State Aid (EU Exit) Regulations 2019

Debate between Lord Fox and Baroness McIntosh of Pickering

Thursday 14th March 2019 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I welcome the opportunity to discuss these two statutory instruments and I welcome the opportunity of the amendments that have been tabled to press the Government. I shall take each in turn. I remind the House that as a very young person I spent six months working as a stagiaire in DG IV, as it then was—it is now DG COMP—of the European Commission, where we looked at measures to prevent the distortion of competition, such as state aid.

I shall press my noble friend on whether and at what stage the Government will come forward with their policy on state aid post Brexit. We do not yet know what our own destination will be. It is quite possible that we will end up remaining or applying to join the EEA and EFTA, which have a competition regime very similar to that of the European Union. If that were the case and we ended up with a sort of Norway-plus EEA/EFTA-style arrangement, would the House have to revisit the statutory instrument in that regard, and would other changes have to be made?

I cannot remember which Government were in power at the time but it is worthy of note that the United Kingdom was effectively the author of the original Articles 85, 86 and, I think, 92, which relate specifically to state aid. The noble Lord, Lord Stevenson, raised in particular the question of the Irish border. Obviously, that will have an impact, particularly in relation to the block exemption on agriculture but also to any subsidies for other products that may be deemed to be a distortion of trade. A no-deal Brexit is still a potential prospect, so what consideration has been given to the World Trade Organization rules that will apply to subsidies? If the answer is in this rather long SI, perhaps the Minister could refer us to it. That would be immensely helpful.

I now turn to the European structural and investment funds regulations. Yesterday we had a debate on the rural development agricultural fund and a short debate on the maritime and fisheries fund, and this debate on structural funds is not dissimilar. I do not know whether the investment funds cover Horizon 2020. Perhaps the Minister could confirm my understanding that it is the Government’s desire to continue to participate in projects such as Horizon 2020. It would be immensely helpful to know that.

I should like to place on record—I know that the noble Baroness, Lady Crawley, will remember this only too well from her time in the European Parliament— that we have benefited from a European Social Fund programme targeted at new opportunities for women returning to work, and there are other specific projects as well. This is something that for some reason the UK Conservative Government would never embrace: targeting and giving assistance, through funding, to workers in their 50s or older who perhaps need training before they feel confident enough to return to the employment market. I see the noble Baroness, Lady Quin, in her place. She too will remember that great training schemes were made available for youth employment, although obviously they were not that helpful. When one sees the level of youth unemployment in countries such as Spain, it is clear that these projects are never as well funded as they could be.

Therefore, can the Minister say what criteria will be used, what projects and beneficiaries might be identified, and what sums will be made available? My specific question relates to paragraph 7.5 of the Explanatory Memorandum to the structural funds regulations, which says:

“To this end, HM Government funding guarantee ensures that, in the event of a No Deal, HM Treasury will underwrite sums that would have otherwise been received from the European Commission”.


I would like to pin the Minister down. Am I correct in understanding that we will have matched funding replaced by additional government funds, and am I right in assuming that HM Treasury’s largesse will know no limits? That is a very big ask because, if we have been allocated £8.4 billion of funding under structural funds for 2014 to 2020, there will be a remaining period until the end of that time is reached. So I should like clarification that the matched funding will be made good by Her Majesty’s Treasury for the projects that are outstanding for that period.

Finally, I will follow up on a point raised by my noble friend the Minister in his introduction, when he said that this was something to which we might return. The point was highlighted by the House of Lords Secondary Legislation Scrutiny Committee Sub-Committee B, in paragraph 42 of its report. The Government have decided not to replicate the current power granted by the European Council, which the Secretary of State could assume in the right circumstances. Will my noble friend set out the circumstances in which the Government might seek to appropriate those powers? Would it be a statutory instrument that he would intend to assume? Will he explain to the House and satisfy Sub-Committee B that there is sufficient flexibility in the statutory instrument to override any need for the Secretary of State to have the final say?

[Lord Fox (LD)]

My Lords, in the event that the proposition put prior to this debate by the noble Lord, Lord Adonis, comes to pass, and this SI is not needed, my time will not have been wasted: a more cogent seminar on state aid I could not have asked for than the one I have just received from the noble Lord, Lord Stevenson. I am grateful to him for placing these amendments before your Lordships’ House as this is an issue that requires greater clarity; I associate myself with the questions put by the noble Baroness, Lady McIntosh.

