Northern Ireland Protocol Bill

Lucy Frazer Excerpts

Committee stage
Wednesday 13th July 2022 Commons Chamber

[Jim Shannon]

The debate was not widened by me; it was widened by somebody else.

Let me be clear: I voted against that agreement, but I listened to its proponents tell us that it protected Unionism. One of those proponents—David Trimble, who sits in the other place—well understands the issue and has outlined how the Northern Ireland protocol has adversely impacted the Good Friday agreement, but we are asked to sit in silence when our economy, our buying power and our very identity is decimated by the protocol.

The hon. Member for Gordon (Richard Thomson) had the opportunity to visit my constituency and understands the importance of fishing there. The Anglo-North Irish Fish Producers Organisation and the Irish Fish Producers Organisation are clear that the Bill will do away with the tariffs and red tape. How can it be right for a fishing boat to leave Portavogie, Ardglass or Kilkeel, get out of the harbour and get 2 miles off the shore, and pay a tariff on anything it brings back? The Bill will stop that. For those in Portavogie in my constituency of Strangford, and for those in Ardglass, Kilkeel and other places, I look forward to the days whenever we can grow our fishing sector, and create more jobs, opportunities and prosperity.

As the House discusses this legislation to begin the process to rectify the gross betrayal of Northern Ireland to get Brexit done, I ask Members please to remember the truths of where we are. I understand that there are those who did not want the referendum result. I understand that some want to remain tied to the EU. I understand the threats that are coming from Europe and latterly from the US. But the question is easy: are we a part of the United Kingdom of Great Britain and Northern Ireland? If so, the protocol must go. The Bill does not satisfy all that I want to see, but it does begin the journey. I am asking the Committee to travel with us, not against us: to call time on the kicking we have gotten as a political football between the EU and the UK. The EU has not negotiated common sense after 300 hours of discussions; it was never going to, or it would have happened already.

The reason we are here today is the Northern Ireland Protocol Bill, which was put forward by the Government and which my party fully supports. We need to make the changes. It is time to legislate this common sense to allow us all to move on together. The quicker that happens, the better. The people of Strangford want it and I want it, being British. I think all the people of Northern Ireland here are British, but even those who are not want it as well.

[The Financial Secretary to the Treasury (Lucy Frazer)]

I wish to begin by thanking all Members who took part in the debate on Second Reading as well as in the debate in Committee that preceded this one. As we progress to the second day of the Committee stage, I want to reiterate some of the key points that go to the heart of why the Government have introduced this Bill.

The Northern Ireland protocol was agreed with the best of intentions. However, as the right hon. Member for East Antrim (Sammy Wilson) has passionately set out, reinforced by the hon. Member for Strangford (Jim Shannon), unfortunately it is causing real tensions and problems for the businesses and people of Northern Ireland, including trade disruption and diversion, costs and bureaucracy. This legislation will fix the practical problems that the protocol has created in Northern Ireland. It will enable us to avoid a hard border, protect the integrity of the UK and safeguard the EU single market.

Let me address the clauses in turn. The Government’s intention is to introduce a new and different regime, including a green lane for goods remaining in the UK and a red lane for those destined for the EU. Clause 4 will allow the UK Government to implement such a regime for goods remaining in the UK and entering Northern Ireland. The clause, therefore, disapplies in domestic law certain EU law requirements and, with clauses 5 and 6, provides the powers for Government to remove many of the burdens currently placed on businesses by the extensive customs and regulatory processes that are required under the existing Northern Ireland protocol.

Clause 4 also defines “qualifying movements” that will be able to enter our proposed green lane. The subsections remove current burdensome processes for prescribed qualifying movements of UK or non-EU destined goods, and there is a power to define UK or non-EU destined goods. Clause 4 is central to our intention to rationalise the processes for goods moving into Northern Ireland. We have been clear that we do not believe it is appropriate to continue to require full customs and regulatory processes when goods are not even destined for the EU. This clause is part of what will allow us to put in place a more sensible and proportionate regime.

Our green lane and red lane proposals will form the basis of that regime. Engagement with businesses on the detail of the regime is already under way. We know that it is important that we listen carefully. It is the powers in clauses 4, 5 and 6 that will allow us to put it in place.

