Monday 4 March 2019
Arrangement of Business
My Lords, if there is a Division in the House, the Committee will adjourn for 10 minutes.
Intellectual Property (Copyright and Related Rights) (Amendment) (EU Exit) Regulations 2018
Considered in Grand Committee
My Lords, the regulations were laid before the House on 19 December 2018.
Copyright law is largely harmonised internationally by a series of multilateral treaties, to which the UK and most other countries are party. Our membership of these treaties does not depend on our relationship with the EU and ensures that, in all scenarios after exit, UK copyright works will continue to receive protection around the world. Conversely, foreign works will continue to receive protection in the UK. However, there is a body of EU law on copyright that goes beyond the provisions of these international agreements. This has introduced EU-only rights—such as the sui generis database right, which provides EU-wide protection for EU database creators—and arrangements that facilitate the use of copyright content in cross-border services, such as the copyright country-of-origin principle, under which satellite broadcasters transmitting films and other copyright-protected works across the EU need permission from the copyright owner only for the state in which a broadcast originates, rather than in every state in which it is received.
A significant portion of UK copyright legislation derives from the EU copyright acquis and therefore includes references to the EU and member states. Without amendment, many of these references would become inappropriate after exit, either because they presuppose the UK’s membership of the EU and will not make sense once we are no longer a member state, or because they implement EU cross-border copyright mechanisms that, in a no-deal scenario, will become inoperable.
For those reasons we are introducing this instrument. In broad terms, it will preserve, where possible and appropriate, existing arrangements in UK copyright legislation by making minor, correcting amendments. The only exceptions to this principle of continuity arise in our implementation of some of the EU cross-border copyright mechanisms. It is unavoidable that the reciprocal element of these mechanisms between the EU and UK will become inoperable in a no-deal scenario, because they depend on reciprocal provisions that apply only between member states. This SI therefore amends our implementation of these mechanisms.
In some cases, it is appropriate to continue to extend a cross-border provision to the EU on a unilateral basis, because providing continuity in this way benefits UK consumers or businesses. This is the case for the country-of-origin principle in satellite broadcasting, where maintaining the effect of existing law will support UK consumers’ continued access to foreign television programming. For other mechanisms, providing continuity would be detrimental to those in the UK: for example, to continue to provide database rights for EU creators without reciprocal action by the EU would put UK businesses at a competitive disadvantage. This instrument will restrict those mechanisms to operate on a purely domestic basis, or bring them to an end, as appropriate.
We know that there are concerns over lack of consultation, and I would like to offer assurances that we engaged with affected stakeholders as far as possible within the constraints. There is no question that formal consultations are an important part of the process of engagement, but they are not the only part. We have regularly engaged with and listened to the concerns of stakeholders from across the creative and digital industries on an informal basis since the referendum. This engagement has given us a sound basis from which to prepare these regulations, and we are grateful to all those who have shared their views on copyright and EU exit.
In support of this instrument, we have published three impact assessments, each of which has been green-rated by the independent Regulatory Policy Committee. Those correspond to three of the most significant cross-border mechanisms: sui generis database rights; the copyright country-of-origin principle; and cross-border portability of online content services, which allows EU consumers to access their online streaming or rental services as if they are at home when they visit another member state.
Both the Secondary Legislation Scrutiny Committee and the European Statutory Instruments Committee commented that those assessments did not provide sufficient detail on the impacts of no deal on UK stakeholders. The reason is the same in each case: impacts on UK consumers, rights holders and broadcasters will result from the UK being treated as a third country in a no-deal scenario—not from these regulations, which amend the UK’s implementation of the cross-border provisions and will primarily affect EU rights holders, consumers and broadcasters.
In line with the better regulation framework, the impact assessments consider the effects of this instrument, and not the impacts that arise from the legislation of other countries and which we cannot avoid in a no-deal situation. However, we recognise that these impacts exist and that UK stakeholders will need to be aware of them. That is why the Government published in November 2018 a long-term economic analysis of the impacts of leaving the EU, and detailed guidance on what a no-deal Brexit would mean for copyright and related rights. That gives consumers, rights holders, businesses and other organisations the information that they need, in plain English, to make informed preparations for all outcomes.
These regulations will provide certainty, clarity and, as far as possible, continuity for UK businesses, rights holders and consumers as we leave the EU. I commend them to the Committee.
My Lords, I am delighted that this statutory instrument is being considered as an affirmative one, which is probably all my fault as I wrote to the relevant committee on 1 November setting out my interest in the subject and why I believed that it should be discussed. My interest dates back to having been an MEP and MP, and I spent time as a stagiaire in DG IV—as it then was—of the EU Commission, although I was concerned more with anti-trust at that time than intellectual property.
I would like to press the Minister on three separate issues, although he will be pleased to know that I am not against the statutory instrument in any shape or form. We are obviously helped by the findings of the two committees, for which I think that this Committee will be grateful. The report of the Secondary Legislation Scrutiny Committee mentions, as one reason why it was critical and thought that the House would benefit from such discussion, the assessment of the impact of the loss of the reciprocities. The Minister referred to that. As UK consumers while in another member state, we were going to lose the right to benefit from Netflix—if we only knew how to do it, of course—but visitors from another member state to this country would continue to benefit.
I understand the conclusion that the Government have drawn. However, given the extensive range of copyright issues covered in this instrument and that it seeks to establish reciprocity in relation to the loss of free access to portable online content services for consumers, how did the department reach that decision without having made an assessment of the impact of that loss on UK consumers?
We have heard from the Minister this afternoon that there has been a broad and general paper, from which I am sure that we will all benefit, but what was the basis for reaching the decision? Has he had any discussions with Ministers of other member states to see whether, having given up reciprocity, there is any way we might revert to it in future when we are negotiating a deal? Is that lost for ever, or is it only in the context of the no-deal statutory instrument before us today?
How wide an impact assessment has the department done in preparing for this statutory instrument? Do we know either how many UK-based broadcasters will be affected, how the loss of portability of online content may impact on UK consumers or how much the facility has been used in the past? From my experience, if you are visiting Brussels in the capacity of an MEP or as a lawyer, I frankly do not think that you would have much time to watch Netflix—I see that the shadow Minister disagrees. However, if you are there on holiday, it would obviously have a greater impact. The conclusion reached by the Secondary Legislation Scrutiny Committee Sub-Committee B is that it would have been helpful to provide more information, if the department has it, on the potential impact of EU exit on both UK businesses and consumers in this area.
We are apparently seeking to preserve the UK’s compliance with the requirements of the Marrakesh treaty—where these treaties are drafted and signed seems ever more exotic. I understand that we are seeking to ratify the treaty in our own right. Does my noble friend have a proposed timetable for that? We have learnt from other departments that ratifications of treaties and deals are not quite as straightforward as we might believe. I should be grateful for a response to those questions as well as to my overall question as to whether we are seeking reciprocity in the long term through a deal.
My Lords, the noble Baroness, Lady McIntosh, has asked some very pertinent questions which I certainly want to reinforce, and I look forward to what the Minister has to say in response. This is a deceptively short SI, but it deals with a rather large number of important rights, both for business and for the consumer. Even though I agree with the committee that it would have been helpful to provide more information on the potential impact of EU exit on UK businesses and consumers in these areas, at least the impact assessment set out the general impact in broad terms. The Minister used the word “unavoidable”. Sadly, I do not think that there are any alternative solutions to the issues set out in the statutory instrument.
What does the Minister consider to be the actual impact? As with all the SI impact statements, the assessment for this one says that, pretty much, the only impacts are a result not of the SI but of leaving the EU, becoming a third country and so on. However, there are substantial impacts as a result of consumers not having such rights and broadcast businesses not having the rights under the cable and satellite directive. Indeed, business has a double whammy because, as was discussed on 6 February, under the AVMS directive—as my noble friend Lord Foster pointed out, it deals not so much with copyright as with regulation—broadcasters will have a real problem in terms of the country of origin and regulation. So it is not just copyright and clearance issues that will add to the burden of cost; it is the certainty of regulation. It is no wonder that, already, a large number of broadcasters that broadcast into the European Union and have relied on the country-of-origin principle are upping sticks and moving to places such as Amsterdam.
At least for the AVMS directive there is some consolation in the Council of Europe regulations, but for a more limited range of material. Unless the Minister can correct me, I do not believe that there are any consolations on copyright clearance for broadcasters. This really is damaging.
I noted what the Minister said on consultation, and we have had endless discussions about the level of consultation. He said that the IPO had engaged with affected stakeholders, but I am very interested to know who he has managed to talk to, especially on the consumer side.
The portability aspect is a new right. It was rather treasured by many consumers, I think, and now it is being taken away. The noble Baroness, Lady McIntosh, was absolutely right to ask the question she did. Perhaps I am looking for unicorns but, if we were negotiating with the EU post Brexit, would we be seeking to reinstate portability? As I said, it is a treasured right that was introduced after a large number of years by a very effective EU Commissioner.
I also support the noble Baroness, Lady McIntosh, in wondering when the Marrakesh treaty will be ratified. Obviously that is of considerable importance for that particular right. Again, it was hard-fought for and is very important for those who are disadvantaged. Perhaps the Minister could give us a timescale within which it is proposed to do that.
I hope I have covered all the points, but perhaps the Minister can give some indication as to what he thinks the real cost is. I do not know whether the overarching impact assessment given by the Government gets into that kind of detail—I doubt it very much. No doubt the Minister has all the facts at his disposal.
My Lords, I thank the Minister for his introduction. We broadly accept the position of the department. However, as the noble Baroness, Lady McIntosh, and the noble Lord, Lord Clement-Jones, have touched on, a number of issues are staring at us, both in the impact assessment and in the SI itself. I will not go through all these, because most of the main points have been picked up. However, the Minister touched on the issue of no deal and the problems associated with it. Obviously, if we were to rule out a no-deal scenario, many of the issues would be dealt with and we would not be having these conversations.
Following on from the final point of the noble Lord, Lord Clement-Jones, he will find that the answers are not within the impact assessment, especially on cost and finances. Page 2 of the first two of the three impact assessments, under the heading “Full Economic Assessment”, looks at both the costs and the benefits. In both, the first line states:
“It has not been possible to monetise the costs due to a lack of available data”.
Unfortunately, I do not think there will be detailed answers on the costs, whether to the consumers or to the industry, because of the lack of available data.
That feeds into the Secondary Legislation Scrutiny Committee’s points, which, because the Minister obviously knew they were coming, I am addressing head-on. I do not think there has been a clear enough answer to them. The committee is of the view that it would have been helpful to provide more information on the potential impact of EU exit to UK businesses and consumers in these areas. That is an indictment not of the department, but of the work that has gone into finding out the impact of this.
Well, my next point is on lack of consultation. The Minister touched on this because, again, he obviously saw this coming down the line. There was no detail in the statement about the stakeholders. In fact, there was a comment—unfortunately I have not written it down—on how consultation has been ongoing since the decision was taken on Brexit. That may well the case, but the specifics of the issues around this area are really important. It would have been nice, and still would be, to get a little more detail on who the consulted stakeholders are, when they were consulted and what that consultation looked like.
I will pick up on another of the Minister’s comments. To paraphrase, he said that the general public will know about this because we have this information about the loss of reciprocity on our website. Until picking up this SI and coming here to respond on behalf of the Opposition, I was not aware—which was obviously my fault—that reciprocity would be lost following no deal or the UK’s going into a third-country situation. The idea that it is widely known that individuals will lose access to online content—whether it be Netflix, iTunes or other aspects of it—is just not correct. If we are going to end up in this situation, some information from the department to the wider British public, whether through the businesses or the organisations, would be a good thing. It would make the public aware of what was coming down the line if we ended up with no deal.
I will not pick up on all the other issues; they were covered very well by the noble Baroness and the noble Lord. I am sure the Minister will pick up on the points about the Marrakesh treaty, so I will leave it there.
I thank all noble Lords for their contributions. I will start off with consultation. At the time we were developing these regulations, we were in the early stage of negotiations. Revealing our continuity of approach through a public consultation might have risked our negotiating position, so it was not possible to conduct that full formal public consultation of the sort one would normally like. Within those constraints, the Government engaged with stakeholders in the creative and digital industries as far as possible: in August last year, officials in the department held a whole series of industry round tables to discuss no-deal planning with publishers, collective management organisations, broadcasters, technology firms, museums, archives and educational establishments. I could undoubtedly write to noble Lords and give them greater detail—for example, on the alliance for IP and the British Copyright Council, both of which are representative bodies that cover a broad range of copyright needs. I believe we engaged as far as was right and proper.