My remarks will be less structured than those of the noble Lord, Lord Stevenson. Regarding the question he posed of what qualifies as state aid, I put before your Lordships my experience of working in the United States and where, for example, a company might be looking to establish a new facility. When considering where that facility might be located, the company speaks to the administrations of various states—this is literally state aid. It asks about the tax structure it would receive in that state, the training regimes that universities might deliver, the buildings and planning regulations that might be needed. All these things qualify as aid which may be offered to companies to locate in a particular place.

The United States would talk about not being a country that distorts the market. Yet the local market is heavily distorted by literally billions of dollars that different US states put in to attract businesses to their location. How does this future regime of state aid fit into that pattern? We have unitary authorities. My noble friend Lord Purvis is going to ask about the role of devolved authorities, but we already have a degree of devolution to unitary authorities in England. They are required to deliver local or regional industrial strategies; LEPs are being granted money to deliver them. How does this fit into a structured state aid programme?

We talked recently about Nissan, which received a secret letter from the Government reassuring the company that it should keep one of its models in the north of England—a large sum of money was secretly committed by the Government in that letter. I contend that that was state aid; whether it would be recognised internationally as state aid is another matter. But we have a dichotomy: there is aid that the state—through a central, local or devolved budget—can give to companies or individuals to help them flourish or locate to particular areas, but it may or may not qualify in terms of whatever international agreements we are under. The noble Baroness, Lady McIntosh, is right to say that, whether we are operating under an EEA, WTO or any other regime, this will become an important distinction. What work are the Government doing on distinguishing between these various forms of state aid?

Recognition of Professional Qualifications (Amendment etc.) (EU Exit) Regulations 2018

Debate between Lord Fox and Baroness McIntosh of Pickering

Monday 11th February 2019 Lords Chamber

[Lord Fox (LD)]

My Lords, before going into detail, I acknowledge that the General Medical Council, the Law Society, the Institute of Chartered Accountants in England and Wales and the Engineering Council have welcomed these proposals. I suspect this is more in sorrow than anything else, since this is better than the uncertainty that would exist without them.

My understanding of secondary legislation and its role—I fear I am treading into Adonis country here—is that it should be about technical, non-controversial issues. When you consider that the 2005 directive paves the way for free movement, you realise that this is actually quite a controversial instrument. In essence, it is here to make up for the fact that, outside the EU, we can no longer treat the European Union as a most favoured nation under WTO rules and will have to strike out the movement opportunities of EU 27 citizens. I understand that; that is why I tabled Amendment 66 to the Trade Bill. I know the Minister was not the beneficiary of that debate or speech but, for the sake of completeness, I am sure he would like to consult Hansard from about this time last week. He will see that free movement has important benefits and this SI tries to mitigate their removal. For that reason, I would say that this is not non-controversial and it is not, strictly speaking, just a technical piece of legislation. Therefore, we should probably not be using this instrument to discuss it, but here we are again.

I am sure the Minister has had a chance to look through Hansard for the other place; his colleague Richard Harrington, the Under-Secretary of State, piloted the debate through that House. A number of issues came up, which have already been touched on. One of these was about the Internal Market Information System, or IMI, of which we will no longer be members after exit. This is an important registry of skills and the way they relate to each other. It is not clear what we will replace it with—an Excel spreadsheet, perhaps—or who will hold it and be accountable for its veracity. I suspect it will be the Minister’s department, but this is not clear.

Reciprocity was raised by the noble Baroness, Lady McIntosh. The debate in the other place seems to indicate that there is no guarantee of reciprocity or process by which it is being sought or managed. If that is the case—it seemed to be the view of the Under-Secretary of State—why not? What are the Government doing to protect the interests of British citizens?

[Baroness McIntosh of Pickering]

I am most grateful to the noble Lord. We managed to get it on the record from my noble and learned friend Lord Keen that there is no reciprocity. Reciprocity remains a matter for negotiation. Perhaps the Minister could confirm this, but my understanding is that all those professionals who happen to be British and wish to practise, or continue to practise, in EEA countries and Switzerland will not be subject to reciprocity. This will have to be negotiated at some future date.

