United Kingdom Internal Market Bill

Baroness Neville-Rolfe Excerpts

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Monday 23rd November 2020 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

30: Clause 16, leave out Clause 16
Member’s explanatory statement
This probing amendment is intended to clarify the extent to which the Government has considered how the provisions of the bill in respect of services will work in practice.

[Baroness Neville-Rolfe (Con)]

My Lords, I seek clarification on the use of Clause 16 on services, on which hang the plentiful exclusions in Clause 17 and Schedule 2, and the related operation of mutual recognition, and of direct and indirect discrimination for services. I spoke to the amendment from the noble Baroness, Lady Hayter, in Committee but her concerns have been met by the interests of consumers being added to the objectives of the CMA in implementing this legislation by the Government’s judicious amendment to Clause 29, which we will touch on later, so I return to the charge alone. I refer to my interests in the register because of my involvement now and historically in various businesses, although I am not sure where their interests would lie.

The Government’s concession does not help to answer my questions about services, which are about the practical application of the services clauses. This is important because services make up over 80% of GDP, although I note that a large chunk—financial services, health and social services, legal services, transport, audio-visual and some others—are excluded from the reach of some or other of the clauses in Part 2. In a digital world, services are increasingly attached to goods, such as cars, white goods and smartphones, so the distinction between goods and services is also now blurred. Many service businesses sit outside London, including in the former red wall seats, and millions of them are small businesses—the sector closest to my heart for its innovation, dynamism and espousal of family values.

Services are at the heart of our economic success—it probably all dates back to the time when Napoleon accused us of being a nation of shopkeepers. However, they are also a mystery and ill understood, as I know from the excellent work we do on the EU Services Sub-Committee, of which I am honoured to be a member. Moreover, if you google services you find yourself lost between various motorway service stations and public services such as the NHS. It is our duty as a House to try to shine some light on this potentially confusing new area of law on services in the internal market.

Unfortunately, I do not really understand what Clause 16 and its associates are intended to achieve. I do not think I am alone in this. The Minister talked in Committee of the value of the non-discrimination rule and said that it is

“a fundamental safeguard for businesses, ensuring that there is equal opportunity for companies trading in the UK, regardless of where in the UK the business is based.”—[Official Report, 28/10/20; col. 357.]

But then there are exclusions on a major scale, suggesting that millions of businesses, and perhaps non-business entities, will not benefit from this principle.

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[Lord Callanan (Con)]

I thank my noble friend for tabling this amendment, which seeks to clarify the extent to which we have considered how the provisions of the Bill in respect of services will work in practice. I shall endeavour to do my best to answer my noble friend’s concerns, because I know that she appreciates and promotes just how critical the services sector is to the United Kingdom, and I share that view. It is vital, constituting more than 80% of our GDP and four out of five jobs nationwide.

The principles of mutual recognition and non-discrimination in Part 2 underpin an internal market framework which will limit the emergence of new barriers following the return of powers from the EU. This will support UK businesses trading services in other parts of the UK, and authorities regulating these services. The Bill will complement the existing services regulatory framework while building in certainty for businesses and regulators.

The mutual recognition principle means that businesses authorised to provide services in one part of the United Kingdom will not need to satisfy further authorisation requirements to provide those services in the other parts of the United Kingdom. This principle of mutual recognition applies to authorisation requirements. It does not cover matters such as non-mandatory membership of organisations, which cannot prevent a service provider from offering a service but which might be desirable to join for other reasons.

A similar form of mutual recognition already operates as part of the existing UK-wide regulatory framework for services under the Provision of Services Regulations 2009. Regulators complying with that legislation will already be subject to the principle of mutual recognition. Similarly, the non-discrimination principle is a fundamental safeguard for businesses, ensuring equal opportunity for companies trading in the UK regardless of where in the UK that business is based, from where it provides services or where its staff are based.

As my noble friend Lady McIntosh highlighted, with the non-discrimination provision, regulators have until now had to follow rules in the Provision of Services Regulations 2009 which prevent discrimination towards service providers from other European Economic Area states. These rules will be revoked at the end of the year when the transition period comes to an end, as they will no longer be relevant to the UK’s situation. It is only right that rules that have previously prevented discrimination towards businesses from the other EEA states should now be applied to ensure the continued flow of services across our United Kingdom.

