Delegated Legislation Committee
Draft Kimberley Process Certification Scheme (Amendment) (EU Exit) Regulations 2019
The Committee consisted of the following Members:
Chair: Mr Nigel Evans
† Caulfield, Maria (Lewes) (Con)
† Cleverly, James (Braintree) (Con)
† Duncan, Sir Alan (Minister for Europe and the Americas)
† Ford, Vicky (Chelmsford) (Con)
† Freer, Mike (Lord Commissioner of Her Majesty's Treasury)
† Grant, Peter (Glenrothes) (SNP)
† Hands, Greg (Chelsea and Fulham) (Con)
† Heald, Sir Oliver (North East Hertfordshire) (Con)
† Hoey, Kate (Vauxhall) (Lab)
† McFadden, Mr Pat (Wolverhampton South East) (Lab)
† McInnes, Liz (Heywood and Middleton) (Lab)
Mann, John (Bassetlaw) (Lab)
† Smith, Nick (Blaenau Gwent) (Lab)
† Stewart, Bob (Beckenham) (Con)
† Twigg, Derek (Halton) (Lab)
† Umunna, Chuka (Streatham) (Lab)
Jeanne Delebarre, Committee Clerk
† attended the Committee
Seventh Delegated Legislation Committee
Tuesday 5 February 2019
[Mr Nigel Evans in the Chair]
Draft Kimberley Process Certification Scheme (Amendment) (EU Exit) Regulations 2019
I beg to move,
That the Committee has considered the draft Kimberley Process Certification Scheme (Amendment) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Evans.
During the 1990s, the trade in conflict diamonds was a significant cause of instability, particularly in Africa. The Kimberley Process certification scheme is an important tool for reducing conflict in Africa and elsewhere. Great strides have been made since its inception in 2002. Today, more than 99% of the global supply chain of rough diamonds is certified as conflict-free.
From the beginning of the Kimberley process, the UK has been represented by the European Union. Together with our European partners and other participants, the UK has been active in support of the Kimberley process and its principles: increasing transparency, ensuring that trade is limited to Kimberley process participants, and applying effective controls.
The Kimberley process is not a treaty and has no basis in international law. It is simply a grouping of interested states known as the “participants”, which have decided to enact domestically the same process for verifying the trade in rough diamonds at their borders. They then made the political decision to permit the trade in rough diamonds only with similarly minded states within the Kimberley process. Its legal effect, therefore, comes from domestic legislation. Hence, if we are to continue to participate in the process after we leave the EU, as we intend, the draft regulations are essential.
As Members will be aware, until 29 March 2019 the UK remains a full member state and is subject to all the rights and obligations of EU membership. Those include trade arrangements that fall within the EU’s common commercial policy, such as the Kimberley process. Under the terms of the withdrawal agreement, we have agreed with the EU that it will notify international partners that the UK is to be treated as a member state during the implementation period. That would mean that the UK continues to participate, represented by the EU, and that the UK trade in Kimberley process-compliant rough diamonds would continue.
In the event that we are unable to enter an implementation period, our participation through the EU would end. UK trade would be frozen until our application for participation was approved by the other participants in the Kimberley process. In either case, this draft legislation will ensure that we continue to comply with the requirements of the Kimberley process. It will secure our borders, prevent any non-compliant rough diamonds entering the UK supply chain and send a strong message to would-be smugglers that the UK is not a recipient of conflict diamonds.
Will my right hon. Friend give way?
May I first explain the logic fully? Perhaps my hon. Friend will save his comments for later in the Committee sitting, when I shall be happy to answer.
The draft regulations will also reassure the Kimberley process bodies of the UK’s commitment to the scheme ahead of our application for independent participation. The instrument does not undermine the wider EU withdrawal negotiations, nor does it assume no deal. Instead, it lays the groundwork for our future relationship with, and independent participation in, the Kimberley process. That matters because maintaining our relationship with the process is an intrinsic element of our international commitment to conflict prevention. It is also pivotal to how we support UK business to operate responsibly in post-conflict and difficult environments.
In 2017, the UK’s exports in rough diamonds outside the EU were valued at £67 million. We expect that to continue. The Government Diamond Office implements the Kimberley process in the UK and works closely with Border Force to ensure that we meet the minimum standards set by the process.
As an EU member state, we are a well-respected participant in the Kimberley process, and we expect to remain so as an independent participant. We have already informed the EU of our intention to initiate our application. Demonstrating that we have appropriate legislation in place is a fundamental part of that application process. That is the purpose of the instrument, which, once passed, will apply even if we are not a participant immediately at the point that the UK leaves the European Union or after any implementation period.
I welcome the opportunity to hear any comments. The regulations are essential to the process I have described and I commend them to the Committee.
It is important to have clarity about the Kimberley process certification scheme in future. It is right that the UK should continue to participate in international initiatives to stop the trade in conflict diamonds to ensure that the purchase of diamonds does not finance violence in Africa.
I have several questions to ask the Minister in the interests of clarity. The explanatory memorandum does not give a great deal of detail about the consequences of the legislation, specifically the potential damage to trade if the UK’s application to the Kimberley process is delayed. I ask the Minister to provide further information to enable us to make informed decisions.
The document that describes why the measure was brought to the special attention of the House states that it,
“gives the Secretary of State power, by statutory instrument subject to the affirmative procedure, to make further amendments to the Council Regulation where he or she ‘considers that this [Council] Regulation is no longer effective to ensure that the law of the United Kingdom is consistent with the international Kimberley Process requirements’.”
It also states that,
“this mechanism allows no more than is appropriate”,
which raises concerns about how clear the powers are. I should be grateful for clarification from the Minister on that point.
On the broader impact of Brexit on the diamond trade in the UK, it is my understanding that 94% of our trade in that area is with the EU. That will most likely disappear after Exit day, regardless of the outcome of our application to the Kimberley process. After we leave the EU, trade will probably go directly to the EU, rather than via the UK, as before. Has the Department made any assessment of the cost of that to the UK?
Finally, on the lack of any impact assessment, I find it unsatisfactory that the documents state that no impact assessment has been done because it is not believed that there is any impact. I do not think that is a good enough reason not to do an impact assessment. The point of doing an assessment is to ascertain what the impact is. I thank the Minister for his remarks and I should be grateful if he would clarify those points.
I have family from Sierra Leone; it was the place of my mother’s birth. The country was racked with conflict, in large part driven by the illegal diamond trade. Does the Minister agree that this statutory instrument not only helps to ensure that the trade in illegal rough diamonds is curtailed, but sends a powerful signal to our international friends and partners that, irrespective of our membership of the EU, the UK stands by its moral commitments to some of the poorest countries in the world? By passing this statutory instrument, the UK Government will be sending a very powerful signal to Sierra Leone, in particular, which has a longstanding relationship with this country, that we take its plight seriously and that we are doing everything we can to ensure that conflict does not arise again in the future.
It is a pleasure to serve under your chairmanship, Mr Evans. I thank the Minister for his comments.
I will not oppose this statutory instrument, because it is important that the protection that is achieved through the Kimberley process continues, and it is vital that the United Kingdom remains part of it. I would obviously much rather that we did not have to go through this, and I very much hope that this statutory instrument is not needed, because it will come into force only if we leave the EU without a deal. Given that nobody is openly supporting that, it would be an unfortunate, if not ridiculous position for us to be in.
What difference does this statutory instrument make to the United Kingdom’s ability to influence the direction of the Kimberley process and its participating countries in the future? Does it make it easier for the United Kingdom to address some of the weaknesses and limitations in the existing process? Although the Kimberley process is effective to an extent in stopping the trade of rough diamonds where it is likely to finance armed violence against a country’s recognised Government, it covers only rough diamonds, not cut or polished stones. Does the United Kingdom expect actively to promote an extension of the scheme to cover the trade in finished or polished diamonds?
The definition of conflict diamonds appears to refer only to the use of the diamond trade to finance violence against the recognised Government of a country. There is no doubt that, in the recent past, the Governments of some of the biggest diamond-producing countries in the world have used the diamond trade to finance repression and violence against their own people. That has certainly happened in Zimbabwe, and it may have happened in the Democratic Republic of the Congo and other diamond-producing nations. In addition, appalling human rights abuses all too often go with the diamond trade and the diamond business. A country’s natural resources should be used for the wellbeing and welfare of the people of that country, and international traders and speculators should get only what is left. That is quite clearly not what happens in the diamond trade.
It is important that, where there are massive fortunes to be made through the exploitation of natural resources, those who do the work and face the physical risks of carrying it out get fair reward for their time and labour. People who work in the diamond mines in a lot of those countries certainly do not get that, and their families get next to nothing. All too often, miners are killed in accidents because the safety precautions are inadequate. Although the Kimberley process helps to cut down—although not to eliminate completely—one way in which the substantial wealth that diamonds represent can be abused, it does not even begin to touch some of the other ways that it can be misused.
It is a constant source of shame to us all that so many of the people who are involved in creating some of the most valuable and highly sought-after goods on the planet live and work in utterly intolerable conditions. At the moment, none of that is addressed through the Kimberley process. I hope the Minister will give us some kind of indication of how the UK might seek to use its influence to ensure that, in the future, those whose labours produce so much wealth for so many people have a chance to enjoy a fair share of it for themselves.
The Kimberley Process certification scheme was established in 2003. Although it is a great system and I totally support the draft regulations, we must not consider it perfect. The scheme is not perfect; blood diamonds are still used by various regimes for different reasons, as the hon. Member for Glenrothes outlined.
We should obviously continue with the process, but I was not sure whether the Minister was implying that we would not be able to buy stuff until we get this—will he respond to that? We cannot get diamonds into this country if we do not get the draft regulations through—is that right?
I welcome the comments of both the Minister and the shadow Minister. The draft regulations are one of the many important statutory instruments that need to be passed before 29 March, whether we leave with or without a deal, so I welcome it.
Although I should probably know this, I would like to check it with the Minister: exactly how many countries participate in the Kimberley process? As part of the EU, we have been a member for a long time. Is there any doubt at all in his mind about whether a participant in the process might try to stop us joining? Is the process of becoming a member subject to a majority vote, or is it simply a matter of automatically becoming a participant when we leave or the implementation period is finished?
