United Kingdom Internal Market Bill

Hilary Benn Excerpts

Monday 21st September 2020 Commons Chamber

[Mr Walker]

My right hon. Friend is of course right about that, and we still hope to strike a free trade agreement with the EU. I also point out that these issues can and should be resolved through the Joint Committee—I will come back to that.

Both the UK and the EU signed up to the protocol on the basis I just outlined. We are committed to implementing the protocol and we have been working hard to ensure that it is done in a way that delivers the promises that have been made. That includes working with the EU to reach agreement through the Joint Committee process in a number of areas that the protocol left unresolved, and we very much hope that agreement can be reached shortly. But if it is not, the harmful legal defaults contained in some interpretations of the protocol, which were never intended to be used, would be activated. The consequences for Northern Ireland in that scenario would be very damaging. We cannot and will not run that risk.

The provisions we are considering today will therefore ensure that in any scenario, we will protect Northern Ireland’s place in the United Kingdom; ensure that businesses based in Northern Ireland have unfettered access to the rest of the United Kingdom; and ensure that there is no legal confusion or ambiguity in UK law about the interpretation of the state aid elements of the Northern Ireland protocol.

[Hilary Benn (Leeds Central) (Lab)]

Will the Minister give way?

[Mr Walker]

I will give way to the right hon. Gentleman in a moment, because I do intend to refer to some of his comments in my speech, and I will happily take his intervention shortly.

Further measures will be set out in the Finance Bill. These will have the same effect as those already proposed in the UKIM Bill, and will make it clear that no tariffs will be payable on goods moving from Great Britain to Northern Ireland unless those goods are destined for the EU market, or there is a genuine and substantial risk of them ending up there. We will take the necessary powers in the Finance Bill to ensure that this is defined in a reasonable and proportionate way, which ensures that legitimate traders are not penalised, while also resolving the outstanding issues relating to the payment of VAT and excise duty. So we are taking limited and reasonable steps through the legislation to create a legal safety net by taking powers in reserve, whereby Ministers can guarantee the integrity of our United Kingdom and ensure that the Government are always able to deliver on their commitments to the people of Northern Ireland in line with the three-stranded approach of the Belfast/Good Friday agreement.

[Mr Walker]

I will come in detail to the amendment tabled by the hon. Gentleman’s party later in my speech, but I do recognise that when it comes to state aid, we have made specific agreements under the protocol on goods traded between Northern Ireland and the EU, and we should stick to those in order to ensure the effective functioning of trade north, south, east and west. We are taking steps in the Bill to clarify the state aid elements, and some of those will be to the benefit of businesses in Northern Ireland. I will come back to that point in more detail.

[Hilary Benn]

Will the Minister give way?

[Mr Walker]

If I may, I will come to the right hon. Gentleman’s point very shortly, and then I will happily give way to him.

We would not take these steps lightly. We hope it will never be necessary to use these powers, and we would do so only if, in our view, the EU was engaged in a material breach of its duties of good faith or other obligations. We would, of course, always activate appropriate formal dispute resolution mechanisms with the aim of finding a solution through this route in parallel to any domestic legislation. I draw the Committee’s attention to the statement that the Government made on 17 September .

--- Later in debate ---

[Mr Walker]

The right hon. Gentleman makes a powerful point. That is why we are taking the powers in this Bill, and we would seek the consent of the House before those powers were exercised—it is to ensure that there is a legal default different from the one that he suggests. It is about taking these steps in parallel.

I want to recognise the significant concerns that many Members have raised, which is why we have agreed that a “break glass” provision should be included, requiring the House of Commons to give its approval before these measures are commenced. I will return to the detail of that shortly, but the Committee should be in no doubt that this Government will always seek to ensure that the Belfast/Good Friday agreement is protected and that the political and economic integrity of our United Kingdom is maintained. That is what the Government amendments in this group seek to achieve.

Clauses 11, 40 and 41 of the Bill give effect to the Government’s commitment to give unfettered access to Northern Ireland goods to the whole UK internal market, in line with the protocol. They will ensure that we protect the vast majority of the £8.1 billion of goods sales from Northern Ireland to Great Britain and guarantee Northern Ireland’s place in the UK’s internal market. That will provide vital legal certainty for businesses in Northern Ireland, whose largest market is the rest of the United Kingdom—56% of Northern Ireland’s goods trade is with Great Britain—and deliver on a promise that has been repeatedly made throughout the process of our exit from the European Union.

