Employment Rights (Amendment) (EU Exit) (No. 2) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Wednesday 6th February 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, it has been a very helpful and useful debate and we look forward to hearing the Minister’s response. I have a number of questions that pick up on points already made by other noble Lords.

I will not delay the House too long, but I cannot let pass my normal question to the Minister, when dealing with SIs, about commencement dates. His department has a very bad record on bringing out regulations that commence on the common commencement dates. He promises to do better, but I have yet to see it. Unfortunately, these are not ones that I can tease him with because they are supposed to come out only if required and on exit day.

However, that is not quite the case here, is it? If we look at the Employment Rights (Amendment) (EU Exit) Regulations 2019 and the parallel regulations for Northern Ireland—which I think are numbers three and four as grouped on the Order Paper—both of them say that the regulations,

“come into force on exit day, subject to paragraph (2)”.

Paragraph (2) provides that certain elements of the regulations,

“come into force the day after the day on which these Regulations are made”.

When the Minister introduced the regulations, he said that we did not have to worry about them, that there was nothing in them that would need to take place, and that he was optimistic that there would not be a need for them to come into force. However, that is not true, as some parts of these regulations will come into force. In that context, could he reinforce what he said, which is that there is no diminution in existing rights as a result of the parts of these regulations that will come into force before exit day—and are, therefore, not strictly EU exit regulations in that sense, although we will pass over that, if the issue is indeed trivial, as I suspect it is, given that they seem to be corrections to earlier regulations and primary legislation that may not have kept pace with nomenclature in the EU. If that is not the case, the Minister owes it to the House to make a statement about exactly what is happening under these regulations.

More generally, several speakers—my noble friends Lord Monks and Lady Crawley and the noble Lord, Lord Balfe—have raised points about what is meant by the fact that, on the one hand, the Government are withdrawing powers which, as my noble friend Lady Crawley said, are currently in force and could be implemented to maintain workers’ rights and the rights of employee representatives but, on the other, the Government intend, although there is no evidence for this apart from the assertions of both the Prime Minister and the Minister, that there should be no diminution. Where is the legislation that is going to bring forward that levelling up to the existing situation? If the Minister cannot give us an answer, will he please write to us about what the Government’s intentions are? Clearly, the regulations amend Section 13 of the Work and Families Act. That amendment reduces, in crude terms, the rights of workers currently. What is the timescale for that being rectified?

On the question of what TUPE means and the definition of “TUPE-like”, again the regulations remove powers that exist. Where is the regulation that is going to bring forward the parallel arrangements to make sure that that continues in UK law? The rights of employee representatives, which were mentioned in particular by the noble Lord, Lord Monks, are similarly affected.

These may not seem to be very serious comments, but I think that people across the country will be concerned that their rights are being eroded. At the same time, politicians are saying that they should not worry about it, because the Government have in mind to make sure that there is no diminution. So it is not just a question of the diminution but of making sure that, when changes are made that would have happened had we stayed in the EU, those are also replicated in UK law. I would be grateful to hear the Minister’s comments on those points.

[Lord Henley]

My Lords, I thank all noble Lords for their comments. The noble Lord, Lord Monks, complained that these regulations had possibly been drafted before the talks were concluded. I have to say that it would be rather difficult to draft them after the talks were concluded because I suspect that they might be somewhat late. I think that to start drafting these amendment regulations at 10 minutes to midnight would not be the right way to go about it and I would be quite rightly criticised.

What I can say, and I think that the noble Lord will be pleased about this, is that the Employment Rights (Amendment) (EU Exit) Regulations were published in draft form in December 2017. That allowed for extensive consultation and allowed us to comply with the statutory obligation to consult the relevant bodies on a change made to the conduct of employment agencies and employment business regulations. We received, I think, two responses, one from the National Association of Schoolmasters Union of Women Teachers and the other from the Recruitment & Employment Confederation. I need not go into detail, but neither raised concerns about the drafting of the amendment: rather, they commented more on EU exit in general. We also, as I said, shared these regulations in draft with the TUC and with the CBI—so there was considerable consultation on them.

I shall repeat the commitment that has been made by my right honourable friend the Prime Minister, by my own Secretary of State and by Ministers throughout the Government. Now as a Parliamentary Under-Secretary of State I shall repeat it, although it has been made by people who are far important than me. We are committed not to rolling back on workers’ rights, and by laying these SIs we are upholding that commitment. We already go beyond the EU minimum in many areas of employment law; that is well known. I can say to the noble Baroness, Lady Burt, that we have no intention of making any changes to statutory maternity pay. People will not be affected whether we are in the EEA or not. That is true for all the concerns that have been put forward.

Looking to the future, as my noble friend Lord Balfe invited us to do, I would remind the House of what we discussed in a Statement debate—and there will be other chances to discuss it. Our Good Work Plan sets out our vision for the future of the labour market and our ambitious plans for implementing the recommendations that arose from the Taylor review. That important package will ensure that workers have access to the rights and protections that they deserve in a changing labour market, with the changing technology that we face. In addition, it will create a level playing field for employers, thereby ensuring that good employers are not undercut by the small minority who seek to circumvent the law. That is worth stating at the Dispatch Box as I move these instruments.

Perhaps I may deal with one or two specific concerns, in particular the drafting points made by the noble Lord, Lord Monks, and echoed by others. He asked whether the new phrase “TUPE-like powers” provide the same scope for power. The phrase “TUPE-like provisions” is needed to maintain the current scope of the powers, and the new wording ensures that the Government will continue to have the power to enhance workers’ rights as we do now. We will continue to do that and I repeat that commitment once again. The noble Lord also asked whether these statutory instruments would need to be amended following the talks that he referred to. I can make it quite clear again that these SIs are for no deal. We hope that once we have a deal they will be unnecessary.

The noble Lord also put a question about European works councils. He asked how the Government could claim to be preparing for Brexit when they did not have plans for workers to have proper representation in the absence of European works councils. We are preparing for a no-deal exit, as any responsible Government would do. UK employees will still be able to be represented on works councils—but, again, that will be a matter for the employer and employee representatives. Employees and their representatives on European works councils will retain their existing protections in all circumstances.

The noble Baroness, Lady Burt, asked about the differences as regards Northern Ireland. This is a devolved matter in Northern Ireland in a way that I do not think it is in Scotland. The TUPE-equivalent amendment in Northern Ireland is to the Employment Relations (Northern Ireland) Order 1999. However, in the continued absence of a Northern Ireland Executive, it is for the UK Government to take any necessary EU exit legislation for Northern Ireland through Westminster. However, I can give an assurance that the Northern Ireland departments have been consulted in the preparation of these statutory instruments.

The noble Lord, Lord Monks, also asked whether they would apply during any implementation period. Again I can say that they will be needed only in the case of no deal. I have dealt with the question of statutory maternity pay, which will remain the same. My noble friend Lord Balfe asked about the ability to repeal the legislation. If the SIs are no longer required on exit day we expect, as I think he quoted, to defer, revoke or amend them through further legislation in time for the end of the implementation period. Which route we take will be a matter for us to decide at the time—but, regardless of what we decide, we will uphold our commitment not to roll back on workers’ rights.

With that, I think that all I need to do is to repeat the assurance to the noble Baroness, Lady Crawley, and others that these amendments do not narrow TUPE powers: rather, they ensure that the Government will continue to have the power to enhance workers’ rights, as we do now. One last question was put to me about European works councils by my noble friend Lord Balfe. He asked whether we could apply the EU directive on EWCs like Switzerland. I repeat that these SIs are only for if there is no deal. Switzerland is covered by the directive under the deal that it has with the EU, so that would be a matter for future negotiations.