Will the Minister also remind me whether Zimbabwe is a participating country? If so, that draws attention to what the hon. Member for Glenrothes said—that some changes need to be made to the way that the process works. We as a country, when we are there in our own independent right, might be able to help make such changes.
I am grateful to hon. Members for their comments and questions. Let me endeavour to answer them in turn.
I will respond first to the hon. Member for Heywood and Middleton, on the Opposition Front Bench. Among other things, if we were not a participant, others would not trade in rough diamonds with us, so we would be out of the trading system that has emerged on the back of the Kimberley process. Potentially, that could lead to a weakness in the policing of the trade in rough diamonds.
The cost would be the same as now. Likewise, the impact is unchanged, hence the absence of a need for an impact assessment. The point that I would make is that the draft regulations are simply the transposition of the EU-based regime to an autonomous UK one, so that we can participate autonomously. I suppose the parallel is with the Sanctions and Anti-Money Laundering Act 2018: we used to do all sanctions with the EU, but now we will be able to do them on our own. The regulations are one of the changes necessary to adjust to us leaving the European Union.
In response to the hon. Member for Vauxhall, 82 countries are members, which include Zimbabwe. We are confident that our existing participant status will be embraced by the 81 as we reapply on a slightly different footing.
My hon. Friend the Member for Braintree is absolutely right to emphasise again the importance of this regime in addressing some of the worst aspects of conflict and rapacious behaviour in war-torn areas. My hon. Friend the Member for Beckenham is also right that this is not a perfect regime, but it has been a successful and improving one, given what was there before, which was quite simply nothing.
The hon. Member for Glenrothes asked about influencing direction. We would remain a full participant, and would be so on our own, so inasmuch as we could influence direction in the past, we will still be able to do so in future. The draft regulations are a transposition of the regime—that is what such statutory instruments are for—which does not open up immediately any scope for adjusting, improving or amending, because that is not what the changes before us are intended to do.
I thank my right hon. Friend for allowing me to intervene again. May I ask whether, on 30 March—assuming that we leave on 29 March, as we will—Hatton Garden, say, will be able to import legal diamonds into the country? Is that what this is all about?
There is a distinction between polished and rough diamonds—
I am sorry.
So this is about a particular category of diamond. The draft regulations mean that if we were a participant, anything legal in the Kimberley process would include us in that process; if we do not pass them today, it would not.
Let me answer one more question put to me about the powers. The Kimberley process requires participating Governments to certify the origin of rough diamonds and to put in place effective controls to prevent conflict diamonds entering the supply chain. That is done through the Kimberley Process certification scheme, of which we would be a part if the draft regulations go through. In the process, each international shipment of rough diamonds must be accompanied by a Kimberley Process certificate relating to that specific shipment. In other words, the certificate is valid for one specific journey only. The certificates are issued by the exporting country’s Kimberley Process authority, which has controls in place to verify that the shipments are conflict-free.
As I outlined in my opening speech, the draft regulations are crucial to our participation in the Kimberley process and, in turn, to our conflict prevention objectives and obligations. The instrument is fully consistent with the Prime Minister’s commitment to be a supportive member of the European Union until we leave, and it will ensure the UK’s continuous compliance with the scheme. It has the added advantage, Mr Evans, of making me a greater expert in rough trade than even you, sir. I commend the regulations to the Committee.
Question put and agreed to.
Draft Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019
The Committee consisted of the following Members:
Chair: Sir Christopher Chope
Abrahams, Debbie (Oldham East and Saddleworth) (Lab)
† Blackman, Bob (Harrow East) (Con)
† Blackman, Kirsty (Aberdeen North) (SNP)
† Glen, John (Economic Secretary to the Treasury)
† Hepburn, Mr Stephen (Jarrow) (Lab)
† Johnson, Gareth (Dartford) (Con)
† Knight, Julian (Solihull) (Con)
† Lopez, Julia (Hornchurch and Upminster) (Con)
† Mercer, Johnny (Plymouth, Moor View) (Con)
† Pearce, Teresa (Erith and Thamesmead) (Lab)
† Reynolds, Jonathan (Stalybridge and Hyde) (Lab/Co-op)
† Shuker, Mr Gavin (Luton South) (Lab/Co-op)
† Smith, Jeff (Manchester, Withington) (Lab)
† Walker, Thelma (Colne Valley) (Lab)
† Whittaker, Craig (Lord Commissioner of Her Majesty’s Treasury)
† Whittingdale, Mr John (Maldon) (Con)
† Wragg, Mr William (Hazel Grove) (Con)
Peter Stam, Committee Clerk
† attended the Committee
Eighth Delegated Legislation Committee
Tuesday 5 February 2019
[Sir Christopher Chope in the Chair]
Draft Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019
I beg to move,
That the Committee has considered the draft Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Sir Christopher. As part of contingency preparations for a no-deal scenario, the Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying statutory instruments before the House under the European Union (Withdrawal) Act 2018 to deliver that, and a number of debates on statutory instruments have already been undertaken in this place and in the House of Lords. The SI being debated today is part of that programme and was debated in the House of Lords yesterday.
The SI will fix deficiencies in UK law for financial markets and insolvency regulations to ensure that they continue to operate effectively post exit. The approach taken in this legislation aligns with that of other SIs being laid under the withdrawal Act—providing continuity by maintaining existing legislation at the point of exit, but amending where necessary to ensure that it works effectively in a no-deal context. The instrument being debated today concerns insolvency-related protections that are provided to systems and central banks under the EU settlement finality directive. “Systems” for these purposes are entities such as central counterparties, central securities depositories, and payment systems. These systems provide essential services and functions relied on by the financial services sector. For example, central counterparties stand between counterparties in financial contracts, becoming the buyer to every seller and the seller to every buyer. They guarantee the terms of a trade even if one party defaults on the agreement, reducing counterparty risk.
Under the SFD, a European economic area-based system can be designated by its member state’s designating authority. Once a system is designated, funds or securities placed in that system by a system user cannot be clawed back in the event of the system user going into insolvency. This framework is intended to benefit both systems and their users. In particular, a system may provide services on more favourable terms to a user if it has SFD protections in place. In certain cases, membership of a system is contingent on those protections being provided, as that is an essential tool for the system to manage risks. Designation is therefore important, as it facilitates the smooth functioning of, and confidence in, financial markets.
The Bank of England and the Financial Conduct Authority are the designating authorities in the UK. When the Bank or FCA designates a system, it currently informs the European Securities and Markets Authority—ESMA—which places it on the EU register of designated systems. The SFD provides similar protections to central bank functions across the EEA. Collateral received by an EEA central bank in accordance with its functions, such as emergency lending, cannot be clawed back if the relevant counterparty to the central bank is subject to insolvency proceedings. The relevant EU laws—the SFD and the financial collateral arrangements directive—are implemented in the UK via the Financial Markets and Insolvency (Settlement Finality) Regulations 1999, the Companies Act 1989, the Financial Collateral Arrangements (No. 2) Regulations 2003 and the Banking Act 2009.
Should the UK leave the EU without a deal or implementation period, there will be no framework for the UK to recognise systems designated in EEA jurisdictions, which in turn may risk the continuity of services from those designated systems for UK firms. This SI introduces changes to mitigate risks to UK firms, to ensure that settlement finality protections continue to operate effectively following the UK’s withdrawal. First, the SI introduces a UK framework for designating any non-UK system. To do that, the Bank of England’s existing powers to designate and charge fees will be expanded to non-EEA systems, so that they can be designated under UK law. Moreover, the Bank of England will be able to grant protections to non-UK central banks, including EEA central banks, that already receive protections under the SFD. That will help to maintain the effect of the current framework, providing continuity to UK firms accessing systems and central banks, while assisting UK firms in accessing the global market. In making those changes, the SI also maintains existing designations for UK systems that were made by the Bank of England before exit day.
Secondly, the SI establishes a temporary designation regime. That provides temporary designation for a period of three years to existing designated EEA systems that intend to be designated under the new UK framework. The purpose of temporary designation is to allow time for designation applications to be processed by the Bank of England, while ensuring continuity of access for UK firms to relevant EEA systems immediately after exit day. The SI also grants the Treasury the power to extend that period, should the Bank of England need more time.
The Treasury has been working very closely with the Bank of England and the Financial Conduct Authority in drafting this instrument. The Treasury published the instrument in draft, alongside explanatory notes to maximise transparency to Parliament, industry and the public, on 31 October 2018. The Treasury has engaged with the financial services industry, in particular systems, on the SIs and will continue to do so going forward. Last Wednesday the Treasury also published the impact assessment that accompanies the SI. The impact assessment confirmed that there is no impact to UK firms as a result of bringing forward this legislation. However, there will be costs to EEA firms, which will need to familiarise themselves with the UK regime and pay fees to the Bank of England in order to be designated.
In conclusion, the Government believe that this legislation is necessary to ensure the smooth functioning of financial markets in the UK, if the UK leaves the EU without a deal or an implementation period. I hope colleagues will join me in supporting the draft regulations, which I commend to the Committee.
It is a pleasure to serve under your chairmanship, Sir Christopher. Once again the Minister and I are discussing a statutory instrument that would make provision for a regulatory framework after Brexit in the event that we crash out without a deal. On each of these occasions, as the Minister knows well, I and my Opposition Front-Bench colleagues have spelled out our objections to the Government’s approach to secondary legislation.
The volume of EU exit secondary legislation is deeply concerning for accountability and proper scrutiny. The Government have assured the Opposition that no policy decisions are being taken. However, establishing a regulatory framework inevitably involves matters of judgment and raises questions about resourcing and capacity. Intrinsic decisions are being made on a daily basis now about supervisory arrangements, and we do not believe that is the correct process for ensuring the scrutiny required for measures of this kind.
Today we turn our attention to the draft financial markets and insolvency provisions. The regulations serve an important purpose in ensuring the stability of our overall financial market infrastructure in the event of insolvency, so there must be due care and attention paid to carrying those safeguards into domestic legislation. Replacing EEA references with UK ones sounds relatively straightforward. However, I would like to ask the Minister some questions about the bestowal of powers on the Treasury and about the establishment of the temporary designation regime, which I will refer to as the TDR, both of which are brought about by the SI.