Clause 11 sets out that qualifying Northern Ireland goods will benefit from mutual recognition and are not discriminated against. It ensures that the mutual recognition principle will apply to all such goods that will also benefit from unfettered access under clause 40. Clause 40 ensures that, in implementing the protocol, authorities must have special regard to the fundamental need to maintain Northern Ireland’s integral place in the UK’s internal market and customs territory and to facilitate the free flow of goods between Northern Ireland and Great Britain. That, of course, applies to trade between Great Britain and Northern Ireland in both directions.

Clause 41 ensures that there will be no new checks, controls or administrative processes on goods moving from Northern Ireland to Great Britain. This clause is in keeping with what the Government have constantly said, including in our manifesto, and in line with our commitments to businesses in the “New Decade, New Approach” agreement.

Clauses 42, 43 and 45 set out the safety net that I have described. Clause 42 ensures that full unfettered access is guaranteed in any scenario by providing a power to disapply or modify the requirement for export declarations or other exit procedures when goods move from Northern Ireland to Great Britain. As the right hon. Member for Leeds Central (Hilary Benn) rightly said on Second Reading, there is no real justification for such declarations being needed to protect the EU’s single market or customs union. It is a wholly reasonable suggestion from the UK that this issue can and should be resolved through the Joint Committee, but if it is not—and this is perhaps where he and I disagree—there needs to be a safety net in place.

[Hilary Benn]

I am grateful to the Minister for giving way on that point. I want to press him on the safeguard measures that are provided in article 16 of the protocol and the extent to which they enable the Government to take action if they think the EU is being unreasonable. There is a one-month waiting period, but after that, the Government are able to take safeguard measures. Annex 7(5) goes on to say:

“The safeguard measures taken shall be the subject of consultations in the Joint Committee every 3 months”.

Could he clarify what would cause those safeguard measures to come to an end? Would it be a decision of the arbitration mechanism that the Government lost? Could it then go to the European Court of Justice? In other words, could he explain why what the Government negotiated to protect the country from bad faith action by the EU is insufficient? We have not had an answer to that question.

[Mr Walker]

We are talking about the question of legal default. The UK Government are responsible for their implementation of the protocol, and we want to ensure that we have the necessary powers in UK law to avoid those legal defaults. As I have said, we would initiate all necessary proceedings in international law, including those under the protocol, if necessary, at that stage. It is not a stage that any of us want to get to, and we still hope to resolve these issues through the Joint Committee.

--- Later in debate ---

[Karen Bradley]

The hon. Gentleman would have to take up the reasons why the case was taken with the lady in question, but the DeSouza case is a clear example of how the Northern Ireland Act 1998 did not address these matters. I have been clear, in many interventions since I left my post last summer and while I was in post, that respecting the right of everybody who lives in Northern Ireland to identify in the way that they are comfortable with is incredibly important and we must respect it. So I say to the Minister: part 5 should not be in this Bill. The Government should not ask MPs to vote for an illegal law as a negotiating tactic. This part should be in a separate Bill, if these clauses are needed, and it should be debated separately; it should not be polluting what is otherwise a good and necessary piece of law. All possible steps to avoid needing these clauses should be taken.

I say to the Minister that I am undecided as to which way I will vote this evening, because I respect the fact that Government have moved and compromised, and I understand that that is a difficult thing for Governments to do. But I ask the Minister to give me clarity: if I walk through the Lobby today, am I breaking the law? If I walk through the Lobby today, will the law be broken as a result of my doing so? Will I have the answer for me at 3 am, not for my constituents or others, that I have done the right thing and that this will lead to a better result for the UK?

[Hilary Benn]

It is a great pleasure to follow that fine speech by the right hon. Member for Staffordshire Moorlands (Karen Bradley). I want to concentrate on how we get out of this mess without breaching international law and the treaty we signed up to. Four issues have caused all this: the question of exit summary declarations, the definition of “at-risk goods”, state aid and third country listing. The Bill deals with only some of those; further legislation is threatened to deal with the rest, but one has to look at them together.

The first thing I want to say is that it seems the Government are in a state of hopeless confusion on two questions. The first is: is the EU negotiating in good faith or not? I asked the Prime Minister that last week at the Liaison Committee and he told me it is not. Earlier that same day, the Northern Ireland Secretary told the Northern Ireland Affairs Committee that the EU is negotiating in good faith, and indeed the Government’s response to that Committee’s report confirmed that. I do not know whether that makes the Minister, for whom I have a great regard, the adjudicator in this matter, but perhaps he might offer his opinion in his wind-up, because the Government do not appear to be of one mind.

Secondly, I believe the Minister referred in his speech—I tried to write down the phrase as I recall it—to, “Harmful legal defaults that were never intended to be used” or words to that effect. If they are legal defaults that the Government object to, it really does raise the question: why did the Government sign up to those legal defaults when they negotiated the protocol and the withdrawal agreement, and signed that and extolled its virtues to the House of Commons?