However, as the noble Lord, Lord Clement-Jones, and my noble friend Lady McIntosh, stressed, there is an impact from no deal. We did an impact assessment on these regulations and the impact is minimal, but the wider impact of leaving without a deal will be greater. We recognise that leaving the EU without a deal will lead to disruption in the field of intellectual property for the UK’s creative industries. However, in passing this instrument, we will provide continuity wherever possible and, where changes to existing arrangements are unavoidable, we will ensure that clear and appropriate legislation is in place. I believe that that will minimise, as far as possible, disruption to the creative and digital industries, whose work obviously depends on an effective intellectual property framework.
The noble Lord, Lord Clement-Jones, asked what the Government were doing to support UK broadcasters facing the loss of the AVMSD and the copyright country-of-origin principle. I assure him that it is still the Government’s intention to secure an agreement with the EU on our future relationship, and we set that out in last year’s White Paper. We want any deal to involve the best possible arrangements for the broadcasting sector. If we leave without a deal, broadcasters might face disruption due to the EU copyright country-of-origin principle ceasing to apply to the UK. Therefore, again, we sought to give broadcasters and others as much information as possible about the implications of no deal by publishing technical notices and detailed guidance on what that would mean for copyright. However, I make it clear that we will continue to seek a deal.
I also make it clear to the noble Lord and to my noble friend Lady McIntosh that we will continue to seek reciprocity. The political declaration provides a good basis on which to negotiate our future relationship with the EU on these matters. For copyright, this includes a commitment from both parties to maintain high levels of protection for database rights and artists’ resale rights. The specifics of our future relationship with the EU will obviously be the subject of those negotiations. However, as set out in the political declaration, our aim will be to make sure that the agreement continues to stimulate innovation, creativity and economic activity.
Further on reciprocity, the EU portability regulation works through reciprocal application of the cross-border rules. The regulations that we are dealing with today will not cover UK/EU travel in the event of no deal, and the UK obviously cannot replicate the effect of existing arrangements on a unilateral basis. However, keeping the portability regulation in UK law after exit would not have the same effect as an agreement on mutual cross-border portability. Instead, it would place unreciprocated and inappropriate obligations on service providers operating in the UK. Whether we can continue to agree reciprocal portability with the EU will have to be a matter for detailed negotiations. At this stage, I cannot go any further than that.
My noble friend also asked how the IPO came to this decision without an assessment of the loss of service in the UK. UK consumers of online content services might see changes in their services when they visit the EU after exit. This could range from being offered different content to having their access restricted. Ultimately, this will depend on the licences that their service providers have in place and the terms of service. That is a direct result of the UK being considered a third country under the portability regulation. Again, I stress that it is not something that we can deal with unilaterally.
My noble friend also asked about the effect on UK broadcasters. Without a deal, member states may cease to apply the country-of-origin principle to broadcasts from the UK, which will mean that UK broadcasters that transmit across the EU may need to renegotiate their licences to acquire rightholder permissions for every member state in which their broadcast is received. The issue arrives out of EU legislation; again, it is not something that we can address unilaterally.
I turn to the question which all three noble Lords asked about the ratification of the Marrakesh treaty. We are committed to making sure that people with disabilities continue to benefit from improved access to copyright-protected works. We are on track to ensure that we are able to ratify the Marrakesh treaty in our own right as soon as possible after exit. Our ratification will then need to be accepted by the World Intellectual Property Organization before we are once again considered a member of the treaty. While there is likely to be a delay between exit and the acceptance of our ratification in a no-deal scenario, we are working hard to ensure that this will be as short as possible.
There were a few more questions. The noble Lord, Lord McNicol, asked for any further information from the department explaining no-deal issues. I go back to the October 2018 guidance, which sets out in pretty clear terms what no deal means for copyright. I have a little more detail about who we consulted, but I do not think it adds anything to what I said before. I assure noble Lords that this included representatives and trade bodies from commercial broadcasters, collective management organisations, libraries and archives, tech firms, publishers, authors and photographers. I do not think I need to write with any further points. I think that deals with most, if not all, of the points raised, but I see that the noble Lord, Lord Clement-Jones, would like to come in.
My Lords, I stress—I think I made this clear—that I used the words “round table” in the plural. There were a number of round tables and I am sure matters of the sort that are coming up today were discussed. If they were not, I will certainly write to the noble Lord, but I cannot believe that they were not discussed.
Designs and International Trademarks (Amendment etc.) (EU Exit) Regulations 2019
Considered in Grand Committee
My Lords, the Intellectual Property Office has been preparing for a range of outcomes to our negotiation with the EU. The regulations form part of that preparation and are intended to ensure that the system governing intellectual property rights in the UK continues to function in the event of no deal being agreed when we leave the EU on 29 March.
For designs, much of our existing domestic legislation derives from EU directives, which are implemented through the Registered Designs Act 1949. Under the EU design regulation, the appearance of a product can be protected under a registered community design, granted by the EU Intellectual Property Office. This system runs in parallel to our domestic system, so protection in the UK can currently be obtained by registration under either or both the EU or UK systems.
Shape and appearance can also be protected under the unregistered community design. This is automatically established when a design is first shown to the public and is particularly valued by design-intensive sectors such as the fashion industry. Like registered design, the UK provides a parallel domestic system. However, the terms of UK unregistered design are different from those of EU unregistered design. After exit, protection in the UK for existing registered and unregistered designs under the EU regulation will be lost. The draft instrument uses the powers provided by the European Union (Withdrawal) Act 2018 to address deficiencies in UK design law that would arise upon exit and to ensure that such EU design rights are not lost.
In addition to the rights granted by the EU Intellectual Property Office, businesses can obtain EU-wide registered design and trademark protection through an international system administered by the World Intellectual Property Organization. This system enables businesses to protect their designs and trademarks in multiple territories via a single application, filed in one language. Both the EU and UK are contracting parties to this system. Like registered EU rights, international EU rights are protected through EU regulations, meaning that a failure to act will result in the protections afforded to these rights also being lost.
This instrument ensures that replacement rights will be provided to those who own registered EU designs on exit day in the form of a “re-registered” UK design. We will preserve UK protection through the “continuing unregistered design” for those who hold unregistered EU design rights at exit day. These new UK design rights will be fully independent of the corresponding EU right. However, they will retain the effective date of the EU design and, in the case of a reregistered design, any other relevant dates that were filed as part of the original EU application.
Because the terms of EU unregistered design right are broader than those provided by existing UK unregistered design, we are also introducing a new type of UK right called “supplementary unregistered design”. In doing so, we will ensure that the full range of design protection provided in the UK prior to exit day will remain available after we leave the EU. This new right will function alongside existing UK unregistered design. An EU unregistered design that exists before exit day will continue to provide protection in the UK through the continuing unregistered design, while those who disclose new designs in the UK after exit day will enjoy continued access to the characteristics of EU unregistered design through the new supplementary unregistered design right.
The instrument also ensures that registered designs and trademarks which are protected in the UK through EU designations under the Hague agreement and the Madrid protocol will continue to be protected in the UK after we leave the EU. For international designs that designate the EU, we will create comparable reregistered UK designs just as we are with EU designs registered at the EU Intellectual Property Office. For international trademarks designating the EU, we will create a comparable UK trademark, taking an approach similar to that set out in the EU trademarks exit SI, recently approved by both Houses.
As with reregistered designs and comparable trademarks being created from registered EU designs and trademarks, these new rights will be fully independent of the corresponding international designs and trademarks, but they will inherit their effective dates and will be treated as if applied for and registered under UK law.
The instrument further explains the approach that will be taken for registered community design applications and international design and trademark applications which are pending on exit day. Those with such a pending application will be able to file a new application in the UK, claiming the earlier filing date of the EU application. To claim the earlier filing date, the application must be submitted to the IPO within nine months of exit day.
The instrument also sets out provisions to accommodate other particulars of EU and international design and trademark protection, including deferment of design publication and the use of subsequent designations to create multiple EU protections under a single international trademark registration. As these new UK rights can be challenged, assigned, licensed and renewed in their own right, the instrument also contains provisions to accommodate those procedures.
Finally, there are miscellaneous amendments to existing UK trademark and design law to reflect the fact that the UK will no longer be an EU member state or a member of the European Economic Area. Although this SI has not been subject to a formal consultation, the IPO has discussed options for preserving EU and international design and trademark rights with both UK stakeholders and the World Intellectual Property Organization. These regulations represent the culmination of those discussions. The IPO ensured that businesses and legal practitioners were made aware of these changes through technical notices published in September last year, and it will also provide full business guidance once the draft instruments are made.
The regulations are a small but vital part of ensuring that the intellectual property system continues to function if the no-deal outcome arises. I hope that noble Lords will support them and I commend them to the Committee.
My Lords, I thank my noble friend the Minister for setting out the scheme. I have just one or two questions so as to gain a greater understanding of the background.
The Explanatory Note, which forms part of the statutory instrument, states on page 69:
“An impact assessment has not been published for this instrument as no, or no significant, impact on the private, public and voluntary sectors is foreseen”.
The Explanatory Memorandum then sets out precisely what the costs are. If the department has not conducted an impact assessment, how can it be sure that no significant costs will arise? If a design is not reregistered, will it lapse? In the view of my noble friend and the department, is a deadline of nine months following exit day for reregistering a design sufficient, given the sheer volume of designs that I understand are in play? There seem to be different figures for the costings, and it would be helpful to know what those costings are.
Paragraph 7.10 on page 5 of the Explanatory Memo-randum, under the heading “Deferred publication”, says:
“Rights holders with a deferred design at EUIPO that request deferment in the UK will not be able to defer publication for more than 30 months overall”.
Therefore, there is a discrepancy, with one deadline being nine months and the other being 30 months. Does that mean that rights holders will have an extension between nine and 30 months? Presumably this would not be affected by something subsequently being negotiated in the event of a deal being agreed, as with earlier statutory instruments. Paragraph 7.10 goes on to say:
“As these designs will already be examined by the EUIPO, no formal examination … will take place at the UK IPO”.
That seems sensible indeed.
The 16th report of Sub-Committee B of the Secondary Legislation Scrutiny Committee concludes that a preliminary estimate of £375,000 is deemed to be the cost of converting some 700,000 RCDs owing to the comparable UK right. That is a major exercise. Clearly, this cost will not be a charge laid at the door of the IPO. The report goes on to state that it will be part of the fees. Does my noble friend or his department envisage a big increase in the level of the fees because of this? The figure of £375,000 was given as a preliminary estimate. However, on page 12 of the Explanatory Memorandum, an estimate of £63,000 a year is given for the average cost,
“in other fees associated with holding a registered design right”.
I would like the Grand Committee to have an idea of what the overall fees will be. On page 11, at paragraph 12.3, it is repeated that:
“Holders of RCDs will face the additional cost of renewing the new comparable right in addition to the original RCD”.
It goes on to say that, based on the UK renewal costs, the cost is estimated to be £500,000 a year.
We have two different costs: one of £375,000 and one of £500,000. It might be difficult for my noble friend to say what the projected costs will be. Is this something that should cause concern? Is it a one-off cost or an annual cost? Might it stifle future designs?
My Lords, as with the last SI, the noble Baroness has put her finger on a large number of issues. Although this SI does not compete with the 600-page one that is still to come, I am afraid that, even at 60 pages, its length demonstrates the number of rights that sadly are going to be lost and which are extremely valuable to designers, particularly fashion designers and particularly at events such as London Fashion Week.
I start by asking whether the Minister could expound the situation as far as the exhaustion of design rights of this nature is concerned. The situation was wonderfully simple for those who wished to exhibit new designs at London Fashion Week, for example, knowing that their designs would be protected on the continent—those who exhibited in Paris had them protected here, and those who exhibited on the catwalk here had them protected all over the EU. Perhaps the Minister will explain what the actual exhaustion situation will be, particularly with the new SUDRs.
The mechanisms are relatively straightforward. These are similar to those adopted for the equivalent of the EU trademark. As I read it, there is a level of automaticity about the registration of the new right. It would be churlish not to welcome the fact it will include the features that are characteristic of the European design right, in terms of lines, contours, colours, shapes, textures and so on. That is an extremely important aspect.
I assume that, although there is a level of automaticity—entirely as the noble Baroness said—the sting will come in the renewal at the end of the three years, or whenever it occurs. The Explanatory Memorandum talks about this costing a total of £500,000. It would be useful to know where that estimate derives from.
