Draft Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019

Stephen Doughty Excerpts

Monday 21st October 2019 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)]

I beg to move,

That the Committee has considered the draft Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019.

May I say what a pleasure it is to serve under your chairmanship, Mr Hanson, and congratulate you on becoming a grandad for the first time? [Hon. Members: “Hear, hear!”]

The regulations, which were laid before the House on 11 July, will disapply directly effective rights of establishment and the provision of services derived from article 49, on freedom of establishment, article 56, on free movement of services, and article 57, the definition of “services”, of the treaty on the functioning of the European Union—TFEU—if the UK leaves the EU without a withdrawal agreement. Certain directly effective rights, derived from article 18 of the TFEU, prohibit discrimination on grounds of nationality within the scope of application of the EU treaties. For completeness, the regulations therefore also disapply article 18 of the TFEU in so far as it relates to the disapplication of rights of establishment and provision of services.

The regulations also disapply equivalent or similar articles derived from the European Economic Area agreement between the EEA countries, the free movement of persons agreement with Switzerland, and the Ankara agreement and the additional protocol with Turkey. Henceforth those will be referred to as countries with associated agreements.

Directly effective rights of establishment and free movement of services ensure that nationals from EU member state territories can be self-employed, own and manage a company and provide services on a temporary basis in another member state under the same conditions as that state’s own nationals, and that they can receive services without facing certain restrictions in the EU single market. Rights derived from the TFEU are based on reciprocal relationships between EU member state territories; and rights derived from EU bilateral and multilateral agreements are based on reciprocal relationships between EU member state territories and certain non-EU territories.

The rights are retained in UK domestic law on exit day by virtue of section 4 of the European Union (Withdrawal) Act 2018. The Government have decided to disapply the rights as part of their preparations for Brexit on 31 October. The decision was taken for three primary reasons. First, the rights will no longer be reciprocated. The rights apply only to nationals of one EU member state or country with an associated agreement operating in the territory of any other EU member state or country with an associated agreement. As a result, once the UK ceases to be a member state of the EU, the rights will automatically no longer be reciprocated.

The second reason is sovereignty. Given that the rights will no longer be reciprocated, failing to disapply the rights in UK law would leave a lack of clarity as to whether EU nationals and nationals of countries with associated agreements had additional rights, compared with nationals of other countries, to challenge the laws and decisions of UK authorities after Brexit. In turn, that could restrict the Government’s future ability to regulate, particularly when UK nationals will no longer have the benefit of these rights in the EU.

The third reason is compliance with international law. Disapplying the rights will facilitate the UK’s compliance with international trade law and specifically the World Trade Organisation’s general agreement on trade in services—GATS—ensuring that the UK is not in violation of the most favoured nation principle.

I want to move on to impact. The Government were keen to ensure that the regulations received proper scrutiny before being brought before the House. I can confirm that the Government sought and received the consent of the devolved Administrations in Scotland and Wales to legislate on this matter, as the treaty rights being disapplied could, in a domestic context, impact on both reserved and devolved policy. This included agreement from the Scottish Parliament’s Economy, Energy and Fair Work Committee. The Government also notified the Northern Ireland civil service of our intention to legislate.

In addition, the Government engaged fully with the Joint Committee on Statutory Instruments. The Committee considered the regulations at its meeting on 4 September and chose not to report them to either House. The instrument was also considered by the Secondary Legislation Scrutiny Committee at its meeting on 23 July, and it drew the instrument to the special attention of the House on the grounds that it gives rise to issues of public policy likely to be of interest to the House.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I appreciate that I have not been selected as a member of the Committee, but I understand that I have the right to speak and ask questions on behalf of my constituents. The Minister is obviously getting his defence of this highly controversial measure in early. Does he not accept that it has caused great alarm to many self-employed EU citizens who have been operating legitimate and important businesses in our communities up and down the country? I was contacted by a constituent today who was simply unaware of this and is deeply alarmed.

[Nadhim Zahawi]

That is precisely why I am going into some detail on why the regulations will have no impact at all on the work or services provided by EU nationals or nationals of Turkey or Switzerland.

Let me make some more headway on the reasoning given by the Secondary Legislation Scrutiny Committee. For example, the Committee noted that the instrument seeks to ensure that the UK is compliant with WTO law and that it will make it an offence to dishonestly use illicit satellite decoder cards from the EU. I will attempt to address both of those points momentarily. However, I want to reassure the House on a number of aspects of the regulations: the practical impact that we expect from the disapplication of these rights; the interaction between these rights and EU citizens’ rights, which I think was essentially the thrust of the concern of the hon. Member for Cardiff South and Penarth on behalf of his constituents; and the impact of the disapplication of these rights on the immigration regime.

First, with respect to the practical impact of the regulations, they do not impose any additional restrictions on EU nationals or EU-based businesses, or on the nationals and businesses of the countries with associated agreements, at the point at which we exit the EU. This is because existing UK legislation is expected to be compliant with these rights. The Government have prepared as thoroughly as possible to identify policy areas that are reliant on the establishment and free movement of services treaty rights, and therefore have a good understanding of where direct policy impacts can be expected as a result of disapplying these rights today. With the exception of an impact on the use of satellite decoder devices, no direct policy impacts were identified during that preparation. The regulations will impact on the use in the UK of satellite decoder devices intended for EU audiences in order to dishonestly receive a programme with the intent of avoiding a charge. This is as a result of aligning the law with that already applied for satellite decoder devices intended for non-EU audiences.

