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General Committees

Debated on Wednesday 13 February 2019

Delegated Legislation Committee

Draft Local Government (Structural and Boundary Changes) (Supplementary Provisions and Miscellaneous Amendments) Order 2019

The Committee consisted of the following Members:

Chair: Geraint Davies

Champion, Sarah (Rotherham) (Lab)

† Courts, Robert (Witney) (Con)

Creasy, Stella (Walthamstow) (Lab/Co-op)

† Dakin, Nic (Scunthorpe) (Lab)

† Fabricant, Michael (Lichfield) (Con)

Hodge, Dame Margaret (Barking) (Lab)

† Howell, John (Henley) (Con)

† Keegan, Gillian (Chichester) (Con)

† Lewer, Andrew (Northampton South) (Con)

† McMahon, Jim (Oldham West and Royton) (Lab/Co-op)

† Morgan, Stephen (Portsmouth South) (Lab)

† Philp, Chris (Croydon South) (Con)

† Quin, Jeremy (Lord Commissioner of Her Majesty's Treasury)

† Sunak, Rishi (Parliamentary Under-Secretary of State for Housing, Communities and Local Government)

† Swayne, Sir Desmond (New Forest West) (Con)

Umunna, Chuka (Streatham) (Lab)

Williamson, Chris (Derby North) (Lab)

Hannah Wentworth, Laura-Jane Tiley, Committee Clerks

† attended the Committee

The following also attended (Standing Order No. 118(2)):

Hoare, Simon (North Dorset) (Con)

Eleventh Delegated Legislation Committee

Wednesday 13 February 2019

[Geraint Davies in the Chair]

Draft Local Government (Structural and Boundary Changes) (Supplementary Provisions and Miscellaneous Amendments) Order 2019

I beg to move,

That the Committee has considered the draft Local Government (Structural And Boundary Changes) (Supplementary Provisions and Miscellaneous Amendments) Order 2019.

Last year, Parliament approved legislation to establish Bournemouth, Christchurch and Poole Council, known as BCP, Dorset Council, East Suffolk Council, and Somerset West and Taunton Council in place of the existing 13 councils in those areas. Today, we are considering the fourth statutory instrument consequential to that legislation in order to effect the practical success of those new councils. If approved and made, the order will ensure that all the necessary technical and definitional arrangements are in place so that effective local government continues in those areas. We have worked closely with all the councils concerned; their officials have commented on drafts of the order and have confirmed to us by email that it fully meets all local requirements.

The order provides for several items of business. First, it will establish charter trustees for the unparished parts of the existing boroughs of Bournemouth, Poole and Taunton as the bodies in which the historical rights and privileges associated with those areas are to be vested. For example, Bournemouth and Poole have the historical rights to have mayors and Poole has the right to a mayor and a sheriff; likewise, the Taunton charter trustees will have the right of a mayor for Taunton. I am sure members of the Committee will be delighted to know that historical regalia, such as maces, will also vest in the charter trustees.

Secondly, the order vests the market rights in Bournemouth and Poole to the BCP council, allowing the new council to continue to hold the rights to run charter markets. Thirdly, the order provides for the statutory definition of the area of the ceremonial county of Dorset to be amended in the Lieutenancies Act 1997 and the Sheriffs Act 1887. I am sure that no members of this Committee were present to pass those pieces of legislation, but I know they are held in good heart today.

I am happy to confirm that I was not here in 1887. Lichfield is one of the very few cities in the country—only 13, I believe—to have a sheriff, complete with two gold maces going back to the reigns of William and Mary and, before that, Queen Mary. Does the Minister recognise the importance of ceremonial and its value in civic life?

I thank my hon. Friend for that contribution. I commend him and the people of Lichfield for maintaining those civic traditions, and of course I agree that they are an important part of our civic society. Although what we are considering today is technical in nature, the underlying substance of what we are doing is vital to ensure that local civic traditions are not lost when local government reorganises and they can be passed appropriately to the right local civic bodies. I am delighted that we are enabling that for the people of the areas that will benefit from the order.

I thank my hon. Friend and his team for the work they have done in support of Dorset’s local government reorganisation. The point made by my hon. Friend the Member for Lichfield is apposite. When proposals for change are first mooted, people often say, “This will throw the baby out with the bathwater. We will lose our sense of history and place.” The fact that these things can be retained in a modern reformed setting, melding the old and the new, is an important message that I hope the Minister carries forward to other councils.

I thank my hon. Friend for his continued support for these measures. He embodies the best of the traditional and the modern world, ensuring that local areas embrace the future with efficiency, a dynamic approach to local government and a desire to serve their constituents better, while retaining the great traditions of those areas. I am delighted that he is here to see that come into practice.

Moving on to slightly more mundane—but no less important—matters, the order fourthly makes provision to ensure that the local government pension fund maintained by Dorset County Council, along with all the property rights and liabilities in respect of that fund, will vest in the new Dorset Council. That fund will be the pension fund for employees of that council and of the new BCP council, as well as employees of all other employers in that fund.

Fifthly, the order makes provisions to amend the Weymouth Port Health Authority Order 2017, so that references to the joint board made up of the abolished authorities of Weymouth and Portland Borough Council, Purbeck District Council and West Dorset District Council will instead refer to Dorset Council, which will be the sole authority for the area following reorganisation. Finally, the order makes provision for the existing social housing finance and housing revenue account arrangements to continue for the new councils of Bournemouth, Christchurch and Poole, East Suffolk, and Somerset West and Taunton.

All the provisions are sensible and necessary consequential changes in the light of the establishment of the new councils, which Parliament has already approved. They will ensure a smooth transition to the new arrangements, and continued effective local government in the areas covered. I commend the order to the Committee.

It is a pleasure to serve under your chairmanship, Mr Davies, in these wonderful morning Delegated Legislation Committees.

The order has been a long time in the making and we are towards the back end of the process, so there is no point spending the morning going through its history, but I have some questions to ask of the Minister. First of all, I welcome a principle and a culture that is not about changing the identity of a people and a place, but is instead about administration in an area. I just hope that when the changes have been made and the new authorities are fully functioning, that culture is followed through in everything the authorities do. We cannot believe that administrative boundaries are anything like the historical, trusted, valuable identities that people feel.

Let us be honest: there have been a number of Delegated Legislation Committees considering reorganisation in shire areas, and the reason why councils in those areas are considering reorganisation is their financial foundation. They are struggling to meet the increasing demand for adult social care and children’s services; their budgets are being hit year on year, in the same way as every local authority in England. They are increasing council tax, often to the maximum, but that is still not enough to replace the grant that the Government have taken away. The Government have refused to meet the social care, children’s services and homelessness demands that the Local Government Association has highlighted, and I am afraid that unless we deal with the crux of the issue, which is that £8 billion funding gap, reorganisation will not fix the problem. It will save some money, but it will not save the important neighbourhood services that make places what they are.

We cannot have a situation in England, which will be the outlier in the UK, in which councils are in effect just providers of social care and almost nothing else matters. That is not why councils come into existence or why councillors stand for election. People stand for election as councillors because they believe passionately in the power of their place and their communities. The idea that we should starve them of the resource they need to make those places better is, I am afraid, simply not in the spirit of a thriving Britain. As we approach Brexit—who knows when that will be—that demand for a better Britain has not been laid out and the offer has not been made to the people of this country. I strongly believe that local government is a foundation on which we will build a stronger country, but that cannot be done when we starve it of essential resources.

Obviously, we are embarking on the fair funding review, which will seek to address some of these issues. We know that the Government are keen for rural service unit costs to be taken into account, and Labour welcomes that, although we have repeatedly observed that the removal of deprivation as a factor in a number of service areas is not in the spirit of a fair funding review. A genuine review of council funding that takes into account all funding pressures must take both rural service unit costs and deprivation into account. Some services will be more expensive in rural areas; some will be more expensive in urban areas; and for many services, whether the area is rural or urban will have no bearing on cost.

In this reorganisation, for example, one of the biggest pressures is adult social care and children’s services, yet in the Government’s 2014 review of unit costs adult social care was not found to be more expensive in rural areas. It is assumed that the geography requires more downtime, with staff travelling from one appointment to the next, but when costs such as staffing and fewer children’s placements are taken into account, it is cheaper to deliver social care in rural than in urban areas. Given that is the lion’s share of the budget pressure for those local authorities, it prompts the question whether a fair funding review will fix the foundations of funding in this area. I press that point: what is the Government’s vision for fair funding? How do they intend to address the weak foundations that this reorganisation is being built on?

There are also the practicalities that are not often debated in this place but are really important. When many local authorities are brought together, they inherit different cultures, ways of working and staffing structures, which will of course change. They will also inherit different ways of collecting data, with different systems, programs and ways of recording jobs for a range of services. It would be comforting to hear that the Government have considered those points in the reorganisation, to ensure that, in the transition of many different data programs retained by councils, essential information is not lost.

Data and information technology have moved on but can be a significant bugbear. When I was council leader in Oldham, I often got the blame for the 1974 reorganisation; I had to point out that I was not born then but it was still a bugbear. When the councils reorganised, many district councils destroyed a lot of social care records as part of the transition, as district town halls closed to form the new metropolitan borough.

We need to ensure that, in the transition to a new authority, those practical matters are taken into account and that there is proper funding in place to ensure that it can be done efficiently.

I thank the hon. Gentleman for his thoughtful comments. To start with finance, I do not wish to try the Committee’s patience by rehashing the debate on local government finance in the Chamber last week. Suffice it to say that we believe we are supporting and empowering local government to deliver its three major tasks. One is to support the most vulnerable in society, the second is to grow local economies, because that is ultimately the only way to pay for the services we rely on, and the third is to build strong communities.

The range of support provided by central Government —pothole funds, the high street fund, business rates retention pilots, almost £650 million more for social care—shows that we are a Government committed to supporting local government in pursuing those vital goals for all our constituents. I agree with the hon. Gentleman that people in local government deserve praise for the passion with which they serve their communities. They come into it to realise the three goals I outlined.

What is important is not just the money but the quality of the services we provide. That is why the Government are relentlessly focused on not only keeping taxes as low as possible for our residents but ensuring that we learn from each other, and we see local councillors striving to do exactly that. As we heard from my hon. Friend the Member for North Dorset, our purpose is to ensure that local government is fit for the future. It is not about being told by Ministers in this place what to do, but about local councillors talking to each other and deciding themselves how best to serve their constituents.

Of course, saving money is part of that and is not to be sniffed at. I do not think we should accuse local government of not looking for ways to save money. Ultimately, the taxes that fund local government are paid for by all our residents. It is right that if we can do things better and cheaper we should look for those opportunities, but that cannot be the only reason for local government reorganisation.

During all the debates we have had on this topic, we have heard many passionate contributions, including from hon. Members from those areas such as my hon. Friend the Member for North Dorset, who spoke at great length about the various benefits that this local government reorganisation would bring to his area and constituents. We very much support those aspirations and ambitions that local councillors have for their areas.

The hon. Member for Oldham West and Royton talked about data and digital. I agree with him that that is important. It is not just about the nuts and bolts of integration, which I am pleased to report seems to be going very well on the ground—the go live date for all the new councils is 1 April 2019, and all councils are making excellent progress towards being ready to roll on that day. More broadly, the importance of using data to benefit our constituents is vital.

I am delighted that this Government have backed local government with a new £7.5 million fund to create digital innovation projects across the country. All types of councils are benefiting, from unitaries to urban areas to shire districts to shire counties, and we are finding through that process that councils are collaborating. This is not party political; it is about councils working together and learning from each other, building data platforms that will benefit our constituents, finding ways to streamline and reduce the cost of technology, and ensuring that we can use that information to target services at those who really need them and, in an ideal world, prevent things from happening in the first place. Of course we are in the early days of that revolution, but there are many good examples. There is one close to the area of the hon. Member for Oldham West and Royton, in Stockport Council, which I had the pleasure to visit on one of my first ministerial visits. It was digital council of the year last year and is a great example for others to learn from.

I am delighted that all these councils are embracing the future with optimism. I am delighted that this Government are able to support these locally led and locally delivered plans for reorganisation. I look forward to seeing more than 1 million residents benefit from the changes that we are approving today.

Question put and agreed to.

Committee rose.

