Road Vehicles and Non-Road Mobile Machinery (Type-Approval) (Amendment) (EU Exit) Regulations 2019

Lord Adonis Excerpts

Wednesday 20th February 2019 Lords Chamber

[Lord Adonis (Lab)]

I am very grateful to the noble Baroness for giving way. She cited the fact that there would be no formal consultation on this SI, as indeed on any other SI that has come before the House. Did she note that paragraph 10.1 also said that,

“the intention is to ensure that, as far as possible, the status quo is maintained”?

The noble Baroness has done a very good job in the last 10 minutes of explaining why the status quo is not being maintained in key respects. There is a contradiction in paragraph 10.1 regarding the justification the Government have given for not consulting. According to that justification, they should have made no changes at all but continued with the existing type-approval regime. Given that the Government have made those changes, and given the statement that they themselves made in paragraph 10.1, there should surely have been consultation.

[Baroness Randerson]

I agree with the noble Lord that there should be consultation, because the Government themselves have admitted that there are aspects that could be misleading. That is what they say in the EM.

It is my understanding that gaining EU type approval is pretty expensive. It would be useful to know at least approximately how much it costs, so we can get some view of what the Government will have to undertake in future.

I turn now to the SI on emissions. These EU regulations establish mandatory fleet average CO₂ emissions targets for all cars and vans in the EU, plus Iceland, Liechtenstein and Norway. They establish targets by which manufacturers must abide, based on a formula, and levy fines for non-compliance. EU states record and report new EU vehicle registrations to the EEA, which leads to the publication of emissions performance for individual manufacturers. Are we going to carry on with this system on a UK basis? Powers are being moved to the Secretary of State, but will the system of publication of performance continue? It is really important for public confidence. Small manufacturers can apply for derogations. In the SI, small manufacturers are defined as producing 300,000 cars and 22,000 vans. Are the Government going to divide that by 28 or something, to redefine a small manufacturer, or will the definition of a small manufacturer across the whole of the EU apply within the UK, in which context it will hardly be small?

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Once again, the Government do not think that there will be a significant impact on business—although on this occasion there does at least appear to have been some sort of consultation. It is a very complex SI, involving a large number of regulations and so on, and my concern is that the Secretary of State has to have an incentive to publish figures, to improve and to encourage manufacturers to improve.

[Lord Adonis]

My Lords, the House is indebted to the noble Baroness, Lady Randerson, for doing an excellent, forensic job of exposing the issues in this statutory instrument. These entirely substantiate her point about the failure to consult, given the potentially far-reaching nature of the changes. Her last, broader point about the impact of Brexit on the motor industry is, of course, extremely well made.

If we were not in the midst of a very deep Brexit crisis, Parliament and the Government would be overwhelmed at the moment by the controversy and issues raised by the closure of the Swindon plant by Honda. This, together with Nissan’s decision to massively scale back production in Sunderland, amounts to a wholesale disinvestment by Japanese companies now taking place in this country. Indeed, one can join up the dots with Hitachi, a company I know well because I played a big part in persuading it to come here and start manufacturing trains 10 years ago. It has now pulled out of nuclear reactor manufacture at the plant in north Wales because of uncertainty in the decision-making process directly related to Brexit. It is deeply unhappy about what might happen in the European rail market at the moment. I am not absolutely sure that it will be staying in the UK for the long term either. We might be on the verge of seeing the reversal of 30 years of industrial policy in this country, all caused by Brexit, and this unravelling could have a lot further to go if the Brexit process proceeds.

The broader context of Brexit is dire for the motor industry, but the point narrowly focused on these regulations, made by the noble Baroness, Lady Randerson, is that we should not be doing anything with the regulatory framework that discourages the import and export of cars. I should have thought that the Minister, for whom I have a high regard, would accept that as a starting principle. I know that she, like me, is unhappy about the whole Brexit process and I am not expecting her to justify it in her reply to this debate: I suspect we would be in a large measure of agreement. If she accepts the starting point that there should be no change to the regulatory environment—certainly none imposed by the United Kingdom, because that would be an act of self-mutilation—can she explain more fully the two paragraphs that the noble Baroness, Lady Randerson, highlighted? These also struck me as I read them; they are paragraph 7.8 and paragraph 2.4. I have nothing to add to the noble Baroness’s remarks about paragraph 7.8. Like her, I simply do not understand it. If the doubling of the production limits referred to is necessary to ensure the continuation of trading conditions until the end of 2019, why is it not necessary beyond the end of 2019? That seems a straightforward question.

