Monday 16 November 2020
The Grand Committee met in a hybrid proceeding.
Arrangement of Business
My Lords, the hybrid Grand Committee will now begin. Some Members are here in person, respecting social distancing, others are participating remotely, but all Members will be treated equally. I must ask all Members in the Room to wear face masks, except when seated at their desks, to speak sitting down, and to wipe their desks, chairs and any other touch points before and after them. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I shall immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
The microphone system for physical participants has changed. Members’ microphones will no longer be turned on at all times to reduce the noise for remote participants. When it is your turn to speak, will noble Lords please press the button on the microphone stand? Once you have done that, wait for the green light to flash and turn red before beginning to speak. The process for muting and unmuting from remote positions remains the same.
Public Procurement (Amendment etc.) (EU Exit) Regulations 2020
Considered in Grand Committee
My Lords, procurement by the Government and public sector bodies represents a significant part of the UK economy. It is essential to the day-to-day running of government and should be appropriately regulated. The Government are committed to ensuring the continued functioning of this important marketplace when we leave the EU.
This statutory instrument will ensure that the UK will meet the requirements of the withdrawal agreement and the Northern Ireland protocol and replaces the earlier statutory instruments that did not take these matters into consideration. This legislation is essential to provide legal clarity for public procurement and certainty going forward, as we look at the possibilities for wider procurement reforms, which may be brought into domestic legislation.
The majority of this SI is unchanged from the Public Procurement (Amendment etc.) (EU Exit) Regulations 2019, as amended by a second SI made in 2019, instruments that were debated in both Houses before being signed. Those instruments however, addressed deficiencies in a no-deal scenario. This instrument consolidates the first 2019 SI as already amended, incorporating further changes and new provisions, where relevant. The amendments made by this instrument do not amount to a material change in procurement policy. They will ensure that the UK’s procurement system continues to function as intended at the end of the transition period. UK contracting authorities will be able to continue to procure goods and services without substantial changes in the process. In that way, the Government are ensuring that those entities can continue to be able to obtain value for money for UK taxpayers.
The instrument makes amendments to the three sets of regulations that implement the EU directives on awarding contracts and concessions in the public and utilities sectors outside the field of defence and security. Your Lordships debated a separate instrument amending the Defence and Security Public Contracts Regulations last week. Where this instrument differs substantially from the 2019 instrument is that it seeks to provide a level of continuity for procurement procedures which began before the end of the transition period. Procurements that fall within this category, including orders from ongoing contracts, will continue in substance to follow the unamended procurement regulations. We do not expect that there will be many procurements which fall into this category; however, it would be difficult to measure these exactly. A number of new technical amendments have also been included in this instrument.
This instrument makes it clear that specifications with an information and communication technology component can continue to refer to the common technical specifications recognised by the EU Commission. This is an extremely dynamic area of technical specifications, and the EU’s process for recognising them is based on accepted best practice that the UK Government have been instrumental in developing. We have decided that, pending a mechanism to identify these domestically, retaining the reference to the EU’s standardisation process is deemed the best solution.
The thresholds that govern the award of public contracts came into effect in the UK on 1 January 2020, and the sterling figures in this instrument reflect those updated figures. The procurement of certain legal services by a lawyer as defined by the lawyers’ services directive are excluded from the procurement regulations. So that EU lawyers do not receive preferential treatment over those from third countries, this instrument amends the definition of lawyer to mean a person practising as an advocate, barrister or solicitor in any part of the UK or in Gibraltar. That includes those Swiss lawyers entitled to practise under their domestic designation in accordance with the Swiss citizens’ rights separation agreement.
This instrument also makes various amendments to the procurement regulations to reflect recent amendments made to other domestic and retained direct EU legislation —for example, in relation to the acceptable formats for advanced electronic signatures, and the applicable rules for determining the origin of products. To enable the procurement regulations to reflect technological developments and full and ongoing interoperability in electronic invoicing, a power has been conferred on the Minister for the Cabinet Office to make regulations to substitute a different e-invoicing standard, a different reference from the same standard or make changes to specific syntaxes for e-invoices.
The instrument disapplies rights derived from Article 18 of the Treaty on the Functioning of the European Union and parallel provisions in other agreements, to the extent that they are not disapplied in other domestic regulations. Retaining these rights would leave a lack of clarity as to whether EU parties within the scope of Article 18 of TFEU would have additional rights in the UK compared to non-EU countries. For example, suppliers from the EU may be provided with additional rights compared to third-country suppliers.
The UK has been invited to accede to the government procurement agreement, or GPA, in its own right. This instrument repeats the contingency arrangements set out in the 2019 EU exit statutory instrument, in case we are unable to legislate for GPA accession, resulting from any delay to the Trade Bill. One of the amendments ensures continued guaranteed access, rights and remedies on current terms for suppliers from existing GPA parties who would no longer have the guaranteed access, rights and remedies that they currently enjoy. This will mitigate the risks of a short gap in GPA membership by facilitating continued market access. Due to delays to the Trade Bill, we have also included a similar measure to this in relation to certain bilateral trade agreements between the EU and third countries to which the UK is currently party via its membership of the EU. This will keep alive the existing obligations towards suppliers from countries with which the EU has, before the end of the transition period, entered into a trade agreement with provisions relating to public procurement by which it is bound. The period in the 2019 EU exit SI was set to 18 months. This has been reduced to 12 months in this instrument to reflect the progress made in the Trade Bill.
In summary, this instrument seeks to ensure that the current public procurement regimes will continue to function after the end of the transition period, and to implement the relevant sections of the withdrawal agreement. It does not seek to make major policy changes or introduce new frameworks; instead, it makes largely technical changes to correct the deficiencies that will naturally emerge within our legislation at the end of the transition period. Left unamended, the existing regulations would not work as intended, and the EU exit regulations made last year in the context of a no-deal scenario would come into force. This would amount to a breach of our international obligations as well as a cause of confusion and uncertainty for procurers and suppliers, hampering the public sector’s ability to obtain value for money from procurement. I commend the regulations to the Committee and beg to move.
My Lords, the Minister has spelled out very clearly the rationale for this instrument and I do not think that anyone this afternoon will object to taking this forward and providing for the next 14 months the certainty critical to business, commerce and our future trading arrangements.
I should just like to lighten the afternoon a bit by explaining that last week I was responding to a student who had asked me about the lead-up to Brexit. In replying to her, I dictated on to my digital recorder, for download by my assistant, my thoughts, which included the word “Brexiteers” several times. On every single occasion the predictive text provided us with a bit of a smile by downloading “bringing tears” rather than “Brexiteers”. For many of us, those tears continue to run down our cheeks.
This afternoon’s measure is very practical and I merely want to raise three points. First, there is the importance, highlighted by Paul Blomfield, my former parliamentary colleague from Sheffield, when this was debated in the Commons, of widening the issues that we would want to take forward in future. I hope that in the Trade Bill and any instruments arising from it we will be able to do that in terms of social value, the carbon agenda and environmental impact, and therefore be able to widen the current harmonisation and continuation of existing practice, including through the GPA.
The second is to ensure that we continue the process of recognising that harmonisation and alignment are a benefit to us rather than a disadvantage. The Minister spelled out why that was the case for the next 14 months and I think most of us recognise that it will be the case for many years.
The third and slightly more controversial point, which I could not resist making in my short intervention on these regulations, is that we are in a bit of a mess in this country at the moment on procurement. We have seen examples—understandable, given the speed of operation—of procurement in dealing with Covid that are completely unacceptable and place civil servants in an impossible situation. I would like the Minister to take back to his colleagues people’s genuine worry about how procurement is operating and the real danger of nepotism and worse. We really do need transparency, as well as systems that do not allow those in the know, or those who know the people in the know, to be the ones who get the contracts.
My Lords, it is a delight to follow the noble Lord, Lord Blunkett, and I agree with his point about the need for transparency in awarding contracts. If the last few months have shown us anything, it is the enormous power of procurement and what it can do when aligned with the right motives.
Following on from what the noble Lord, Lord Blunkett, said, I have a few brief remarks about widening the remit and taking into account both the environmental and public health impacts, effectively, of the things we buy. The Government’s buying standards for public procurement are closely aligned with the EU’s Green Public Procurement programme, but they are not mandatory and therefore do not have enough teeth. A recent report from Sustain, the alliance for better food and farming, shows that two-thirds of councils have left food out of their climate emergency plans, only 20% include the climate implications of procurement at all, and only 13 councils are considered to have suitable plans in place, given that we face a climate emergency. This report is about to be released but, apart from the statistics above, about 67% of council climate action plans contain no new or substantial proposals on food. I think everyone has learned in the last few months or years just what that means for biodiversity and climate change.
Also, for public health, a good diet in the public sector needs to be normalised at a national level. At the moment this generally means councils going against the grain, with limited budgets to implement change. We should have mandatory standards for serving meals high in fruit and vegetables and low in ultra-processed foods and serving less meat across the public sector. We need to make it easier and quite normal to serve better meat and dairy and to work more locally. This has a lot of benefits for both the environment and the sustainability of small farms. When I ran the London Food Board, we set up a big buying scheme among a bunch of schools and were able to deliver cheaper and better food through intelligent purchasing.
The Government’s other great big success story is the buying standards for sustainable fish. We now have strong, clear rules and they have been adopted by caterers in the public sector in workplace and university restaurants, and by a lot of retailers. This has shown the great potential for public sector food to establish and embed high standards in the new normal. In 2017, however, a Department of Health report found that only 52% of hospitals, of all places, were actually compliant with Government’s own buying standards. I urge the Government to do something about it.
Before I finish, I have some questions. Will the Government commit to all public procurement tendering processes for contract renewals being aligned with our net zero 2050 target? Finally, can the Minister confirm whether all government departments have a specific sustainable procurement policy in place? If the answer is “not all departments”, can the Minister tell me which departments have it and which do not?
My Lords, I am delighted to follow the noble Baroness and I very much agree with her comments on working more locally. I want to raise three points with the Minister in the limited time we have.
First, I ask for an assurance that no procurement contracts currently in force will be undermined, nullified or constrained by these regulations, and that no new contracts entered into by devolved Governments in Wales and Northern Ireland—I realise that Scotland may be different—will be made void by any part of these regulations if such contracts are a renewal of existing procurement contracts or are issued based on the same principles.
Secondly, I draw attention to paragraph 10 of the notes accompanying these regulations, which refers to “regular engagement” having been undertaken with the Welsh, Scottish and Norther Ireland Governments, but does not say whether agreement was reached on these matters with those Governments. Perhaps that could be clarified.
Thirdly, I draw attention to Regulation 16, which refers to:
“The Water Industry (Specified Infrastructure Projects) (English Undertakers)”
and puts the Minister for the Cabinet Office in place of the European Commission. Does “English Undertakers” refer to undertakers operating in England, or does it include operators based in England who may be operating in Wales? If so, should there not be some reference to Welsh Ministers in that context? Those are the three points I wish to raise.
My Lords, I am grateful to the Minister for his introduction and for the very helpful Explanatory Memorandum to the regulations, which tells us that the EU regulations have ensured that the
“public procurement market is open and competitive and that suppliers are treated equally and fairly.”
It goes on to say that in most respects that will remain substantially unchanged; any changes will be to correct minor deficiencies. Therefore, I should like to follow up on my noble friend Lord Blunkett’s third point and ask the Minister whether he can explain some recent public procurement decisions in light of this.
Why, for example, was a contract for hand sanitiser given to TAG Energy without competitive tender, especially as that company was reported dormant on 25 February and the contract awarded on 1 March? Why were contracts awarded without tender to Public First and to Topham Guerin, the company that ran the social media campaign for the Tories in the 2019 general election? Was there any tendering before Randox, which employs Owen Paterson MP at over £8,000 a month, was given a £133 million contract for Covid testing? Did Serco, for which the Health Minister Edward Argar used to work, have competition before it was awarded contracts for contact tracing and call centres totalling over £150 million? Finally, although I could ask about many more, did the company of the noble Baroness, Lady Mone—PPE Medpro—face competitors for the contract for 25 million gowns? Was it advertised to any other bidders?
These are just a few of many examples where it seems the proper procedures were not followed. I understand the urgency at the moment, but it is no excuse to say that we are in the middle of a pandemic when lucrative contracts have been given to companies with no experience in that area, many of which seem to have only one thing in common: a link with the Tory party. It is small wonder that the media have again said today that there appears to be a new virus around—“crony-virus”. I look forward to the Minister’s answers to my questions with keen anticipation.
My Lords, it was extremely tempting, in preparing for my three-minute slot, to talk about the endless stream of disastrous public procurement decisions in the Covid pandemic, which made the term “chumocracy” such a figure in media headlines, as the noble Lord, Lord Foulkes of Cumnock, just reflected. But I have chosen instead to follow the noble Baroness, Lady Boycott, by taking this opportunity to focus on the impact of procurement on the dangerous, disastrous state of public health; the UK’s responsibility, as chair of COP 26, to show the way in public procurement that benefits our poor, fragile, battered earth; and to add to that, as the noble Lord, Lord Blunkett, did, the need for procurement that adds social value in our poverty-wracked society.
The Government tell us they want to be world leading in every area they mention, yet we are, once again, at the back of the pack in using public procurement to improve public health and the environment. Back in October 2019, I asked Written Questions of the respective Ministers what percentage of food served in schools, prisons and hospitals was organic or locally sourced. On schools, I was told that the Government had no information at all. The noble and learned Lord, Lord Keen of Elie, was able to tell me quite a bit on prisons, although not the specific information that I asked for. On hospitals, I was pointed to a forthcoming independent review of NHS hospital food that did indeed report last month. Henry Dimbleby’s initial food strategy report highlighted similar issues.
So it is good that there are signs that the Government are catching up with this agenda, even though they are many years, even decades, behind. In Latvia, for example, since 2014 it has been mandatory to apply green public procurement criteria in food and catering services in state and local government institutions. Finnish procurement for public food aims to assist the national goal of every adult consuming half a kilo of fruit, vegetables and berries every day. The city of Copenhagen aims to serve 90% organic food in public kitchens, favouring seasonal and diverse produce. For example, one tender included 86 different varieties of apple from seven different wholesalers.
What is striking about all these examples is that there is, tied to health and environmental criteria, a desire and outcome that focuses on local, small, independent producers, rather than the giant multinational producers of dull, tasteless, ultra-processed pap, which forms so much of British institutional diets. The health and environmental advantages are obvious, but since the Government tell us they aim to build back better and to level up, that must mean spreading out the economy, breaking up the hold of giant multinational companies and building up market gardens, local manufacturing and small independent businesses across the land. EU membership never stopped this, as my examples show, so the continuity the Minister referred to still provides a chance for a fresh start and a bid to catch up with so many of the nations that have raced ahead of us.