Draft Employment Rights (Amendment) (EU Exit) Regulations 2019 Draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) Regulations 2019 Draft Employment Rights (Amendment) (EU Exit) (No. 2) Regulations 2018 Draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) (No. 2) Regulations 2018

The Committee consisted of the following Members:

Chair: Mr Nigel Evans

† Ali, Rushanara (Bethnal Green and Bow) (Lab)

† Baron, Mr John (Basildon and Billericay) (Con)

† Bradshaw, Mr Ben (Exeter) (Lab)

† Cadbury, Ruth (Brentford and Isleworth) (Lab)

† Eagle, Ms Angela (Wallasey) (Lab)

† Fitzpatrick, Jim (Poplar and Limehouse) (Lab)

† Harris, Rebecca (Lord Commissioner of Her Majesty's Treasury)

† Hughes, Eddie (Walsall North) (Con)

† Madders, Justin (Ellesmere Port and Neston) (Lab)

† Mercer, Johnny (Plymouth, Moor View) (Con)

† Morris, Anne Marie (Newton Abbot) (Con)

† O'Brien, Neil (Harborough) (Con)

† Smith, Nick (Blaenau Gwent) (Lab)

† Stephens, Chris (Glasgow South West) (SNP)

† Stewart, Bob (Beckenham) (Con)

† Tolhurst, Kelly (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

† Vickers, Martin (Cleethorpes) (Con)

Nina Foster, Committee Clerk

† attended the Committee

Twelfth Delegated Legislation Committee

Wednesday 13 February 2019

[Mr Nigel Evans in the Chair]

Draft Employment Rights (Amendment) (EU Exit) Regulations 2019

With this it will be convenient to consider the draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) Regulations 2019, the draft Employment Rights (Amendment) (EU Exit) (No. 2) Regulations 2018 and the draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) (No. 2) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mr Evans. The draft statutory instruments were laid before the House on 14 January 2019 and on 31 October 2018 respectively. They are part of a package of measures that the Government have promised to introduce to make sure that we are prepared in the event that we leave the EU without a deal. It is important to remember throughout the debate that the changes will not be needed if a deal is secured.

The statutory instruments under consideration amend employment law to reflect the UK’s withdrawal from the EU. New directives agreed in the EU are transposed into UK law. The act of the UK leaving the EU therefore does not remove those rights, which are already in UK law. By passing the European Union (Withdrawal) Act 2018, Parliament gave the Government the ability to ensure that necessary changes can be made to keep the statute book in proper working order.

I can confirm that the SIs before the Committee make only minor changes to language to ensure that existing regulations will reflect the fact that the UK is no longer a member of the EU. Those changes are necessary to ensure that the statute book is accurate and clear. It is important that businesses, employees and citizens have clarity regarding their rights and responsibilities.

During the passage of the 2018 Act, some hon. Members raised concerns about the potential for the Government to use some of the powers granted by that Act to make more fundamental changes. I assure the Committee that the Government are not making any changes to employment rights or employment policy through these regulations. The Prime Minister, the Business Secretary and many other colleagues have been clear that there will be no roll-back on workers’ rights when we leave the EU.

Does the Minister not concede that, as a result of the regulations, in the event of no deal, employees and workers in the United Kingdom will not be able to set up a European works council?

If the hon. Gentleman allows me to make some progress, I will come to that point. We should aim not to sensationalise the issue, but to provide clear answers to the public. It is our responsibility to be the guide during this unprecedented time.

The Committee will be aware of the programme of reforms that the Government are already implementing to strengthen workers’ rights and we are delivering on our commitments through the “Good Work Plan”. We do not need to be in the EU to have strong workers’ rights or to enhance them in the future. Indeed, we will continue to deliver the good work reforms after the UK has left the EU.

Far from being content with EU minimum standards, the UK has gone beyond them in a number of areas. Our maternity entitlements are nearly three times greater than the EU standard. In the UK, we offer 52 weeks of maternity leave, of which 39 weeks are with pay; the EU requires only 14 weeks of paid leave. We give fathers and partners the statutory right to paternity leave and pay—an entitlement that the EU is only now starting to consider. We allow eligible parents to share paid leave and thus caring responsibilities in the first year following birth or adoption; the EU does not provide for that right. We have given all employees with 26 weeks’ qualifying service a statutory right to request flexible working; EU law allows workers to make a request only if they are returning from parental leave. One of the EU’s own agencies, Eurofound, ranks the UK as the second best country in the EU for workplace well- being, behind only Sweden, and the best for workplace performance.

In our future outside the EU, the political declaration on our future relationship states that we will build on the withdrawal agreement commitment not to reduce our shared standards or regress from existing EU legislation. As my right hon. Friend the Prime Minister said in the House yesterday, we are prepared to commit to asking Parliament whether it wishes to follow suit whenever the EU changes its employment standards. I hope that that provides assurance to the Committee that the Government are absolutely committed to protecting and enhancing workers’ rights.

The statutory instruments are an important and necessary part of the work to protect rights in the event that we leave the EU without a deal. Of course I hope that the regulations will not need to come into effect, and that an agreement can be reached with the EU so they can be revoked.

Will the Minister explain why the Government initially thought that the regulations should be subject to the negative procedure and not debated at all? We are obviously pleased that the Government changed their mind when the European Statutory Instruments Committee asked for the change.

The statutory instruments that were laid subject to the negative procedure, which was changed by that Committee, relate particularly to Northern Ireland. They were upgraded to be debated, so we have the opportunity to debate all four sets of regulations in Committee today.

Although I hope that the regulations will not need to come into effect, because I hope that we can reach an agreement, in the event of no deal it will be vital that they are enacted. Failure to pass these largely technical regulations would result in uncertainty about workers’ rights and employers’ obligations, which could lead to disruption for business and citizens and an increased risk of litigation, which is in no one’s interest.

Against that background, I will explain one set of provisions about which hon. Members may have concerns. The Employment Rights (Amendment) (EU Exit) Regulations 2019 make changes to the rules on European works councils. Businesses and trade unions in the UK value the opportunity for employee engagement and consultation that the councils provide, and the Government recognise and encourage those benefits. However, withdrawing from the EU without a deal will mean that the UK is no longer covered by EU rules on European works councils.

In that scenario, it would be for the EU to give UK workers the right to be represented on the councils. It is an unavoidable and unfortunate truth that there is no way for the UK unilaterally to ensure that workers in this country retain that right without a deal. There is also no way to replicate the European works council system only in the UK, as their purpose is to enable cross-border engagement. That requires the same rules in all countries, which requires a withdrawal agreement.

The assertion that the UK cannot make those provisions is incorrect. In relation to financial services, for instance, the UK is unilaterally making provisions on payment services and hoping that EU member states will do the same. Is the Minister aware that what she is saying is incoherent and inconsistent with what is happening in other policy areas?

Is the Minister not concerned that we are, yet again, in Committee considering statutory instruments without impact assessments, which does not allow adequate scrutiny? I have raised the issue several times. Can she give an assurance that the next time she or her colleagues come before such a Committee, they will provide an impact assessment?

All the regulations have had de minimis statements applied. Obviously, they have been cleared through the better regulation framework, because if the impact exceeded the de minimis threshold, full impact assessments would have been made. All regulations or SIs that we bring to the House will be looked at by the Department in a deep way to assess the impact.

The hon. Lady’s first point was on other regulations that may be passing through the House at the moment and that are not directly related to the draft instruments. It is clear that we are retaining EU law. The changes we are considering are mostly technical, apart from the changes to the particular area I am referring to at the moment. Rightly, we want to see co-operation and agreement in the future where it is necessary and achievable. That is why the Government are determined to deliver a deal, so that we can have those reciprocal agreements with other member states.

The Minister is being most generous in giving way. She will be aware that the European Parliament and European Commission are currently negotiating regulations for workers in the gig economy and for working parents that are far better and stronger than anything found in the UK Government’s “Good Work Plan”. Is the Minister saying to the Committee that if the European Parliament and European Commission agree those regulations, the UK Government will match them?

I remind the hon. Gentleman that we are debating an SI that will be enacted if we are in a no-deal situation on 29 March. As I have already outlined, whether we decide in a future no-deal situation to align our laws with the EU’s is a different matter, but I repeat: we have the “Good Work Plan” and we are going further. We are still a member of the European Union, so we still take part in those conversations happening in Europe.

I would like some clarity regarding the Minister’s answer to the hon. Member for Glasgow South West. Is it the Government’s policy to match future EU advancements in worker protection laws?

I assure the hon. Gentleman that we have been very clear that we will not roll back workers’ rights. In fact, we have made an express commitment to go further. As I outlined, we already go further than Europe in many ways. We have been feeding into the development of EU thinking on some of these policies, as some of the work we have been doing in the UK is particularly good. We are determined to continue on our path. Our ambition is that the UK continues to be a great place to work, with those protections continuing to be afforded to the people employed in this country.

Our domestic regime for employee engagement and consultation will remain in place, and we will encourage businesses to continue to allow UK workers to be represented on a voluntary basis in European works councils. We are retaining as many of the existing rules as we can to enable that. All existing protections for workers and for their representatives on European works councils—even those there voluntarily—will be maintained. Approving the draft regulations is the only way to ensure that workers involved in European works councils are protected if there is no deal. They deliver on our commitments.

Another area I am aware that Members may be concerned about is the changes being made to the TUPE regulations. In a dynamic economy such as the UK’s, there will inevitably be takeovers and mergers and contracts changing hands, which is good for the prosperity of our country; the best companies outdo the worst. We recognise that that must be combined with strong protection for the workers in those companies, for whom a change of employer may be a stressful and difficult experience. TUPE regulations are central to protecting workers from suffering as a result of being transferred.

The draft regulations are an important part of EU-derived employment law, which we have committed to retain. In the UK, we have gone further than required under EU laws and we have extended these important protections to other groups of workers. Not only will we retain the elements from the EU, but we commit to retaining the gold-plating. Only by making the changes contained in the draft Employment Rights (Amendment) (EU Exit) (No. 2) Regulations can we make sure that workers remain entitled to these protections. The changes are necessary to ensure that the Government retain our current powers to extend the protection provided by TUPE to other groups of workers. These powers have been used to protect workers where there is a change of service provider that is not also a business transfer—a situation that would not be covered by EU rules. That crucial gap can include situations where a business outsources or contracts out a service. The changes are technical, but it is important that I set Members’ minds at ease.

The current powers are defined with reference to the EU directive, which applies to the UK as a member state. When the UK is no longer a member state, if there is no deal the reference will no longer make sense, so the reference must be changed so that it does not rely on EU law. Without that change, the Government could not use the power or use this tool for protecting workers in future.

I have highlighted these areas as the other changes in the SIs are purely technical, made to reflect the fact that the UK will no longer be a member of the EU. I assure the Committee that the amendments made through these SIs deliver on our workers’ rights commitments, thus providing clarity to employers, workers and businesses, and confidence that the Government are prepared for a no-deal scenario.

Can the Minister explain to the Committee why the Government felt it necessary to make some of these changes retrospective and bring them into being before we have left the European Union, even though these SIs are meant to be a series of so-called no-deal SIs?

In the event of a deal situation, the SIs that have been laid and passed can be revoked, referred, or brought to a following end-date, so there is a range of options on the table in a deal situation. We have been passing the no-deal SIs, particularly those before the Committee today, to make sure that we are ready if we leave the European Union on 29 March without a deal. It is imperative that we have regulations in place to ensure that we have a functioning statute book and are able to operate in a correct way.

I thank the Minister for giving way again. Some of the provisions in these statutory instruments actually came into force on 1 December 2018. Why is that?

I do not know the particular SIs that the hon. Lady is referring to, so I cannot comment on them. All I am commenting on are the ones that I have in front of me today.

Some provisions in the regulations that are scheduled to come into force came into force at the beginning of last December. Will the Minister explain why it was felt necessary to bring them into force well ahead of our leaving the European Union and then apply them retrospectively, which is not a good principle of law?

That may be, but the measures that she is referring to have not been highlighted. I am not aware of the ones that the hon. Lady is referring to. I am referring to the SI that is in front of me today.

If the Minister cannot give us the explanation I seek now, will she undertake to provide it in writing to all members of the Committee?

I will happily write to the Committee if the hon. Lady outlines to me the SIs that became active on 1 December 2018, so that I can give her and the rest of the Committee further clarification on that.

It would be unacceptable not to provide clarity to businesses and workers, and I encourage the Committee to approve the instruments. I commend them to the Committee.

It is a pleasure to serve under your chairmanship, Mr Evans. I am standing in for my hon. Friend the Member for North West Durham (Laura Pidcock), who has had a family bereavement. I am sure the Committee sends its condolences.