Again, we are told that relevant stakeholders were consulted. Can the Minister again unpack whatever round table it was that took place? It is rather like Colonel Mustard in the drawing room: where was the deed done on consultation? It is important that we know when examining these statutory instruments that the right people were consulted and are happy, as far as it is possible to be happy with a no-deal Brexit SI, with the proposals set out. I look forward to hearing what the Minister has to say.
My Lords, I am very grateful for the comments of the noble Baroness, Lady McIntosh, and the noble Lord, Lord Clement-Jones, which have covered much of the ground that I was going to raise, so I shall not go back over it. As both of them have said, this is a complicated area. My feeling from the comments made is that it is likely to become more complicated after a no-deal exit, not least because of an additional design right.
On that point, as the noble Lord, Lord Clement-Jones, pointed out, it has taken this rather odd set of circumstances to persuade the Government that there is a problem with our whole range of design rights. We have raised in the House before the question of why there is such a focus in the UK on registered design rights, as against the very much larger number of unregistered design rights used in fast-moving industries such as fashion and why those industries do not use the registration system at all. Bringing in another model just to try to fill a gap seems to overcomplicate the whole structure, although it provides additional cover, as the noble Lord said, and I welcome that.
Does the Minister recognise that an issue is looming here? Do we need another in-depth look at this whole area to try to unbottle some of the problems that we have caused in the past few years by bringing in additional layers of legislation and regulation and consider whether we need a new approach, because the industry has moved away from the current regulatory structures?
Having said that, a number of points raised need answers, and I look forward to hearing what the Minister will say. I have only a couple to mention. The noble Baroness mentioned paragraph 12 of the Explanatory Memorandum. I have two points on that. At paragraph 12.11, there is a rather odd piece of typography. It states:
“An Impact Assessment has not been prepared for this instrument because .”
There are just two square brackets, so we do not know why it was not prepared, although we can guess. Can the Minister confirm why we have not had an impact assessment and not leave us hanging? It is a bit like a missing third act.
I have a point about cost recovery, which was well argued by the noble Baroness. The resourcing issues of this are not small: they may be £500,000, they may be £375,000, but they are still substantial. On a cost-recovery model, who pays? Are we saying that designers currently registering designs—which is about 10% of the total design component of industry—are carrying the costs not only of the existing arrangements but the additional burden of having to produce another registered design system introduced because of the possibility of defects in the relationship of those registered on the European basis? It is all very well saying that this is a benefit to the designers, but it is at a cost. I should be grateful if the Minister would confirm my reading of the situation.
I asked this question on the previous statutory instrument, but I did not get a full answer. We seem again to be engaging in asymmetry. There would be an argument for saying that if we have to have a no-deal exit, when that happens, the arrangements for design protection must be limited to the UK because no reciprocity is promised from the EU, yet here we are saying that we in the UK will continue to recognise the registration process which takes place in EU countries after we leave but are unable to offer that right to those who register designs with the UK, even with the additional right. Why are we doing that? Is that an asymmetric approach, or is there something we do not know about the arrangements that have been made for that? I am not against what has been going on. However, if I am right, I think the consequences are that, while overseas or European designers may benefit from having their designs copyrighted—the catwalk example is a good one, in that you can have a fashion show in Paris and be confident that your designs will be covered in Britain—in Britain, we will not be able to do that because there is no necessary reciprocity. That seems unreasonable and I would be grateful to know who benefits from it when we hear from the Minister.
My Lords, I will start with consultation and explain what we did. I will not repeat what I said on the previous SI, but the important thing is that, although we were not able to consult fully in the way one might have wished, the IPO has engaged with businesses on the implications of exit ever since the referendum result. We have sought to maximise continuity in the no-deal scenario and in the early stages of negotiation on the future partnership. As I said earlier, revealing the details of our continuity approach through public consultation might have risked that. The individuals who took part in the technical review did so in a personal capacity; we invited all sorts and I hope we had a representative group. They were chosen because of their past experience as representatives of various stakeholder bodies which usually engage in consultation with the IPO.
I thank the Minister for giving way. We have been over this ground before and I do not want to prolong the debate. However, the essential difference that is now emerging across all the SIs that we have been considering is the question of whether consultation has been carried out under Cabinet Office rules or not. If it is done under Cabinet Office rules, there are procedures, processes and resulting consequences, including publication and the reporting of all evidence received. I think we all agree that this would probably have helped materially in the process of going through all these statutory instruments.
The second point is that the consultation has then got to be on an open and representative basis, rather than selecting people from organisations with which the department, quite rightly, has ongoing and continuing discussions. The problem with this approach is that it tends to give the impression that those who have been consulted are speaking in their official capacity, when the Minister is making the point quite clearly that that is not the case and that this is very much an informal, personal discussion, because the consultation is not happening under Cabinet Office rules. That is the point we are all making; I do not think we need to dwell on it, but we should accept that that is the situation so that we do not get mixed up between the two systems.
I am glad that the noble Lord is prepared to accept that point. Obviously, we could not follow the Cabinet Office rules—I was trying to make that clear. They are not strict in that respect and there was no absolute necessity to follow them on this occasion. However, we wanted to make sure that we consulted enough and consulted appropriate people to make sure that we were not going into this blind—not that we would have been doing so even if we had not consulted.
I move on to the other hardy perennial—the impact assessment. We assessed the impact using the better regulation framework in line with the Treasury’s Green Book guidance. The impact was deemed to be less than £5 million so a full impact assessment was not required. Analysis is focused on the direct impact of the relevant SI compared with the current legislation, and analysis of the wider impacts of the UK’s exit from the EU has previously been published in the form of the long-term economic analysis, which was published in November 2018. My noble friend asked how we could be so sure of that. I want to make clear that our renewal fee estimates are based on the proportion of registered community designs currently held by UK businesses. That figure is 7% and the calculation was based on that.
My noble friend then gave the figure of 375,000 or roughly half a million and asked whether the fees would increase because of this. UK-registered design fees were subject to significant reductions in 2017. We have no plans to increase these fees to accommodate the cost of converting registered community designs. My noble friend also asked whether a design would be allowed to lapse if it were not reregistered. Creation of a reregistered design will be automatic—the holder will be granted the reregistered design if he or she holds a registered community design on exit day.
I think the noble Lord is correct. If I have got that wrong I will write to him. He also asked about designers being able to disclose their unregistered designs in the UK and whether they would be protected from copying in the EU. A registered design will need to be disclosed in the EU first to be protected there should we leave without a deal. The statutory instrument provisions allow us to negotiate reciprocal arrangements on first disclosure with third countries—which may be the EU, individual countries within it or wider—but that has to be a subject for a future agreement.
My noble friend also asked about the discrepancy between the nine months’ deadline for pending applications and 30 months for deferred publication. The UK will honour the EU deferment period. We will not allow designs to exceed 30 months in total. Applicants will be allowed to file an application claim for a 12-month UK deferment within the nine-month period. However, in some circumstances the full 30 months will fall short. Unless already subject to deferment, applicants will have only 21 months in total.
Does the Minister think it is clear from the instrument that there is the 21-month discrepancy? He said in moving and introducing the regulations that it was nine months. I picked up from reading the statutory instrument that it was 30 months. He has now said that it will be 21 months. I am concerned that if I were a designer and not au fait with these instruments I would be confused about the period.
As I said, 21 months is 30 months less nine months. I was trying to make clear that the EU deferment period will not allow designs to exceed 30 months in total. Within the nine-month period, applicants will be allowed to file a UK application claim for a 12-month deferment. However, in some circumstances the full 30 months will fall short, unless already subject to deferment and then applicants will have only 21 months in total. I think it is clear—if not, I might have to write to the noble Baroness, Lady McIntosh, on that matter.
I will move on to the question asked by the noble Lord, Lord Stevenson, about the qualification for holding a UK unregistered design right. Currently, the UK law says that someone who lives in or carries on a business in a member state can claim UK unregistered design protection. That is because of Section 217 of the Copyright, Designs and Patents Act, which says that any qualifying person—someone who lives in or runs a business in the qualifying country, which is defined to include a member state—can claim a UK unregistered design right. If we did not make any change to this, after exit day people and businesses in the EU would be able to claim new UK unregistered design rights while people and businesses in the UK would lose their equivalent rights in the European Union. That would create an imbalance between the UK rights holders and the EU rights holders. The UK law is therefore being amended to limit the geographical criteria for a qualifying person to claim unregistered design protection. That means that, after the UK’s departure from the EU, a company based in a member state will not qualify for UK unregistered design.
Finally, I will address a point made by the noble Lord, Lord Clement-Jones, about what would happen if one had a registered community design application which was still pending in the EU Intellectual Property Office on exit day. Businesses with applications which are still pending on exit day must file new UK-registered design applications to obtain continued protection in the UK after exit. However, where a new UK application is filed within nine months of exit day, it will retain the earlier filing date recorded against the corresponding EU application. That will ensure that those with pending registered community design applications will not lose any rights in the UK.
I go back to the point raised by my noble friend, to try to make it a bit clearer, on the nine months provided for pending trademark and design EU applications. The time period was established following informal consultations, and stakeholders who were consulted were content in the main with those nine months. I appreciate it was not the full consultation the noble Lord would have liked.
I think I have answered most of the questions—
Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019
Considered in Grand Committee
My Lords, these regulations were laid before the House on 7 February 2019.
The protection of consumers from unsafe products is at the heart of the legislation before us today. It has a single yet crucial objective—to ensure that, in the event of no deal, the UK continues to have a robust and highly effective product safety and legal metrology regime. It ensures continued protection for consumers across the UK and provides certainty and clarity for businesses.
The UK product safety and legal metrology regime is among the strongest in the world. It is vital that we continue to retain such a robust system, even if the UK leaves the EU without a deal in place. The legislation will not change the existing system or approach taken, which I know is supported by stakeholders. The changes are limited to those necessary to ensure that the 38 product safety and metrology laws it covers will still work effectively on exit.
Before I say more, I would like to explain the approach we have taken, because I appreciate that some noble Lords may have concerns that such a large instrument may be difficult to navigate.
I make no comment.
I assure the Committee that this approach has been designed to increase understanding and reduce the number of similar instruments that would otherwise be needed. Many cross-cutting issues are the same for different products. These have similar definitions, obligations and requirements. As a result they require similar amendments, which it makes sense to group together into one instrument rather than to separate out into many different instruments. Another reason for the size of this instrument is the lengthy technical schedules. These are used widely by industry, and incorporating them here from retained EU law makes it easier for businesses to see and understand the legislation as a whole.
During development of this instrument, we have been mindful of the impact on business of changes to processes as a result of the UK’s exit from the EU. Where possible, we have given businesses time to adjust, including an 18-month transition period for importers for any labelling changes and a 90-day transition period for companies notifying key safety information for cosmetic products already on the market. We have also engaged with businesses on the drafting. Drafts of the schedules were shared with stakeholders and feedback obtained. Stakeholders, including trade associations, industry experts and enforcement agencies, took part and welcomed this approach. As a result we have a better understanding of the main requirements and concerns of stakeholders, including businesses, and have been able to reflect these in the legislation that is before us today. In addition, and given the importance of this area of law, we have completed and published a full impact assessment to ensure complete transparency—despite the impact being below the threshold at which an impact assessment is required.
On the detail of the instrument, it is important to repeat that it will not change the UK’s approach to product safety. It keeps important elements; for example, it retains the requirement for conformity assessment to ensure that products meet the essential requirements set out in the legislation, including the need for assessment by third-party organisations where that is currently required. It retains the use of standards that give rise to presumptions of conformity with the legislative requirements, making it easier for businesses to ensure that their products are safe by following a designated standard.
Taking action to protect consumers from unsafe products remains vital, and this legislation ensures that the UK’s market surveillance system will continue to work to limit the number of unsafe and non-compliant goods available to UK consumers and businesses. It also gives ongoing recognition of existing authorised representatives in the European Economic Area for any appointed before exit, while those after exit will need to be in the UK.
For cosmetic products, due to the risk they pose to human health, responsible persons—who play a key role in ensuring the safety of cosmetic products—will be required to be based in the UK from the point of exit. By addressing these issues we are able to give business certainty and—crucially—we will retain our ability to remove unsafe or non-compliant products from the market.
To conclude, I hope that the Committee will agree that maintaining a functioning product safety framework in the event of no deal is essential both for consumer safety and business confidence. Without this legislation in place, there would be major risks to the safety of consumers—the safety of the toys our children play with, the cosmetics we all use every day, and the electrical items which are found in abundance in our homes. Maintaining these protections is vital to people across the country. I beg to move.