Secondly, on citizens’ rights, the rights disapplied by the regulations should not be confused with the citizens’ rights of EU citizens currently resident in the UK, which are being protected separately. The UK’s guarantee to EU citizens is that those who are resident in the UK by exit day will still be able to work, study and access benefits and services, whatever the scenario. This is separate to, unrelated to and unaffected by these regulations.

Thirdly, with regard to immigration, these regulations will not in themselves have any impact on the immigration regime applying to EEA, Turkish and Swiss nationals in the UK. The Government have announced that free movement as it stands under EU law will end on 31 October if we leave the EU without a deal. A new points-based immigration system will be introduced from January 2021. Until then, much of the free movement migration framework will remain until the UK Parliament passes legislation to repeal the Immigration (European Economic Area) Regulations 2016.

The regulations that we are considering today carve out the rights in so far as they fall within the scope of the immigration regime applied to Swiss nationals and Turkish nationals. This is to ensure that changes to the immigration regime applied to Swiss nationals and Turkish nationals come into force via primary immigration legislation. These regulations are an important part of the Government’s preparation for Brexit. They facilitate the UK’s compliance with international trade law and they preserve the UK’s freedom to regulate, should this Government or a future Government choose to do so—after we have left the EU, of course.

I commend the regulations to the House.

[Bill Esterson (Sefton Central) (Lab)]

It is an even greater pleasure than usual, Mr Hanson, to serve under your chairmanship. I congratulate you on becoming a grandad for the first time and I hope we will not detain you for too long from visiting your new grandchild, which I know you are keen to do—but I apologise that I will detain you for a little while.

Before we consider these regulations, we should consider the comments of the3million, the organisation representing the more than 3 million EU and EEA citizens resident in the United Kingdom. The organisation has described this measure as not being what was promised by the Government and says that it undermines promises made by the Government, which, of course, is something that the Democratic Unionist party has been only too familiar with in recent days.

What is it that we are considering today? We are considering the removal of the rights of EU, EEA, Swiss and Turkish nationals who are self-employed or business owners or operators in the United Kingdom. Who are these people and how will they be affected? They are thousands—potentially hundreds of thousands —of people who are working in professional services, entrepreneurs, people who operate start-up businesses, people who operate in IT and in professional and financial services, architects, or self-employed workers in the gig economy. There are serious potential consequences not just for them but for their staff, their customers and their suppliers—both for businesses and the self-employed—as well as for their families and the local economies in which they operate.

The Minister talked about the impact of the regulations; in fact, at one stage, he said that he was keen to move on to the impact. But there is no impact assessment, so how can we possibly know? This is a perennial discussion—it seems that we have been dealing with the issue long enough for it to be perennial and not just something of a repeated nature. Every time we have a set of these regulations, the impact assessment is lacking. Because this measure affects so many people, it is impossible for the Minister to say that it will not have a significant impact on the economy. He simply has no way of knowing that, because that investigation—that impact assessment—has not been carried out.

[Stephen Doughty]

My hon. Friend is making strong points, with which I completely concur. He will note that the Minister used very careful words: he said “no further restrictions at the point of exit”. The fact that this matter is being considered in this way, rather than through the immigration Bill, will raise significant concerns about these rights changing in due course. We on the Select Committee on Home Affairs have looked at the subject many times. This issue did not come up, and we have discovered all sorts of problems with the existing EU settlement scheme, let alone with this provision, which many people were unaware of.

[Bill Esterson]

I am grateful to my hon. Friend for those remarks, which I will address in some detail later.

--- Later in debate ---

[Nadhim Zahawi]

It is incumbent on us all to be sensible and to reflect on today. Let us not add fuel to the flames of division. Let us come together. Hon. Members heard in my opening remarks that we have consulted thoroughly with our colleagues in Scotland and Wales, so I ask everyone to please act responsibly.

[Stephen Doughty]

I gently say to the Minister that it is certainly not my intention, or that of many hon. Members, to scaremonger in any way. The fact is that we are representing our constituents who are scared and who have concerns. I was not aware of this issue until my constituents raised it with me. I have to say that I do not agree with his characterisation of the EU settlement scheme. The Home Affairs Committee, on which I sit, has repeatedly found serious concerns and problems with how it operates, and indeed with the entire immigration system. That is why people have those concerns and are scared. It is genuine; it is not us scaremongering.

[Nadhim Zahawi]

I am grateful to the hon. Gentleman for that thoughtful intervention. I only ask that he shares the debate with his constituents, so that they can read, in black and white, what I have outlined as the true position of the legislation.

I again thank you, Mr Hanson, and Committee members. The regulations form an important part of our preparations to leave the EU, hopefully with the great deal that the Prime Minister has negotiated. They help to preserve our freedom to regulate after we have left the EU with respect to the establishment and carrying on of business in the UK, and the provision of services. They also facilitate our compliance with international trade law, which is important. We pride ourselves on being a country where people obey the rule of law—a subject that has been widely debated in this place and across the media. I commend the regulations to the Committee.

Question put.