The Minister’s introduction presented the regulations as a necessary tidying-up exercise to remove unnecessary references to EU directives in important areas of workers’ rights, such as maternity leave, part-time work, fixed-term contracts and so on—I think she used the term “minor” to describe the effect of the legislation. On one level, that is understandable—we need our laws to be aligned with reality—but it seems at odds with the Prime Minister’s stated aim of protecting workers’ rights. From the removal of those powers, one can only conclude that the Government do not intend to match our EU counter- parts in terms of employment protection. The Committee will note that I asked the Minister about that and I do not think we had any confirmation that it is Government policy.

The regulations do not just remove our ability to keep pace with the EU but remove one area altogether. The Minister has already referred to it, so the Committee will not be surprised to hear that I am talking about European works councils, which are an important part of workplace democracy and a vital mechanism for giving a voice to the employees of multinational companies.

The Transnational Information and Consultation of Employees Regulations 1999 set out the rules governing European works councils. They say that where a company is based in two or more member states and has more than 1,000 employees, a European works council can be set up if one is requested. The regulations provide for the procedure to set up the council and a series of rights for employee representatives. Many of the information and consultation rights and protections are stronger than those under national legislation—for example, in relation to time off for workers’ representatives and the right to use experts and to undergo training. Those rights will be lost in a no-deal scenario.

Article 1 of the EU’s recast directive on European works councils anticipates the possibility of works council agreements that include non-EU countries and encourages them to proceed on a voluntary basis to enable workers’ representatives to participate. For example, the European works councils of companies operating in Switzerland often include Switzerland in their scope and may include Swiss representatives as members. However, the regulations do not appear to make provision for works councils to continue to include the UK in their scope on a voluntary basis, even though some European works councils have already amended their agreements to enable them to continue to work with UK representatives after Brexit.

In the regulations, the Government seek to retain certain aspects of the European works council scheme for councils set up before exit day, whenever that turns out to be. We welcome the fact that the enforcement framework, various employee representative rights and protections, and the confidential information protections are preserved for existing European works councils. There are also provisions to ensure that existing European works councils can continue to operate.

The concern, however, which we have already referred to, is that no new councils will be set up and that the right to request information on employee numbers, the provisions governing the setting up of a negotiating body, and the process and content of works councils and information and consultation procedure agreements will be lost. That clearly constitutes a loss of valuable workers’ rights in contravention of the Prime Minister’s promise to maintain existing workers’ rights at current levels.

The opportunity for workers to participate in discussions with their European colleagues on company-wide issues is valued by businesses, employees and their representatives. It can include opportunities for the workforce to be included in strategic multinational decisions about jobs, investment and training. Employees and unions are concerned that if UK representatives lose their place at the table, there will be a risk to UK jobs and investment.

In the event of a no deal, we need a commitment to continue to support and facilitate future voluntary UK worker participation in European works councils, as anticipated by article 1 of the recast directive, by keeping in place existing rights and protections for UK representatives on European works councils after Brexit. This will ensure that, in future, UK worker reps joining new or existing councils will continue to have their current rights and protections, including the right to paid time off to attend such meetings, as currently set out in regulations 25 to 27, and a right to training, as set out in regulation 19B. In our view, the draft regulations need to be amended to cover at least those basic work- place protections. Failure to do so would mean not honouring the Prime Minister’s clear commitments in this area.

On a more technical point, as alluded to by my hon. Friend the Member for Wallasey, the draft regulations are supposed to come into force on exit day, with the exception of certain provisions. The Minister needs to explain the need for that distinction.

I also have concerns about the lack of a Government statement on their timetable for revoking the regulations, in full or in part, should a withdrawal agreement with the EU be concluded. The draft regulations do not provide for the method by which they would be revoked. The unique circumstances that we currently face could involve considerable numbers of statutory instruments being repealed or revoked in a short space of time. The nature of the revocation is an important matter that we need clarity on from the Minister. I hope she agrees that, if a withdrawal agreement is secured, the draft regulations will not be needed subsequently, including in a transition period or in any backstop, if that is where we end up.

The second draft instrument proposes to alter the Secretary of State’s power under section 38 of the Employment Relations Act 1999 to provide TUPE protection to workers not ordinarily covered by those regulations, which typically include what are colourfully known in the directive as administrative reorganisations of public administrative authorities and the service provision changes that the Minister referred to.

I understand the need to remove the reference to the EU, but I do not understand why, as part of that process, the Government intend to water down TUPE protections, which it seems will be the inevitable consequence of using the phrase “TUPE-like” in the draft regulations. That is the nub of it. Why is “like” in there at all? Surely it is superfluous. The protections will be “the same or similar”. Why can they not just be the same? That is what the Opposition want, and I think it is what the Prime Minister intended.

This change will cover a potentially huge number of employees, as it will apply to contracting out of public sector services, market testing, private finance initiatives, any other outsourcing and contracting exercises, second and subsequent generation contracting where the contract was first awarded from the public sector, and reorganisations and staff transfers from one part of the public sector to another. We cannot simply nod through the draft regulation because it could affect thousands of employees.

The risk is that “TUPE-like” could mean that TUPE protections on changes to terms and conditions may no longer apply. Will the Minister confirm that the power could be used to prevent employees’ terms and conditions from being preserved after a transfer? Is it not the case that the draft regulations will mean that current rules regarding protection against a dismissal connected to a transfer could also be disapplied? Is it not also correct that existing laws regarding information and consultation on a transfer could be ignored as a result of the draft regulations? On the latter point, the Trades Union Congress points out that the draft regulations do not expressly refer to employee representatives, be they trade unions or elected representatives. Will the Minister explain why that has been omitted?

I would also be grateful if the Minister clarified what would happen in a no-deal Brexit where employees of a UK company were involved in a TUPE transfer post 29 March to a new employer based somewhere within the EU. Would any employee wishing to enforce their rights against their new employer have to do so subject to the European Court of Justice’s jurisdiction? Normally, both employers in a TUPE litigation would be made parties to the case. Does that mean that UK companies could still be subject to ECJ jurisdiction post Brexit?

The other aspect of the second draft instrument is the proposed amendment to section 13 of the Working Families Act 2006, which will have the effect of removing the obligation to keep pace with EU law on annual leave entitlements. The enshrining in UK law of the working time directive was one of the finest achievements of the last Labour Government, bringing for the first time a legal entitlement to rest breaks and paid annual leave. I am not surprised that the Government are taking the opportunity to weaken the standing of the working time regulations, given that a number of current and former members of Government, including Cabinet members, have spoken at length about the supposed burdens of the regulations. The Opposition do not consider paid annual leave or daily and weekly rest breaks to be a burden. They are essential health and safety measures, as well as important parts of workplace protection.

It is clear from this instrument that the Government do not wish UK workers in future to enjoy parity with their European counterparts. This can be seen as the firing of the starting gun on the race to the bottom. Indeed, as the political declaration makes clear, employment standards are to be considered subordinate to open and fair competition. That is where we are heading.

Does my hon. Friend agree that this is not just about the protection of employees but about those they serve? I refer to the ten-minute rule Bill introduced by our hon. Friend the Member for Warwick and Leamington (Matt Western) in the Chamber today, which was prompted by the deaths of people in Coventry as a result of a bus driver having worked inordinately long hours that week and the two weeks beforehand. That is an example of the importance of adequate employment legislation, not only for workers but for those they serve and their customers.

My hon. Friend is absolutely right. That is why the working time directive was initially presented as health and safety legislation. It is not just about the worker’s health and providing adequate rest breaks, but about protecting those enjoying the benefits of their labour.

The Prime Minister may talk a good game but the evidence is that the words do not match the reality. Hers is the party that introduced employment tribunal fees, doubled the qualifying period for unfair dismissal and commissioned the atrocious Beecroft report, which proposed removing workplace protections altogether. I hope I will be forgiven for taking the Prime Minister’s comments in the Chamber yesterday about matching EU developments in employment rights with a pinch of salt, given what is before us today. Her track record does not inspire confidence, and these regulations do not do what she claims she wants to do. In fact, they do the opposite.

I say to the Minister that if the Government are genuinely trying to find common ground with Members across the House, these regulations should be withdrawn, because they do not do what the Prime Minister claims she wants to see happen. They represent the erosion of workplace protection and they must be opposed.

It is a pleasure to see you in the Chair, Mr Evans. We need to start from the moment the Government tried to sneak these measures through using the negative procedure when they tabled the regulations on 31 October 2018. I am astonished that that great bastion of democracy, the House of Lords, was the place to correct the Government’s disregard. If it were not for the concerns put by the Trades Union Congress, that is exactly what the Government would have done.

It is true that the House of Lords spotted that the regulations would better fit the affirmative procedure but, to cheer up the hon. Gentleman, so did the European Statutory Instruments Committee of the House of Commons, of which I am a member, when we had a look at the regulations. We also suggested to the Government that the regulations are not minor and should certainly be subject to fuller debate.

I am grateful for that clarification. I was previously a member of that Committee—I thought the Whip was punishing me for something—and that shows the Committee system plays an important role. The Minister needs to answer why these statutory instruments have different dates for different parts. For instance, 1 December has been mentioned; some mention exit day and some mention other dates. The Minister should clarify that. If there is no clarity on that matter, I do not see how the Committee can agree to these statutory instruments.

Although the Government have said that they want to keep workers’ rights, the clear concern is that what is happening in reality is a loss of guaranteed upgrades. A classic example of that, which I mentioned in my question to the Minister, is the regulations currently being negotiated between the European Parliament and the European Commission in respect of workers in the gig economy and working parents.

It is clear that, if there is no deal, UK workers will no longer be entitled to request the establishment of a European works council. That is important in many areas of the country. In the bus sector, for example, companies such as Arriva have workers across the European Union and in the UK. Arriva ran services in the west of Scotland before it pulled out, and its workers had to be offered jobs elsewhere in the European Union to continue their work.

The fact that UK workers will no longer have the opportunity to request the establishment of a European works council, in order to participate in discussions about company-wide issues with European colleagues, is very serious. Protections are clearly being weakened, because European law and the courts provide a protective backstop—I believe that phrase is in vogue—against EU workers’ rights law being weakened by future UK Governments.

That brings us to the issue of trust. The Prime Minister’s statement yesterday, and her answer to my question about what happens here if the European Union strengthens workers’ rights, mirrors what she said in her letter to the Leader of the Opposition: that there would be a vote in Parliament, and that the Government would not advocate matching those terms.

I asked that question of the Minister today, and I feel she did not guarantee that the Government would match those terms. Somehow it would be put to a vote, and workers across the UK would have to trust the Conservative party to enhance their workers’ rights— I do not think so.

I am sure the hon. Member for Wallasey will agree that those of us who were involved with the anti-trade union Act saw the real face of conservatism when it comes to workers’ rights and protections, and we remember the statements made in relation to workers’ rights by the great advocates of the leave campaign. The Secretary of State for International Trade said:

“It is too difficult to hire and fire”

people in the United Kingdom.

The reality is that these statutory instruments are badly drafted and offer no scope to keep United Kingdom law in line with EU law. As such, I will be voting against them.

It is a joy to see you in the Chair, Mr Evans. I begin by thanking the Minister for agreeing with the recommendation of both the House of Lords and the European Statutory Instruments Committee, which considered this collection of eight different measures and asked the Government to think again about using the negative procedure. If the Government had their way, there would have been no debate whatsoever about any of these important matters.

The Minister told the Committee that these are just technical amendments, that there is nothing to see here and that we should all be happy not to be bothered by a series of tiny law changes. However, those of us who have been in the House a long time and know all about the general approach of the Conservative party to workers’ rights legislation want to check it out anyway. A little later, I will outline some things that it would be helpful for the Minister to clarify in her response.

Let us look at what these two sets of statutory instruments do. The first is for Northern Ireland, which of course does not have a functioning Executive at the moment, and therefore legislation is effectively being made for it without its direct say-so. The second set applies to the rest of the country: England, Wales and Scotland.

The European Statutory Instruments Committee noted that the regulations amend four employment Acts to remove the power of the Secretary of State to make secondary legislation implementing EU employment directives. That is good, one might think, but that is four employment Acts changed by this collection of legislation. The Committee also felt there is a policy vacuum in what will replace the powers being taken away.

