That the Grand Committee do report to the House that is has considered the Provision of Services Regulations 2009.

Relevant Document: 22nd Report from the Joint Committee on Statutory Instruments.

My Lords, the regulations before the Committee today implement the EU services directive into UK law. The regulations concern both the provision and the regulation of services. They are therefore relevant to service providers and to authorities with a supervisory or regulatory role in relation to services—termed “competent authorities”. The directive represents a great step forward for the internal market in bringing down barriers to business in the EU and is a major achievement of better regulation across the EU.

Although the freedom to provide services and the freedom of establishment are already set out in the treaty establishing the European Community, services businesses trying to set up or trade in the internal market have still faced unnecessary obstacles. Some countries have imposed rules discriminating against businesses from abroad. Businesses have also had to apply for different licences for each country or region in which they want to operate. These obstacles have meant that some businesses, particularly small and medium-sized enterprises without the ability to pay local experts, have been unable to market their services abroad or have found it uneconomic to do so. Trade in services accounts for only 24 per cent of the trade in the internal market, even though services account for 70 per cent of EU GDP.

As noble Lords will no doubt be aware, the directive covers around two-thirds of the service sector as a whole. The directive excludes some services industries, such as financial services, healthcare, gambling and transport. This is due to the fact that EU legislation exists in some of those excluded areas already and that liberalisation was seen as undesirable for others. However, the directive still represents the horizontal piece of legislation that we were striving for. Details on scope are in Part 1 of the regulations.

The directive, which these regulations will put into UK law, has been incorporated into the EEA agreement. The regulations therefore apply in relation to the EEA states of Iceland, Liechtenstein and Norway, as well as the 27 EU member states.

There are four main elements to the directive, and thus to the regulations, which I will outline in the order in which they appear in the regulations. First, Part 2 of the regulations concerns the quality of services provided to recipients. To increase recipients’ confidence in buying services from abroad, all service businesses will have to provide consumers with certain information about the business and the service in question. The requirements are simple and should not present a burden for UK businesses as we anticipate that most of them will already be doing this as common practice. We hope that consumers will benefit from increased quality, competition and choice, and that this will result in a wider customer base for businesses offering services.

Secondly, Parts 3, 4, and 5 of the regulations set out legal requirements on competent authorities regarding their regulation and supervision of service providers and recipients. These provisions reflect the requirement in the directive that all such authorities across the EU remove unjustified, disproportionate or discriminatory legislative and administrative barriers to providing services. These could include requiring a prospective service provider to register with an authority or to establish premises in a particular country, in the absence of an adequate policy rationale. Part 6 of the regulations places several other requirements on competent authorities that will benefit both service providers and recipients. For example, authorities must recognise equivalent documentation and equivalent professional liability insurance from service providers and recipients from other member states.

Thirdly, the directive requires each member state to set up a point of single contact, which is termed the “electronic assistance facility” in the regulations and is provided for in Part 8. The electronic assistance facility will be a web portal where businesses can find the information they need about operating in the UK and apply online for any necessary licences or authorisations that are in the scope of the directive. Other states are establishing similar facilities. This will greatly simplify the current situation where businesses have to spend time and money finding information from different places, often having to visit the relevant competent authority in the country where they wish to operate. In future they will be able to apply for and receive authorisation online.

This is a good opportunity for me to thank local councils and other competent authorities for their hard work in screening their processes and laws and preparing for the point of single contact. It has been a huge task, so my thanks go to them for their commitment.

The fourth element is enhanced co-operation between regulators across the EU, which is provided for in Part 9 of the regulations. Competent authorities will be able to communicate with each other through a secure web-based system called the Internal Market Information system, which my department is establishing now. Part 9 of the regulations requires authorities to provide information through the system to their counterparts in other countries regarding whether a service provider is duly authorised and other relevant matters. This will take the burden off the service provider to provide documentation repeatedly to different authorities. The system is also intended to ensure proper regulatory supervision of service providers and the services they provide across EU borders.

