later this year, and which were resolved in the Agriculture Bill, with the Government conceding that there needed to be a statement on the standards of environment, animal welfare and animal production standards in relation to the agricultural trade and products. If you add public health, social and labour standards, we are back with the lists that appear in today’s amendments. I wonder why that is; I do not really have an answer. However, it might be worth more consideration. I will look carefully at Hansard to see whether we can find a common thread that might be picked up in later amendments, and on which it might be worth pushing for further debate if we can—or perhaps to a vote.

In passing, I am sorry that the noble Baroness, Lady Noakes, whose contributions are always of interest, was foxed by the term “cultural expression”. I believe that is the term used when state aid is used to support activities that would otherwise not be possible. A reference here would be the horse race betting levy, which would otherwise be banned, or the support that this Government brought in to support the film industry, animation, high-end drama and other aspects of cultural life, building on work done initially by the Labour Government. I think that is where it comes from. If it is valid for anyone in the public sector or an elected organisation to wish to see more work, investment and activity in the green economy, for example, as the Prime Minister announced today, it is just as appropriate to say that there could be support for cultural expressions, the term used to talk about the culture industries.

The general feeling is that the Bill is too tightly constrained around how the market access provisions will work—so much so that there may be disbenefits to consumers unless people in different parts of the country can respond differently to issues they feel strongly about. As I said, I will read Hansard, but I feel that while the common frameworks will be able to carry most of the load of the issues raised today, they will not take us all the way and it may be necessary to return to this issue at some stage. In the interim, I beg leave to withdraw the amendment.

Amendment 10 withdrawn.