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[Lord Stevenson of Balmacara]

I wonder whether the noble Lord could answer my question about the commencement date and the discontinuity between the fact that these are supposed to be brought in only on exit day although two of them refer to regulations that will come into force on the day they are passed—which presumably will be today. If the noble Lord does not have any inspiration at this moment, perhaps he could write to me.

[Lord Henley]

I had completely and utterly forgotten the noble Lord’s obsession with commencement dates in the excitement of dealing with orders of this sort. It might be that inspiration comes to me, but it may not be the sort of inspiration that would satisfy the noble Lord. I am told that the standard practice for statutory instruments is that they have a coming into force date. If that does not answer the noble Lord’s question, I will write to him.

I think that I have dealt with all the points that were put to me.

Takeovers (Amendment) (EU Exit) Regulations 2019

Lord Stevenson of Balmacara Excerpts

Tuesday 15th January 2019 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, I rise partly in response to the noble Lord, Lord Fox, who I was worried at one point was about to decimate the industry from which I have made a modest living for some years—albeit in the private sector rather than in the public sector. I declare my interests as set out in the register and that some 10 years ago I sat on the appeal committee of the Takeover Panel.

The Takeover Panel has been a remarkable success. The way in which it resolves difficulties and issues instantaneously without litigation is envied around the world. If it did not exist, we would most certainly seek to create it. Everything that can be done to ensure its effectiveness must be applauded, including this statutory instrument.

My question to the Minister is about shared jurisdiction. Because so many companies want to be covered by the Takeover Panel, and indeed cannot be included in various listings unless they are covered by it and thus want to have more shareholders invest in them, does this mean that companies which at the moment are not satisfying the residency test will move their business to the UK to ensure that they do cover the residency test, thereby bringing more employment and more business to the United Kingdom?

[Lord Stevenson of Balmacara (Lab)]

My Lords, I will pick up on a couple of points raised by the noble Lord, Lord Fox, and respond in part to some of the points made by the Minister in his introduction of this memorandum, about which we have very little of substance to complain because it does what it says it is going to do on the tin, as they say.

I first reinforce the wider context, which—although I think it sent shivers through a number of those sitting opposite me—we will have to return to before too long in one context or another. The arrangements under which company takeovers and mergers are taken are complex. This is bedevilled by the fact that some are statutory and some not. The role of the statutory bodies does not always fit perfectly with those of the listing arrangements under the Stock Exchange rules. The problems bedevilling British industry, which are too well known to need rehearsing here—short-termism and often acting without regard to national interest—have been raised by the Government over a number of years, but we still do not have their final conclusion or decisions, and we await them with some interest.

Having said that, this SI has similarities with a number we discussed in previous weeks. Only yesterday we talked about intellectual property. I am struck by the difference in approach taken by the department in this SI on takeovers and those we discussed yesterday on intellectual property, patents and trademarks. Does the Minister agree that one of the underlying themes of the debate yesterday on intellectual property was what appeared to be a fairly clear steer by the department that it wished to bring into play regulations that would future-proof discussions that may emerge should there be some form of deal or, even if there is not a deal, some sort of discussions and debates about how the country would wish to engage with partners in the EU on intellectual property, trademarks and patents? Is he struck, as I am, by the fact that the asymmetric approach taken yesterday in those SIs is not being picked up today?

The issue here is whether there should be some form of joint supervision and some mutual recognition of arrangements and structures. Companies increasingly operate across borders. It may not always be easy to identify precisely where the headquarters are. Indeed, some companies have made a virtue of having more than one headquartered operation in a number of countries. Simply doing it on a numerical basis of where securities are listed is not going to get to the same conclusion, as the SI admits. So we have a potential problem, in a sense not dissimilar to that addressed in the SIs we dealt with yesterday, which could perhaps provide an opportunity for further discussion. Does he therefore agree that this SI, as we have it before us, does not meet the asymmetry test in the terms we discussed?

On a slightly different line, consultation was raised extensively and has been raised in all these EU exit regulations. I can understand why the Minister will respond by saying that the consultation was appropriate for the circumstances. But in this case the only consultation I can see mentioned is with the Takeover Panel itself. There has been no attempt to try to look out to a wider interest—for example, to consumer interests, trade union interests or employee interests more directly—in the way these operations take place. There is no reference to the CBI or the FSB. I am a bit surprised about that, and I wonder if he would like to comment on whether he felt the department had the best advice possible in circumstances where so few people were consulted.

My final point is the question raised earlier this evening, which is relevant again now. There is nothing in the SI itself or the Explanatory Memorandum to confirm whether this statutory instrument will continue in the event that there is no no deal. As mentioned in the last debate, I wonder where the poison pill lies in this. What are the circumstances under which elements of this SI will fall away, and how will that be achieved? Does it require a further debate and discussion? Does it require a new statutory instrument? I would be grateful if we could be put in the picture. It would be interesting, if somewhat frustrating, to feel that all the effort we are putting into these statutory instruments today is simply a rehearsal for going back and redoing them should no no deal take place. We should presumably know in about 20 minutes whether that is likely to be the case.

In conclusion, it may be that elements of this SI would continue to any deal scenario. The Secondary Legislation Scrutiny Committee pointed this out on another SI that we will discuss shortly. I wonder if that is the case here and, if so, if the Minister could identify which elements of this would continue in any future discussions and negotiations.

[Lord Henley]

My Lords, I thank both noble Lords for their contributions, particularly the noble Lord, Lord Fox, for saying how helpful the notes attached to this order were. This does not often happen and I must thank the noble Lord on the occasions that he is as polite as that. I also welcome the experience he brings to this debate, particularly with his knowledge of takeovers, although I am not sure I fully share his view of the general helpfulness or unhelpfulness of shareholders. Perhaps I could deal with some of the questions that he, my noble friend Lord Leigh and the noble Lord, Lord Stevenson, put.

First, as always, let me remind the noble Lord, Lord Stevenson, that these are no-deal regulations only brought before the House for the eventuality that we leave the EU without a deal. In the event of a deal, as has been made clear by other colleagues from the Front Bench, there will need to be legislation in the Act that will come before us in due course to deal with that. We will have time enough to debate that.

I also do not think I accept his point—I am not sure I fully understood it—whereby he suggested we were taking an asymmetric approach to these matters when we dealt with those three orders yesterday. I imagine we will deal with them again in the Chamber in due course, but not on this occasion. I never quite understand what the noble Lord means by that asymmetric approach.

[Lord Stevenson of Balmacara]

I do not want to delay the House unduly, but I would not wish the evening to conclude with the Minister going off in confusion and worrying all night. Just to be certain, there was no need in the drafting we saw yesterday—let us take the trademark arrangements, for example—for us as a UK emerging from the EU as an independent state to offer to recognise trademarks registered in the EU. That does not seem to be taking back control, because one is opening up to UK manufacturers which have their own trademarks a chance to lose out to trademarks they will have to compete against which are registered elsewhere in the EU, and we are not part of the EU. I can understand the logic of it, but it certainly does not seem to fit the criteria set out for a no-deal Brexit.

The interesting arguments that emerged during the debate yesterday were that the primary reason that was there was that it might be negotiable in the future for similar arrangements for UK trademarks to be deemed to be registered also in the EU. In that sense, that symmetry of each section—the EU 27 and the UK having their own arrangements for registering trademarks which are then mutually recognised—is symmetrical, but what the SI proposed was very much asymmetrical.