Effective implementation of the services directive across the EU is estimated to be worth about £4 billion to £6 billion per year to the UK economy, and about €30 billion per year to the EU economy. Member states must implement the services directive by 28 December of this year. The Provision of Services Regulations will also come into force on that date, and will apply to the whole of the UK. The devolved Administrations are amending their own legislation where necessary so that it complies with the directive.

I hope that noble Lords will agree that this is great news for UK businesses, whether they want to export their services to Europe, purchase services from providers in other member states or take advantage of the streamlined processes here in the UK. The increased opportunities are also there for foreign businesses to invest in the UK, all of which in turn is great news for the UK economy. I beg to move.

My Lords, I thank the Minister for introducing these regulations. I note from the Explanatory Memorandum that they set out rules relating to the provision of services and implement the services directive. If the directive works as we all hope it will, and if it is properly implemented across Europe, it should bring benefits to British businesses, which would be very welcome.

The objective of the services directive is to open up the single market by removing and reforming costly and time-consuming national standards and approval procedures. The Conservatives have been at the forefront of pushing for this in the EU Parliament. It will mean that service providers will be able to operate in all member states without prior authorisation or the need to set up a local subsidiary. However, I would not be fulfilling my task in opposition if I did not focus on areas of doubt, especially about where the regulations part company with the directive. I apologise to noble Lords because I have quite a number of questions, some of them rather technical. Before I go further, I should declare an interest: I am a chartered accountant and from time to time I provide management consultancy advice. I believe that those who provide such a service are covered by the regulations.

Having listened to the debate in your Lordships' House on Friday on the report of the European Union Committee, EU Consumer Rights Directive: Getting it Right, I was struck that it had certain threads in common with this debate. The noble Lord, Lord Whitty, said that,

“if you try to buy insurance in Spain because you believe it is cheaper you are bunged back”—

those were his technical words—

“into the British website”.

He went on to say:

“Some business practices are a greater inhibition to cross-border trade than the regulatory framework”.—[Official Report, 23/10/09; col. 933.]

As the Minister explained, financial services are not included in the regulations. However, I raise the issue to make a broader point about cultural practices, on which he may like to comment.

The British Chambers of Commerce has communicated with me, as I am sure it has with other noble Lords, and one of its key concerns is about the pace and quality of implementation of the directive across the rest of the EU. This would not be the first time that the UK had entered zealously into the spirit of an EU directive only to find that it had not been followed with such alacrity in other EU nations. What are the Government doing to ensure that we do not, once again, welcome foreign competition in but find our own businesses not so welcomed elsewhere? I have learnt that in most EU states the web-based points of single contact will work only in the national language. If true, it does not sound very encouraging. What work are the Government doing with other member states to develop the single points of contact so that they operate as they should?

Paragraph 3.2 of the Explanatory Memorandum states:

“It is our view that imposing obligations on all service providers (and not just those set out in the Services Directive) … is a proper exercise of the power”.

The Minister will correct me if I am wrong but it appears that while here in the UK all suppliers, including those from outside the EU and EEA, are covered because the regulations extend beyond the requirements of the directive, in other countries suppliers from outside the EU and the EEA are not covered. Can the Minister confirm that this means that the directive does not create a level playing field elsewhere in the EU? If that is right, what representations have the UK Government made to the Commission to try to get this anomaly changed?

I notice from paragraph 3.5 of the Explanatory Memorandum that the drafter has,

“extended the provisions in Part 3 to cover a provider of UK origin supplying services to a recipient of UK origin”.

Can the Minister confirm that domestic providers supplying services to recipients in their own countries—for example, in France, Italy, Spain or Poland—are not required by the directive to be covered? That is the implication. If that is so, is this not a somewhat blatant example of gold-plating?

I read at the top of page 4 of the department’s Guidance for Business on the Provision of Services Regulations, published this month, that, among other things, the services directive requires each EEA state to,

“set up a point of single contact”—

the web-based point of single contact to which I referred earlier—

“enabling service providers to apply and pay for authorisations (to offer or provide services) online”.

