Leaving the EU: Chemicals Regulation

Angela Smith Excerpts

Thursday 1st February 2018 Westminster Hall

[Angela Smith (Penistone and Stocksbridge) (Lab)]

As always, it is a pleasure to serve under your chairmanship, Mr Evans. I am grateful for the opportunity to speak in this debate. I congratulate the EAC on its report and my hon. Friend the Member for Wakefield (Mary Creagh) on her very clear and detailed explanation and defence of its recommendations, which I entirely endorse.

It is a pleasure to follow the hon. Member for Gordon (Colin Clark). He had no need to justify his position as both an MP for a constituency with oil and gas interests and as someone with an interest in the environment. If we dichotomise those two very important issues, we do a disservice to the country. The oil and gas industry remains important; it will not disappear overnight. We need to work hard to reconcile those two key interests as much as we can.

This topic is critically important. I am chair of the all-party group on the chemical industry, and this report is of great interest to me and to the all-party group. I reinforce the point that the chemicals sector directly contributes £6.4 billion to the UK economy each year and employs approximately 88,000 people—in all the areas that my hon. Friend outlined but also in areas such as the south bank of the Humber, where it is a critically important employer.

As has been pointed out, 60% of our chemical exports go to the European Union, and 75% of our imports in this sector come from the bloc. We must recognise that the chemicals sector has an important impact on all manufacturing sectors—in my constituency, for instance, we have the steel sector, which is an important downstream recipient of chemical products—and therefore the knock-on effects of regulation in this sphere will be profound and felt far and wide.

[Mary Creagh]

I congratulate my hon. Friend on the brilliant work that she has done in chairing the APPG and ensuring that the voice of the chemicals industry is heard loud and clear in this place. Does she agree that the issue is not just upstream but downstream chemicals, affecting things as diverse as kidney dialysis chemicals and machines, artificial limbs and so on? It spreads right out into the medical industry as well. We do not want there to be unintended or unforeseen consequences, because chemicals really do network out into every nook and cranny of our lives.

[Angela Smith]

I agree. That is why chemicals are considered one of our key foundation industries that is of profound importance to the UK economy in every respect. On that basis, it is imperative that we get this right; on that, at least, I hope that we all agree.

The Environmental Audit Committee made several very sensible recommendations as part of its inquiry. However, in their response, the Government have given very little away about policy proposals. Nine months later, and with the Brexit date looming on the horizon, I, alongside the sector, the members of the Committee and Parliament more generally, remain deeply concerned by the lack of clarity.

What do we know and what do we not know? Against the Committee’s explicit advice, the Government are attempting to use the European Union (Withdrawal) Bill to give Ministers the power potentially to create a new UK-based regulatory body to replace REACH. The industry has made it abundantly clear that replacing REACH would be costly and over-bureaucratic. It would also potentially limit important access to data, as my hon. Friend pointed out, and to scientific collaboration, a point made powerfully by the Royal Society of Chemistry.

REACH represents the gold standard in international chemical regulations, and there is no appetite at all in the industry for degrading regulatory standards, I am pleased to say. What is more, if companies are to continue trading with the EU, compliance is, in the words of the Chemical Business Association, “non-negotiable”. Failure to comply means no market access and therefore no trade, as my hon. Friend pointed out.

As I said, creating a body like the one that we are discussing risks costing the public purse and taking a huge amount of time, simply to add another layer of bureaucracy for no practical purpose whatever. After all, substances requiring evaluation or authorisation will already have achieved that status by complying with REACH by this year’s deadline of 1 May. I ask the Minister these questions directly. Will she urge the Government to reconsider their approach to chemicals regulation post Brexit? Can she assure the industry today that we will remain in full regulatory alignment, both in the transition and in the long term?

Another area causing immense concern relates to the registration process. The Committee recommended that “as a minimum” the Government should ensure that the UK retain the registration element of REACH. The Government even acknowledge that any company wanting to trade with the EU will have to engage with that element of REACH. So why leave it? In the short term, companies need assurance that REACH registrations made before May 2018 will remain valid post Brexit, because otherwise, why bother, why do it? Millions of pounds have already been spent on registrations. The Chemical Industries Association says that if companies have to re-register everything because of Brexit, the cost will be in the region of £350 million. That is not pocket money; it is a significant sum that could have a serious impact on the industry.