Oh, 2.54. I was told that it was 4.5 kilograms, so the figure has doubled. My first thought was: thank goodness for the Explanatory Memorandum. I tried reading the instrument without the Explanatory Memorandum just to torture myself, but I did not get very far without a stiff drink.
When I read the House of Lords Secondary Legislation Scrutiny Committee’s acknowledgement that the SI had to be corrected and relaid because of legal drafting errors in an earlier version, it did not fill me with great confidence. The scrutiny sub-committee voiced concern at the department’s decision to combine so many different legislative measures in a single statutory instrument, and I certainly agree with that concern. I come to this as a vice-president of the Chartered Trading Standards Institute and as a guardian of hallmarking in the Birmingham Assay Office.
It is virtually impossible to scrutinise this instrument effectively with the crazily reduced time limit of 29 March. The scrutiny sub-committee expressed concern about uncertainty and the impact that leaving the EU’s produce safety regime in a no-deal scenario could have on UK consumers and businesses. In that context, I should like to put some questions to the Minister.
On the category of cosmetics, for instance, paragraph 7.19 of the Explanatory Memorandum states that,
“this instrument will make further amendments to ensure the continued protection of UK consumers after exit. In a ‘no deal’ scenario it is likely that the UK will no longer have access to the EU Cosmetics Products Notification Portal which provides essential information to National Poison Centres to protect public health. Work has already begun on a UK replacement database”.
Can the Minister guarantee that no British consumer of cosmetic products will be put at risk of being poisoned? The Explanatory Memorandum uses the phrase “Work has already begun”. Will that really reassure British women—the principal consumers of cosmetics—that all cosmetics made at home and abroad will be safe? What will a functioning statute book actually look like in the cosmetics sector, and could rogue cosmetics firms set themselves up with the precise purpose of circumnavigating loose consumer protection in this area and making fast bucks from an overly trusting shopping sector, especially online? Is this the kind of no-deal consequence that we are facing in this sector? Also, what is the timescale for the completion of the UK’s replacement cosmetics product portal?
Perhaps I may also ask the Minister a few questions about consultation. Paragraph 10.1 of the Explanatory Memorandum states:
“The Department did not undertake a public consultation”.
At least that has the virtue of honesty and brevity. But further down the page we read, at paragraph 10.3:
“Informal consultation has taken place with a good cross-representation of stakeholders, including trade associations and other industry representative bodies across the product areas covered by this instrument”.
Can the Minister give us his definition of “informal” and “good”, as in,
“good cross-representation of stakeholders”?
How many meetings took place with the stakeholders? Did the cross-representation of stakeholders have the Explanatory Memorandum available when they looked at this SI? If they did not, I admire their superpowers. Did the informal consultation involve, say, trading standards, the Scottish Government or the CBI in all its regional forums, and were the meetings in situ or just a set of emails and phone calls? If we leave the EU without a deal, is this a good time to be “informal” about commercial regulation?
I have a few final questions. On the impact of this SI, paragraph 12.1 of the Explanatory Memorandum states:
“The impact on business has been looked at in an Impact Assessment … for this instrument”,
and has been assessed as de minimis. That is all right, then. However, later in the Explanatory Memorandum there is a reference to how much this whole procedure will cost businesses, and it does not seem like small beer. Paragraph 12.3 informs us that some of the 241,000 businesses that are to be affected will try to familiarise themselves with the new inventory of regulations. The cost estimate is put at £19.6 million, which is a substantial sum in itself, on the assumption that the average business leader will need only three hours to build total operational familiarity with these new rules. That is ludicrously optimistic. To take the example of a managing director of a company in Birmingham—a city I know well—which trades across Europe and indeed the world, she can get to work on a Monday morning and will have absorbed the consequences for her business of a no-deal Brexit by lunchtime that day. Is that the Government’s professional opinion? I would be grateful for the Minister’s response.
My Lords, I am delighted to follow the noble Baroness, because we overlapped for at least five years as Members of the European Parliament. The noble Baroness referred to cosmetics; I think we will both remember the fevered exchange we had with constituents on animal testing. I echo her remarks.
I am sure my noble friend will be only too aware of the criticism that has been levelled at his department, and I feel for him most deeply, because this epic package is the surest cure for insomnia that any Minister could wish for. Could he put our minds at rest, and those of the members of the sub-committee? I am mindful of the problems we have already heard: this instrument had to be reissued because there were minor drafting errors in the original script, plus the fact that the impact assessment was published subsequently, which meant that the scrutiny committee was not able to perform its function because it did not have that document in front of it.
I do not detract from the fact that this is a very necessary piece of legislation, but I hope that this will not be the way forward. There will be instances where regulations fall naturally together, but the very number of pages here, and the fact that this has had to be repeated and that the impact assessment could not be packaged together with it, must surely be a cause of concern for the department. I do not want to go down this path again.
I have a number of questions. The sub-committee noted that there is considerable uncertainty, for reasons that have been well rehearsed, about the possible impact on UK consumers and businesses of leaving the EU’s product safety regime. Does the Minister share the concern of the scrutiny committee’s Sub-Committee B about the impact that the loss of access to EU product safety databases could have on UK consumers? Even at this late date, might the department be able to provide that information in writing to the committee before the SI transfers from here to the Chamber? That concerns me, given that it relates to offshore installations, other major industries and explosives as well.
I want to share one anecdote with my noble friend. In a previous ministry—it was the Department of Trade and Industry, under a Conservative Government, I think—it was decreed that second-hand toys could no longer be sold in charity shops because of the danger that the eyes and other pieces might be displaced and be a great safety risk to small children. What I was not prepared for was the amount of correspondence—in those days, they were hard-copy letters; people printed out a standard letter and we received multiples of it because we had thousands of constituents. That was an unintended consequence of the toy safety directive as it was implemented in UK law at that time. One might say that it was gold-plating, so it would be nice to know that nothing is being gold-plated here and that we are just transferring what is already in UK law. If my understanding is correct and we lose access to EU product safety databases, it must surely set alarm bells ringing.
With so many regulations or schedules to regulations bundled together here—and following on from what was itemised by the noble Baroness, Lady Crawley—is my noble friend convinced that we are not missing a matter of public policy here? This is our one opportunity to discuss it before we pass the regulations in the Committee and subsequently in the House.
My Lords, I am a member of the statutory instruments Sub-Committee B, along with my noble friend Lord Rooker, who is in his place. I want first to thank the Minister for arranging the briefing meeting that took place last week. It is quite an unusual event for a full-scale briefing invitation to go to all Peers. I think it was at the request of the sub-committee, but it is recognition that this is quite an unusual statutory instrument.
I shall not go over the points raised about the sub-committee’s comments. My only question is in reference to the Health and Safety Executive, which is referred to in paragraph 10.2 of the Explanatory Memorandum as one of the organisations that has given technical input. I commented at the briefing and repeat today that this is not the first statutory instrument for which extra resources will be required by the Health and Safety Executive. It should be noted officially that it will be under some strain in completing its responsibilities in this area, particularly as I understand that it has been without a chief executive for at least six months. Can the Minister assure us that some inquiries will be made about why that is and that somebody will be in post as soon as possible?
My Lords, like the noble Baroness, Lady Crawley, I am a vice-president of the Chartered Trading Standards Institute. The other interest I declare—as it is pertinent to the remarks I want to make—is my chairmanship of the government-appointed national accreditation body, the United Kingdom Accreditation Service, or UKAS. In that role, I welcome the work that has gone into this statutory instrument in respect to the transposition of the EU regulation on accreditation. I also welcome the consultative approach taken by BEIS and the Office for Product Safety and Standards with UKAS and other relevant stakeholders and the engagement surrounding that consultation. Like the noble Baroness, Lady Donaghy, I thank the Minister and his officials for the briefing we were offered on this statutory instrument.
I recognise that transposing EU regulations to make them operable under UK law necessitates some changes. None the less, the reassurance that there has been no change to government policy is important. Therefore, UKAS is generally supportive of the way that the accreditation regulations have been transposed. We are reassured by the Government’s continuing commitment to maintaining the United Kingdom’s regulatory standards for product safety and the conformity assessment activities required for demonstrating compliance. We welcome the fact that UKAS’s position as the sole national accreditation body has been retained.
However, there are one or two potentially negative impacts from the amendments to EU Regulation 765/2008, the accreditation and market surveillance regulation amendment. My one question today relates to what measures are in place to prevent a competitive and possibly profit-driven rather than a not-for-profit accreditation market developing for United Kingdom-based conformity assessment bodies. Have the Government considered what else they might do to safeguard UKAS’s position as a not-for-profit national accreditation body and to prevent other accreditation bodies offering accreditation in the United Kingdom?
My Lords, I add my thanks to the Minister for conducting a consultation on this “minor” piece of legislation last week and for his explanatory letter to the noble Lord, Lord Fox, which has been passed on to me. However, after the meeting last week I have rather more questions now than I had in the first place.
In the event of a no-deal Brexit, this SI creates a new independent regime for checking product conformity, initially mirroring EU product-safety standards. The Government have combined 38 measures into one, creating a piece of legislation over 600 pages long. The concerns that I outlined at the meeting—which were subsequently outlined by the noble Baroness, Lady Crawley, as well—regarding the breadth of industries and the number of sectors covered by this instrument remain. It makes it difficult for Parliament to read and scrutinise let alone those organisations to which it actually applies. Any company, small or otherwise, looking at this piece of legislation would be daunted, and I do not accept the argument that the repetition over all the different sectors covered will be reassuring and ensure consistency of treatment between different areas, as was mentioned at the meeting last week.
I also do not think that the 241,000 businesses which will be covered by this instrument will thank the Government for making them wade through so much paperwork to find what they need. Surely one of the fundamental principles of a democratic society is that people should be able to know what the law is and easily understand how it applies to them. Today’s SI has the potential to undermine that principle.
We know that there is a premium on time before 29 March, and we certainly have plenty of SIs to get through, but the Government could have laid each of the measures separately and then grouped them together in smaller debates. Companies, and consumers, will not thank them for this tombstone of an SI.
At the meeting last week, I also raised the costs of implementation, which have been calculated at a total of £25 million. The analysis and evidence summary talks of a corporate manager or director taking an average of three hours to familiarise themselves with the new legislation. The £25 million is supposed to cover an estimated £54 billion-worth of GVA and £63 billion-worth of goods from our exporters to other EU countries, with about £104 billion imported from EU countries.
The impact assessment does not include the wider impact caused by the separation of the UK and EU product safety regimes. It is surely here where the biggest costs to businesses of a damaging no-deal Brexit would lie. No assessment that I can see is made of the cost of relabelling products—removing the old CE marker and substituting the new UKCA one. The manufacturers’ organisation Make UK told the BBC that,
“thousands of companies are going to have to spend millions of pounds collectively on changing all their markings to comply with the new mark”.
It does not include the cost to British exporters of having to seek approval from two notifying bodies: one based in the UK and one based on the EU.
My first question is: what assessment have the Government made of those costs to UK businesses and what knock-on effect will they have on consumer prices? Is this not another reason why the UK would be foolish to leave on 29 March without a deal? That is a rhetorical question: the Minister and I both know the answer to it.
My second question, to which I would appreciate an answer, regards the impact of a no-deal Brexit on our 176 notified bodies operating in the UK which provide more than 4,000 jobs between them. If the EU does not allow UKCA-marked products to be sold in the EU, there will be no incentive for foreign manufacturers to have their products certified in the UK. They will go to an EU-notified body to receive the CE mark and then import the products into the UK. Does the Minister agree with that assessment? In the light of it, are the Government seeking assurances from the European Commission that it would accept UKCA products in a no-deal scenario?
On the subject of the CE mark, I should like to ask a question on behalf of the charity Electrical Safety First. It is concerned that although the UK Government have created their own mark, it will not be a consumer mark widely recognised by the public. What plans do the Government have to raise awareness of the new mark among consumers? What are the timings and what transition plans are there? Electrical Safety First would like the Government to work with it and industry to raise awareness of the UKCA. That sounds like a fair offer to me. How does the Minister respond?
Next, I should appreciate some clarification on the expiry of the CE mark. The Government have decided that they will continue to allow products imported from the EU that bear the CE mark to be sold on the UK market and that this will happen unilaterally, regardless of whether the EU agrees to allow UKCA-marked products to be sold to the EU. At the meeting with the Minister, he referred to a transition period of 18 months using the existing marks for importers, and to one of 90 days for cosmetic product imports. We discussed that earlier today. But there appears to be no sunset clause on the SI. I presume the Government will have to change the law to ban CE marked-products from being sold in the UK should they ever wish to do so. Can the Minister clarify whether that is correct?