[Lord Henley]

I take the noble Lord’s point, but I do not think it is relevant to the regulations we are dealing with today, so I will get back to the various questions that noble Lords put. I will first deal, as always, with consultation, which is so important to noble Lords. I can again give an assurance that in developing these we worked very closely with the United Kingdom supervisory authority, the Takeover Panel. The noble Lord, Lord Fox, talked about its role as a referee. I do not think it is necessary at this stage for me to get on to the composition of it. The Takeover Panel includes representatives from a range of business sectors. I can give an assurance that it consulted publicly on the changes it will need to make to the Takeover Panel to reflect these regulations. No doubt, if it is available, I will seek advice from the Takeover Panel and give a little more information to the noble Lord.

The noble Lord also asked about the impact on the companies affected. I can say that the only cost to business arising from these regulations will be that associated with compliance with a different supervisory regime. That will affect only the few companies that previously fell under the Takeover Panel’s jurisdiction and will no longer do so after exit, following the loss of that shared jurisdiction regime. The cost of compliance between the different regimes is unlikely to vary significantly as the takeover directive establishes standard requirements, and these costs will arise only in the event of a takeover. I give way to the noble Lord.

Insolvency (Amendment) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Tuesday 15th January 2019 Lords Chamber

[Lord Fox (LD)]

My Lords, in addition to the concerns which were very importantly raised on the nature of the drafting involved here and the use of powers, I have a couple of major technical quibbles. At the risk of treading into what may be the patented territory of asymmetry, which was just discussed, we seem to be back in an asymmetrical relationship here. We are changing our rules in the hope that Europe will reciprocate. That is my interpretation; if it is wrong, perhaps the Minister can update me. How forlorn or optimistic is this hope? What hope do those employees have of their rights and benefits being preserved—the Minister rightly highlighted that we need to have these processes in order to preserve them—for businesses which cross not just into the United Kingdom but into the rest of Europe?

The Minister’s point about courts was very interesting, because that of course was what the European Court of Justice was for: dealing with cross-border disputes over a similar group of rules. What the Minister describes is complicated, expensive and fraught with the possibility of failure. Perhaps the Minister can explain what benefits we will reap from substituting what we have today with what his department has set in front of us. So I have serious concerns that there are major problems with this SI.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for introducing this issue. The SI seems to be welcomed by many in the industry and deals with a particularly difficult issue in a very constructive way, according to reports from those who have written to us. I agree with the points made by the noble Lord, Lord Fox. When the Minister responds, it would be interesting if he could be quite clear about whether the SI covers the minimum necessary to get the statute book in order if there is no deal, or whether, as he suggests, the Government will go a little further and lay out some sort of attractive regulatory pas de deux for the EU post Brexit which would make it easier to legislate for an asymmetrical solution. That is probably not quite what is happening here, but it would certainly be interesting to get the Minister’s response.

Given that the results are coming in of the vote in another place in which the Government’s proposals have been roundly defeated, we may be witnessing a transition to a slightly different arrangement, which we do not need to comment on just yet. In the circumstances it would perhaps be best to let the Minister respond to the points made. I hope to hear from him very shortly.

[Lord Lexden (Con)]

Before my noble friend replies, I will make just a couple of points as a current member of the Joint Committee on Statutory Instruments. I preface them by saying how greatly the committee will relish the praise that my noble friend heaped upon it at the outset.

The two points arise from the committee’s report. The first relates to Regulation 5(1), where the committee points out that it would have been far better if the department, despite the explanation that it provided, had avoided the ambiguity of language to which the committee drew attention by replacing vague concepts with clearer definitions, instead of continuing with its own approach.

The second point relates to Regulation 5(2), to which the committee drew attention because it appears to give very wide powers to the courts that will be called upon to adjudicate issues. Despite the department’s explanation, the committee remained concerned,

“at the breadth of the discretion conferred on a court by regulation 5(2)”.

It went on to say that this regulation,

“leaves it entirely to the courts to determine—on a case-by-case basis—what law they should apply in any particular case”.

I would be very grateful if my noble friend could touch on those points when he replies.

Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Monday 14th January 2019 Grand Committee

Many questions arise from this SI and the others, and I very much hope that the Minister will be able to answer them.

[Lord Stevenson of Balmacara (Lab)]

My Lords, it has been a lonely journey to the heart of the intellectual property policies in this country. The noble Lord, Lord Clement-Jones, and I have been stepping together on this route for a number of years. It is really nice to see so much additional expertise brought to the table and shared with us. We have got off to a slightly ropey start, but I do not think anybody could argue that we have failed to reach the heart of the arguments now. I pay due regard particularly to the noble Baroness, Lady Bowles, who is a living legend on these matters and brings expertise from her work in previous lives, and to my noble friends Lady Kingsmill and Lord Adonis. Together with the noble Lord, Lord Clement-Jones, they have displayed the sort of expertise and knowledge we need when we address these issues.

I have only four points. I think they largely cover what my noble friend Lord Adonis, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Bowles, have said, so I will not repeat them at length. They raise issues of some substance which make me worry that the SIs in this area—this is the first of three but, as we have heard, there are more to come—are the equivalent of poking a wasps’ nest with a stick. An awful lot of rather difficult and worrying issues need to be addressed, and we have very little time to look at them. Whether there is a deal or no deal, these will not go away. They will need to be addressed, and we should think very hard about how we do so. I agree with the noble Lord, Lord Clement-Jones, that we ignore it at our peril.

A number of speakers have asked whether these draft regulations change current policy or impose new liabilities or obligations and, if so, to what extent. I listened carefully to the Minister as he got into his stride, and I do not think he really answered the question he raises for us in his letter, circulated on 7 January—I understand a copy is in the Library—which asserts that the regulations,

“do not change current policy”.

As mentioned on a number of occasions, there has been no formal consultation, some unreported discussion, no impact statement and no calculations. Yet out of this, a one-way ticket has been offered to exporters who bring intellectual property into the UK. No opportunity has been given to our fellow citizens working in the UK and producing goods they wish to export to the EU, who have no certainty that there will be any ability to benefit from parallel arrangements. This question seems not to have been answered so far by the Government and needs to be addressed properly if we are to go forward.

The noble Baroness, Lady Bowles, mentioned the asymmetry of the arrangement that the Government have come up with—absent discussion, a costing or an impact statement—and suggested that there may be more downside to this than has been said. Her suggestion of a sunset clause is a very good idea and may be something the Government should think harder about before they come back with an SI on the Floor of the House.

My third point is that made by my noble friend Lord Adonis in his careful consideration of the European Commission’s statement of September 2017. The pinning of all our hopes on a deal that may be negotiable in the future is not a satisfactory business proposition; it will send shivers down the community we are talking about here, a community of creators and intellectual property persons working in one of our most productive areas of activity, on which we pin great hope in the industrial strategy. Yet that is what it is: without any certainty on a regional basis, let alone on the international points made by the noble Lord, Lord Clement-Jones, the climate for those creative industry specialists working in intellectual property and seeking to export it seems extremely damaging. I hope that the Minister has something more to say about that.

Finally, on the legal issues, the Silhouette case comes up for all three SIs before us—it makes a good case for us considering them together, but we are not doing that. The legal issues are worrying. The legal note that I wish to refer to suggests that the basis on which this has been considered is somewhat whimsical. The argument is that it is possible that courts will not follow the Silhouette case in this area. That seems an unreasonable basis on which the Government should make regulation. If that is the case, the narrow question, raised by the noble Lord, Lord Clement-Jones, is whether the Silhouette case will necessarily become part of retained EU case law under the EU withdrawal Act 2017. We need certainty on this; if the Minister is not able to give us a clear view at this stage, I would be grateful if he could write to us on this point, because it is the key issue for those concerned.