My Lords, in October 2019, the Prime Minister agreed the political declaration on the UK’s post-Brexit relationship with the European Union, which committed Britain and the EU each to adopt “common high standards” in state aid, competition, employment law and social legislation. In November 2019, the Prime Minister boasted that Brexit would free him to make fundamental changes to Britain’s public procurement rules. The implication was clear: he planned to relax the current rules on procurement and state aid and introduce some kind of “buy British” policy to echo Donald Trump’s “buy America” policy.
We are told that this week could be when the EU-UK trade talks finally come to a conclusion. We know that Ministers are already discussing a draft Green Paper on procurement and that the Cabinet Office is consulting stakeholders on future procurement rules, including new criteria for awarding contracts. Perhaps the Minister could say what those criteria might include. They ought to include setting stronger employment standards, delivering a fairer deal at work, and doing more to help those hit hardest by technological change.
Achieving record rates of employment is not enough. The last Labour Government did it and, despite a decade of austerity, the coalition Government and the post-2015 Tory Governments have done it too. Until the virus crisis there have been lots of jobs, but too many have been insecure, with nearly a million people struggling to survive on zero-hours contracts and a million in temporary work or doing second jobs. Many more have been vital jobs done by key workers filling essential roles but receiving unfairly poor pay and scant recognition. The Institute for Fiscal Studies reckons that key workers receive significantly lower pay than other workers. Surely the Government must use their procurement power to deliver a fair deal to their own employees, such as health workers, and to staff employed by private sector firms working on public sector contracts, such as care workers, delivery drivers and cleaners.
Many communities have missed out, having been hit hard by technological change and economic disruption, such as those in the south Wales valleys and in former centres of heavy industry in the north of England. Successive Governments have struggled in vain to counter the uneven impact of structural change, which has left millions of industrial casualties in its wake as old industries fade and new ones locate elsewhere. Public procurement has a really big part to play in steering new jobs to places left bereft by globalisation and technological change. Can the Minister confirm that regulations such as these will drive that very objective?
My Lords, I thank my noble friend the Minister for introducing an important SI to the Committee. Could he set out, as page 9 of the Explanatory Memorandum mentions, the sequence of events for Britain applying to join the GPA? Is there any possibility that our application might be refused? What is the procedure for signing up to the new arrangements? I note that paragraph 7.30 of the Explanatory Memorandum says that the Trade Bill is
“highly unlikely to have completed its parliamentary passage”
and its implementing regulations adopted. Paragraph 7.32 then says that
“it is likely that the extension of existing duties … will be revoked and replaced.”
That begs the question of what the sequence of events will be. It would be helpful to know that there will be a smooth transition to the GPA.
I note that the Minister set out today and in one of the stages of the Trade Bill that the threshold for the GPA and EU public procurement arrangements are virtually the same—about €135,000. This is obviously a multi-million pound business. I wonder to what extent the Government encourage our businesses to bid in particular for food and agricultural products to supply schools, hospitals, prisons and other public bodies in other countries. Without this public procurement there would be huge benefits to our local farmers and producers supplying our very own schools, hospitals, prisons and other public bodies with locally sourced meat. It would be helpful to know that they will be encouraged to bid for this wider market in so far as it is feasible.
One remaining question, to which my noble friend referred—and I declare that I am a non-practising Scottish advocate—is that the definition of “lawyer” has been changed. Is that to take account of the United Kingdom Internal Market Bill? I just wondered for what particular reason the definition has been changed at this stage.
I would like to know what the sequence of events is for us joining the GPA, to be sure that it will be a smooth transition, and that the Government are doing everything in their power to bring these contracts for public procurement to the attention of the relevant businesses to enable them to apply for what could be a costly tender.
I call the noble Lord, Lord Bhatia. Lord Bhatia, are you there? I call the noble Baroness, Lady Wheatcroft.
My Lords, as others have done, I thank the Minister for introducing these essential regulations—clearly, we have to fill the gap that we are creating somehow.
It was good news on 7 October when the World Trade Organization agreed to the UK’s accession to the government procurement agreement when we can legislate effectively to join that agreement. The agreement covers contracts worth £1.3 trillion, so it is clearly important that we should have access to those contracts on a level playing field basis.
The noble Baroness, Lady McIntosh of Pickering, asked whether our Government are encouraging our businesses to apply for the appropriate contracts as they come up under the GPA. I would be glad to hear from the Minister exactly what the Government do on that front. Clearly, it is important that we export to the biggest possible market.
But I am concerned about that level playing field basis—and the noble Lord, Lord, Lord Hain, mentioned his concerns about this. Last year, the Prime Minister said that he would like to “fundamentally change” the public procurement rules to “back British business”. A Green Paper is expected shortly. Perhaps the Minister could tell us exactly when we might see it. Could he also tell us whether it is right to be concerned, as the noble Lord, Lord Hain, is, that we may well jeopardise our access to GPA contracts if, as the Green Paper will suggest, we move very strongly towards favouring British business?
Others have referred to the dubious nature of some of the contracts that have already been issued for PPE. I understand that the Government had to move quickly, but I do not understand why, as the Good Law Project has exposed, there had to be special procurement channels set up for “VIPs”. The Cabinet Office was directly feeding its contacts into the procurement process. Speed is one thing, but handing contracts to favoured friends is very different. Could the Minister tell us whether “VIP” channels exist in other procurement areas, not just PPE?
I call the noble Lord, Lord Bhatia. Are you there, Lord Bhatia? We will move on to the noble Lord, Lord Wallace of Saltaire.
My Lords, this is the third version of a public procurement EU transition SI since January 2019. Later this afternoon, we will be dealing with the third version of a parallel exit SI on data transparency. My colleagues tell me that they have also been responding to the third version of a whole succession of EU exit SIs in many other areas. This looks like indecision and incompetence across government, with Ministers failing to provide clear direction to their officials or to decide what the hard detail of our future relationship with the EU will be.
The impression of confusion and indecision is heightened by the references in the Explanatory Memorandum to the not yet enacted Trade Bill, which means, as has been explained, that there will be an unavoidable gap in the legislative framework from 1 January. As the Minister knows, the delays to the passage of the Trade Bill are due to government hesitation, not parliamentary obstruction. We are now well over four years since the EU referendum and two years since the passage of the withdrawal Act. I can easily imagine the scorn that Conservatives in opposition would be expressing about any other Government that had drifted like this.
We are also being asked to approve this SI without having certainty about the nature of the UK’s future relationship with the EU. Can the Minister explain what differences in the applicability of this SI will follow from the absence of any deal with the EU, rather than a continuing legal framework for our relationship? Will UK companies and service providers retain any rights to compete for public procurement contracts within the EU in the event of a breakdown in relations? Will they retain such rights if there is some sort of minimalist deal?
In this case, an instrument that refers repeatedly to previous amendments and to the further amendments now proposed is deeply obscure, and will no doubt provide good fees for lawyers as they struggle to interpret it. Worse, it includes repeated phrases such as, “The Minister for the Cabinet Office may make further regulations”—combining legislative complexity with excessive executive powers.
I note that the SI provides for
“the continued application of the general principles of Union law applicable to the award of public contracts”.
That is very sensible, since the principles of Union law on public procurement were negotiated by UK Ministers and officials under previous Conservative Governments, including when Margaret Thatcher was Prime Minister. But that of course does not fit in with the absolutist definition of sovereignty that the noble Lord, Lord Frost, now expounds every week. There are continuing international obligations, as the SI recognises, which cannot easily be ignored when the UK Government wish.
I also note that the intention in this SI
“is to treat non-UK economic operators on a level playing field.”
That is also an abrogation of UK sovereignty, of course. Are we refusing to accept the concept of a level playing field in our future relations with other European states but reasserting it in our relations with contractors from Turkey, the Middle East and China?
The SI also touches on delicate questions about the relevance of international agreements in environmental, social and labour law. The EU is moving ahead in developing policies on how to include calculation of the embedded carbon in imported goods and international contracts. Will this also be a factor in calculating the value of bids for UK public procurement from foreign contractors? And on “social value”, will the Government take into account the political, labour and social conditions that contractors tolerate in their own home countries?
Several noble Lords have mentioned recent concern about public procurement by this Government. That raises wider questions about the outsourcing of public services and the management of public procurement. On another occasion, we must debate the contracts awarded without open competition to contractors linked to the Conservative Party through personal links or donations, or to overseas companies without relevant expertise or experience.
I was particularly struck by the award of one of the first test and trace contracts—
I was particularly struck by the award of one of the first test and trace contracts to a multinational company with its headquarters in Miami to manage a service that self-evidently depended on detailed local knowledge within England. But there have been many other surprising awards, which demand further scrutiny.
I have one last question, on which the Minister may wish to write to me. These SIs frequently refer to the United Kingdom and Gibraltar but rarely, or never, to the UK and the Crown dependencies, which of course were not members of the EU. I note that companies headquartered in Jersey or Guernsey are frequently awarded UK government contracts. Are UK companies also guaranteed a level playing field in return? Do the Crown dependencies follow and observe UK practice in this field? If not, should the UK Government not take back control of that aspect of British sovereignty?
My Lords, we can support this draft instrument, but I am afraid that I have to raise the bigger question that is around. It was touched on by my noble friends Lord Blunkett and Lord Foulkes as well as by the noble Baroness, Lady Wheatcroft, and the noble Lord, Lord Wallace, and it is whether this Government can be trusted to adhere to public procurement rules. The Grand Committee hardly needs me to repeat what it read in the papers yesterday and again today; that has been mentioned. However, the record of Ministers bringing in their friends and relatives, whether paid or unpaid, to advise on or carry out government-funded work is making a mockery of our Nolan rules in procurement processes, and any integrity in the use of taxpayers’ money. I note that, in introducing this instrument, the Minister particularly mentioned the importance of value for money. This is partly why we make sure that we have competitive tendering.
We have read of lobbyists and their clients benefiting from vital information from such advisers before either the public or Parliament knows; of investors at a paid-for conference getting a heads-up on vaccine developments; and of £1.5 billion of taxpayers’ money being awarded to companies linked to the Conservative Party during the pandemic—companies with no record as government suppliers before this year. Urgency is not really sufficient excuse; I understand that it may have worked for the first couple of weeks, but not for this long after. In normal times Ministers must advertise contracts for privately provided services, so that any company has a chance of securing the work. A person’s connections are not supposed to help. Today it sometimes seems that unless you have a close connection with a Minister, it is not even worth tendering. My colleagues in the other place have endless stories about their local firms—firms with a track record—not even being considered. Sometimes their phone calls are not even answered.
It is not as if all this playing footsie with friends produces good results. Test and trace is hardly a success and we have had stories about unusable PPE. The noble Lord, Lord Evans of Weardale, chair of the Committee on Standards in Public Life, has just said that
“the perception is taking root that too many in public life, including some in our political leadership, are choosing to disregard the norms of ethics and propriety that have explicitly governed public life for the last 25 years, and that, when contraventions of ethical standards occur, nothing happens.”
Can the Minister assure your Lordships’ House that whatever the rules agreed in this instrument, or any other, good governance and ethics, not chumocracy, will determine how contracts are awarded?
On the issue itself, I emphasise just two points. One is about the devolved authorities. Have they agreed with this SI and were they involved in its preparation? I know that in Wales, for example, they have been worried about whether they will be able to use procurement to raise standards, along the lines suggested by my noble friend Lord Hain about a fair deal for employees of outsourced companies. There are also the issues raised by the noble Baronesses, Lady Boycott and Lady Bennett, about the use of procurement to promote healthy or local services, including for food. When is the Green Paper likely to appear and is it also being drawn up together with the devolved authorities?
I also have a question to which I ought to know the answer but do not. I apologise as it is a genuine question, and I am not trying to make any point at all. Who oversees this instrument? I know that it is always far too difficult to expect SMEs, which feel that they have been excluded, to take action. What will be the supervising and enforcement authority to ensure that all tendering keeps to this or any other instrument concerning procurement?
My Lords, I thank all those noble Lords who have spoken in the debate, and for their general welcome for these regulations. I will obviously try to answer at least some of the points made, but a number of them have been extremely detailed and not ones of which I have had prior notice. Where I cannot answer, I will obviously follow the usual conventions.
I was taxed about this being the third version of a procurement EU exit SI; I sought to explain in my opening speech the reason why. As I thought that I had explained, the previous two SIs were prepared for no deal, while this SI is to reflect the obligations in the withdrawal agreement and is within the powers provided under the European Union (Withdrawal) Act. It can correct deficiencies caused by our exit from the EU and it acts to implement the withdrawal Act. It is not dependent on the deal’s outcome.
Crown dependencies are not members of the EU and therefore are not subject to the public procurement regulated by the EU. The exception is Gibraltar, where the EU directive has been implemented. That is why Gibraltar is specifically included.
I am not going to follow the rather more political comments about alleged aspects of procurement. It is clear that a number of noble Lords are close readers of aspects of the press. No doubt a number of journalists will be gratified by the reference to allegations in the press. What I say on behalf of Her Majesty’s Government, and so far as I am concerned, is that no one would defend any form of impropriety in public life. That is a fundamental position to which all political parties have subscribed and, I trust, will subscribe. As the noble Baroness opposite generously observed, a number of the allegations relate to the procurement of PPE and other materials in the early stages of the Covid outbreak. In repeating what I have said—that no one will defend any improper or inappropriate action—I am sure that there will, quite rightly, be a long and continued examination of these aspects and allegations.
The reality is that the Government have been working tirelessly to protect people and save lives. Our approach has meant that we have secured 32,000 million items of PPE for now and in the future, as well as developing the biggest testing system per head of population of all the major countries in Europe. We have processes for carrying out proper due diligence for all government contracts. The noble Baroness asked for more specific information about this and we take these checks extremely seriously. For contracts relating to equipment such as PPE, we have a robust process in place ensuring that orders are of high quality and meet strict safety standards, but I am happy to provide her with further information.
I was asked about the devolved Administrations. Noble Lords will know that I attach great importance to them personally. I assure the noble Lords, Lord Wigley and Lord Hain, and the noble Baroness, Lady Hayter, that the devolved Administrations were consulted on the amendments to the procurement regulations and that they agreed with this SI. They support it and were, I am advised, involved in the drafting.
On the undertakings that the noble Lord, Lord Wigley, asked me about, those covered previously will continue as before. Essentially, that is the overall purpose of the statutory instrument before us.
I was asked about the GPA. Obviously, the UK currently participates in the GPA via its EU membership. The UK needs to the accede to the GPA in its own right to maintain legally guaranteed access to the public contract opportunities that the GPA provides. The offer that we have made to GPA parties maintains our existing commitments in the UK part of the EU schedule. As noble Lords know, the withdrawal Act aims to ensure as much continuity as possible. The UK has approval to join the GPA in its own right and a number of international agreements with procurements chapters have been signed. Therefore, all suppliers should continue to be treated equally and fairly through open competition. We expect a smooth transition, having received agreement for UK accession from January 2021. I acknowledge, as I did in my opening remarks, that delays to the Trade Bill have led to the instrument having a 12-month contingency to avoid any gap.