[Hilary Benn]

In respect of supermarket deliveries to Northern Ireland, it is really dead simple: those supermarkets sell only in Northern Ireland, so they would, of course, be appropriate for the green lane. But given the very large number of other businesses that send goods across to Northern Ireland, how do the Government propose to identify those businesses that are sending goods that are destined for the Republic and those that are sending them into Northern Ireland where they may be processed and then moved on to the Republic of Ireland? How will that work in practice?

[Lucy Frazer]

Obviously, this is a matter that the Government have been considering very carefully. There are goods, as the right hon. Gentleman says, that will obviously be going to Northern Ireland. Businesses will also know that there is a significant category of goods that will not, and then there are the goods that may not be certain at all. That is something that the Government will be discussing with businesses during the consultation over the summer period, and it will be set out how those goods are dealt with. The hon. Member for Strangford asked us about reducing paperwork, and I can say that, of course, that is the intention of the future regime.

Clause 5 ensures that a Minister of the Crown has the power to make regulations in relation to any provisions to which clause 4 relates, with the exception of customs matters, which are dealt with in clause 6. Clause 5 is essential in enabling a Minister of the Crown to deliver the UK’s proposals for a new green and red lane regime. Taking a power to provide for the regime is required, and the precise detail of the regime will be guided by consultation with stakeholders.

Clause 6 ensures that the Treasury or Her Majesty’s Revenue and Customs can make regulations in respect of customs matters. It will ensure that, once this Bill gains Royal Assent, the Departments can put in place the arrangements needed to operate a coherent customs regime.

Clause 24 sets out the Parliamentary procedure to be followed in respect of the exercise of regulation-making powers related to tax and customs matters in this Bill. The clause provides that regulations making provision in relation to tax and customs matters are to be made by statutory instrument. Regulations would be subject to the affirmative or negative procedure, depending on their effect. These statutory instruments would come before the House of Commons only in line with the exercise of Commons financial privilege, usually given to tax matters.

Before I turn to the amendments, I will touch on a number of points that have been made by hon. Members across the House. My hon. Friend the Member for Amber Valley (Nigel Mills) rightly said that the Government have been very generous and practical in our approach to border checks, not only in relation to Northern Ireland, but more broadly. He is also right to say that we have tried to negotiate a way forward with the EU. We have spent 18 months doing that. We have spent hundreds of millions of pounds on the trader support service, we have spent 300 hours in negotiations and we have shared 17 non-papers. Unfortunately, the EU has not come to an arrangement with us, and that is why I stand at this Dispatch Box today.

I dispute what the hon. Member for Hove (Peter Kyle) says, that it is clear that the two positions can be reconciled. It is clear that they cannot. We have tried to do that, but we have not succeeded. The Foreign Secretary invited Vice-President Šefčovič to the Joint Committee when we announced this legislation. However, the EU proposals do not go forwards; they go backwards. Under the EU’s suggestions, sending a parcel will involve completing a form with more than 50 data fields. A grandmother who wants to send a gift to her daughter in Belfast will need to complete a customs declaration and a pet owner will have to pay £280 for a certificate to take their pet. I welcome the support for this Bill from the right hon. Member for East Antrim and the hon. Member for Strangford.

Dealing now with the amendments, I will first respond to amendment 24, tabled by the hon. Member for North Down (Stephen Farry). I appreciate the intention of his amendment. However, it would be contrary to one of the core purposes of the Bill, which is to disapply in domestic law those parts of the Northern Ireland protocol that require goods remaining in the UK or not destined for the EU to complete burdensome processes.

The amendment would also mean that the “at risk” test would be left in place, which would mean that some businesses moving goods between Great Britain and Northern Ireland would still be required to pay customs duty even when those goods remained in the UK. As the hon. Gentleman will be aware, the Government’s intention is to put in place a different regime, one that is more proportionate and would remove the unnecessary burdens on business created by the protocol. I hope he will therefore withdraw his amendment.

On the points the hon. Gentleman made about the vet agreement, the UK remains open to a negotiated solution. We have put forward a number of practical solutions to resolve outstanding issues on SPS, but the UK has also been clear that we will not commit to dynamic alignment, which would compromise our sovereignty.

