Committee (3rd Day)
Relevant documents: 7th and 12th Reports from the Delegated Powers Committee, 6th Report from the Constitution Committee
Clause 12: Subsidy control
16: Clause 12, page 7, line 10, leave out subsection (3)
Member’s explanatory statement
This is part of a series of amendments based on recommendations from the Delegated Powers and Regulatory Reform Committee which states that a number of subsections in the Bill “contain inappropriate delegations of power and should be removed from the Bill.”
My Lords, in rising to move Amendment 16, I warmly thank the noble and learned Lord, Lord Judge, for supporting this suite of amendments, which raises concerns about the breadth of the order-making powers that Ministers seek to gain from this legislation.
I start by thanking the Minister for his holding letter indicating that he is conferring with the noble Lord, Lord Caine, on responding to the questions raised on Monday. I am grateful for that and the efficiency of his private office.
The information from the Northern Ireland Executive suggests that there are approximately 14 live areas where there are subsidy controls, which operate within Northern Ireland under one element of the protocol. The purpose of my amendment is twofold: first, obviously, to raise the concern about the breadth of the power, which is in breach of international obligations, and about powers that the Government seek without formulating policy first.
Secondly, the purpose is to further probe what the Government intend the position to be with regard to subsidy control for Northern Ireland, and when they came to their conclusions. We are told that the position is grave and imminent—that is the defence of necessity for breaching international obligations. But we spent a lot of time in Committee and on Report on the Subsidy Control Bill. I moved two amendments relating to Northern Ireland, and the noble Lords, Lord Dodds and Lord Empey, and the noble Baroness, Lady Hoey, also raised these issues in Committee. Like others, I asked on a number of occasions what interaction there would be with the protocol and what difficulties operating two systems would cause. The noble Lord, Lord Callanan, reassured me that they would work together.
That legislation is now apparently not fit for purpose and needs to be amended—in breach of our obligations, of course. We passed that legislation this year, and it came into force this spring. With seriousness, I say again that, at no stage during the passage of that Bill, which is being amended by this Bill, did any Minister say that there was a grave and imminent threat that required that we withdraw entirely from the agreement on state aid that we negotiated and secured.
In fact, the timing of this is interesting. As we have heard, the Government indicated in 2021 that the protocol was working, but we now hear that there is grave and imminent peril. We legislated during this time, and the Government said that they played no role in bringing about the circumstances of the peril. But, legislating at the time, we obviously had a role to play.
The paper that the Government published on the UK solutions, raising concerns about the operation of the protocol, relates to Northern Ireland, tax and spend, and subsidies. It says:
“The Protocol applies EU state aid rules regardless of developments since—despite the robust subsidy control commitments agreed by the UK and EU in the Trade and Cooperation Agreement, which we have built on in the Subsidy Control Act 2022”.
If we put in place robust subsidy control commitments in the TCA, that was after the protocol. I am not sure why the Government say that they are unaware of some of the consequences of the regime that they agreed and then put in place, which they considered to contain robust subsidy control commitments.
I asked questions about the Government’s position and what they were negotiating, or seeking to negotiate, with the European Commission. I asked how a dual system would operate, and, when I moved my clarity-seeking amendments, the Minister—the noble Baroness, Lady Bloomfield—said that there would be enhanced referral powers or consultation procedures for subsidies within scope, to enable EU concerns to be properly and swiftly addressed. So, when we were passing this legislation, the Government were negotiating not a removal of subsidy controls from the protocol but a more efficient approach to the operation of the two systems. The noble Baroness, Lady Bloomfield, said to me that, under the two systems, there would be “specific and limited circumstances” where EU rules would apply to Northern Ireland. I asked what “specific and limited” meant, and it seemed to be simply a more efficient way of reporting and declaring. I would be grateful if the Minister could indicate at what time and stage the Government drew the conclusion that they had to entirely remove state aid elements from the protocol.
The consequence of this is a major chill effect, because businesses operating within Northern Ireland and across the rest of the UK simply do not know what the Government’s intent will be when they are looking to make investment choices. I repeat that there are a number of live situations where this is currently in operation. So the Government are actively contributing to a state which is bringing about concern and which they cite as “necessity”.