The note says that even if the case law does fall within the definition of retained EU case law—so there is a doubt about this—it is relevant only to retained EU law which is unmodified on or after exit day. I would be grateful if that complicated idea could be unpacked, because I do not understand it. The note, which is supposed to be an explanatory memorandum for us, then says:

“Arguably”—


in other words, it is making an argument to us that it hopes we will accept,

“the retained EU law on exhaustion of rights will be materially modified on exit day, as a result of the amendments in the Exhaustion SI, because the Government is changing an EEA-wide exhaustion regime of which the UK is currently part, to a one-way”.

That makes the point that this is a one-way ticket, which is a very difficult argument to make to those affected by it. To cap it all, the unforeseen consequences listed at the end of the statement are quite horrendous:

“The UK Courts will have to follow the case law which established the principle of ‘international exhaustion’”—


a point made by the noble Lord, Lord Clement-Jones; this is a very big step away from where we are—under what is called,

“the implied licence theory in the UK”.

I suspect that lawyers listening to and reading this will be gratified to hear that a dripping roast is being created by this new SI. The document goes on to say that,

“rights-holders will not be able to prevent goods first placed on the market in a non-EEA country”,

to be brought into and resold in the UK. This was the question raised by my noble friend Lady Kingsmill, about what damage would be done to existing operators of intellectual property. The UK market could be,

“affected by cheap goods from countries where genuine goods are sold more cheaply … Consumer confusion may also arise in the UK, where genuine goods are sold under the same mark but are in fact different (e.g. toothpaste and chocolate)”—

I am sure there are many other examples. It continues:

“An international exhaustion regime is a much greater threat to UK retailers and manufacturers … In a worst case scenario intellectual property rights-holders will no longer be incentivized to produce goods for the UK because prices have been driven down”.


These are very worrying concerns for anybody who might be affected by this. I think the Government are skating on very thin ice with this issue. They have not made the case that this does not change current policy; it certainly does and it is a one-way ticket which is not satisfactory for those involved.

[Lord Henley]

My Lords, as always, I thank all noble Lords for their contributions, and hope I can deal with all the relevant points. As always, I will offer to write on those which I find harder to address, and hope noble Lords will be content with those letters.

I remind the Committee of exactly what we are doing. This order, since we are now dealing with them as three orders, is a result of the withdrawal Act, an Act which has been through both Houses and sets out powers precisely so that the Government could make contingency measures in the event of there being no deal. That is why we have brought forward the Intellectual Property (Exhaustion of Rights) Regulations that we are debating: to deal with that no-deal situation. As I and others have made clear on other occasions when dealing with EU exit regulations, of which there are quite a number, they are contingency measures designed to deal with the possibility that there is no deal. We expect that there will be a deal, but at this stage, in advance of debates in another place and other matters, it would be an irresponsible Government who did not make appropriate plans to deal with no deal so as to provide business with a degree of certainty.

The Government are therefore considering various options for the future. We are undertaking research and consultation on what would be the most appropriate exhaustion regime for the future, but that is for another day. We will deal with that in due course, but it is not what we are debating this afternoon. That will take time, and I do not believe there is a compelling reason to rush to an alternative system until we have seen the evidence and listened to what businesses and consumers have to say.

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[Lord Henley]

My Lords, I reject any suggestion that officials have been constrained in what they can do. The point I was trying to make is that we are talking about two things. We are talking about what happens in the event of us leaving without a deal. If we do, we need to set certain things in place, which is what these regulations do. Meanwhile, we will continue to negotiate as part of the whole withdrawal process to get the right deal. We will then get the right things in place. At that point, further instruments will no doubt come before the House—I look forward to debating them—and those will follow full, frank and proper consultation with all concerned. There has been a degree of consultation on these regulations, but they deal purely with a no-deal situation.

[Lord Stevenson of Balmacara]

I am grateful to the noble Lord for giving way. I was going to try to be helpful, although he may not welcome the intervention. When we have had similar discussions on SIs and similar confusion and annoyance have been expressed on all sides about the fact that consultation has not been done in the usual manner and statements have not been provided, the Government have used the argument—the noble Lord did not use it on this occasion—that the de minimis provision is that the department has made an estimate, which is presumably accepted by Ministers, that the burden of the costs that will fall on the industries affected by the SI is less than £5 million. Is that the case with this arrangement—yes or no?

[Lord Henley]

I cannot remember whether that is the case with this set of regulations, but the noble Lord is right that, obviously, we do not consult on SIs with an impact of that order. My understanding is that he is correct, in that there is little or no impact in the case of these regulations. That is why most businesses to which I have spoken are broadly in favour of the regional exhaustion regime.

Patents (Amendment) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Monday 14th January 2019 Grand Committee

[Lord Clement-Jones]

I thank the noble Lord for that intervention because that is exactly the impression that I had got.

To add to the Minister’s woes, I want to go off into a completely different subject that he himself raised at the very beginning: the issue of the Agreement on a Unified Patent Court and the unified patent. The unified patent has come up; the Minister has mentioned it and it was included in the technical note in September. There is a big issue surrounding the Agreement on a Unified Patent Court and the unified patent. If the agreement is ratified by Germany and comes into force ahead of any exit date, the UK will need to work out how to remain a member of the UPC or withdraw from the system, which could have a significant impact on business. Of course, at this stage it is not clear if the agreement will come into effect at all, but if it does and if, as a third-party country, the UK then wants to take part, is it not clear—I have a 39-page legal opinion on this subject—that we, the UK, will have to acknowledge the supremacy of EU law and the ECJ as part of signing up to the UPC agreement? What kind of “taking back control” for Brexiters will that be?

What advice have the Government received on this matter? I heard what the Minister had to say: he made the very positive statement that we were going to sign up. Have the Government had any further observations on the UPC agreement and the unified patent? How do they envisage UK legislation dovetailing with both systems, assuming that it is ratified?

[Lord Stevenson of Balmacara (Lab)]

My Lords, this has been a good debate that has raised lots of issues. I think the noble Lord, Lord Clement-Jones, is right that there are real questions to be asked here, although I feel that we are experiencing a bit of a split focus here. It is like being part of the film “The Matrix” because there seem to be two different levels of debate going on. There are the particularly narrow questions about the statutory instrument as presented, with which I think there are some substantial difficulties, but there are also the wider issues about why we are doing all this and the way that we are doing it. The noble Lord, Lord Deben, and others have focused on the absurdity of a situation where we are trying to persuade ourselves that, despite our best instincts, despite all the training that we have had here and despite everything that we do every other day of our lives, we are quite happy to sit here and wave this through just because it might not happen. That seems to be Alice in Wonderland rather than “The Matrix”, but perhaps they come together in a curious way which I have yet to experience.

The noble Lord, Lord Clement-Jones, commented on the Unified Patent Court, which is an intriguing area of public policy which has yet to have its full ramifications explained. He is absolutely right that the UK has committed itself to ratifying the UPC and intends to join up. I am sure that the Minister will confirm that when he comes to respond. Of course, with that comes the continuing role of the ECJ, because all judgments of the UPC—although there will be a platform of it operating here in London in property which has already been bought and refurbished in premises on a lavish scale which may not have been seen by the press yet, but I am sure that when they are there will be a bit of a scandal—will be absolutely redolent of the way in which the European continuing engagement will have to operate. That is because so many people hold unified patents and will need to have them defended in ways which are important not only here but in the six other areas where the court will be operating. But that is part of the further discussion and debate along with the consultation issues which I agree need to be bottomed out at some stage, but perhaps not today.

