Taxation (Cross-border Trade) Bill (Fifth sitting)

Jonathan Reynolds Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 30th January 2018 Public Bill Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I beg to move amendment 137, in clause 13, page 9, line 4, leave out “public notice” and insert “regulations”.

This amendment, together with Amendments 138 and 139, makes the power to give effect to an accepted recommendation of the TRA exercisable by regulations rather than public notice.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 138, in clause 13, page 9, line 8, leave out “public notice” and insert “regulations”.

See explanatory statement for amendment 137.

Amendment 139, in clause 13, page 9, line 17, leave out “public notice” and insert “regulations”.

See explanatory statement for amendment 137.

[Jonathan Reynolds]

Good morning, Ms Buck. It is a pleasure to begin the second week of our Committee’s consideration of the Bill.

The amendments, like many that the Opposition have tabled, concern the democratic deficit in the Bill. As we have covered in numerous evidence sessions and in our discussions so far, the Bill is far too reliant on secondary legislation. The scrutiny of Delegated Legislation Committees—especially those that consider instruments laid according to the negative procedure, as the majority will be—is insufficient for taxation matters of such potential magnitude. Parliament will have the option to raise objections to the instruments, but they will not be debated on the Floor of the House as a matter of course.

The amendments are important because the Bill introduces an even more troubling concept: that of making law by public notice. After Second Reading earlier this month, the House of Lords Delegated Powers and Regulatory Reform Committee published a report that probed the most worrying aspects in detail. The report emphasises that the concept of public notice, on which the Bill is heavily reliant, is effectively a modern form of rule by proclamation that removes the opportunity for parliamentary scrutiny. It states:

“For Ministers and others to make law by ‘public notice’, without any recourse to Parliament, is highly unusual and such provisions should attract strict surveillance by Parliament.”

It also notes that

“the Treasury’s Delegated Powers Memorandum says that such notices will only make provision that is purely technical or administrative in nature. Nonetheless, clause 32(9) of the Bill allows anything that can be done under public notice to be done by regulations, implicitly acknowledging the importance of things done by public notice.”

It identifies the Bill as a throwback to the Statute of Proclamations 1539, which

“gave proclamations the force of statute law…it was repealed in 1547 after the death of Henry VIII”.

We should all be grateful for the institutional memory of the House of Lords.

Equally problematic are the mechanics by which public notice takes place. As the Delegated Powers and Regulatory Reform Committee emphasises, under clause 37(5) the only qualification for public notice is that the person who issues it has selected a channel that they consider appropriate, but a definition of “appropriate” is absent from the Bill. Public notice could therefore mean anything from a full-page advert in the Financial Times to a small ad in a trade journal or perhaps even a tweet. Clause 24 permits Her Majesty’s Revenue and Customs to establish a system for making rulings to determine the customs code and the place of origin of particular goods, both of which have an impact on the duty. Other rulings could affect the rights and liabilities of an individual.

The Delegated Powers and Regulatory Reform Committee recommends

“the creation of a generally applicable system for making determinations which are capable of affecting an individual’s legal position should ordinarily be dealt with by legislation, subject to scrutiny by Parliament, rather than by public notice without any such scrutiny”—

checks and balances. The Opposition agree wholeheartedly —hence our amendments.

The Government’s manoeuvres are deeply concerning. We would be failing in our duty of scrutiny if we did not step in to raise our anxieties about how powers of proclamation may be used. We are well aware of the volume of new legislation that needs to be produced to create and implement a new customs code, and of the temptation to create or take advantage of constitutional shortcuts to facilitate the process. However, protecting the rights of the individual must come first. Where matters of taxation are concerned, the parliamentary process is usually more rigorous with respect to the reasons for setting the duty.

As I have already said, the secondary legislation process is not optimal, and we believe that the balance between primary and secondary legislation in the Bill is unsound. However, using delegated legislation for these matters instead of creating regulations by public notice would surely be the least-worst option. It would allow for a bare minimum of parliamentary involvement and oversight of new tax and customs law. Even the negative procedure gives Parliament the option to reject a statutory instrument, although no formal debate takes place. Where possible, more significant matters should surely be considered via the affirmative procedure, so that at least there would be the basis for debate.

The Opposition believe that, without such debate, we will be at risk of setting a dangerous precedent that allows the ruling Executive to make regulation by public notice as it pleases, potentially even beyond the scope of the Bill. Therefore I call upon all members of the Committee to support the amendment, to ensure that we can continue to perform our vital role providing checks and balances in the structure of taxation and customs law in the UK.

