Restriction of Hazardous Substances in Electrical and Electronic Equipment (Exemptions) (Fees) Regulations 2022

Baroness Bakewell of Hardington Mandeville Excerpts

Tuesday 6th December 2022 Grand Committee

[Baroness McIntosh of Pickering (Con)]

My Lords, I am most grateful to my noble friend for presenting this statutory instrument. I read very carefully the conclusions of the Secondary Legislation Scrutiny Committee and will go through some of the issues with this Committee this afternoon.

The Explanatory Memorandum sets out very clearly at paragraph 10.1 that a six-week public consultation was conducted which closed on 26 August. That is normally considered a holiday period. Certainly it is when I have always taken my holidays, as I tend to go to northern Europe and that is probably the last bit of good weather and bright sunshine that we might expect. It was a short six-week consultation; I think they normally last 12 weeks. Was there any reason why the consultation was shorter and not carried through to September, which would have given people more chance to respond?

Fifty-three of the 54 respondents objected to the line that the Government took. I will not read it out because it is there and everyone will probably say the same thing this afternoon, but I wonder why the Government overruled those who bothered to reply.

My noble friend said of paragraph 16 of the Secondary Legislation Scrutiny Committee’s response that this is not a potential loophole. I would like to understand why he and the department think that. If Northern Ireland, which is still part of the single market, can export these products to the rest of Great Britain, which is not, and those in Great Britain have to pay the fee, that gives those operators in Northern Ireland a commercial advantage, if I understand this correctly. I would like to understand the background to why my noble friend thinks it is not a loophole or a commercial advantage to the Northern Irish.

Previously, in its conclusions, the Secondary Legislation Scrutiny Committee confirmed that there is no payment for Northern Ireland operators and that 53 of the 54 responses were negative towards the Government’s position. I underline the uncertainty in paragraph 14 of that scrutiny committee report, which says that the view the department has put forward

“creates uncertainty and may be inconsistent with the Department’s declared intention to have a GB-specific, cost-recovery based system for exemptions.”

I take this opportunity to press my noble friend on that.

I have one last question. What will the position of this statutory instrument be under the retained EU legislation Bill? Are we coming back to revisit this, or is this the last time we will look at this statutory instrument?

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for his introductory remarks on this statutory instrument.

Previously, applying for an exemption for the use of certain hazardous substances was handled and organised, and the cost was picked up, by the EU. After Brexit, the cost was picked up by the UK taxpayer. The Government are now moving the cost from the taxpayer to the businesses which are required to apply for exemptions. Not surprisingly, those businesses are balking at this additional cost where previously there was none for the same service.

As the Minister said, the fee that Defra is implementing to be payable is £39,721. At the same time, the Secretary of State will publish a charging scheme of fees and how they will be reached. The fee set out in the instrument will operate from April 2023, when the new scheme of charges will also become operable. There is no indication at this time whether those charges will be higher or lower, only that they will be on a full cost-recovery basis.

As the noble Baroness, Lady McIntosh of Pickering, said, Defra held a six-week consultation on the fee being introduced in this SI, which ended on 26 August. Of the 54 responses received, 53 disagreed with the consultation proposals. This is the first time that the businesses concerned have been expected to pay for exemptions.

The Secondary Legislation Scrutiny Committee, of which I am a member, asked a number of questions of Defra on the SI. The exemptions cover such items as the use of lead in portable emergency defibrillators and the use of mercury in intravascular ultrasound imaging systems. This is vital to the health service and a number of us at all levels, because of the effects on the health service, on which we are completely reliant.

The fee is to cover the cost of a consultant’s fee in assessing the application and whether the product is safe and fit for use. Regardless of whether the application is a renewal or a new exemption, the fee to be applied is the same. There are 23 existing exemptions that would require an application fee to be paid when they are next renewed.

Four businesses consulted were concerned that specialised items provided in low volumes but subject to the application of a fee might not continue to be supplied in GB due to the cost. This would have a significant impact on some medical technologies. Given that some of those businesses supplying this equipment and needing an exemption certificate are small and medium-sized businesses, the cost is likely to have a negative effect. Can the Minister comment on this?

The Northern Ireland market, as both speakers have said, is not subject to these regulations as it still operates under EU rules. No fee is therefore charged there. This SI applies to England, Scotland and Wales only. Can the Minister say whether it is likely that some devices might appear illegally on the Northern Ireland market, not subject to a fee, and then be sold on to England, Scotland or Wales? I understand the Minister says that this is not likely, but this is a loophole in the system whereby no fee would have to be paid for a separate GB exemption; the noble Baroness, Lady McIntosh, also referred to this. Would it not be better if the same system applied to the whole of Great Britain, including Northern Ireland? Would the Minister care to comment on that?

--- Later in debate ---

[Lord Benyon (Con)]

I thank noble Lords for their valuable contributions to this debate. I will address the points that have been made.