The point about paragraph 2.4 is that I simply do not understand the policy, because it is a policy change. I shall read the paragraph, because there are so many great minds in the House that they might be able to help the House before the noble Baroness replies. It concerns type approvals, a critical issue for the registration of cars, and it reads as follows:

“The UK will no longer accept EU-27 approvals when motor vehicles are registered, other than for motor vehicles that are in the UK prior to Exit day. A process will be established to issue UK approvals for holders of EU-27 approvals. Existing EU approvals issued by the UK’s VCA will remain valid. All of this is an interim arrangement valid for a maximum of two years, pending a comprehensive review and re-working of the UK’s type approval arrangements (with legislation planned for mid-2019)”.


As I read that, the implications seemed profound and I have some questions about it. If the aim is to have continuity, the obvious question is: why make any change at all? A golden rule in my experience of government, though it is being repudiated by the present Government all the time, is, “Where it is not necessary to change, it is necessary not to change”. Indeed, I always thought that was a cardinal Tory rule—it is Edmund Burke. So if the aim is to maintain the status quo, which is surely in the interest of the United Kingdom because we have such a large car manufacturing hub, why make any changes at all? Why not simply say that the United Kingdom will accept EU 27 type approvals hereafter?

Secondly, unless I have misunderstood it, paragraph 2.4 seems to envisage a kind of zombie land for vehicles. It says that the UK will no longer accept EU 27 type approvals for vehicles that are in the UK, registered after exit day—that is my understanding—and a process will be established to decide what the regime will be after two years, which stands to reason because it would take two years to decide what that process is. Therefore, it is my understanding that that could lead to retrospective action because there will still be vehicles coming into the UK with those type approvals in that two-year period. However, it says that the UK will no longer accept those approvals, other than for motor vehicles that are in the UK prior to exit. If the United Kingdom chooses to change the rules, it might create a category of vehicles that have perfectly legally received type approval after exit day but which the Government retrospectively decide no longer meet the approvals. On my reading of paragraph 2.4, that must be a possibility. If that is not the case, why does it not say that the UK will accept EU 27 approvals until the new regime comes into force, which will be after the comprehensive review? Is the Minister following my point? I do not understand what looks to be a zombie period between the completion of the review and exit day.

Thirdly, why is the planned legislation necessary unless the United Kingdom is planning to set up a wholly new and separate type-approval regime? Surely, the only reason for setting up such a regime is that we envisage that our type-approval regime and standards might be different—potentially radically different—from those on the continent.

This leads to my fourth question, which is the big industrial policy question underlying all this: if we diverge from the EU 27 type-approval regime, as appears to be envisaged by paragraph 2.4, will that not, in itself, create a significant impediment to trade? Is that not profoundly against the interests of the United Kingdom, given that we are a massive exporter of cars to the European Union? It may be that all this is redundant because the devastation that Brexit causes to our car industry—just to extrapolate from the events of the last month—is so great that we no longer export large numbers of cars to the EU. It may be that by destroying this great industry we do not have the problem of continuing to mimic EU 27 type approvals.

However, many of us in the House hope that we will continue to have a car manufacturing base in this country after Brexit. Surely, it is in our interests that we do not erect new barriers to trade in cars and that we maintain the status quo as far as possible. In which case, paragraph 2.4 appears to act contrary to that policy, unless the noble Baroness can reassure me in her reply that my concerns are entirely misconceived.

[Lord Dykes (CB)]

My Lords, I, too, appreciate the explanations given by the noble Baroness, Lady Randerson, about her anxiety about a number of key features of this statutory instrument. I am commenting on the second of the two documents rather than the first one, although the first has a number of significant question marks. I thank the noble Baroness for her thoughts on those matters. As the noble Lord, Lord Adonis, said in agreeing with the noble Baroness, a number of questions need to be answered comprehensively today by the Minister.

However, it is not just that but, once again, the anxiety we all feel about the huge accumulation of SIs going through inadequately, badly considered, all in a rush, in not enough time to be considered properly. It comes back to the much more fundamental issue that one always needs to remember in this whole business, of the flaws in the original referendum and the failure to prepare properly immediately after the result for all the things that are now flowing through in the last minute—literally the last few weeks—in the painful process of the disintegration of this country’s membership of the EU. This is now causing more anxiety and concern among many members of the public as they wake up to these realities, not having been given any guidance by the Government immediately after the result. It is not a matter of disrespecting the result of that vote. We know that it was flawed for various reasons. The construction of the referendum was wrong. British citizens who had lived in other European countries for more than 15 years were excluded automatically, so were the youngest voters, who should be entitled to be on the register for future occasions. There were many other mistakes as well. It was really the fault of the Government immediately afterwards—

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[Lord Rosser (Lab)]

My Lords, I will be briefer than I had intended, mainly because most of the points I wanted to raise have already been made. I am afraid there will inevitably be some degree of repetition.

As the Explanatory Memorandum says in relation to the first SI:

“EU law requires manufacturers of road vehicles and engines for non-road mobile machinery to be type approved before production can begin”.