I turn now to amendments 34 and 35 in the name of the right hon. Member for Tottenham (Mr Lammy) . The Minister for the Cabinet Office and Paymaster General, my right hon. and learned Friend the Member for Northampton North (Michael Ellis), addressed this issue briefly in the previous debate, so I will not labour the point. Replacing the requirement for a Minister to consider that regulations are “appropriate” in the use of the Bill’s delegated powers with a test of necessity risks our ability to put in place the right solutions to the problems the protocol is causing. In these clauses, that would potentially circumscribe the ability to design a green lane that will preserve the unity of the UK internal market. I expect the right hon. Gentleman will not agree with me, but I ask him to withdraw his amendments.

Amendments 15 to 18 and new clause 5, tabled by the hon. Member for Gordon (Richard Thomson), would remove the Government’s proposed parliamentary procedures for statutory instruments under the Bill relating to tax and customs matters. The amendments attempt, in some cases, to replace them with a new, so-called super-affirmative procedure. In other cases, the amendments attempt to limit them to the draft affirmative procedure, removing the possibility of the made affirmative procedure in cases of urgency.

The drafting of these amendments is defective, making it unclear precisely what procedure is intended to apply to different categories of regulations. However, I will address the principle behind them. As Members will know, true super-affirmative procedures for statutory instruments are vanishingly rare. The normal affirmative and negative procedures for SIs provide effective scrutiny for the House. The hon. Member’s proposed procedure is long, requiring months of consultation on draft SIs, and procedurally complex, but ultimately does little more than envisage a Committee of the House making recommendations and preventing an SI coming into force pending a vote by this House. The amendments would require the Treasury or HMRC to make statements about any representation they have received on the draft recommendations.

I hope I can reassure the hon. Member that the Government intend to consult on the policy—indeed, work is under way—and the usual tools of parliamentary scrutiny will allow him to seek answers about this from me and my ministerial colleagues. His amendments would simply slow down solving the problems facing the people of Northern Ireland and create a muddling precedent on perfectly effective parliamentary procedures. I therefore urge him to withdraw his amendments.

New clause 4, tabled by the hon. Member for Foyle (Colum Eastwood), would prevent the exercising of powers in this Bill until an agreement has been sought on reducing sanitary and phytosanitary checks in the EU-UK Joint Committee—the joint decision-making forum overseeing implementation of the UK-EU withdrawal agreement. In many ways, I agree with the spirit of what the new clause seeks to achieve, but where we differ is that I recognise that we have already exhausted this option. The Government have engaged extensively with the EU on reducing the burden of sanitary and phytosanitary checks both through the Joint Committee and through official-level channels. As I mentioned, we have had over 300 hours of ministerial and official discussions and spent a significant amount of money. Nevertheless, we were still prepared to get round the table with the EU, and we held further talks through the autumn to the turn of the year.

However, as we set out in the statement by my right hon. Friend the Foreign Secretary on 17 May, the EU has simply shown insufficient flexibility. Although the EU published proposals in a non-paper on SPS in October 2021 that claims that checks carried out on SPS goods moving from GB to NI will be reduced by 80%, our own analysis and business feedback shows that this would not be the case in practice, and that a large volume of SPS goods staying in Northern Ireland will still face documentary, identity and physical checks. I understand why the new clause has been tabled, but regrettably we have had to conclude that the solutions put forward by the EU are not sufficient. It is for the EU to come back to the negotiating table or for the UK Government to get on with the job. I invite the hon. Member to withdraw his new clause.

The Bill provides a comprehensive and durable solution to the existing problems with the Northern Ireland protocol. As I said, the protocol was agreed with absolutely the best of intentions, but it is creating real problems on the ground for people and businesses in Northern Ireland. It is creating trade disruption and diversion, and increasing costs and bureaucracy for traders. The Bill will fix those practical problems. It will enable us to avoid a hard border and it will safeguard the EU single market. I therefore recommend that the clauses in this group stand part of the Bill.

Question put, That the amendment be made.

Northern Ireland Protocol Bill

Lucy Frazer Excerpts

Committee stage
Tuesday 19th July 2022 Commons Chamber

[Sir Jeffrey M. Donaldson]

I understand the point that the hon. Gentleman makes, but negotiations have taken place and all these issues have been well aired with the European Union. When I met Maroš Šefčovič, I pointed out the real and practical impacts of the protocol not only on businesses in Northern Ireland but on consumers. More fundamentally, I pointed out the impact on our identity and sense of our place within the United Kingdom—the relationship of Northern Ireland with the rest of our home country.