--- Later in debate ---

[Baroness McIntosh of Pickering]

My Lords—

[Lord Fox]

My Lords—

Trade Bill

Debate between Lord Fox and Baroness McIntosh of Pickering

Committee: 4th sitting (Hansard): House of Lords
Monday 4th February 2019 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I rise briefly in support of the noble Baroness, Lady Brown, and associate myself with all her remarks. I also associate myself with the noble Baroness, Lady McIntosh—I agreed very much with what she had to say.

Amendments 101A and 103B are probing in nature, and I will address a few thoughts to this TRA membership question. In Schedule 4, the TRA is proudly declared to be independent. That is important in trade, because, as one goes through Article 6 of GATT, and the 1994 associated agreement on that article, one sees that the whole idea behind trade remedy processes is that they are fair and are not being used as political weapons by the countries wielding them. That independence is therefore philosophically important to preserve. And yet, in Schedule 4 we find that the Secretary of State will appoint all the non-executives. In addition, the non-executives will always be in the majority, and the Secretary of State can fire all of them. To add icing to the cake, the Secretary of State has the power to issue guidance, and the TRA must “have regard” to it. That does not look to me like a recipe for independence. It would mean that the TRA would begin life with a bad image, and it would be difficult for it to appear a useful, independent tool internationally.

I worry that, if another body had a similar structure which might have political interference—although I do not think we would actually operate it badly—we could be on the wrong end of something. We would not be able to criticise, because it would have the same structure. I join other noble Lords in very much looking forward to what the Minister has to say about the independence of the TRA, and about the points that I and others have made.

[Baroness McIntosh of Pickering]

My Lords, I shall speak to Amendment 101A and, without rehearsing the points, I entirely endorse what the noble Baroness, Lady Brown, and the noble Earl, Lord Kinnoull, said in speaking to the amendment. The Minister was kind enough to have a meeting with the team and myself, but I have this awful feeling that she will not support this amendment. I would like to give her a bit of bottle this evening and say why she must adopt the amendments, particularly Amendment 101A. A similar amendment was not carried in the House of Commons but by a very narrow margin and it goes to this point that a number of noble Lords have said this evening—the process must be, and be seen to be, fair in appointing and sustaining members of the TRA, and they must operate independently and impartially. I make this plea to the Minister: the Government must be seen to rein in some of the powers of the Secretary of State, which will be pretty broad if we let the Bill go to its final stages without making these points.

I entirely support what my noble friend Lord Lansley said about why an independent Trade Remedies Authority is required, and I should have declared an interest: I spent a very enjoyable six months in 1978 when I was very young, very keen, and very green, with the EU Commission—DG IV, now known as DG Comp. We did important things, such as read the Financial Times, which was amazing because a number of companies were announcing they were merging without having told the European Commission or the UK home authority, so it is absolutely vital that we have an independent authority such as the Trade Remedies Authority.

To respond to the point made by the noble Lord, Lord Fox, we need to give the businesses in this country the knowledge that there will be a remedy which replicates the remedies that are currently available. I entirely support his point that it will not be EU-wide, but we do need some anti-dumping and retaliatory measures at our disposal in this country.

[Lord Fox]

It will be very hard to do that—I was not suggesting that they should not have that support.

European Union (Definition of Treaties) (Canada Trade Agreement) Order 2018

Debate between Lord Fox and Baroness McIntosh of Pickering

Monday 25th June 2018 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, following on from the remarks of the noble Lord, Lord Whitty, which essentially I support, obviously it is a matter of regret that, if I understand it correctly, the agreement does not include services. That is a major omission. Also, on the Canada-US border, which I realise is not covered by discussions today, there is already tension, in particular over the flow of food and agri-food goods. This was raised at the G7 summit.

My noble friend said—I welcome this most warmly—that there will be proper scrutiny of the agreement. I wonder whether she will be in a position to share with the House this afternoon what form that scrutiny will take, and perhaps give a commitment that scrutiny will take place while the House is sitting—because I gather some procedures are being considered by the Procedure Committee that will allow some of the regulations flowing from the EU withdrawal Bill to be considered while the House is in recess. I do not know about other noble Lords, but it concerns me greatly that we were promised proper scrutiny and have given vast powers to the Executive to bring in regulations. My understanding was that all the regulations and statutory instruments would be considered while the House was sitting—and we have the September sitting, when we could give instruments close consideration.

