Exiting the European Union (Consumer Protection)

Mary Creagh Excerpts

Monday 25th February 2019 Commons Chamber

[Dr Coffey]

No, I do not agree with that assessment. Nevertheless, this SI is not about whether we have a deal or not—it is about having an effective regulatory system. It is not about changing policy or trying to make it stronger—it is about trying to make sure that we can have something that works and continues to work in future.

In line with the European Union (Withdrawal) Act 2018, these regulations simply make technical and legal amendments, including transitional arrangements, to maintain the effectiveness and continuity of UK legislation that would otherwise be left significantly inoperable, so that the law as today will continue to function legally following our exit from the EU. I recognise that the statutory instrument is long and makes many adjustments, but I can assure the House that they represent no changes of policy.

[Mary Creagh (Wakefield) (Lab)]

The truth is that the statutory instrument will not be able simply to cut and paste the REACH database into UK law. We cannot cut and paste the chemicals framework established by the EU into UK law because it regulates, evaluates and authorises chemicals, and that is significantly different. That is why the Minister is asking this House to establish a UK chemicals database and asking the UK industry to make significant contributions towards that. That is the case, is it not?

[Dr Coffey]

That is right. These regulations will apply to the whole of the United Kingdom, with the exception of paragraph 1 of schedule 11, which makes amendments to existing domestic legislation regarding the disposal of polychlorinated biphenyls that, in the current regulations I referred to, extends only to England and Wales. This Government, and this country, have to be ready for the prospect of not being part of ECHA—the European Chemicals Agency—in future, and we therefore need to put in place the regulatory framework that means we will continue to have a safe chemicals industry in future.

[Dr Coffey]

Actually, I am not aware of the reference to that by Rolls-Royce. Yes, we do need, in effect, to replicate the database, and that is what part of these regulations establishes. However, I want to make it clear to the House that CEFIC—the European Chemical Industry Council—and the Chemical Industries Association in the UK have made a joint statement to their members that the contracts that currently exist between consortiums should be amended so that information or data is available both for REACH and for UK REACH in future. None of the consortiums can force their members to do that, but I believe that it is in their best interests to make sure that the data and information required is available to both chemicals regulation systems.

As I said, the regulations apply to the whole of the United Kingdom. This Government and the devolved Administrations have worked together closely on these regulations and have agreed that a UK-wide REACH system will mean a coherent UK market backed by consistent policies and chemical management. The devolved Administrations have been involved in the drafting of the SI and have given their consent. That includes the Labour-run Welsh Government and the SNP-run Scottish Government. Indeed, this was also scrutinised by the Scottish Parliament, which also gave its consent.

[Mary Creagh]

A little earlier, the Minister talked about a section—forgive me, but I do not have the exact number—relating to the disposal of PCBs. Is she saying that different regulations will apply in Scotland and Northern Ireland, and, if so, will they be to higher or lower standards, or the same?

[Dr Coffey]

I am saying that, as it stands today, chemicals regulation is a devolved matter in how Governments can apply these things. We have a particular regulation that currently applies only to England and Wales. The Scottish and other Administrations will have made their own applications in legislation for that. That is why this is the only bit of the entire statutory instrument that does not apply to the whole of the United Kingdom.

--- Later in debate ---

[Dr Coffey]

As I said, we are recruiting staff to undertake additional elements, but it will be open to the regulator to take advice from where it likes, whether that is from ECHA, from within the UK—we should remember that, in many cases, UK scientists are the people giving advice to ECHA—or, indeed, from further afield. We will not be restricting the regulator’s consideration, but it matters that we have an operational scenario for chemicals regulation. The House can be assured that we will continue to have a safe chemicals industry in the future.

[Mary Creagh]

The Minister will be aware that my Committee, the Environmental Audit Committee, held an evidence session in December 2018, subsequent to our report published in 2017, in which we heard from Elizabeth Shepherd, a partner at Eversheds Sutherland. She is one of the UK’s leading experts in chemical regulation, and she said:

“The UK regulator, HSE, is no longer involved in the evaluation of substances. HSE has, to date, played a very active part in evaluating chemicals… the chemicals that were assigned to HSE for the 2018-19 period have been moved away from the UK already to other evaluating authorities. Businesses are concerned that they will lose the insight that participation gave them and the opportunity to influence the shape of regulation.”

We are losing our influence, are we not?

