European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Committee: 6th sitting (Hansard): House of Lords
Monday 12th March 2018 Lords Chamber

Moved by

[Baroness Hayter of Kentish Town]

86: Clause 7, page 6, line 15, at end insert “fees or charges,”

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I shall speak sparingly to this amendment and others in this group given the expertise and experience of those others whose names are on them. Of course, it is traditionally not for this House to decide anything on the raising of taxes, but we have a role in considering the powers to raise fees or charges. This is the nub.

Without having spelled out why they consider that such powers need to be created and to whom they might be given, Ministers have decided that they should by mere secondary legislation be able to levy funds from—we assume—business and individuals. I shall leave it to those whose names are on the amendments to spell out rather more than I will their disquiet over such powers. I will then listen with great interest to what excuses the Minister is able to dream up to explain this particularly extraordinary Henry VIII power. I beg to move.

[Lord Turnbull (CB)]

My Lords, I regret that I was unable to attend all of Wednesday’s Committee stage, thereby missing a number of important speeches, but I have the opportunity now to speak on behalf of the noble Lord, Lord O’Donnell. I hope that your Lordships will accept that one Treasury ex-Permanent Secretary is a fair swap for another.

I particularly admired the speech of my immediate predecessor, the noble Lord, Lord Wilson of Dinton, who set out the proliferation of players and organisations who could have the right to make secondary legislation out of this Bill and the low hurdle they have to get over. These amendments raise important issues on the scope of secondary legislation, some of which has important constitutional implications.

The report of the Delegated Powers and Regulatory Reform Committee has pointed out that it is a long-standing principle—of some 330 years—that the introduction of taxation or its increase should not be permitted simply by secondary legislation. Amendments to Clauses 7, 8 and 9 rightly insist that levying of taxes and increasing them should not be covered by these powers. They also point out that some fees and charges are equivalent to taxation and should be subject to the same constraints.

One can break down taxes, fees and charges into different categories. There are those that simply cover the costs incurred in administering a particular service—for example, passports. One can test this principle by looking at the annual trading account that an organisation produces to ensure that no surplus is generated. Secondary legislation may be appropriate for fees or charges which satisfy this condition.

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[Lord Callanan]

The noble Lord makes a good point. I was speaking to my noble friend Lady Goldie about the matter when he asked her the question earlier. I will have a look at this for him. I think it is fair to say that most of our negotiating positions on the existing directives and regulations are already public. We share our positions, the issues that are being discussed are transparently available on both our website and the EU’s website, and many of the issues that will come to fruition over the next year or two are already in early formative phases. I therefore genuinely do not think that there is much about this process that is secretive, but I will certainly have a look at the issue for the noble Lord.

[Baroness Hayter of Kentish Town]

My Lords, I think it will be obvious why I spoke so briefly at the beginning of this debate, as I have now heard far better speeches on this group than I would ever have made. I am sorry that the noble Lord, Lord O’Donnell, who “salivated”—his word at Second Reading—at the thought of being able to raise money by SIs, was not here. However, he and the other “guilty men”, as they were called, who used these in the past, have made the case well that this would be quite a move from our traditional way of raising money. Whatever the name of the charge—the noble Lord, Lord Deben, said that it was basically “taking money out of your pocket”, and the noble Lord, Lord Cormack, called it an “obligation to pay”—we know what we are looking at.

The noble Lord, Lord Deben, said that this had, “not been entirely well thought through”. I hope that that, rather than anything more untoward, is why this power has crept in there. As everyone has said, it is for Parliament to decide whether to raise funds—whether to pay for some WTO obligation or for anything else. The example of the American situation is very valid: it is how, ultimately, you stop Governments doing what you do not want them to do.

Earlier in this debate the noble Lord, Lord Lisvane, said that we need some hard examples. I do not think that the WTO example is the hard example to justify these powers. I think that his second point was that, if we do not get those hard examples to convince the House, surely it is much better that we leave this to the withdrawal (No. 2) Bill, by which stage we will know exactly what in the withdrawal agreement had led to the need to raise a particular fee, charge, imposition or whatever. That seems more appropriate.

Speaking about the WTO, I think that the Minister said that he thought the Government might be in a difficult position. I have to advise him that I think the Government are in a difficult position now on this power in the Bill. I hope that the Government will bring forward their own amendment on Report. That would be a way of taking matters forward. I am sure that there are far more expert noble Lords in the House than me who might meet the Minister to see whether we can find some such amendment. I hope that we do not have to repeat this debate on Report and that the Minister will bring something back because, if he does not, I can assure him that we will. For the moment, I beg leave to withdraw the amendment.

Amendment 86 withdrawn.