Finally, I will mention market surveillance. The UK will lose access to RAPEX—the EU’s rapid alert system—and ICSMS, the Information and Communication System on Market Surveillance, which we will replace with our own databases for market surveillance and public protection to help remove unsafe or non-compliant products from the UK market. The charity Electrical Safety First is unsurprisingly exercised about counterfeit goods as well, particularly those sold online. What plans are there to prevent more counterfeit and substandard electrical goods from being sold, particularly online, after Brexit?
I am sorry for the length of my remarks and promise to make it up to the Minister in the next SI, but this is, as I have mentioned, an inordinately long one. I appreciate that I have asked a lot of questions, so will the Minister undertake to write to me on any he may not manage to answer today?
My Lords, I join other noble Lords in thanking the Minister for organising the meeting held last week on this SI—as has been said, it was very useful in covering a lot of the ground that otherwise would have needed to be raised today. It is interesting to have had the experience of going through such an extraordinarily large tome with so many details; it took me into areas of public policy where I did not think I would ever have to go. I particularly enjoyed, and of course immediately read first, the intoxicating liquor order 1988, which was closely followed by the strawberry regulations. Both were of immense interest and, for those who have not yet managed to get that far through the document, worth the journey.
I will not raise many of the points which have been made, but I will come back to a point raised during the meeting which has not yet been properly answered. There is substantial additional work implicit in the change in regulations, which has already been mentioned by the noble Earl, Lord Lindsay, and my noble friend Lady Donaghy, for the United Kingdom Accreditation Service and the Health and Safety Executive. It is not yet clear that the additional resources that may be required will be funded and that support will be offered. Could the Minister confirm that that will be the case? Additional work will clearly be required; it may be of a short-term and temporary nature, but I suspect that it will be continuing. Assurances need to be given that the additional work will be properly covered, or we will lose.
On that same theme, the Minister said as he introduced this that it was really all about consumer confidence and product safety. Of course, that will be only as good as the body and individuals which have to police it. That will largely fall to trading standards—we have already discussed some of the issues that are raised in this. I asked at the meeting, and ask again: what will the financial arrangement be for this? Clearly we want good product safety and consumer confidence, but will get them only if we pay for them. In the past it has been assumed that the additional work can be picked up by those responsible for trading standards, which are largely local authorities. When primary legislation has gone through this House in the past, we have also asked these questions and had assurances that substantive new additional work applying from primary legislation—such as the recent Bills going through this House—would be funded. Indeed, mechanisms for that have already been described and put in place. Can we again have some confirmation that the additionality implied in these regulations will also be funded?
My Lords, I forget who it was who said, “Never apologise, never explain”, but I will start with an apology for the sheer size of this SI, which has received some comment—not just at this meeting, but at the meeting I held last week. I am grateful for the comments made by all those who came to that meeting and more widely by others, particularly the concerns of the Secondary Legislation Scrutiny Committee, on which the noble Baroness, Lady Donaghy, and the noble Lord, Lord Rooker, sit. I also discussed that with the chairman of that committee, the noble Lord, Lord Cunningham. I know he has also had correspondence with my honourable friend Kelly Tolhurst, who has ministerial responsibility for these matters within the department, and with my right honourable friend the Secretary of State.
I hope that we have made some progress in explaining why we thought it necessary to have such a large SI, with the measures being dealt with together rather than being laid separately, as the noble Baroness, Lady Burt, suggested. One can argue it both ways. I think that it helps. It might have created something of a joke for those dealing with the vast number of no-deal SIs, and I am the unfortunate person who happens to be in the department with the largest number. However, the noble Baroness, Lady Burt, emphasises that she too is unfortunate, and that is true also of those on the committee who had to scrutinise the SI. However, I think that in the end it was the right decision. The noble Baroness, Lady Burt, talked about organisations being daunted by the sheer size of it. I hope that setting out all the legal requirements makes it easier for them, and we are working on a very extensive package of guidance, which will provide clarity for businesses, market surveillance authorities and consumers.
The noble Baroness, Lady Crawley, said that she would have liked to see a little more about consultation. I appreciate that we produced a draft SI and then had to produce another one as there were some small changes, but they were small changes in a very large SI. We invited stakeholders to review the draft SI and shared it with them via reading rooms and in face-to-face meetings. I think that stakeholders were supportive of being engaged with in this way and felt reassured by that approach. In addition, their feedback enabled us to make some drafting amendments where appropriate.
We have continued to keep in touch with stakeholders and have updated them via email or in one-to-one meetings. We have attended a number of industry events to discuss the implications of no deal, including an event with the cosmetics association, the British Toy & Hobby Association and the British Retail Consortium, and there will be upcoming events with techUK. Therefore, we have had contact with as many organisations as possible and I hope that that regular contact has been of use to them. Certainly, we have not had any complaints from the various bodies involved.
I will certainly write to the noble Baroness on that and I hope that we can give further and better particulars, as they say in the law. She will then know exactly whom we have spoken to and I hope that she will feel content that we have gone out largely to the right people.
The impact on business was raised by a number of noble Lords. I explained what was behind the impact assessment, which was published on GOV.UK. We found the impacts as being de minimis; they are largely costs of familiarisation. I dare say that, because we are trying to replicate what already exists, familiarisation should not be too much of a problem. As is always right and proper, the impact assessment was shared with the Regulatory Policy Committee. I hope that the smooth arrangements we have put in place will help businesses in understanding that some of the new administrative requirements will make life easier and ease the impact of exiting the EU.
The noble Baroness, Lady Crawley, asked about the cosmetics database and whether I could guarantee that no consumer would be put at risk. She is right to emphasise the importance of this, because cosmetics can have a detrimental effect if not properly policed and supervised in the right way. The SI includes a requirement that all cosmetic products must be safe for human health. Each cosmetic product has a responsible person to ensure that it is safe before it is placed on the market. I assure her that preparations for the UK database are well advanced and trading standards has the power to take action against unsafe products.
That is not a direct cost of the SI; it is a cost of leaving the EU. That is why it was not part of the impact assessment. I will, as I am planning to do for one or two other questions she raised, write to the noble Baroness on what the extra costs are likely to be for registering both here and in the EU.
My noble friend Lady McIntosh asked about the uncertainty of the loss of access to the product safety database and what effect it will have on consumers. The new product safety database will be available to all market surveillance scientists from exit day. The new service will give the UK national capability to collate information on unsafe and non-compliant products, share information and rapidly alert market surveillance authorities. In addition—as was raised by the noble Baroness, Lady Burt, who talked about RAPEX—the UK will retain access to any publicly available information on RAPEX.
RAPEX is very similar to the food alert, which I think is called RASFF—the noble Lord, Lord Rooker, knows it by heart. My noble friend just mentioned information that will be publicly available, but it sounds as though we are not going to be part of it. This raises the question: if there was a rapid alert about a product in this country which we wished to share, would we have a reciprocal arrangement? Will that be part of the deal we hope to negotiate?
That will be a matter for the deal. I was talking about what was publicly available from RAPEX. What we will make available and other such matters go beyond what we are debating at the moment, as we are discussing no deal, but they are matters which we should consider as part of the deal.
I move on to trading standard resources; the noble Baroness, Lady Donaghy, asked whether they were sufficient. I have to make it clear that I believe there are no new duties placed on trading standards. The Office for Product Safety and Standards has been working with trading standards to ensure that it has the capability to discharge its responsibilities, including working with the Chartered Trading Standards Institute on EU exit plans. She asked about the appointment of the new chief executive of the HSE. I am afraid I do not have any information on that, but I will add that to the many letters I will be sending out and will write to her.
My noble friend Lord Lindsay asked about the position of UKAS and whether it might be undermined by profit-seeking bodies coming in to take over its job. I make it absolutely clear that there will continue to be just one national accreditation body and that body only will be able to issue accreditation certificates demonstrating that organisations meet the approved requirements. We have it on the record now, but if my noble friend would like me to write to UKAS, I would be more than happy to do so.
The noble Baroness, Lady Burt, asked about the cost of changing to the UKCA mark and the new notified body. The SI means that most manufacturing companies will not have to use the UKCA mark. If a business needs to change to an EU body as a result of the EU’s position on the no-deal scenario, that will be a result of the EU’s position and it is something that would be part of any future negotiations. I also give her an assurance that we will need further legislation should we want to end CE marking recognition, so that will not come through as a result of this.
The noble Baroness asked about Electrical Safety First. Again, I will have to write to her on that. My noble friend asked for an assurance that we were not gold-plating, just as there were accusations when we were taking these things on board the other way many years ago. No gold-plating is going on here; we do not have the powers to gold-plate under the EU withdrawal Act. I hope all we are doing is providing a degree of certainty to the industries concerned and the public that things will continue as before.
National Minimum Wage (Amendment) Regulations 2019
Considered in Grand Committee
My Lords, the regulations were laid before the House on 28 January 2019. Their purpose is to increase the national living wage and all the national minimum wage rates from 1 April 2019. The regulations also include an increase in the accommodation offset rate, which is the only benefit in kind that counts towards minimum wage pay.
The national living wage has had a positive impact on the earnings of the lowest-paid. Between April 2015 and April 2018, those at the fifth percentile of the earnings distribution saw their wages grow by almost 8% above inflation. That is faster than at any other point in the earnings distribution.
The labour market has continued to perform well. The employment rate is at a record high of 75.8% and the unemployment rate is at 4%, the lowest since the 1970s. Increasing the minimum wage is one more way in which the Government’s industrial strategy is boosting people’s earnings power and seeking to raise productivity throughout the UK.
From April, the national living wage for those aged 25 and over will increase by 38p to £8.21, which is a 4.9% increase. The 38p increase in April will mean that a full-time worker on the national living wage will see their pay increase by more than £690 over the year. The national living wage is on course to reach the Government’s target of 60% of median earnings in 2020. The annual earnings of a full-time minimum wage worker will have increased by more than £2,750 since the introduction of the national living wage in April 2016.
The 21 to 24 year-old rate will increase by 32p, meaning that those in that age group will be entitled to a minimum of £7.70, an annual increase of 4.3%. Those aged between 18 and 20 will be entitled to a minimum of £6.15, an annual increase of 4.2%. Those aged 16 and 17 will be entitled to a minimum of £4.35, an annual increase of 3.6%. Finally, apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, will be entitled to £3.90. This is a 5.4% increase and is the largest increase of all the rates that we are debating today. All these above-inflation increases represent real pay rises for the lowest-paid workers in the UK.
The Government’s green-rated impact assessment estimates that more than 2.1 million people will benefit directly from the regulations. All the rates in the regulations have been recommended by the independent and expert Low Pay Commission. The LPC brings together employer and worker representatives to reach a consensus when making its recommendations. The Government asked the Low Pay Commission to recommend the rate of the national living wage such that it reaches 60% of median earnings in 2020, subject to sustained economic growth.
For the national minimum wage, the LPC has recommended rates that increase the earnings of the lowest-paid young workers without damaging their employment prospects by setting it too high. I thank the LPC for the extensive research and consultation that has informed these rates recommendations, all of which is set out in its 2018 report published in November. At Budget 2019, the Chancellor will announce the LPC’s remit in the years after 2020. The Government have an aspiration to end low pay. This year, we will engage with the LPC, workers and businesses to balance this ambition with the need to protect employment for lower-paid workers.
The Government recognise that as the minimum wage rises, there is a higher risk of non-compliance as a larger share of the workforce is covered by the minimum wage. The Government are committed to cracking down on employers who fail to pay the national minimum wage, and we are clear that anyone entitled to be paid the minimum wage should receive it. Consequently, the Department for Business, Energy and Industrial Strategy has almost doubled the budget for enforcing the national minimum wage and national living wage. Funding reached £26.3 million this year, up from £13.2 million in 2015-16.
HMRC follows up on every complaint it receives, even those which are anonymous; these include those made to the ACAS helpline, via the online complaint form or from other sources. Increasing the budget allows HMRC to focus on tackling the most serious cases of wilful non-compliance. It also increases the number of compliance officers available to investigate national minimum wage complaints and conduct risk-based enforcement in sectors where non-compliance is most likely. In 2017-18, HMRC recovered pay arrears in excess of £15.6 million for over 200,000 workers.
Sustainable increases in minimum wage rates depend on strong economic fundamentals—and those of the UK are strong. The economy has now grown for 24 quarters in a row—the longest streak in the G7. Evidence has also long told us that investment in human capital is crucial for the long-term productivity of the workforce. The industrial strategy sets out our long-term vision for increasing productivity, including through raising the minimum wage, and so boosting the earnings power of the lowest-paid workers. Through these regulations, the Government are building an economy that works for everyone. I commend them to the Committee and I beg to move.