On exit summary declarations, there is a place for this and other concerns to be resolved, which is in the Joint Committee, through the article 16 process. The House needs to ask itself why the Government have said so little thus far about their intention to use article 16 if a satisfactory agreement cannot be reached; I did not get an answer from the Prime Minister last week and, with respect, I did not get an answer from the Minister today, but it seems that the Government have so little faith in the mechanism they negotiated that they have decided that they need to take powers to breach the terms of the treaty, even though—I remind the Minister—article 168 of the withdrawal agreement says that, “For any dispute between the EU and the UK arising under this agreement, the EU and the UK shall ‘only’ have recourse to the procedures provided for in this agreement. This Bill drives a coach and horses through that sentence, which the Government agreed. In the statement that Ministers put out last week, the Government said that they would use the provisions of article 16 “in parallel with” the powers they wish to take in this Bill. In parallel? I really do not understand that as an argument, because surely they should use the mechanism they have negotiated first, and then if they are absolutely determined to break international law, they can get to that subsequently.

I come back to the point about the Joint Committee. Why have the Government not shared with the House the proposals they have made to the EU side about how goods at risk can be identified? It is simply not good enough. Part of the reason why the Government have got into such a mess is that they have not shared with us how the negotiations are going and have then suddenly produced a remedy that is contrary to international law to solve a problem the contents of which we are not aware of because Government have not shared with Members how things are going.

This is not an academic issue: many businesses that trade into Northern Ireland have absolutely no idea, with just over three months to go, of what the arrangements are going to be—none. There is a responsibility on both parties—the EU and the UK—to give them some clarity. Have the Government proposed using, for example, tariff lines as the way to define goods at risk? Or products and shipments, or companies as the basis? To those who have looked into the issue in great detail, it seems that those are probably the three broad approaches that might be taken. I ask the Government to please be open with the House of Commons on this matter.

On state aid, I find it impossible to believe that the Government did not realise what the full implications of article 10 might be. Everybody recognised that it brought into the ambit of the state aid rules what happens in Northern Ireland, but had it really not occurred to Ministers that there might be reach-back—I think that is the expression—implications for state aid in the United Kingdom? This is currently a theoretical issue, because there are not any cases. The Minister will be well aware that in the wake of covid, the EU Commission has significantly relaxed the state aid rules. Other EU members are giving state aid to all sorts of companies. The question is how the matter is going to be resolved by means other than resorting to the breaking of international law.

There is a great puzzle in respect of the Government’s position. When the Chancellor of the Duchy of Lancaster appeared before the Select Committee on the Future Relationship with the European Union on 11 March and we asked him whether businesses that trade out of England into Northern Ireland were going to be subject to the full panoply of state aid regulations, he replied:

“No, we do not believe so.”

That was in March, but apparently the Government do now believe so. What happened between March and now to lead them to that conclusion?

The Chancellor of the Duchy of Lancaster also said:

“The subsidy regime that the UK proposes to put in place after we have left the EU”—

we have now left the EU—

“will be one that the EU will recognise as a robust system.”

Here we are in September, and of a robust system for state aid there is no sight yet. How can that be the case? We read reports in the paper that the reason is because Ministers cannot agree on what kind of state aid policy they want.

The publication of such a policy is urgent for two reasons: not only for the purposes of sorting out the problem of potential reach-back, but for making a breakthrough in the trade negotiations. To be fair to the EU, it has moved from saying at the beginning, “You must follow all our rules on state aid in perpetuity,” to now saying rather plaintively to the Government, “Would you be so kind as to give us just an inkling of what your state aid regime is going to look like?” To announce that we are going to follow the World Trade Organisation rules is hardly a revelation, because as an independent member of the WTO we are obliged to follow the WTO rules. As we know, though, they lack important details and do not cover services.

The sooner the Government publish a state aid regime to answer the EU’s question, the sooner they can help the trade negotiations to move forward. Assuming that an agreement could be reached on that regime as part of the negotiations, the Government could, as the Minister will know, use article 13(8) of the withdrawal agreement to amend article 10, which is the cause of the potential problem—namely, reach-back.

The Bill does not deal with third-country listing, and no Bill could, because it is a regulatory decision of the European Union about the terms on which it lets third-country food and animal product imports into its jurisdiction. I happen to think that if the EU were to deny us such listing, arguably the UK could take the EU to the European Court, on the grounds that it was a perverse decision, or indeed the UK could certainly invoke article 16, on the grounds that denying the UK third-country listing was a breach of the good faith obligation under article 5.