Section 79(3) of the Employment Rights Act 1996 is about the parental leave framework, and it will be repealed. Section 19(4) of the Employment Relations Act 1999 is about part-time work, and that will be repealed. Section 45(4) of the Employment Act 2002 is about conditions of employment, framework agreements on fixed-term work and the application of terms and conditions of employment and matters that arise because of the UK’s obligations under that particular EU directive. That will be repealed. Section 42(5) of the Employment Relations Act 2004, which has provisions about information and consultation, will be repealed.

The Government could have done other things. They could have tweaked rather than repealed all those things. Why have they decided to repeal? Why have they decided to tweak in other ways, such as by saying “TUPE-like”, rather than just cutting and pasting existing requirements and protections into UK law? I am alarmed that the Government felt they could bring forward this legislation without the Minister coming here to give us a lot more information about the Government’s approach.

It is about not only putting the same rights into UK law, but saying a bit about the loss of updating rights for the future. What, for example, is the Government’s intention, as the hon. Member for Glasgow South West has noted, on shadowing future rights that the EU may decide to grant its citizens, particularly in the gig economy? We know from experience that this Government have done little in the nearly nine years they have been in existence to aid and assist those who work in the gig economy. That has been left to unions such as the GMB, which has pursued Hermes through the courts to get those who work there the employment rights they should have been granted at the outset.

We know that other unions are pursuing employers such as Pimlico Plumbers and various other non-gig employers that are attempting to say that they do not have anyone working directly for them. Somehow all those people are self-employed and therefore have to pay for their own pensions and holiday pay. They do not get any sick pay or any other access to the basic protections we would expect every worker in the UK to get as a matter of common decency. Again, the Government have stood by and done absolutely nothing to protect those rights. They have made clucking noises about it and released the odd press release about how they are very concerned, but they have not done anything to make those rights accessible and available.

In fact, the coalition Government introduced employment tribunal fees, which effectively made it impossible for those with issues to enforce the rights they thought they had under UK law. They effectively dismantled what was left of the employment tribunal system by starving it of resources, so waiting lists were massively long and the only people who could really afford to get their statutory rights enforced at all were trade unions members who could afford to wait for a very long time and those who could risk their own money simply to try to get their basic rights enforced in the UK.

Of course, the Government also introduced the Beecroft report, which basically said that all maternity rights, and most employment rights, are a burden on business and ought to be abolished, and that everyone should fend for themselves.

It is very hard, looking at these transitions of EU regulations into the UK statute book, to take the reassurance of anyone from a Government with such a record that we can rely on the blandishments they might issue on the Floor of the House. We want to see proper law, proper debates and proper employment rights. We also wish to see an enhanced capacity for those organisations to allow workers to access their rights, thereby making those rights a reality.

So we come again to the Government’s record in that respect. The Trade Union Act 2016 made it virtually impossible for trade unions to operate without being caused enormous organisational problems and expense, which is a particularly vindictive approach to organisations that were created to ensure that workers can access their rights.

Many Conservative Members have said that, somehow, there will be freedom when we leave the European Union, but I could be forgiven for thinking that that will inaugurate a race to the bottom on rights. There will be competition in how exploitative we can be to those who work in what is already—let me put it this way—a very flexible economy, in which many people now struggle even to achieve basic pay, conditions, pension entitlement, sick pay, holiday pay and the rest of it.

We will look at the colour of the legislation, but I note that the Minister initially tried to get these statutory instruments through without even having a debate. Labour Members continue to look very closely, with a great deal of scepticism, at what is actually happening here, and whether there will be another attempt further to ratchet down the rights that people enjoy in our labour market.

I gently say that those of us on the Government Benches have listened to these allegations that we all have it in for workers’ rights, but nothing could be further from the truth. We are actually very proud of our track record on workers’ rights, and we stand by it. Although we may be silently listening to this long line of allegations, it does not mean that those allegations are true. We can stand proudly on our track record. I thought I would put that on the record, because otherwise a person listening in from outside this place might go away with the wrong impression. At the end of the day, actions speak louder than words.

I am glad to have provoked the hon. Gentleman to get to his feet and make that fairly fantastical claim, when 60% of people in poverty are actually in work, and when we have seen a huge increase in the number of people on zero-hours contracts, or on contracts so flexible that they cannot put food on the table at the end of the week.

Does the hon. Lady agree that insecure work has exploded in the past nine years and that the reason we are so suspicious is that those who advocate leaving the European Union kept using the deregulation of workers’ rights as a vehicle to enhance their cause?

Absolutely. We all remember the horror with which the Thatcherites perceived the appearance of Monsieur Delors at the Trades Union Congress, when he actually said that there was a social justice aspect to the European Union and that, of course, if there is a free market in the EU, there also has to be cross-border workers’ rights. Anyone who looks at the record will know exactly what to expect from the deregulators who form the core of the Brextremist Members of the Government party. They are positively salivating at the chance to cut further people’s entitlements in the labour market. They have always hated the idea that there was a floor below which they could not take workers’ rights, even when they were in government.

The hon. Lady talks about social rights, yet she tends to turn a blind eye to the fact that within the EU—certainly on the continent—unemployment is nearly twice the level that it is here, and youth employment in certain countries runs up to 50% and above, which is an absolute disgrace. That is not social justice. There has to be an element of balance in the hon. Lady’s remarks if she is comparing our track record with that of the EU on the continent.

The hon. Gentleman makes an interesting comment. He looks at countries such as Spain, which has had a particularly difficult time with youth employment, and southern countries, but does not mention Germany or Sweden or any of the other places—[Interruption.] Let me finish the sentence. He does not remember any of the other places where there is a much less exploitative approach to skills, training, work and opportunities, and where they manage to create a much more productive economy, with a much happier workforce, which does not feel that it is being exploited.

I am afraid the hon. Lady was being selective again. I quoted the EU average unemployment rate, which includes Germany and France and the northern countries. Even taking them into account, the EU unemployment rate is twice the level of that in this country. When the hon. Lady talks of productivity, she has got to be careful. If we are employing a greater share of the workforce, productivity will go down. Halving the unemployment rate is often done among low-skilled workers.

Order. Before the hon. Lady responds, I would just say that the discussion is going a bit wide of the mark. We could turn this into a general debate, but that is not what we are here for. If we could focus on the statutory instruments, that would be really useful.

Thank you, Mr Evans, and I am more than happy to abide by the obvious correctness of your ruling. I will merely say in passing that the issue is about taking away workers’ employment rights and making them harder to access and easier to exploit, which suggests that the hon. Member for Basildon and Billericay takes a very different view from Labour Members of what represents a good productive workforce. A proper look at the evidence indicates as much.

Does my hon. Friend agree that the hon. Member for Basildon and Billericay and a number of his colleagues seem to act in an evidence-free zone, even when the facts speak for themselves regarding the Government’s legislative changes to employment rights and reducing people’s rights? They opposed the national minimum wage when Labour introduced it and a whole series of improved labour standards regulations. Just because he says it, albeit in a well-mannered way, does not make it true. He should face up to the facts, which are that his Government have undermined labour standards. This is another attempt at a race to the bottom and labour market exploitation.

Order. I know the hon. Member for Wallasey is not going to be tempted too far down the road of responding to that intervention.

Mr Evans, you know me very well and you know that I am never tempted at all to get away from being in order, which I take extremely seriously.

I have a couple of other points. We have to remember that for slightly more than 40 years the UK, as a member of the European Union, has seen progress in and directives on employment law, as well as protections for a range of rights, including health and safety, equality, equal treatment and anti-discrimination. Those protections have been considered a floor below which no Government of this country have been able to go, despite the wishes of certain current Government Members.

The Minister asks us to trust her—and trust the Prime Minister’s warm words but complete lack of action—that the Government do not wish to go below that floor, yet many of the Brextremists in the Conservative party have openly indicated otherwise. The Beecroft report would have crashed through the floor into the basement and further down. We know about the treatment of trade unions and organisations whose raison d’être is to protect workers. The lack of legislation or progress on any new forms of employment is simply another indication that, at the very least, the Government do not prioritise this area, but I suspect that the situation is worse than that.

If we are to agree to instruments such as the draft regulations, we will need much better suggestions from the Minister than, “Trust me.” We want much more evidence that there will be no loss to updating rights and that, as the TUC suggests, further rights agreed by the European Union will be more than matched in this country. We also need to know much more—I hope the Minister will cover this in her reply—about why it was thought acceptable for some pieces of legislation to be debated retrospectively after coming into being.

I hope that the Minister’s reply will give us some satisfaction that we can trust in, so that we can move forward. However, I have to say that I think it quite right for the Opposition to vote against the draft regulations until we see much more evidence that the Government will deliver what they say they want to deliver, and that they will act. To date, they have simply talked.

It is a pleasure to serve under your chairmanship, Mr Evans. I want to pick up where my hon. Friend the Member for Wallasey finished: on the issue of trust. I know the Minister to be a reasonable woman, and she is in her job at the moment, as the Prime Minister is in hers. However, the Government are basically asking us to take the draft regulations on trust. What will happen in the future, when we lose the protections and rights that we enjoy thanks to our European Union membership? It may happen under a different Minister, but it will almost certainly happen under a different Prime Minister. As we all know, the Prime Minister says that she will not hang around for very long, and she will certainly not take the Conservative party into the next general election.

We also know that, as my hon. Friend said, there are many Conservative Members itching to get their hands on employment protections and regulations. They want a bonfire and a race to the bottom, and they fantasise about a Singapore-style Britain somewhere in the middle of the Atlantic. It is those people who are likely to steal the Prime Minister’s crown when there is finally a Conservative succession, because they are in the majority among her party members.

I just do not recognise that description of members of my party. I am sorry, but it is wrong to say that we fantasise about doing away with all that stuff.

I was not referring to the hon. Gentleman, of course, but I invite him to study the writings and comments of members of the European Research Group and their favourite economist, Patrick Minford, about their vision for our future. If the hon. Gentleman is not aware of those views, it is very worrying, because these are the people who are holding our country to ransom and taking over the Conservative party. There are Conservative MPs on my own patch whose local parties are being infiltrated by Arron Banks supporters with the specific aim of deselecting decent Conservative Members like the hon. Gentleman and replacing them with hard-right fanatics.

The Minister is asking us to take everything on trust in a world in which it is simply not possible to do so in a responsible way. She was very selective in her list of areas where Britain does have a good record, and where her own Government have a fairly good record on parental leave and so forth.

As others have mentioned, the Government do not have a good record when it comes to organised labour; they have a blind spot regarding its crucial importance in protecting workers’ rights and people at work. We have heard countless examples, including the scandal of tribunal fees, the Trade Union Act and so forth. The Minister is asking us not only to take on trust that the people in charge now will still be in charge in the months ahead; she is also giving a rather imbalanced account of the Conservative party’s record.

I occasionally read that there are members of my own party who would like to facilitate or support the Prime Minister’s EU withdrawal deal, in return for what I consider to be completely meaningless assurances about the future of workers’ rights. I simply invite them, before they take that leap of faith, to look at the way in which the Government are ramming through these SIs without proper scrutiny.

We are elected as Labour Members to support workers’ rights. I would not want any of my colleagues inadvertently to support a very bad deal, on the basis of assurances given by a Prime Minister who is not going to be around, and when the real power brokers in her party have absolutely no intention of respecting those guarantees.

It is a pleasure to see you chairing our proceedings this afternoon, Mr Evans. The final comments from my right hon. Friend the Member for Exeter were the perfect introduction to my remarks, given that I am one of those prepared to give the Prime Minister the benefit of the doubt, although not a blank cheque. Like many colleagues—every Opposition Member, I suspect—I signed amendments to the 15 January resolution, requesting greater clarity and assurances on workers’ rights as part of the Government’s deal, which they are trying to conclude and persuade Parliament to accept.

I heard what the Minister said about workers’ rights. We have heard that from the Prime Minister before. I do accept that in this country we enjoy rights above EU norms and that we are not entirely dependent on the EU for bringing forward workers’ rights. However, as every Opposition Member who spoke has clearly articulated, we need to see real evidence that the Government mean what they say on workers’ rights. Until we see that, there will continue to be a great degree of cynicism and scepticism that the Government actually mean it.

The discussions now taking place with trade unions are very welcome, but they are two years too late. Engagement with Labour Front Benchers is two years too late. Having said that, we are running out of time and the Government have the opportunity to demonstrate that they mean what they say.