My Lords, I welcome this statutory instrument and the increases outlined by the Minister. As he knows, next month will be the 20th anniversary of the introduction of the national minimum wage, and I had the honour of being one of the founding members of the Low Pay Commission at the time. The recommendations we made impacted on and benefited 1 million women—and, incidentally, the world did not come to an end, which some forecasts had said would happen.
I am pleased that successive Governments have upheld the principles laid down by the original committee, and I hope that that will continue. Obviously, this was before the national living wage was introduced. However, one omission from our very first report in 1998, before the implementation, was the issue of accommodation offset. We were asked as a committee to look at that again, because we had not seen the significance of it.
I well remember being taken with the committee down to a convent in the middle of the Devon countryside to be gently lobbied by the Mother Superior and a number of nuns about the importance of having an accommodation offset. The Minister will know that it might have been gentle lobbying, but, my goodness, we were in absolutely no doubt whatever about the strength of feeling involved. The experience we had on the committee is a memory I will take with me for a long time. We were conscious that we were creating history, and I am very glad indeed that this is still here for us to admire.
My Lords, I will fulfil the promise I made to the Minister on the previous statutory instrument and be brief. It is also a great relief from Brexit to be discussing something that is current and not contingent on anything else happening.
The statutory instrument talks about the national minimum wage amendment regulations, but the table refers to the national living wage. It does not take much to confuse me. I just want to explore that difference for a minute or two. The uplift of 4.9% for over-25s to £8.21 is very welcome and I accept and welcome the comments from the Minister on the progress that the Government are making to get to 60% of median earnings by 2020.
The concept of the national living wage was introduced by the Government in 2015. I appreciate the Minister’s comments on how the amount has increased but my understanding is that it is not a national living wage because it is not based on actual living costs. The Living Wage Foundation currently calculates it—although presumably it is due for an uplift as well—at £9 per hour and £10.55 in London. It says that the living wage is what people need to earn to live. Citizens UK says that there is a moral imperative on employers to pay that if they can and 4,700 businesses and 104 local authorities do.
We know that 20% of all low-paid workers are in the public sector. Can the Minister say what percentage of public sector workers are in receipt of the living wage? It was very good to hear the Minister’s comments on enforcement. Can he tell me how many companies have been found to be paying below the minimum wage and how many of these have actually been prosecuted?
In conclusion, I hope that we will be moving towards the living wage very soon. It is proven to be good for business because it improves staff morale and retention. It is good for society and for the Government’s coffers too, because 35% of those earnings will go to the Treasury.
My Lords, I declare an interest as one of my children is an apprentice aged over 19. He is in the first year of the apprenticeship and so would benefit from the figures that we have in front of us today. I have not discussed it with him but I am sure he will be delighted to hear that there is more money on its way.
My noble friend Lady Donaghy’s comments were well made and it is astonishing that we are 20 years into what was seen at the time as quite a revolutionary policy and which is now, in the words of the Minister who introduced the order, settled between all parties as a feature of our working environment. It is a good thing as it works for all sections of society, particularly those at the lower end of the pay spectrum.
This is the fourth consecutive year that I have been reviewing this order, so I took the change of looking back to last year’s Statement, when the Minister was also responding, although that was only his first time. I will repeat some of the things that were said then because I think that the issues are still relevant. There are two important points to put on record. The document in front of us is an excellent piece of work. Again, I congratulate the team responsible for it. It reads very well indeed. It is a bit scary to go back to what we learned at university about the economics of wage policy and the impact of living and national wages but, nevertheless, it is important to see it all there. The document itself is good but also it plays back to the work done by the Low Pay Commission, in place for 20 years now, but doing fantastic work. It is very good to see its ability to move from the national minimum wage conditions when it was set up in 1998 to now, with the national living wage, which progressively moves the lower paid on full rates up to 60% of the median wage. The commission has adapted and continues to do its work in a way that is important and effective for society as whole.
Three points were made last year which I think have been picked up in the current document. One concerned whether the approach that has been taken to calculate the impact of the national minimum wage has stood the test of time. It was good that the department decided to take external advice from an expert body, and it is good to read the report and evaluation, which goes some way to answer some of the points I raised last time. That gives us a good basis on which to go forward.
My substantial second point concerns whether the straight line bite path—a rather curious phrase—will be on target to hit the position of 60% of median earnings in October 2020, which is not very far away. Echoing the noble Baroness, Lady Burt, it is not clear in the document before us whether we will hit the target on that date and, if not, what the issues are. It is clearly conditional and contingent on economic growth, but I think I heard the Minister say that he was confident that the essentials of the economy were sound, so that does not need to be a factor.
It is then simply a question of how one tracks what is obviously a moving target—the median wage—how it will move and how changes made annually in the current form can do that effectively. I do not think there is any problem, but if the Minister wants to say anything more about it, I should be grateful to receive it.
My final point is one raised by my noble friend Lady Donaghy. The only figure that sticks out from the table on page 1 of the Explanatory Memorandum as being out of sync is the accommodation offset rate, which has been set at 7.9%. Everything else has percentages beside it; this one does not, so I have had to make my own calculation; I hope it is approximately right. The rate of 7.9% is a bit different from all the others, which are between 4.9% and 5.4%.
I understand the logic behind that, which was explained well by my noble friend, but I do not understand the differential approach. There must be figures which support it, which may be in documents to which I have not had access, but will the Minister explain why it is necessary to raise it at the rate of 7.9%, which seems to be adverse in terms of remuneration—taken-home pay—when the rest of the percentage increases are at a more modest level? Is there a particular reason? Do rents in the areas we are talking about particularly differ from the rest of the country? Is there a particular reason or has a general approach been taken? I should be grateful for further information on that.
My Lords, I join both the noble Baroness, Lady Donaghy, and the noble Lord, Lord Stevenson, in offering my thanks to the Low Pay Commission. I had not realised that the noble Baroness was a founder member of it 20 years ago, and I offer congratulations on its 20th anniversary. Unlike her, I have never been lobbied by a Mother Superior from a Devon convent, but one looks forward to all new experiences in life. I will just say that I can imagine what it is like.
We are very grateful to the Low Pay Commission for the work it does. It is a good body that understands that it has to make difficult decisions in trying to come to the right figure for the different rates, representing the interests of those in work, those out of work, employers and the effect on employment. We are grateful to it for its advice.
The Government, as noble Lords will note, set an annual remit for it asking it to recommend the highest possible national minimum wage rates such that it does not increase unemployment. Again, we have that target, referred to in my opening marks and by the noble Lord, of getting to 60% of median earnings by 2020, subject to sustained economic growth. I hope we can do that; we are on track for it at the moment. As I made clear, my right honourable friend the Chancellor will set out further guidance in the Budget Statement for life beyond 2020. The duty of the Low Pay Commission is to advise us. It is then for the Government to produce a figure and put it into the regulations. That is what we are debating today.
The noble Baroness, Lady Burt, asked about the difference between the national minimum wage and the national living wage. The latter is just another phrase for the statutory minimum wage that applies to those aged 25 or over. It was brought in in 2016 and we are aiming to get that statutory minimum wage to that 60%. She asked why we could not follow what the Living Wage Foundation suggested. It is possibly better to follow the advice of the body that we have sought advice from—the Low Pay Commission—rather than another external body. I believe that setting the national living wage too high or increasing it too quickly could in the end lead to higher unemployment and harm the very people whom the policy is intended to help. That is why we look to the Low Pay Commission to set those rates; it will draw on economic, labour market and pay analysis, independent research and stakeholder evidence, as well as its own experience from trade unionists, business representatives and economists. I commend the work of the Living Wage Foundation, but the key distinction of the rates recommended by the LPC is that that body has to consider the impact on business.
The noble Baroness also asked about levels of non-compliance and about how many were underpaying. In 2017, 1,000 businesses were found by HMRC to have underpaid the national minimum wage. The cases resulted in £15 million of pay arrears being identified for more than 200,000 workers. There have been 14 successful prosecutions since 2007, but the important thing is to identify the businesses that are non-compliant and get them to comply. She also asked about the percentages of public sector workers receiving the living wage. I will write to her with any exact figures on that.
Finally, the noble Lord, Lord Stevenson, asked about the large increase in the accommodation off-set. The LPC seeks to raise the accommodation off-set to reach the level of the 21 to 24 year-old rate. A high rate for the off-set better reflects the cost of provision and enables investment in higher standards of accommodation by business. I hope that that deals with that point.
I think that that covers all the points that have been raised. I beg to move.
European Union (Withdrawal) Act 2018 (Consequential Modifications and Repeals and Revocations) (EU Exit) Regulations 2019
Considered in Grand Committee
My Lords, I am grateful for the opportunity to be here today to discuss these regulations. They are part of the Government’s wider programme of secondary legislation before exit day to ensure that the UK’s legal system continues to function effectively when we leave the European Union.
This instrument is being made using the consequential and correcting powers in the European Union (Withdrawal) Act 2018. The changes proposed are of a technical nature and do not represent substantive policy changes. They are part of the ongoing work of my department in laying the groundwork for the UK’s withdrawal.
The regulations were initially laid in draft before the sifting committees as a proposed negative instrument. Indeed, the Secondary Legislation Scrutiny Committee of your Lordships’ House agreed with my department’s assessment that the negative procedure was appropriate in this case. However, the European Statutory Instruments Committee in the other place recommended that the regulations should be debated under the affirmative procedure. It concluded that,
“the cumulative impact of the amendments is such that the additional safeguard of affirmative resolution is appropriate”.
As is usual, my department was content to accept the recommendation of the committee, and accordingly we are gathered here today to debate the regulations under the affirmative procedure.
These draft regulations have three primary objectives. The first is to make provision for how certain cross-references in UK law to European Union legislation are to be read following exit day. The regulations also make consequential amendments to domestic interpretation legislation to ensure that the rules and definitions within them apply, as appropriate, to the new category of law that will be created on exit day—namely, retained EU law. Finally, they repeal and revoke various pieces of primary and secondary legislation which were made to enable the UK to fulfil its EU obligations. These will become redundant on exit day as a result of the repeal of the European Communities Act 1972 and the UK’s withdrawal from the EU. I shall now give noble Lords more detail on these three objectives.
First, I shall address the provisions on cross-references to EU legislation. This is quite a technical area, so I will take a moment to go through it carefully and in detail. UK legislation which implements EU law, and EU instruments which will become part of retained EU law, contain many cross-references to EU instruments. There are two types of cross-references to EU instruments: ambulatory and non-ambulatory.
An ambulatory reference is a reference to an EU instrument as amended from time to time, which means that the reference will automatically update when the EU instrument is amended. The EU (Withdrawal) Act 2018 sets out what happens with existing ambulatory references after exit. A non-ambulatory reference is a reference to the EU instrument in the form that it was in when the reference was made. It does not automatically update when the legislation to which it refers is amended and therefore it would need to be manually updated later.
The European Union (Withdrawal) Act 2018 does not make provision for how non-ambulatory references to EU legislation made up to the point immediately before exit day are to be read. This is being done through these regulations. This issue is quite technical and the regulations need to cover several different scenarios. For example, they need to make sure that references to EU instruments that will be onshored on exit day are read as the domestic version where appropriate. However, this is only if they are up to date. If the reference is not up to date on exit day, it will remain a reference to the version of the EU instrument that was in place when the reference was originally made. It would therefore not reflect amendments made by the EU since the reference was made.
The other complicating factor is that some references are to EU instruments that will be onshored—that is to say will form part of domestic law on exit day—and some are references to EU instruments, such as directives, that will not be onshored. They need to be treated differently. These regulations also provide that cross-references to EU legislation, which forms part of retained direct EU legislation, created on or after exit day are to be read as references to the retained version of the EU legislation. This requires changes to the Interpretation Act 1978, as well as to the corresponding interpretation legislation for Scotland and Northern Ireland.
As I have already mentioned, the second objective of these regulations is to ensure that the rules and definitions within domestic interpretation legislation apply, as appropriate, to that retained EU law. This is the new body of domestic law created by the European Union (Withdrawal) Act 2018, which we had so much fun debating. This requires consequential amendments to the interpretation legislation for Scotland and Northern Ireland in line with the changes made to the Interpretation Act 1978 by the European Union (Withdrawal) Act 2018. For example, Part 3 of these regulations amends the Interpretation and Legislative Reform (Scotland) Act 2010 by inserting the new EU-exit related definitions, which stem from the European Union (Withdrawal) Act 2018. It also amends the definition of “enactment” to include retained direct EU legislation so that the interpretation rules will work post exit.