The uncertainty is enormously problematic for companies, which need REACH registrations to operate but are reluctant to make the payments in case they become invalid. That dilemma risks an exodus of companies from the UK to the European Union—to other member states—and has already led a number of companies to spend vast sums of money opening up offices on the continent.

[Mary Creagh]

My hon. Friend is making a brilliant point. As she sets it out, I am struck more and more by the fact that the Government like to talk about sound finance, but actually our own chemicals regime starts to look more like an ideological indulgence, an extravagance, with, of course, other people’s money—taxpayers’ money and the chemicals industry’s money.

Does she agree that many of the only representatives of American firms based here are now having to—or will have to—shut up shop and set up in other countries? Not only are our own companies moving out into the European Union, but companies from third countries, which use the UK as a springboard into that integrated European market, are also going shopping and setting up elsewhere.

[Angela Smith]

I agree with that latter point. On the first point that my hon. Friend made about ideological indulgence, I find it enormously frustrating that we are set not only to spend large sums of public money to achieve satisfaction and indulge ourselves ideologically, but to ignore the voice of business. I find it startlingly difficult to comprehend why what has always seen itself as the party of business is ignoring those very important voices—I just find it absolutely unbelievable.

Two years after the referendum, I still find it hard to reconcile my understanding of the party of Government. I have always respected it as a party that has always listened to the voices of those who make the wealth that keeps this country going, but it is no longer doing that—all in the name of a project that will damage the country’s economy in the long term. I find it absolutely astonishing, I have to say.

I ask the Minister what she is doing to give clarity to business in this area. Should businesses continue to make REACH registrations and will these registrations remain valid post-Brexit, or at the very least during the implementation period? Have her Government colleagues broached these subjects with their European counterparts during negotiations? I think we need to know—Parliament has a right to know this.

Does the Minister acknowledge that the easiest way to resolve these issues would be to stay in the single market and, as a consequence, to remain within REACH? That is the easiest way forward. It is the way forward that the chemicals industry prefers, and it would solve so many problems. I look forward to the Minister’s response and hope that she can provide some clarity.

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[John Mc Nally (Falkirk) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Evans.

I take this opportunity to thank the hon. Member for Wakefield (Mary Creagh) for securing this crucial and topical debate. Some interesting and intriguing points and concerns have been raised. The hon. Lady has already said that she feels as though the Government are treating the chemicals industry as a Cinderella industry. Her point about zombie legislation was not lost on Members, and her detailed knowledge of this subject is admirable.

Other Members made clear their concerns about the loss of jobs and the possibility of animal testing, which raises another unnecessary problem that we would have to deal with. Many other important questions are as yet unanswered. It was good to hear that the hon. Member for Gordon (Colin Clark) might cross the divide—that intrigues me—but it was reassuring that he has already become a devotee of the EAC. The hon. Member for Penistone and Stocksbridge (Angela Smith)—

[Angela Smith]

The hon. Gentleman is one of the very few people who have got the pronunciation right.

[John Mc Nally]

Am I? If I can say “Auchtermuchty”, and so on, it is fairly easy.

The hon. Lady raised the importance of getting the transition right and reiterated that we need policy certainty on this issue. The modesty of the hon. Member for Bristol East (Kerry McCarthy) and her understanding of the complexity of this inquiry is to be admired. She is without doubt a very able and knowledgeable MP, as I have learned.

It has been a privilege to be a member of the Committee, as it is to follow the hon. Lady. As well as benefiting from my deeply committed and knowledgeable colleagues, I have relished fighting on issues that I am passionate about. Highlighting the need to protect our precious environment against pollution on a local, national and international level has been my mission. From the scourge of plastic microbeads and nurdles on our beaches, to plastic fibres from clothing that poison our waterways, the Committee has shone a light on environmental issues that the public want and need to know about. The Committee has successfully alerted corporate giants to their responsibility to communities and to the wider world that we share. We have never shirked asking difficult questions. I wish to acknowledge our Chair, the hon. Member for Wakefield, and I am sure that my colleagues want to do the same. In my opinion, she provides the best model for the operation of a successful Committee.