I am grateful to my hon. Friend and neighbouring MP for giving way. Does he agree that many of those enhanced rights were enacted by the last Labour Government, of which he was a part? Some changes, such as articles 13 and 14, enhancing rights against religious discrimination in the workplace, were incorporated by that Labour Government from EU legislation. This Government have shown much less willingness to enhance rights, and the risks remain that they will continue to run down our rights, as has been evidenced in this debate.

My hon. Friend demonstrates the degree of concern that the Opposition have about workers’ rights. I was not going to mention it but I am proud to say that, when I was employment Minister, I had the privilege of signing into legislation a number of rights that were not dependent on the EU. My right hon. Friend the Member for Exeter and my hon. Friend the Member for Wallasey were also in positions that enabled them to take legislation through the House that improved standards in this country.

As my right hon. Friend the Member for Exeter said, the Minister is highly regarded in this place, so I say this with no disrespect. Our vote against these SIs demonstrates that the Government need to do more before they get support from as many Labour MPs as they need to get their deal through. Some of us on the Opposition Benches want that commitment and those assurances, so that we can vote without the fears outlined by my right hon. Friend.

I thank all Members who have contributed to the debate. As the Minister responsible, I am well aware how passionate Members are about the subject, and not just those on the Opposition Benches. Despite what has been said, there is strong support for these regulations on the Government Benches.

I am extremely sad that the Opposition will be voting against this SI. I remind the Committee that it deals with a no-deal scenario and would come into force only if we leave the European Union on 29 March without a deal. It ensures that our statute book is in working order. By passing it today, we are effectively guaranteeing workers’ rights. Voting against it puts workers’ rights in jeopardy in the event of a no-deal scenario.

I will address some of the points that have been made. We are lucky that a number of experienced and well-respected Members have taken part in the debate. As a Minister and a relatively new Member, I welcome the experience and comments of Members who have been around far longer than I have. I was elected as a Conservative Member in 2015, but some of the comments I heard this afternoon, about my party’s position on workers and its aspirations for their future in our economy, were contrary to what my party stands for.

The Prime Minister invited Matthew Taylor to undertake his review—it was our Prime Minister who brought that forward—and we will be implementing the majority of its recommendations, as published in our “Good Work Plan”. That plan will be the biggest reform of workers’ rights in a generation—that is the reality—and a Conservative Government will bring it forward. I respect the position of hon. Members who say that they do not feel that they have had clear assurances from the Prime Minister that in a deal situation we will not row back on workers’ rights, but the fact of the matter is that the Prime Minister has been clear. Not only have we announced the “Good Work Plan”, but we have already laid three SIs that further protect workers’ rights.

If the Minister wants to enhance and strengthen workers’ rights, the Government are welcome to support my Workers (Definition and Rights) Bill, which I can assure her is a beautifully written piece of legislation that deals with some of the issues. Does she not appreciate the criticism that the EU is currently negotiating regulations that give better and stronger workers’ rights than those set out in the “Good Work Plan”? If the EU pushes those through, can she give us an assurance that the UK Government will adopt the regulations?

Let me be clear: the reality is that we are committed to going further on workers’ rights, as has been shown through our publication of the “Good Work Plan” and the laying of SIs. We are going further than any Conservative Government have, and I am very proud of that. I am extremely proud to be part of a Government who have put workers’ rights at the top of their agenda, particularly in my Department.

I am proud that this Government look at and deal with the issues that arise, and then look for ways of resolving them, which is exactly what we are doing with our “Good Work Plan” and the SIs that have already been laid. I understand the concerns of Opposition Members, but I am pleased to be extremely clear in saying that we are committed to maintaining workers’ rights and to going as far as we can. We talked about European Union committees and the work currently going on. We are still involved in those negotiations, are feeding into those negotiations and are helping the EU to formulate recommendations. The legislation that we are bringing forward will ensure that they are protected and will continue to be protected.

I would like to finish my points and then get on to answering some of the questions I have been asked.

I was pleased that my hon. Friend the Member for Basildon and Billericay made his contribution. He was absolutely right, as was my hon. Friend the Member for Beckenham. I thank them for making their points. The accusations that the Opposition have levelled at our party and our Government this afternoon characterise a party that I did not join and I am not part of; they illustrate something that I do not think is the reality. I am the Minister responsible, and it is not what I think, so there we go. [Interruption.]

Order. I think that the Minister is being heckled by her own side. Can we please have a bit of calm, so that she can focus on her response?

Thank you, Mr Evan; I am so very lucky to have you in the Chair this afternoon.

I thank hon. Members for their contributions. I reiterate that these regulations are for a no-deal situation. The Government are still determined to get a withdrawal deal. I hope that the Opposition will be willing and open-minded, and will want to work with the Prime Minister to ensure that happens, to get to a position where they will support a deal so that the regulations do not have to come into force in a no-deal situation.

I will try to answer the questions I have been asked, but I am more than happy to write to hon. Members if I do not respond to all of them. Hon. Members suggested that we are not retaining workers’ rights in these regulations. The regulations are mainly technical; they introduce technical changes to ensure that current rights are retained and that we operate from a clear statute book. As hon. Members know, there was no provision in the European Union (Withdrawal) Act 2018 for us to make changes in policy. There was an element of the Act that enabled us to bring forward legislation to retain EU law and make modifications so that we would have a clear statute book.

The hon. Members for Wallasey and for Ellesmere Port and Neston raised the question of enacting such legislation. It is true that those elements were intended to correct redundant EU references, which is why they would come into force earlier. They are not a consequence of the UK leaving the EU; they would change out-of-date references in the legislation. I hope that my explanation has answered the hon. Lady’s question on that—the instrument does not actually have any relation to the UK leaving the EU.

I am grateful to the Minister for explaining why there are different dates, but can she explain why some of them are retrospective?

As I have outlined, it is because of out-of-date references to EU regulations in the legislation, which will be changed. On European works councils, it is true that the European Union could allow us to have a reciprocal agreement even in a no-deal situation. That could happen, but obviously we cannot guarantee that the EU will allow it. As it stands, the current laws and protections afforded to representatives on those councils and to employees will be retained. It will affect new works councils, but that might be resolved in a deal situation. In a no-deal situation, it does not stop the fact that there might be cross-border co-operation and reciprocal agreement. I can give hon. Members some comfort that, as I have outlined, anything that would allow us to continue in the same way and ensure that workers’ rights are protected would be a good thing.

Can I get this absolutely right? We are talking about taking employment rights from the European Union and putting them into UK law. Effectively, we are changing as little as possible, so that things do not change for workers. That is what the Conservative party would like to happen.

I assure my hon. Friend that he is correct; that is exactly what we are doing. Failure to pass this no-deal SI would put workers’ rights in jeopardy. This SI would allow us to protect those rights.

I thank the Minister for that explanation, but paragraph 7.6 of the explanatory memorandum states something different, namely that

“the SI amends the TICE Regulations 1999 so that no new requests to set up a European Works Council or information and consultation procedure can be made.”

Therefore, the statutory instrument actually weakens workers’ rights. Deal or no deal, is it the Government’s position that UK workers will have access to a European works council where it applies?

As I have already said, because we will no longer be a member of the European Union, it will be up to the European Union to decide whether it gives us reciprocal abilities to continue down that path. There are existing rules governing consultation for businesses and employers. There is already a UK system. I like to think that what I said about opportunities for us to have reciprocal rights was clear, but the SIs relate to a no-deal situation, and I was very clear in my opening speech that in such a situation some things would be a reality and would not necessarily be in our control.

It was suggested that we should not use the wording “TUPE-like”. We decided to use that wording to maintain the current scope of the powers.

The SIs make no change to the working time directive. It will not be scrapped or lost. That is not what the SIs are intended to do. As I tried to make clear, in a no-deal situation, these SIs would not all of a sudden roll back or strip workers’ rights. That is not what they are about; they are about protecting the situation as it stands. That is why I feel very strongly about them. There will not be a vacuum in workers’ rights in a no-deal situation, because the powers effected by the SIs will protect the status quo. In a no-deal situation, those rights will not suddenly disappear. There will not be a race to the bottom. The Government have no intention of that.

We need a statute book that is ready to protect workers and give businesses, workers and employers all the clarity they need if we exit the European Union without a deal on 29 March. I hope the Committee recognises that these important pieces of legislation provide such clarity, and that failing to do so could jeopardise the rights of workers. I do not believe the UK workforce would be happy if it was unclear about what would happen in a no-deal situation.

I absolutely accept the comments made today about the Government’s commitment to securing workers’ rights, and wanting to go further. I am sorry that the Prime Minister’s word has not been taken completely at face value, because I fundamentally believe that what she has said is the case.

As I have already outlined, we have submitted the three SIs dealing with, among other things, the repeal of the Swedish derogation, and fairer holiday pay. Obviously, there is legislation to come. In a deal situation, or even a no-deal situation, we are intent on going further and making sure that workers in this country are protected. That also means working with and reacting to businesses and the marketplace. When things change, a responsible Government will look at the challenges and find ways to resolve some of the issues that may affect the workforce. I firmly believe that the Government are trying with absolute focus to do that.

The Government are complying with our duty to ensure that the UK is prepared for every outcome, whatever happens in the EU negotiations, and not to roll back workers’ rights. I therefore hope the Committee will approve the regulations.

May I explain the process to the Committee? I shall put the first question and if the Committee wants a Division, that will happen. Each statutory instrument will then be taken individually. It will be up to the Committee whether to divide, but they will be taken separately. For the three statutory instruments that have not yet been moved, the Clerk will read the title before I request the Minister to move them formally.

Question put.


That the Committee has considered the draft Employment Rights (Amendment) (EU Exit) Regulations 2019.

Draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) Regulations 2019

Motion made, and Question put,

That the Committee has considered the draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) Regulations 2019.—(Kelly Tolhurst.)

Draft Employment Rights (Amendment) (EU Exit) (No. 2) Regulations 2018

Motion made, and Question put,

That the Committee has considered the draft Employment Rights (Amendment) (EU Exit) (No. 2) Regulations 2018.—(Kelly Tolhurst.)

Draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) (No. 2) Regulations 2018

Motion made, and Question put,

That the Committee has considered the draft Employment Rights (Amendment) (Northern Ireland) (EU Exit) (No. 2) Regulations 2018.—(Kelly Tolhurst.)

Committee rose.

Draft Public Procurement (Amendment etc.) (EU Exit) Regulations 2019

The Committee consisted of the following Members:

Chair: Sir Henry Bellingham

† Brown, Alan (Kilmarnock and Loudoun) (SNP)

† Chishti, Rehman (Gillingham and Rainham) (Con)

† Churchill, Jo (Bury St Edmunds) (Con)

† Dent Coad, Emma (Kensington) (Lab)

† Dowden, Oliver (Parliamentary Secretary, Cabinet Office)

† Fletcher, Colleen (Coventry North East) (Lab)

† Graham, Luke (Ochil and South Perthshire) (Con)

† Grant, Mrs Helen (Maidstone and The Weald) (Con)

† Jayawardena, Mr Ranil (North East Hampshire) (Con)

† Knight, Sir Greg (East Yorkshire) (Con)

† Lord, Mr Jonathan (Woking) (Con)

† McMorrin, Anna (Cardiff North) (Lab)

† Platt, Jo (Leigh) (Lab/Co-op)

† Rashid, Faisal (Warrington South) (Lab)

† Rimmer, Ms Marie (St Helens South and Whiston) (Lab)

† Thomson, Ross (Aberdeen South) (Con)

† Whitfield, Martin (East Lothian) (Lab)

Sarah Rees, Committee Clerk

† attended the Committee

Thirteenth Delegated Legislation Committee

Wednesday 13 February 2019

[Sir Henry Bellingham in the Chair]

Draft Public Procurement (Amendment etc.) (EU Exit) Regulations 2019

I beg to move,

That the Committee has considered the draft Public Procurement (Amendment etc.) (EU Exit) Regulations 2019.

May I say what a pleasure it is to serve under your chairmanship, Sir Henry? The Government are committed to securing an agreement on the UK’s exit from the EU, but clearly we must be prepared for all outcomes. The legal framework for the regulation of public procurement by the Government and public sector bodies is essential to the day-to-day running of the public sector and to the economy. If no deal is reached with the EU, certain aspects of that legal framework will be deficient, leaving the public sector and businesses without legal clarity. The statutory instrument therefore seeks to address those deficiencies in a no-deal scenario.