As the noble Lord, Lord Caine, was not able to confirm to me on Monday whether the Government are formally seeking that the EU change its mandate for negotiations, in this Bill we are seeking to remove from the protocol a key part that the Government negotiated. So I hope that the Government can provide crystal clarity on this point, because it is needed for the economy of all parts of the UK. I beg to move.
My Lords, I must inform the House that, if Amendment 16 is agreed to, I will not be able to call Amendments 17, 18 or 19 by reason of pre-emption.
My Lords, I shall be very brief and will say nothing about the breadth of the power being sought by Clause 12. I will read Clause 12(3):
“A Minister of the Crown may, by regulations, make any provision which the Minister considers appropriate”.
We all know what that means: a Minister will be empowered to create any regulations as he or she thinks fit. That is not objective: as he or she, sitting down, thinks fit. It is purely subjective. If we allow this piece of legislation to go through, we are saying to the Minister, “At whatever time it may suit you, take a blank sheet of paper and either write with a pen or type on your laptop whatever you think you want”. That will then be put before the Commons and the Lords, and, as they have not rejected anything for an eternity in real terms, it will become law.
Is that really how we think that power should be given to Ministers anywhere within the UK? It surely is not. There are other ways of making regulations. Good heavens, no Minister needs a lesson from me in how to create regulations; we are bombarded with them all time. But I do ask the House: is this really how we expect to be governed? The Minister can do what the Minister likes. The clause uses a different and longer phrase—“considers appropriate”—but it really means no more than whatever he or she wishes. It is not good enough.
My Lords, I simply express my very strong support for what the noble and learned Lord has said: there is absolutely no limitation on the power conferred on the Minister to make
“any provision which the Minister considers appropriate”.
There is no test here of necessity or a requirement that the Minister should be satisfied that there are reasonable grounds for thinking that the regulation is necessary. In any event, the regulation is both unamendable—as all regulations are—and subject to the negative procedure, which means in effect that it will never be discussed. So it is thoroughly bad. I have no doubt that it is for that reason that the Joint Committee recommended that this particular power should be removed from the Bill, and if I am given the chance to vote for that view, I shall do so.
My Lords, in the spirit of trying to help the Government, I will repeat what I said in relation to an earlier group of amendments: it would help the Committee, as well as the other place, if the Government could give us an indication of the type of regulations that they have in mind, so that we do not have this blanket provision before us today. There is still time to do that.
I will also ask a question of information. I understand that the “provision” to which the noble Lord, Lord Purvis, refers in removing it from this particular clause does not apply to agricultural subsidies. So, if it is the case that agricultural subsidies are still going to apply, who is in a position at the moment to decide on that, and within what timeframe would that be?
My Lords, I have been looking at Clause 12 through a particular prism. As my entry in the register of interests discloses, I have a particular interest in financial services. I am also an investor in various enterprise investment and seed enterprise investment companies, which I will refer to as EIS and SEIS companies, and venture capital trusts. For those who are not aware, EIS schemes are those which allow UK investors to invest in UK companies and deduct the amount invested in those companies against their income tax at prescribed rates to encourage investment in private companies.
For some time, I have been frustrated that these truly excellent schemes have been hampered by restrictions. The schemes are hugely popular. EIS has helped some 66,000 companies in the UK in total, with some 3,755 companies raising over £1.5 billion last year alone. Since 2018, VCTs have made some 1,000 investments, raising £1.7 billion, of which 45% were less than £1 million. So I am very concerned by anything that threatens the existence of these schemes and am keen to find ways of enhancing their effectiveness. There are, however, restrictions and regulations reducing the opportunity for UK businesses to raise this vital small equity for essentially risky enterprises, and I have been concerned that these restrictions have in part been due to the requirements of EU state aid rules.
The enormous success of the EIS and VCT schemes is very much a British phenomenon and probably viewed with some mistrust by the EU, given our tremendous track record in starting and growing new UK businesses. In fact, most businessmen and investors I have spoken to are amazed to discover that it is governed by EU state aid rules. Fortunately, at the moment we have EU approval for the design of the EIS and VCT schemes under Article 107 of the Treaty on the Functioning of the European Union, and the smaller SEI schemes, due to their size, fall within Article 21 of the general block exemption regulation. However, as we decide how to plough our own path post Brexit, it is important that we are entirely free to create our own rules concerning subsidies that might amount to state aid—within, of course, the constraints of WTO and other commitments.