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you for the opportunity to speak and for chairing the meeting, Ms Buck. I would like to speak briefly around the amendments. One of my earliest questions about the Bill was: what is a public notice and how does one justify that it has been made sufficiently public? The Opposition raised that case clearly. On the definition of public notice and the fact that the person making the public notice has to make that judgment call, particularly in relation to clause 13, which concerns the dumping of goods, foreign subsidies and increases in imports, and given that the UK has not had provision to make regulations and rules, it seems sensible to say that a public notice is not the best way. Parliament should have some say. We have raised concerns previously that, although Brexit is apparently about taking back control, it appears that control is being taken back to the Executive rather than to Parliament as a whole. I will therefore support amendments 137 to 139 if they are pushed to a vote.

[The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)]

It is a great pleasure to serve under your chairmanship again, Ms Buck, and to welcome back the hon. Member for Stalybridge and Hyde. This group of amendments would require trade remedies measures to be imposed and given legal effect by regulations. I appreciate the concerns in relation to the use of public notices, which were raised by both Her Majesty’s Opposition and the Scottish nationalist party representative. I am grateful for the opportunity to set out why this is an entirely appropriate procedure for imposing trade remedies measures.

If you were cynical, Ms Buck, you might think that, because the Opposition have decided to make parliamentary scrutiny the central theme of their critique of the Bill, they are leveraging that into every single argument at every single stage. I am not a cynic, and take the concerns at face value, as the genuine ones that I am sure they are.

The imperative is to act quickly once the Trade Remedies Authority has identified the need to tackle injury to UK industry. I would have hoped that Members on both sides of the Committee would recognise that the imperative is to act quickly when injury to UK producers has been identified, and to move as swiftly as possible to put that right. Measures will be calculated and recommended by a fully expert and independent body, following an extensive investigation that is governed by strict World Trade Organisation rules. Our priority has to be to ensure that those recommended measures are imposed quickly, to provide relief to industries suffering injury.

The additional proposed process would delay our ability to apply measures precisely at a time when UK industry is suffering injury, and when it has been independently established that that is so. It would run counter to the calls we have heard from industry for a swift process. The use of public notices to implement trade remedies measures is consistent with the approach taken in comparable WTO countries such as New Zealand and Australia, and is therefore in line with international good practice.

Therefore I say to the hon. Member for Stalybridge and Hyde that, to suggest that this use of public notice is untoward and could lead to further government by proclamation, even outwith the Bill, is disproportionate. The reality is that this set of amendments, as with so many put forward by the Opposition, would in fact undermine the very principles that they say they are interested in: namely, to protect UK industry to ensure that we have a proportionate and speedy response to unfair dumping or use of subsidy and make sure that injury to British industry is put right. It is a shame that, collectively, the Opposition’s amendments suggest that their priorities are somewhere else.

[Jonathan Reynolds]

The Minister’s case is that this needs to be used for reasons of speed. Can he give us detailed information about how long it takes to prepare a statutory instrument to be brought before the House, given that that does not need parliamentary time in the Chamber—it cannot be that extensive? Exactly how much time will be saved by this proposed new form of parliamentary process?

[Graham Stuart]

The hon. Gentleman has been in the House for some time. I would have thought he would be familiar with the calendar of the parliamentary year, with long periods of recess when Parliament does not sit. Why on earth would Her Majesty’s Opposition, so often accused, doubtlessly unfairly, of being in hock to the producer interest and blind to wider society and the interests of the consumer and the ordinary citizen—though I decry that attitude—because of their links to the trade union movement, wish to put delays in place?

The hon. Gentleman knows full well the delays that can come with secondary legislation. To have that at the end of that extensive, independent and exhaustive expert assessment that has established injury, why on earth would the Labour party, or indeed the Scottish nationalist party, want to get in the way of swift, effective and proper defence of British jobs, British workers and British business?

[Graham Stuart]

I apologise for getting the name of the hon. Lady’s party wrong—it is the Scottish National party. We have put forward a proportionate and swift system, and hope that we would be able to deliver a speedier, more proportionate and balanced response than that of the EU. That is certainly our aim. I note again that amendments tabled by the hon. Lady’s party and Her Majesty’s Opposition suggest that their priority is entirely different.

[Jonathan Reynolds]

I am grateful for the infusion of energy that the amendments have brought to the Committee. The Minister’s bluster revealed a lot. I noticed that he did not actually answer my question. If the Government’s concern is the wish to bring a trade remedy during recess, they have to invent a new constitutional procedure to do that. I am afraid that is a very thin case and the Minister did not provide a reason why the new process is required in the interests of brevity. He was not able to give us any clear information, so we will push the amendment to a vote.