According to a “Dear CEO” letter sent to relevant companies by the Bank of England in July 2018, those companies were advised to prepare for a TDR and begin a pre-application process. However, it is not clear whether the TDR we are debating today applies to one that will exist solely in the event of no deal, or whether this is an interim plan for a transition period. Whichever is the case, this seems extremely late to be establishing such a framework.
The Minister and I debated the establishment of a temporary permissions regime back in October, to give firms sufficient time to apply for it, but our exit from the European Union is now next month. How does the Minister propose that companies will have enough time to apply, or that the Bank of England will have sufficient capacity to deal with the likely volume of incoming applications, along with those for the temporary permissions regime?
I note in the draft regulations that notification must have been made prior to exit day of the intention to apply for temporary permission. Does the Treasury or the Bank of England have an estimate of how many participants are likely to apply under the TDR? How will the TDR operate and where is that outlined? From the Minister’s speech, it sounded as though it would perhaps be applicable only to firms that are already recognised, but I am unsure of that point and would be grateful for clarity on it.
The instrument also confers on the Treasury the power to extend the TDR as it sees fit. The Opposition’s concern is that that is granting an indefinite authority. Will the Minister explain why that is necessary? It would seem much more appropriate and democratic to include a sunset clause on such powers, to ensure appropriate checks and balances.
For that reason, this feels like one of the more blunt statutory instruments that we have discussed in relation to providing for a no-deal framework. I am quite concerned about that, but I would like to give the Minister the opportunity to respond to some of those concerns and give us some insight into those matters, before probing slightly further.
I thank the Minister for ensuring that an impact assessment was provided to us in advance. We have not always had one, and I am pleased that we do today. I found it incredibly helpful in preparing for the Committee, and in understanding the legislation and the impact the Government expect it to have. That was very useful.
The information that the Government have provided to us, particularly in the explanatory memorandum, still says that they believe that no deal is incredibly unlikely. The explanatory memorandum says of no deal that
“the government does not anticipate it arising.”
I understand that the explanatory memorandum was written back in October. I wonder whether the Minister is keen to update its phraseology so it is more in tune with the Prime Minister’s current views, given that no deal seems much more likely than it did around October.
I have a few concerns with the statutory instrument, some of which were covered by the hon. Member for Stalybridge and Hyde. The SI seeks to vary the powers of the Bank of England. It seems to me that that is a significant change. Any variation of the powers of the Bank of England should probably be discussed by the House in a bigger forum than a Delegated Legislation Committee. Whether the power of the Bank of England needs to be extended in this way to cover any transitional period is quite a serious matter, which probably needs to be looked at in the round, perhaps by the Treasury Committee.
The hon. Gentleman’s point about the power of the Treasury is incredibly important. Giving the Treasury unfettered power to extend the period is concerning, and that is certainly not something that I would be particularly happy to support. The Minister mentioned that the draft SI and the explanatory memorandum were published back in October. I would be interested to know—I have asked this before, so the Minister should expect me to ask this question—whether there were any hits on the website for the draft SI. There is no point in the Government putting it on a website if nobody looks at it, because then it is not fulfilling its purpose as a consultative document.
If people did look at the SI, did they comment on it? I understand that consultation was undertaken only with the FCA and the Bank of England, rather than more widely. That is certainly what the explanatory memorandum says. Did anybody else have any input into that consultation, to raise issues or make positive comments about the statutory instrument? Has the statutory instrument been changed since it was published in draft? I expect that if people had responded to the consultation with concerns, the draft statutory instrument could have been changed to take account of those concerns, so it would be useful to know whether any changes were made.
On the transitional designation, 126 EU systems currently benefit from protection under the settlement finality directive. According to the impact assessment,
“as of 24 January 2019, 26 systems have indicated their intention to enter the UK post exit regime.”
Presumably those 26 systems have done something to start the process for transitional protection, which is quite impressive considering that the transitional scheme does not yet exist.
How many of those 126 organisations have actually been contacted by the Bank of England? Has the Bank of England contacted all of them? Are they aware that they will need to do something in advance of 29 March, if things go ahead as envisioned? If they are not aware, why is the Treasury not asking the Bank of England to contact them to make them aware of their requirement to do that? We are very close to 29 March now. It would be sensible for those organisations to be aware that they have to notify their intention before exit day to take part in the transitional scheme, and that they then have to make a full application within six months. That would be incredibly useful.
There are a few more things I would like to raise. The hon. Member for Stalybridge and Hyde mentioned the issues with the Government saying they are not making policy decisions through the delegated legislation being made under the European Union (Withdrawal) Act 2018. It seems to me that the Government have made a very significant policy decision by not recognising things that are recognised in EU states by EU authorities. It seems to me that the Government have at no stage put it to Parliament that that is their policy position in all the delegated legislation coming through.
I am on the European Statutory Instruments Committee and we see a lot of statutory instruments coming through where the UK has decided unilaterally not to recognise EU qualification designation systems. There seems to be no clarity about which ones are not recognised and whether any will be recognised. Obviously, in this case, the Government are building in a transitional protection to recognise some things that have been recognised by EU authorities for a brief period. However, I have not seen that in any of the other instruments that have come forward. I am not clear whether that is a Government policy. It would help us all as parliamentarians to understand why the Government have taken a decision unilaterally, when the EU has not changed any legislation, not to recognise things on day one that have been recognised as appropriate under the current system. More information on the Government’s position on that would be incredibly useful.
I am concerned about not recognising those designations, because the EU has not changed its law and will not do so overnight on 29 March. Presumably, those regulatory regimes will not change overnight on 29 March, so they should still be appropriate. The more sensible legislative approach would be to continue to recognise those designations and, in the event of the EU or the UK making changes to its regulatory regime, to bring forward another SI or in some cases primary legislation to change that recognition, and to refuse to recognise those agreed under EU authority. The Government seem to have it backwards; this is certainly not how I would have done it if I were making these decisions.
Whatever happens, it is important that the SI works and there is continuity for the people and organisations that benefit from these protections. I understand that, in setting up transitional designation, the Government are trying to ensure that that happens. I am concerned about the lack of consultation. I get it that the Government have consulted the Bank of England and the FCA, but more consultation or evidence of consultation with the organisations affected would have been helpful. It would have been useful if the Government had come forward with that information.
What I am most concerned about is ensuring that transitional designation is fit for purpose—that the people who should use it can do so and are aware of their obligations, so that people are protected. I am also particularly concerned that the Treasury is being granted powers that I am not keen it should be granted without a sunset clause—that is a great idea—and that the Bank of England is being granted powers that I feel should be discussed in a bigger forum than a DL Committee. An awful lot of DL Committees are going on, so some Members might have missed the fact that this incredibly important Committee was happening and been unable to come along and say, “I’m not particularly happy about the way that this is being done.”
It would be useful if the Minister provided answers to some of those points. Depending on his answers, we might need to vote against the SI.
I thank the hon. Members for Stalybridge and Hyde and for Aberdeen North for raising those issues. I will start with the Opposition Front-Bench spokesman’s opening comments. He questioned the appropriateness of our journey through these many SIs. It is profoundly concerning to me that we have such a high volume to deal with every week. All I can do is ensure that the work has been done on the impact assessments, and that the engagement with industry has been thorough and its concerns responded to. I reassure him that, clearly, we are within the scope of the powers under the legislation.
Hon. Members asked a number of specific questions, which I shall try to address. The hon. Gentleman expressed concern about the provision being applicable only in a no-deal situation. I can confirm the SI is just for a no-deal scenario. The temporary designation regime allows EEA systems that currently benefit from UK protections under the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 by virtue of the UK’s membership of the EU to continue to do so after exit. As the hon. Member for Aberdeen North pointed out, the Bank of England clarified on 24 January which have already expressed a desire to join.
Can the Minister explain whether, in the event of the Prime Minister’s deal getting through and there being some sort of implementation period, he envisages a transitional regime or whether everything will just go ahead as it is currently?
I am very happy to respond. In the situation that we have a deal, which is what the Government wish to happen, we would enter the implementation period. That means we would have continuity of current arrangements until we secured the enhanced equivalence solution, which we would be working towards, by the middle of next year, before the end of the implementation period.
The hon. Member for Stalybridge and Hyde expressed concern about the cost. We estimate that 126 EEA firms benefit from UK protections via the SFD and would therefore be in scope for this regime. Each firm is expected to have a one-off familiarisation cost of £210, so the total cost would be £27,000.
The hon. Member for Aberdeen North asked about the extension of the Bank’s power to designate non-EEA systems, which she posited was a significant policy change to the EU SFD and therefore incompatible with the general onshoring approach. The key point is that if, in the undesirable circumstances that we leave the EU with no deal, the UK becomes a third country and therefore is treated the same as any other non-EU jurisdiction, the new regime would need to reflect that. The SFD is a directive rather than a regulation and so allows for a degree of member state discretion on transposition into national law. I suspect that is why there is the impression of some arbitrary decision being taken.
A number of member states, including the UK, have in place or are working towards a framework for designating non-EEA entities. I would therefore submit that the Bank’s power to designate non-EEA systems is not a significant policy change from how the SFD framework currently operates in the EU at member state level. I note the hon. Lady’s observations about how her approach would differ, in that, if changes were made to the EU directive, we would submit another SI. I cannot give her the explicit rationale for why we did not adopt that approach, but I am happy to write to her on that point.
The hon. Lady also raised concerns about who had looked at the SI and asked about hits on the website. I do not have that data. I do not know whether it has been collected; I do not think it has. We engaged with stakeholders, including the financial services industry, while drafting these SIs, and they were published in advance. We shared the draft legislation with industry to allow stakeholders the opportunity to familiarise themselves with our approach and to test our understanding of the impact, and it was welcomed and supported. I cannot give the hon. Lady a precise answer about the iterations leading to the final SI being laid before the House, but I can say that there are no concerns about where it has ended up.
The hon. Lady asked about my view on the likelihood of no deal and whether it has changed. Obviously, we cannot completely rule out the possibility that the UK will leave the EU without a deal, but from my perspective as a junior Treasury Minister, it is important that I deliver a fully functioning legislative and regulatory regime come what may, and that is what I am determined to do. We have engaged with stakeholders to ensure that happens. The Commons continues to debate and, I hope, approve SIs relating to no deal, but I think the process the Government are going through is well known.