As mentioned by the noble Lord, Lord Purvis of Tweed, we now have our own Subsidy Control Act but, under the protocol, some EU state aid rules still apply. I can see the issue, namely that the EU is worried that a company based in Belfast has cheaper finance than a competitor in Dublin—but, frankly, that should be our choice and the choice of other countries to offer incentives to finance their businesses.
Why do we have this problem? As Andrew Harper helpfully wrote in the British Tax Review in autumn 2020, the two sides promote opposing perspectives: the EU very much promulgating its state aid regime on the basis of the level playing field and the UK adopting the subsidy language of the World Trade Organization. This is much more than a semantic or linguistic distinction. It is one of substance, both in the scope and the enforceability of the rules.
In these circumstances it appears sensible to point out the key issues that could arise. Without Clause 12 —and I am aware that there is a stand part debate following—first, the EIS and VCT schemes as they operate in Northern Ireland will presumably have to remain fully EU state aid compliant because of EIS companies and VCT investees based in the Province trading with the Irish Republic or the wider EU. Secondly, following from that, barring the UK Government being prepared to countenance two separate systems within the UK, the EIS and VCT schemes as they apply to England, Wales and Scotland will be difficult to modify.
Thirdly, if, post transition, these schemes were to diverge as between Northern Ireland and the rest of the UK, what is the position in the case of, say, an English EIS company raising scheme funding that would be in excess of that sanctioned by EU state aid rules? If that English company then sends its goods to Northern Ireland, where potentially they can be traded with the south or the rest of the EU, how will that be allowed to happen? It simply cannot make sense to exclude Clause 12.
Just to give some perspective and a feeling of the situation at the moment, the proportion of EIS recipients in Northern Ireland is really very small. In 2020-21, out of the aforementioned 3,755 recipients of EIS I mentioned, only 40 were based in Northern Ireland—some 1%, and by no means all are goods traders, to whom the protocol applies. Some may say that the state aid provisions in the protocol do not really apply to the sort of state aid such as EIS and VCT, but there is a risk that it might—and, of course, famously, of reach-back, which would be wholly unwelcome. That is why we need Clause 12(1). I welcome Clause 12 to ensure we have a single UK-wide subsidy control policy and that, for example, with a Covid-19-type recovery loan scheme there would not be greater restrictions on Northern Ireland companies than GB ones, and that we would be free to amend our own rules freely.
There is a pressing example of an EU state aid restriction that needs urgent attention: the sunset clause imposed by EU state aid rules on EIS and VCT, which kicks in on 6 April 2025. It urgently needs to be repealed, as suggested in the mini-Budget. Indeed, the current Chancellor specifically said that those sunset clauses would go; it is about the only bit of the mini-Budget that he said he wanted to keep. This issue of sunset clauses was raised on page 119 of the May 2021 report from the Taskforce on Innovation, Growth and Regulatory Reform, which people cannot resist calling TIGRR, chaired by Sir Iain Duncan Smith, along with other restrictions that it wanted to see lifted. These include the age restrictions that apply to an investee company and, of course, the maximum investment thresholds, particularly those for the smaller SEIS, which presently has to be less than £150,000. The mini-Budget seeks to raise that to £250,000 for a single company, but it is still far too low.
The criticisms of Clause 12, which is needed to enable a Government to accommodate the result if the EU successfully takes international action in respect of something it regards as unhelpful, are answered by my amendments, which tighten up the ability to make change through regulation. In particular, proposed new Clause 12(4)(c) in my Amendment 19 deals with the most unfortunate case, if there is a change, to stop it applying retrospectively. My amendments would ensure a minimum framework for the Minister’s regulatory power, which could arise following alterations in national law to provisions within the scope of EU state aid at the international level, and set the boundary between the exercise of the regulatory power by the Minister and the requirement for primary legislation. I appreciate that, under Clause 23(3), any regulation has to be a statutory instrument and is treated as such. However, most importantly, the amendments would ensure that the Government were unable to make any retrospective provision, so that investments and reliefs to date were protected.