The amendments in the draft regulations provide a balance between the need to maintain continuity based on the established framework and principles, and the need to correct those deficiencies to the extent permitted by the European Union (Withdrawal) Act 2018. Principally, the statutory instrument amends three sets of regulations that implement EU directives on awarding contracts and concessions in the public and utilities sectors outside the field of defence and security.

One of the key amendments is to replace the requirement to publish contract notices in the Official Journal of the European Union with a requirement to submit notices to the UK e-notification service. That is intended simply to comply with the publication requirements of the World Trade Organisation agreement on Government procurement. The UK e-notification service is being developed and is on track to be in place by exit day.

I realise that the explanatory memorandum does not officially form part of the instrument we are debating, but it is there to help us. Paragraph 6.6 of the memorandum states:

“There are some deficiencies in the Regulations that have not been fixed in this instrument.”

Can the Minister tell us what those deficiencies are, when they are likely to be fixed and debated, and why we are doing this in a piecemeal manner?

I am happy to write to my right hon. Friend with fuller details, but the instrument essentially seeks to align the procurement regime we have under the EU and bring it into UK law. There will be further opportunities to fix deficiencies as we continue to reform regulation in a post-EU environment.

The Minister says there will be future opportunities. Surely, as the Minister responsible, he has already identified those opportunities and planned a timeline for making the fixes he thinks are required. Will he clarify that?

The best approach to identifying opportunities for reforming procurement laws is to look at those laws in totality once we have left the European Union so that, to the point made by my right hon. Friend the Member for East Yorkshire, we can consider their full scope rather than doing things in a piecemeal fashion. In that way, we will be able to reform EU procurement law in its totality and ensure that we address the range of concerns about how that law works. Since we will no longer be bound by it, we will have the opportunity to do that in a full-hearted way.

Further to the point made by the hon. Member for Kilmarnock and Loudoun, may I make a suggestion? Does my hon. Friend agree that broadband is critical for the future of our country, but that too often public procurement rules have been used to stop the roll-out of broadband by setting artificially high barriers to the provision of state aid by the Government? The state aid rules have been used against local communities. Will he look at that as he takes this policy area forward?

That is one example. There are many such examples. The Government are still working on the assumption that we will reach agreement on the withdrawal agreement, that it will be passed by Parliament and that we will have a transition period, which will allow us two years to consider this further. I would like to have a Green Paper first so that we can discuss all the ideas before formally bringing forward legislation, to make sure we capture all the related issues.

Can the Minister explain what checks and balances there are? The EU procurement rules were about open competitive tendering. We know that with Ferrygate it was a direct award. What checks and balances are there to stop the UK Government, rather than the Cabinet Office, from having too much power in the procurement process?

The draft regulations take all the existing EU procurement rules and replace them in the law of the United Kingdom. All the remedies that exist under EU law will exist under these regulations. Such cases can be pursued in court, as was the case previously. There is no change to the law other than to bring these things into UK law, and no change to the remedies—they still exist in the courts as they did previously.

This statutory instrument confers a number of regulation-making powers. They mirror powers that the EU Commission and the European Council have under EU directives and regulations or the treaty on the functioning of the European Union. The current procurement regulations are subject to the derogation in article 346 of the treaty on the functioning of the European Union. That provision enables the UK to take necessary measures to protect essential security interests connected with the production of or trade in armed munitions and war material. That includes overriding the procurement rules or aspects of them.

To ensure that the UK continues to benefit from this important derogation once we have left the EU, we have incorporated the text of article 346 into the procurement regulations, with appropriate modifications. Currently, the arms and munitions that fall within the scope of the derogation are determined by a list drawn up by the Council of Ministers of the European Economic Community as it then was, back in 1958. The list includes portable and automatic firearms, ammunition, guided missiles, military vehicles and so on. The modifications we have made include a power for the Secretary of State for Defence to update that 1958 list, for example to take account of developments in technology. Given the nature of this regulation-making power and its potential to affect the scope of the procurement regulations, its exercise has been made subject to the affirmative procedure.

The other regulation-making powers will be exercised by the Minister for the Cabinet Office. They include the function to revalue the main financial thresholds following a biennial review on the same basis as the European Commission, and to convert thresholds of the agreement on Government procurement directly into equivalent sterling values. Also transferred is the power that the directives confer on the Commission to update the exemptions to the use of electronic means of communication, in the light of technological developments, and to update the technical requirements relating to tools and devices for the electronic receipt of tenders, as well as to take account of technological developments.

The updates would be made through regulations that are subject to the prior consent of Welsh Ministers or Northern Ireland Departments in respect of devolved Welsh or Northern Ireland authorities. The Commission’s power to amend the list of international agreements in the field of environmental, social and labour law, set out in annexes to the directives, has also been conferred on the Minister for the Cabinet Office by means of the Minister’s power to treat the list as though certain international agreements were removed and others not covered were listed. Again, any ensuing regulations are subject to the prior consent of Welsh Ministers or Northern Ireland Departments in respect of Welsh or Northern Ireland devolved authorities.

Finally, the Commission currently has the power to amend the annexes to EU regulation 2195/2002 of the European Parliament and of the Council on the common procurement vocabulary—CPV. That regulation will become retained direct EU legislation on exit day. The Minister for the Cabinet Office is given the same power to amend the annexes to the retained version of the regulation.

I want to raise an issue about the drafting of the regulations that sticks in my craw slightly. Regulation 17(2) refers to the Utilities Contracts (Scotland) Regulations 2016. Clearly, the idea of adopting the Scottish Parliament’s statutory instrument to replace the European Union regulations is how the Government want to proceed, which is fine. However, unfortunately, in drafting it, the Government have omitted to make provision for it to be amended. Given that the Minister for the Cabinet Office has powers to increase the amounts when regulations kick in, a similar power rests with the Scottish Parliament and should be reflected in the regulations, so that the correct, updated regulations are referred to for utility companies. This provision is made earlier on in the regulations, so I think it is just a mere omission and if we have to revisit it, it can be done at the appropriate stage.

I thank the hon. Gentleman for his intervention. I think he is quite right in that interpretation but I will confirm that.

The annexes set out a sophisticated vocabulary that enables numerical codes to be used to describe different kinds of works, supplies and services in, for example, notices that advertise procurement opportunities and so enable suppliers quickly to identify procurements that are of potential interest to them.

Moving on to the other amendments, the UK is moving forward in its activity to join the WTO agreement on Government procurement in its own right. We have reached the stage where GPA parties have agreed in principle to our market access offer and accession. However, in this instrument, we have taken precautions in case the UK’s accession to GPA has not been fully completed by exit day. One of the amendments ensures continued guaranteed access, rights and remedies on current terms for suppliers from existing GPA countries for a period of eight months from exit day. Without this amendment, suppliers from GPA parties would no longer have the guaranteed access, rights and remedies that they currently enjoy in our public procurement contracts. This will mitigate the risks of a short gap in GPA membership by facilitating continued market access.

Delays in the Trade Bill mean that we have also laid before Parliament for approval a further statutory instrument that would amend the regulations we are now debating, to implement a similar measure for certain bilateral trade agreements between the EU and third countries to which the UK is currently party via its membership of the EU. That will keep alive existing obligations towards suppliers in the countries with which the EU has, before exit day, entered into trade agreements, with provisions relating to public procurement, by which it is bound.

This second amending statutory instrument would also preserve existing duties towards GPA economic operators and amend the time period to 18 months from exit day. This change in the time period bring the GPA provisions in line with those related to the UK’s transitioned international agreements. This SI is also subject to the affirmative procedure.

Section 3 of the withdrawal Act has the effect that any EU legislation in force and applicable on exit day will automatically become part of UK law. The draft regulations modify various EU regulations and decisions that will become retained direct EU legislation. They also revoke for the whole of the UK the Commission’s implementing regulation that establishes standard forms of public procurement. The forms laid out in the Commission’s regulation will not be required for the new UK e-notification service. The service itself will be designed to elicit information in the form and the way it is to be submitted.

In summary, the regulations seeks to ensure that the current public procurement regime will continue to function after our withdrawal from the EU. It does not seek to make major policy changes or introduce new frameworks. Instead, it makes largely technical changes to correct deficiencies that will naturally emerge within our legislation on exit day. Left unamended, the existing regulations would not work as intended and would cause confusion and uncertainty for procurers and suppliers, hampering the public sector’s ability to obtain value for money from procurement. I therefore commend the regulations to the Committee.

It is a pleasure to serve under your chairmanship, Sir Henry. I welcome this opportunity to discuss our procurement system and the proposed changes. I thank the Minister for his opening remarks. With just 44 days before our scheduled departure from the European Union, I only wish that this was not happening in such rushed and chaotic circumstances. However, that is what we have come to expect from this Government.

Before I comment on the statutory instrument before us, I must point out, as we in the Labour party have been doing for the last few years, that our procurement system is fundamentally broken. It is a system that works for big business at the expense of our small and medium-sized enterprises and, most importantly, the public. It rewards companies with poor employment practices that do not pay their fair share of tax and, in the cases of Carillion and Interserve, have flawed business models. The explanatory memorandum states that the purpose of these regulations is to transpose into law an “open and competitive” system in which

“suppliers are treated equally and fairly.”

I do not think that is possible without a fundamental shift in Government policy.

We know, for example, that under the current system SMEs receive a declining proportion of Government cloud spending. We also know that the number of businesses receiving late payments from the Cabinet Office has nearly tripled in the past two years, and that many large outsourcers simply do not pay their suppliers on time. Most importantly, a few mega-firms that are too cosy with Government continue to be dominant at the top. Although we accept and recognise that we need to address the statute book deficiencies that result from the UK exiting the EU, if the Government are serious about creating a procurement system that is truly open and fair, they must start at the root and overhaul this broken system.

Is it not right that this statutory instrument yet again demonstrates the pressure that the incredibly hard-working civil servants are under to have everything in place for no-deal day? As was mentioned earlier, there are deficiencies that have been identified and not listed. An explanation for that has been given, but I feel that time pressure was probably more of a reason why those deficiencies were not listed. Given the drafting errors that this statutory instrument contains, the pressure pot is about to explode.

I thank my hon. Friend for making that point, and share his concerns that this Government are not prepared for a no-deal exit from the EU. The fact is that the Government could stop this today by taking no deal off the table.

I will raise a number of specific issues with the Minister, on which I would like clarity. The first is the e-notification service that is proposed to replace the Official Journal of the European Union, in which tenders are currently published. We are told that the e-notification service will be ready by 29 March, so will the Minister confirm that that deadline will be met? Given this Government’s record on the delivery of technology, there is no reason for optimism. The Verify programme, the national security vetting solution, the common platform programme, the digital services at the border project and the emergency services mobile communications programme are just a few flagship Government IT programmes; they have all been plagued by delays, spiralling costs or outright failure. To put it bluntly, this Government have consistently proven themselves incapable of introducing new technology across the public sector without causing significant disruption. Just this month, we have been discussing the Government’s failure to develop a EU citizen registration programme that works on both Android and Apple phones, so why should we have any confidence that they will deliver on this technological aspect of EU exit?

That e-notification service is particularly important because of the consequences of the system not being fully operational on exit day. The UK awards the most procurement contracts by value of any EU nation. Should that system be non-functional or error-prone as a result of the chaotic circumstances in which it has been created, the economic consequences could be dramatic, and the challenges to the public sector of maintaining procurement could be significant. That is the primary reason why we on the Opposition Benches are perplexed that no impact assessment has been carried out. We are especially concerned about SMEs, which often lack the access to technical expertise that large companies enjoy. If there are problems with the e-notification service, the impacts of those problems will be felt unevenly, and the Government will be further baking into the system the imbalances that already exist in our procurement market.

Turning to the Competition and Markets Authority and its oversight role in enforcing state aid rules, which is noted in the SI, will the Minister please update us on the CMA’s preparedness for exit day and whether it has the staff and resourcing that it needs? As my hon. Friend the Member for East Lothian pointed out earlier, as we know from extensive reporting in the media, the civil service is facing a challenge of historic proportions as it scrambles to prepare for both a no-deal Brexit and a transition Brexit. As the head of Her Majesty’s Revenue and Customs, Jon Thompson, recently said, the civil service is “hamstrung” by this lack of clarity. The Labour party has said that the civil service is incapable of fulfilling its role because of nearly a decade of public sector cuts.

These truly are trying times to be a public servant, and it is in this climate that the Competition and Markets Authority will attempt to enforce a state aid regime the nature of which we do not yet know, and in which the CMA has no experience. In other words, we do not know yet how a significant feature of the procurement market will work.