To help provide clarity, Clause 16 sets out a list of requirements and provisions that are neither regulatory nor authorisation requirements and therefore are not covered by the principles in Part 2. First, those requirements dealt with in other parts of the Bill—namely the mutual recognition principle in Part 1, which relates to goods, and provisions covered by Part 3, on professional qualifications—are not within scope of Part 2. This is because it is not desirable for one set of requirements to be subject to several rules from different parts of the Bill.

Secondly, existing requirements are out of scope because Part 2 applies only to new or substantively modified requirements that come into force, or otherwise come into effect, after this section comes into force. However, for the mutual recognition principle only, existing requirements will be brought within scope of the Bill where a corresponding authorisation requirement in another part of the UK introduces a new or substantively changed requirement.

Thirdly, a requirement which applies both to service providers and non-service providers is not in scope of Part 2. This part of the Bill is concerned only with the requirements which seek to regulate service providers and not all requirements which might affect service providers.

Finally, there are administrative requirements on service providers that we consider are reasonable in all circumstances, and therefore they are also not in scope of this part. Such administrative requirements could include, for example, where a service provider may be required to notify a local regulator of their presence, or where they are required to provide proof that they are in fact authorised to provide that service in another part of the UK. These requirements are necessary for regulators to continue operating effectively under the rules in this part, but it is our view that they are limited enough in scope so as not to create any unnecessary barriers to trade.

I can therefore assure my noble friend that the Government have considered carefully how the provisions in Part 2 will work in practice, and that Clause 16 is an essential part of their operation.

My noble friend asked whether penalties apply to businesses that are excluded from the Bill. If a given matter is out of scope of Parts 1 to 3, it is also by definition out of scope of the OIM’s functions and responsibilities.

My noble friend Lady McIntosh raised the four weeks’ consultation, as did a number of other noble Lords. The consultation followed the principles for a government consultation and represented an ambitious plan to engage businesses of all sizes across all four nations, as well as many academic experts and representatives of the devolved Administrations.

My noble friend Lady Neville-Rolfe asked also about Schedule 2, which lists a number of services with the aim of reflecting those outside the scope of the Provision of Services Regulations 2009, which is the current services framework. The Government also recognise that it is appropriate for legal services to be excluded from the provisions on the mutual recognition of services to reflect the separate legal systems in England, Wales, Scotland and Northern Ireland.

The noble Lord, Lord Purvis, asked whether service providers from the Isle of Man were subject to the measures in Part 2. The answer is no. Part 2 applies only to businesses and individuals that a have a permanent establishment in the United Kingdom as defined by the Corporation Tax Act 2010, which does not include of the Isle of Man. It is also the case for all Crown dependencies.

The noble Lord also asked when the services principles apply and when the goods principles apply. The services principles apply only where the goods principles do not. Only one set of principles will apply as to a particular requirement.

I hope that I have answered the questions of noble Lords and of my noble friend. I hope that she feels able to withdraw her amendment.

[Baroness Neville-Rolfe (Con)]

I thank noble Lords for an interesting debate and I am grateful for the support of my noble friend Lady McIntosh, the noble Baroness, Lady Bowles, and, of course, my noble friend Lady Noakes, who rightly pointed out the probing nature of this amendment, which I obviously do not seek to press. She also said that it was right that we include the services sector in the internal market, which is obvious from its very scale—a point that she, the noble Lord, Lord Stevenson, and the Minister emphasised—I think that it is about 80% of GDP. The Minister was also right to emphasise the value of mutual recognition and the loss of the EU-based services regulations of 2009, which to some extent we are trying to replace.

The single most important thing about the services element of the Bill, in Clause 16, is to understand the Government’s intentions, particularly in view of the minimal nature of consultation in framing it. My noble friend Lord Naseby was right to emphasise the importance and use of consultation. He also asked a question about the proposed registers which I am not sure we got a complete answer to.

The trouble is, we still do not know why these provisions are needed in individual cases—I gave some examples that I did not really get an answer to, such as hairdressers and other businesses—and why they vary from sector to sector. As the noble Lord, Lord Purvis, said, I am an optimist—I have been a strong supporter of the Government on this Bill against the advice of respected friends—but perhaps the Minister can kindly reflect on whether he can do anything further on services, with services now being so linked to goods as we have all agreed, to allay my fears. Some sectors, from property to restaurants, appear to face new regulations, possibly draconian, without much of awareness of it. The noble Lord, Lord Stevenson, suggested a letter outlining what was covered within the services sector. Perhaps the Minister could reflect a little further on how we might communicate this and reassure people about the value of these provisions in creating a single market with mutual recognition, which I strongly support. But we need to make sure that people understand what their duties are and that such duties are not overly draconian and will be sensibly enforced. I beg leave to withdraw the amendment.