I may just stunt the time taken up by other speakers by looking at the other four SIs which are due to be discussed shortly by the noble Lord, Lord Bates, and others. I am sure that he will have read through and inwardly memorised the rather clever phrasing used by HM Treasury which I recommend to the department as it might wish to use it in the future and thus avoid some of the confusion. It states:

“HM Treasury has not undertaken a consultation on the instrument, but has engaged with relevant stakeholders on its approach to Financial Services legislation under the European Union (Withdrawal) Act 2018, including on this instrument, in order to familiarise them with the legislation ahead of laying … The instrument was also published in draft, along with an explanatory policy note, on 31 October 2018, in order to maximise transparency ahead of laying”.


That is wonderful phrasing and I congratulate the Treasury on having found a way out of an apparently insoluble problem. If it can defeat the noble Lord, Lord Adonis, and his assembled minions, obviously it will be well ahead of the game.

[Lord Adonis]

My Lords, I am grateful to my noble friend for giving way. Does he not think that the best way of maximising transparency, which is a laudable objective that the Grand Committee shares entirely, would be to have an ordinary consultation under the Cabinet Office procedures of 12 weeks where people can make formal responses? The Government then evaluate those responses and publish their response together with all of the consultation responses before the debate in the House rather than what the noble Lord, Lord Henley, is proposing, which is that the consultation should take place after the House has approved the regulations.

Will he further say, in this new Alice in Wonderland world in which we work where consultations take place after Parliament has agreed the regulations on which we are consulting, how he thinks that Parliament is then intended to take account of the consultation? In the world of the noble Lord, Lord Henley, where we consult on the regulations having passed them, if the result of the consultation with the trusted and selected individuals or the selected and trusted individuals shows that there is a need for further substantial revisions to the regulations, what are we supposed to do? What procedure does my noble friend have in mind for how we then rescind these regulations and produce new ones? Does he not think that it would be better if we could come out of Alice in Wonderland and go to the world that applied before Brexit started, where we had good, orderly government and consulted on major changes to legislation before we brought about those changes rather than afterwards?

[Lord Stevenson of Balmacara]

My Lords, I regularly spend most of my day with Alice in Wonderland because I think that it is a wonderful place to be. The noble Lord will be surprised to learn that I agree absolutely with every word he has said. The only difference between us is that I do not think I need to repeat it every time.

Finally, I wish to draw two points to the attention of the Government. The first is that we have to be clear about the damage that will be done to the UK’s pharmaceutical industries along the lines of what the noble Lord, Lord Warner, said. I hope that we will get a letter from the Government confirming or denying some of the points which were made in that exchange. Secondly—this is a minor point but it is worth exploring and asking questions about. In paragraph 4.3 there is rather confused wording about—the extent and territorial application of this SI. Although it applies to the United Kingdom, bits of it, which are not specified, do not apply to the Isle of Man. Activities have been taken up so I would be grateful for a side note because this needs to be responded to today.

Trade Marks (Amendment etc.) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Monday 14th January 2019 Grand Committee

[Lord Puttnam (Lab)]

My Lords, on that point, I have spent the last 50 years of my life earning my living as a result of intellectual property. It is almost impossible to explain to noble Lords and the Minister how fundamental the harmonisation of intellectual property and the clear, clean flow of revenues generated by it is to the financing, never mind the issue of recruitment, of material for film, television and associated industries.

[Lord Stevenson of Balmacara (Lab)]

My Lords, we welcome back my noble friend Lord Puttnam, who has been too far away. He has just been trying to finance a film, so he speaks with some detailed recent knowledge on these matters. He makes a broader point which is that the losses we are incurring as a result of these changes are very significant indeed and are not taken into account in any of the costings we have seen on the table so far.

We have had a number of contributions. The noble Baroness, Lady Bowles, was right to remind us of the fundamental Paris Convention of 1883—soon to be updated, I think—which will possibly have a larger role to play in the post-Brexit scenario, should there be one. We have to build into that the very odd demarche taken by the Government in this SI, which is to solve a problem caused by the country losing the ability to trade in the way that my noble friend Lord Puttnam has said across all boundaries and simplifying all the arrangements by bringing in an additional right for those who are trading into the UK from outside when it is not at all clear, and almost certainly not the case, that the UK in a separate environment will be offered that. I do not really follow the logic of that. It came up, as was said, in an earlier SI. I would be grateful if the Minister could respond with a bit more context on why this generous gesture, very asymmetric in its approach, is being made now and in a way that will complicate any future negotiations and discussions.

--- Later in debate ---

[Lord Henley]

I ought to make it clear that the IPO discusses these matters with DExEU to agree an approach. We want to make sure that there is a similar approach across Government. I can expand on that in any letter I write to the noble Lord. It is not just a matter for this department or that one, as the noble Lord would put it. I am now going wide of my brief, but there is a degree of consistency when dealing with the no-deal regulations to make sure that we get this right. I see that the noble Lord, Lord Stevenson, is itching to get to his feet, so I will give way, but I agree to write to the noble Lord on this point.

[Lord Stevenson of Balmacara]

I have read similar passages in the SIs from the Treasury which were due to—but will not—be discussed this evening. They reflect a different approach, which the Minister mentioned he would feed back to officials in due course. He talked about an all-of-Government approach to this, but that has not been borne out by what we have in front of us. I will be interested to see the letter which explains what is happening, particularly in relation to the department for which he is responsible. In fairness, that is all he can answer for, but if it is possible to add to that a wider brief about what is happening more generally, Ministers in other departments would find it interesting.

The second point is that I am sure these issues are not being raised on the particularity of these SIs alone. Surely they are being raised because what we are concerned about here is that the Government cannot do their job properly in regulating for the future if they do not have the trust and enjoy the confidence of the sectors that they are engaging with. Here we are in a situation where some advice is being taken from some people, and some are being labelled as “trusted” while others are therefore labelled as not trusted. I do not think this is a very good basis for going forward, and I wonder if the Government might like to reflect on that.

[Lord Henley]

My Lords, I will certainly look at what the Treasury is recommending. As I say, we have consulted DExEU. I can certainly give an assurance that all those whom we consult will be trusted. I am sure my noble friend Lord Deben would be the first to admit that he was possibly being mischievous when he tried to imply, merely because the word “trusted” appeared in one Explanatory Memorandum but not in another, that there was some element of a lack of trust by this Government. If any noble Lords think that is the case, I would thoroughly refute it.

Good Work Plan

Lord Stevenson of Balmacara Excerpts

Tuesday 18th December 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for repeating the Statement made yesterday by his right honourable friend the Secretary of State.

Taken together, the Good Work Plan and the response to the first full strategy from the Director of Labour Market Enforcement make a very good start to putting flesh on the bones of the aspiration in the industrial strategy to put good work and developing better jobs at the centre of the vision for a full employment Britain. There is a lot to welcome in these documents. However, I venture to suggest that the most important decision announced yesterday was to accept the Taylor recommendation that the Secretary of State should take responsibility for promoting the quality of work. That should transform policy in the department, and we will be keeping a close eye as things go forward.