Part 4 makes similar provision for Northern Ireland through amending the Interpretation Act (Northern Ireland) 1954. It inserts the definitions relating to EU exit and updates the definition of “statutory provision” to include retained direct EU legislation. These regulations also ensure that the normal rules on laying documents before the Northern Ireland Assembly apply where a duty to lay documents is contained in a piece of retained direct EU legislation.
The third objective of these regulations is to repeal and revoke redundant pieces of, and provisions within, domestic primary and secondary legislation which implement EU law obligations. These pieces of legislation will become redundant as a result of the repeal of the European Communities Act 1972 and the UK’s withdrawal. The precise nature of the repeals and revocations is explained in detail in the Explanatory Memorandum to these regulations in paragraphs 7.11 to 7.27. I hope that these explanations assure noble Lords that these repeals and revocations are necessary to ensure that the UK’s statute book remains coherent and the UK’s legal system continues to function effectively. However, I shall provide some further explanation of particular repeals and revocations in the hope that it is helpful.
A number of Acts which gave effect in UK law to the accession treaties concerning member states’ accession to the EU are now being repealed. This is because these Acts will become redundant upon the UK’s withdrawal from the EU. Without these repeals, these pieces of legislation would sit meaninglessly on our statute book. We are repealing them, so that the statute book remains clear and effective. Another aspect of the repeals that might be of interest to noble Lords is the repeal of the European Communities (Amendments) Act 1993. In particular, the repeal of Section 6 of that Act requires consequential amendments to be made to other pieces of legislation. Section 6 determines who is eligible to be a member of the UK’s delegation to the European Committee of the Regions, an advisory body representing Europe’s regional and local authorities.
When the UK ceases to be a member state, it will no longer be entitled to send a delegation to represent the UK at the Committee of the Regions. Section 6 of the 1993 Act therefore becomes redundant on exit day and so is being repealed. Section 6 of the 1993 Act has been amended multiple times through primary and secondary legislation in order to reflect changes that have occurred to devolution and local government arrangements. Legislation that has amended Section 6 will of course also become redundant and so is being repealed or revoked. Let me give an example. An amending provision is contained in Schedule 8 to the Scotland Act 1998, which simply added the words,
“a member of the Scottish Parliament”,
to Section 6 of the 1993 Act to show that a member of the Scottish Parliament could form part of the UK’s delegation to the Committee of the Regions.
Finally, I draw noble Lords’ attention to the transitional and savings provisions contained in the regulations in relation to the repeals. Under the European Parliamentary Elections Acts 1978 and 2002, treaties that increase the powers of the European Parliament cannot be ratified unless approved by an Act of Parliament. An example can be found in the European Communities (Amendment) Act 1986, which approved the Single European Act. The transitional and savings provisions make clear that the repeal of provisions containing such approvals have no effect on the validity of the treaties or on anything done in relation to those treaties.
The Government have engaged with the Scottish Government, the Welsh Government and the Northern Irish Civil Service on the amendments proposed in the regulations, and no concerns were raised about the proposed amendments. Following the recommendation of the European Statutory Instruments Committee that the regulations should be debated, my department considered it appropriate to present these regulations for noble Lords to scrutinise today. I hope that your Lordships will agree that the draft regulations are an important part of the UK Government’s preparations for withdrawal from the EU. The principal purpose is to provide a functioning statute book on the day the UK leaves the EU.
I am extremely grateful to the Minister for his very careful introduction to the background of the regulations. I should make clear that I have no criticism of the detail of the regulations themselves; I fully understand the reason for them and the explanation he has given has reassured me on all those points.
I have, however, two points on the provisions relating to Scotland. I am delighted to see the noble Baroness, Lady Goldie, here, because she will recall our discussions relating to what is now Section 8 of the Act, when I argued that consent of the Scottish Parliament should be required in the exercise of powers relating to Scotland in any way. As I recall it, she gave me an assurance that the Scottish Government would be consulted on any such amendments and, in the end, I was content with that. It is not in the legislation itself but, rather like the Sewel convention, it is part of the background to the exercise of the power to make regulations under the Act.
My first question is short and technical and relates to the provision in Part 1 of the schedule to which the Minister referred—the reference to the Scotland Act 1998 and the repeal of paragraph 28 of Schedule 8. The reason I refer to it is that it is laid down in Section 8(7) of the European Union (Withdrawal) Act 2018 that regulations under Section 8 may not do various things, among which is to,
“amend or repeal the Scotland Act”.
What is happening here is an amendment to the Scotland Act. That provision is qualified by stating that it does not apply if,
“the regulations are made by virtue of paragraph 21(b) of Schedule 7 to this Act”.
I notice that in the preamble to the regulations, reference is made to that paragraph.
My point is very short. I seek confirmation from the Minister that what we see in Part 1 of the schedule is an exercise of the power under paragraph 21(b) of the schedule and not under Section 8, because if it is under Section 8 standing alone, it would seem to be contrary to the prohibition in subsection (7). I think that is a relatively straightforward point, and I do not imagine that it will cause the Minister any concern.
The second point relates to Part 3 of these regulations which, as the noble Lord has pointed out, amends the Interpretation and Legislative Reform (Scotland) Act 2010. At first sight, it seems very odd that a UK Minister should be amending an Act of the Scottish Parliament; this very important Act was drafted with great care in Edinburgh. There is no doubt whatever that power to do this was given to Scottish Ministers under Schedule 2 of the withdrawal Act, because this is a devolved matter and there is no inhibition on their powers to deal with devolved legislation as they think fit. It seems that the Scottish Parliament is the natural place to make these amendments. One can understand that the position in Northern Ireland is different, because the Assembly is not sitting; it is obviously necessary to make provision by legislative means and this would seem the appropriate way to do it.
That is really a preamble to what we find set out in paragraph 10.2 of the Explanatory Memorandum, which says:
“We have consulted the Scottish Government, the Welsh Government and the Northern Irish Civil Service”.
It is the next sentence which troubles me. It says:
“In particular, we have consulted them on the amendments to the Interpretation Act (Northern Ireland) 1954 and the ILRA 2010; these amendments are made in Part 3 and 4 respectively of the instrument”.
That sentence is wrong, because the amendment in Part 3 is nothing to do with the Interpretation Act (Northern Ireland) 1954 or the IRLA 201; it is an amendment to the interpretation Act made by the Scottish Parliament. Therefore, that sentence does not make sense. The last sentence deals with something different: consultation relating to the technical and consequential repeals to the Scotland Act, which is what we saw in Part 1 of Schedule 2. My question really is this: what is the position in relation to the amendment of the Interpretation and Legislative Reform (Scotland) Act 2010 which we find in Part 3?
Following our long debates on the whole structure of the withdrawal Act, the noble Baroness, Lady Goldie, will understand my concern that the Scottish Parliament should be properly consulted on matters of this kind. I have to say that paragraph 10.2 of the Explanatory Memorandum does not make it clear. The second sentence is plainly incorrect and there is a gap, because it does not mention that Part 3 is an amendment of the Interpretation and Legislative Reform (Scotland) Act 2010. I ask the Minister for clarification as to what exactly is going on here and whether the consultation, which is fundamental to the exercise of the powers in relation to Scotland, has been properly carried out.
My Lords, unlike the distinguished noble and learned Lord, Lord Hope, I am not a lawyer and am unable to go into the detail that he has. I look forward to hearing the answers to his excellent questions. However, I have three simple questions that I would like to address to the Minister.
The first question is about impact. When this instrument was referred to us for debate, making it an affirmative instrument, the ESIC commented on the cumulative impact, saying that this meant that it should be debated here. As a consequence, we are all here today. There is no impact assessment and there is a statement from the Government saying that there is no need for one. Given the scale of the changes and the consequential effects, it seems that there could well be more than £5 million-worth of work for all the professional services and from companies in all four countries of the UK. I would be interested to hear more on that.
I also make the comment that, after EU exit, it will be much more difficult to find out what is going on in the EU, which is a problem when we are continuing to take European Union changes on board. We cannot even send representatives to the Committee of the Regions any longer, let alone the Council.
How will we keep business and citizens informed of what is going on in the EU? This is an issue which I hope the EU Select Committee, which I serve on, will look at as part of its report on the future bilateral institutional arrangements with the EU 27. This troubles me a bit because I am looking forward to post Brexit and how we will work alongside our friends in the EU 27, allow our citizens to continue to visit them, and our businesses to continue to operate.
My second question is a simple one. There has been no consultation except with the devolved Administrations. How do we know that the quite extensive changes that are being made in this Order are safe?
Finally, as my noble friend knows, I strongly support the Government’s approach to providing a new legal base for the post-Brexit world and for doing that in the orderly way he is pursuing. However, I would be interested in an update on the gaps that there may be on Brexit day, particularly in the not very likely event of no deal. It seems that this Order helps to deal with some of the gaps, but I would be interested to know how many more there may be that we should be worrying about.
My Lords, I add my thanks to my noble friend for bringing this statutory instrument before us today. I associate myself entirely with the comments of the noble and learned Lord, Lord Hope of Craighead, particularly on Part 3. I am minded to ask whether adopting this is not really the preserve of the Scottish Parliament. I remember only too well the long hours we spent discussing Section 8 and I hope that that is not something that will be repeated in later statutory instruments when it should be the preserve of the devolved Parliaments. The noble and learned Lord entirely concentrated his comments on the fact that the Northern Ireland Assembly is not sitting, and I wonder whether that is an issue which it is appropriate to bring before the Committee.
Page 1 of the Explanatory Memorandum refers to “non-ambulatory references”, a rather curious expression repeated by the Minister which I do not recall from the Act itself. They are references which are not automatically updated. The memorandum goes on to state in paragraph 2.5:
“These repeals and revocations are needed to remove redundant provisions of domestic legislation”.
This was identified when it was discussed in the equivalent Committee in the other place by our honourable friend Chris Heaton-Harris, the Parliamentary Under-Secretary of State who responded to questions raised by Matthew Pennycook from the Opposition Benches. The second question asked why no references are in fact made to non-ambulatory references in the European Union (Withdrawal) Act itself or indeed in the debate. What my honourable friend Chris Heaton-Harris, as the Parliamentary Under-Secretary of State, said in reply was quite astounding. I should like to quote him:
“I honestly do not know what my Department might have been thinking at that time. However, I believe that we have tried to go through this process in the best possible way, so I guess we are heading towards the second of the hon. Gentleman’s suggested answers to his own question, rather than the first. We have gone through a quite legitimate tidying-up exercise”. ”—[Official Report, Commons, Delegated Legislation Committee, 21/2/19; col. 6.]
The question to my noble friend the Minister is: was “non-ambulatory references” omitted from the debate by accident or by design? Can he assure the House that this will not recur, that we might not expect any other omissions in the short time available before Brexit day?
I do not know if it was the Minister’s own expression or whether “we are gathered together” was written for him, but I was expecting something a little more exciting after that. I congratulate him for getting through yet another speech, given that his voice is not quite back to its normal timbre. He is also employing what for me is another new phrase, “onshored”. Maybe the people behind him can give us a little clue afterwards about the difference between retained, repatriated and onshored and whether there are any more new expressions coming.
Like other noble Lords, I thank the Minister for trying to make sense of something quite complicated but I am afraid that I have a few questions nevertheless. First, the 2018 Act ends the supremacy of EU law over on UK law on exit day. It was there by virtue of the 1972 Act—as paragraph 6.2 of the Explanatory Memorandum reminds us. It ends because of the repeal of, I think, Clause 1 of the 1972 Act. However, assuming that we get a deal, and that this includes a transition period, some of this supremacy might have to continue through the transition period as we will continue to abide by EU rules then. How and when will the 2018 Act be amended to allow for this?
Secondly, paragraph 7.19 of the Explanatory Memorandum refers to the regulations amending Section 6 of the 1993 Act—to which the Minister referred—the provisions as to who is eligible to participate in the Committee of the Regions. Can the Minister let me know whether that is the only statutory change that will be required for us no longer to be on the committee? I have not noticed any reference to the committee elsewhere and as this refers only to eligibility and not, for example, selection, role, time limits or anything else about our membership, in domestic law or anywhere else. Can the Minister confirm whether anything else needs amending to make sure nothing else is left that would send people to that committee? Although not mentioned in these regulations, can the Minister also let us know whether any legislative changes about appointment, eligibility or anything else are needed with regard to our membership of what in my day was called the Economic and Social Committee, but which I know has a different name now?