I remind your Lordships that this directive applies fairly and squarely to a number of already perfectly adequately regulated providers of services. I hope that the Minister can convince me that this wording “and pay for” is not simply creating another opportunity for yet another stealth tax on business, which this Government can seize upon with their usual keenness.

I have a number of technical questions taken in order from the regulations. Regulation 2 refers to specific sectors and/or instruments where the rules do not apply. Regulation 6 refers to the relationship with other Community instruments. Concerns have been expressed to me that the test set out in the paragraph, which states:

“A requirement imposed by Parts 2, 5 or 6 of these Regulations on a competent authority or provider of a service does not apply, if or to the extent that, the competent authority or provider cannot comply both with that requirement and with a requirement to which this paragraph applies”,

is a different test from that in Article 3 of the services directive.

Article 3 states:

“If the provisions of this Directive conflict with the provision of another Community act governing specific aspects of access to or exercise of a service activity in specific sectors, or for specific professions, the provision of the other Community act shall prevail and shall apply to those specific sectors or professions”.

Can the Minister explain why the regulations do not more exactly reflect the directive?

In the definition of “regulated profession” under Article 4(11), the directive states that,

“regulated profession means a professional activity or a group of professional activities as referred to in Article 3(1)(a) of the Professional Qualifications Directive 2005/35/EC”.

The definition in the regulations restates this definition more or less, save for a change. The directive 2005/36/ED defines “regulated profession” as,

“a professional activity, or group of professional activities, access to which, the pursuit of which, or one of the modes of pursuit of which is subject, directly or indirectly, by virtue of legislative, regulatory or administrative provisions to the possession of specific professional qualifications; in particular, the use of a professional title limited by legislative, regulatory or administrative provisions to holders of a given professional qualification shall constitute a mode of pursuit. Where the first sentence of this definition does not apply, a profession referred to in paragraph 2 shall be treated as a regulated profession”.

However, the draft regulations express it as follows:

“‘regulated profession’ means a professional activity or group of activities

(a) access to which, the pursuit of which or one of the modes of pursuit of which is subject (directly or indirectly) by virtue of legislative, regulatory or administrative provisions to the possession of specified qualifications, or

(b) the pursuit of which is by persons using a professional title which is limited by legislative, regulatory or administrative provisions to holders of a given professional qualification”.

Once again, can the Minister explain—perhaps not today but in writing afterwards—why the regulations do not more accurately reflect the directive?

On paragraph 2(2) of Regulation 12, can the Minister explain why the words “frivolous or totally without merit” were not inserted after the word “vexatious” to bring the regulation into line with, among other things, the terms of the Illegal Services Act 2007?

In Regulation 32, there is no definition of “electronic procedures”, so does this include e-mail confirmation, or is it restricted to web-based solutions?

In paragraph 2(b) of Regulation 34, there is a reference to “professional secrecy”. Such language is not generally legally recognised in the United Kingdom. Can the Minister confirm that this means the equivalent of an obligation of confidentiality or legal professional privilege?

In relation to Part 7 and the obligations for information to be provided by competent authorities, what is the role of the devolved Administrations? The obligation under Regulations 36 and 38 relate only to the Secretary of State. The interpretation provision does not, for example, make reference to “Scottish Ministers”. Should it? In Regulation 38, the Secretary of State and the Commissioners for Revenue and Customs must jointly provide a facility which will become the point of single contact. What role is there for Scottish Ministers in relation to this?

The Merits of Statutory Instruments Committee has specifically raised the matter of pedlars, and my noble friend Lord Lucas will in a moment ask for the Minister’s assurances on that question, which is important. That committee also reported that,

“given the broad scope of these Regulations, it will be vital to their success that the Government ensures that all affected service providers are aware of the new requirements. The Government may therefore wish to enhance their efforts in this regard”.

I would be grateful to hear the Minister’s response to that point.

My Lords, I, too, thank the Minister for introducing this measure. It is clearly very welcome at this time, when we have so many problems with the economy and in business. Anything that will help businesses to increase their opportunities is to be welcomed.