I hope all those speaking to Clause 12 standing part understand that there is a fundamental difference in approach to subsidies between the EU and UK. The EU tends to favour money handed out to companies at its discretion for the companies’ direct benefit—frequently, of course, through individual states. We like to empower investors and, as such, the markets to decide where the money should go. It is, in effect, the investors who decide which companies will benefit from their money, which is enhanced by a tax break. Like so many areas in business life, we have a different way of thinking from the EU and we have to protect our interests first. Concerns that this is a breach of other international treaties or laws are fair to raise and difficult for many of us non-lawyers to understand. But even if they are correct, what I do know is that UK companies need protection to enable them to carry on being financed in the way our Parliament feels appropriate.
May I ask the noble Lord two questions? First, should these problems not have been considered by the United Kingdom Government before they signed the protocol? Secondly, is there any reason why these problems cannot be raised in the negotiations with the EU to take place in the near future?
I cannot answer for the UK Government on whether they should have been raised before; that is clearly historical and we are where we are. In theory, there could be a negotiation with the EU to try to deal with some of these problems, but we would be on the back foot and there would be no reason for the EU to agree, whereas Clause 12 deals with it satisfactorily.
My Lords, I associate myself with my noble friend Lord Purvis of Tweed and the noble and learned Lord, Lord Judge, who have made the case in very strong terms for why subsection (3) should be removed. I pause only to make one observation: it does not even specify the Minister but says:
“A Minister of the Crown”.
So not only is it an extremely wide power, it is a power available to any Minister in any ministry of any kind, at any time, without any restraint whatever. How can that possibly be consistent with the principles on which we pass legislation in this Chamber?
My Lords, I apologise for not having been present for the first two days in Committee for family reasons. I am in violent agreement with my noble and learned friend the Convenor. It seems to me that this amendment, others in this group and, indeed, others in the Marshalled List seek to address something of a legislative slough of despond. If that is the case, it is a swamp that needs draining. I think noble Lords on the Government Front Bench will realise that the bar will be set very high indeed on Report.
I shall briefly address two other contributions. First, to respond to the noble Lord, Lord Campbell of Pittenweem, I may be misremembering but, from my past, I think “a Minister” is used as a generality in drafting to reflect the collectivity of government. It could be any Minister given the particular responsibility at the time, although I agree that some of the flanking provisions might draw that into a certain amount of doubt.
As for the noble Baroness, Lady McIntosh of Pickering, she is ever the peacemaker but I would discourage noble Lords from pursuing the idea of putting in an illustrative list of measures that might be subject to these powers. Illustrative is only illustrative: if they are not in the statute, they are simply a bit of an Explanatory Memorandum, if you like. Even if they are in the statute, no drafter or Minister will allow them to lie there without the assertion that they are not an exhaustive list, so that anything can be added at the whim of Ministers. As my noble and learned friend the Convenor pointed out, quite a lot is being done at the whim of Ministers.
My Lords, I too support the amendment in the name of the noble Lord, Lord Purvis of Tweed, for all the reasons that the noble and learned Lord, Lord Judge, gave. When the Minister replies to the noble Lord, Lord Purvis, will he point to the incident that triggered the grave and imminent peril that forms the basis of the doctrine of necessity that the Government have used in justifying the Bill, with its extraordinary powers for Ministers?
I should just like to ask a question of whichever Minister will reply to this brief debate. I am of course entirely on the side of the noble and learned Lord, Lord Judge, and the noble Lord, Lord Purvis, in what they said. I understand why my noble friend raised his commercial points, but between us and him is a great gulf fixed. What we are concerned about is the arbitrary and unfettered power of Ministers.
I have great respect for all three of the Ministers who are handling this Bill, and great sympathy for them, but are they truly happy to exercise such unfettered powers without reference to Parliament and proper debate? We go back to where we were on Monday: the imbalance of power and the excessive power of the Executive, which has been growing like a mad Topsy for the last few years. It is deeply disturbing to anybody who believes in parliamentary government, and I want to know if it is deeply disturbing to the Ministers on Front Bench this afternoon, because if it is not, it should be. I would be much more worried than when I got up if they tell me that they do not mind.