It goes on to say:

“The proposed changes are designed to ensure that the type approval regime is effective after EU withdrawal”.


We then come on—and the noble Baroness, Lady Randerson, already referred to this—to the reason for the proposed changes. It says:

“If these changes are not made the legislation will not be operable after EU withdrawal because the UK would be required to continue to accept motor vehicles entering the UK market which have a type approval granted by one of the EU 27 approval authorities, and would have no formal way to challenge the validity of the approval”.


I think the question has already been asked but I will ask it again: how many challenges have there been so far under the existing arrangements if this is now being put forward, as it almost seems to be the sole major reason for making the changes we are now discussing?

I had also intended to read out paragraph 2.4, but I will not as my noble friend Lord Adonis has already done so. It makes reference to the interim arrangement that will be introduced, which is valid,

“for a maximum of two years, pending a comprehensive review and re-working of the UK’s type approval arrangements (with legislation planned for mid-2019)”.

I put it to the Minister that if we are talking about introducing an interim arrangement for a maximum of two years, with uncertainty as to what will happen after two years, does that not create quite a lot of uncertainty for the motor industry going forward? This SI may or may not clear up uncertainty for a short period of time, but it certainly does not do so over a much longer period of time. Perhaps the Minister could comment on that.

As I say, the Explanatory Memorandum makes reference to the interim arrangement, under which there will be a need for,

“manufacturers holding an EU approval from an EU-27 approval authority … and producing motor vehicles on or after Exit day … to apply for a Provisional UK type approval from the VCA in order to be able to register their motor vehicles in Great Britain or Northern Ireland”.

How quick is this process for applying for a provisional UK type approval? After all, we are getting pretty close to 29 March, so how many of these motor vehicle manufacturers have already applied for one; how many applications are we expecting; is there loads of paperwork to fill in; is it a formality; and on what basis would an application be accepted or rejected? Presumably, that in itself might create a further degree of uncertainty for the motor industry in this country.

My noble friend Lord Adonis has already raised the issue of consultation and read out the bit from paragraph 10.1 that says:

“No formal consultation has been undertaken, as the intention is to ensure that, as far as possible, the status quo is maintained”.


I share his view that that is not a very good reason for not holding a consultation. Surely the consultation, or at least one key part of it, would be on whether what is in front of us achieves the objective of maintaining the status quo, since maybe some of the manufacturers or others involved in the industry might think that it does not. But since no formal consultation has taken place, presumably they were not invited on a formal basis to offer their views on that particular, rather key issue.

[Lord Adonis]

Is there not a more fundamental point, which is that the regulation emphatically does not maintain the status quo? On the contrary, it envisages a completely new type-approval regime being set up. How can the Government say that they are not consulting because that maintains the status quo when the regulation itself emphatically does not maintain the status quo?

[Lord Rosser]

That is the point I was trying to make—that in fact, if the Government had held a consultation, they might have had people coming back and saying that it was not maintaining the status quo, but the Government did not give them a chance to say that because they did not hold the consultation in the first place. Paragraph 10.2 seeks to get round that by referring to the fact that there were,

“a series of focused meetings”—

I do not think anyone would expect a series of unfocused meetings to take place—

“with stakeholders such as the Society of Motor Manufacturers and Traders … the Motor Cycle Industry Association … the Agricultural Engineers Association … and the European Engine Manufacturers Association … Numerous smaller trade associations have also been provided with information, and a number of manufacturers have been contacted directly”.

Were they contacted directly on whether what is in front of us in fact maintains the status quo? That is what the Government are saying their objective is, so did they speak to manufacturers about whether they thought this maintains the status quo? As we have already heard in some detail, quite a case can be made for saying that this certainly does not maintain the status quo, which is what Government have said is their objective.

In addition, bearing in mind that the Explanatory Memorandum talks about focused meetings, I know that the Secretary of State is not exactly a fan of trade unions, but I notice that when the Explanatory Memorandum refers to who the focused meetings have been held with, it does not seem to include the trade unions involved in the motor industry. Is this simply a reflection of the Secretary of State’s view that the people who work in the industry, as opposed to the people who own and manage the industry, have nothing whatever to contribute as far as the future is concerned? It would be helpful if we could have a reply on that. I am sure that the Minister will not be surprised that, bearing in mind the content of some of the other SIs that we will go on to deal with, there seems to be a similar silence there on whether those who work in the industry and the organisations that represent them have been consulted.