The hon. Member for Stalybridge and Hyde asked what the procedure would be for extending the temporary designation regime. Under this instrument, the Treasury will be able to extend the temporary designation regime by an additional 12 months beyond the initial three-year period. We would do that by laying a negative SI, given that we would not be substantively changing anything; it would be an administrative change. We would lay a written ministerial statement before both Houses in advance of laying that SI, in order to inform them of the situation.
I suspect that the Minister may need some inspiration to answer this question, but could that be a cumulative process? Could it be used only once, or could a series of annual negative SIs be laid to prolong the process in perpetuity?
I am grateful for the advice I have received, mystically, from behind me. It could be a multiple approach, but, again, that would be justified in the written ministerial statement. It is quite difficult to see how that would go on in perpetuity, but if there was a justification from the Bank of England, that would be made clear and that would happen.
As the Minister managed to get divine inspiration for that question, he might manage to get some for this one. He has talked about the cost to companies of having to make these changes and go through the registration process. I failed to ask about, and the Minister did not mention, the additional cost that the Bank of England might incur from administering the transitional designation regime.
I am very happy to write to the hon. Lady about that. I think the cost would be minimal, and it would be in the context of the Bank’s overall work. I do not know whether the cost relevant to this directive can be isolated, but I will write to her in general about the resourcing of the work of the Bank of England.
The hon. Lady also asked whether the Government have decided not to recognise systems that are recognised by EU authorities. The mutual recognition process works by virtue of the UK being a member state and hence subject to the settlement finality directive. I may have raised this point earlier. When we leave the EU, we will no longer be subject to the SFD, so this is not a policy decision; it is a necessity to provide continuity in respect of EEA systems. That is why the temporary designation regime is being created.
There is also the question of our overall aspiration. Clearly, we hope to secure a deal, and therefore we have ambitious plans subsequent to that, during the implementation period, to have an ambitious arrangement with the EU where we have strong relationships, regulator to regulator. This SI is essential for ensuring that we continue to have an effective framework for financial markets insolvency in the UK in a no-deal scenario. I hope this sitting has been informative and that the Committee will join me in supporting this SI.
Question put and agreed to.
Draft Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019
The Committee consisted of the following Members:
Chair: Joan Ryan
† Benyon, Richard (Newbury) (Con)
Ellman, Dame Louise (Liverpool, Riverside) (Lab/Co-op)
Farrelly, Paul (Newcastle-under-Lyme) (Lab)
† Foxcroft, Vicky (Lewisham, Deptford) (Lab)
† Frazer, Lucy (Parliamentary Under-Secretary of State for Justice)
† Goldsmith, Zac (Richmond Park) (Con)
† Hair, Kirstene (Angus) (Con)
† Harrison, Trudy (Copeland) (Con)
† Hart, Simon (Carmarthen West and South Pembrokeshire) (Con)
† Kawczynski, Daniel (Shrewsbury and Atcham) (Con)
† Lopresti, Jack (Filton and Bradley Stoke) (Con)
† McDonald, Stuart C. (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
† Milling, Amanda (Cannock Chase) (Con)
† Phillipson, Bridget (Houghton and Sunderland South) (Lab)
† Qureshi, Yasmin (Bolton South East) (Lab)
Snell, Gareth (Stoke-on-Trent Central) (Lab/Co-op)
Williamson, Chris (Derby North) (Lab)
Anwen Rees, Committee Clerk
† attended the Committee
Eleventh Delegated Legislation Committee
Tuesday 5 February 2019
[Joan Ryan in the Chair]
Draft Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019
I beg to move,
That the Committee has considered the draft Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019.
The draft regulations form part of our ongoing work to ensure that if the UK leaves the EU without a deal, the necessary statutes will be in place. If Parliament approves the withdrawal agreement, which includes an implementation period, and passes the necessary legislation to implement the agreement, the Government will defer the coming into force of the draft regulations until the end of that implementation. If a deal on our future relationship is reached, we envisage that they will be revoked entirely. They will simply cover the situation if there is no deal at all.
The draft regulations will make changes to the rules in England and Wales, in Northern Ireland and in Scotland to determine which courts should have the power to hear a case with a cross-border element that could involve the EU and the relevant European Free Trade Association countries—Norway, Switzerland and Iceland. They will also change the rules on how to ensure that any judgments or decisions can be enforced across the EU and the relevant EFTA states.
Perhaps it would be helpful if I explained the application of the EU regulations that we seek to replace. The principal measure that relates to civil and commercial law is the Brussels Ia regulation. The Brussels regime provides clear and reciprocal rules on jurisdiction in civil and commercial matters to determine which court hears a cross-border case. Its application is mandatory and leaves no discretion for courts to act otherwise. For example, if a UK consumer or business has a dispute with a party in a state that is a member of the EU or is a party to the Lugano convention, there are clear rules to determine which court in which jurisdiction should hear the case. This prevents the risk of parallel proceedings, or more than one court hearing the case.
Secondly, there is almost automatic recognition and enforcement of the judgments of one participating state in another. If a business successfully sues another business in one state, it can ensure that it enforces the resulting judgment where it needs to without going through costly and time-consuming additional processes. That is possible because all participating states must apply uniform rules of jurisdiction and can trust that jurisdiction was assumed properly and appropriately.
The Brussels regime operates almost entirely on a reciprocal basis. Its effectiveness is founded on mutual co-operation between states: countries respect the jurisdiction of each other’s courts and recognise and enforce each other’s judgments. However, with some limited exceptions, including consumer and employment cases, the Brussels rules do not apply if the defendant in a dispute is domiciled outside the EU. In such cases, the EU member states and the Lugano parties—Norway, Switzerland and Iceland—apply their own national rules on cross-border matters.
What will change if we leave the EU without a deal? In those circumstances, the EU regime for determining these matters will simply cease to apply to us. The reciprocity in the EU regime that I have described can no longer apply to relations between EU member states and the UK after exit, nor will they apply between the Lugano parties and the UK. Furthermore, there are no unilateral actions that the UK can take to compel the EU as a whole to continue to apply the reciprocal jurisdictional rules or to enforce judgments. We therefore need to legislate now to provide clarity about how the UK will determine whether it has jurisdiction in a civil and commercial case and when UK courts will recognise and enforce judgments from EU countries. However, our legislation cannot determine what rules the EU will apply; that will be down to member states’ own national laws.
The Government’s response, which is set out in the draft regulations, is to revert—with some limited exceptions—to the rules on jurisdiction and the recognition and enforcement of judgments that currently apply to cross-border disputes to which the Brussels regime does not apply, namely disputes that involve parties from the UK on the one hand and parties from countries outside the EU and the Lugano convention on the other. The draft regulations are not creating new policy; they are transitioning us to a well-developed and understood set of rules that will provide an effective framework for UK courts to work with and will take into account the lack of reciprocity in the area.
There are a few exceptions to this general approach. Importantly, existing international agreements such as the rules of The Hague convention of 2005 on choice of court agreements would continue to apply, as the UK is acceding to this as a contracting state. This will be brought into UK law, post EU exit, by a separate SI that has been subject to the negative procedure, which means that UK courts would take jurisdiction whenever there is a valid choice of court agreement to which the convention applies. We would also readily recognise and enforce the judgment of a foreign court that is validly selected under an agreement. Courts of other contracting states to the convention would equally recognise and enforce the judgment of a UK court to which the convention applies.
We have sought, where we can, to maintain the jurisdictional protections for UK consumers and employees that are contained in the Brussels regime. These rules are not restricted to EU-domiciled defendants, so we can retain much of the consumer and employee-friendly approach of the Brussels regime while restating them for UK-based consumers and employees, which will largely take away their need to sue abroad in such cases and the expense and difficulty that it brings.
This instrument is necessary to fix the statute book in the event of a no-deal exit from the EU. We have assessed its impact and published a full impact assessment. Broadly, we have concluded that although in certain respects the common law might operate less efficiently that the Brussels regime, to which the UK is a party as a result of EU membership, only negligible costs would arise from this SI, relative to the alternative of leaving legislation on the statute book that would cease to operate effectively in the absence of reciprocity after the UK has left the EU. The Government’s view is that removing deficient retained EU law from domestic law would clarify the rules that apply to determining jurisdiction and post-EU exit recognition and enforcement of judgments. Our approach has been led by engagement with the sector, particularly the Law Society, the Bar Council, the Brexit Law Committee and others.
As I have set out, there would be deficiencies in retained EU law that implements the instruments of the Brussels regime because of a lack of reciprocity should we leave the EU without a deal. This SI fixes those deficiencies and establishes a practical set of rules for dealing with cross-border disputes in civil and commercial matters in such a scenario.
The Minister outlined legal issues dealt with by the recast Brussels regime, which has been in force since January 2015. One issue she did not mention is that when a person is one of a number of defendants, they can be joined to proceedings that are commenced in another member state where they are not domiciled if those proceedings are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments.
As the Minister said, the way the Brussels regime has been put into practice means that there is a seamless transfer of cases and judgments—a bit like the customs union, but for legal services. The Opposition recognise that this SI has to be tabled to ensure reciprocity, as the agreement between European Union member states and the UK on cross-border, civil and commercial disputes will no longer apply after exit day. The SI would also make provision for cases that start before exit day, but—as far as I know—the Ministry of Justice has not published an impact assessment of the draft regulations’ effect on the current system and on cases that are currently before courts.
Although the Law Society and Bar Council have been consulted, a number of bodies have reservations about the impact of these draft regulations. They are concerned, and we are concerned, about the impact that a no-deal Brexit would have on cross-border co-operation on civil justice. Trade between the United Kingdom and the European Union’s 27 countries has increased in the past 40 years, not least because of civil judicial co-operation.
One thing we are concerned about is the loss of the Brussels I framework for determining which national court has jurisdiction, and recognising where there is a choice of court clause or not between parties to the dispute. Following on from that, it provides for a near-automatic recognition allowing parties to enforce the judgment in all EU member states. It covers all judgments reached in civil and commercial matters, including contractual and non-contractual disputes, employment, insurance and consumer disputes.