Could I suggest to the noble Lord, before he sits down, that the real question is not whether the Ministers on the Front Bench would be happy to exercise these powers, but whether they would be happy for their opponents, were they to be in office, to exercise these powers.
As so often, the noble Lord puts it very well. It ought to be a parliamentary lesson to us all: never seek to take to yourself powers that you would not be happy to see the other side have. The noble Lord put it very succinctly and I endorse what he said.
The big point about this clause is the one made by the noble and learned Lord, Lord Judge, supported by the noble Lord, Lord Campbell. We should not be writing into our statute book such extraordinary sweeping powers, to be exercised at the stroke of a pen, with no real supervision or scrutiny by the Executive.
I would like to speak briefly to the second important point, which is, in my view, the one made by the noble Lord, Lord Purvis of Tweed, when he spoke of the “chill effect”. I also found things I agreed with in the speech of the noble Lord, Lord Leigh of Hurley, rather to my surprise. The chill effect is real and will continue. Investors will be deterred from coming to Northern Ireland, and Northern Irish businesses will be deterred from investing, by the uncertainty which will not be resolved by the passage of this Bill but created by its passage. The effect of Clause 12, taken with Clause 22, is to enable the Minister to establish a different regime in Northern Ireland from the regime in Great Britain. The assumption might be that if the protocol falls, what results is the status quo ante: the UK rules. That is not the case. The Minister would be entirely free to produce whatever rules for Northern Ireland he thought fit. It is obvious what that uncertainty does to investment.
I am surprised at the silence of the DUP.
I am delighted that the silence may be about to be broken. It seems to me it would be odd to be insouciant about this uncertainty. The DUP may have been given assurances that only UK rules will be applied and nothing will be different, in which case I suppose it might believe such assurances. That would be a triumph of hope over experience, because we would not be where we are today—we would not have this Bill to discuss—if the DUP had not been betrayed and misled by the last Prime Minister but one.
My Lords, I am truly grateful for the opportunity to participate, and would have done so earlier had I stood up more quickly. I will address some of the issues raised by the noble Lord, Lord Kerr, and the noble and learned Lord, Lord Judge.
First, the noble Lord, Lord Leigh, touched on the reasons behind Clause 12 and why it is necessary, and I think it is worth reminding noble Lords of the current position following the approval of the Subsidy Control Act. Under the provisions of that Act, Northern Ireland is specifically excluded from the UK subsidy scheme. Therefore, we are subject, as per Article 10 of the Northern Ireland protocol, to EU state aid laws, and all the laws listed in Annexe 5 to the protocol shall apply to the UK
“in respect of measures which affect that trade between Northern Ireland and the Union which is subject to this Protocol.”
I have spoken to Invest Northern Ireland—the body that looks after foreign direct investment into Northern Ireland—about these matters. In effect, while the UK is setting up a new, more flexible state aid regime, under Article 10 of the protocol the UK subsidy control regime would apply only to about 50% of the financial support that will be provided to Northern Ireland, with the remainder continuing to fall within the scope of EU state aid rules, applying mainly to the manufacturing of goods.
So, Northern Ireland will be forced to adhere to the strict rules and conditions of EU law on things such as no expansions, maximum grant rates, only new establishments and so on, and when the projects are large or outside the scope of the exemption regulations, Northern Ireland will have to seek European Commission approval. Effectively, we have two regimes which are very different in policy terms and practical effect. Under the UK scheme, things effectively will be automatically approved unless specifically prohibited, and in Northern Ireland, under EU rules, everything will be prohibited unless approved—very different policies, and two very different systems operating in one country.
The reasons behind Clause 12 are sound; otherwise, there will be no level playing field across the United Kingdom for state aid. The noble Lord, Lord Kerr, talked about uncertainty, but Invest NI has expressed concerns about the application of this dual regime. We will be at a disadvantage compared to other parts of the UK competing for inward investment. Other parts could be much more attractive as a location for investment as a result of not having to wait for European Commission approvals, for instance. Northern Ireland approvals will take significantly longer than the new timescales envisaged in the Subsidy Control Act for the rest of the United Kingdom. Other areas could have far fewer conditions or restrictions and might well receive greater levels of funding and subsidy than will be possible under the EU regime in Northern Ireland, which prohibits subsidies greater than 50%, whereas under the Act subsidies should be “proportionate”, but no maximum is specified.
