Legislative Reform (Hallmarking) Order 2013

Lord Hodgson of Astley Abbotts Excerpts

Tuesday 29th January 2013 Grand Committee

[Viscount Younger of Leckie]

My Lords, the primary purpose of the draft order is to enable the UK’s assay offices—that is, the bodies which test and hallmark articles of precious metal—to set up hallmarking operations in offshore locations. The Hallmarking Act 1973, which governs hallmarking in the UK, currently prohibits such operations, limiting the striking of UK hallmarks by the assay offices to within the territory of the UK.

The Hallmarking Act makes it an offence, during the course of trade, to describe a non-hallmarked article as being wholly or partly made of gold, silver, platinum or palladium, or to supply, or offer to supply, it with such a description attached. Section 2(4) of the Act defines a non-hallmarked article as one which does not bear the “approved hallmarks” and a sponsor’s mark. The definitions of approved hallmarks in Section 2(1) include one to the effect that approved hallmarks are,

“marks struck by an assay office in the United Kingdom, whether before or after the commencement of this Act, under the law for the time being in force”.

This imposes on the UK’s assay offices a geographical limitation, preventing them striking UK hallmarks in overseas locations. It places them at a serious competitive disadvantage to certain EEA competitors whose law does not prevent their assay offices from operating offshore.

The draft order is designed to remove this geographical limitation, thus redressing the competitive imbalance by enabling the UK assay offices to operate offshore, thereby helping to ensure their future viability and, in the longer term, protecting UK jobs. A feature of the scheme to permit offshore marking is that the British Hallmarking Council will authorise offshore-struck marks, which will be clearly distinguishable from the existing domestically struck marks. In order to make clear the distinction between the two sets of marks, the council will also issue guidance to the new offshore marks. This will help to introduce clarity for consumers, retailers and the enforcement community alike.

The market in articles of precious metal, and the hallmarking of such goods, has moved on. It is now a global business in which vast amounts of high-volume, low-cost jewellery are produced, mainly overseas. In order to capture this market, some of our EEA competitors have been busy setting up hallmarking operations within or in close proximity to manufacturers’ premises. They are able to do so because their national laws do not prohibit it. The advantages to both parties of such an arrangement are obvious and it is equally clear that failure to adapt to this changing market will pose an ever greater threat to the existence of the UK assay offices.

In addition to the main change to the Act, two other changes effected by the draft order are directly related to the broadening of the scope of the Act. The first concerns the widening of the choice of marks for sponsors and manufacturers, referred to in the Act as a “sponsor’s mark”. These are unique marks which identify the person or organisation submitting an item for hallmarking. Currently such marks must include the initial letters of the name of the sponsor. As there are only so many permutations of letters possible, these are beginning to run out. The order will therefore remove this requirement, making it easier for sponsors to register their marks. To ensure that some sort of rationale applies to the extended range of marks that will become available, the British Hallmarking Council will be issuing guidance on the limits that will apply to such marks.

The other change corrects an anomaly in the Hallmarking Act whereby articles of silver, gold and platinum cannot be coated with platinum without the written consent of an assay office. The change will permit articles of silver, gold and platinum to be coated with platinum without having to obtain such consent.

Why are these changes being made only now, given their obvious value to the UK hallmarking fraternity? The answer is severalfold. The changes being effected by this order represent the culmination of a lengthy journey. It has its origins, in fact, in the previous Administration, which began the process back in 2009 under the stewardship of the noble Lord, Lord Drayson. The Government of the day had to ensure that the legislative process they chose to pursue was the right one. As noble Lords will appreciate, such a process takes time. In addition, it was essential to secure the agreement of the British Hallmarking Council, which supervises the activities of the UK assay offices and includes assay office representatives, as to the detail of the approach to be taken. By 2010 this had been achieved and the order process was set in motion.

In the intervening period, the Government have necessarily focused on making sure that the order is fit for purpose, which has involved clearing a number of legislative and parliamentary processes designed to do just that. The important issue is that the order that has been forged from all these processes will achieve our original aim of opening up new opportunities for the UK assay offices.

In conclusion, a simple accident of drafting has led the assay offices to the situation in which they now find themselves. It is sobering to think that four words in the original drafting of the Hallmarking Act—“in the United Kingdom”—have led to this unfortunate situation. Were it not for that, the assay offices would be competing on level terms in overseas markets and we would not be having this debate today.