Participation in Brussels I has been in four particular areas, and the impact is on four particular areas. First, it encourages cross-border trade. As it continues to grow, commercial parties will correspondingly need judgments to be enforced against counter-parties with assets in other countries. Brussels I allows them to do this easily and cheaply due to the near-automatic nature of the mechanisms. This can encourage—and has encouraged—investment in member states, and promotes the growth of UK businesses overseas. The ability to enforce judgments, or awards in the case of arbitration, in a country is often a threshold issue for businesses contemplating an investment in that country, so will be beneficial to UK businesses in the European Union, and for European Union businesses looking to continue to trade with the UK.
Secondly, Brussels I increased predictability and certainty, leading to reduced costs for businesses. Businesses have the certainty that they can enforce their rights, and that can easily recuperate assets in EU countries. This is particularly helpful for smaller businesses that do not have resources that are comparable to those of large companies.
Thirdly, Brussels I makes England and Wales attractive to litigants. Maintaining it would provide a continued incentive for parties to negotiate jurisdiction clauses in favour of the English courts. As mentioned in previous hearings, British legal services are worth about £24 billion, which will be massively impacted if we leave without a deal.
Finally, Brussels I provides an enormous amount of protection to consumers by allowing them to sue or defend themselves in the home court familiar to them without having to pay lawyers or high legal fees for that purpose.
Can I ask the Minister whether the Lugano convention has been considered? It deals with jurisdiction, recognition, and the enforcement of judgments in civil and commercial matters. It currently applies between European Union member states and Switzerland, Norway and Iceland—the European Free Trade Association area. Other non-European Union members can accede to the convention under certain conditions. We ask the United Kingdom Government to seek accession to the Lugano convention by applying to the Swiss Federal Council as soon as possible. The convention is not a European Union instrument although the European Union is party to it, so we ask the Government to make it a priority in their no-deal preparations. Will the Minister confirm if that has been considered or applied for? If not, why not?
Ms Ryan, I would like to indicate that the Opposition will be abstaining in the vote on this statutory instrument.
Before I call the next speaker, I realise that not all Government Back-Bench members of the Committee are interested in this topic, but I would ask that they either work quietly or leave the room. It is not acceptable to be carrying on your own meeting from the beginning to this point in our sitting.
I thank the Minister for her statement. I want to make a couple of short comments. It is important that we do not underestimate the significance of these proceedings. We are, essentially, re-writing an important piece of primary legislation. Full treaties are basically being dis-applied from the United Kingdom through 84 pretty technical clauses. I just wonder at the outset whether there are ways that we can make this process work better from the point of view of scrutiny.
Importantly, the explanatory memorandum to the draft regulations refers to there having been no formal consultation but some discussions with stakeholders; the Minister named one or two of the stakeholders. However, from what I can see, the explanatory memorandum was written several months ago. I wonder if it would have been possible during that time to ask for written submissions from some of these stakeholders, so that MPs trying to scrutinise such important bits of legislation could see for themselves the expert opinion of the likes of the Law Society or the Bar Council.
I managed to track down a briefing from the Law Society of Scotland. I am grateful to it for having prepared one at such short notice. The Minister will be pleased to hear that it gave the draft regulations a clean bill of health, so we ultimately accept their need and will support their implementation. However, given the significance of these issues, it would have been useful to have seen a little bit more detail than provided in the explanatory memorandum.
The explanatory memorandum makes reference to private international law being transferred to Northern Ireland, to be within the competence of the Northern Ireland authorities, but it is silent on devolution to Scotland. I have not been able to get a definitive view in the time available whether this matter should be devolved to the Scottish Parliament. Regardless of whether it is devolved or not, I would like some reassurance that there have been close discussions with the Scottish Government about what the draft regulations will mean for the Scottish courts. There usually are such discussions, but I do not see them mentioned in the explanatory memorandum. The White Paper on civil jurisdiction commits to close working with the devolved Administrations. It would be useful to have a flavour of what has been discussed in relation to this particular draft statutory instrument.
Finally, I have a question on an exception that the Minister pointed out, although it is probably for a future day, about our retaining the rules on the jurisdiction in employment cases. Reading through the explanatory memorandum, it seems to me that an employer must sue an employee where the employee is domiciled, which seems perfectly sensible. However, if it is the other way around, the employee has a choice of where to sue the employer, although strangely enough that choice does not include where the employee is domiciled. He could sue in the jurisdiction where he carries out work for his employer but not where he is domiciled.
I totally get that the Government are actually only implementing what the Brussels regulations do at the moment, but I think the situation is slightly strange. The Government have tweaked one or two other Brussels regulations in relation to corporations and associations, so I wonder if they gave any thought to tweaking that one. It seems strange that an employee could not sue where they are domiciled. I am guessing that that would affect someone who lives in, say, Newcastle, but works offshore, three weeks on, three weeks off, in Scottish waters. As I understand it, they would not be able to sue in England. That is probably too technical for today; it is something to think about for another occasion.
Notwithstanding our slight concerns about the degree of scrutiny of something as important as the draft regulations, I understand that they are necessary. We support them.
I thank the Front-Bench Members for their interesting and important submissions. I recognise what the hon. Member for Bolton South East said— that this draft instrument has to be introduced in the circumstances—and I underline the importance of the recognition of judgments across borders.
To answer a couple of the hon. Lady’s points, we published the impact assessment last Monday. On her specific point about cases already before the court, there is a saving provision to ensure that the UK will deal with those cases under the Brussels regime, so far as that is possible. She also highlighted the Lugano convention. I assure her, as we have said at all stages of this process and in relation to the deal discussions, that the UK Government absolutely want to remain a signatory to the convention; it is one of our priorities. We have spoken to the other states party to that convention, whose agreement we will need. However, the EU also has to sign up to that, and we have raised the matter with the EU.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East raised several matters relating to Scotland, including whether there had been consultation on this aspect of Brexit. I highlight that our Brexit Law Committee comprises members of all the key stakeholders in this area—the Law Society, the Bar Council, TheCityUK and several specialists—who we have consulted for their advice and opinions. I have held roundtables with them throughout this process, as have my officials.
I assure the hon. Gentleman that we have regularly consulted the devolved Administrations throughout this process. I was at an interministerial meeting with all the devolved Administrations in Edinburgh on Thursday last week to discuss this very subject. I was pleased that the Scottish Minister for Parliamentary Business thanked my officials for their co-operative working with the Scottish Government on this matter, as well as on many others. The hon. Gentleman also mentioned the Law Society of Scotland, which I have spoken to several times to update it on what we are doing.
If the hon. Gentleman would like to raise any technical matters, I am very happy to discuss those with him. However, for those reasons, I commend the draft regulations to the Committee.
Question put and agreed to.
Draft Farriers and Animal Health (Amendment) (EU Exit) Regulations 2019 Draft Veterinary Surgeons and Animal Welfare (Amendment) (EU Exit) Regulations 2019
The Committee consisted of the following Members:
Chair: Siobhain McDonagh
† Ali, Rushanara (Bethnal Green and Bow) (Lab)
† Braverman, Suella (Fareham) (Con)
Coyle, Neil (Bermondsey and Old Southwark) (Lab)
Cunningham, Mr Jim (Coventry South) (Lab)
† Davies, Glyn (Montgomeryshire) (Con)
† Debbonaire, Thangam (Bristol West) (Lab)
† Drew, Dr David (Stroud) (Lab/Co-op)
† Duguid, David (Banff and Buchan) (Con)
† Kendall, Liz (Leicester West) (Lab)
† Mc Nally, John (Falkirk) (SNP)
† Moore, Damien (Southport) (Con)
† Rutley, David (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)
† Seely, Mr Bob (Isle of Wight) (Con)
† Spellar, John (Warley) (Lab)
† Stevenson, John (Carlisle) (Con)
† Stewart, Iain (Milton Keynes South) (Con)
† Watling, Giles (Clacton) (Con)
Jack Dent, Committee Clerk
† attended the Committee
Ninth Delegated Legislation Committee
Tuesday 5 February 2019
[Siobhain McDonagh in the Chair]
Draft Farriers and Animal Health (Amendment) (EU Exit) Regulations 2019
I beg to move,
That the Committee has considered the draft Farriers and Animal Health (Amendment) (EU Exit) Regulations 2019.
With this it will be convenient to consider the draft Veterinary Surgeons and Animal Welfare (Amendment) (EU Exit) Regulations 2019.
It is an honour to serve with you in the Chair, Ms McDonagh. We have two statutory instruments for the price of one.
Buy one, get one free!
Coming to you at a knockdown price.
I wish I had not gone there, to be honest, given some of the comments I have just received.
I have moved the motion for the draft Veterinary Surgeons and Animal Welfare (Amendment) (EU Exit) Regulations 2019, and I will also speak to the draft Farriers and Animal Health (Amendment) (EU Exit) Regulations 2019. [Interruption.]
Order. It has been suggested to me that it might be the other way round.
Okay. For the record, I have moved the motion for the draft Farriers and Animal Health (Amendment) (EU Exit) Regulations 2019, and I will also speak to the draft Veterinary Surgeons and Animal Welfare (Amendment) (EU Exit) Regulations 2019.
Both statutory instruments aim to ensure that there will continue to be a functioning regulatory and legislative regime for professional regulation of veterinary surgeons and farriers, and enforcement of legislation for protecting animal health and welfare, if the UK leaves the EU with no deal and no implementation period. I will address both draft instruments in turn.
The draft Veterinary Surgeons and Animal Welfare (Amendment) (EU Exit) Regulations 2019 set out the approach for professional regulation of veterinary surgeons from the European economic area, and make a technical change to the Animal Welfare Act 2006 to ensure the continuity of existing enforcement powers. Both changes are needed to ensure operability of the existing legislation.
I acknowledge the vital contribution of veterinary surgeons in maintaining high levels of animal health and welfare in the UK, as well as their role in protecting public health and food safety and facilitating international trade. On behalf of the Government and, I am sure, the Committee, I sincerely thank them for their important work.
In the UK, the veterinary profession and its standards are regulated by the Royal College of Veterinary Surgeons. Since its passage, the Veterinary Surgeons Act 1966 has provided a mechanism for veterinary surgeons who have qualified outside the UK to register to practise here. That mechanism, in so far as it applied to EEA and Swiss nationals, was subsequently amended to reflect the requirements of the EU recognition of professional qualifications directive when that was adopted in 2005.