I simply wanted to rise to make this point again this afternoon, Dame Eleanor, and to reaffirm a point that is fundamentally important. Let us not lose sight of the main objective of the Bill. While the Bill seeks to create a framework within which we can find practical solutions to the problems created by the protocol, more fundamentally the Bill is about addressing the concerns that have given rise to the political instability in Northern Ireland. It is about protecting the Good Friday or Belfast agreement, protecting the political institutions, protecting the delicate constitutional balance that is at the heart of that agreement, and resetting it in a way that achieves the consensus that is the absolute engine that drives power sharing in Northern Ireland.

I fear at times that some fellow Members of this Committee get so into the weeds of the detail that they lose sight of the bigger picture, which we believe is fundamental for the delivery of the Bill.

[The Financial Secretary to the Treasury (Lucy Frazer)]

I thank my right hon. and learned Friend the Minister for the Cabinet Office and Paymaster General for opening the debate this afternoon, and I thank hon. Members across the Committee who have contributed to it.

There has been a lot of talk this afternoon about negotiation. The Government have consistently said that it is our preference to resolve the issues through negotiation. Our door remains open, but the EU has so far not been willing to make changes to the protocol that deliver the solutions Northern Ireland needs. In that context, the Government are acting now to provide the solutions, to be implemented through this legislation, including for fiscal policy.

The reality is that businesses and consumers in Northern Ireland are not currently afforded the same UK tax breaks as those in the rest of the United Kingdom. That is preventing them from reaping the full benefits of this Government’s policies, and this simply cannot continue to be the case. The clauses we are discussing today will enable us to remedy these discrepancies, by paving the way for Northern Ireland to benefit from VAT, excise and subsidy control regimes consistent with those in place in Great Britain.

Let me begin by addressing clause 12. The hon. Member for Hove (Peter Kyle) said that the clause was complicated. It provides the basis for a single UK-wide subsidy control policy rather than the two separate regimes currently existing under the Northern Ireland protocol. The clause will provide legal certainty, and therefore confidence, about the extent to which businesses will be able to receive subsidies. It will provide clarity in domestic law that article 10 is disapplied, meaning that any subsidies that would previously have been notifiable to the EU under article 10 will no longer need to be notified. The clause will also amend section 48(3) of the Subsidy Control Act 2022 so that UK subsidy control requirements will apply to all UK subsidies, including those in Northern Ireland. Clause 12(3) provides powers for a Minister to make appropriate provision regarding any part of the Northern Ireland protocol to which the clause relates.

The protocol creates a two-tier system in the UK under which people and businesses in Northern Ireland are at risk of losing out in comparison with the rest of the UK. EU state aid rules have limited the level of support that may be granted in Northern Ireland without approval from the EU. With the covid-19 recovery loan scheme, for example, there were more limitations on who was eligible for the loans in Northern Ireland than in Great Britain. The Bill will remove that uncertainty for businesses and bring about parity between Northern Ireland and the rest of the UK.

Clause 17 provides Ministers with the ability to ensure that VAT, excise and other relevant tax policy is consistent across the whole UK, including Northern Ireland. That means that people in Northern Ireland will benefit from the same policies as people in Great Britain where it is beneficial for them to do so—as, of course, they should. I would like to explain why that is important. The EU has set rigid limits on VAT and excise rates and reliefs in Northern Ireland, meaning that even if UK policy changes would have no impact at all on the EU, they may not currently apply in Northern Ireland. That is why, as hon. Members across the Committee have mentioned, we still have not been able to introduce the new temporary zero rate for energy saving materials in Northern Ireland, as we have done in Great Britain.

[Stephen Farry]

Will the Financial Secretary clarify whether the Treasury has made any approach to the European Commission to seek the flexibility to have the same rate? Whenever she wrote to me at the end of April, she said that no discussions whatever had taken place since the Chancellor’s spring statement.

[Lucy Frazer]

As the hon. Member will know, because the point has been raised across the Committee over the past few days, negotiations have been taking place for almost two years. There have been 300 hours of negotiations with our EU counterparts, UK officials have shared 17 further non-papers with the European Commission, and we have been attempting to find common ground across these areas. Since the date that the hon. Member mentioned, the Foreign Secretary invited Vice-President Šefčovič to a joint committee meeting, where she announced our intention to table legislation. We would like to resolve the issue through negotiation, but it simply has not been possible.