The points that have been made about a level playing field are quite fair. We must ensure that there will really be an open market and that things are as they are portrayed. However, concern has been expressed to me that, even in this country, we may not be fully ready to implement what is proposed. It is very important that, on the one hand, we see implementation carried out fairly elsewhere and that, on the other hand, in this country we are up and running and able to do so ourselves. We, too, need to be seen to be operating fairly.

Rightly or wrongly, a figure suggested to me is that only 10 per cent of businesses—particularly, perhaps, small businesses—are aware of this opportunity. Can the Minister assure me that awareness of the opportunity will be increased and widespread? It is suggested that only 10 per cent of businesses will be aware of it, so will the Minister consider at least how we can ensure that within this country those who are able to take the opportunities will be aware of them and thereby be able to engage in them?

My Lords, I start by declaring an interest. I run a business, publishing the Good Schools Guide, which is likely to be affected by this directive. I agree with my noble friend Lord De Mauley that it is important that businesses be told about this directive, and I note from the Explanatory Memorandum that some desultory contacts have been made with the major organisations. To get to the wide range of service providers, much more is needed. I suggest that it might go out with people’s VAT returns, for example. A VAT return is an official document to which you can fairly well guarantee people will pay attention. It is a common method of communication on taxation and other matters. Certainly, the efforts made to date have not reached me in any form, and I hope that in the coming months I shall hear something from the Government.

My particular interest is in Regulation 45, which concerns street trading and its application to pedlars. Over the past few days there has been considerable correspondence between the secretary of the Merits Committee and the department, for which I am grateful. One part of that reads as follows:

“There are no organisations which represent the interest of pedlars, however, BIS is shortly to consult on the future of pedlar legislation”.

That means both that this is the department responsible for pedlars and that it does not know what the pedlar organisations are. A moment’s consideration of all the legislation that has passed through this House and the other place over the past three years, started by a whole procession of local authorities, would have enabled the department to know exactly who the pedlar organisations were, who represented them and who worked for them. I have calmed down now but it made me astonishingly angry that the department either should have been so careless of the needs of those for whom it is legislating or was telling an out and out lie. I find it difficult to know which of those it was. It is astonishing: how can you say that you are in charge of pedlars and not know what has been happening in Parliament over the past three years and therefore know exactly who to approach? As I hope the department has found out over the past couple of days, the pedlars are well organised, they have a well established, representative system and they are quite capable of reacting to legislation.

The latest communication that I have received from the pedlars’ side of business reads as follows:

“The Opinion of Counsel for BIS dictates an arbitrary removal of the protection of a Pedlars Certificate from some currently lawful pedlars. We are informed that under the Services Regulation they will not require a Certificate. Implementation of the Regulations will immediately criminalise them under the Local Government (Miscellaneous Provisions) Act 1982 for not having legal authority (Pedlars Certificate) to carry out their activities”.

I do not know where this matter rests. I understand that I cannot press it to a Division today but, when we come to approve these regulations in the Chamber, I very much hope that the matter will have been settled between the department and its newly discovered friends, the pedlars’ representatives. I hope that we shall know that this section does not harm pedlars or, if it does, that the Government will say at that point what steps they intend to take to rectify the harm caused by their own omissions. If we do not get that assurance when we come to approve the regulations in the Chamber, I shall certainly press the matter to a Division.

My Lords, I thank all those who have contributed to this fascinating but somewhat complex and technical debate. I cannot guarantee that I shall answer every question precisely but I will ensure that, if I do not do so today orally, I will cover every point in writing. I think that the noble Lord, Lord De Mauley, will agree that he posed a significant number of questions. However, with the assistance of those sitting behind me, I shall do my best.

I was asked whether other countries’ points of single contact will be ready by the deadline of 28 December. We know that plans for PSCs are well advanced in some other member states, including key UK markets such as Spain, the Netherlands and parts of Germany. Some other states appear less advanced according to the Commission. However, all EEA states are committed to introducing a PSC and the UK will continue to work to encourage progress.

I was asked whether other points of single contact would include English as a language. Some countries—for example, the Netherlands and Denmark—made a commitment to provide material in English, but not all countries have done so at this stage.