The UK hallmarking community has been the driving force in the case for legislative change. The consultation also revealed strong support from the trading standards community for the proposed changes. If the order becomes law, it will provide invaluable support to the continuation of hallmarking in the UK, which has centuries-old traditions. By so doing, it will have the potential to protect UK jobs while helping to ensure that the British public and retailers can continue to rely on a domestic market offering jewellery and other similar articles of precious metal bearing predominantly UK hallmarks. I commend the draft order to the Committee.

[Lord Hodgson of Astley Abbotts]

My Lords, I thank my noble friend for his careful and detailed explanation of the order, and I thank the officials in his department for the very extensive explanatory document they have provided. Before I go any further I have to declare an interest. I am a liveryman of the Goldsmiths’ Company, but I should make it clear that I am not speaking for the company; indeed it does not even know that I am going to make this speech and I am not sure that it will much like what I am going to say anyway.

I understand the reasons for the regulation. As my noble friend has made clear, this is about removing the restrictions on hallmarking within assay offices in the UK because they put those offices at a clear competitive disadvantage. The explanatory document talks about Thailand, India and Holland, so I quite understand that. I also understand, particularly when wearing my hat as a goldsmith, the extensive and high reputation of the UK assay offices; indeed, the word “hallmark” has a much wider use in the English language than merely being applied to the issue of jewellery made of silver, platinum and so on. It has become a word used to denote quality everywhere. So far, so good, but I want to probe a couple of issues.

We have two sets of people with different objectives as far as this regulation is concerned. The assay offices wish to increase the hallmarking model and they do not much care who does it, while UK jewellery manufacturers are anxious to build and develop their trade and who, by having an absolutely clear and unequivocal UK hallmarking standard, may have some competitive advantage. Because it is not tackled very clearly in the explanatory document, I would like the Minister’s reassurance that we are not in danger of hollowing out the UK industry in our efforts to protect the position of the assay offices.

Paragraph 9 on page 12 of the explanatory document reads:

“The Government agrees that it is likely that some jobs will be lost as a result of the setting up of hallmarking operations by the UK Assay Offices in overseas locations”.

That is surely true because elsewhere in the document it says that 35% of the jobs are going to be lost, or at least that is one of the estimates. Further on, paragraph 12 states:

“The Government therefore rejects the notion that no benefit will accrue to the UK as a result of the proposed changes to the Hallmarking Act. The unanimous expression of support for change by both the BHC and Assay Offices is a reflection of the fact that the demand for change emanated in the first place from within the hallmarking community”.

Of course it did, because it is looking for ways to boost its trade. It is not going to say anything other than just, “Right on, Government”. We need to be careful that we do not, by advancing the position of the assay offices, remove the competitive advantage from our manufacturing industry—an important industry.

My second point is the potential loss of quality and reputation. This is going to be an interplay between individual assay offices, the British Hallmarking Council and the international hallmarking convention. It would be helpful if my noble friend could say a little about this when he winds up the debate. The British Hallmarking Council is made up, I hope, of representatives from the assay offices; I think I heard the Minister say that. Is there a third party? Are representatives of manufacturers and others involved in this industry part of the hallmarking council? I ask because there must surely be a danger of some regulatory capture if only the assay officers are represented on the Hallmarking Council. In turn, how does it relate to the international hallmarking convention, which obviously only some countries belong to, because it is referred to in the explanatory document?

--- Later in debate ---

[Viscount Younger of Leckie]

I do apologise; I was under the impression that the noble Lord had raised that issue.

The noble Lord, Lord Stevenson, raised the issue of how to inform consumers about these changes. The procedure is that a dealer’s notice is required to be displayed in all premises selling hallmarked items, and this will include both the onshore and the offshore marks.

Finally, the noble Lord asked about the representation of the British Hallmarking Council. The council consists of 19 members covering eight assay offices, 10 government appointees and one chairman. The 10 government officers include four from industry, while the others are from consumer protection and the independents. I hope that that answer helps the noble Lord.

In conclusion, although there may well be some other questions that need to be answered—

[Lord Hodgson of Astley Abbotts]

I thank my noble friend. I do not doubt that his officials will be able to answer my question very quickly. Am I right in reading from the explanatory document that the profit expected from this is £400,000 a year? Have I read the explanatory document right? It seems to be an incredibly small sum of money for us to go through all this, but perhaps I have misunderstood or misread the explanatory document.

[Viscount Younger of Leckie]

Indeed, I have read the document and I can confirm that that is in the notes that I have read. I believe that it is an estimate, but I note what my noble friend has said in terms of the actual sum of money.

In conclusion, I hope sincerely that the introduction of this order will mark a turning point in the fortunes of UK assay offices, and I commend the order to the Committee.