On advertising GPA opportunities to British firms, a national portal is a requirement of the GPA. Each GPA party will have space to advertise its opportunities and suppliers will have open access to them. The e-notification service is free of charge and will be openly accessible.
The noble Lords, Lord Blunkett and Lord Wallace, the noble Baronesses, Lady Boycott, Lady Bennett and Lady Hayter, and others made important points about the nature of future procurement. One advantage of where we are and where we hope to go is that we will be able to govern our own approach. We will use opportunities offered by our exit from the EU to consider carefully long-term options for reforming the procurement rules. I am sure that my colleagues will keep in mind the issues that have been raised, such as social value and the environment. We cannot provide further details on the possible outcomes at this stage but I can tell the noble Baroness that the Green Paper to consult on the proposed future changes to the procurement rules is currently being prepared. The plan is to publish it before the end of this year. Any changes will obviously be subject to separate legislation, which will enable your Lordships to probe these issues further.
I agree that not all the material is absolutely central but obviously I agree with the importance of high-quality food. Long ago, I worked with my noble friend Lord Goldsmith, then the MP for my local authority area, to promote the importance of good-quality food in public sector bodies. The Government are extremely mindful of the importance of these issues.
I was asked about the definition of lawyers. I believe that I included some remarks about what “lawyer” meant in my opening speech but if that is not the case, we will let the noble Baroness, Lady McIntosh, know. I think that I answered that point.
We need to ensure that the public procurement regulatory regime will function after the end of the transition period, providing continuity and legal certainty for UK public procurers and suppliers and signalling to suppliers from GPA and other countries that those regulations will guarantee them continued access, rights and remedies.
I know that I have not been able to answer all noble Lords’ questions in this short time but I hope that I have given the Committee some assurance and clarified the implications of the amended legislation. I trust, therefore, that noble Lords will support this statutory instrument.
My Lords, the Grand Committee stands adjourned until 3.45 pm. I remind Members to sanitise their desks and chairs before leaving the Room. Thank you.
Arrangement of Business
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person, respecting social distancing, while others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. The time limit for debate on the following statutory instrument is one hour.
Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2020
Considered in Grand Committee
My Lords, the regulations were laid before the House on 14 September 2020. Our negotiations with the EU continue. As previously set out, we want a relationship with the EU based on friendly co-operation between sovereign equals and centred on a trading relationship based on free trade. These draft regulations form part of the important and necessary work being done to update our legislative framework in readiness for the end of the transition period. This will ensure that retained EU legislation continues to work effectively here in the UK.
The primary purpose of this statutory instrument is to update the 2019 EU exit regulations on consumer protection enforcement given changes in EU and domestic law since those regulations were considered and approved by this House on 15 January 2019. This SI does not alter the approach of the 2019 exit regulations; it merely enables them to work given those changes.
The 2019 exit regulations dealt with the collective redress regime for consumer protection laws. This regime applies where the infringement of certain consumer protection laws causes harm to the collective interests of consumers. It deals with systemic infringements of consumer law rather than any individual disputes.
The EU’s Consumer Protection Cooperation Regulation, known as the CPC Regulation, provides for reciprocal arrangements between enforcement bodies in member states, such as the UK’s CMA. It allows them to investigate and, if requested by an enforcer in another member state, to take action to end cross-border infringements of EU consumer law which harm the collective interests of consumers.
In the UK, the Enterprise Act 2002 allows enforcers to seek court orders to ensure the cessation of and, where appropriate, redress for infringements causing collective harm. The 2019 exit regulations revoke the CPC Regulation, which will not apply to the UK once the UK is no longer bound by EU law. The revocation is also necessary to prevent UK enforcers being obliged to assist their EU counterparts while, of course, EU enforcers are not under the same obligation. The 2019 exit regulations also amend the 2002 Act to allow the domestic collective redress regime to function effectively once EU law no longer applies in the UK. Those regulations replace the concept of a Community infringement—the breach of consumer protection laws in the EEA—with a Schedule 13 infringement for breaches of UK consumer protection laws.
Since the 2019 exit regulations were made, a new EU CPC Regulation, the 2017 CPC Regulation, has come into force. This statutory instrument updates the 2019 exit regulations so that they revoke this new CPC Regulation. This new exit regulation ensures that the UK collective redress regime will continue to apply to those retained EU-derived consumer protection laws to which the 2017 CPC Regulation has been extended.
This statutory instrument also ensures that the 2019 exit regulations amend the new material added to the 2002 Act by the CPC implementation regulations. That new material includes express online interface powers under which the Competition and Markets Authority can seek court orders requiring the removal of online content from, or restriction of access to, websites. This statutory instrument will ensure that the 2019 exit regulations amend that Act as it stands now, and the improvements made to that Act are therefore retained. None of these changes alters the approach of the 2019 exit regulations.
This SI also makes a number of other changes to EU exit regulations relating to consumer protection. First, it makes a small number of changes to two previous UK-wide exit regulations that amend legislation relating to crystal glass, footwear and textiles. These are specified in the Northern Ireland protocol. These changes ensure that those regulations do not impact on the operation of the Northern Ireland protocol.
Secondly, this SI makes technical changes to replace references to “exit day” with “IP completion day”, which will now be 31 December 2020, and is necessary in the context of the transitional provisions of those exit regulations.
Finally, this statutory instrument makes some minor amendments to clarify drafting in the Enterprise Act 2002. This is in response to the 14th report for this Session by the Joint Committee on Statutory Instruments in relation to this year’s regulations implementing the new CPC Regulation.
My departmental officials have undertaken the appropriate assessment of the impacts of this instrument on businesses and relevant bodies. This showed there is likely to be a negligible impact on business. These amendments do not bring about a wider policy change or impose any new liabilities or obligations on any relevant business, organisations or persons.
Although consumer protection is devolved in Northern Ireland, following consultation, the Department for the Economy, Northern Ireland, has agreed for the SI to include Northern Ireland provisions which relate to areas that are devolved to Northern Ireland. Consumer protection is reserved for Scotland and Wales, although officials in both the Scottish and Welsh Governments have also been advised of these regulations and they have raised no objection.
This instrument is a sensible and necessary use of the powers of the withdrawal Act which will ensure that the law in this area continues to function effectively after the end of the transition period. I therefore commend the regulations to the Committee.
My Lords, the regulations being updated address systemic infringements of consumer law. Currently, they allow the Government to investigate and, if requested by another member state, take action to end cross-border infringements of EU consumer law that harm the collective interests of consumers. Consumer protection co-operation—the CPC regime—will ensure, as the Minister said, that the law in this area continues to function effectively after the transition period, not least through the CMA.
Unscrupulous trading practices have for too long been a feature in society, despite EU consumer law. It is right that UK standards should apply where EU-based traders target their activities in the UK. It is critical that the UK and the EU continue to work together to safeguard high standards of consumer protection once EU CPC regulation ceases to apply to the UK. This is critical in the context of ticket abuse. Here I declare my interest as co-chair of the All-Party Parliamentary Group on Ticket Abuse, where I work with my impressive co-chair, Sharon Hodgson. Our aim is to promote and provide a forum for the discussion of issues relating to the sale and resale of tickets for events, with a particular focus on devising solutions to the problem of modern-day ticket touting.
If we are to be successful in this context we have to co-operate closely with our European colleagues. Together we adopted the first secondary ticketing law banning bots, which came into effect last December as part of the directive on better enforcement and modernisation of consumer protection rules. As FEAT—the Face-value European Alliance for Ticketing—has argued, we need to establish a European watchdog that has the resources and powers to regulate online marketplaces, ensure compliance and issue effective penalties for breaches of law. The UK should still be part of that.
We need to put an end to the bulk-buying of tickets and resale at a higher price, which is still practised illegally by ignoring the terms of resale. That practice distorts the primary market, with tickets often selling out within moments of going on sale, only to be listed on secondary platforms at many times their face value. This is a huge business. The ticket resale market in Europe is estimated to be worth €12.14 billion last year.
I hope the Government will confirm that, in all their future dealings with the EU Commission, co-operating and liaising with our European friends will remain the highest priority, because this cross-border crime requires parallel and aligned legal frameworks and within-day co-operation. For that to happen, the CMA needs more powers from the Government on consumer protection. The CMA is more powerful when it comes to competition laws but does not have the same powers for consumer protection.
Does my noble friend agree that the time is overdue for the CMA to receive powers to impose fines? We need to change the powers of the CMA. It needs powers similar to those of National Trading Standards, or the police, to investigate cases with criminal powers. Consumer rights in this context are there to be protected, and wherever possible to be strengthened. There are still too many inadequacies in consumer protection law. It is not just consumers who suffer from modern-day ticket touts. Reputationally, sport, the music industry and the arts suffer as well.
In many respects these are framework regulations for the future, so I should like to set down one marker in particular. The noble Baroness, Lady Hayter, will recall that I have long believed that the only way we can address the worst excesses of corruption on the secondary market platforms is to have an individual booking reference on each ticket, and to enforce that requirement. That would enable an individual to check with event organisers whether a specific ticket was valid. Yet too often, enforcement is absent.
We have made progress with the details on tickets—the row, the seat, the face value, the age restrictions and the original seller—although those legal requirements are all too frequently flouted, again through lack of adequate enforcement. The regulations are limited and welcome in their objectives, and they are very specific. We now need parliamentary time and government commitment to address and update consumer protection in this country. The regulations are a welcome and necessary start, and I hope the Minister will be able to signal that the Government take these issues seriously, and intend to act once the transition period is over, while always working exceptionally closely with the European Union to ensure that, as far as possible, we take a harmonised and unified approach to this cross-border problem.
In this Committee last week we discussed the Common Rules for Exports (EU Exit) Regulations 2020, which deal with the Government’s ability to prevent the export of particular products in an emergency—such as PPE products being sent out of the UK. In his opening salvo then, the Minister, the noble Lord, Lord Grimstone, talked about
“the ability of the EU Commission to exercise these powers in Northern Ireland.”—[Official Report, 10/11/20; col. GC 421.]
The Minister said that the devolved Administration in Northern Ireland had powers over consumer affairs in Northern Ireland; that is correct. What I want to find out from him is: who, in practice, will be making the totality of consumer law in Northern Ireland, and who will implement it? For instance, under the protocol we have a “zone of regulatory compliance”, consisting of the 27 EU member states plus Northern Ireland.
The issue, it seems to me, is that in the regulations before us there are specific references to Great Britain and not Northern Ireland. For the sake of clarification, can the Minister, in his winding-up speech, tell us whether the European Commission will have any role in consumer affairs in Northern Ireland, given that, after the IP completion day, it clearly will have a role in other areas? I do not quite understand how it is consistent with taking back control if what will, on 1 January, become a foreign power, is to exercise executive authority in a part of the United Kingdom.
Can the Minister assure the Committee that that will not be the case here? Or, because we now have a regulatory border in the Irish sea—which the Government continually try to deny exists—will the regulations continue to be made in Brussels, where we have no representation or say? If not, who will make them, for the parts of consumer law that are not dealt with by the devolved Administration?
It seems to me that there is so much potential with these SIs, which are so terribly complex and not things that the general public would normally have access to or an interest in, but which are exceptionally important. There is a big issue of principle here. Are we actually effecting significant constitutional change that is against the principles of the Good Friday agreement without the knowledge or consent of those who would be directly affected? I would be most obliged if the Minister would address those matters in winding up.
My Lords, I read this SI in the context of the internal markets Bill, which we are wrestling with on Report on Wednesday. I have a couple of questions. Paragraph 2.9 of the Explanatory Memorandum refers to particular industries that were, in a sense, left out or were not ready at the right time. My eye fell particularly on “footwear”. I had the privilege of representing Northampton South, a town steeped in footwear, and still has the UK’s leading footwear brand in Church’s, along with a host of others and the ancillary trades that go with it. I also noticed the reference to “crystal glass”, because I go down to the west country quite often—and, of course, Dartington is also involved in crystal glass.
My first question is whether these new regulations for Northern Ireland affecting those two industries—and, presumably, textiles—mean that they are the same as regulations in the rest of GB, or are they different? It is not entirely clear from reading this what the situation is. Secondly, was there any response, when the new regulations were tabled, from any of the trade associations affected by these industries? Footwear is obviously one, and I am sure that there are trade associations for glass and textiles.
So that is that area—then there is paragraph 2.12. The question that arises in my mind is whether this measure means that the exit regulations are on the basis of no deal or a deal? In other words, it does not make any difference for paragraph 2.12 whether there is or is not a deal or no deal.
Just to make an observation on paragraph 2.14 in the context of the internal markets Bill, it says:
“Those sections provide that where a court in one Part of the United Kingdom makes an order under Part 8 of the 2002 Act that order is, in another part of the United Kingdom, to be treated as an order made by the court in that other part of the United Kingdom.”
It is so good to see that there, and well done to those involved in that process.
I have another small point, which is that I am never too sure what the definition is of a small business. It keeps coming up, and I would be grateful if somebody would write to me and tell me what the definition is within the department.
Finally, it is nice to see my colleague here, my noble friend Lord Moynihan. I suspect that he and I and perhaps one or two others are particularly involved in the world of sport. We know that industry extremely well. He is so right to raise the problems of ticket touting and resales. It is a growing problem and really needs tackling. If we are talking about increasing the powers of the CMA, that has to be done. I hope that my noble friend, who may not be able to give us a strong answer on that today, will recognise that this is a big and a growing problem. Given the size and importance of sport to British citizens, it really needs tackling.
I thank my noble friend for his introduction of this instrument, one which was certainly needed for me. To follow all the cross-references proved very difficult, and I shall not pretend that I could do so in every case. In parenthesis, I wonder why this instrument, which is an amending instrument in respect of the earlier 2019 regulations, is not the subject of a consolidated instrument.
The whole thing is a very good example of how difficult it is properly to scrutinise what is going on in the Brexit proceedings. I am speaking this afternoon because I believe that consumer protection is an area on which Brexit may have considerable impact, and it is not mentioned very often. I do not believe that there is an awareness among people, whether for or against Brexit, who appreciate what may be lost without a comprehensive agreement with the European Union. I entirely endorse the call for co-operation with the EU 27 made by my noble friend Lord Moynihan.
I have some specific questions for my noble friend. If they are answered in the footnotes or in an equally opaque statutory instrument, I apologise. First, what is happening to the European Consumer Centres Network, which was created to provide advice if things go wrong with a cross-border purchase? Furthermore, what is the position of the UK European Consumer Centre, funded jointly by the UK and EU to give free advice to consumers who have bought goods or services in another EU country? Similarly, what is happening to the online dispute resolution platform, enabling consumers to locate suitable alternative dispute resolution providers to handle their complaints?