[Dr Coffey]

I do not think we are losing our influence. The measure was taken by ECHA after the people of the United Kingdom voted to leave the European Union. Currently, a country can only be a member of ECHA by being a member state of the European Union, so this is forward planning. Some of these assessments can take time to go through the ECHA process, and therefore, given that the HSE would not be a relevant authority for future ECHA authorisations, I would not want to criticise ECHA for having made that decision. Meanwhile, the HSE has the competence, and it has started recruiting people to undertake the different activities it will need to do.

I will now move on to decision making and working with the devolved Administrations. Just as the HSE inherits the role and functions of ECHA, the responsibilities of the European Commission will pass to the Secretary of State. For example, the Secretary of State will make decisions to authorise the use of a substance of very high concern or to restrict chemicals on the basis of an opinion from the HSE, as covered by articles 60 and 73.

REACH also covers devolved matters such as environmental protection. For that reason, the Secretary of State must act with the consent of the devolved Administrations where a decision relates to an area of devolved competence, as set out in proposed new article 4A in schedule 1. A safeguard clause allows the devolved Administrations, and indeed the Secretary of State, to take urgent action where it is needed to protect human health or the environment. This must then be followed up with the normal restriction process to see whether there should be a UK-wide control, as set out in article 129.

On transferring existing UK registrants into the UK REACH system, the regulations contain a range of transitional provisions to provide legal continuity to business and to protect supply chains. All registrations held by UK companies will be automatically transferred, often known as “grandfathered,” to the UK REACH system at the point of exit, as set out by proposed new article 127A in schedule 2, which means there will be no break in their access to the UK market.

Companies will need to provide the HSE with information to support their registrations in two phases: initial information within 120 days and the full information within two years. That is set out in proposed new article 127B in schedule 2.

--- Later in debate ---

[Dr Offord]

rose—

[Mary Creagh]

rose—

[Dr Coffey]

I would like to bring this to a close fairly soon, because I am conscious that some Members have put in to speak, as would normally be the case rather than the Minister taking interventions.

--- Later in debate ---

[Sue Hayman]

I am afraid that that is not the information I have been given. As I said, the Minister did not rule that out to the Lords Committee, and when I went to Brussels to visit the REACH team, they confirmed that they believed this would be the case. Will the Minister categorically confirm whether these proposals have the potential to lead to further animal testing?

[Mary Creagh]

My hon. Friend has triggered a memory that I thought I had buried. On the animal testing point, when our Committee held an update hearing in December, one concern raised was about where the intellectual property that UK companies have submitted into the REACH database lives. There was a great deal of concern that the Minister’s reassurances that companies could just go and get that intellectual property, which they have paid for and registered, out of the database is problematic, because it is now owned by REACH, and once the UK leaves, we ironically will not have access to our own intellectual property. Does that not show the complete misunderstanding of the right hon. Member for Wokingham (John Redwood) of how the world trades in chemicals, on which REACH sets the global standard?

[Sue Hayman]

I thank my hon. Friend for making that important point, and I will be interested to hear the Minister’s response.

If we voted to pass this SI, we would be voting for legislation that is likely to increase animal suffering through duplicate testing. It would also mean that critical decisions on chemicals were made by a body with little experience and layers of accountability and scientific expertise stripped away. Greener UK has said:

“As currently drafted, the chemicals SI significantly weakens the regulation of chemicals, including those with links to cancer and hormone disruption.”

How can we responsibly let this secondary legislation pass, in the light of these serious and grave reservations? Does the Minister recognise those risks, and can she guarantee that British people will continue to receive the same health and safety and environmental benefits that we currently do as a member of REACH?

In a no-deal Brexit scenario, we would become a third party to REACH on 29 March, with all existing REACH registrations and authorisations held by UK companies becoming immediately invalid. Companies wanting to continue to export into the EU would need to transfer their registrations to EU-based companies or rely on their customers making importer registrations.

[Sue Hayman]

I completely agree. In fact, representatives of trade unions have made exactly that point to me, and they have deep concerns about this.

Companies wanting to transfer their registrations would potentially need customers to make importer registrations. That could lead to serious ramifications down the supply chain and interruptions to the many billions of pounds’ worth of trade between the UK and EU.

[Mary Creagh]

I thank my hon. Friend for giving way; she is making an excellent speech and being very generous with her time. I wanted to intervene on the Minister on the issue of grandfathering rights. Is not the truth that British companies are now in an invidious position where, if they want to keep trading with the EU after exit day, whenever that may come—goodness knows what will happen in the next 48 hours, let alone the next five weeks—they will have to transfer their registrations to an affiliate in the EU? How can they then grandfather those rights into the UK’s chemical regulation system when they have given them away in the European Union?