My noble friend also said that no case in the investment sector against the UK had yet been successfully prosecuted. When we had the little debate last Thursday on the G7 summit, I pressed my noble friend on what the dispute settlement would be—this is in the White Paper—in relation to the free trade agreement that we seek with our current EU partners, and indeed other free trade agreements that might be agreed. In the context of concerns raised, certainly by the Belgian Government, this obviously is a source of concern that may have greater credence the closer we come to reaching an agreement with the EU, or indeed more broadly.

I take some comfort from the reassurance that my noble friend has given the House this afternoon that public services will remain a matter for the UK Government. Perhaps she could give a bit more substance to that commitment, because a lot of scare stories were going around at the time the TTIP agreement was being discussed, and it would be most unfortunate if, in the context of the CETA agreement, such scare stories were to persist.

[Lord Fox (LD)]

My Lords, the noble Lord, Lord Whitty, was right to highlight consumer and voter concerns about such matters—but I should point out that there are also business concerns about the Government’s stature in the trading environment. It is not just the content but the body language that goes with it. At the weekend we saw some appalling body language from senior Ministers about business and some of our most important exporters, so it is good that we can ameliorate that at least in some way with some positive body language here. It is good for us to be discussing this. Perhaps it is churlish of me to point out that the reason why we are discussing it is that we are in the EU, which has worked hard to deliver this treaty.

It is also heartening that we are discussing something that fits within the WTO legislative procedure rather than—sadly, and increasingly—within a worldview that is moving outside the WTO. So it ticks a number of multilateral boxes. As we have heard, Canada is of course an important current trading partner, and one that we hope to make larger. So CETA and its ratification are to be welcomed. It is a good arrangement and, clearly, as the Minister pointed out, the Canadians have made it clear that this is a framework by which a transition in the event of Brexit can be moved into a bilateral agreement between ourselves and Canada.

As the noble Baroness who spoke before me pointed out, it is clear that this does not include services—that is my understanding. I see that the Minister is shaking her head. Perhaps she might indicate which services are in and which are out. My sense is that very few are in. What would be the attitude towards a bilateral agreement on services between our two countries?

The Minister also pointed out that a working party to transition this has already been set up. Perhaps she could give us some sense of how long “swiftly and seamlessly” really means in terms of moving from one to the other. She used some examples; quite a lot of them were agricultural and food products. Clearly, Canada has a very strong agricultural industry. I would be interested to know what impact analysis has been done of the relative flows in both directions of agricultural and food products between our two countries. The Minister talked about growing trade—I think she used the phrase “hundreds of millions” in extra trade. What kinds of targets do the Government have for increasing the flow between the two countries?

It is all good—except the context in which CETA could be transitioned between our two countries really does depend on the nature of the arrangement we have with the European Union. Canada has already made that clear and has expressed unhappiness on, for example, the division of quotas and other such issues. Perhaps the Minister can tell us how these kinds of things feed in to our negotiations with the European Union.

The investment court system—ICS—has already come up. The Minister mentioned it, as did both the previous speakers. This is clearly an area that has raised people’s concerns. There is a perception that large multinationals will have an advantage in such a system. It is easy to understand that perception because this will be a complex and expensive process. How can the Government allay the fears of smaller traders and individuals that this will not be a charter for the larger, deeper-pocketed companies to play the system? Can the Government confirm that the ICS will be rolled over into any bilateral agreement should CETA be transitioned post Brexit?

Finally, the major exports between the two countries are in the engineering sphere, specifically nuclear reactors, boilers, machinery, vehicles and aircraft. I note that all these sectors could suffer severely under Brexit; for example, due to border friction, the restriction of movement of people, and exiting Euratom. There will be pressure on those businesses, so what assurances can the Minister give them? I note the particular importance in the aircraft industry of the Anglo-Canadian relationship at Bombardier in Belfast. Again, what assurances can the Minister give the workers there?

It is good that, instead of attacks on business by the Foreign Secretary or the Health Secretary, we are having a positive debate about business. CETA adds a long-term view to things, in respect of which business is desperately looking for stability. Within the context of those questions, we welcome this statutory instrument.