Question put, That the amendment be made.

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[Graham Stuart]

The legislation makes it clear that the Secretary of State should look at it, and various people who have commented on the structure have said that it is right that, although the main body of work should be conducted by experts, ultimately it should be a politician accountable to Parliament, part of a democratic process, who should make that decision. Were they in any way to disagree, they would have to come to Parliament to make a statement. That is appropriate and proportionate, and why on earth the Opposition parties would want to go to such lengths to try to stop us bringing in effective remedy to protect British producers, I cannot imagine.

[Jonathan Reynolds]

Very briefly, why can the Minister not give us any detail about the methodology by which injury will be calculated, or any of the basic details that the US and the EU have already put in primary legislation? He cannot tell us how that will be because it is not in the Bill. Surely, we need some parliamentary safeguards about what the decisions will be, because the Minister cannot tell us the process that will be followed.

[Graham Stuart]

Our purpose here is to be probed, so even when that probing is redundant or tiresome, one should deal with it in as fair a way as one possibly can. As we know, this is a framework Bill; the secondary legislation, which will have parliamentary scrutiny, will bring in the details as it does in most other jurisdictions. We will follow a balanced, proportionate and effective basis to ensure that we assess that injury in the right way, and we will do so under the aegis of the WTO. Efforts to cut and paste aspects of the WTO system on to the face of our legislation when we are subject to WTO rules anyway are unhelpful and unnecessary.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Schedule 4

Dumping of goods or foreign subsidies causing injury to UK industry

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Division 8

Ayes: 9

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Labour: 7
Scottish National Party: 2

Noes: 10

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Conservative: 9

[Jonathan Reynolds]

I beg to move amendment 28, in schedule 4, page 58, line 33, after “contribution”, insert

“within the meaning of Article 1 of the WTO Agreement on Subsidies and Countervailing Measures”.

This amendment provides a definition of financial contribution by reference to the WTO Agreement on Subsidies and Countervailing Measures.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 29, in schedule 4, page 59, line 24, at end insert—

“and shall be determined in accordance with Article 3 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.”

This amendment provides that the meaning of injury for the purposes of Schedule 4 shall reflect the provisions of the relevant article of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.

Amendment 30,in schedule 4, page 59, line 25, after “make” insert “further”.

This amendment is consequential on Amendment 29.

Amendment 31, in schedule 4, page 59, line 31, after “make” insert “further”.

This amendment is consequential on Amendment 29.

Amendment 33, in schedule 4, page 61, line 20, at beginning insert

“having regard to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and the WTO Agreement on Subsidies and Countervailing Measures”.

This amendment requires regulations determining what constitutes “negligible” and “minimal” to have regard to relevant WTO provisions.

[Jonathan Reynolds]

This is the second group of amendments on today’s amendment paper relating to schedule 4, on injury caused by dumping. Amendment 28 provides a definition of financial contribution by reference to the WTO agreement on subsidies and countervailing measures. Amendment 29 provides that the meaning of injury for the purposes of schedule 4 shall reflect the provisions of the relevant article of the agreement on implementation of article VI of the general agreement on tariffs and trade 1994. Amendment 30 is consequential on amendment 29, as is amendment 31. Finally, amendment 33 requires regulations determining what constitutes “negligible” and “minimal” to have regard to relevant WTO provisions.

I recognise that in the previous debate the Minister moved a little toward us in acknowledging some of the shortcomings of the Bill and the areas where there will eventually have to be clarity. These amendments concern one of the central issues regarding how we construct our future trade defence policy. In last week’s evidence session, it was made clear by representatives of UK industries that Brexit represents a potential opportunity for the UK to expedite its remedial processes when it comes to dumping and calculating injury—something that has already been referenced by all sides in the discussion today and by the Minister.

Industry also emphasised that, while assessing dumping margins can be relatively easy and straightforward, calculating injury margin needs much more involvement from industry and Government, and the results are not always so obvious. My hon. Friend the Member for Scunthorpe has again mentioned the steel crisis, and I would direct Members to read the Business, Energy and Industrial Strategy Committee’s transcripts from the previous Parliament on the crisis, which articulate very clearly the issues involved. It is of great concern to the Opposition that manufacturers and British industry are telling us that the Bill is seriously lacking in the detail they need to plan effectively for the future.