[Sue Hayman]

Once again, my hon. Friend makes an extremely important point. Of course, we also need to look at the huge costs to companies of these actions. The problems and difficulties that will be caused are not short-term but long-term.

Does the Minister acknowledge that a no-deal outcome brings with it huge risks to industry, jobs and our environment? Due to the numerous deficits and risks posed, we will be voting against this SI and would encourage Members across the House to do the same in good conscience.

--- Later in debate ---

[Mary Creagh (Wakefield) (Lab)]

It is a pleasure to follow the hon. Member for North Ayrshire and Arran (Patricia Gibson). I was getting my speech together as I was listening to what she said.

This is of course a very important sector for the UK economy. As the Minister said, REACH regulates not just chemicals but products—everything from the coating on a frying pan to the flame retardants in carpets and sofas, which my Environmental Audit Committee will be looking at very soon—and it is vital in the protection of human health. However, it is also a single market mechanism to ensure the free movement of chemicals across the EU and to enhance innovation in the EU chemicals market.

What British companies are asking themselves, as they look at this statutory instrument, is: what is to stop my EU customers going somewhere else? The answer in this statutory instrument is nothing. We are putting more costs on UK businesses, we are rendering them uncompetitive in the EU market and we are allowing the burden of excess regulation to fall on them both in this country and in their export markets.

What are companies doing in response to that? Many of them have already left. There has been an exodus of small chemical companies. Someone told me that a small mosquito repellent company—obviously, mosquito repellent is a very seasonal product—was concerned about what would happen to its business in the UK, making products predominantly for the EU market. It has shut down its factory, which I think was based in Gloucestershire, and has moved it to Italy. Quietly, it has moved tens of jobs and a manufacturing company out of this country.

REACH regulates about 30,000 substances bought and sold in the EU’s markets, and 60% of the UK chemicals industry’s exports go to the EU. This is our second largest export to the EU after cars. We have seen in the car industry—with Honda’s announcement last week, as with Jaguar Land Rover and Nissan—just how important access to the EU single market is for our automotive industry, as it is for the parts that go into those cars. Of course, chemicals—chromium in particular— are absolutely vital to the automotive and aerospace industry.

We export almost £15 billion-worth of chemicals a year to the EU, and all our businesses have to comply with REACH. So far, companies have made more than 12,000 registrations. The Environmental Audit Committee looked at this back in April 2017, and we have seen this problem coming at us down the track for the past two and a half years. We heard that UK businesses had at that point spent about £250 million on registration. Since then, there has been another registration deadline, in May 2018, for smaller volumes of substances. The estimate now is that about £600 million of UK companies’ money has been spent registering chemicals with the European Chemicals Agency up to last May.

What happens to those sunk costs? What is happening is that those companies now only have their own representative in the EU up to 1 April. As I mentioned to the shadow Secretary of State, my hon. Friend the Member for Workington (Sue Hayman), they will not have registrations if they have handed them over. They are in the very difficult position of not knowing what to do in the next four to six weeks, and I do not think these difficulties can be overstated.

The Minister has said that she is going to spend £13 million on the new HSE database, but the fact is that REACH costs €100 million a year to run. We are therefore going to have a tiny shadow of the European chemicals database here in the UK.

REACH is difficult to transpose into UK law because it is a governance structure, not just a list of substances. Even if it was just a list of substances, our registrations and the intellectual property that goes with them have, in some cases, been lost by UK companies, or transferred to different places and are difficult to track down. So many of the regulations apply to data sharing, co-operation and the facilitation of free trade in chemicals between companies in member states. If we are not in the single market and not in the EEA, we will not have access to that data.

The Minister has said that she wants associate membership of the European Chemicals Agency, but she did not say in her opening remarks whether that is still being pursued, and if so, how progress on that associate membership is going. I understand that Norway is a member of it through its membership of the EEA.

We are clearly duplicating regulation if we have our own version of REACH, and companies trading in the EU and the UK will incur duplicate costs. We are doubling the costs of chemical regulations by leaving the EU. We know that uncertainty is having an impact on long-term investment and decisions. The Chemical Industries Association and the Chemical Business Association have indicated that a significant number of their members are considering moving their operations out of the UK to preserve their European business.