In an answer to a Written Question, my noble and learned friend Lord Keen of Elie told me
“Existing EU instruments in the area of civil judicial cooperation (including—
this is important—
“disputes in family and consumer matters) will continue to have effect between the UK and EU member states during the Implementation Period.”
There is no surprise about that. He went on to say:
“The position after 11pm on 31 December 2020 will depend on the outcome of negotiations”.
But where are we on that matter, apart from running out of time? I hope that my noble friend will be able to confirm that these are all matters that have been discussed and, although we may say that nothing is agreed until everything is agreed, there is an agreement in principle to maintain these important areas.
I have put down Written Questions about a very important consumer right relating to air travel—namely, EU Regulation 261/2004, which deals with passenger rights in the event of flight delays and cancellations. I have been told by my noble friend Lady Vere of Norbiton, speaking from the Department for Transport, that the rules apply until 31 December. I think we have all got that message. She said that, after that date, the rules are
“retained in domestic law and will therefore continue to apply.”
I have great doubts as to whether this, being a regulation, can be retained without amendment and requiring some domestic legislation. I have asked about this but have not yet had a reply.
I understand that, as of 31 December, the EU law on passenger rights no longer applies to passengers departing from a UK airport to an airport in the EU 27, unless—and this is important—the airline is a union carrier. Yet again I ask, in a different forum, what is the position on that regulation, and how do the Government intend to replicate in full the rights currently enjoyed?
My Lords, I offer my thanks to the Minister for updating us and giving us the background to these regulations. It is clear that they update the legislative framework for consumer protection, and I note that their principal purpose is to make changes to a previous statutory instrument, the Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2019.
However, several questions arise as a result of this, and I would like to pose them to the Minister. The first is general: I have increasingly found that many, particularly older, people are subject to scamming. As a result of this, they could provide money to—shall we say—undisclosed sources, thinking that there could be problems ahead for themselves. Could the Minister detail whether this statutory instrument will prohibit this sort of activity or whether the Government are considering future legislation to deal with this element of consumer protection? This form of scamming is now happening on a continuous and persistent basis, leaving many people vulnerable, and it needs to be addressed.
In relation to the statutory instrument under discussion, do the Minister and the Government feel and assert that the provisions within these regulations are equal to, better than or substandard compared to the EU regulations that they seek to replace? How will this statutory instrument intersect with the common frameworks process? I declare an interest as a member of the Common Frameworks Scrutiny Committee. The process is meant to allow devolved Administrations to come to a common approach on how they manage divergence. Following the enactment of this SI and bearing in mind the restrictive nature of some of the provisions within the United Kingdom Internal Market Bill, will the devolved Administrations have a voice in any consultation on outlining frameworks for consumer protection?
I note that the Northern Ireland Assembly has given consent to the UK Government to legislate for it in respect of this piece of legislation, and that that involved it passing a legislative consent Motion. How do the Government intend to work with the Northern Ireland Executive and Assembly in relation to the general issue of consumer protection following the enactment of these regulations? How will the Northern Ireland protocol play in relation to these regulations, with specific reference to the regulation in Part 4B? I think that the noble Lord, Lord Empey, has already presented the political conundrum in relation to the protocol. I suggest that that should be further added to the common frameworks process.
With reference to the Northern Ireland protocol, and with particular reference crystal glass, footwear and textiles, these regulations have been redrafted to ensure that they do not affect the operation of the Northern Ireland protocol, according to the Explanatory Memorandum. I understand that that is important for ensuring that business can be pursued without being hindered or hampered.
There is also a need to ensure that flexibilities are inbuilt to ensure that Northern Ireland retailers and consumers are protected, are not subject to undue prohibitions or severe tariffs as a result of the protocol and do not end up in prohibitive lists. Can the Minister assure me that this not will be the case and that business activity and transactions can take place unhindered, that consumers would still have access to high-quality goods and that their rights will be protected at all times?
Finally, with regard to the views of the Joint Committee on Statutory Instruments on defective drafting, with special reference to the Enterprise Act 2002, to allow lower and superior courts in all UK jurisdictions to make interim and final online interface orders as part of that enforcement, is the Minister confident that these are now adequately drafted and will be resistant to legal challenge?
My Lords, I do not need to detain this Committee long. My noble friend the Minister has done an excellent job of explaining these regulations. I spent most of my working life in retail, as the fourth generation in our family store, which sadly no longer exists. I am sure that my noble friend Lord Naseby would be delighted to know that we stocked Church’s shoes as well as Dartington glass and many very good quality items from Northern Ireland. As a result, I have always taken a keen interest in consumer rights. I hope that we always put consumers at the forefront of our service commitment and would always go further than any legal requirement. Of course, consumer law is not always clearly written, but that is not relevant to this particular discussion today.
As far as I can see, these regulations are only relevant to ensuring that
“reciprocal arrangements for Member States to cooperate in investigations and enforcement actions in the case of cross-border infringements of consumer laws causing collective harm to consumers”
that are in force up to exit day can continue. Can my noble friend confirm that, with the passing of this instrument, regardless of whether there is no deal, consumer rights in the UK will not be affected in any way as a result of us leaving the European Union? I understand that this is being brought in
“to allow domestic legislation on collective redress to function effectively in relation to EU-derived consumer law after EU exit.”
Presumably, however, if our consumer law is tougher than the EU law, this redress is not applicable.
Finally, I wonder how many UK consumers are actually aware, in any case, of these rights and where they could find out about them more and have them explained in a simple way to understand them within the current regulations? Even with my noble friend’s excellent introduction, I have to say that it is all rather confusing.
I also thank the Minister for his excellent introduction to this statutory instrument. I know that he will be unsurprised by the two issues I will raise. First, I raise the question of the full involvement of the devolved Administrations in the adoption as well as the monitoring and enforcement of aspects of the emerging new architecture of our cross-UK market. It is particularly important, given that this measure amends the Enterprise Act 2002, to ensure that consumer-protection-related enforcement orders are recognised across all four Administrations. As they need to operate there, the CMA will, obviously, also have a role, which I think strengthens the case we will make shortly, on the United Kingdom Internal Market Bill, about why the devolved Administrations should be represented on the CMA. It is clearly going to be important that there is joined-up thinking about this.
During our membership of the EU, as the Minister probably knows better than most, the many very welcome consumer protection measures were always agreed via the Council, Commission and European Parliament, so all parties that had a subsequent duty to implement any such rules were party to their determination. We will want to be very sure, as we enter our new arrangement for an internal market, where consumers also need appropriate protection, on standards, complaint handling and redress, that any provisions are developed with the full involvement of the four Governments and legislatures that would then have to adopt and work with such measures. Could the Minister outline the involvement of the three devolved authorities, in the case of this instrument, and how future measures will be handled across the four nations?
I was particularly interested by the point raised by the noble Baroness, Lady Ritchie, about whether this should be added to the list of the common frameworks, if it is not already. Hopefully, consumer protection can be such a framework, but I am also hoping that, on Wednesday, we will be able to support the amendment that I know will be proposed so that common frameworks would be included in the United Kingdom Internal Market Bill. It seems that this would be a very good way of ensuring that consumer protection is automatically, if you like, handled in that very consensual way. That was my first point about the devolved authorities.
Secondly, I want to take up the points made by the noble Lords, Lord Bowness and Lord Randall, and others about how consumers have benefited enormously from a swathe of measures introduced in the EU, affecting trade across the borders between us and other EU countries and raising standards, protections and rights within each country. The consultative way of producing directives may have taken time across the EU, but it meant that consumer representatives were able to engage with the process both here in the UK, by working with our Government, and through pan-European consumer groups in relation to both the Commission and the European Parliament. I am sure that the Minister was often lobbied by consumer interests when he was there. Those representatives were also able to work with UKRep. Can the Minister detail what discussions have been held with Which? and other consumer organisations in relation to this instrument? Can he also outline the Government’s plan to involve them in future preparation of regulations relating to their area?
I want briefly to touch on two other things. The first is redress, which has been mentioned. We have a bit of a hotchpotch in this country at the moment. Some bits of redress come under the Minister’s department—a number of different departments, actually. Plans for a public sector ombudsman were with the Cabinet Office, I think, but have gone nowhere. I understand that the Government are rather busy at the moment, but it would be useful if this could be looked at at some point because it is an important part of consumer protection. Specifically, there was a directive that consumers should be informed of the relevant redress system for their industry, even where a provider was not part of it. It would be interesting to know what will happen to that.
Finally, I want to add my name to the points made by the noble Lords, Lord Moynihan and Lord Naseby. Things like the ripping off of consumers through ticket touts and bots is bad for consumers and involves a lot of criminality. I hope that the Minister has heard those pleas for action on this matter and a strengthening of the CMA’s powers to deal with this and other issues.
I thank all noble Lords and noble Baronesses who contributed to this debate.
Of course, the UK has left the EU to take back control on these and other matters and make decisions as a sovereign independent state. As I said in my opening speech, since the 2019 exit regulations on consumer protection enforcement were made, a new CPC regulation has come into force. This statutory instrument is therefore necessary to update the 2019 exit regulations so that the new CPC regulation is revoked. As I also said earlier, it also makes a small number of changes to two other exit regulations so that they do not have an impact on the operation of the Northern Ireland protocol. These amendments will allow the domestic collective redress regime to function effectively once EU law no longer applies in the UK. They will prevent UK enforcers being required to assist EU counterparts who are not under the same obligation. I reiterate that none of these changes alters the approach of the 2019 exit regulations.
I can confirm for the noble Baroness, Lady Hayter, that we have one of the strongest consumer protection regimes in Europe. It ensures that consumers’ interests are safeguarded with a comprehensive set of consumer rights and through strong advocates for consumer interests and other well-developed advice services. Of course, we remain firmly committed to the strong consumer rights and high standards that have benefited UK consumers for many years; these regulations do not change that. The political declaration between the UK and EU sets out the parties’ determination to continue working together to safeguard high standards of consumer protection; the UK remains fully committed to this undertaking.
We are continuing and enhancing global co-operation on consumer protection through our trade policy and through the CMA continuing to take an active role in many international fora. Our recently signed trade agreement with Japan illustrates this and includes consumer co-operation measures that go beyond those in the EU-Japan agreement, for instance.
My noble friends Lord Moynihan and Lord Naseby and the noble Baroness, Lady Hayter, referred to the ticket resale market and the importance of co-operation with the EU; I know that my noble friend Lord Moynihan in particular has been an extremely influential voice on this issue. The CMA has already taken enforcement action under UK consumer law against foreign-based secondary ticketing websites, such as Viagogo and StubHub, and enforcements of these provisions do not rely on the CPC network.
The domestic enforcement powers that we currently have will be retained. For instance, a new online interface order remains available to our enforcers; among other things, it allows a court to order the removal of content or restrict access to websites and software used by traders in selling services. Effective co-operation on consumer protection will be an important part of the UK’s future relationship and is of course in the interests of all parties. The CMA will continue to take an active role in many of the international fora that regulate these matters. We will look at the CMA’s powers of enforcement, but they are separate from this instrument; my department is engaging directly with the CMA on that question.
The noble Lord, Lord Empey, and the noble Baroness, Lady Ritchie, asked about the EU’s role in making consumer law in Northern Ireland. These regulations will ensure that three specific EU-derived laws—relating to crystal glass, footwear and textiles—continue to apply as required under the Northern Ireland protocol. Most consumer protection law is not affected by the protocol. Going forward, the UK Government will set the rules overall, subject to commitments in the protocol.
My noble friend Lord Naseby asked about footwear and related issues. In Great Britain, these regulations will continue to be subject to amendments made by previous exit SIs, which are largely narrow and technical, as the Northern Ireland protocol does not apply in this area. Substantial divergence in the GB and Northern Ireland protocol rules is not currently envisaged.
I will reply in writing to my noble friend Lord Naseby’s question on the definition of small and micro-businesses.
My noble friend Lord Bowness noted the complexity of the rules. I agree with him on this one. It is a technical area, but we have had a good discussion today. We have produced a substantial amount of explanatory material, but if he does not feel he has enough and wants to write to me, I would be happy to send him even more of it if he wishes for some bedtime reading.
We want consumers and businesses to continue to feel confident and empowered in cross-border transactions. The Government have committed to fund the UK European Consumer Centre for at least another year after the transition period ends to help consumers resolve cross-border disputes. We will use this time to assess the most effective way to provide consumers with advice about cross-border purchases in future.
My noble friend also raised passenger rights, which, as I am sure he understands, is not addressed by the instrument. As he probably also understands, consumer protection for flight passengers is a matter being considered by the Department for Transport. I know that he is in correspondence about it with my noble friend Lady Vere, who is a Minister in that department.
The noble Baroness, Lady Ritchie of Downpatrick, asked about protection for older people at risk of scamming. We have worked closely with Citizens Advice to run a National Consumer Week to help raise awareness of scams. I totally agree that this is a vital piece of work. On her point about consultation with Northern Ireland, this has been central to the formation of the SI, as I indicated. We will of course continue to engage with Northern Ireland and the other devolved Administrations, as the noble Baroness, Lady Hayter, asked, in response to the future development of consumer law.
On the rectification of problems raised by the JCSI on the previous 2020 regulations, we are satisfied that the redrafting of the previous regulations reported by the JCSI now satisfactorily deals with its concerns. It has of course received the usual pre-laying quality assurance procedures.
My noble friend Lord Randall asked about domestic consumer law. This will be retained in full as a result of a series of these exit-related SIs and, of course, by our domestic legislation regime, which, as he notes, in many cases already exceeds that required by EU rules.
The noble Baroness, Lady Hayter, further asked about devolved issues. I mentioned that we contacted the Northern Ireland Government on these measures and no concerns were raised. The Department for the Economy confirmed its agreement on 28 April. Although consumer protection is of course reserved in Scotland and Wales, officials in both the Scottish and Welsh Governments have been advised about these regulations and have not raised any objections. Northern Ireland has consumer protection and enforcement devolved to it, as I said. Consumer protection is reserved for Scotland and Wales, but we always look to engage with these devolved bodies on any new measures required.
Finally, the noble Baroness asked about engagement with Which? I have certainly spoken to it about other matters, but not these particular regulations. We hold regular discussions with it and others, such as Citizens Advice, to help shape our consumer policy and, in particular, to understand the impact of the current pandemic on consumers. It will continue to be a vital stakeholder for the work of my department.
In conclusion, these regulations will ensure our consumer rights framework continues to function effectively once the EU CPC regulation ceases to apply to the UK. With that, I commend the regulations to the Committee.
The Grand Committee stands adjourned until 5 pm. I remind Members to sanitise their desks and chairs before leaving the Room.
Arrangement of Business
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person, respecting social distancing, and others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes. The time limit for debate on the following statutory instrument is one hour.