I, too, was on the trip that the hon. Lady mentioned to America prior to last year’s election. The Committee visited Washington DC to meet various agencies, senior academics and scientists. We were told by one of the scientists there that they had already had 100,000 companies registered in Ireland. That immediately raises concerns, and it reinforces what has been said today. We were all warned that Brexit threatened our membership of REACH and would result in disastrous consequences for our industries and economies. I was also warned that the Scottish Government’s competencies in environmental matters were facing an existential threat.

The chemicals industry is an economic linchpin, and we heard grave concerns from senior people who fear that Brexit may result in deteriorating standards if REACH is compromised. REACH has been widely described as the most complex piece of legislation ever undertaken in the EU’s history, and around 30,000 chemicals are registered under it at present. I think that in the UK something like 6,500 are registered under it at the moment. Meanwhile, as has been said, its membership is a passport to the global chemicals marketplace.

REACH standards are recognised by regulatory regimes worldwide. That enables exports worth £14 billion every year across the EU. By May this year—the looming deadline for registering chemicals under REACH—UK companies will have spent an estimated £250 million on the process over the past 10 years. If the unthinkable occurs and no agreement is hammered out between the UK and EU, are we then a UK out of EU reach? Chemical registration-related data sharing would cease to exist. That would be utterly disastrous for businesses and their investments, and they would have to reapply all over again. It would be an absolute nightmare for us to go through.

Let me turn to my homeland, Scotland. The Scots chemical industry is a truly international and invaluable part of the Scottish economy, second only to our thriving food and drink industry. It is a major exporter that delivers outstanding GVA and has shown remarkable resilience in these turbulent economic times. I believe that the most recent Office for National Statistics figures show that the Scottish sector maintained double-digit export growth between 2014 and 2015, before the recent weakening of the pound. Surely that success cannot be allowed to face uncertainty. As we know, the sector is acutely sensitive to any tariffs or barriers that would make exports less competitive. We must also think of the vast numbers of people employed in the sector, as has been said—more than 10,000 directly in Scotland and six times that figure indirectly—in an array of jobs ranging from manufacturing, sales and marketing to logistics. Chemical sciences account for 33% of all Scottish manufacturing.

The regulation system achieved through REACH allows us to protect our environment and therefore human health. Industry and the public—our constituents —cannot afford to wait for the UK Government to act on these issues. Industries will still need to meet EU regulations after we leave the EU if businesses are to continue trading, so why is the Government’s position so vague? We are painfully aware that prolonged uncertainty could cost the taxpayers of this country millions of pounds and leave our exports in disarray.

I believe wholeheartedly that membership of REACH is vital to allow unhindered movement of medicines and drugs post-Brexit. Yet when they were asked by the Environmental Audit Committee to take a pragmatic approach to the UK’s future relationship to the EU single market for chemicals, the Government gave a meaningless response that held no answer. That is simply not good enough. As for Scotland, its continuing transition to a low-carbon energy country must be allowed to continue. It is important for everyone that that approach is seen as a way forward for the environment. Everybody here has asked questions; we now demand some answers.

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[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dr Thérèse Coffey)]

It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate the hon. Member for Wakefield (Mary Creagh) on securing this debate and I thank her Committee for its report.

The Government recognise that the UK chemicals sector is vital to the economy and to many other industries, often leading the way in research and innovation. Not only is it our second largest export industry, but it is a key component in almost all our other huge sectors. As the hon. Lady explained, chemicals are in many of the products and processes that we use. I am fully aware of the extent to which they can be in everyday products, and indeed in medicines and elsewhere.

The Committee’s inquiry took place nearly a year ago and we replied to it in July. I note that the Committee invited comments on our response. I have continued to meet the industry, and across Government, engagement with the industry and stakeholders will continue. I recognise that the principal concern of the industry—to ensure that existing REACH registrations remain valid—has not changed.

I also recognise that trade associations and other organisations have continued to call for the UK to stay in REACH. As I have explained elsewhere, given the principles set out by the Prime Minister in her Lancaster House speech, we will not stay in REACH per se but, through the provisions set out in the European Union (Withdrawal) Bill, we will bring into law the regulations that put REACH into effect. That is important because the continuity will provide an effective regulatory system for the management and control of chemicals to safeguard human health and the environment. It will also minimise any market access barriers for UK companies trading with the EU.

