Protocol on Ireland/Northern Ireland: Follow-up Report (European Affairs Committee)

Baroness O'Loan Excerpts

Monday 11th September 2023 Grand Committee

[Baroness O'Loan (CB)]

My Lords, I am privileged to serve on the sub-committee that produced today’s report, under the excellent chairmanship of the noble Lord, Lord Jay. The committee has been well served by its staff. In particular, I pay tribute to Stuart Stoner, who as clerk of the committee played such a pivotal role in the production of this report and in supporting us as Members.

Some 89% of the 80,000 or so registered businesses in Northern Ireland have fewer than 10 employees; just over 2% have more than 50 employees and 42% of businesses have a turnover of less than £100,000. These factors impact on the ability of many businesses to respond quickly and strategically to changes required to IT systems, product modification and haulage and transportation change. Business across the UK faces significant challenge at this time of inflation and uncertainty, and business in Northern Ireland, including those seeking to do business with the rest of the UK, has additional challenges. Regulatory divergence is occurring and will continue to occur as the EU and the UK legislate. Business wants to respond to legislative change and to function effectively but, in the absence of any identifiable strategy within government departments to track and publicise occasions of regulatory divergence, that divergence, whether between Great Britain and Northern Ireland or between Northern Ireland and Ireland, remains the number one concern, as the noble Lord, Lord Jay, said.

Can the Minister inform the Committee today whether His Majesty’s Government have made an assessment of the practical impact of regulatory divergence on Northern Ireland and of the issues that the sub-committee has raised? Can the Minister tell us whether, following the establishment of the EU-UK Trade and Co-operation Agreement, processes have been established that will meet the current information deficit and ensure that information is provided in a way that is coherent, industry-specific and the product of consultation, so that businesses are not hunting through the mass of guidance, policy papers, detail papers and so on to identify divergence? Much of the Government’s response seems to refer to framework structures that require to be underpinned by working groups and other modalities. Will the Minister assure us that such infrastructure exists and is functioning?

There is an underlying fear that Northern Ireland will find itself in a no man’s land between Great Britain and the EU. The processes for changing law in the myriad areas affected by the UK’s withdrawal from the EU are enormously complex. A considerable volume of legislation is produced each year in the UK, while the EU continues to legislate by means of directives, regulations and so on, on matters affecting the internal market as it operates in Northern Ireland. Business needs to know which laws are being introduced and which laws are being repealed, meaning that they are no longer obliged to operate in compliance with those laws.

The bigger question is how regulatory divergence impacts on businesses that wish to operate in both the EU single market and the UK. To what extent are separate manufacturing, labelling, tax, regulatory and enforcement regimes applicable to particular businesses and how can they best respond to maintain and expand their businesses so as to take advantage of the opportunities offered by Northern Ireland’s unique access to both the EU single market and the rest of the UK?

In the context of the EU and excise duties, stakeholders have welcomed the new enhanced co-ordination mechanism to review future legislation. Businesses have welcomed the potential for further flexibilities. The committee has urged the UK and the EU to ensure that the new body is sufficiently resourced. Can the Minister assure the Committee that this has been happening?

The sub-committee has repeatedly called on the Government to maintain a register of regulatory divergence, and we have done so again in this report. Businesses cannot be expected to derive essential commercial information on regulatory issues by way of Explanatory Notes or Memoranda on the potential impacts of proposed legislation. The expertise for tracking and identifying regulatory divergence surely exists within our government departments, which have extensive responsibilities in the areas of legislative drafting, regulation and enforcement. Can the Minister assure the Committee that that expertise will be directed to ensure that there is coherent, timely and accessible information for businesses across the UK?