I will not go through the issue that has been raised with regard to paragraph 7.8 and mention that all again, because clearly the Minister will reply to that. I just want to check that what we have in front of us will meet, at least for a period of time, one of the issues that has been drawn to my attention. A motor manufacturer in this country says that it has a long run-in time of some months for production of the particular vehicle it makes. If it does not have type approval, it cannot complete the car—the type approval for the vehicle concerned, which is manufactured in this country, is done from its headquarters in another European country. It indicates that that could potentially lead to hundreds of almost-finished models of that car being stuck in the plant in this country. I am told that the company is creating extra parking spaces near the plant—which is certainly a waste of money but perhaps quite sensible for this reason we are talking about today, as well as because of potential customs delays, which one might argue is a separate issue. Can the Minister at least say that, provided that the manufacturer can get one of these provisional licences or approvals, what we have here would meet that potential difficulty for a major manufacturer in this country that needs a long run-in time for production of the particular vehicle it produces, and can she confirm that its headquarters where the type approval is done, which are in another European country, would not be in any difficulties as a result of anything in this statutory instrument? If in the short term that would not be the case, because the manufacturer will have no difficulty in getting the provisional certificate or arrangement, what will happen to it in two years’ time, bearing in mind that the Government are not able to tell us what the situation will be then, and does this SI not mean uncertainty for it, at least after two years, if not earlier?

I will ask one or two questions on the other SI, on vehicle emissions, to check what some of the wording means. I am looking at the Explanatory Memorandum, and I am sure the Minister will know why I am referring to it—basically, I cannot make head nor tail of what the statutory instrument itself says. There is a reference in paragraph 2.7 to a summary of the changes being made to the current legislation, and then it sets them out. It says:

“Minor amendments to restate retained EU legislation in a clearer and more accessible way, such as omitting time-limited obligations”—


which one might think was not quite the same as expressing something in a clearer and more accessible way. Could the Minister outline the time-limited obligations that are being omitted? What is the significance of their omission?

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[Baroness Sugg]

My Lords, I thank noble Lords for their consideration of the draft regulations. The regulations will ensure that we can continue to control the registration of vehicles in the UK and also to combat climate change in the transport sector after we leave the European Union. I shall now respond to some of the points raised.

The issue of type approval and the standards that apply was raised by many noble Lords. Future changes to the standards that apply to vehicles approved and registered in the UK will be laid before Parliament for approval in the form of statutory instruments. At the point when we leave the EU, all existing standards, including those for safety and environmental performance, will continue to be applied to new vehicles registered in the UK. There will not be a drop in standards or a resultant effect on road safety or environmental performance when we leave the EU.

As for future decisions on remaining aligned with EU standards, it will be for the Government to propose legislation for Parliament’s consideration, and the process by which the legislation will be considered will be an SI, subject to the affirmative procedure, establishing a new full UK approval scheme. As discussed, that will be laid later this year. I reassure noble Lords that, as has been highlighted, the SI will create an interim arrangement, which will be valid for a maximum of two years. The department is undertaking a comprehensive review and reworking the UK’s type-approval arrangements in the case of a no-deal outcome, in order to ensure continuity for manufacturers. This absolutely is about maintaining the status quo. That is why we are having the interim measure for two years.

The review is not intended to make policy changes. We would remain aligned with existing standards, but we would amend the retained EU legislation on type approval, which runs to 3,700 pages, to eliminate remaining deficiencies and, if possible, to streamline the legislation to make it more accessible. There will, of course, be a formal consultation on that process, to ensure that we get it right. This is an interim measure for two years, maintaining the status quo pending a large piece of work with a formal consultation to ensure that, should we leave with no deal, we would have the best possible functioning type-approval system.

[Lord Adonis]

But what is the point? Why not simply continue to maintain EU 27 approvals? If we do not intend to diverge, what is the point of this big piece of work?

[Baroness Sugg]

By leaving the European Union through the European Union (Withdrawal) Act, we will take EU legislation on to our statute book. So we are carefully looking at that legislation to make sure that it functions in the best way for us. As I said, this is not intended to make policy changes and is intended to remain aligned with existing standards. But there are more than 3,700 pages of type approvals, and we want to make sure that they function correctly on our statute book. That is a significant piece of work, which we will be doing alongside a formal consultation to make sure that this continues to function.

The consultation on type approval was conducted by discussions and working groups, largely through the main UK trade bodies covering the various categories of vehicle that require type approval. We have had a range of meetings that included members of the SMMT, the Motorcycle Industry Association and the Agricultural Engineers Association. Through these meetings, we refined our proposals and addressed sector-specific issues as well as informing people what is expected in a no-deal scenario. Obviously, we have also spoken to the European trade associations.

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[Baroness Sugg]

Before, it was for the whole of the EU. Now it will be for the UK only, so this is a temporary measure until the new type-approval statutory instrument comes in.

[Lord Adonis]

The Minister referred to a statutory instrument, but the regulation refers to legislation. What is the relationship between the legislation, which is scheduled for mid-2019, so will be introduced very shortly, and the statutory instrument to which she referred?