Amendment 30 withdrawn.

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[Baroness Neville-Rolfe (Con)]

My Lords, I thank my noble friend Lord Callanan for his amendments, which, as many have said, represent a real readiness to listen. The changes all seem very sensible, especially the proposal for the CMA to lay an annual plan before Parliament and before the devolved legislatures. Perhaps a similar procedure could be derived in relation to the common frameworks, over which there has been so much grief and debate. In my experience, when things go well, such reports become routine and are not even debated, but they are a good way of keeping the Executive —public servants, any boards involved and the Ministers they serve—objective, efficient and thoughtful.

However, I am afraid that I do not support Amendment 54. Board members of the CMA should not be “representative” of a territorial interest in the way this would inevitably turn out. The interests of the four nations should be taken into account in coming up with a balanced, objective board, but this is not the right way to do it. My noble friend Lady Noakes summarised the balance issues very well from her own wide experience. The amendment would also jeopardise the very objectivity and pursuit of the public interest which is vital to a better CMA.

By the way, Tesco’s head office is not in London; that was a bad example for the noble Baroness, Lady Randerson, to choose. At least in my time, we had a very high degree of sensitivity to Welsh issues, sold more Welsh food elsewhere in the UK than anybody else, and indeed from time to time had Welsh individuals of great independence sitting on the board.

[Lord Fox (LD)]

That is just proof that you can take the Peer out of Tesco but not Tesco out of the Peer.

My noble friend Lady Randerson hinted that she thought the Minister might be developing emotional intelligence—or perhaps we will see signs of that later. However, I think that most of your Lordships have welcomed the government amendments in this group. They are showing movement in the right direction and are an improvement on what you would expect those of us on these Benches to condemn as a deeply flawed Bill.

My noble friends Lady Bowles and Lord Bruce both made the point about where the OIM is and its presence in the CMA. We are not debating that in this group, although we will be some other time. However, Amendment 54 and consequential Amendment 59 should be seen as the safety belt in the event that the OIM remains within the CMA.

The noble Lord, Lord Naseby, made a powerful speech against Amendment 54. I did not see him in his seat when the noble and learned Lord, Lord Thomas of Cwmgiedd, was giving his strong endorsement of his amendment. He may have been oscillating somewhere between virtual and physical; if he was, I apologise. In his speech, the noble and learned Lord, Lord Thomas, put forward a very important point. The CMA is getting considerably more powers as a result of the Bill. The point he did not make but inferred is that those powers move from being reserved powers to those that step into the realm of devolved powers—there can be no doubt about that.

There is therefore a significant change in the nature of the task that the CMA is overseeing. The Government may say it is too much trouble to change the nature of the governance of the CMA, but its focus is changing from reserved issues to those which cover devolved matters, so that change should be reflected in its governance.

My noble friend Lord Bruce talked about unintended rather than intended consequences. The Government need to create a board that can reduce the number of unknown unknowns that it encounters. Amendment 54 is a perfectly reasonable amendment, which would make sure that there are people on the board who understand the nature of the markets in the devolved countries.

To take the point made by the noble Baroness, Lady Noakes, one would hope that the careful construction of a board would understand the need for that. I have to tell your Lordships—and perhaps the principles of my noble friend Lady Bowles could be passed to some Cabinet members—that the construction of boards and organisations over the course of the last 12 months has been nothing like a careful assembly of the right people. It has been a gathering of friends and known people to do the bidding of the Secretary of State. Therefore, it is right for the opposition to be very suspicious about the future board of the CMA, which will have this extraordinarily bumped-up role. That is the reason for Amendment 54 and also for consequential Amendment 59.

The noble Baroness, Lady Noakes, is correct. In a sensible world, what she suggests would happen. However, we cannot trust that to go forward, and trust is going to be very important with regard to the devolved authorities and how they work with the CMA if, indeed, the office for the internal market is located within it.

The noble Lord, Lord Wigley, the noble Baroness, Lady Finlay, and my noble friend Lady Randerson gave wise advice: rather than politicise the CMA, this is helping to inoculate it from political suspicions. That is why, if the noble and learned Lord, Lord Thomas, seeks to put it to the House, we Liberal Democrats will support Amendment 54.