My third question concerns the fact that the regulations now make good the absence, as we have just heard, from the 2018 Act of consideration of non-ambulatory EU regulations. This question may fall to the Minister’s noble friend Lady Goldie, because I think she dealt with this when we took the Bill through. There was quite a discussion about clinical trials at one point. We were concerned that, while the EU rules about clinical trials have been changed, they will not be operative—I think that is the word—on exit day. We were very worried, therefore, that because we would be taking over what was in operation on exit day, these new rules would apply across the rest of the EU after exit day but we would be stuck with the old ones, with enormous implications for whether we could participate in clinical trials that particularly affect orphan drugs and childhood illnesses. That lack of carryover was of concern. I am worried, although I think that particular issue got sorted by some clever intervention, about whether the introduction of these regulations covering non-ambulatory regulations addresses issues where things change over time and are different after exit day in the way we would want them to. Certainly the feeling was that we wanted to stay absolutely in line with EU regulations. I could not quite understand the difference between ambulatory and non-ambulatory sufficiently to know the answer to that.
My fourth question was raised by the noble Baroness, Lady McIntosh, and is about what happened when these regulations were dealt with in the Commons, where the Under-Secretary of State admitted that he did not know what his department might have been thinking. He has a good excuse: he did not do the Bill, because he was not there at the time, but this Minister, of course, did, so he might have a little more knowledge and has had advance notice since 21 February about why such references were overlooked. The noble Baroness, Lady McIntosh, asked whether it was by accident or design, and it would be useful to know. If it was by accident, we understand that, but it would be good to know whether there are similar examples. If it was by design, it would be interesting to know why it did not happen at the time.
Finally, I have a question which is not specifically on these regulations. To date we note that the Prime Minister’s spokesperson, instead of saying, “We will leave on 29 March” said only, “We want to leave on that day and we will work to try to achieve that”. Of course, as we know, the Prime Minister confirmed last week that, should MPs mandate her to seek an extension to Article 50 next week, legislation will be brought forward to amend the EU withdrawal Act’s definition of exit day. Any such regulation to amend exit day would be subject to an affirmative procedure and therefore require pretty swift consideration in both Houses. Can the Minister give us a little advance notice, as I am sure they are already preparing for that, about when an instrument would be laid, given the requirement on the length of time between being laid and being debated? Since it is already 4 March, I think he will understand why I pose this question.
First, I thank all noble Lords for their contributions. I shall deal first with the last question of the noble Baroness, Lady Hayter, and commend her for her ingenuity in bringing the subject up in this Committee. As she knows, under the EU withdrawal Act there is a provision for the Government to amend exit day by use of secondary legislation powers. There has been no decision to do that yet. We await details of the various votes that will happen next week, but we remain confident that we will be able to deliver a withdrawal agreement that the House of Commons can vote for with enthusiasm and therefore we will not need to table any references or any further secondary legislation, but if it is required, the ability is there. That is set out in the EU withdrawal Act. That is as far as I want to go with that at the moment in this forum.
As I set out, this SI makes amendments to legislation using the consequential and correcting powers in the European Union (Withdrawal) Act 2018 to prepare the UK for withdrawal from the EU. The purpose of the instrument is to ensure that the statute book accommodates retained EU law. The instrument will make clear how certain cross-references to EU legislation are to be read after exit day and make amendments to the interpretation legislation for Scotland and Northern Ireland to ensure that it adequately references and incorporates retained EU law.
The instrument will also repeal and revoke pieces of primary and secondary legislation that were made domestically to enable the UK to fulfil its EU obligations, but that will become redundant as a consequence of the repeal of the European Communities Act and the UK’s withdrawal from the EU.
Let me deal with a number of the questions raised. The noble Baroness, Lady Hayter, asked about the Committee of the Regions and whether this will be the only statutory instrument-making legislative amendment relating to the UK’s participation in the committee. As I have already mentioned, these regulations repeal the provision which determines who is eligible to be sent to participate on the UK’s behalf at the committee. When the UK withdraws from the EU, it will no longer be entitled to send a delegation to represent the UK at the committee. My department laid the European Institutions and Consular Protection (Amendment etc.) (EU Exit) Regulations 2018, which made amendments and revocations to address deficiencies in respect of retained direct EU legislation that relates to the functioning of institutions and bodies of the EU and the application of its rules in EU legislation. Seven of the decisions that were revoked by those regulations relate in part to the Committee of the Regions. That is because the decisions are deficient because the UK will not form a part of the institutions to which the provisions relate after exit.
Was one of those institutions the Economic and Social Committee? The noble Baroness, Lady Neville-Rolfe, asked about the Committee of the Regions and I think I have responded to her point. She also asked about how we will ensure representation and consultation on issues going forward. That is a live discussion. We are also discussing with the devolved Administrations how they can feed in to EU and UK policy-making during the implementation period because during the implementation period we will not have direct representation in any of the institutions that we have been talking about, the European Parliament or the Council, and we will have no UK Commissioner. As she is aware, in the withdrawal Act there is provision for governance arrangements. It is a joint committee that will comprise a number of committees and sub-committees. We are talking further to the EU about how that will work in practice. There are live discussions with UKRep about how it can continue to influence the legislative process in Europe because it will have to switch from being a body that directly represents us in the various fora to being one which seeks to influence by other methods. There is a great deal of policy-making work going on about how we can do that and how Parliament will continue to be consulted and represented in decisions. As I said earlier, we are discussing this further with the devolved Administrations, which are very interested in these considerations, as you would imagine.
The legacy arrangements following the end of the UK’s participation in the Committee of the Regions are being considered further by the Ministry of Housing, Communities and Local Government. I have received representations from members of the Committee of the Regions, who want some sort of ongoing body. Personally, I am not convinced of the necessity for such a thing, because we already consult plenty of other local government fora and there is no need for a separate one, but I know that the Ministry of Housing, Communities and Local Government is taking these discussions forward with existing members of the Committee of the Regions. Discussions are constructive, both with them and the various local government associations, about how the consultative rights and responsibilities that local government currently has at European level through that committee might be replicated domestically in a non-statutory way when the UK has left the EU.
The noble Baroness, Lady Hayter, also asked about the clinical trials regulation. As I am sure she remembers, we debated this at great length during the passage of the EU withdrawal Act, and it is an important issue. These regulations will not affect whether the CTR would come into force in the UK if implemented by the EU during the implementation period. The clinical trials regulation is expected to be implemented in 2020 and would therefore apply to the UK under the terms of the implementation period. We think that the clinical trials regulation is good legislation and we fully support it, but the noble Baroness will remember that one issue we had with it is access to various EU databases. Of course, access to those databases is a subject of live discussion and negotiation with the EU, which we hope to take forward when we enter the implementation period and discuss the ongoing relationship. We gave assurances at the time that we are committed to taking part in the regulations as much as possible under the negotiations. So it is not just a question of implementing the legislation, which we may do anyway if it occurs during the implementation period; it is also about ongoing participation in the various databases.
The Government have confirmed that UK law will remain aligned with parts of the EU’s CTR legislation, but within the UK’s control in all circumstances, so that researchers conducting clinical trials can plan with greater certainty. As I said, commitments were made in this House in April during the passage of the EU withdrawal Act, and have since been restated in the Government’s no-deal technical guidance issued to stakeholders in August. Any legislative requirements to deliver this commitment will be announced in the usual way.
Regardless of the outcome of the negotiations, the UK is committed to offering a competitive service for clinical trial assessment. This covers regulatory approval from the Medicines and Healthcare products Regulatory Agency, as well as services from the Health Research Authority’s Research ethics service, the National Institute for Health Research and the NHS. If UK legislation makes references to the clinical trials regulation, normal rules will apply to those references, as set out in the EU withdrawal Act and these regulations.
I deal next with the question raised by the noble and learned Lord, Lord Hope. The restriction on using the correcting power in Section 8 to amend or repeal a devolution Act does not apply to the Government of Wales Act 1998, as this is not a protected Act. It is under Section 8, but the amendments to the Scotland Act 1998 fall within both exceptions under Section 8(7)(g). It is consequential from the repeal of Section 6 of the European Communities (Amendment) Act and the provisions within which it is being repealed, which modify another enactment. I can tell the noble Lord that we have consulted with the Scottish and Welsh Governments; we have written to Ministers about this directly and they have raised no concerns about our proposed course of action. As I said, the SI was drafted in consultation with the devolved Administrations, with particular regard to these consultation amendments. The technical consequential amendments to the Scotland Act 1998 and the Government of Wales Act 1988 were explicitly agreed with the devolved Administrations. As I said, we wrote to them; no concerns have been raised by Ministers either.
I am grateful to the Minister. Has he answered both of my points? I had a question about Part 1 of the Schedule, which he has indeed answered, but my other point was on what in Part 3 of the regulations themselves relates to the Interpretation and Legislative Reform (Scotland) Act 2010. I was pointing out a defect in Paragraph 10.2 of the Explanatory Memorandum. From what the Minister has said so far, I am not clear whether he accepts that there is a defect in the wording of that paragraph. However, if there is, would the Minister accept that it should be more clearly worded, to make it clear that the Act referred to in Part 3 was the subject of express consultation as well? Furthermore, although I think one cannot now alter the Explanatory Memorandum, could he undertake, when this measure is introduced to the House, to make it absolutely plain that that particular step was taken, just so that we do not have to go over this ground again in the House itself?
The noble and learned Lord makes a valid point. It could have been clearer. I will look at it again with lawyers and officials, and we will come back to it in the House. On the Scotland interpretation legislation, some amendments were made in the EU withdrawal Act; these regulations make the consequential provision that the Minister considers appropriate in consequence of this Act. This includes further amendments to the Interpretation and Legislative Reform (Scotland) Act 2010, drafted together with the Scottish Government. But I take his point about the Explanatory Memorandum; we will have a look at it, and perhaps I can write to him and come back to it when we consider it further in the House.
My noble friend Lady McIntosh and the noble Baroness, Lady Hayter, raised the comments by my honourable friend Chris Heaton-Harris, and the question of why we do not deal with the non-ambulatory references and/or retrospective deficiencies in the devolved interpretation legislation. The principal purpose of the Act is to provide a functioning statute book. However, the Government and Parliament recognised at the time that it would not be possible to make all the necessary legislative changes in a single piece of legislation. That is why the Act conferred on Ministers temporary powers to make secondary legislation to enable corrections to be made to laws which would otherwise no longer operate appropriately once the UK has left, so that the domestic legal system would continue to function correctly outside the EU. I remember at the time we had extensive discussions about it. The noble Lord, Lord Beith, in particular was exercised about ambulatory references. There was discussion about the issue at the time.
No one is arguing that ambulatory provisions were referenced. The whole thrust of the debate this afternoon is that non-ambulatory provisions were not discussed. This was the sole purpose of the discussion in the other place and is what we would like to understand. The noble and learned Lord, Lord Hope of Craighead, has already indicated that the Explanatory Memorandum is deficient in relation to Scotland, and I would argue that it is deficient in another regard. In paragraph 2.5, it says that we are repealing, revoking and removing redundant provisions. That is not the case; the department is actually adding in an omission. Non-ambulatory provisions were simply not referred to in the debate or the original Act. That is an omission. To correct the record, it was an omission which is quite rightly being addressed. We would like to know whether it was by accident. I know my noble friend is reading a prepared speech, but we have now raised the issue this afternoon of non-ambulatory provisions. Was it by omission? Was it meant to be omitted? Between now and our leaving the European Union, can we expect any other omissions that need to be tidied up?
I am not sure that I accept my noble friend’s statement that there was an omission. However, as this is quite a technical matter, perhaps it would be better if we went away and looked at it in detail, and I will write to her about it.
My noble friend Lady Neville-Rolfe asked me about the total figures for statutory instruments so far. The laying of SIs allows Parliament to fulfil its essential scrutiny role and to go through the various steps required. We remain confident that the necessary legislation to fulfil a functioning statute book will be passed by exit day. The current totals are as follows. More than 470 EU exit SIs have been laid to date. They account for over 75% of the SIs that we anticipate will be required by exit day, and over 260 of them have now gone through the various processes and have been made. Good progress has been made and we remain confident that the required SIs will be laid in time for exit day. I think that I have dealt with all the queries that were raised.
I am very grateful for the helpful reply that my noble friend gave on the subject of the Joint Committee and the institutional arrangements. It is good news that thought is being given to how to make these work well after exit day. Perhaps, at leisure, he could look at the questions that I asked about consultation and impact assessments. I do not think that he quite replied to them and it would be helpful to know where the Government stand.
Committee adjourned at 6.47 pm.