Under the European system—our current system—EEA and Swiss nationals who hold degrees from veterinary schools recognised by the EU are entitled to have those degrees automatically recognised in any member state. Once the UK leaves the EU, that reciprocal arrangement will come to an end. The purpose of this statutory instrument is to ensure operability and consistency of the system for registering EEA and Swiss-qualified veterinary surgeons after the UK leaves the EU. EEA or Swiss-qualified persons who wish to register to practise in the UK will still be able to do so. They will, however, have to follow the same process as those who have qualified elsewhere, outside the EEA.
That process is set out in section 6 of the 1966 Act, and requires that an applicant satisfies the Royal College of Veterinary Surgeons and
“has the requisite knowledge and skill…for practising…in the United Kingdom”.
If the royal college is satisfied that the degree held by the applicant meets that requirement and is equivalent to one from a UK veterinary school, there is no further assessment of their knowledge and skill. The royal college estimates that approximately 87% of applicants from the EEA will meet that requirement. That is a very high percentage.
If the applicant does not hold such a degree, they must undertake and pass a professional examination administered by the Royal College of Veterinary Surgeons. That would help to ensure consistency of approach to the regulation of veterinary standards in the future. I stress that the changes will not affect those already registered to practise veterinary surgery in the United Kingdom. Transitional arrangements also ensure that those in the process of registering with the royal college on exit day are entitled to have their application considered under the current rules.
As I mentioned, the draft regulations make a minor technical amendment, to section 29 of the Animal Welfare Act 2006, to ensure that an existing power of inspection remains available in England and Wales after exit day. The power permits the inspection of premises to check compliance with regulations made under section 12 of the Act that implement EU obligations. I recommend this statutory instrument to Committee members.
The draft Farriers and Animal Health (Amendment) (EU Exit) Regulations 2019 will ensure that the system for recognising farriery qualifications continues to function effectively after the UK leaves the EU. The instrument also amends section 64A of and schedule 3 to the Animal Health Act 1981, as well as three exemption orders under the Veterinary Surgeons Act, to ensure the operability of those pieces of legislation after EU exit.
First, I will talk about changes to the professional regulation of farriers. Farriers are responsible for the shoeing of horses, and therefore are very important to maintain the health and wellbeing of horses. In Great Britain, farriers have been regulated since 1975 by the Farriers Registration Council under the Farriers (Registration) Act 1975. Farriery is not currently regulated in Northern Ireland. Under the European system, EEA and Swiss nationals who hold farriery qualifications, or who have certificates attesting to their experience, are entitled to have those qualifications or that experience recognised in any member state. Once the UK leaves the EU, that reciprocal arrangement will come to an end.
To ensure consistency of professional standards, we propose to use the same system of recognising farriers’ qualifications from the EEA as that for farriers from the rest of the world. If a farrier has an overseas qualification recognised as equivalent to that required by the Farriers Registration Council, they can register to practise in the UK. Farriers whose qualifications and training and not equivalent to UK standards, but who have two or more years of professional experience as a farrier, will need to undertake professional assessment. If they have less than two years’ professional experience, they will need to undertake full professional training in the UK, followed by a professional assessment, before being registered to practise in the UK. That will help to ensure consistency across the profession, and will help to protect the health and welfare of horses.
We have discussed the proposals with the Farriers Registration Council, which is content with this approach. The amendments do not affect the rights of those already registered to practise farriery in the United Kingdom, or who are in the process of applying to register with the FRC when the UK leaves the EU.
I will briefly outline the technical changes that the statutory instrument aims to make to the Animal Health Act 1981 to ensure its operability after EU exit. The statutory instrument amends section 64A of, and schedule 3 to, the Act. The amendment to section 64A will ensure that, where a power of entry currently exists in Great Britain, an inspector can continue to assess compliance with secondary legislation under the Act.
A further operability amendment, to schedule 3, removes any EU obligation that no longer applies to the UK after exit. The relevant local authority must be satisfied that adequate measures are in place to prevent any risk of the spread of foot and mouth disease before it decides not to slaughter susceptible animals. It is not necessary to express the requirement that European Union interests are not endangered, as there is also a clear interest for the UK to be disease-free to facilitate trade.
Three exemption orders under the Veterinary Surgeons Act 1966 currently permit specific minor veterinary surgery procedures to be carried out in the UK by persons other than veterinary surgeons, provided they have successfully undertaken an approved course. In the UK, before a UK course can be approved, the Secretary of State, rightly, must consult the Royal College of Veterinary Surgeons. However, at the moment, EU law requires us also to recognise any training undertaken in an EEA country that would allow a person to carry out that procedure there. There is no EU minimum standard for such training—no requirement that the member state in question consult its equivalent to the RCVS.
Importantly, there is no guarantee that the course is of the same standard as those undertaken in the UK. In the future, it will be for the Secretary of State—and, in some cases, the Department of Agriculture, Environment and Rural Affairs, as the responsible authority in Northern Ireland—to decide whether any non-UK course meets the appropriate standard, to ensure there is more rigour. That will help maintain high standards of animal health and welfare in the UK.
For the reasons that I have set out, I commend the statutory instruments to the Committee.
I am delighted to serve under your chairmanship, Ms McDonagh. I welcome the Minister to his place. We have our issues with SIs, but we had not got to the stage where the Government were trying to freeze the Opposition into submission. This is a first.
I know the Minister was expecting a great audience. I welcome our audience, and I hope they can hear us in this big room. It is the annual dinner of the British Veterinary Association today—I declare an interest as an honorary associate—and perhaps the Minister was expecting all its members to turn up. Vets are an important part of our community, and they might have wanted some sport before their dinner tonight. Sadly, they have not arrived in any great number, so the message obviously did not get through to them.
I have no particular problem with the two statutory instruments—that on farriers is particularly non-contentious—but the situation does not bode well for trying to get through so many SIs before the end of March. I do not know whether the Minister has a checklist, as some must have elsewhere in his Department, where they are counting down the days. It behoves the Opposition, as well as the Government, to do their job, and our job is one of scrutiny and holding the Government to account. That is very difficult with the numbers of SIs coming through, and with some of the technical aspects of those SIs. That concern is shared across the board, and I put that on the record. However, we are doing our best. As I said in business questions to the Leader of the House last week, any additional resource would be greatly welcomed, so that we could be even more effective in what we are trying to do.
At one level, these issues are not contentious. Members will be pleased to know that we are not going to vote against the SIs, but we have some points to make. On the issue of farriers, there is little to argue about. There is no shortage of farriers in this country, and it makes some sense that we try, in advance of whatever happens at the end of March, to bring some order to that particular trade. However, that is not true of vets.
We are already somewhat short of vets—I think the figure is 11.5%—and many of the vets in our abattoirs are European Union vets. That matters, because if there is not a vet on the line, the line shuts. There is a huge potential impact on the way in which our food is provided. If we get this wrong, it will be one of the aspects of our withdrawal from the EU, whenever that may be, that will have quite serious consequences.
As I have pointed out in previous Delegated Legislation Committees, we are, sadly, not taking the opportunity to improve environmental standards. This is really just cutting and pasting what we already have in place as members of the EU, and hoping that we can do similar things as part of a British legislative approach. It is not improving our environmental standards, which is sad, because the Government always say that they aim to improve environmental standards when we leave the EU. We may see that in the forthcoming environment Bill, and it will be interesting to know where the changes covered in these SIs fit with that primary legislation.
As far as I am concerned, we are going backwards to go forwards. Let us put some figures into perspective. The British Veterinary Association says that, in terms of European economic area veterinary surgeons, who are vital to the UK, something like 50% of new entrants each year who register with the Royal College of Veterinary Surgeons are EU nationals, and 95% of vets in our abattoirs are either EU nationals or foreign-registered vets. That is where we get the figure of an 11.5% shortage, because it is very difficult to recruit foreign vets at the moment. Jason Aldiss, who has been to see me—he is probably known to the Minister—is from Eville & Jones, which is one of the major agencies for supplying foreign vets. He has two British vets and 600 foreign vets on his books. That is why we need a lot of foreign vets. It is important that we get this right.
I will ask some questions in a minute, but I want to put this in perspective. The Lords will consider this issue tomorrow, and I am sure they will have some points to make. The Lords Secondary Legislation Scrutiny Committee came to the following conclusion:
“This instrument proposes to end the preferential access that veterinary surgeons with EEA qualifications currently have when seeking to practise in the UK. The significant change is proposed in the context of the ending of the mutual recognition of qualifications following the UK’s withdrawal from the EU. The Committee notes the assurances provided by the Department regarding the new registration requirements for EEA veterinary surgeons and the introduction of the new role of CSOs”—
certification support officers—
“who are to provide support in relation to export health certificates.”
That is all well and good, but the Committee goes on to say:
“Given the importance of EEA-qualified veterinary surgeons for the UK, especially in public health areas such as disease control and the safeguarding of animal health and welfare, the House may nevertheless wish to explore further the approach the Government have taken with this instrument and the potential impact…We therefore draw the draft Regulations to the special attention of the House, on the ground that they give rise to issues of public policy likely to be of interest to the House.”
Hon. Members will hear more about that tomorrow. It is at least worthy of some reflection that the Lords have identified this as an area of concern. We could likewise say something about the farriers regulations, but this is more contentious.
The Public Accounts Committee report, “Defra’s progress towards Brexit”, identified that as one of a number of issues. It was less than satisfied and said that the Department is “cavalier” about having enough suitably qualified staff to take on the work, particularly in ports and abattoirs.
Vets have previously come here from the EU and from outside the EU, but how does the Minister intend to fill the gap if they stop coming? The PAC recommended that DEFRA
“needs urgently to develop a credible plan for increasing vet capacity for export health certificates that does not add to exporters’ costs including addressing concerns around coverage across the country and whether it is appropriate or possible for non-vets to sign off health certificates.”
Of course, these jobs are statutory; someone else cannot do them. They require veterinary surgeons. That is why the BVA has expressed concern and highlighted how important those vets are—that is where the numbers come from. The same is true of the RCVS, which will oversee the new regulatory arrangement for registering vets from abroad. Those bodies are concerned and want the issue to be addressed.