European Union (Withdrawal) Bill

Debate between Lord Fox and Baroness McIntosh of Pickering

Committee: 8th sitting (Hansard - continued): House of Lords
Monday 19th March 2018 Lords Chamber

[Lord Fox (LD)]

My Lords, the noble Lord, Lord Berkeley, is unable to attend, so I will move Amendment 227BB in his stead. This amendment represents something of a change of scene from what we have been discussing this evening, relating as it does to the future of the recreational boating sector following the UK’s departure from the EU. But this is an important sector for us. It is not just about the estimated 3.5 million people who take part in boating activity in the UK every year. It is also a thriving business sector, with the recreational boating and marine sectors being a success story in the UK. In 2015-16, the marine industry contributed about £1.3 billion to the UK economy, which adds up to around 33,000 full-time employees and more than 4,500 businesses. We should realise also that this is often in areas where alternative employment is not always available, so the sector is very important to the communities in which it exists.

The industry currently enjoys the benefits of free movement of people and the absence of customs borders between the UK and other EU countries. There are then, unsurprisingly, a number of issues arising from Brexit, causing significant uncertainty to both recreational boaters and the marine industry. I know that the Royal Yachting Association, the RYA, and British Marine have been in contact with DExEU and other government departments in relation to these issues. Briefly, and for the benefit of the House, I will set out the key issues.

The first is the ability of recreational craft to retain what is called Union goods status, which allows continuous free navigation around the waters of the EU. The second is the nature of the maritime border control regime between the UK and the EU after Brexit. The third is the ability of UK citizens who have RYA qualifications to travel freely to and from the EU for work that is often seasonal.

The Union goods issue requires a little explanation, so I will go into that detail, if noble Lords will excuse me. Vessels and all the equipment on them, such as computers and electronic gear, that enter the EU from non-EU countries are required to pay customs duties and VAT unless the owner can show that they are entitled to exemption. This is not the case if the equipment has Union goods status, which means that it is treated as duty paid. Pre Brexit, vessels moving between the UK and the rest of the EU are treated as Union goods, provided that VAT and customs duties were paid when the vessel first entered the EU. After Brexit, vessels moving between the EU and the UK, and vice versa, should qualify for a temporary relief from duty—but only if the vessel stays for fewer than 18 months in the country in question. So UK citizens who keep their boats in, say, Greece, would find that they would have to pay all the duties or move completely outside the EU before they could re-enter for another 18 months. The result of this is clearly not good for the Britons who have to keep moving their boats around to avoid paying up to 20% of the boat’s value in duties. It is also not good for countries such as Greece that are hosting this tourist trade. Additionally, when boats are moving in long-term passage within EU waters, there might also be customs duty when moving from one EU country to another EU country. It is not clear how that will unfold.

Noble Lords will appreciate that these issues may not necessarily be front of mind and addressed in the broader negotiations on customs and border controls. Accordingly, this amendment asks the Government to produce a report to Parliament in advance of 29 March 2019. This report would set out the rights and freedoms that recreational boaters currently enjoy and how they would be maintained after the UK’s withdrawal from the EU. It would provide a clear opportunity for the Government to offer much-needed certainty to the thousands of recreational boaters—and of course to the marine businesses as well.

Without that reassurance, there is potential for significant damage. Very briefly, that significant damage comes in terms of costs and the administrative burden faced by boaters and business, with associated significant damage to the resale market for boats. It also causes new maritime border controls, which could be disproportionate and compromise navigational safety—and, as I said before, RYA instructors could find it difficult to do seasonal work elsewhere.

The RYA and British Marine have been in touch, and I know that they are ready to negotiate. None the less, the importance of this sector to communities all around the country should not be overlooked when there is so much else going on. We have talked about the need to negotiate everything in such a short time, and this is just one more thing that the Government need to place on their list. Before the formal departure from the EU it is vital that the Government commit publicly to setting out how they will defend the interests of UK boaters and marine businesses. I will be interested to hear the Minister’s response to this amendment.

[Baroness McIntosh of Pickering (Con)]

My Lords, my name is not associated with this amendment but I am a regular attender of the London Boat Show at the invitation of British Marine. I have a specific question for the Minister to answer when he sums up. The record figures for the export of yachts and recreational craft this year were spectacular. But a source of concern to British Marine once Britain has left the European Union is the extent to which Britain will remain aligned with the legislation. I mention that because we transposed the recreational craft directive onto the statute book. The British Marine Federation was instrumental in making sure that that directive did not cause too much damage to our industry in terms of the standards with which it had to comply. Will the Minister assure the House that we will continue to align ourselves with future legislation to make sure that our main export market for recreational craft will still be there and that we will have some means of ensuring that the concerns of the British marine industry can be made known when future statutory instruments are being negotiated?