Indeed, Matthew Taylor should be very pleased that the Government have accepted the vast majority of his recommendations, and Sir David Metcalf ought to be similarly delighted that most of his 37 recommendations have also been accepted. Something must be happening in the water that they are drinking at 1 Victoria Street—or maybe that is the result of all this good news.

It is worth remembering, however, that nearly 4 million people are in insecure work in this country and 1.1 million work in the gig economy. At a time of low wages, stagnating productivity and growing insecurity because of Brexit, families across the country need reassurance and action so that our workforce feels valued and secure.

Some of the decisions announced yesterday—the introduction of labour market enforcement, abolishing Swedish derogation and ensuring that workers keep their tips—were originally Labour Party policies, but we welcome them without quibbling. We still have concerns about a number of points, which I hope that the Minister will be able to deal with when he responds.

First, although there has been some movement, can the Minister confirm that the question of abolishing the absurd difference between workers and employees in their employment status has been kicked into the long grass? If so, why? On zero-hours contracts, the Government will apparently legislate to allow workers to request a more predictable and stable contract, but the ability to request more stable hours exists already. Will the Government commit to placing an obligation on the employer to meet this request and, again, if not, why not? The agreement to the labour market enforcement recommendations is very welcome, but there is very little detail. Can the Minister confirm that the enforcement agency has the necessary powers and resources?

Finally, we welcome the increased penalties for successful employment tribunal claims, but these will make no difference if the current system for enforcing awards is not also strengthened. Some 35% of successful claimants currently do not receive their compensation. What additional action are the Government going to take to address the efficacy of tribunal award enforcement?

The Statement contains a very large number of instances of proposals for primary legislation to bring these announcements into being. I would be grateful if the noble Lord will confirm that, welcome though that is, realistic time will be made available for this in the near future. If so, can he give a recognised timetable?

[Lord Fox (LD)]

My Lords, I join the noble Lord, Lord Stevenson, in thanking the Minister for repeating the Secretary of State’s Statement. There is perhaps an inverse law here. We are at the end of a long day in a long Session and very few noble Lords are left in the Chamber. Despite that fact, this stands to affect more people than anything else the House has debated this week. It is important and it will genuinely help to improve the lives of millions of UK citizens. For that reason, we welcome the Government’s response to the Taylor review. We welcomed the review when it came out and the Statement sets in motion a number of important steps in the right direction. This has been a long time coming and it is unfortunate that the Minister’s department, along with every other part of government, has a lot of things to do around Brexit, meaning that important work such as this takes too long and is slow to come out.

The Government are right to reject open hostility to flexibility in the job market. Many people want and need the right sort of flexible job environment. Hopefully, these steps will move that forward. Flexibility should not be open to abuse. Workers need real control and choice over the work they take, which means giving them new rights and enforcing existing ones more stringently. The Government’s response has been a bit underwhelming in some cases. If the Minister will excuse me, I will go over a few areas where we think more work should be done.

The Government have said that they will bring forward legislation clarifying employment status and aligning tax and rights, but there is scant detail. Will the Minister fill out the detail or, if not, the process by which it will be forthcoming? The Government have also failed to genuinely address the need for a “dependent contractor”, set out as an employment status for people within the gig economy. The existing status of “worker” needs to be updated and redefined for the sort of 21st-century work that the noble Lord, Lord Stevenson, referred to. We need that status to guarantee gig economy workers minimum earnings, sick pay and holidays. The Government have ruled out a higher minimum wage for hours not guaranteed as part of a contract, and are now going through lengthy consultation. We welcome consultation and, in other environments, the Minister has been criticised for not consulting sufficiently—but it needs to be quick and direct and it needs to get to the point. Action to stamp out abuse of zero-hours contracts must be swift rather than convoluted and kicked into the long grass.

Ministers have refused to rule out reintroducing fees for employment tribunals after the Supreme Court ruled them illegal. They should take that step immediately and rule out reinstating those charges. The Government must show how they will help gig economy workers access occupational pensions. That does not seem to have been addressed and I will come back to it in a moment in relation to sexual equality.

To close, I have three other questions. The Taylor review said that those working in self-employment should receive the same state benefits as those in employment. Why, then, are self-employed workers with fluctuating incomes punished by universal credit? In a good month, their benefit is cut, but in a bad month, their benefit does not rise as much because the minimum-income floor kicks in. Therefore, will the Business Minister undertake to work with the Work and Pensions Secretary to ensure that universal credit is responsive to this kind of fluctuating income, perhaps by measuring incomes over a rolling 12-month period rather than on a month-by-month basis? This unfairness needs to be addressed.

Secondly, around 55% of workers on zero-hours contracts are female. The trade unions warn that the gender pensions gap now stands at about 40%. That means that disadvantages to pensions for zero-hours employees disproportionately affect female workers. Therefore, to avoid further disadvantaging women, the Government must act on Taylor’s recommendation to improve pension provision among the self-employed. What will the Government do to ensure that women in less stable forms of employment will be able to enjoy a secure retirement?

Finally, the University of Greenwich study from 2016 found that disabled workers on zero-hours contracts were often unable to get their bosses to make reasonable adjustments required by the law. They were often afraid to raise the issue because they felt that it might endanger their employment prospects and put them back on to benefits. What are the Government doing to protect disabled people in insecure forms of employment? How will they ensure that the 21st-century economy works for disabled people and not against them? I look forward to the Minister’s response to those questions.

Accounts and Reports (Amendment) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Tuesday 18th December 2018 Lords Chamber

[Lord Fox (LD)]

My Lords, I thank the noble Lord, Lord Henley, and his department for innovating and delivering two SIs in one package. I am not sure that this has been done before, but it is perhaps appropriate that the department that spearheads innovation should be leading on this.

I did a quick count back and I think that over the course of my career I have been responsible for 18 reports and accounts, all of which, I should say, were for UK-domiciled and listed companies, so many of the issues here do not apply. The Minister will be pleased to know that I will not be regaling your Lordships’ House with the benefit of that experience, because it is clear that there are many things that can be improved around financial reporting. There are an awful lot of deficiencies around reporting, but these are not the vehicles by which that improvement should be delivered, so the Minister can be pleased that I will not be using that for a long discourse.

I have two or three points on the annual reporting side and one very important problem that I think we have around the audit area. On the reporting side, the Minister mentioned the reporting protocols around payments to Governments for logging and mining activities. Will the Minister write to me and say what those are and underpin that there is no change planned between the two regimes as we move from one to the other? This is an area where a little more clarity would help.

Paragraph 7.12 of the Explanatory Memorandum covers where this instrument applies and when the change comes. I note that if a business is called on to restate its chart of accounts—which has happened in my knowledge, and happens from time to time—it has to go back through time and restate its accounts. I have to say that this change will make it an extraordinarily difficult activity in the event that any business needs to do that.

The Minister said that the Government have been working closely with business, but when we look at the consultation outcome we see that they have not been able to consult in order to minimise sensitivities in advance. It is not clear to me why they were not able to consult—perhaps the Minister will explain why it was felt not to be appropriate.

I turn to the audit side. This could hardly come on a more auspicious day, when we have the CMA making its comments about audit companies and we have the Kingman report with reflections on the fitness for purpose of the FRC. The Minister mentioned the FRC at least a dozen or 15 times. The role of the FRC in managing this rollover between the two regimes is crucial, yet we have, in the words of a very experienced practitioner in Sir John Kingman, the finding that the FRC is essentially unfit for purpose in how it is operating today, never mind with the extra responsibility that this SI puts on it. I would like to understand how the Minister thinks that this is going to be enacted by an FRC which is short of a leader and clearly short of the resources to manage its day-to-day job, without giving it extra responsibilities. I look forward to his response.