It has been suggested that we are not listening to the voice of business, but I humbly point out that the Government are listening to the voice of the people by respecting the referendum result. It was reiterated throughout the 2016 campaign that a vote to leave was also a vote to leave the single market.

[Angela Smith]

I differ on the point that people voted to leave the single market. Nevertheless, I am sure the Minister just said that the Government will do their best to minimise any lack of access to the European market. Is that not an acknowledgement that there will be some damage to the industry if we leave REACH and have to set up our own regulatory regime?

[Dr Coffey]

The hon. Lady will recognise that our future relationship is still a matter for negotiation. Phase 1 has happened and we are moving into phase 2. Having exactly the same regulation the day before and the day after we leave the European Union will minimise market access barriers for UK companies trading in the EU.

We agree that ensuring the continued validity of REACH registrations is a critical issue and fully recognise the investment that UK companies have made in the REACH registration process. We are clear that we want existing registrations, authorisations and approvals to remain valid in the EU and UK markets, which is clearly in the interest of businesses operating in the UK and the EU. That recognises the complex compliance activity that takes place through supply chains. As the hon. Member for Wakefield pointed out, it is not just about sales between companies but about the movement of goods through the supply chain within a company.

We want to avoid the unnecessary duplication of compliance activities undertaken by businesses prior to exit. That was set out in the Government’s position paper, “Continuity in the availability of goods for the EU and the UK”, published in August 2017, which also set out our principles for maintaining the availability of goods after exit.

It is likely that some products will be undergoing testing, registration or authorisation processes at the point of exit. For such cases, given the ambition for a close future relationship, the body carrying out the assessment should be permitted to complete it and the results should be recognised in UK and EU markets. That would be in the best interests of businesses across Europe, and I encourage them to work together to support that pragmatic outcome.

Although it would not be appropriate to pre-judge the outcome of the negotiations, we will discuss with EU member states how best to continue co-operation in chemicals regulation in the best interests of the UK and the European Union. That extends to aspects of knowledge sharing—it would be ideal to continue that work through the negotiations. For example, the EU is highly reliant on the expertise of the Health and Safety Executive in the assessment of chemicals, particularly biocides and pesticides.

I am aware that the guidance that the European Chemicals Agency published on its website about the UK’s withdrawal from the EU has caused concern. That guidance reflects the EU’s view of what would need to happen if there were no future relationship between the EU and the UK. It does not, of course, take into account potential negotiated outcomes and I am pleased to note that that has now been acknowledged on the ECHA website. As hon. Members may be aware, the guidance has recently been updated to reflect issues about the transfer of registrations and authorisations.

We have increased resources within my Department, in the HSE—a body sponsored by the Department for Work and Pensions—and in the Environment Agency to work on chemicals policy and prepare to deliver an effective regulatory regime after we leave the EU. We have established a joint programme of work with HSE to deliver what we need to have in place for day one. I work with ministerial colleagues across Government from the Department for Business, Energy and Industrial Strategy, the DWP, the Department for Exiting the European Union, the Department for International Trade and the Treasury.

We are also planning for a non-negotiated day one outcome to have a functioning chemicals regulatory and enforcement system. We are now scoping and designing what such a system would look like, including an IT system to replicate REACH. As the hon. Member for Wakefield pointed out, that includes the budget that has been released so far to scope that system.

On leaving the EU, our regulatory system and laws will be identical to those of the EU. There could be opportunities to consider improving the regulatory system to maintain standards in protecting the environment and human health. That is why we have considered the regulatory approaches of other countries, including those that are largely modelled on REACH.

Although we will not be part of REACH, there is an opportunity to work internationally to strengthen the standardisation of methods that assess chemical safety in support of the mutual acceptance of data to identify and share information on emerging concerns and on new approaches to risk assessments. In a global world where we share chemicals and have several existing chemicals conventions, it makes sense for our regulatory authorities increasingly to share that information to ensure that we have greater compliance and convergence in understanding and recognising the benefits and hazards that chemicals can pose. I do not see any reason why we cannot have that ambition once we leave the EU.