Competition (Amendment etc.) (EU Exit) Regulations 2020
Considered in Grand Committee
My Lords, the Competition (Amendment etc.) (EU Exit) Regulations 2020 were laid before the House on 30 September 2020.
From 1 January 2021, the UK’s competition regime will no longer be integrated with the EU’s competition system. Instead, it will function on a stand-alone basis as provided for by the Competition (Amendment etc.) (EU Exit) Regulations 2019, which were approved by Parliament in 2019 to prepare for EU withdrawal. Those regulations will come into force at the end of the transition period, but first they require amendment to reflect the terms of the withdrawal agreement. The purpose of the regulations put before your Lordships today is to implement the UK’s obligations on competition law under the withdrawal agreement and to deliver a separate and sovereign UK competition regime at the end of the transition period. The content of the regulations is therefore separate from both ongoing trade negotiations with the EU and the Government’s consideration of ways to enhance competition in the UK.
So what do the regulations do? They address three broad topics. The first two topics relate to the jurisdiction of anti-trust and merger cases at the end of the transition period. While the UK was a member state of the European Union, the European Commission had jurisdiction to investigate the UK effects of certain anti-trust and merger cases instead of UK competition authorities. This system has continued during the transition period. This means that there will be a limited set of anti-trust and merger cases that relate to the UK which were opened by the European Commission but not completed before the end of the transition period. These cases are dealt with by Article 92 of the withdrawal agreement. I shall refer to them collectively as live EU cases. Article 92 gives the European Commission competence to conclude live EU cases. These cases will be completed under the law that applied to them when they were opened. This arrangement ensures that competition cases which straddle the end of the transition period will be brought to an orderly conclusion, in turn giving legal certainty to UK businesses, regulatory authorities and courts.
The third topic addressed by the regulations relates to commitments accepted and remedies imposed by the European Commission in connection with its anti-trust and merger cases. These commitments and remedies often relate to multiple EU member states, including the UK, and the European Commission is normally best placed to secure compliance with them. In accordance with Article 95 of the withdrawal agreement, the European Commission will remain responsible for the monitoring and enforcement of the UK aspects of such commitments and remedies. However, this responsibility can, by mutual agreement, be transferred from the European Commission to the UK’s competition authorities.
I will now briefly explain the main changes made by the regulations in relation to these three topics. First, with respect to the European Commission’s investigations of live EU anti-trust cases, the regulations amend transitional arrangements made in 2019 to reflect the Commission’s continued jurisdiction over these cases. The amendments ensure that the Competition and Markets Authority can assist the Commission in its investigations of live EU anti-trust cases in the way it currently can under the Competition Act. To implement fully the legal effect of the withdrawal agreement, the regulations restrict the CMA from investigating the UK aspects of a live EU anti-trust case until the Commission’s case has concluded. This reproduces an effect similar to that which arises currently under EU law. The CMA will of course be free to investigate the UK aspects of any anti-competitive behaviour that occurs after the end of the transition period.
Decisions of the European Commission and the Court of Justice of the European Union made in relation to live EU anti-trust cases will be binding in the UK for the purposes of private claims seeking follow-on damages for a breach of competition law. The regulations ensure that UK authorities must consider any relevant penalty issued by an EU body in a live EU anti-trust case when deciding the amount of a penalty to be issued under UK law.
Secondly, the European Commission will continue to have exclusive competence over live EU merger cases, including in relation to any UK elements of the case. This means that, except in certain circumstances, the CMA will not have jurisdiction to review a merger after the end of the transition period if the European Commission began its own review of the merger on behalf of the UK before the end of the transition period. The exception to this rule is where the European Commission is re-examining a merger case following a successful appeal but is not considering the UK aspects of the merger in its re-examination. To prevent an enforcement gap emerging in the UK, the regulations ensure that the CMA can investigate the merger in these circumstances. The regulations amend the transitional arrangements made in 2019 to reflect the European Commission’s jurisdiction over live EU merger cases.
With respect to the transferred UK aspects of EU commitments and remedies, the regulations give to the CMA monitoring and enforcement powers to secure continued compliance with them. These powers are modelled on the CMA’s existing powers to monitor and enforce domestic commitments and remedies. The powers will apply also to sector regulators that enforce competition law concurrently with the CMA.
In addition to the changes made in relation to these three topics, the regulations make technical amendments to the 2019 regulations so that appropriate reference is made to the end of the transition period. Finally, as with the approach taken by the 2019 regulations, the regulations revoke a recent EU regulation on investment screening, which will have no practical effect on the UK beyond the end of the transition period because it relates to information-sharing between EU member states.
The provisions on competition law contained in the withdrawal agreement mean that the UK will move smoothly to a separate and sovereign competition regime. The regulations make only those changes which are necessary to give effect to these provisions and to ensure that the UK’s competition regime functions as intended by the regulations that Parliament approved in 2019. The regulations will provide legal certainty for the UK’s businesses, the CMA and the UK courts. I therefore commend the regulations to the Grand Committee.
I thank my noble friend for his clear and full explanation of these regulations. Perhaps I may start with a little reminiscence. It feels slightly as if I have come full circle because I was a member of the Standing Committee on the Competition Bill in the Commons in 1998. I remember being in opposition at that time and tabling amendments for the purpose of defining the approach to vertical agreements in what became the Competition Act. Nigel Griffiths, who was then the Labour Parliamentary Under-Secretary in the Department of Trade and Industry, said that he thought the amendments were very interesting and might even agree with them. However, he could not possibly accept them because the Government had not yet been told by the European Commission what the structure of vertical agreements would be in the EU regulations. Instead of being rule makers, we were rule takers at that point. We will become rule makers where this is concerned in the wake of our departure from the EU.
Like their predecessors a year or so ago, these regulations set out a comprehensive set of mechanisms for ensuring that there is a transition, without falling through the gaps between EU competition responsibilities and the UK responsibilities being assumed. I will resist the temptation to ask my noble friend about the competition policy aspects of our negotiations with the European Union, albeit that they might in some specific circumstances impact upon how these regulations are interpreted or whether they will survive the deal itself, when we come to legislate for that.
I will make a couple of points, though. For my first, the best example is given by the question of block exemptions for vertical agreements. A number of definitions have to be understood in relation to that, but the one that illustrates the nature of the point I want to make is the threshold of market share for the assumption that a vertical agreement might—not does—have anti-competitive impacts. In the EU regulation, that is a 30% market share.
The issue is: what is the market? Defining the relevant market is very important. There is a whole raft of circumstances in which defining the relevant market when we leave the EU—that is, from 1 January next year—will be a different and potentially debatable proposition. For example, is Northern Ireland in the relevant market for United Kingdom purposes or in the single market? If it is in both, the calculation of the 30% market threshold would be distorted in potentially both jurisdictions. Determining what the relevant market is for a range of different circumstances leads to my first question: what are the Government’s and the Competition and Markets Authority’s intentions relating to the definition of markets in a range of contexts?
My noble friend referred to my second point: the regulations revoke EU regulation 2019/452, which sets up a screening mechanism for foreign direct investment. Appropriately, they revoke it because it will not apply in the United Kingdom. Indeed, as we discovered in recent weeks, it does not apply to the United Kingdom now. It was not introduced in the United Kingdom on 11 October, as it was, in theory, introduced across the EU, but of course in practice only in those member states that have chosen to implement it. Some have; many have not yet. There is a wider move across many EU member states to try to screen for foreign direct investment. It is part of a broader push on the part of the European Commission to understand how far foreign investment and foreign ownership impact on strategic value chains as part of what it describes as strategic autonomy.
In our context, tomorrow the House of Commons will debate at Second Reading the National Security and Investment Bill. What is the point of my referring to this? It is that I wonder whether my noble friend might be able to tell us a little more. It is clearly not the case that the National Security and Investment Bill creates a directly comparable structure to that revoked in these regulations; it is potentially more interventionist than the screening process in the EU regulation, but it is also in its way much less broad in its application. For example, comparing the list of sectors affected, the EU regulation refers to water infrastructure, which is not mentioned in the 17 sectors in the NS&I Bill. The EU refers to elections infrastructure, food security, sensitive information—I am not quite sure what sensitive information is in this context, but the regulation includes it—and freedom and pluralism of the media.
One or two of these issues continue to be covered by the public interest notifications under the Enterprise Act, with which I was involved. Those will continue and will give us potential remedies, but others will not. Indeed, in my view the Enterprise Act needs some amendment for public interest grounds for the media. I hope we will find an early opportunity to do that. So my second and final question to my noble friend is: are the Government considering any further measures to try to screen foreign direct investment and its impact on our critical infrastructure more generally?
My Lords, as the Minister outlined, today we are bringing over EU competition regulations into UK law. With only a few score days until the end of the transition period—whatever that is going to look like—there is little chance to make anything other than the fairly minimal and technical arrangements described, although plenty of complications remain, and may well be added to by future legislation, as the noble Lord, Lord Lansley, clearly outlined.
The debate on this SI is also a chance to think about the place of competition in our society. Competition law—or anti-trust law, as the Americans call it—traditionally seeks to maximise competition. In that our current law is clearly failing, with the dominance of a handful of internet companies in cyberspace; the dominance of the great parasite, Amazon, in cybercommerce; and the oligopolistic place of a handful of companies at each stage of our food chain, from seeds and fertiliser supplies to manufacturing fast food.
There is also the fast-growing issue of common ownership—the way in which trading practices and the dominance of a few hedge funds and financial players mean that those companies are owned by a handful of financial firms with no real interest in seeing competition between each of their shareholdings. I would be interested in any comments the Minister is able to make on what plans the Government have to tackle that issue, which has been raised by the OECD, among others, as a growing concern. Small independent businesses, innovators, inventors and creatives are swept up by the logic of our “might is right” business world—bought out, possibly at considerable financial benefit to themselves but at great cost to the rest of us, who are left with a handful of companies dictating what we watch, read, eat and wear, albeit that they might be carefully differentiated by brand into different segments.
If we go to systems thinking, to ecological thinking, what we have is a poor, degraded business environment, lacking in the diversity that brings colour, taste and richness, and resilience—something that Covid-19 has made only too clear. We clearly need different kinds of laws and arrangements.
Yet when we go to other elements of our society, there is far too much competition. The privatisation of public services has led to the cutting of the pay and conditions of workers, a reduction in the quality of provision and the pumping of public money into private hands. The competition is played out in the race to the bottom of provision. I take as an example the report last week from the Children’s Commissioner. The commissioner—a commendably brave and stalwart public servant—noted in a tweet that the “market” in residential care homes was broken. I would like to step back and say that this is an area in which the market—competition—should have no place at all. Competition has been and continues to be unable to work out how to provide the best possible provision for mistreated suffering children. It requires co-operation from all those involved, all along the line, from social workers to residential homes to foster carers. To set up a system designed to make profits from this is nothing short of obscene.
We might look to the United States for another area where competition is entirely inappropriate: the provision of prison places. This is also true here in the UK, where private prisons are demonstrably worse than their public counterparts. Privatising—seeking to make profit out of—the coercive power of the state, setting up the companies providing this in competition, can never be right and can lead only to perverse incentives, such as encouraging more imprisonment, however much the individuals in the system might be there for entirely right, humanitarian reasons, as the vast majority are.
We have a society both lacking in competition and with far too much competition, but behind that is a monolith: no competition at all, financialisation, the turning of everything from the water we drink and bathe in to the council houses that were once public assets and the social care that supports our frail elderly and disabled into a source of profits—profits that all too often are sucked out of our society into the nearest handy tax haven, something supported by the same financial sector, the same City of London, that services and supports that tax haven.
We have seen the destruction of a balanced, mixed, healthy and economic ecosystem, with some things working by good competition, such as local market gardeners seeking to produce the freshest, tastiest and most interesting vegetables, local tailors being the best at reviving and updating your wardrobe, and carpenters producing solid, useful and attractive furniture—and other things, such as schools, carers and housing, which are built not on competition but on co-operation, being regarded as the solid foundations of a decent society.
There is no choice at this moment but to support this SI and go forward from where we are but, as the Government keep talking about building back better and levelling up, we need to look at far more foundational issues and laws for our society.
My Lords, the role of competition in the economy and in protecting consumer choice is extremely important, and the EU competition rules have done so for a defining period of time. I must declare my interests: in the late 1970s, I spent six happy months as an intern—a stagiaire—in DG IV, now DG COMP. I saw a great future for myself as a competition lawyer; sadly, that was not to be.
I thank my noble friend the Minister for introducing these regulations, but a number of questions arise. It is clear that great uncertainty lies ahead for companies under the regime set out in the regulations. As my noble friend Lord Lansley alluded to, there are many unanswered questions on state aid and subsidies, which are still part of the negotiations. In the context of these regulations, what will the definition of “dominant position” be for merger policies once the CMA takes over, as regards any UK company wishing to continue to do business in the EU? If my understanding is correct, there will be a period of time when a UK company is subject to two different regimes, as my noble friend the Minister set out earlier. Obviously, that could lead to a degree of confusion.
On the ongoing rights of the European Commission in looking at live cases, what will be the position for an appeal to be made under any decision taken in those cases? Will it still have the right to appeal to the European Court of Justice or will it have to rely on entirely UK-based remedies? Which body should it apply to in this regard?
I echo what the noble Baronesses, Lady Bowles and Lady Bennett, said about the current unhealthy state of competition and the UK’s ability sufficiently to ensure a level playing field and protection for consumers against giant tech firms. This area concerns me greatly going forward, so I would be interested to know what proposals my noble friend has in that regard. In this brave new world of leaving the protections of the EU’s competition policies, how can he reassure British consumers that their rights will be protected? Does he at least have an update on what the situation will be regarding roaming charges from 1 January 2021? Will roaming charges revert to UK providers being able to charge fantastic amounts for our use? Obviously no one is going anywhere at the moment but, when travel resumes, will they be able to charge what they deem to be reasonable but others might deem extortionate?
If under the regulations before us today the UK courts no longer have the facility to refer questions of interpretation of competition policy in European Union law to the European Court of Justice, what protection will businesses have from potential unfair competition for their products in the rest of the European Union? It would be helpful to understand what that would be. Can my noble friend assure me also that there is no possibility of a double penalty being imposed under the two regimes appearing to run in parallel for an interim period? I know that the Explanatory Memorandum states clearly that the CMA will “have regard to” penalties that might have been imposed by the European Commission, but it would be helpful to have clarification in that regard.
Can my noble friend also reassure me that businesses that continue to operate in the EU will not face more red tape as a result of the regulations before us than is currently the case? I do not oppose the regulations, but I am deeply concerned about some of their implications.
My Lords, I start by supporting an intelligent policy on competition. As Ovid, one of my favourite classical writers, said:
“A horse never runs so fast as when he has other horses to catch up and outpace.”
When one gets fed up with the sheer scale of Amazon, one ought to remember this wisdom.