The noble Baroness, Lady Bakewell, asked why the fee is being introduced when so many respondents to the consultation did not support it—a point made by both other speakers as well. If I am in business and not facing a cost that is being picked up by somebody else, and I am asked whether I would like to pick it up, I am likely to say no. I am not surprised that they did not want to do this, but there are two reasons for doing it. One is to relieve the poor, overburdened taxpayer from picking up the cost of this. The second is to drive behaviour change and to drive companies to look at the alternatives where possible; I will come on to talk about that. I assure the noble Baroness that introducing the fee is entirely consistent with the Government’s Managing Public Money principles and is based strictly on a cost-recovery basis. It is also worth noting that charging is common practice in circumstances in which industry is required to apply for registrations, authorisations and licensing to comply with regulatory requirements.

Existing guidance on how to submit an application for an exemption is available on GOV.UK and will be updated to reflect the requirement to pay an application fee well in advance of the April 2023 date when the fee will be introduced. I assure the Committee that in granting exemption applications, the Government are not acting to constrain the development of alternative, less harmful substances. A fundamental requirement in considering an exemption is to do a detailed technical appraisal of substitute substances. In circumstances where an application is granted, it will be done for a time-limited period only.

I will address some of the other points. A short consultation was required to ensure that this statutory instrument could be laid using powers that expire at the end of this year, using the EU withdrawal Act. While it was short, key stakeholders were contacted and encouraged to respond. I suspect the noble Baroness and I were on the same side in the referendum, but I can assure her that this gives more accountability for the decisions that are taken. When I was last at Defra, this would just have been rubber-stamped. It would come have from the Commission and we would have had no say over it. At least we can now drive standards and do things in the right way. I hope that responds to the first and second points made by my noble friend Lady McIntosh.

The points raised by the Secondary Legislation Scrutiny Committee are important, but I reiterate that there is no loophole. Products placed on the Northern Ireland market must comply with the EU ROHS and EU exemptions. Unfettered access means that such products can then move freely into Great Britain. They are not required to submit a GB exemption application, so there can be no loophole in avoiding paying the necessary application fee. I hope that satisfies the Committee’s concerns.

Points were made about the REUL Bill. Ministerial colleagues and I are in the process of analysing Defra’s REUL stock and determining what should be preserved as part of domestic law, as well as REUL that should be repealed or amended. This work will determine how we use the powers in the Bill and, therefore, inform assessments of the Bill’s impact.

It is important that we consider whether recognition of exemptions in other jurisdictions with similar ROHS regulations to ours could work. There is no guarantee that we will proceed even after that assessment, but any proposal to proceed will be subject to consultation. It is therefore sensible to proceed now on the basis that no alternative to the current arrangements will be in place.

A number of people asked questions about the fees. The fee will be £39,721, as I said. This is made up of the technical consultant’s fee of £36,625 plus £3,096, which covers the cost of other administrative tasks such as publishing the consultation. The fee will be payable from April 2023. Exemptions last up to five years, or seven years for medical devices such as those mentioned by the noble Baroness. Exemptions are granted to products rather than to the applicant. This reduces the impact on business because, very often, the applications are made by trade bodies and huge multinational companies for which this figure is loose change down the back of the sofa. For an SME it would be a substantial cost, but that cost is very likely to be picked up by a whole range of different SMEs operating together through a trade body.

Since January 2021 we have received two applications for exemptions for Great Britain.

[Baroness Bakewell of Hardington Mandeville (LD)]

I am sorry to interrupt the Minister. Is he saying that if, for instance, an MRI scanner received an exemption certificate, it would not matter who manufactured it and it would have the same exemption certificate?

[Lord Benyon (Con)]

The exemption is on the product, not the applicant, so yes. Some of these would be multinational companies based overseas wanting to export their products here. They would have to get this to do so.

I think that addresses the main concern of the noble Baroness, Lady Hayman. Trade bodies will be the vast majority of the applicants, not businesses. It is crucial that we drive behaviour change where it can be achieved. The application process requires the applicant to have looked at alternatives before securing an exemption.

The noble Baroness, Lady Hayman, asked for examples of recent exemption decisions. Lead in solders in portable emergency defibrillators is one. Mercury in components of intravascular ultrasound imaging systems and lead in hexavalent chromium used for civil explosives in mining and quarrying are other examples of where this requirement will be used.

The Secretary of State could grant exemptions without the need for an application if the sale of essential equipment were jeopardised because of the non-payment of a fee. For example, if the supply of essential equipment was required for the health sector and was jeopardised because of the requirement to have an application, the Secretary of State could overrule it and give that exemption. I think that gives a lot of assurance to people who feel that, for example, our NHS could lose out on getting a vital piece of equipment.

The final question, quite rightly put, was whether this drives business away from the UK. It is normal for businesses to be charged fees for registrations and applications if necessary. As I say, it is important to note that the fees apply to the product, not to individual businesses. There is a track record of businesses working together to submit applications.