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[Baroness Bowles of Berkhamsted (LD)]

My Lords, I am sorry that there are too many speakers from this part of the Chamber, but I should like to point out that, although some advances have been made in the Sanctions and Anti-Money Laundering Bill with regard to the proposals that have already been mentioned, that is in the context of a particular Bill that has already received some scrutiny—and indeed some policy amendments—which make the application of criminal offences a little more palatable. There is, for example, the stipulation in the anti-money laundering part, which is the bit that has two years and is more akin to the instance envisaged within the withdrawal Bill, that there has to be a mental element. I do not see that safety here.

I further wonder why things that were not previously subject to criminal sanctions have to be made into criminal offences. It is a big policy change to say that any administrative or other misdemeanour is henceforth going to be criminalised with a two-year prison sentence. I do not call that “no change”. It has to be looked at in the context of each individual offence and how it may arise, otherwise you are saying that any regulatory breach will henceforth carry two years in prison. Moreover, you do not know the detail of what those regulatory breaches may be—how big or how small, or who may be on the other side of them. This would cover every piece of single market legislation. Some of these things will be quite small, and were not criminal offences before. What has changed through Brexit that suddenly we have to criminalise everybody for everything?

[Baroness Hayter of Kentish Town]

My Lords, because the case was made so clearly by the noble and learned Lord, Lord Judge, with the added detail provided by the noble Lord, Lord Marks, I shall not try to add anything to the substance of the argument. I just want to express my regret at the lack of preparation and forethought that went into the drafting of this power. Indeed, I was alarmed by it on the very day I first read the Bill and started blogging about it back in the summer. I then tabled Questions for Written Answer in October asking the Government what other instances there were of new criminal offences being created by secondary legislation. In the replies I received on 2 and 23 October, the noble and learned Lord, Lord Keen of Elie, was unable to list any.

I went on to ask the then Minister, the noble Baroness, Lady Anelay, the same question. The noble Lord, Lord Callanan, had by then taken over and replied in her stead on 14 November—but again gave no examples. The letter merely noted that “existing” criminal offences “in our law”—those are his words—which relate to the EU might need to be transferred to another body: for example, an offence not to notify an EU institution of something important relating to health. The letter ended by saying that the offence might have to be changed to a failure to notify the equivalent UK body. I understand that, but that is an existing offence, not a new one, and alters only to whom the report should be made. No case was made for, and no example given of, where new offences might be needed as we leave the European Union—much less one with the threat of up to two years in prison on first offence.

Noble Lords will not be surprised that I did not let this drop. I raised the issue again with the lucky noble Lord, Lord Callanan, who had another meeting with me in January—he has all the fun. On Wednesday last, when we anticipated dealing with this group, just before we broke for lunch I received an email from his department in response to my request in January. But again the email failed to answer why any new offences might be needed. It commented only that,

“existing criminal offences may require widening or amending, or new offences may need to be created to fix deficiencies in retained EU law”—

but provided absolutely no examples. The only example given in the email was of an existing offence where a business fails,

“to provide an EU authority with certain information”,

and therefore such an offence may,

“need amending to ensure they continue to operate effectively post exit day, for example by changing references from an EU authority to a UK one”,

and to ensure that businesses are complying with the law. Again, that is a change rather than a new offence. It is true that the email goes on to state:

“Previous case law”—


here I shall look to others to look into the detail of this—

“has created some uncertainty as to whether actions such as these would amount to creating a new offence rather than amending an existing one, and there could be differing legal views on this point”.

As I read the email, it seems that on that basis alone—that there is possibly a legal issue as to whether an amendment to an offence is a new offence—the Government have written themselves powers to create brand new offences that are punishable by up to two years in prison. So I think we are agreed that that will not do and that these powers have to go. Moreover, they have to go more completely than the Government allowed for in the sanctions Bill because, as was said in the debate at the time, anything there would follow an international agreement to which we would be a party as a Government—so there would have been that earlier stage. But these powers will not be part of that, and therefore I hope that, when the Minister responds, he will say that these powers are going to be taken out of the Bill.

[Lord Callanan]

First, I thank the noble and learned Lord, Lord Judge, and my noble friend Lord Hailsham for bringing the matter of creating criminal offences under the powers in Clauses 7(1), 8 and 9 to the attention of the Committee through their Amendments 87, 128, 156, 339 and 340, which seek to amend the relevant provisions in the Bill. As I said, I understand that similar concerns were raised during the debates on the Sanctions and Anti-Money Laundering Bill, but that a mutually agreeable outcome has since been reached, with the Government bringing forward a requirement on Ministers to make additional statements alongside their statutory instruments. Of course, the offences envisaged under that Bill were different and carried considerably greater sentences. I hope that I can satisfy the concerns that noble Lords have expressed during this debate. However, the Government are still looking very closely at how the powers in the Bill are drawn and how they will be exercised—and, as I say, we are open to discussion on finding similar solutions in this Bill.