I seek clarification from the Minister on our GPA membership in the event of no deal, which is absolutely essential if we are to protect the access of UK suppliers across the EU. Although, as the Minister mentioned earlier, we have an agreement in principle, will he assure us that we will definitely be ready for independent GPA membership on exit day?

If the UK leaves the EU without GPA membership, the explanatory memorandum states in paragraph 7.20 that Government policy will be to offer other nations access into our procurement market, seemingly without any assurances that this arrangement would be reciprocated. We could then be in the incredible situation of allowing international suppliers competing with UK firms to fulfil our procurement contracts while UK firms might be prevented from accessing global procurement markets. This policy would be disastrous for UK firms and emphasises the totally chaotic handling of these negotiations. It further adds to the uncertainty that businesses are already facing with Brexit.

Let me reiterate that if our GPA membership is not finalised before exit day, this is yet another area in which we are simply not ready for exiting the European Union next month without a deal. Six pieces of legislation are not in place that would need to be. The Government are seriously behind on the passage of statutory instruments such as this, which are needed if we are to leave without a deal or a transition period. Equally, our Border Force is woefully unprepared, without the staff or IT systems needed for EU exit. We can add GPA membership to the growing list of reasons that we are simply unable to leave next month without serious chaos and disruption.

Finally, I have two quick points of clarification. With reference to the transitional measures set out in the schedule, specifically in paragraph 2, what assurances have we received from the EU that existing contracts with UK suppliers will be honoured? Will the Minister clarify the mechanism that the Government will use to cancel or nullify this SI in the event that the UK does leave the EU with a deal? Will he also confirm that a further SI will then be needed during the transition period to prepare the statute book for our future negotiated relationship?

In closing, I want to reflect on and state our disbelief that there are no impact assessments accompanying this SI. I dedicated my speech to pointing out the enormous changes these regulations will cause to the UK procurement system, from a new IT system to the possibility of UK SMEs being restricted from applying for EU procurement contracts.

Impact assessments should quite clearly have been carried out, especially when the stability of some of our SMEs is at stake. However, the explanatory note states that

“no, or no significant, impact”

on the private or voluntary sector is foreseen. It even goes on to say that the impact on small business is expected to be low. How is that defensible after all that we have heard? It is a disservice to those businesses that assessments have not been completed but, quite frankly, I should not be surprised, as it is characteristic of this Government’s handling of this entire process: “Trust us and we’ll sort it out.”

I take this opportunity to restate our position that no deal must be categorically ruled out by the Government. As these regulations confirm, we are not ready for the chaos it would cause. These regulations, most of all, risk baking in the imbalances our SMEs too often face in the system, and they confirm our belief that the procurement system needs urgent transformation, to put real social value at its heart. If only we had a Government willing to stand up in the interests of the many, and to reform the broken system that, too often, works just for the few.

The Opposition spokesperson raised a large number of issues and I shall seek to address them all. If I fail to do so, I will be more than happy to write to her.

The starting point is to remember that the regulations are not intended to change our procurement regime. The opportunity to do that will come afterwards, depending on the future relationship that we negotiate—or sooner, in a no-deal scenario. With the regulations, we seek to replicate existing procurement rules to give stability to companies engaged in procurement, so that they will know that the rules under which they currently bid will continue after we leave the European Union. Of course there are areas of procurement that we would like to reform, but the regulations are not the appropriate vehicle for doing so; it would be better for us to look subsequently at reforming procurement in the round.

Within the context of existing EU procurement rules, we have made significant progress. The hon. Member for Leigh mentioned SMEs. In the last Parliament, for the first time, this Government set a target of 25% of all Government business going to SMEs, and we met it. In this Parliament, we have set a target of 33% and we are making progress towards that. Indeed, I have announced further measures to help us reach that point. However, the regulations are separate from that; they are about ensuring continuity, which in my experience is what businesses are after.

I will try to address some of her specific points. The hon. Lady rightly said the e-notification scheme is due to come into force at the end of March. Ministers in the Cabinet Office take a close interest in that, and we continue to believe that it is on course to do so. I do not think that there is concern about that. A question was asked about what would happen if, as we hope to, we leave with a deal. In that instance, the measures will simply be deferred. They may have to be amended, depending on the nature of the future political framework that is agreed, and how we implement it through primary legislation.

The regulations do not provide for oversight by the CMA of the procurement regime. Agreed suppliers will, however, continue to be afforded remedies provided for in the regulations. In that way, contracting authorities and other entities will be held to account by the courts—again, essentially replicating the situation that we had before.

The hon. Lady rightly raised GPA membership. From listening to her, one could be forgiven for thinking that we were somehow desperately off-track on GPA membership. We have reached agreement in principle for the United Kingdom to join the WTO GPA. We are confident that we will very shortly be in a position to lay statutory instruments before Parliament to enable that to happen.

There is a small chance of a gap between the “in principle” accession to the GPA that is already agreed and the “in law” joining of the GPA, essentially because of the number of days required to lay the statutory instruments before Parliament. What we are trying to do with the regulations, and the subsequent SI that I highlighted, is to give certainty in that scenario to all contractors who are not based in the UK that they can continue to access the UK as if we remained members of the GPA.

Theoretically, in that small gap there is a chance that another country could decide that there was no basis for UK companies to access their market. However, there is a pretty small chance of that, first of all because we have moved unilaterally to say that we would allow them access. On the basis of reciprocity, we would expect it.

Furthermore, almost every country, I think bar South Korea, would require an Act to be passed by its Government to exclude UK companies, and it would have to apply to a situation where the procurement process had commenced, a UK company had applied for it, and the process had concluded. Given that we have already reached agreement in principle to join and we are progressing at a very good rate, the chances of that happening are exceptionally small. However, to provide clarity we have said that overseas actors can have access to our market.

Looking at the history, Moldova was the only country to object to our accession to the GPA. Following further discussion with our mission in Geneva, Moldova has now agreed to withdraw that opposition. Indeed, the members of the GPA committee have agreed to our accession.

My hon. Friend is right. Essentially, political agreement has been reached for the United Kingdom to join the GPA; these are just the remaining technical stages. I would happily outline them in more detail, but I shall not bore the Committee. In essence, we have reached an agreement; these are just technical measures to ensure that it happens.

The hon. Member for Leigh set great store by the question of an impact assessment. She rightly highlighted the explanatory memorandum, which sets out the impact in broad terms. When impacts are assessed to be below an annual cost of £5 million, a full impact assessment is not required. Our initial analysis is that it falls below that threshold; therefore, such an assessment is not required.

I hope that I have addressed all the points that the hon. Lady raised. As I said, I will happily take up further points subsequently through correspondence. Again, I reassure the Committee that the regulations make provisions for the status quo. They take the existing EU procurement laws and replicate them so that there can be certainty. The only real change relates to notification. Clearly, we will not have access to the OJEU, so we are creating our own notification system. However, it will replicate the existing OJEU notification system.

There are, of course, questions surrounding how we can reform procurement. In the end, leaving the European Union provides the opportunity for us to look at it more flexibly. However, the proper way to do that is through full consultation, looking at a total process of reform. That will rightly be considered by Parliament through primary legislation, which is a much better vehicle for such reform than a statutory instrument. On that basis, I commend the regulations to the Committee.

Question put and agreed to.


That the Committee has considered the draft Public Procurement (Amendment etc.) (EU Exit) Regulations 2019.

Committee rose.

Draft Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019

The Committee consisted of the following Members:

Chair: Mark Pritchard

† Burden, Richard (Birmingham, Northfield) (Lab)

† Cowan, Ronnie (Inverclyde) (SNP)

† Dowd, Peter (Bootle) (Lab)

† Dunne, Mr Philip (Ludlow) (Con)

† Jenrick, Robert (Exchequer Secretary to the Treasury)

† Johnson, Gareth (Dartford) (Con)

† Jones, Darren (Bristol North West) (Lab)

† Kawczynski, Daniel (Shrewsbury and Atcham) (Con)

† Matheson, Christian (City of Chester) (Lab)

† Merriman, Huw (Bexhill and Battle) (Con)

† Metcalfe, Stephen (South Basildon and East Thurrock) (Con)

† Murray, Ian (Edinburgh South) (Lab)

† Smith, Jeff (Manchester, Withington) (Lab)

† Trevelyan, Anne-Marie (Berwick-upon-Tweed) (Con)

† Walker, Thelma (Colne Valley) (Lab)

† Whittaker, Craig (Lord Commissioner of Her Majesty's Treasury)

† Whittingdale, Mr John (Maldon) (Con)

Robert Cope, Kevin Candy, Committee Clerks

† attended the Committee

First Delegated Legislation Committee

Wednesday 13 February 2019

[Mark Pritchard in the Chair]

Draft Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019

I beg to move,

That the Committee has considered the draft Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019.

As members of the Committee who follow Treasury statutory instruments with interest will be aware, we have been undertaking a programme of legislation to ensure that if the UK leaves the European Union without a deal or an implementation period, a functioning legislative and regulatory regime for financial services continues. To deliver that, the Treasury is laying statutory instruments before Parliament under the European Union (Withdrawal) Act 2018. There have already been debates on many such statutory instruments in this place and in the House of Lords. The draft statutory instrument that we are debating is part of that programme. It has already been debated and approved by the House of Lords.

In December 2017, the Treasury announced that we would legislate to establish a temporary permissions regime enabling European economic area firms operating in the UK to continue their activities in the UK for a time-limited period after withdrawal without seeking full UK authorisation. At the same time, it was announced that we would legislate to ensure that contractual obligations not covered by that regime could continue to be met. That will help to protect the interests of UK customers of EEA financial services firms.

The legislation setting out the temporary permissions regime for firms that passport under the Financial Services and Markets Act 2000 was debated and passed by this House last autumn in the form of the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018. Legislation for other temporary regimes covering non-UK central counterparties, EEA payments and e-money institutions, and trade repositories has similarly been debated and passed by this House.

The draft regulations before us deliver on the second commitment that we made: to ensure that those financial services contracts not captured by the temporary permissions regime can continue to be serviced. They also ensure continuity for UK-based customers of financial services providers that do not enter other temporary regimes, or that exit such regimes without having obtained the full UK authorisation, recognition and registration that they would otherwise need to continue carrying out their activities in the UK.

Specifically, this draft instrument makes provision for passporting EEA firms, non-UK central counterparties, EEA payment and e-money institutions, and trade repositories to wind down their UK operations in an orderly manner. It will apply to firms and service providers that no longer wish to operate in the UK, and those that exit a temporary regime without permission from the UK authorities to carry on a new business here. The approach taken in the draft regulations aligns with that taken in other statutory instruments laid before Parliament under the European Union (Withdrawal) Act. The regulations deliver on the Treasury’s commitments and are vital to the financial services sector and all UK consumers.

Turning to the substance of the regulations, those familiar with EU law will know that it allows EEA firms, non-UK central counterparties and trade repositories to provide regulated services in the UK by virtue of being authorised in another member state, or recognised and registered by the relevant EU authority. In a no-deal scenario, the UK would be outside the EEA and the EU’s legal, supervisory and financial regulatory framework. Once the EEA frameworks providing for passporting rights, recognition of central counterparties and registration of trade repositories fall away, as they would in a no-deal scenario, we need to act to avoid widespread disruption to the provision of financial services, which would clearly be detrimental to UK businesses and consumers.

The draft regulations insert provisions into existing temporary regimes to enable the orderly wind-down of contractual obligations or services, and so will provide continuity and certainty for UK customers of those firms that do not enter the temporary regimes, or that exit them without full UK authorisation, as I have said. Specifically, the regulations will establish four distinct run-off regimes relating to four different temporary regimes. The regimes will cover: first, EEA firms passporting under the Financial Services and Markets Act; secondly, non-UK central counterparties; thirdly, EEA payments and e-money institutions; and, last, trade repositories.

The temporary regimes already established go a long way in mitigating risks of disruption and uncertainty. Without these additional wind-down provisions, however, UK businesses and consumers could see some disruption to their contracts or services. The instrument is necessary to minimise that disruption to users and providers in a no-deal scenario. For example, if an EEA insurance provider with customers in the UK does not enter the temporary permissions regime, the instrument will allow the insurer to pay out on a claim to its UK customers where it could otherwise be illegal for it to do so. The instrument will allow firms with pre-existing contractual obligations to continue to meet them, providing certainty and fairness to both the providers and users of financial services, and demonstrating that the UK remains open for business and takes legal certainty and business continuity seriously.