Members of this Committee, as well as its witnesses last week, have spoken at some length on the shortcomings of the proposed approach, not least that UK industry will be in the dark until all the statutory instruments that are required have been promulgated. As industry and those in many parts of the parliamentary process have repeatedly emphasised—in contrast to the Minister’s comments—it is highly unusual that secondary legislation is considered the appropriate means through which to establish the central tenets of our future trade defence policy. Indeed, it is considered normal practice by most of our major trading partners for these issues to be dealt with in primary legislation. Equally, because of the way in which the statutory instruments will be considered, this forum might well be the only opportunity to debate these measures and give them the proper scrutiny they demand.

The point of the amendments is to bring some of the detail and certainty that UK industry is seeking. Understandably, members of UK industries feel anxious voyaging into the unknown with only vague reassurances from Government. As my hon. Friend the Member for Bootle has said, there is no certainty about this Government’s future or that of the individual Ministers concerned. As the Manufacturing Trade Remedies Alliance has made clear—

[The Chair]

Order. Can I encourage the hon. Gentleman to be specific in relation to his amendments, as far as possible?

[Jonathan Reynolds]

I will be, Ms Buck.

The package of amendments offers a relatively straightforward solution to these issues by using a pre-existing, widely accepted set of terms to define injury. As referred to in amendment 29, the agreement on implementation of article VI of the general agreement on tariffs and trade 1994 is a set of World Trade Organisation rules, which already provides a blueprint to many major global economies. That will form a solid basis, which UK industry can use to start planning how it will adapt to the new post-Brexit landscape.

Complying with the requirements in the amendments will help to provide consistency following our exit from the European Union, and align us with existing trading standards in economies we seek to trade with globally. It makes little sense to delegate this decision to secondary legislation when we are already in a position to opt for a widely accepted and road-tested definition that would keep us aligned with potential trading partners. That would also have the major advantage of offering certainty to UK industries today—not years from now—on how the trading landscape will look post-Brexit, and allow them to plan accordingly.

I urge the Ministers to support this amendment. It is a relatively small commitment, which would help to bring consensus and certainty to the British economy.

[Graham Stuart]

These amendments seek to include specific reference to the relevant WTO agreements in the Bill. As I said in our earlier discussion, the Government have carefully considered the right balance between primary and secondary legislation. Where there are very technical provisions in a regime, those are usually set out in secondary legislation because they are very detailed. That is the case here, so we have taken powers to make the necessary regulations.

As a member of the World Trade Organisation, the UK will be required to abide by the WTO agreements. We intend fully to comply with these obligations, and the regulations will therefore reflect the detail of the WTO agreements. However, as I have said, clause 28 does require the Secretary of State, and the TRA, to have regard to international obligations, which should provide any reassurance needed.

It has been suggested that the injury margin is more complicated and harder to define than the dumping margin. We do not believe that that is the case. Both calculations are based on industry data and export data and involve a number of variables where the TRA would be afforded discretion to use its expertise in determining the appropriate approach.

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[Jonathan Reynolds]

I am grateful for the Minister’s response, which gave us some degree of detail that we have not had to date, but I think that there is a difference of opinion on some of the evidence we heard last week. In my notes, the Manufacturing Trade Remedies Alliance made it clear that the methodology of the assessment on how to decide appropriate trade remedies was, in its words, a key detail that it is missing. It said that that was relevant in particular to the application of the lesser duty rule and that it would welcome further clarity and legal certainty. With that in mind, I will press the amendment to a vote.

Question put, That the amendment be made.

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Division 10

Ayes: 9

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Labour: 7
Scottish National Party: 2

Noes: 10

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Conservative: 9

[Jonathan Reynolds]

I beg to move amendment 39, in schedule 4, page 64, line 21, at end insert—

“Part 2A

Recommendations: general provisions

12A (1) The provisions of this paragraph apply to all recommendations made by the TRA under this Schedule.

(2) In any case where the TRA makes a recommendation to the Secretary of State, the TRA must, at the same time as making that recommendation, provide any relevant select committee of the House of Commons with—

(a) a copy of that recommendation, and

(b) an account of the evidence on which the TRA has based that recommendation.”

This amendment requires recommendations made by the TRA under Schedule 4 to be made available to relevant select committees of the House of Commons, along with an account of the evidence basis for the recommendation.

[The Chair]

With this it will be convenient to discuss amendment 70, in schedule 5, page 83, line 44, at end insert—

“Part 2A

Recommendations: general provisions

11A (1) The provisions of this paragraph apply to all recommendations made by the TRA under this Schedule.

(2) In any case where the TRA makes a recommendation to the Secretary of State, the TRA must, at the same time as making that recommendation, provide any relevant select committee of the House of Commons with—

(a) a copy of that recommendation, and

(b) an account of the evidence on which the TRA has based that recommendation.”