Another question was whether the UK has been working with other Governments on the development of the points of single contact. We have actively participated in Commission-led implementation working groups and in a number of bilaterals, and we co-sponsored two EU-wide events for PSC experts and advisers across Europe in November 2008 and in 2009.

I was asked about implementation in other member states and mutual evaluation. All member states are working to the same implementation date, making legislation in accordance with their own parliamentary procedures. As I said, plans for the points of single contact are well advanced in some other member states, including key UK markets such as Spain, the Netherlands and parts of Germany. In some others, arrangements will take a little longer. The UK will continue to work to support implementation at the European level.

I was asked what we are doing to ensure that other member states implement effectively. In terms of direct interaction with other member states, the UK has played a leading role in developing effective points of single contact, and early in the implementation process we encouraged other member states to develop PSCs which cater for business needs. We organised two events for PSC experts to share best practice, co-funded the development of a common branding for PSCs across Europe—the EUGO brand—and provided a website. Lastly, we have pushed other member states to consider promoting PSCs both nationally and across Europe. We continue to stress the importance of the full implementation of the services directive in other member states in meetings at EU level. In the six months after implementation, the first half of 2010, member states and the Commission will evaluate how far barriers to the setting up or carrying on of the business have been reduced, and a consistent approach is encouraged across the EEA. The UK is working with its European counterparts to ensure that the process is transparent and effective, while the Commission will report the outcome of mutual evaluation to the European Parliament and Council.

The noble Lord, Lord De Mauley, asked why the information provisions are being extended to non-EEA providers. By applying the information provisions to all those providing a service in the UK, we are aiming to ensure a high quality of services for consumers and, in particular, to ensure that they have access to a minimum amount of information about the complaints procedure whomever they buy services from. We also want to avoid creating parallel regimes for service providers depending on where they are established.

On the question of conflict, when requirements on competent authorities do not apply, Article 3 of the services directive concerns the relationship with the provisions of other Community law. We have not copied out the wording from Article 3 in our regulations as it does not provide sufficient legal certainty, not least because the term “conflict” is open to interpretation. Regulation 6 has been drafted so as to transpose our understanding of a conflict in order to provide legal certainty. Our understanding is that a conflict will occur whenever a requirement in the services directive and a requirement in another Community instrument contradict each other to the extent that it is impossible to comply with both. This interpretation is consistent with guidance on the implementation of the services directive published by the European Commission, and it is a principle of Community law that exceptions in Community legislation must be strictly construed. Regulation 6 therefore requires a competent authority to do whatever is necessary to comply with the requirements in Parts 2 to 6 of the provision of services regulations and a requirement derived from another Community instrument. It will often be possible to comply with both requirements by taking a single action, such as complying with the stricter of the two requirements in order to ensure compliance with both. However, if it is not possible to comply with both, the requirement deriving from the other Community instrument will prevail.

The question arose of why the definition of a “regulated profession” differs from that of the EU professional qualifications directive. Regulation 4 is consistent with how the UK has transposed the Professional Qualifications Directive 2005/36/EC. There is a distinction between the two categories of professional bodies as reflected in the directive, and Regulation 4 makes this distinction clearer.

The requirement to pay for an application online was described as a stealth tax, but that is not the case. Many applications already need to be accompanied by a fee. It would be less helpful to businesses if they could apply electronically but then had to post the fee.

I was asked why the drafting of vexatious complaints does not include those which are frivolous or totally without merit. Regulation 12(2) states:

“Paragraph (1)(b) does not apply to complaints that are vexatious”.

That is, service providers do not have to find a satisfactory solution to complaints that are vexatious, although they do have to respond to them. The term “vexatious complaints” covers frivolous complaints, so we thought there was no need to provide further wording in the drafting. We have set out clearly in the guidance that vexatious complaints may include complaints that are unsubstantiated or malicious.