I shall start with the reassurance that the three main powers in the Bill are explicitly restricted from creating a “relevant criminal offence”, which is defined in the Bill as an offence for which an individual who has reached the age of 18, or in relation to Scotland or Northern Ireland the age of 21, is capable of being sentenced to imprisonment for a term of more than two years. A vital part in achieving continuity and consistency for businesses and individuals as we leave the EU is to ensure that criminal offences continue to operate effectively after exit. As such, the Clauses 7(1), 8 and 9 powers can create criminal offences punishable by imprisonment for two years or less. In applying this two-year limit, the Government have sought a balance between appropriately limiting the three main powers and providing a functioning statute book on exit day.

The amendments would see that no criminal offences—or no criminal offences punishable by any term of imprisonment at all—could be created under the three main powers in the Bill. However, it is important that these powers are able to create certain criminal offences, as I shall come on to explain. For example, criminal offences provide an essential function of ensuring compliance with regulatory regimes which provide crucial protections for businesses and individuals. Some of the regimes criminalise particular conduct relating to the EU and some offences may no longer operate as intended after exit day if they are not corrected, particularly where functions transfer to a UK authority. For example, it could be an offence for a business to fail to provide an EU authority with certain information, but after exit day the authority collecting that information might be a UK one instead. Continuity would seem to demand penalties remaining in place—

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[Lord Callanan]

I understand the noble Lord’s concern, which comes on to the same point made by the noble Baroness, Lady Hayter. I will come on to deal with what constitutes a new offence and what does not in a second.

Continuity would seem to demand penalties remaining in place for what would substantively be the same misconduct. Currently, certain types of financial services firms are regulated at an EU level. Depending on negotiation outcomes, we may need to bring such firms into the UK regulatory regime. Under these circumstances, we would want the UK regulators to be able to regulate such firms in a way consistent with their current regulatory framework, in line with their statutory objectives. Where appropriate, this may include bringing firms within the scope of existing criminal offences to which UK financial services firms are already subject.

To give another example, Her Majesty’s Treasury is considering amending the existing offence in Section 398 of the Financial Services and Markets Act 2000 of “knowingly or recklessly” giving a regulator,

“information which is false or misleading”.

This would make it an offence, as a consequence of transferring functions from the European Securities and Markets Authority, for third country central counterparties to mislead the Bank of England in connection with recognition applications. In direct response to the noble Baroness, Lady Hayter, and the noble Lord, Lord Beith, a view could be taken that this creates a new offence as it will be a new function for the Bank of England and extends this offence to central counterparties established in third countries to whom it did not apply before. Her Majesty’s Treasury is also considering making similar provision for the FCA—as a consequence of transferring functions from the European Securities and Markets Authority relating to trade repositories—and similar considerations apply. We therefore need the power in its current shape to provide certainty that we can make such statutory instruments.

As an alternative example, marketing authorisations for medicinal products are currently granted at both EU and UK level. Post exit—again, depending on negotiation outcomes—it is possible that the best way to provide continuity for businesses marketing medicines in the UK will be to convert EU marketing authorisations into UK ones. Under Regulation 95 of the Human Medicines Regulations 2012, it is currently an offence to provide false or misleading information in connection with applications for marketing authorisations as this information is key to assessing the safety, quality and efficacy of medicines. The offence is punishable with a fine or imprisonment for a term not exceeding two years. It is vital that, if we need to, we are able to amend the existing offence or create a comparable one. I think we can all agree that it remains important that false or misleading information is not supplied in connection with the process of converting EU marketing authorisations into new ones, and that the public’s health is protected.

Noble Lords will see from the examples that the intent here is largely to ensure that the same types of conduct carry criminal penalties as before, or that we can create criminal offences to deal with the post-exit world. Previous case law has, though, created some uncertainty as to whether widening an existing offence would amount to creating a new offence, and there could be differing legal views on this point.

[Baroness Hayter of Kentish Town]

The noble Lord just used a different word—“widening”—but I think his earlier example was making a notification to a different organisation. “Widening” suggests that the scope of what might be a crime would be extended. Is that what he meant?

[Lord Callanan]

No, that is not what I meant.

It is therefore vital that the Bill can provide for “creating” criminal offences to ensure that no offences that are needed fall away as we leave the EU, and that businesses and individuals continue to comply with the law.

Any statutory instruments made under Clauses 7(1), 8 and 9 which create or widen the scope of a criminal offence will automatically be subject to the affirmative procedure so that they will be subject to a debate and vote in this House and in the other place. The Government accept that this level of scrutiny is important here and, as I said at the beginning of my remarks, I hope we can consider further safeguards. Therefore, I hope that with those assurances I have demonstrated why we think this element of the power must remain part of the Bill and that noble Lords will feel able not to press their amendments.