The BVA and the RCVS referred the issue to the Migration Advisory Committee, to ensure that vets are considered one of the special professions that must be exempted from the rigmarole. As the Minister has rightly said, there is a registration process and some will get through it, but the cost of the exam is £2,500, which is not inconsiderable for someone who, for all sorts of reasons, may not be earning an income until they get to this country. It would be interesting to know who intends to meet those costs.
The Minister may not be able to answer some of my questions now, but I hope he will write to me in the course of time. The explanatory memorandum does not state whether policy is being changed. Are any policy changes required as a result of the SIs? If so, why has no consultation been undertaken with either vets or the businesses in which vets are employed? What changes will the measures lead to in operational delivery? If there are fewer vets, somebody somewhere will have to make some sacrifices.
Will the draft regulations impose additional costs on businesses, individuals or the public sector? We are told that there is no regulatory impact assessment because supposedly the measure will have no impact on those sectors, but the reality is that any such change will have an impact. These businesses are important to us. They actually see the throughput of our meat on to our supermarket shelves. I would have thought that that is worthy of a regulatory impact assessment.
Will the draft regulations result in any additional environmental impacts compared with the legislation being amended or replaced? What would happen in the event of us crashing out? That would affect not just these draft regulations, but the primary legislation covering the way in which veterinary surgeons operate. The sector would be immediately under the spotlight. We hope that such an eventuality will not happen, but what preparatory work have the Department and the Government done?
I have one last question, which I always ask. The main issue for those vets from abroad to whom I have spoken is less to do with what they are going to earn—because they negotiate that—than with their pensionability. What practical measures are the Government putting in place to ensure that pension portability is permitted and encouraged? Otherwise, foreign vets will find that whatever pension they earned during the period they worked here is locked up here, which will not be very helpful if and when they go back to their country of origin. It would be interesting to know the pensionable arrangements, because that, in its own way, will determine whether people come here and, more particularly, whether they stay here. That is all connected to the collection of data and regular reporting. I hope that the Government will keep us regularly informed about any potential shortfall in the number of vets, particularly in the abattoir sector.
The Minister may not be able to answer a number of those questions, but they are important because vets matter, and not just to our food chain. We all know vets, and foreign vets are at least somewhat quizzical about where their future in this country lies.
I do not have much to say. The hon. Member for Stroud (Dr Drew) has already pointed out things that concern me, particularly regarding the RCVS figures, which show that about 20% of UK vets are trained not in the UK but at EU universities, and that there could be an increased demand for vets post-Brexit, especially if inspections are needed at the border and at the ports. An impact assessment does not appear to have been carried out, even though it would give us an idea of what that might mean for animal welfare and trade.
Scotland is a huge exporter in broiler chickens, which are exported to Europe and across to Russia. They are globally renowned chickens. If their welfare was damaged in any way, that would affect the business in my local area. In addition, live shellfish are transported abroad to Europe. If that process is delayed in any way, the people who produce the animals do not get paid at the other end. If they die in transit because there is a lack of vets to make it a seamless, frictionless transition, that is a cost to them and it can affect local communities and their businesses, so I am reticent about that. The regulations relating to farriers are non-contentious, but has an impact assessment been carried out with regard to non-EU people who have registered somewhere else but who work in this country?
I am grateful for the contributions that have been made, and I am pleased to hear that the hon. Member for Stroud will be attending the BVA dinner this evening.
You are going as well, are you?
Yes, I will be speaking, and I am little bit worried about the hon. Gentleman’s suggestion that I might be the subject of some sport. We shall see, but I am sure he will be well behaved, just as he was trying to be today.
Characteristically, the hon. Gentleman has raised a number of important points—he does his homework, as we well know—but I will touch on the issue of the shortage of vets, because I think that Members on both sides of the House are concerned about that and want to take action. To address concerns that have been raised about the shortage, we in DEFRA have provided evidence to the Migration Advisory Committee, strongly supporting the return of veterinary surgeons to the shortage occupation list. The Migration Advisory Committee is due to report in spring 2019, and while the UK prepares to leave the EU, DEFRA is working closely with the Home Office to ensure that there is a long-term strategy for the veterinary workforce, as part of future immigration policy. I hope that is helpful.
Will the Minister support me in saying that we can work cross-party on that? We believe very strongly that this must be sorted; it should have been sorted some time ago because of the seasonal agricultural workers scheme, although I know these are not seasonal workers. I do not know whether there is anything the Opposition can do to help, but the Government have to get real. We must make sure that we are recruiting people appropriately.
That point is understood, and I will gladly meet the hon. Gentleman to discuss further his suggestion of working closely on the issue. That leads on to what else we are doing to help vets, in the event of a no-deal scenario, to prepare for increased demand for export health certificates for animals and animal products, because those products will need to pass through border inspection posts. DEFRA’s internal estimates suggest that we will need the equivalent of up to 50 full-time official veterinarians to respond to the changes in demand for export health certification.
We are providing free training for 400 official vets, and our very detailed discussions and engagement with the industry indicate that, with their existing capacity, the use of new certification support officers and their ability to bring more vets into the market, we should be in a reasonable position to meet that demand. In addition, we are providing free training for 200 CSOs and we are already starting to put CSOs through that training, so that they can add value and help our vets to focus on those issues to which they can make the biggest contribution in what could be quite challenging circumstances if there is an increased volume of demand for EHCs.
The hon. Gentleman asked about the cost of the statutory exam, which is £2,500. We have looked at other professional regulators, and these fees are fairly comparable. For example, they are cheaper than the General Dental Council’s examination fees of about £3,735.
How long will it take for those people who are being trained to qualify and be ready? If we crash out—as I understand it, we will not have mutual recognition under the SI—will they be ready and will we have enough people to backfill the shortage? If not, would it not be sensible to be more flexible, here and now, with regard to mutual recognition so that we do not make life more difficult, as my hon. Friend the Member for Stroud has already said?
I also reiterate my hon. Friend’s point about impact assessments. A detailed, or even cursory, impact assessment of the implications would have fleshed out the issues and enabled us to engage with them more fully. The consequences are very dire if we do not get it right. A number of Departments, including the Treasury, have failed to provide impact assessments, and I am sick to death of sitting on Delegated Legislation Committees without impact assessments. I do not think that is an appropriate way to scrutinise proposed legislation, which is especially significant given the context in which we find ourselves.
The hon. Lady has also made thoughtful points. I reassure the Committee that we are working incredibly hard to ensure that we are ready for any eventuality, including regarding the availability of vets. There is an ongoing dialogue: I have met the chief veterinary officer and the BVA several times and I am sure I will meet them again tonight. We have worked very closely to make sure that we are in the best possible position for any eventuality come 29 March.
Hon. Members have also asked whether there is a change of policy. The answer is yes, because mutual recognition of qualifications will cease in a no-deal situation. A couple of hon. Members made points about impact assessments, which are required only when there will be a direct impact on business as a result of regulatory change. The SI concerns the registration of individuals only. Those points have been discussed with the RCVS, which is content with the proposals.
I hope that my remarks have answered most of the questions. I am sure that the hon. Member for Stroud will buttonhole me tonight if he has any other points.
I look forward to that dialogue, which will be really important. Lord Gardiner is looking forward to tomorrow’s debate in the House of Lords, where those points can be considered in even more detail.
As I said in my opening remarks, it is important that these statutory instruments are passed. If they are not, the current system for regulating veterinary qualifications from EEA veterinary schools will not operate effectively, which would result in an inconsistency of veterinary standards in the UK and the inability of inspectors to enforce certain animal welfare standards. Additionally, the system for recognising farriery qualifications from the EEA, enforcing animal health regulations and approving courses for certain veterinary procedures would not operate effectively.
We know and have discussed at length the importance of the veterinary and the contribution that it makes to public health and to animal health and welfare in the UK. The SIs will help veterinarians to carry out their very important work in a no-deal scenario. For those reasons, I commend both statutory instruments to the Committee.
Question put and agreed to.
That the Committee has considered the draft Farriers and Animal Health (Amendment) (EU Exit) Regulations 2019.
DRAFT VETERINARY SURGEONS AND ANIMAL WELFARE (AMENDMENT) (EU EXIT) REGULATIONS 2019.
That the Committee has considered the draft Veterinary Surgeons and Animal Welfare (Amendment) (EU Exit) Regulations 2019.—(David Rutley.)
Draft Drivers' Hours and Tachographs (Amendment etc.) (EU Exit) Regulations 2019
The Committee consisted of the following Members:
Chair: Mr Laurence Robertson
† Allan, Lucy (Telford) (Con)
† Brown, Alan (Kilmarnock and Loudoun) (SNP)
† Chishti, Rehman (Gillingham and Rainham) (Con)
† Clarke, Mr Simon (Middlesbrough South and East Cleveland) (Con)
† Donelan, Michelle (Chippenham) (Con)
† Fletcher, Colleen (Coventry North East) (Lab)
† George, Ruth (High Peak) (Lab)
† Heappey, James (Wells) (Con)
† Henderson, Gordon (Sittingbourne and Sheppey) (Con)
Kinnock, Stephen (Aberavon) (Lab)
† Knight, Sir Greg (East Yorkshire) (Con)
† Mackinlay, Craig (South Thanet) (Con)
† Norman, Jesse (Minister of State, Department for Transport)
Phillips, Jess (Birmingham, Yardley) (Lab)
† Slaughter, Andy (Hammersmith) (Lab)
† Sobel, Alex (Leeds North West) (Lab/Co-op)
† Turner, Karl (Kingston upon Hull East) (Lab)
Bradley Albrow, Committee Clerk
† attended the Committee
Tenth Delegated Legislation Committee
Tuesday 5 February 2019
[Mr Laurence Robertson in the Chair]
Draft Drivers’ Hours and Tachographs (Amendment etc.) (EU Exit) Regulations 2019
I beg to move,
That the Committee has considered the draft Drivers’ Hours and Tachographs (Amendment etc.) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Robertson. Following the UK’s decision to leave the European Union after the referendum, the Government have been working hard to develop a positive future relationship with the EU, which has involved a significant amount of work by the Department for Transport to prepare for a range of possible outcomes in the Government’s negotiations.