[Lord Stevenson of Balmacara (Lab)]

My Lords I am very grateful, as was the noble Lord, Lord Fox, to the Minister for giving a very concise and important overview of these two SIs. We are trying out a slightly different method here—trying to cut down on the amount of speaking that the noble Lord has to do at the Dispatch Box. I think that it has worked, so I hope it will be a model for others to come.

The three points I wanted to make have been covered by the noble Lord, Lord Fox, so I will not repeat them, but I want to say one thing in relation to scrutiny. The Secondary Legislation Scrutiny Committee has asked us to look at both these SIs with regard to a couple of points. I am happy that the Minister covered the points, so I do not need to delay the House on those matters. For the completeness of the record I also wanted to ask about extractive industries and whether there would be any impact in the way that those accounts will be treated consequent on the introduction of these SIs, if they are required. Again, a letter will be sufficient on that.

The noble Lord, Lord Fox, is right. It is a bit intriguing to find that the principal body which would have been responsible for this is going to be abolished before it has the chance to implement the changes made in the statutory instrument. I would be grateful if the Minister could confirm that, as I understand it, the independent review of the FRC, which I read with interest—it is a very good read indeed, full of spicy and rather spiky comments—is suggesting that the FRC needs to be replaced by a new, independent statutory regulator with stronger powers. Is that right and, if so, will it be completed in the timescale that is envisaged for this statutory instrument?

There is a letter—which is not the same as the report—which was sent to the right honourable Greg Clark MP by Sir John in parallel with his report, which looks at whether there is a case for a fundamental change in relation to who appoints company auditors. There are a number of extremely interesting ideas, particularly for PIEs—again, accompanied by well-phrased and rather pointed comments about the current state of play. They suggest quite strongly—although it is not clear whether the Secretary of State is going to accept this—that there would be a case for moving away from companies having responsibility themselves for appointing their auditors to a situation in which an independent, strong regulator, presumably the new body replacing the FRC, will have a probably quite significant role.. I assume that this decision will be undertaken by the new review, building on the work on the FRC, and of course the CMA review, which is rather surprising because that was only an interim report. I am a bit surprised that that is being taken forward already. If it is, fair enough—but will that review being undertaken by Donald Brydon, the chairman of the London Stock Exchange and Sage, take on the letter element of the Kingman report we have received today?

I have also looked at the CMA report. There is a considerable interest in how that might work. Obviously, it will considerably affect the viability, profitability and operating activity of the large companies that have been very successful in building up accountancy and audit-related functions in this country. It may not be a fatal change—it may be a necessary change—but, again, I would be grateful to get a steer from the Minister as to what exactly is going on here and what the pace of that would be, if it was decided to move forward.

[Lord Henley]

My Lords, I am grateful to both noble Lords for their comments. I suspect that I will keep mine pretty brief and will write to them in further detail, which I think they will be grateful for, bearing in mind the hour. Again, I emphasise that the SIs are there for continuity through exit should there be no deal. We need to provide a degree of certainty for businesses at a time of significant change.

I will deal with some of the points that were made. On logging and mining, which both noble Lords raised, I will write to the noble Lord, Lord Fox, and copy that to the noble Lord, Lord Stevenson.

On the question of working closely with business, the noble Lord, Lord Fox, asked why we did not consult more widely. Officials did consult with stakeholder groups, including preparers, users and auditors, but they were not able to consult more widely due to negotiation sensitivities at the time.

I am afraid that both noble Lords are ahead of me in that I have not yet read the independent review of the FRC, but that will be something to look forward to on my Christmas list. The noble Lord, Lord Stevenson, commented on the barbed nature of some of the comments. It certainly adds to the joys of reading these things when they are written in such terms. We will carefully consider and consult on the recommendations and, if there are any, ensure that a smooth transition affects these functions. But obviously the FRC exists at the moment and therefore we have to make these changes.

Lastly, the noble Lord asked whether the SI would be impacted in future by the range of ongoing reviews in the audit market. I recognise that there is quite a range of work going on to ensure that the audit market is as effective as possible, which may lead to later changes, but as I have said on many occasions—and will continue to say—we will consult on those issues in due course.

I think I have answered the questions that both noble Lords have put to me and, there being no further interventions likely, I commend these two Motions en bloc to the House.

Off-site Manufacture for Construction (Science and Technology Committee Report)

Lord Stevenson of Balmacara Excerpts

Wednesday 12th December 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare an interest: my wife is a senior lawyer whose specialism is in construction. We have been so busy in the past few weeks that I have not had a chance to discuss with her anything in this report, so anything I say is entirely my fault and she must not be blamed for it.

I thank the noble Lord, Lord Patel, for introducing the report, which he did in his usual style and picked up the key points. The committee has obviously worked extremely hard. It has been a harmonious and interesting group and its members have been able to turn that enthusiasm and interest into good-quality speeches today. A number of them have been able to add to and embellish their contributions by bringing in their specialist subjects. I had forgotten about the local interest of the noble Lord, Lord Broers, in nuclear power and I cannot wait for the forthcoming Question. I shall have to follow my noble friend Lady Young and look harder for my inner tree the next time I am under stress in relation to these issues.

Joking apart, this is an interesting report of which the House can be proud. It is an example of the kind of activity that goes on—day in, day out—in your Lordships’ House but rarely sees the light of day in the way we all want it to do. The report is obviously based on substantial evidence collection. Anybody who is anybody in the construction world seems to have appeared—either in person or in writing—in front of the committee. It is clear that it has hit a particular moment in the thinking, debate and discussion in the public sphere around this area, which has encouraged the Government to give their support. I have done a number of committee reports over the years but I do not think I have read a government response that has been as broadly supportive of what the committee has reported, even though, as the noble Lord said, it does not go quite as far as you think it is going. The words are warm but the actions do not quite match up to where the committee would want.

Construction is an interesting area because, as a number of noble Lords have said, it is a key sector of the economy. It is often used by Chancellors of the Exchequer as a way of signalling whether the economy is going forward or is in a contracting phase. It has a direct relationship to employment so it is important in its own right. As others have said, it has a long value chain right across the country so, in a sense, by looking at construction you are also looking at the way in which Britain operates.

It is good that construction has been selected to be a key part of the industrial strategy. It has all the right hallmarks in volume, size and how it operates. However, it suffers in many ways, although that is not its own fault because it is at the cusp of what might happen to many sectors of our economy during the fourth industrial revolution. Will it benefit from the digital revolution or is it going to suffer? Is it going to use the digital revolution to create innovations in productivity and change the way it works? Is it going to rethink its approach to investment cycles? Other noble Lords have mentioned these points.

Construction is also interesting because it reflects much of what we call the British disease in what we do—appalling productivity despite hard work and long hours; short-term investment cycles; no big strong companies being built out of family companies and developing into publicly quoted companies; terrible R&D; and underskilling throughout. As has been mentioned, it is not a diverse environment; it is not investing in itself; and profit-taking is far too obvious and far too often. The relative number of SMEs, particularly at the bottom of the chain, is too great for the overall system and that leads to problems in innovation. It is a problem area at a macro level. I have mentioned diversity but we must not forget the recent blacklisting saga. It is not carbon neutral and it does not have an effective way of communicating to government about what it does—or, at least, until recently, there were no authoritative voices.