This amendment requires recommendations made by the TRA under Schedule 5 to be made available to relevant select committees of the House of Commons, along with an account of the evidence basis for the recommendation.

[Jonathan Reynolds]

These amendments have been grouped because they both refer to making recommendations by the new Trade Remedies Authority, and the evidential basis for those recommendations, available to the relevant Select Committees of the House.

Clearly, how the TRA operates is essential to our future trade policy. We know some things from the Bill about how it will operate—schedule 5 refers to the procedure that will be followed where an increase in imports of goods causes serious injury to UK producers, so there is more detail than we had previously—but the intention is for further detail about the interpretation of what constitutes a significant increase to be set out in secondary legislation. The TRA will also have considerable discretion in many areas of its operation.

Given the stage we are at with the Bill, we are being given a fairly limited set of options in terms of addressing the lack of accountability in key parts of how the framework will operate. These amendments would introduce an additional layer of scrutiny and consultation, which is needed to ensure that the interests of UK industry are properly represented. Select Committees provide vital checks and balances, and given their policy specialisms and ability to call relevant witnesses, they are best placed to scrutinise decisions by the TRA.

These amendments would not only allow us to address the democratic deficit, but provide a platform for engaging with the wide range of inputs needed fully to understand the implications of TRA decisions on different parts of our economy and different segments of UK industry. That might include the Transport Committee, the Treasury Committee, the International Trade Committee and, of course, the Exiting the European Union Committee. The amendments would provide an important democratic backstop to the new process that avoids concentrating too much power in the hands of the Secretary of State or the TRA. In the absence of greater detail in the Bill, I urge members of the Committee to support the amendments to bring some much-needed future accountability to the TRA and to our trade defence policy.

[Graham Stuart]

New paragraphs 12A and 11A, introduced by amendments 39 and 70, would require the recommendations made by the TRA under schedule 4 to be made available to relevant Select Committees of the House of Commons, along with an account for the evidence base of those recommendations. Let me begin by stating that transparency is one of the four design principles set out by the Government for the trade remedies framework. The inherent assumption of a lack of scrutiny implied by the amendments is simply untrue.

To protect the TRA’s status as an independent public body, its recommendations to the Secretary of State should not be subject to political influence before a decision to accept or reject them has even been taken. Those recommendations will be made on the basis of the framework set out in this legislation and underpinned by technical and procedural details to be set out in secondary legislation. Giving the Select Committee a role in that process will undermine the impartiality of the process—an impartiality which is supported by industry. Publishing the recommendation in advance of the decision by the Secretary of State could also further undermine impartiality by increasing lobbying of Ministers by the affected parties, and could also lead to unnecessary disruption of the markets affected.

The Bill provides for public scrutiny of both the TRA and the Secretary of State’s decisions. Whether the Secretary of State accepts or rejects the recommendation, the evidence base for the TRA’s recommendation will be made available to the public, as is required under the terms of the WTO agreements. Furthermore, if the Secretary of State rejects the TRA’s recommendation to apply measures, he or she must lay a statement before Parliament setting out the reasons for that decision. Parliament will then be able to hold the Secretary of State to account if it considers the reasons to be unsound.

[Graham Stuart]

The hon. Lady has been a Member of this House for some time and will know that there is a series of means by which that can be pursued. Making a statement to the House provides the initial spur to start that scrutiny, if that is what the Select Committee or others decide. There are urgent questions, Adjournment debates, Backbench Business Committee debates—I will not list them all, as the hon. Lady is probably rather better on parliamentary process than I am. She will know that there is a huge number and they can all be used. Her Majesty’s Opposition or the SNP and their spokesmen have other means by which to raise the issue.

On that basis, I ask the hon. Gentleman to withdraw the amendment.

[Jonathan Reynolds]

I have two observations to make, the first of which is on impartiality. I would strongly refute that scrutiny by Select Committee would increase the partisanship or the partiality of the transparency of the process. The House’s Select Committees are to me the best example of cross-party working and cross-party accountability in the entire parliamentary process, and we should not shy away from using them when they can improve the process.

Secondly, there was reference to technical and political considerations. The decisions are not just technical. Of course they will draw on technical expertise and criteria, but they are inherently political. We saw that in the steel crisis, where frankly even with very clear technical evidence of dumping, there was a political point of view—not one I share—that the benefits to the UK of dumped steel outweighed the benefits of protecting the UK steel industry. That was not held by all parts of the Government, but certainly by some.

A transparent process that allows decisions to be analysed in that context would certainly add to the process, especially when we consider the lack of detail we have so far. I therefore press the amendment to a vote.

Question put, That the amendment be made.