I will always be grateful to the CMA in its previous guise as the Office of Fair Trading, because it took a case that brought us over-the-counter medicines. These have been a huge boon that we would never have had without its brave fight against the medical and pharmaceutical vested interests—a huge consumer benefit worth billions in recent years.
However, over the years, the competition authorities, using the existing powers to which my noble friend the Minister referred, have had a tedious obsession with the inequities of the latest tall poppy, usually shortly after the temporary period of monopoly profits has passed. I have seen that in my life several times—with the brewing sector, now a fraction of its one-time status thanks in part to the counterproductive beer orders; in ice cream; in dairy, where we still struggle to compete with European cheese and yoghurt manufacturers; and in supermarkets where, during repeated inquiries, the shops’ profits were shown to be a fraction of those in regulated industries such as utilities and/or in banks before the crash. True to form, the banks were finally investigated after the devastation of the financial crisis. Even so, I believe that small banks still operate at a disadvantage, although I am glad to see that Sam Woods, deputy governor at the Bank of England, is examining ways of lightening their burden.
I should refer to the register and my interest as a director of a small bank and a shareholder in Tesco and Amazon, although I am better known for my passion for small business dynamism, fuelled by competition, because it underpins a strong economy. I like to speak up for business when I can, because it pays and collects the taxes that nearly all pay and which in turn pay for almost everything in the public sector, and it provides many productive jobs.
Against this background, I thank the Minister for his clear explanation of the amending SI, including the way current EU cases will be treated and any follow-on damages. I look forward to his answer to my noble friend Lord Lansley’s question about vertical agreements, market share and the National Security and Investment Bill—though I think that is for another day—and my noble friend Lady McIntosh’s question on roaming charges.
As a result of an SI last year, and this one, the CMA will have even more powers than before Brexit, and in theory will be able to exercise a chilling effect in even more areas. I worry that it will be able to impose its huge fines in relation to even more aspects of competition law. We are talking here about British businesses trying to make a living and get through Covid without sacking too many staff.
Although this is not directly relevant today, perhaps I could say in passing that I do not agree that some fines should be increased, as the noble Lord, Lord Tyrie, hinted in Committee on the United Kingdom Internal Market Bill. I suspect he has less experience than I do of being on the business side of an argument with the regulator, and has little idea how terrifying it can be and how distracting for management.
I believe in competition, so in the round I support the CMA, but it has to have the right culture. Can the Minister comment on how best we can achieve that in the new post-Brexit era? The new chair will also be important, and perhaps he can update us on that appointment.
Further, does the Minister accept that we need to look at competition matters through the prism of the national interest? I have been struck by how other member states do this, and I am sure we will see more protectionist competition policies in Brussels now that we have left. I used to have tussles in the Competitiveness Council on the drift to protectionism, which I opposed. That was especially so with the French—their representative was usually a young, good-looking and very persuasive sometime banker called Emmanuel Macron—and with the German Minister, who represented one of the socialist elements in the German coalition. They were keen to erect barriers to help their tech and telecoms sectors. History shows that that is an ineffective strategy.
Finally, does my noble friend agree that we need officials who are skilled and well motivated at the CMA, and who understand the importance of not being both judge and jury? We need a good mix of talent with the right values, objectivity, economic awareness and understanding of data—and not too many from magic circle legal firms here, and their equivalent overseas, bringing their MoJ-style ways, sometimes making a mess and then moving quickly back to private practice.
I do not object to the regulations, but I would like to know how the Government will ensure that all parts of the CMA are well run and effective and, as I said earlier, operate in the national interest in the post-Brexit world. As the Minister said in his opening remarks, we will have a sovereign regime, and we must make a success of it.
My Lords, there is quite a lot going on with competition because of Brexit. This instrument deals with investigations that are, or will be, ongoing at the end of the transition period, and potential future monitoring in the UK of EU remedies. It also revokes EU regulation 2019/452 relating to screening in foreign direct investments.
The National Security and Investment Bill will replace at least part of the revoked EU regulation, and that Bill has started its passage through Parliament. Then there is the published draft regulation on state aid, which we have not yet considered, which deals with the change of emphasis of this Government compared with the previous direction under Theresa May.
Additionally, the United Kingdom Internal Market Bill, which we shall return to on Wednesday on Report, reserves powers on state aid to the UK and creates a landscape where the UK internal market rules may have to be taken into account, but it does not really solve how that will happen, or clarify its relationship with other aspects of trade and competition policy.
So many things are up in the air because of Brexit negotiations or because they are awaiting consultation. We live in the Pirandello-like state of characters in search of a policy, holding jig-saw pieces of legislation that we hope will one day mesh with other bits that have not yet been cut. Against that background, I thank the Minister for introducing this statutory instrument. As has been said, it modifies the no-deal version of legislation. Reading through the Explanatory Memorandum, it all seems logical, at least for this bit of the jig-saw—even if we do not know the full picture.
The questions that I have focus on whether, or how much, we will end up with enforcement systems for some decisions that are different from those applicable to others, and what practical differences that will make in terms of the strength of powers available.
As I understand it, cases that are decided by the EU, or fall to be decided by the EU under continued competence, can, after decision, either stay with the EU for monitoring and enforcement or by mutual agreement be transferred to the UK. Therefore, my first question is this: what are the likely reasons for choosing whether it stays with the EU or comes to the UK? What reasons would the UK see for that and does the EU have similar or different views? Does it depend on the size or importance of the case or only, as the Minister has already mentioned, on whether it is part of an interconnected set? Is it likely to cause disputes?
Broadly speaking, the European Commission has greater enforcement powers than the CMA—notably very significant fining powers—and the CMA is seeking greater powers, finding those that it has inadequate. As the noble Baroness, Lady Neville-Rolfe, mentioned, the noble Lord, Lord Tyrie, drew some of that to our attention in debate on 16 November on the United Kingdom Internal Market Bill.
The UK firepower relating to refusal to supply information is capped at £30,000, which is plenty for an individual or smaller business but can be inadequate for a recalcitrant large business. It may easily be less than the cost of preparing the disclosure if lawyers are involved; for example, the EU fined Facebook €1.6 million for failing to provide information, while we fined Amazon £30,000. That does not look very comparable.
The UK also has a poor track record on undertakings given to the CMA on mergers—for example, about not closing down establishments or not removing research—despite attempts to strengthen legislation. That legislation and associated undertakings have always ended up legally weak—about as strong as a wet paper bag. I have my theories as to why that is the case, but for now it raises the question whether there will be a stricter regime for cases retained by the EU for enforcement than for those it is mutually agreed to transfer to the UK. That would appear to be the case, as the Explanatory Memorandum states, and the Minister clarified, that the UK monitoring procedures are modelled on existing CMA procedures—that means not the more powerful EU versions.
The cases that are transferred are done so only for monitoring purposes; the EU retains the rights to review, vary and substitute the decisions. If the UK has a weak enforcement system, does that mean that the EU could make up for that when it comes to review or substitution? However, if it is about preservation of jobs or research which have already gone due to weak enforcement, nothing will bring those back.
The big question is not what is happening in this piece of legislation, but when domestic competition policy and domestic enforcement against large companies will become more substantial.
My Lords, I join others in thanking the Minister for a very clear and comprehensive exposition of the SI before us. The SI is very logical and I do not have much detail to raise on it, which is surprising, but I am sure the Minister will be delighted to hear that. I will instead raise three points from the rather good discussion we have had on competition matters more generally, and possibly in the light of future changes.
First is the shadow thrown on all our work in this area by the continuing, drawn-out EU FTA discussions, with particular reference to what would happen if the rumours are to believed—one never listens to rumours, of course—that there will need to be some form of independent competition authority looking at the UK’s competition regime to make sure that the EU has confidence that we are operating a level playing field. Can the Minister give us any detail on this? Is this in some sense a way of replacing the CMA, or is the CMA secure in the hands of the Government as we currently view it?
The second point is the shadow that is also cast by the National Security and Investment Bill. I have had the benefit of an introduction from one of its co-sponsors at the Department for International Trade—the Minister, the noble Lord, Lord Grimstone—so I do not need to ask for details at this stage. However, as the noble Lord, Lord Lansley, pointed out, the rather odd situation that we are in—the enormous irony—is that, after the National Security and Investment Bill is introduced, as I am sure it will be shortly, the country will probably have a more interventionist competition authority, but, as he said, one that is more limited in terms of the issues defined in the Bill as “national security”. He pointed out the difference between that and our present situation, particularly the concern about whether issues to do with elections, food and media interests will qualify as being considerations under this new legislation. That is something that I think we will have to return to when the Bill reaches your Lordships’ House. In passing, I agree with the noble Lord, Lord Lansley, that there are areas of the Enterprise Act in relation to media that need to be updated sooner rather than later.
My final point is the one made by the noble Baroness, Lady Neville-Rolfe. In a very interesting speech, she drew attention to the wider ramifications of the culture created by the CMA and the dangers that that poses for small businesses, which I know are close to her heart: the freezing effect of an investigation on the ability of small enterprises to carry on working and to recruit the specialist staff they might need to fight off any question of their behaviour being in any way in jeopardy. The whole question about how that works and the economy as a whole is beyond the scope of this statutory instrument, but I hope that it is something that we will come back to.
We place a lot of faith in the CMA, most of which is adequately repaid by the skills and stability it has brought to the sector over the years, but it is a judge and jury in its own court and we have to be very concerned about that in the long run. With that, I am very happy to support the SI.
First, I thank all noble Lords for their contributions to the debate. I remind everyone who contributed that these regulations are required to give full and operable effect to a policy that Parliament has already approved in the form of both the withdrawal agreement and the Competition (Amendment etc.) (EU Exit) Regulations 2019.
My noble friends Lord Lansley and Lady Neville-Rolfe asked about the threshold for market shares in vertical agreements. At the end of the transition period, the Secretary of State will have the power to make regulations to vary or revoke a retained block exemption or to replace it with a block exemption order under the Competition Act, acting in consultation with the CMA, of course. In each case, it will be for the CMA to consider what the relevant geographic and product market will be, and it will have guidance on the factors that it needs to consider.
My noble friend Lord Lansley also asked about the position on foreign investment screening in comparison to the NSI Bill. He also asked whether the Government were considering further measures on foreign investment screening, especially with regard to national security. The answer is that the EU regulation revoked by these regulations relates principally to co-operation between member states on the screening of foreign direct investments. The NSI Bill relates to powers to protect national security in investments, and of course there will be ample opportunity to discuss that Bill in much greater detail when it comes to your Lordships’ House.
As always, I listened with great interest to the noble Baroness, Lady Bennett. She ranged far and wide over whether or not the market economy is right, prisons, care homes and council houses. It was all extremely interesting but totally irrelevant to this SI.
My noble friend Lady McIntosh asked about proposals to protect consumer rights after the end of the transition period. The issues of roaming charges and so on are also interesting but are not covered by these regulations. She also asked about positions on appeals under live cases after the transition period—will UK companies be able to rely on the CJEU or on UK bodies? The answer to that question is yes; currently EU law will continue to apply in relation to all live EU cases, and this regulation concerns only the small number of cases that are live at the end of the transition period. UK companies that are subject to merger or anti-trust investigations and decisions in those cases will, of course, be able to appeal any decisions to the CJEU.
My noble friend also asked about UK companies facing red tape, as I think she referred to it, at the end of the transition period. Of course, the UK has left the European Union and, at the end of the transition period, will cease to be part of the EU’s competition system. This means that there will be some instances of parallel scrutiny by both UK and EU competition authorities, as is normal in any sovereign competition regime. The same thing would happen with companies that are jointly operable also in the United States. The regulations and the withdrawal agreement set out clearly whether the CMA or the European Commission has jurisdiction over a particular case.
My noble friend Lady McIntosh asked about assurances that UK companies will not be doubly penalised. With respect to those few live cases, the CMA will take into account any penalties issued by the Commission in these cases, which reflect the position which applies during the UK’s membership of the EU in relation to a case examined by the Commission and also, lately, after that considered by the CMA.
My noble friend Lady Neville-Rolfe asked about the position of the CMA’s chair. She will be aware that Jonathan Scott was appointed as the interim chair on 9 October, and shortly my department will launch a recruitment process for a new permanent chair. She also asked whether a variety of skills are required in the CMA. Of course, the CMA is a highly regarded competition body and will continue to play an important role in fulfilling its statutory function of promoting competition for the benefit of consumers, drawing on its already wide-ranging and broad set of skills from across the public and private sectors.
The noble Baroness, Lady Bowles, asked about the likely reasons for choosing whether enforcement of EU commitments and remedies will stay with the EU or the UK. Of course, it will be for the European Commission and the UK’s competition authorities to discuss between them whether it might be suitable to transfer responsibilities to monitor and enforce any EU remedies and commitments.
Lastly, the noble Lord, Lord Stevenson, asked about the status of the CMA under the EU CFTA. These regulations are about the handling of those few live cases at the end of the transition period. Of course, they are not negotiations; negotiations are ongoing, and the noble Lord will quite understand that I am currently unable to comment on the status of those discussions and on the future relationship but, suffice to say, the CMA exists in UK statute and is a world-renowned regulator and functions as our independent competition regulator.
The changes I have described today will give legal clarity to UK businesses and those authorities that enforce competition law in the UK. I reiterate again that these regulations do not bring forward new competition policy, but rather ensure that policy which has already been agreed by Parliament functions in the way that Parliament intended. While, of course, these regulations are technical in nature, without them the UK would fail to implement its obligations on competition law under the withdrawal agreement. The regulations made in 2019 to create a stand-alone competition regime would also contain references that are now inaccurate in light of the withdrawal agreement. Therefore, those inconsistencies between provisions on competition law in the withdrawal agreement and UK competition law would cause significant uncertainty for UK business, the CMA and the UK courts. These regulations will complete the process of preparing the UK’s statute book for this purpose, and, therefore, I commend these draft regulations to the Committee.
Arrangement of Business
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person, respecting social distancing, others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded, or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2020
Considered in Grand Committee
My Lords, I am pleased to introduce a statutory instrument laid before the House on 14 October. Neither the Joint Committee on Statutory Instruments nor the Secondary Legislation Scrutiny Committee has drawn the House’s attention to this instrument.
When the transition period comes to an end, the EU’s regulation on data protection, known as the GDPR, will be retained in domestic law through the European Union (Withdrawal) Act 2018. Last year, the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019 were made. I will refer to those regulations as the main regulations. They were made to make minor and technical changes to the retained GDPR and the Data Protection Act 2018 to ensure that UK data protection law continued to be operable on exit day.
The instrument before noble Lords seeks to make some limited amendments to the main regulations, most of which address the fact that there has been a transition period. The majority of the changes are to references to “exit day” in the main regulations, which will be updated to read “IP completion day”. A small number of other changes relate to the transitional provisions for international transfers of personal data.