In future, businesses in Northern Ireland will be subject to new EU VAT, excise and energy tax directives even where they are inappropriate and burdensome for Northern Ireland. That includes forthcoming changes to the application of the EU VAT registration thresholds, which could have a significant administrative impact on businesses in Northern Ireland. Under the Bill, however, we will be able to introduce targeted reliefs to support individuals with the cost of living crisis and achieve net zero, in addition to being able to reform our complicated alcohol duty system, bringing our tax system into the modern era and benefiting the entire UK.

It is not right that there should be unnecessary tax discrepancies between Northern Ireland and the rest of the UK. Clause 17 will enable the Government to lessen or eliminate those discrepancies.

[John Redwood]

Will the Financial Secretary confirm that the Treasury will never use the argument that we must not press ahead with the very necessary VAT cut on energy in the cost of living crisis because we cannot apply it in Northern Ireland? It could damage GB as well as NI if that argument were used. Will she promise that the Government will energetically pursue complete sovereignty over VAT?

[Lucy Frazer]

After this legislation has passed, we will be able to introduce VAT legislation across the UK in the interests of both GB and Northern Ireland. I can assure my right hon. Friend that the Treasury consistently looks at tax policies, including VAT, and the benefits and disbenefits of bringing in changes.

I turn now to amendments 37 and 41 in the name of the right hon. Member for Tottenham (Mr Lammy). I should note that this issue was addressed in a previous debate, so, in the interests of time, I shall aim to be brief. The amendments would restrict the use of the Bill’s powers to only make provision that is “necessary” rather than to make provision that the Minister considers is “appropriate”.

As my right hon. and learned Friend the Minister for the Cabinet Office and I have said previously, “necessary” is a very strict legal test. The amendments would therefore remove the policy discretion for the exercise of these powers, potentially limiting Ministers’ choice of the right solutions to the problems caused by the protocol. Changing the test to an objective one will provide additional uncertainty to businesses and consumers and it would severely limit the ability to facilitate consistent VAT, excise and other relevant tax policies between Northern Ireland and Great Britain, as well as a domestic subsidy control regime that applies to the whole of the UK.

I want to comment on how that was expressed by the hon. Member for Hove, who suggested that Ministers could make changes on a whim. That is simply not the case and is a misrepresentation of the position that is clearly set out in the legislation. Clause 12(3) clearly states:

“A Minister of the Crown may, by regulations, make any provision which the Minister considers appropriate in connection with any provision”.

Therefore, he or she would need to consider those matters very carefully, as Ministers from across the House would do. The amendments might also prohibit the Government from responding in a flexible way to issues facing Northern Ireland. That, in turn, will have a negative impact on Northern Irish businesses and individuals, so I ask the hon. Gentleman to withdraw his amendment.

Many hon. Members discussed the negotiations, and I hope that I have answered those points in my response to the intervention from the hon. Member for North Down (Stephen Farry), The hon. Member for Hove talked about the single electricity market. The right thing to do is not to impact the single electricity market. As the Foreign Secretary has said, we want to cement the provisions in the protocol that are working, including the single electricity market. That is why this Bill does not seek to exclude article 9 or annex 4, which maintain the single electricity market. The Government are committed to preserving it and the benefits that it provides to UK citizens in Northern Ireland.

For those reasons, taken together, these clauses will ensure that the Government can set UK-wide policies on subsidy control and VAT, ensuring that those in Northern Ireland can benefit from the same level of support as those in the rest of the United Kingdom.

[Peter Kyle]

The Minister has clarified that the Government would not act on a whim. However, she did so by saying, in essence, that they would not act on a whim, but they had the power to do so. That is the worry that we have before us. None the less, I will withdraw our amendment, because I hope that the other place will have more time to ventilate these arguments, go into them in more detail and return with some more credible amendments for us to consider in this place. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 ordered to stand part of the Bill.

Clause 17 ordered to stand part of the Bill.

Resolved,

To report progress and ask leave to sit again.—(Julie Marson.)

The Deputy Speaker resumed the Chair.

Progress reported; Committee to sit again tomorrow.