However, there are pluses. Despite considerable efforts by the department and by the Government more generally, the Construction Industry Training Board is a model of the kind of things that can go on in British industry and it should be praised for having survived and doing good work. Interestingly, the department for the construction industry—I hope the Minister will confirm this when he comes to respond—was one of the few to have a tsar for a number of years. This started the department thinking about what was necessary to create the particular recommendations we have seen today.

There are some good things, but there are quite a lot of bad things. The good news is that the report deals very clearly with a lot of issues that needed to be addressed and in a way that should provide a template for future results. I only have a few points on the main report, as people have talked so well about the individual recommendations. For reasons relating to my general argument, I would like to pause for a second on the safety issue, which was raised by a number of people.

This industry cannot be proud of its work on safety in the past, but it has improved and what has been proposed here—this change of culture and operations—may bring a better safety record. That is interesting because, as we have learned in recent weeks and months, health and safety is a British example of approaching problems of public interest that have not been susceptible to a top-down approach. The precautionary principle which infuses all our health and safety work—with the regulator placing more emphasis on analysing the harms and working with the industry to build a sustainable, resilient solution—is the way forward on many of our regulatory issues. This has been done well here and I hope it does not lose out as a result of the change in culture and practice we have been talking about. We should never forget the dangers omnipresent in construction activity.

On the supply side, the report does a good job by raising the issue of how the new technologies, approach and arrangements will work in terms of consumer satisfaction, and wants the Government to move further in what they are doing here. Mortgages are the obvious part of that, but insurance is also an issue. The report generated a response from the Government about the Farmer group, which reports to the Housing Minister in another department, but which is also part of the workstreams affected by the Minister’s response. I hope he will be able to say more about that. The whole question about developing housing will not work unless there is finance to support those who wish to move. The group started in December 2017, so it has had a year. Perhaps the Minister can give us an update on where that is going when he comes to respond, because it seems absolutely crucial.

In the same vein, the housing shortage issue—which the report picks up well in paragraph 55—can be resolved only if the Government think about the finance required for development more generally. The £3 billion homebuilding fund is obviously a way forward, but it is a sort of elephant in the room, because the number is so extraordinarily large and the methods by which it will be achieved are so difficult to understand. I hope the department will not give up on this. Again, the Minister cannot speak to this departmental responsibility, but I hope he will take the message from the report back to his colleagues in government. The presumption in favour and the idea that all this will pull together to create the right road will not work unless financing is provided at the appropriate time to feed the machine when it gets going.

There are several good recommendations in paragraphs 80 and 81 onwards, and later in the report, about the skills revolution required, how the leadership of the Construction Leadership Council should be approached, the good work done in apprenticeship standards and the move towards T-levels, and the hope this will also read across to digital skills. As others have said, this is fine, but we have been here before. Good advice and ideas from industries often do not see the light of day because they flow into the different departments providing support, such as the Department for Education, and then never seem to happen. I hope the Minister can say more about where we are with that, and how we will get some purchase with it.

Relating to the apprenticeship scheme, a number of people mentioned the problem of the particularity of the industry. This is not unique to construction; the same problem appears in other industries which have lots of small companies and very few big companies, because the money taken from the larger companies does not naturally flow within the sector. The Government will need to think quite hard about this when they respond. The history of the Construction Industry Training Board, as I understand it, has been one of trying to work with the industry as it found it to create the sort of skills and training courses that worked for that industry. Simply bolting on a pan-industry apprenticeship scheme may not be the right solution here. As in the audio-visual industry—where there are very few apprentices because they are not the particular need of that industry—the Government need to be smarter on their feet and better able to respond to the way in which the industry is signalling it wants the money that has been taken out to be paid back in training. The same issue is raised here.

There is much in the report about the need for better industry co-ordination, and the response from industry has already been quite good. The need for measurable targets, for a systematic approach to looking at that and for the publication of results is crucial. I hope there will be more on that. There are good, soft words, but no real direction as to where it is going, and how the Government might use the measurement of these important indicators.

On the second side of that same coin of industry co-ordination, how on earth are we going to educate clients to be better users of the industry in its new formulation? I am sure that everyone in this House has been a client at some stage in a large project in a business capacity, and has realised how difficult it is to try and get the communication, dialogue and debate that will result in a good product. Part of that is because we, as ordinary individuals, come into this so rarely. Because we are not trained for it, we do not have the skills and exercise. This has particular bite in relation to the Government, who are a huge procurer of buildings and spend enormous sums of money every year. Up until recently, the skill set required to run and manage a big project was never present, and rarely bought in. Of course, any learning that did take place was lost because people move quickly on to other jobs and practices. I am glad to hear from senior colleagues in the Civil Service that there have been some very substantial changes in the quality of skills in people brought into the Civil Service to do this work properly. I would be grateful if the Minister could reflect on that when he responds, because it is a necessary condition.

The last thing I want to cover concerns productivity. The issues here have again been well analysed in the report, and—in terms of what it is—the government response is good. But it does not yet provide the answer to the productivity puzzle that we are trying to solve. As the noble Lord, Lord Mair, said, it may be a question of trying to ensure that waste is reduced; that better value-for-money measures are put in place; and that skills and training are raised. But there needs to be another piece of work done by the Government to try and indicate how they see the productivity puzzle being resolved, and to make sure that all concerned buy into it in a way which will be effective.

My concluding feeling about this report, although it is not an area in which I am in any sense an expert, is that there is enough here to give real hope that we have within our grasp a solution to some of the problems we have been confronting in the construction industry. The Government’s adoption of a presumption in favour of off-site building is a terrific step forward, but it needs to be really pushed and supported. The Government have a role here; they have to look very seriously at the issues that have been raised, and I hope we will get some words from the Minister on that when he comes to respond.

Finally, as the noble Lord, Lord Fox, said, that is most of the story but not all of it. There are other issues that we need to think about if this will be successful—perhaps another committee, perhaps the Government need to go back to this when doing their return. The planning constraints issue is not resolved by the exchange between the noble Lord, Lord Fox, and others. There is an issue about import substitution; why do we have to import so many of the materials used in construction? Why can we not provide better skill sets, better investment and a better approach to try and make things here? The materials which we are using are part of that whole narrative. If they all need to be brought in from outside—even before Brexit—this would be a terrific chance to do more ourselves.

Carbon Emission Reduction Targets

Lord Stevenson of Balmacara Excerpts

Wednesday 5th December 2018 Lords Chamber

[Lord Henley]

My Lords, I am going to leave the pay of oil and gas executives to their own shareholders, and what my noble friend has said is something that they can take into account. We will continue to try to meet our own carbon reduction targets and also note the comments of my noble friends. We are making enormous progress and are on track to meet our second carbon reduction target. We are the fastest decarbonating country in the G20. Moreover, as I said earlier, we will look at our energy security and other matters.

[Lord Stevenson of Balmacara (Lab)]

My Lords, given that the long-term gain must be to try to get to net zero emissions—by approximately 2050—there is a lot to play for in this area. I think that we should all congratulate the Church Commissioners and the Church of England on making sure, through their pressure, that at least one company recognises that it has a responsibility, even if it is a rather novel way of doing it. Indeed, if the Minister has any worries about what other schemes we might have for capping executive pay, I have many of them up my sleeve which I could share with him. However, surely the main point here is that this has to be an all-round effort. What are the Government going to do about affecting investors whose short-term decisions often ruin the plans that they might have?

[Lord Henley]

My Lords, I believe that the Government have done the right thing in giving the power to the shareholders, who are the investors. They now have the power to look at their executive pay.