Gas Tariffs Code (Amendment) (EU Exit) Regulations 2019

Debate between Lord McNicol of West Kilbride and Lord Liddle

Thursday 26th September 2019 Lords Chamber

[Lord Liddle (Lab)]

Building on the interventions by the noble Lords, Lord Teverson and Lord Howell, I have a question. The Minister will be aware that gas networks and cross-border supplies are a matter of high politics and security, as well as energy policy. The Russians, in their disputes with Ukraine, frequently threaten to interfere with gas supplies crossing Ukraine. When originally proposed, the new German pipeline that the noble Lord, Lord Howell, referred to, which connects Germany and Russia, was described by Poland and the Baltic states as the economic equivalent of the Ribbentrop-Molotov pact, in that it exposed them and made them vulnerable to discrimination by Russia, to put political pressure on their democracies.

As I understand it, if there was a such a crisis involving Russian gas supplies, we would be protected by the principle of non-discrimination, because we are members of the internal market. In other words, if there was pressure on gas supplies on the continent it would not be legal for suppliers on the continent to turn off the taps to Britain. What will the situation be when we leave the EU: will we have those kinds of legal protections, and will the Minister enlighten us as to what they are?

[Lord McNicol of West Kilbride (Lab)]

My Lords, I join the noble Lord, Lord Teverson, in welcoming the Minister to the Dispatch Box. I am sure that in preparing for this SI, looking through the paperwork and the impact assessment, which says there is no significant impact, he might have thought this was a nice, easy one, but the noble Lords, Lord Howell, Lord Teverson and Lord Liddle, have rightly asked further far-reaching questions on the wider issues of energy and gas supply as we move forward. I shall take the Minister back to the start.

The regulations before us deal with the establishment of a network code on harmonised transmission tariff structures for gas, arising from the UK’s withdrawal from the European Union. This issue was debated at length during the debate on the Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019. The Explanatory Memorandum makes it clear that today’s instrument is needed because exit day has been pushed back: it therefore amends those regulations. Will the Minister therefore begin by assuring the House that these regulations do not mark any shift in policy towards the regulatory framework relating to gas?

Looking briefly at how these regulations were laid, I need not remind the House that they would not have been debated and passed until next month had the Supreme Court not announced that Prorogation was invalid. In such a situation, can the Minister be certain that they would have completed their passage before exit day? If not, what would the consequences have been? On the drafting of these regulations, the House will be aware that other regulations need to be amended as a result of the change in exit date. Will the Minister explain why these need to be amended? If this instrument is necessary to make such a small change, will he say why the Government chose to pass this through the affirmative procedure?

More widely, the regulatory framework is an important cornerstone of energy policy, and while the subject has been debated at length, I want to return to one core issue. My noble friend Lord Grantchester has been vocal on the transfer of powers relating to energy policy, particularly on the many responsibilities due to be handed to Ofgem, which has faced budgetary constraints under this Government. Can the Minister say whether any further regulations due to be laid before exit day will transfer any energy powers to UK agencies? Going back to a point made by the three noble Lords who spoke earlier, protecting our energy supply is critical to our safety and security in such difficult and troubling times. I agree with the noble Lord, Lord Teverson, that retention of the petroleum reserves is an issue of national security. Although it does not relate directly to the SI, some words about that from the Minister on behalf of Her Majesty’s Government would be appreciated.

Statutory Auditors, Third Country Auditors and International Accounts Standards (Amendment) (EU Exit) Regulations 2019

Debate between Lord McNicol of West Kilbride and Lord Liddle

Thursday 26th September 2019 Lords Chamber

[Lord McNicol of West Kilbride (Lab)]

I thank the Minister for his introduction to this statutory instrument. Before I come to the substance of the policy in these regulations, I highlight the comments made by the House of Lords Secondary Legislation Scrutiny Committee, which said:

“However, the range and magnitude of the changes are significant: the Regulations make changes to 15 items of legislation and include a sub-delegation of powers to UK regulators and extend a ministerial power of direction”.


The committee is right. Despite the utterances in the Explanatory Memorandum that this instrument exists only to continue the framework of the regulatory oversight and professional recognition of statutory auditors and third-country auditors in the UK, concerns have been raised, as we have just heard, that the regulations extend beyond this. The challenges financial services organisations will face in adapting to these changes are numerous, and were also noted by the SLSC. Can the Minister confirm whether any recent support has been offered to such firms to assist them in adapting to the changes?

In the light of such wide-ranging challenges resulting from these regulations, I draw the House’s attention to the fact that one of the core reasons why the other place divided on this instrument was the absence of a full impact assessment. Although I have no intention of similarly dividing this House, I place on record my disappointment that the Government have chosen not to publish an assessment in the period between these regulations being debated in the Commons and today. Parliament needs to be given the full information on the impact that these regulations will have on the financial sector; without such an assessment, that is not the case.

Moving on, I should like to ask the Minister a number of technical questions about the substance of these regulations. I will speak slowly. First, on Regulation 4, which deals with the loss of the EEA subsidiary exemption, can he confirm the timescale for the issues here to take effect? The legislation does not give a specific timeframe for the implementation of this provision, so I can assume only that further regulations may well be necessary. Secondly, in relation to Regulation 6, which focuses on the EEA qualification for auditors and which the Minister touched on, can he guarantee to the House that EEA-qualified auditors recognised up to December 2020 will retain their eligibility? If I missed that in his introductory remarks, my apologies.

To conclude, the way in which this instrument has been progressed, with little assessment and consultation, is deeply disappointing. It is mentioned in the Explanatory Memorandum for the SI, under paragraph 10 on “Consultation outcome”, that there has been no consultation on this instrument, which is deeply worrying. There also seems to be a thread of ambiguity through the regulations, which I hope the Minister can cast aside with assurances today. On this side of the House, we have agreed that the Government should make preparation through secondary legislation to ensure continuity after exit, but I hope the Minister can confirm that future regulations aimed at doing this will take a different approach.

[Lord Liddle (Lab)]

My Lords, I was not planning to intervene, having not read these papers in great detail, but until my noble friend spoke I was not aware that the Government had not carried out an economic assessment of the impact of these changes. On the face of it, this seems rather worrying.

As the Minister will know, there has been considerable controversy over the role of auditors and accountants in the past five years. The competition authorities in Europe have sought to break up the monopoly of the big five, although I am sure they would not put it as crudely as that. In the UK, the Competition Commission has also pursued these questions. There are also big ethical questions about the combination of roles between accounting and audit, which has resulted in some major scandals about the role of auditors.

Are we content that nothing in what we are doing in any way limits the ability of the authorities to pursue the cause of greater competition and greater separation of powers and duties? One of my really big worries about Brexit is that we may be creating a situation in which a close relationship between an industry and a UK ministry results in arrangements that are not in the interests of consumers or shareholders and that work against the public interest.