Binding corporate rules approved by EU data protection regulators enable multinational companies to transfer personal data within their group globally. The main regulations preserve pre-GDPR binding corporate rules that had previously been authorised by the Information Commissioner as a valid transfer mechanism after the transition period. However, a subset of pre-GDPR binding corporate rules currently relied on by organisations with data flows in the UK may have received authorisation from only EU supervisory authorities. This instrument makes provisions that will allow UK-based group members to use such rules as a valid transfer mechanism, if they obtain approval from the Information Commissioner within six months from the end of the transition period.
UK organisations can currently freely transfer personal data to EU and EEA states, and non-EEA countries for which the EU Commission has made adequacy decisions. The main regulations continue this position on a transitional basis and list the relevant adequacy decisions for clarity. This instrument updates the list to reflect developments since the main regulations were made by adding the 2019 adequacy decision for Japan and removing the reference to the EU’s adequacy decision for the US privacy shield. These amendments are not substantive and are entirely in keeping with the original intention of the main regulations, namely the continued free flow of personal data between the UK and third countries that have already been found to meet the requisite standards for data protection.
The main regulations also provided a legal basis for the continued free flow of personal data from the UK to the EU falling within scope of the law enforcement directive, otherwise known as the LED. The approach adopted in the main regulations was to transitionally deem EU member states and Gibraltar as adequate.
Since the main regulations were made, the Home Office has established that the EEA states, Norway, Iceland and Liechtenstein, and Switzerland, have also transposed the LED into their domestic law, which enables data sharing between authorities in the UK and law enforcement agencies within these countries for law enforcement purposes. To enable law enforcement co-operation and data sharing between the UK and EEA states and Switzerland to continue as it does now following the end of the transition period, this instrument adds them to the list of countries that will be treated as adequate, on a transitional basis, under Part 3 of the Data Protection Act 2018. This will be the most efficient way to ensure the flow of personal data, which is fundamental for law enforcement co-operation.
In 2019, an additional statutory instrument was made to amend the main regulations to reflect the arrangements made for personal data transferred from the UK to privacy shield companies in the US. As this adequacy decision has now been invalidated by the CJEU, the amending regulation no longer has any practical effect. Therefore, Regulation 7 revokes that amending regulation before it comes into force.
I have set out why our approach is an appropriate way to address deficiencies in our data protection regime resulting from the UK leaving the EU at the end of the transition period. This instrument will also revoke some EU legislation that would have no practical effect if it were to be retained under the European Union (Withdrawal) Act 2018 at the end of the transition period, such as Council decision 2004/644/EC, which adopts implementing rules of the European Parliament and European Council on the protection of individuals with regard to the processing of personal data by the community institutions and bodies and on the free movement of such data. This retained version of this decision will have no practical effect, so we are revoking it to keep the UK statute book tidy. I beg to move.
My Lords, the late Lord Jenkins—Roy Jenkins—once said that joining the EU was like climbing aboard a moving train. Clearly, getting off a moving train is even more perilous. I thank the noble Baroness, Lady Barran, for introducing this SI. I do not want to worry her, but I note that those who follow us may be small in number but strong in expertise.
My interest in this matter goes back to the coalition Government in which I served, along with the noble Lord, Lord Vaizey. Data protection then rested with the Ministry of Justice and I was involved in the early stages of the negotiations of what eventually became the GDPR. I will make two points about that experience. First, I saw first-hand as a Minister the respect for the expertise of our civil servants, who had a profound impact on the shape of EU legislation—influence which is now lost by our departure from the EU. Likewise, I was able to engage the help of British parliamentarians in the European Parliament to ensure that the outcomes reflected our needs. The EU is already planning a review of the GDPR. It would be interesting to know what machinery the Government intend to employ to replace the seat at the table and voice in the Parliament that were lost at Brexit.
My second interest comes from my ongoing membership of the EU Services Sub-Committee, on which I serve with the noble Baroness, Lady Neville-Rolfe, who will speak later. Over the last year we have received evidence from a range of sectors, from financial services to intellectual property, from creative industries to research and higher education. All have expressed concern about the lack of certainty about data transfers post 31 December.
In our committee, we have become used to “It’ll be all right on the night” answers from Ministers giving evidence to us. My concerns were not assuaged by the Secondary Legislation Scrutiny Committee report, which said that
“DCMS told us that the Commission was currently assessing the UK for adequacy under both the General Data Protection Regulation and the LED”—
the law enforcement directive. Would failure to obtain adequacy arrangements with the EU have a knock-on effect with other third countries and on how third-country agreements interact with each other?
These are matters that will impact data flow in every area, from clinical trials to law enforcement. Is the DCMS giving the sectors any advice about contingency plans if data adequacy does not prove to be the shoo-in that the Government initially implied? We could well end up with a kind of smorgasbord of overlapping and interlocking agreements, to be interpreted from one FTA to another.
My final reason for intervening today was witnessing the look of incredulity on the face of the former Home Secretary and Prime Minister, the right honourable Theresa May MP, as she sat listening to Mr Michael Gove giving assurances on where we are on law enforcement and national security matters. I am sure my noble friend Lord Wallace of Saltaire will cover these matters in more detail, but until I hear that Mrs May is satisfied with the arrangements made I will continue to remain concerned. It will be interesting to know if the Minister shares Mrs May’s concerns.
We have come to talk about data as the new oil. How we protect it, use it and exchange it will have a great impact on our future prosperity, our national security and our personal freedoms. It is incumbent on the Government to put arrangements in place that are at least as secure and beneficial as we enjoyed within the EU. This SI is only part of a Rubik’s cube of measures needed to carry out those objectives, and I am not convinced that the Government are anywhere near solving it.
It is a thrill to be speaking here this evening. This is my first speech in Grand Committee; I feel as if the set has been designed by Stanley Kubrick, but I will try to give my comments as reasonably as I can. I feel as if I am giving my second maiden speech, so I hope that all subsequent speakers will lavish me and my speech with extraordinary praise.
I begin by saying how enjoyable it is to follow the noble Lord, Lord McNally, who may or may not still be watching the proceedings. He and I indeed worked closely together in the coalition Government on data protection, and in fact it was he who first turned me on to the subject. One of my last acts as a Minister was to grab it and take it over to DCMS to try to realise my vision of DCMS becoming the leading department on digital.
As may have been gathered, data is an extraordinarily dull subject, particularly when it comes to regulations and legislation, but it is true, as the noble Lord, Lord McNally, said, that it is often called the new oil. The reason is that data flows ever more generously around our world; in fact, I am told that the size of the digital universe is now 44 zettabytes, which is 44 times bigger than our physical universe. There are 500 million tweets a day—mostly from President Trump; 294 billion emails a day; 5 billion searches; and 65 billion WhatsApp messages—mostly, no doubt, from Dominic Cummings. It is therefore quite clear that data dominates everything, and there need to be clear rules on how it is used and how it is harmonised across jurisdictions. Data is the new trade route. In fact, the UK, as in so many areas in technology, leads the EU; about 4% of our gross domestic product is now dependent on data companies and industries.
The noble Lord, Lord McNally, rightly spent some time talking about the GDPR. The GDPR is of course a bureaucratic and onerous regulation, but the new version of it came into being just at the time when the “techlash” was gathering momentum, when concern about one’s data, the way that it was used and the privacy surrounding it was very much at the forefront, and the GDPR is now seen as a bit of a gold standard. In any event, one of its unassailable merits is that it is now valid across 27 different jurisdictions in the EU, which means that any company using data within the EU knows that it can transfer across different countries. It has been copied in other states, even in countries such as South Korea, which is seen as a technology leader, while California’s recent passing of its own privacy law is very much dependent on the GDPR. Bureaucratic it may be, but it has become a model.
One of my concerns, though, about the GDPR is that it is not being used effectively by privacy regulators. I gather that only 3% of the 680 staff at our own Information Commissioner’s Office are tech specialists, and there is so far a failure to use the powers of the GDPR, for example, to take on big tech in the way it transfers the data of citizens between its applications. Think about the way that Facebook and Instagram share data. If the Minister wishes to comment on the ICO and its use of the GDPR, that would be welcome.
Of course, what the noble Lord, Lord McNally, also referred to is probably the most important thing and relevant to these regulations: equivalence across different countries and trade blocs. I notice that Japan recently agreed equivalence with the EU, thus surrendering, perhaps, some of its sovereignty to the EU without throwing a temper tantrum. We have not yet agreed equivalence with the EU, and I am told that if we do not reach a deal then the EU will start to consider data adequacy with us only when we become a third country. That will lead to chaos—chaos, I have to say, compounded by the decision of the European Court to reject the Privacy Shield between the United States and the EU. You have a three-way pile-up, with the UK caught somewhere in the middle.
However, there is some cause for optimism in the very dull subject of data. I unequivocally welcome the Government’s recently published National Data Strategy. Launched in September, it addresses some of the real opportunities that the data economy presents. The idea of standardising data across the public sector is extremely welcome, and being able to share data across silos to realise real gains is also very welcome indeed. The focus on data skills and training people in data and in the responsible use of data is a good thing. Some think perhaps that the national data strategy is not ambitious enough. I do not share that view. I think it is a welcome first step and, if implemented properly, will maintain our leadership in this very important area.
However, horizon-scanning ideas are beginning to emerge—for example, the need for companies to value their data. It is astonishing if you look at the accounts of big tech that nowhere will they put a price on the enormous amount of data they harvest from their users. If you put a value on data, you might see companies work harder to make it more secure and—dare I say it or whisper it—it might even be possible for national Governments to tax that data. The wealthiest people in the world really are data billionaires, rather than anything else.
The other emerging idea is that of data trusts. They are a bit like a pension trust where you can put data into, as it were, a separate part of a company and have it governed separately. This could help small companies manage their data more effectively and create whole new industries. For me, all this is very exciting and brings me back to the point to thank the noble Lord, Lord McNally, for first turning me on to data.
To the noble Baroness, Lady Barran, I say that I am hoping that the Government use the opportunity of leaving the EU to review, from scratch, after this SI, some of the laws associated with data protection. I want to emphasise the privacy aspect of data, which I think is hugely important and not without challenges.
When the EU’s GDPR law was introduced in the UK, supposedly to protect individuals’ data and privacy from exploitation by big government, big tech and big corporates, it managed to become a universally hated piece of legislation on the ground, and privacy issues ended up being drowned out by bureaucracy and rules. As the noble Lord, Lord Vaizey, reminded us, the original catalyst for the new GDPR laws was the 2013 Edward Snowden leaks, which revealed that citizens all over the US and Europe had been caught up in the illiberal harvesting activities of the US intelligence services. Many of us were rightly horrified by the US authorities’ invasion of users’ privacy.
However, the reaction to this government state overreach was, ironically, to give the state regulators a whole new set of legalistic and bureaucratic powers, like so much of Brussels law-making. I do not think this has helped. However well intentioned, GDPR data protection has become a barrier to communication, rather than a protector of privacy. If you talk to people in universities, charities or small business, and even medical practitioners, you find they just cannot contact anyone unless they find the record of them having given explicit consent to receiving emails in their backlog. It has all become a bit of a nightmare. It has placed huge burdens on small charities, arts organisations and church groups, which are dependent on databases to raise funds and their profiles. Anyone who breaches the rules is threatened with scarily huge fines. Obviously, that frightens people, and I do not think the GDPR rules are fit for purpose, but, of course, big tech and big corporates can afford to get round those fines, employ lawyers who will exploit loopholes, and so on.
I make this complaint not to underplay the importance of digital privacy but as a plea for sensible data-protection rules moving forward, which will safeguard individual freedom and allow small organisations to competitively accrue data to survive. I am also concerned that there is a real problem in relation to a broader climate of compromising privacy. I note that NHS Test and Trace initially broke GDPR rules, which no doubt damaged the public’s confidence in its appropriate and secure use of data. I am also looking for some reassurance from the Minister that the sort of state surveillance, data collection and data sharing being used in this pandemic, which is short term and should be extraordinary, will not be sold to the public in the future as the new normal. I also have some concerns that, as we speak, the Government are encouraging big tech to breach users’ privacy by demanding that it monitors the communications et cetera of its users, and even censors misinformation. Therefore, the Government are strengthening big tech’s authority and giving it the authority to breach data privacy.
Furthermore, did noble Lords note, earlier this month, that there was a draft resolution from the EU Council to weaken end-to-end encryption—E2EE—putting the likes of WhatsApp under pressure to implement back doors for security services and law enforcement to have access to private communications? Obviously, we are not in the EU now, so the UK can ignore this illiberal proposal but, again, can the noble Baroness reassure me that the Government are not tempted to cite national security and law enforcement to breach privacy? I note the dismay among international journalists, which is just one group who are worried that their data will be used to compromise their professional work and privacy.
Finally, frankly, I worry about a more informal disdain for privacy. I am somewhat dismayed by the number of leaks emanating from the heart of Westminster. WhatsApp, texts, private meetings among colleagues all end up in the public realm or newspapers. This does not show any real regard for private communications. When considering online privacy and data, it is important that we protect private data and encrypted messages, whether from cybercriminals, hackers, oppressive regimes, big tech, big government or even the wrong kind of laws. Actually, this is less about laws and more about having a public debate, establishing that privacy is an important civil liberty, and we should not let the rules get in the way of that discussion.
My Lords, it is always a joy to speak after the noble Baroness, Lady Fox of Buckley, because of her talent for challenge—this time on privacy. This is important, although I think these SIs are narrower than the sort of points that she was interesting us in.
Like the previous regulations that we debated, these make changes to orders relating to life after Brexit—in this case to 2019 regulations on data protection, privacy and electronic communications. Many of the changes are minor and I support them. I refer to my various business interests, most of which are affected by data. I was also the Data Minister at DCMS, and that was during the negotiations on the GDPR which, ironically, we agreed to in good faith to try to help in the negotiations with the European Union in the run-up to the referendum. Indeed, I took over the portfolio from my noble friend Lord Vaizey. Perhaps because he was bored by data, which he has admitted to today, or perhaps because he was so busy with the glamour of digital and its pioneers, he passed it to me with a huge portfolio of ministerial correspondence to deal with, so I had my work cut out. He also gave me the chance to make some progress with nuisance calls, which are a very important consumer issue.
I rise to speak for three reasons. The first is that data is incredibly important to the modern economy. It is the “big oil” equivalent in the 21st century. It is vital to banking, to telecoms, to retail and supply chains, to pop music and entertainment, to aviation, to transport and energy and, with Covid, to pretty much everything else—notably, of course, education, healthcare and border controls. My noble friend Lord Vaizey gave us an idea of the sheer scale of this. He rightly said it was “the new trade route”—I like that as a parallel. It is so important that we cannot slip up in this area. It is possibly even more important than physical trade.