The Treasury worked closely with the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority in drafting the instrument. It has also engaged widely across the financial services sector, which has supported the measure and continues to do so. On 17 December, the Treasury published the instrument in draft, along with an explanatory note to maximise transparency to Parliament and the industry.

In conclusion, the instrument is a pragmatic response to the need to ensure service continuity if the UK leaves the EU without a deal. The importance of the provisions is reflected in the announcement of December 2017, which made it very clear to the industry that well in advance of exit day, the Treasury would put forward legislation to deliver these regimes. The legislation is necessary to ensure that contractual obligations can continue to be met, thus avoiding disruption and losses for UK business and consumers. I hope all colleagues will join me in supporting the regulations, which I commend to the Committee.

What a great pleasure it is to see you in the Chair, Mr Pritchard. I thank the Minister for his explanation of quite a complicated measure, but I cannot help but wonder at the amount of time—both his and his officials’, here and elsewhere—being sucked up by such measures. It is yet another consequence of the madness that is Brexit, and particularly the madness of no-deal Brexit—a prospect that the Government should have taken off the table weeks, if not months, ago, given the opportunity to do so.

The Minister made a genuine attempt to explain as clearly as possible this important, complicated matter. I do not doubt the sincerity of his speech, but I utterly despair at the fact that we are being sucked further into the morass of chaos that is Brexit at a time when the country faces so many major problems. I greatly and deeply regret the situation.

It is a delight to see you in the Chair, Mr Pritchard. Once again, the Minister and I are here to discuss a statutory instrument that would set up a regulatory framework after Brexit in the event of us leaving in a disorderly fashion without a deal. On each of these occasions, my Labour Front-Bench colleagues and I have explained our objections to the Government’s approach to secondary legislation.

The volume and the flow of EU exit secondary legislation give rise to deep concern, from the point of view of accountability and proper scrutiny. The Government say that no policy decisions are being taken, but establishing a regulatory framework, for example, inevitably involves policy, and raises the questions about resourcing and capacity referred to by my hon. Friend the Member for City of Chester.

Secondary legislation should be used when the Government want to do things that are technical, non-partisan and uncontroversial. This Government continue to push through contentious legislation with high policy content using secondary legislation. As legislators, we have to get it right. These regulations could represent major changes to the statute book, so they need proper, in-depth scrutiny. In light of that, the Opposition would like to put on record our deepest concern about the fact that the process for these regulations is not as accessible and transparent as it should be, or as the Minister suggests it is.

Unfortunately, the regulations seem to have three statutory instruments within them: one amending the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018; one amending the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018; and one amending the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018. The way they have been pasted together causes concern, to say the least, and the result is that they are extremely difficult to follow, let alone scrutinise. I would be grateful if the Minister responded to a number of concerns.

Part 2 sets up a temporary permissions regime that says that if someone is carrying out an activity that is authorised in their home state, and several conditions are met, for a temporary period that person can carry on with that activity in the UK. The activity had to have been allowed under the Financial Services and Markets Act prior to exit day, and the person had to have had an establishment in the UK. Several further criteria must be fulfilled; in particular, the regulations seem to say that if the activity was part of performing a pre-existing contract or, more tenuously, part of “reducing the financial risk” to a party to a contract or a third party affected, a temporary permission should apply.

In other words, it seems that these regulations are trying to avoid cutting across existing contracts. They might have in mind, among others, private equity funders on one side of a contract when referring to parties involved with reducing the risk of a contract. I would like the Minister to explain more about that. What is meant by “reducing the financial risk”, and how far does that go?

Chapter 3 of part 2 sets the period for the temporary permissions regime. It seems to say that the period is 15 years for a contract of insurance and five years for other purposes. Does that mean that EU law continues to apply for 15 years for the purposes of insurance contracts, and for five years for other contracts? Clarity on that would be helpful. There is not much detail, and a period 15 or even five years is stretching the limits of “temporary”. We are concerned that in trying to avoid chaos for contractors, the Government might be creating even more uncertainty. I would be grateful if the Minister commented on that and clarified it.

Proposed new part 6, chapter 4 of the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 appears to modify the Financial Services and Markets Act. This is the application of a Henry VIII clause—something that is much criticised by lawyers and judges, as we all know. Chapter 4 also gives the Financial Conduct Authority power to receive applications for permission to vary. That seems to be a significant amount of power going to the FCA, and there is seemingly little power here for Parliament to review or hold accountable.

Proposed new chapter 4 allows the FCA to cancel the temporary permissions based on:

“(a) the person’s conduct,

(b) the practicality of supervision by a regulator,

(c) the size of the person’s undertaking, and

(d) the nature or extent of the regulated activity”.

Can the Minister clarify what conduct would or might justify cancellation, and what

“the nature or extent of the regulated activity”

means? Are we correct in understanding that there does not appear to be a right of appeal on this determination? I would be grateful if the Minister clarified. Obviously, just process and natural justice should be upheld. We are concerned about the implications of making the FCA into a judge in individual cases, and a lawmaker.

Proposed new part 9 of the EEA passport rights regulations appears to give the Treasury the power to extend the temporary regime, as the FCA has to submit to the Treasury an assessment of the need to extend the regime. That, again, leaves doubt about how temporary this all is. I would be grateful for assurances on that.

Other parts of the regulations deal with transitional arrangements relating to central counterparties and trade repositories. On central counterparties, for certain activities a one-year transition period appears to apply, and for others,

“the Bank may direct that the central counterparty be subject to such transitional arrangements as it considers necessary or expedient”.

Again, I would like to know more about the thinking behind issuing such power and discretion to the Bank of England.

We are becoming increasingly alarmed at the Government’s unfolding approach to regulating financial services. There does not appear to be an overall plan; there is no indication of how different pieces of legislation fit together; and, above all, there is no clarity. I looked at legislation across the world that appears to be clearer than this, but is ridiculous. For example, in Fairbanks, Alaska, it is illegal to sell alcohol to a moose.

That seems a much clearer position than the Government’s. In Quitman, Georgia, it is illegal to change the clothes on a storefront mannequin unless the shades are down. That seems perfectly sensible. In South Bend, Indiana it is illegal for monkeys to smoke cigarettes. Apparently, cigars are okay, but only if the monkey goes outside. I am sure that monkeys could understand that legislation, but some of the regulations coming to us are quite ridiculous. We have to be clear.

As Members will know, earlier this week, Labour opposed the Financial Services (Implementation of Legislation) Bill on Second Reading, because it represented a worrying transfer of powers of significant scope to the Executive. We have all been deeply concerned about this, as we have said time after time. Today, colleagues will debate in the Chamber the Securitisation Regulations 2018, which Labour prayed against for similar—or at least related—reasons.

I believe that when we voted to leave the EU, the aim was to empower Parliament to debate and make those decisions, not to concentrate them in the hands of civil servants or Ministers, yet the Government continue to put our economy at risk through their chaotic and opaque approach to lawmaking and the handling of Brexit. It is clear that rather than the Government pushing through such a large volume of piecemeal legislation, we need consolidated pieces of primary legislation, scrutinised in the proper and correct way, as opposed to regulations being brought to Committees in which no one from the Government Benches tries to challenge them.

Ultimately, we legislators have to get this right. This is not just about the principle of democracy and accountability, but about robust lawmaking that is clear, comprehensive, coherent and enforceable. That is our duty as parliamentarians. As far as the public are concerned, we are paid to do that, and we should do it, but the Government are not allowing us to. It is precisely because the stakes are so high, and because the Opposition view their responsibilities to the British public with the utmost intensity and severity, that we will be voting against the regulations.

I am grateful for the opportunity to respond to the questions put by the hon. Members for Bootle, and for City of Chester.

I disagree with the hon. Member for City of Chester. Leaving without a deal is clearly not our preference—there are sectors of the economy, including financial services, for which that would be a very difficult situation indeed—but it is not responsible to take no deal off the table at this stage, and to diminish our leverage in the crucial final stages of the negotiations. In fact, it is not possible to take it off the table, because there is the matter of the primary legislation that is already in place. Until such time as the House of Commons passes a law to the contrary, we have to act on the basis that no deal is a potential scenario.

Any responsible Government would be taking the steps that we are today. The regulations have been welcomed by the industry, which has described them as the final piece in the puzzle, and an important piece of legislation that we need to pass to ensure that UK financial services institutions and consumers are protected.

By approving the regulations, we are making a fair, unilateral regime available to our friends and partners across the EEA—a regime that will give firms temporary access allow them to run off their businesses in an orderly manner. That is what people would expect us to do.

The hon. Member for Bootle asked why we were using secondary rather than primary legislation. We have had that debate on numerous occasions during this process. The European Union (Withdrawal) Act does not allow the Treasury to make major changes to policy or legal frameworks, and does not give the Government the power to make changes beyond what is needed to correct deficiencies that will arise solely as a result of exit. That is all we are attempting to do today.

The hon. Gentleman asked about scrutiny. As I said in my opening remarks, we published the instrument in draft form on 17 December, along with an explanatory memorandum that sets out how it will operate, maximising transparency to Parliament and the industry. We have had numerous meetings with stakeholders across the financial services sector; they welcome the instrument and believe it is absolutely essential. I am therefore disappointed to hear that any Member would choose to vote against it, because the consequences of doing so would be significant in the event of no deal.

The hon. Gentleman asked why there is a contractual run-off period, and whether that would mean that consumers would not be safeguarded—I think that was one of the implications. The period is precisely to ensure that consumers are protected. The example I gave was of a consumer with a long-duration insurance product that lasted for 10 or 15 years. We would want to ensure that the product could be used and the consumer could make a claim if necessary, and that the provider of that service—for example, an EEA insurance company —could not renege on that by virtue of it being illegal. The regulations protect consumers, and enable us to make a fair, unilateral offer to our partners elsewhere in the EEA.

Contracts and businesses will not be unregulated during that period. They will not be permitted to carry out new business in the UK. The FCA and the PRA will have additional powers over firms, including the power to move firms into the supervised run-off period, in which they would be subject to the full UK regulatory regime, and the power to cancel their exemption altogether. Consumers will not be exposed during that period.

The hon. Gentleman asked for further information on cancellation. The regulators’ powers in respect of a person under the temporary regime are the same as under part 4A of the Financial Services and Markets Act 2000, so there will be no change to the powers available to the regulator to take action.

On our ability to extend the duration of the regime, Lord Bates in the House of Lords made clear that to do that, we would submit a written ministerial statement. That followed the expression of similar concerns in the other place in the consideration of the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018. That clarification has satisfied stakeholders. It is not our intention that extensions will happen in perpetuity; the powers are purely to give greater clarity and certainty to the industry that in extreme circumstances there is an ability to extend, and to ensure that there is no detriment to consumers or business.

On the point that the Minister just raised about exceptional circumstances, that is the problem with the totality of the legislation. The Government seem unable to set us on the track to ensuring that we or organisations will eventually have clarity. They seem to be kicking the can down the road all the time. They put things off. They say, “If there is a problem, we will look at it then.” It goes on and on. There is absolutely no clarity for organisations, and the Minister should take that into account.

The legislation has precisely the opposite purpose; its purpose is to provide clarity and certainty to industry. Voting against the regulations will do precisely the opposite of what the hon. Gentleman purports to want to achieve. Of course, the way to provide the greatest certainty to consumers, users of financial services, and the 1.1 million people who work in the sector in all parts of the United Kingdom is to vote for the Prime Minister’s deal—or a deal—before exit day and avoid a no-deal Brexit.

The Minister says that organisations welcome the regulations, but at the end of the day, they welcome them because they are the only thing on the table. Would I welcome them, if I were them? I most probably would, because this instrument is the only document I have that gives me any certainty at all—but it is still not good enough.

It is not the view of the industry that this document is not good enough. The industry thinks that this is the final piece in the puzzle; it provides them with the certainty that they require in the event of a no-deal Brexit. There will now be a temporary regime into which financial institutions can pass, should they wish to. If they do not want to do so, or if they do and then ultimately fail to gain the authorisation that they require, the measures before us provide a further safety net to ensure that consumers and those businesses are protected and safeguarded for a period of time as they run off their business in the UK.

With that, unless any other right hon. or hon. Members wish to comment, I commend these regulations to the Committee.

Question put.

Committee rose.