The European Union (Withdrawal) Act 2018 will retain directly applicable EU legislation in UK law on exit day, in order to provide continuity and certainty to industry and consumers without prejudice to the outcome of the negotiations. Some elements of the retained EU legislation are required to ensure that other legislation continues to function effectively once the UK has left the EU. The amendments in the draft regulations are technical and limited to what is needed for legislation to continue to function. As the Department responsible for commercial road transport, we have conducted intensive work to ensure that there continues to be a functioning legislative transport framework for this important sector in all dimensions of the economy.
For the benefit of Members who may not be aware, I will make a few remarks about the drivers’ hours rules contained in the directly applicable EU regulation—Regulation No. 561/2006—which are central to keeping our roads safe. They set maximum driving times and minimum break and rest times for most commercial drivers of both lorries and coaches. For example, the rules mean that after four and a half hours of driving, a driver must take a 45-minute break, with daily driving time normally limited to nine hours. The consequences of driving any vehicle while fatigued can of course be catastrophic, and the risks are particularly severe if heavy commercial vehicles are involved. These rules are enforced by the Driver and Vehicle Standards Agency and by the police, via targeted roadside checks and visits to operators’ premises.
The principal tool used by enforcement officers is the record generated by the tachograph, which is a device installed in relevant vehicles that records the driving, rest and break times of the vehicles and their drivers. The directly applicable EU regulation—Regulation No. 165/2014—mandates the use of tachographs by relevant drivers. The draft regulations make the changes needed to ensure that this framework will continue to function correctly after exit day.
The draft regulations make amendments in three broad categories. First, they make changes to domestic law, under the European Communities Act 1972, to update the legal provisions that implement EU law ahead of exit day, so that the regime is fully effective and enforceable. In addition to the directly applicable rules I have already mentioned, EU law includes the obligation on member states to apply the wider United Nations AETR agreement on drivers’ hours rules. With the UK outside the EU, that wider international agreement will in the future cover transport operations between the UK and the EU.
The majority of the changes under this heading are to ensure that there are explicit domestic provisions, including for offences and penalties, to fully implement the AETR. I emphasise that the AETR driving time and tachograph rules mirror the equivalent EU regulations, so this legal change does not affect the regulatory obligations on drivers and operators within the scope of the rules. Although the need for the amendments is especially relevant in the context of our EU exit, they are in any event legally required under the UK’s international obligations.
Secondly, the draft regulations make changes to the retained EU regulations, using the powers conferred by the EU withdrawal Act. With the UK outside the EU, the retained EU regulations will cover the majority of domestic transport operations. Changes are required to make the two retained EU regulations suitable for a UK context, and to ensure that they continue to function properly after exit. For example, EU processes, such as the need for the UK to seek authorisation from the European Commission for exemptions from the rules, have been removed. Certain functions will also be transferred to the Secretary of State, such as the Commission’s power to specify the technical requirements of the tachograph, which will become a domestic regulation-making power using the affirmative procedure.[Official Report, 19 February 2019, Vol. 654, c. 14MC.]
Changes are also being made in order to retain the status quo in how the UK recognises incoming drivers or equipment from EU countries. For example, a tachograph that has been type approved by an EU country’s authority remains valid for use in the UK, provided that other rules are complied with, which will help to avoid disruption to the current practices of the haulage and passenger transport industries. The policy area of drivers’ hours is devolved with respect to Northern Ireland. Although this statutory instrument, for the sake of efficiency, amends the retained EU regulation on a UK-wide basis, that does not affect the devolved nature of the policy.
Thirdly, the regulations amend domestic legal provisions, using the powers of the EU withdrawal Act. Under the current EU regulations, member states themselves put in place effective and proportionate enforcement provisions. In Great Britain that has been done by means of criminal offences set out in primary legislation and a fixed penalty regime in secondary legislation. Important amendments need to be made to those domestic enforcement provisions to make them work in a non-EU context, which is necessary to ensure that the rules continue to be clear and fully enforceable after exit.
The Northern Irish devolved Administration are preparing equivalent amendments to Northern Irish law, which will be the subject of a separate statutory instrument. The amendments made under the EU withdrawal Act will come into force on exit day. Should a negotiated exit with an implementation period be agreed, the provisions made under the Act will be deferred until the end of the implementation period, and amended or revoked as necessary.
In summary, the regulations presented here are essential to ensuring that the EU regulations on drivers’ hours, and on the tachographs that are used to enforce them, continue to work effectively in the UK from exit day. They are at the heart of the road safety regime for commercial vehicles, and I am sure that hon. Members across the Committee will share my desire to avoid any disruption to their proper functioning. I should like to be clear that these necessary legal amendments do not modify the substantive regulatory obligations placed on drivers and operators who are subject to the rules. On the contrary, they will help to provide clarity and certainty for the industry about the continuity of the policy framework through the EU exit process. For that reason, I hope that hon. Members will join me in supporting these regulations, which I commend to the Committee.
It is a pleasure to see you in the Chair, Mr Robertson, and a privilege to serve under your chairmanship. As the Minister has just mentioned, these regulations are part of the many aspects of EU law that will fall into UK law under the Government’s European Union (Withdrawal) Act. The instrument ensures that the existing regulatory regime for drivers’ hours and tachographs remains effective from exit day. Without this instrument, some of the existing legislation, which was drafted in the context of EU membership, would lack clarity or fail to operate effectively after we leave the European Union. This instrument is clearly needed, and I know the industry is supportive of it, so we, the Opposition, are supportive of it as well.
However, although it is supportive, the industry has real concerns about the prospect of the UK leaving the European Union without a deal, and tells me that that would be devastating for the haulage and freight industry, even with yesterday’s announcement that customs checks are to be simplified in the event of no deal. The head of the Road Haulage Association warned:
“Business is simply not ready for a chaotic no-deal Brexit… The systems aren’t in place, the staff are not trained, there isn’t the time in the day for hauliers and businesses to do all the paperwork”.
I wonder whether the Minister agrees with that assessment.
Can the Minister also tell us what discussions he has had with the haulage and freight industry on the impact of a no-deal situation? Does he agree that the Government could remove all this unnecessary uncertainty for the industry, and for business generally, by simply ruling out the prospect of a no-deal situation? It is utterly irresponsible of the Government to continue this pretence, and it is about time that Ministers took responsibility and said to business, “It’s not going to happen; we’re not that irresponsible; and we’re not going to do that to the economy of this country.”
It is a pleasure to serve under your chairmanship, Mr Robertson. I will not say too much, but I certainly echo the words of the shadow Minister. I am not going to oppose the regulations, because they are needed, but this hardly seems like taking back control when all we are doing is copying regulations over from EU law into UK law. There are many more important things that the Government should be getting on with, such as ruling out no deal, as the shadow Minister said, or looking at extending article 50, which is now a priority as Brexit day approaches and possible carnage ensues.
Where are the Government on proper no-deal preparations, such as simplified customs checks? What would they mean for the ports, for businesses or for tailbacks at Dover? What would they mean for Seaborne Freight? Where are the Government on the emergency planning that will suddenly put ferries in place to take the heat off Dover, and what other contingencies do they have in place?
What measures do the Government have in place for addressing the shortage of heavy goods vehicle drivers, which is already critical, even without the implications of the UK crashing out without a deal? How many other instruments from the Department are required to come before Parliament? In particular, how many are scheduled for the week that was going to be the February recess before we realised that we will be inundated with legislation? Hopefully the Minister can address some of those points.
I thank both hon. Gentlemen for their support for this important piece of secondary legislation. I will address the points that they have raised.
The hon. Member for Kingston upon Hull East asked whether I concur with his view that a no-deal scenario would be devastating for the haulage industry. We should be in no doubt that the Government do not minimise the disruption that would be caused by a no-deal scenario—that is perfectly clear. That is why we are pressing for a withdrawal agreement and why I encourage hon. Members of all parties to support the Government on that.
Supposing Parliament supports the withdrawal agreement—it is a long shot—what would that mean for the transition period? All it does is kick things into that transition period. What is the timeframe for getting a free trade deal and agreeing a customs arrangement to go with it? What is the timeframe for developing the technology that is needed to prevent a hard border between Ireland and Northern Ireland?
Order. The Minister did refer to no deal, but the debate is not about a deal or no deal as such; it is about drivers’ hours. We need to narrow the scope a bit.
I apologise, Chair, for my natural courtesy, which led me astray in accommodating the hon. Gentleman. Of course, it is important to be aware of the rationale for the regulations, which is to be prepared for every eventuality. If there is an agreement, as we think there will be, they will need to be amended or revoked, as necessary. The point is that we are seeking a deal and we expect to get one.
In answer to the hon. Member for Kingston upon Hull East, we have put in place plenty of contingency arrangements. As he knows, we have bilateral agreements and European Conference of Ministers of Transport permits in place. We also have what is already proving to be a highly pragmatic response from the different countries involved in responding to the situation. That is important, because it will help to mitigate any effects of this unusual and unexpected scenario.
The hon. Gentleman asked whether businesses are ready. I think that many haulage businesses have got the message and are preparing contingency arrangements. They do not necessarily think it will happen, but they think it is important to be prepared. We have worked closely with the Freight Transport Association and the Road Haulage Association, which are the industry bodies responsible.
The hon. Gentleman asked what discussions we have had, and the answer is that we have had extensive discussions, not just at ministerial and official level with the companies themselves, but with particular bottlenecks in the south-east, where we run an entirely separate process designed to ensure proper freight and traffic flows in the event of some disruption at the border. Of course, that disruption at the border could conceivably occur as a result of a no-deal Brexit, but it could also occur for other reasons—for example, we had it in 2015 outside the context of any EU negotiations.
The hon. Member for Kilmarnock and Loudoun asked whether this was really taking back control. I will not go into that issue. He is right that we are taking over regulations, suitably amended, because those regulations had been outsourced to the EU over many years. To the extent that we are now reinstating them in our statute book, we are taking back control.
I have touched on our preparations, but the hon. Member for Kilmarnock and Loudoun also raised the important issue of the driver shortage, which we recognise. We have been working closely with the industry on its “Road to Logistics” package. It has taken some time to get that to a place where it is something that the Government can look closely at, but I am pleased to say that it is now of great interest. I recommend it to my colleagues and encourage them to work closely with the industry to try to crack the issue. Having said that, I invite the Committee to support the regulations.
Question put and agreed to.