I would certainly prefer to see us remaining in REACH. Again, in the current system planned under this statutory instrument, there is silence on enforcement responsibilities, compliance and whether we remain in lockstep with the EU REACH system. There is no real stakeholder involvement in who gets to decide on that, which I think is very detrimental to the UK’s competitiveness. REACH is the global gold standard in chemicals regulation, and it has been copied by South Korea, Turkey and the USA. My Committee visited the USA and heard about its Toxic Substances Control Act—which, sadly, President Trump and his various Environmental Protection Agency heads have tried to row back on, but even the ToSCA is now about 10 to 15 years behind the EU.

To come on to the detail of the regulations, a very concerning deficiency in the statutory instrument is in relation to article 10 on the composition of the agency. We are not replicating the committees that inform decisions at the EU level, which will remove vital checks and balances in the form of stakeholder participation. ECHA has a management committee and technical committees, with stakeholders from industry, environmental and health non-governmental organisations, and trade unions permitted to participate in these meetings, but without a vote. There will be no such stakeholder participation in the UK chemicals agency, as formulated under this statutory instrument. This means that the best information will not be available for these discussions, and it will be ruled by fiat, rather than by discussion.

Article 76 of the original EU version created several committees, including one for risk assessment, one for socioeconomic analysis and a member state committee responsible for resolving potential divergences. The draft statutory instrument completely omits that article and replaces it with a much weaker duty to simply take scientific knowledge into account but with no formal standard mechanism comprising standing committees of experts to do so. We will have no committees of experts, or other committees, to take these registrations into account and help the agency to form its opinions.

The same deficiency appears elsewhere, including in relation to title 7 on authorisation. Article 58 concerns the inclusion of substances in annexe 14, but the duty to take into account the opinion of the member state committee is simply removed and the decision left to the Secretary of State. This is what my Committee has been warning against. Important democratic oversight mechanisms are being lost in translation and in the cut-and-paste process, and quietly, through the back door, in half-empty Chambers such as that in which we are sitting this evening, environmental regulation is simply being downgraded.

As I said earlier, I am very concerned about the budget. REACH was very expensive to set up. The Health and Safety Executive is going to run the UK version, but it has experienced considerable budget cuts over the past 15 years. Its annual accounts indicate that it currently spends just over £1 million for chemicals regulation testing in the UK. Page 98 suggests that it receives £1.2 million for provision of REACH services to the Department for Environment, Food and Rural Affairs, but that is a reduction from the £1.4 million it received in 2016-17. By contrast, I repeat that the spend per year for REACH is €100 million.

There is no commitment to mirror EU outcomes on chemical regulation. The draft statutory instrument has no automatic provision for copy across of EU restrictions and further improvements, so the UK’s controls on chemical use could rapidly diverge from those in the EU. If the UK fell behind those in the EU, protection of human health and the environment would be reduced. We do not want to end up in a situation where chemical regulation is diluted.

I have shared my concerns about the outcomes and the stakeholders. My final point relates to the Government’s better regulation agenda, which has a commitment to bring in regulations only if three times the amount of regulation, measured on the basis of cost to companies, is removed. My Committee has been pressing the Cabinet Office on the issue. In a written statement on 20 June 2018, the then Minister confirmed that the UK still has a deregulation target of £9 billion in this Parliament. That confirmed for the first time that the target would be applied to vast swathes of formerly EU law after the transition or implementation period.

All of the regulations are going to be subject to the bizarre and ridiculous one in, three out rule. If we want to strengthen environmental law, protect new organisms or habitats, or ban a new chemical, the UK must calculate the business cost and ignore the benefits, and then the Department concerned must justify how it fits with the overall reduction target. This rule creates a massive disincentive for Ministers, Departments and civil servants to improve regulation

The National Audit Office report on DEFRA’s progress in implementing EU exit had grave concerns about the long-term function of the UK’s chemical regulatory system. It was very critical, although I acknowledge that some progress has been made. CHEM Trust told me in a meeting that it is also concerned about the rapid warning systems. UK environmental health officers could discover, for example, lead paint on children’s toys or dangerous chemicals in baby products and baby foods, but because of the downgrading of their work, and that of trading standards, we are no longer going out looking for those problems and are very reliant on colleagues in other EU member states alerting us to the need to take such products off the market.

In conclusion, we have been gravely concerned for the past two years. When people voted to leave the EU, they did not vote to have weaker chemical regulation standards or for UK companies to leave the country in order to have better access to EU markets and to have to pay twice for the same registrations. They certainly did not vote for a flood of cheap imports to come into this country without any customs checks or for our children to be less safe from toxic chemicals. I hope that that is not where we end up. It shows the need for us to have a proper transition period and to remain in the single market and the customs union, to avoid such a devastating outcome.

