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

Debate between Matt Rodda and Bill Esterson

Monday 21st October 2019 General Committees

[Bill Esterson]

I am grateful to my hon. Friend for those remarks, which I will address in some detail later.

[Matt Rodda (Reading East) (Lab)]

Does my hon. Friend agree that there is a disturbing lack of assessment and evidence-based policy making on these important matters? The Government are ignoring the demands of many, including the official Opposition, for a full assessment of their new deal. Surely there should be some proper assessment of these important matters.

--- Later in debate ---

[Bill Esterson]

That is a slightly different point to the one we are discussing. We need to look at the detail. I am not sure whether that intervention was part of the hon. Gentleman’s pitch to be Chair of the Treasury Committee—others must judge—but I will touch on his point. The Secondary Legislation Scrutiny Committee speaks of the removal of treaty rights, and the fact that this is a policy change. That goes to the heart of the concern about what is being proposed, because when the withdrawal Act was passed, the Government promised that they would not use the Henry VIII powers in section 8 of that Act as a vehicle for policy change. They also said that it “almost goes without saying” that no change should be made to rights through delegated legislation, yet that is exactly what is being proposed.

The disapplication of the rights of EU, EEA, Swiss and Turkish nationals is clearly at odds with what was promised regarding section 8 of the withdrawal Act. That Act was not intended to address how, whether, and how quickly we should meet our obligations under the WTO, which is the reason the Government are giving for putting these regulations through. The purpose of section 8 of the withdrawal Act was to fix deficiencies in retained EU law—an explanation that, to be fair to Ministers, they have used to justify previous regulations in Committees in which I have responded on behalf of the Opposition. Why is that not the case on this occasion? Why is this not being addressed through primary legislation? Why is it not being done through an immigration Bill, as my hon. Friend the Member for Cardiff South and Penarth asked, and why is that Bill stuck in Committee?

If free movement of people is to end via primary legislation, as the Home Secretary said on 5 September, why is the same principle not being applied to the freedom of establishment and free movement of services, and what are the consequences for those individuals who are self-employed, or who own or manage businesses in this country? A large cohort of the people delivering services or running businesses depend for their lawful residence qualification on being regarded as economically active. They have the right to that definition and to qualify. Their rights are derived under the 2016 immigration regulations, which the Minister mentioned, but that is because they are in accordance with article 49 of the treaty on the functioning of the European Union. These regulations disapply article 49, and therefore the 2016 immigration regulations.

It makes no sense to decide immigration rights for those who are self-employed or are running a business separately from determining the immigration rights of other people, but that is what these regulations do, despite the assurances that were given when the withdrawal Act was passed. If there is nothing to worry about, where is the legal analysis? Where were the Minister’s comments about the legal opinion that the Government have obtained? Where is the analysis that these regulations will not adversely affect the immigration rights of EU or EEA nationals? Thousands of self-employed, business-owning or business-managing providers of services need the assurance that they will not be disadvantaged and that their right to stay will not be questioned or removed. Where is the legal protection? It is not referred to in the explanatory notes, and the Minister did not refer to it.

I note from previous regulations passed in these Committees that on other occasions it has suited the Government to apply a principle of reciprocity. For example, I was responding for the Opposition on the matter of intellectual property regulations when the Government chose to allow EU and EEA firms the right to continue to have full access to our intellectual property regulations, and there was no guarantee that our firms would have those rights in return. Reciprocity was not a barrier on that occasion, but it seems that it is here, when the Government want to remove the rights of self-employed or business-owning or managing EU or EEA nationals.

[Matt Rodda]

This is a particularly worrying point, and I welcome my hon. Friend’s analysis of the situation. The Government seem to have one rule for big business and a very different one for small businesses, which are the lifeblood of our economy. Surely they should be equally fair to both types of business.

[Bill Esterson]

That is right. As my hon. Friend points out, these regulations relate to the self-employed or those running small firms, who do not have legal protections. That relates to the point about where the legal assurance is. He is right that large firms are able to ensure protection, give assurance and make applications to enable individuals to live and work in this country.

On the question of whether the regulations are about delivering WTO most favoured nation compliance, the Government do not have to act so quickly: as with IP rights, they could wait and see whether the EU and EEA grant reciprocal arrangements. After all, Government Members who support no deal—I cannot remember whether anybody in the Committee is in that category—have often argued that, in the event of no deal, the EU would continue with the existing arrangements and reciprocate because it would be in its interest to do so. I wonder whether the Minister goes along with those Members, who almost certainly all belong to the European Research Group. Whether he does or not, why are not the Government waiting to see the response of the EU and the EEA on the matter of reciprocal rights?

I come back to the central point: that EU, EEA, Turkish and Swiss nationals were promised under section 8 of the European Union (Withdrawal) Act 2018 that it would not be used for policy changes—especially those affecting rights. I remind the Minister that section 8 was designed to rectify deficiencies from minor changes—what we are concerned with is not minor, but is a policy change—and where there would be a failure of retained EU law to operate effectively. Compliance or otherwise with WTO provisions is not a matter of retained EU law and should not be addressed in that way. It was never intended that it would be done in that way.

Let us remind ourselves of the impact. More than 3 million EU nationals live in the UK and so do tens of thousands of Turkish and Swiss citizens. Among their number countless thousands will be affected by the regulations. That will affect their confidence about doing business, and it could affect the confidence of those who trade with them. That may mean contractors having to stop working in the UK, which will affect customers and suppliers. There could be legal proceedings against contractors for breach of contract, or sudden retendering because of the loss of non-UK contract holders’ rights. It did not seem to me from the Minister’s remarks as if the Government had considered those potential economic and business consequences.

There are questions about legal remedy and compensation through bilateral investment treaties. Before a number of east European countries came into the EU, we were party to bilateral investment treaties with them. Once we leave the EU those treaties will come back into force, and once those agreements are back in force they will enable companies in those countries to take legal action against the UK Government. Have the Government considered that potential challenge to the legislation? What steps are being taken to ensure that it is not a problem or threat for the UK?

I turn back to the question of the economic benefits of having in this country the relevant businesses and their owners, and self-employed workers. In the event of no deal and the regulations being enacted, what steps will the Government take to protect the investment that those companies bring and make sure they are not undermined by the regulations? At the moment, the response to the regulations of the3million and the businesses that my hon. Friends have referred to is concern about whether it is desirable for businesses and self-employed people from the EU or EEA to stay in this country. If that protection is not in place and that assurance is not guaranteed, those people will be hit, and there will be a knock-on effect on UK jobs and our economy—to return to the earlier comments of the candidate for the Chair of the Treasury Committee, the hon. Member for Thirsk and Malton.

The Secondary Legislation Scrutiny Committee raised concerns and the3million says that the provisions are not what was promised, and undermine promises made by the Government:

“We were repeatedly promised that we would be treated no less favourably and nothing would change to our rights. These regulations do the opposite and remove our right to bring nationality discrimination claims. The proper place to consider the issues of immigration is in the immigration Bill. Not here.”