Secondly, I would like to know the latest thinking within the EU on data. I have the honour to sit on the Lords EU Committee. As the noble Lord, Lord McNally, has already said, we tackle data together. It is one of the aspects of the ongoing FTA negotiations that worry us most. The Government in their wisdom— Mr Hancock was the Minister—brought in a special Act, the Data Protection Act 2018, to ensure we were fully compliant with EU rules and norms on exit day. This was to enable the EU to grant the equivalence status we need, which, as we have just heard, Japan has recently acquired. I am not sure I would have done it that way, as the Act is very burdensome, especially for small businesses, charities and local councils. Everyone, including your Lordships, risks breaches, which at the upper limit attract vast fines—an odd way to take back control. Unfortunately, so far, this has not been a successful strategy. As far as I know, we still await an equivalence decision on data. As with financial services, one assumes this is being held back by the EU as a negotiating ploy. To my mind, this is not very responsible, given the huge interest of both sides in proper data flow. Maybe my noble friend the Minister can reassure me and advise that there is a contingency plan for a year or two—as we have seen on the share trading exchanges in the financial services area—if FTA talks falter or fail, or equivalence is formally withheld for any reason. The noble Lord, Lord McNally, touched on this point and suggested that businesses needed to be consulted on contingencies. I certainly look forward to my noble friend the Minister’s reply on that.
My third reason for speaking is that I spent time in Washington helping—or trying to help—to sort out a US-EU deal on the Privacy Shield in 2017, persuading the US to give some ground. I was therefore extremely disturbed at the European Court judgment against the arrangement on 16 July 2020. During discussion on the Trade Bill on 1 October, the Minister suggested that standard contractual clauses had been supported in that judgment and that updated guidance from the Information Commissioner’s Office would be available “as soon as possible”. Is that now available and what does it, or will it, say? Most important of all: will it solve the problem?
In the meantime, I note that the Privacy Shield decision is removed from our regulations, as we have heard. I also see the reference to guidance for small businesses and to standard contractual clause templates in paragraph 13.2 of the DCMS’s helpful memorandum. But I repeat my question: does this solve the problem? If so, can the Minister kindly explain on the record how and why?
In closing, I support my noble friend the Minister and the Government in getting this and other SIs through in a timely manner before exit day, and I very much hope that she will be able to reassure me.
My Lords, I am grateful to the Minister for her very clear introduction of this SI. The main thrust of it is obvious: it is an amending sequence to make sure that we are ready for the end of the transition period when it comes. Like the other speakers so far, I have no particular concerns about the issues.
I will make two points, which have been touched on already. There is a rather coy comment in the statutory instrument Explanatory Memorandum about the impact of the Privacy Shield and, in turn, its impact on the Schrems II decision. Put simply, it says that revoking would have no real effect—but I wonder whether the Minister could take us a little further down that route when she comes to respond. It seems to me that the issues here are important. If I am right in saying that the decision we are all waiting for, on the transfer of personal data under the data adequacy agreement, will take into account both the GDPR as it was translated in the Data Protection Act and the LED—including the legal consequences of the directive that deal with that aspect of the work—do we not need to have in our mind the considerations that Schrems brought on the Privacy Shield and related issues? If it is true—and I think it is—that both of these issues will be examined by the EU when it comes to make a decision about data adequacy, we need to have a better response than simply ignoring how the Privacy Shield would have operated, and now cannot operate, and whether or not it impacts on the way in which we do things. I look forward to the Minister’s response on that.
It was good to hear the noble Lord, Lord Vaizey, display both his concern about the dullness of data and his enthusiasm for some of these issues—in particular policy around data, on which his fingerprints are very evident. I welcome him to the unfortunately very small number of Members of your Lordships’ House who take an interest in this; I hope that his interest will also span across into intellectual property, which we have not heard enough about recently. Those who are interested tend to be gathered around this table and need a transfusion of new blood every now and then. I hope that he will be able to provide that—not literally, of course.
The noble Lord mentioned the curious case of the Japan free trade agreement, which is referred to in paragraph 7.6 of the Explanatory Memorandum. I have a slightly different take on that. It is interesting that Japan has accepted the accolade of being found to be data adequate, particularly as its relationship with the GDPR is not the same as ours. It certainly approaches data in a slightly different way. As I understand it, the Japan free trade agreement—we have yet to debate it in your Lordships’ House but hopefully will do so shortly, and I gather that a date has now been found for such a debate in the Commons—has in it a section to do with digital trade. That may not be in the Minister’s main portfolio, but it is important.
The memorandum says that digital trade between the UK and Japan after the transition period has ended will be based on the “free flow” of data. I find that slightly odd and I wonder whether the Minister can comment on it. Surely it is not free flow; it is flow based on the considerations in the GDPR and the LED, transposed into our legislation. A judgment will be made on whether it is a constrained flow, precisely because we have concerns about the free flow of data not being in the best interests of our citizens—a point made by the noble Baroness, Lady Fox.
We need to be a little more certain when we come to this decision because it seems that if we are to make deals with data as part of those functions, we must be secure about what we are actually doing when we sign off these documents. This is an important part of our economy and a crucial part of our relationships with the EU. It would surely not be in the best interests of UK plc to have an agreement with Japan, however important that is, which threw further doubt on our ability to meet the data adequacy concerns.
My Lords, this is the third SI on this topic that has come before Parliament since the beginning of 2019. My colleagues have been dealing with similar revisions to already revised statutory instruments on other aspects of leaving the EU, and on a wide range on subjects. At least here we have the excuse that the CJEU’s ruling on the privacy shield, Schrems II, has necessitated further provision. In a debate earlier this afternoon, the noble Lord, Lord True, told us that the two previous drafts on public procurement had set out adjustments necessary for a no-deal outcome, but that the one we were considering today set out the detailed implications of a deal in that area. I am not sure whether I understood or believed his explanation.
I have several concerns about the implications of this SI. I was told in a briefing a week ago that Dominic Cummings detested the EU’s general data protection regulation and was determined that UK legislation should diverge from that standard. Now he has left the Government, but I am not yet sure that his influence has disappeared. The terms of the UK-Japan trade agreement appear to offer individuals fewer protections for their personal data than under GDPR, as many commentators have pointed out. It states that
“each Party should take into account principles and guidelines of relevant international bodies”,
such as the OECD. The Minister will appreciate the level of concern among the engaged public about lowering the protection for personal data now that we have left the EU. I thank her and her colleagues for offering briefings on the evolution of the Government’s digital strategy to interested Peers and I look forward to reassurance on this important principle.
The free flow of data across borders is a vital element in the digital economy, under appropriate regulatory conditions. I was concerned to read in the Secondary Legislation Scrutiny Committee’s comments on this SI that
“DCMS told us that the Commission was currently assessing the UK for adequacy under both the General Data Protection Regulation and the LED.”
Can the Minister tell us when the Commission is expected to complete this assessment?
Then there is the question of data sovereignty, which of course was one of the issues in the Schrems II case. My colleague and noble friend Lord Clement-Jones has written powerfully about the need to hold on to our national data assets as the foundation of a strong domestic base for digital enterprise but also as a matter of national and personal security. I note that health data has become a sector particularly vulnerable to multinational companies and hacking.
The UK Government are peculiarly relaxed about UK public data being stored on servers in the United States, in spite of the provisions of US law that make all data stored in the USA subject to surveillance, as others have mentioned. Our current Government, from the Prime Minister downwards, have an obsession with protecting the UK’s absolute sovereignty from any incursion by EU regulation or law but seem entirely relaxed about extraterritorial American jurisdiction and surveillance. Many of us anticipate that, outside the EU, the UK will not prove to be an independent sovereign state—let alone a sovereign equal of the United States and China—but will become more and more dependent on the United States and a follower of American rules and regulations. If the UK supervisory authority is to diverge from the GDPR, it is most likely that it will converge on US regulation and take the American side in likely disputes with the EU. Do the Government plan to ensure that UK public data is stored in the UK rather than in the United States?
The law enforcement directive struck a careful balance between personal rights and national security. UK officials and Ministers played an active part in negotiating its terms. Our Government were one of the most active in pressing for further data exchanges related to cross-border crime and terrorism, from aircraft passenger names to intelligence on suspects. Cross-border travel, and cross-border crime and terrorist attempts, will not stop now that we have left the EU, but we need to ensure that such exchanges of data are tightly regulated and scrutinised. Until we left, the CJEU provided that scrutiny. Can the Minister tell us what shared mechanism will now be established to scrutinise such exchanges, strong enough to satisfy defenders of civil rights and personal privacy both within the UK and the EU? How confident is she that the UK will be able to ensure its security by maintaining access to these vital but highly sensitive databases?
I recall hearing Conservative MPs assert that we had no need of Europol—for example—when we left the EU because we could rely on our membership of Interpol. That level of ignorance about the quality of different international bodies, that assumption that an organisation that has Russia and China as significant members is preferable to one in which we shared more information with our democratic neighbours, leaves some of us close to despair about where the Government may be drifting.
I have one final question. How do the Crown dependencies fit into this post-Brexit pattern of data exchange? Can we be confident that their regulation is as tight and as open to scrutiny as within the UK and on the European continent? We do not want an offshore world around our shores through which financial data, dark money and criminal assets may flow unseen. What discussions are the Government engaged in with the Crown dependencies to ensure that no loopholes in our post-Brexit regulation of data are left on our doorstep? The Minister may wish to write to me on this matter.
I am grateful to all noble Lords for their consideration of this instrument and their thoughtful contributions to this debate. The noble Lord, Lord McNally, pointed out the level of expertise around our virtual and physical Chamber. That is no novelty in this House, although having such a number of previous Ministers from DCMS here today feels like a particular form of pressure.
My noble friend Lady Neville-Rolfe and the noble Lord, Lord McNally, focused on the importance of achieving a data adequacy agreement with the EU. Doing this remains a priority of this Government. We are working constructively with the Commission to secure data adequacy by the end of the transition period and are making steady progress. We see no reason why we should not be awarded adequacy since we remain committed to high standards, but the process is controlled by the Commission and we are realistic about the increasingly challenging timelines for completing this.
To respond to my noble friend Lady Neville-Rolfe’s questions about preparation, the UK is taking sensible steps to prepare for a situation where adequacy decisions are not in place by the end of the transition period. In such a scenario, businesses and other organisations would be able to use alternative legal mechanisms to continue to transfer personal data—of course, standard contractual clauses are the most common legal safeguard and would be the relevant mitigation for most organisations.
Guidance can be found on both the GOV.UK website and the Information Commissioner’s website regarding steps that organisations may be required to take relating to data protection and data flows by the end of the transition period. Organisations can also call the Information Commissioner’s helpline for further information.
The noble Lords, Lord McNally and Lord Stevenson, talked about the rollover of Japan’s adequacy decision. Specific UK arrangements have now been confirmed regarding the recent EU adequacy decision for Japan. This secures the necessary protections for UK data as well as EU data, so that data that flows from the UK to Japan will continue to receive the same level of protection after the transition period as they currently do.
More broadly, in relation to the Japan free trade agreement—which was raised, again, by the noble Lords, Lord McNally and Lord Stevenson, as well as the noble Lord, Lord Wallace of Saltaire—the UK-Japan FTA includes three provisions that seek to enhance cross-border data transfer relating to personal information protection, cross-border flows and data localisation. The data provisions the UK has negotiated with Japan exceed those agreed previously in the EU-Japan economic partnership agreement, which contains merely a review clause, and will enter into force on 1 January 2021. The agreement recognises the importance of protecting personal data and commits both parties to maintaining a legal framework that provides for the protection of personal information.
I fear that I may disappoint the noble Baroness, Lady Fox, in her wish to see an end to the GDPR. The GDPR will be retained in domestic law at the end of the transition period, but we will have the independence to keep the framework under review. As with all policy areas, the UK will control our own laws and regulations in line with our interests as we move forward.
The noble Lord, Lord Wallace of Saltaire, questioned the impact on our data protection standards in relation to our trading relationship with the US. We know that, far from being a barrier to innovative trade, certainty and high data protection standards allow businesses and consumers to thrive. As all noble Lords have remarked, data is now the driving force of the world’s modern economies and fuels innovation across all sectors.
I thank my noble friend Lord Vaizey for his kind remarks about our new National Data Strategy. Sadly, I missed his maiden speech, so I am glad to have had the chance of a second session. The National Data Strategy is ambitious and pro-growth. We seek to ensure that people, businesses and organisations trust the data ecosystem, that they are sufficiently skilled to operate within it, and that they have access to high-quality data, as well as to provide the coherence and impetus for data-led work across government.
A number of noble Lords, including my noble friend Lady Neville-Rolfe and the noble Lord, Lord Stevenson, referred to the Schrems II decision. The UK Government are pleased that standard contractual clauses remain in place as an important mechanism for transferring data internationally, but we are disappointed that the EU’s adequacy decision on the US Privacy Shield has been invalidated by the CJEU in its judgment of 16 July. The Government are working with the Information Commissioner to address the impacts of the judgment on UK data controllers.
During the transition period, this includes the ICO supplementing the guidance provided by the European Data Protection Board and the European Commission with targeted advice to help UK controllers. Most recently, and since the Explanatory Memorandum was prepared, the European Data Protection Board has issued guidance on how to assess whether to supplement standard contractual clauses with examples of supplementary measures that could be used, if needed, to ensure that personal data remains protected to the required standard. It has also updated the templates for the standard contractual clauses. These were published for consultation on 12 November and have been updated to cover processor-to-processor and sub-processor transfers. The noble Lord, Lord Vaizey, commented on the boredom of data—maybe this is a small example.
In response to the remarks of the noble Lord, Lord Stevenson, the greatest impact will be on organisations which transfer data to the US, particularly to those US companies who had previously signed the privacy shield. After the transition period, the Secretary of State and the Information Commissioner will have powers to issue new instruments relating to transfers of personal data under Article 46 of the UK GDPR.
My noble friend Lady Neville-Rolfe asked about the burden on SMEs of having no adequacy agreement. Officials in DCMS, who were rightly congratulated on their work in this area, are engaging with SMEs through meetings and webinars to try to help them prepare for a scenario where adequacy decisions are not in place by the end of the transition period. In such a scenario, as noted already, organisations would be able to use alternative legal mechanisms to continue receiving personal data from the EU and the EEA.
The noble Baroness, Lady Fox, asked about the impact on law enforcement of not receiving adequacy. In this scenario, if we do not obtain a law enforcement adequacy decision, competent authorities would be able to rely on alternative mechanisms to continue receiving data from the EU, and transfers will most likely occur using the appropriate safeguards provision.
The noble Lord, Lord McNally, asked how we would continue to influence the development of international data standards. Since the UK is a signatory to the Council of Europe’s Convention 108, that is one route; the ICO also has functions to co-operate with data protection regulators in other countries.
I see that I have run out of time, so I apologise to those noble Lords whose questions I did not cover, but I will write. I thank all noble Lords again for their remarks.
That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.
Committee adjourned at 7.08 pm.