[Norman Lamb (North Norfolk) (LD)]

I associate myself with the concerns raised by the Chair of the Environmental Audit Committee, the hon. Member for Wakefield (Mary Creagh), by the Opposition spokesperson, the hon. Member for Workington (Sue Hayman), and by the Scottish National party spokesperson, the hon. Member for North Ayrshire and Arran (Patricia Gibson). For those who raised the specific point about the risks of no deal, the most serious concerns could be avoided by the Government simply ruling it out. That is why it is so important for Parliament to assert its authority this week, to prevent the disaster of leaving the EU with no deal.

I will confine my main remarks to a question raised by Rolls-Royce, which contacted me in my capacity as Chair of the Select Committee on Science and Technology. I challenged the Minister during her opening remarks, but I have to say that I was not convinced or satisfied with her response so I want to return to the issue. The concern is that, as it stands, the draft statutory instrument looks as if it is flawed, and that flaw could have very serious consequences for UK companies.

The UK REACH SI takes account of a number of scenarios, addressing, for example, the issue of an EU authorisation held by a UK entity on which a UK downstream user is dependent and, equally, that of an EU authorisation held by an EEA entity on which a UK downstream user is dependent. However, it has been put to me that the scenario that is not addressed—I really would like the Minister to deal with this specifically—concerns an application for EU authorisation submitted by an EEA entity for which a decision has not yet been made and on which a UK downstream user is dependent.

According to Rolls-Royce, approximately 10 applications for authorisations to use or supply particular chemicals are waiting for a decision by the European Commission, which, as its decision-making process proceeds, takes advice from the European Chemicals Agency and from member states. The likelihood is that the applications currently submitted will not be decided by 29 March. The applications have been submitted by an EEA entity, not by a UK company. However, UK companies downstream in the supply chain—the end users of those chemicals—are reliant on the EEA manufacturer and supplier holding a current authorisation. In the event of no deal, if the EEA entity manufacturing and supplying the chemical to a UK company has not received its authorisation from the EU by 29 March, the UK company that uses that chemical would immediately become non-compliant with the UK REACH SI.

I would be delighted if the Minister intervened on me to address this specific question: what will happen to those companies, including many small and medium-sized enterprises that probably have no idea about all this complexity, that will immediately become non-compliant after 29 March? The consequences for them are potentially disastrous. They would be acting unlawfully in using those chemicals in this country after 29 March. I would be delighted if the Minister reassured the House now. If she is not able to do so, then this statutory instrument has to be opposed because it will have devastating consequences, quite apart from the other concerns that have been expressed in this debate. I urge the Minister, who remains silent, to take this away, rethink it and ensure that it addresses those concerns properly and fully. Without doing so, there will be very serious consequences.

[Mary Creagh]

I, too, have been contacted by Rolls-Royce and Make UK, the former Engineering Employers’ Federation, which says that the chemicals affected—these in-flight chemicals, if you like—are a range of chromates using coatings, sealings, paints, primers and touch-up preparation, including chromium trioxide, which is used in the chrome plating industry and is significant for the automotive supply chain. It says that limiting the use of these substances would affect a wide range of component part manufacturers, processing houses, and maintenance and repair facilities, as well as other equipment manufacturers. This is exactly what the Environmental Audit Committee warned about two years ago: market freeze, where we simply freeze our automotive supply chains. Does the right hon. Gentleman agree that in a heavily regulated industry such as aerospace people cannot just switch suppliers from one day to the next?

--- Later in debate ---

[Patricia Gibson]

Will the Minister give way?

[Mary Creagh]

Will the Minister give way?

[Dr Coffey]

I will not be giving way in my closing remarks—[Interruption.] Well, I am trying to answer the questions that I have already been asked. On what industry needs to know to do, we have had extensive discussions with a number of businesses and trade associations. We have launched a business readiness campaign targeting downstream users, in particular, and we continue to engage with the industry in that regard.

A question was raised about intellectual property. It is fair to say that the intellectual property remains with the company that submits it, but if companies already own the data, they can of course submit that to UK REACH. If not, they will need to arrange access and, as I pointed out, some are already starting to do so. Some—I mentioned CEFIC and the CIA in the UK—have encouraged their members with consortium registrations to make sure that they make that information readily available. Companies can, of course, employ ORs—only representatives—to hold a registration in the EU, just as they may do for access to other markets around the world, while maintaining their UK registration.