I was asked about the role of Scottish Ministers in relation to the provision of a point of single contact. The Secretary of State and the Commissioners for Revenue and Customs must jointly provide a facility which will become the point of single contact. I am not clear about their role, so I shall cover it in writing as well; my apologies for that. What is the role of devolved Administrations in the obligation in Part 7 for information to be provided to the Secretary of State by competent authorities? The obligation under Regulations 36 and 38 relate only to the Secretary of State. The interpretation provision does not make reference to Scottish Ministers. In line with their equivalents in Northern Ireland and Wales, Scottish Ministers have agreed to have a single UK point of contact. It is therefore sufficient that the information specified is provided to the Secretary of State.

The noble Lord, Lord Lucas, raised the question of pedlars. The provisions were included in the draft regulations which my department made available for comment in May and June. My department notified the pedlar community of the proposals on the day that the draft regulations were published. Although some interest was generated and some questions were raised, no changes to the provisions were requested. My department will shortly consult on the future of pedlar legislation. The possibility of introducing a replacement scheme for pedlars solely of services which would be compliant with the services directive is addressed in that document. However, although it is difficult to ascertain, we believe there are very few pedlars solely of services and, as this regulation lifts a requirement on them, it seems unlikely that a replacement scheme is likely to attract much support.

On the possibility of criminalisation, we would say absolutely not. The regulations will ensure that pedlars who trade solely in services will no longer have to apply for a pedlars certificate. Street trader licences apply to traders in articles; for example, traders in markets or fixed pitches. The regulations will not require pedlars of services to comply with the street trading regime.

The regulations propose to amend the Pedlars Act 1871 by removing the requirement for pedlars solely of services to be certified. The services directive requires EU states to remove any authorisation schemes which cannot be justified as non-discriminatory, proportionate and necessary on carefully defined grounds such as public safety and public security. In the Government’s view, the pedlar certification scheme amounts to an authorisation scheme, which cannot easily be justified on these criteria. The changes will affect only a very restricted class of trader: pedlars who trade solely in services. The majority of pedlars in the UK who trade in goods will remain unaffected by the changes.

I hope that I have satisfied most of the concerns of the noble Lord, Lord Lucas. If he has any further concerns, no doubt he would be happy to address them in writing and we would try to respond further.

Noble Lords asked what the Government are doing to ensure that businesses are aware of the benefits and obligations in the regulations. We are carrying out a major communications drive to raise general awareness of the directive among businesses. It is of the utmost importance that we tell them about the benefits that will be available to them. If they are not aware, the resulting benefits will not accrue to the UK economy.

Our communications work involves a range of different channels. They include: attendance and presentations at conferences and business events; distributing messages via business organisations and trade associations; media features; and website and electronic communications. We are working closely with all the usual suspects—that is, the Federation of Small Businesses, the CBI and the British Chambers of Commerce—and we are thankful for their continued support and efforts. In September, we emailed information packs to around 3,000 small businesses and a wide range of service providers via trade associations. We have specifically targeted 145 relevant trade associations and started to place articles in their sector press, some of which has a readership of tens of thousands. We have published detailed guidance on the regulations for business, available on the BIS website. We appreciate that there is a need for shorter guidance for small businesses. We have distributed flyers which summarise what the directive means for business, and the FSB has asked us to work with it to help produce its own short, snappy guidance for small businesses. We will continue to deliver messages about the benefits to business as much as possible over the coming months through speeches, events and media articles.

I think that we ought to take away the idea about VAT. I do not feel capable of responding yea or nay to that. However, we will take it away and respond in writing to the noble Lord, Lord Lucas.

I doubt that I have covered every question, certainly not all those raised by the noble Lord, Lord De Mauley, but we will respond in writing. We will carefully scrutinise Hansard so that we respond to the right things.

I thank noble Lords for giving their time to the consideration of this draft instrument. I apologise for the length of my reply, but I emphasise the benefits and opportunities that these regulations will bring to businesses in the UK. I hope that they will go some way to help to boost the UK economy at a time when that is greatly needed. I commend the regulations to the Committee.

Do I get a chance to reply briefly? I am in your hands, Madam Chairman.

The noble Lord does not have further right of reply.

I shall speak when the regulations are dealt with in the Chamber.

Motion agreed.