Indeed, your Lordships’ Select Committee on the protocol in Northern Ireland, on which I am honoured to sit, wrote to the noble Lord, Lord Callanan, on this matter. He responded by letter on 22 March 2022, saying that he recognised that
“in some cases a more flexible approach will be available in Great Britain than in Northern Ireland and that this could affect all subsidies relating to trade in goods.”
There are real concerns about the application of EU state aid to Northern Ireland when it is not applicable to the rest of the United Kingdom.
On the issue of what replaces the EU regime for Northern Ireland, I have heard what has been said. That is why I am on record in this House as agreeing with the Opposition Front Bench that we need to see the regulations, and they should be published in good time for your Lordships to consider in detail. It is not enough simply to have broad outlines of policy or indications of where it might go; we need to see the regulations at the same time as the legislation. I fully accept that this should be done, and I said so in a previous debate.
I understand also the very strong opinions, many of which I share, on the idea of giving the Executive more and more power at the expense of the legislature. However, I ask noble Lords to bear in mind the situation we are faced with in Northern Ireland as a result of the protocol. Powers have been taken away in 300 areas of law affecting the economy in Northern Ireland. Powers have been taken away from this House, this Parliament and the Northern Ireland Assembly in Stormont, and handed over to the European Commission in Brussels, which initiates law in all those areas.
Noble Lords have expressed great dissatisfaction with the idea, which is regrettable in many cases, that one of His Majesty’s Ministers may be able to sit down with a pen and paper or an iPad and write what comes to mind; but we have a situation where somebody in the European Commission building in Brussels—I do not know who or where they will be, or their name; they are certainly not accountable to anyone here or in Northern Ireland—will write laws for Northern Ireland. It will not be a question of putting them down in statutory instruments, which this House may reject—although we have heard that it hardly ever rejects them. There will be no system of approval or disapproval at all. There will be dynamic alignment of the laws of the European Union with Northern Ireland. Legislators and the people of Northern Ireland will be handed those laws by the European Commission and told: “That’s the law you’re now operating.” Those laws are not necessarily going to be made in the interests of Northern Ireland. They are made by people who have their own interests.
I understand why noble Lords may rail against the delegated powers in this Bill, but why is not the much greater problem of the powers that have been given to Brussels to impose laws directly on part of the United Kingdom in the 21st century a subject for even more outrage? People may say that the Government signed up to this. I agree—they did, against our advice. We voted against it, as did other noble Lords in this House and Members of the other place. But we have this problem and we need to fix it. If it cannot be fixed, we are in serious trouble. I hope that negotiations and the negotiating mandate of the European Union will change to allow these things to be negotiated, but there is no sign of that thus far. If they do not change, this sovereign Parliament must take action to protect the people of Northern Ireland against laws imposed on them. Surely that should have the support of all true democrats in this mother of Parliaments.
My Lords, listening to the noble Lord, Lord Dodds, just then, my mind drifted back a decade or so to a debate in the domed hemicycle in Strasbourg on the issue of state aid in a neighbouring jurisdiction, one that was partially under single market regulation; namely, Switzerland. One after another the MEPs from different groups got up and fulminated against the unfair competition and unfair subsidies that were being carried out in particular Swiss cantons. It became clear as they spoke that what they regarded as unfair subsidies were lower taxes—lower corporation and business taxes, and a lower VAT rate. My point is that what we regard as an objective measure will not necessarily be seen that way in Brussels when it has full control of these things.
I did not make the wise life choices that my noble friend Lord Leigh of Hurley did, so I have no idea how efficacious these vehicles are, but surely that is an issue that ought to be determined through our own national democratic mechanisms and procedures, rather than handed to us by people over whom we have no control. It is this point of trade-offs that I think is being missed.
Of course, how could one not be persuaded by the customary wry, terse brilliance of the noble and learned Lord, Lord Judge, in the way he phrases the problem of executive overreach? I think that all of us on all sides recognise the problem. But we are dealing with a world of imperfections, and the alternative is an also unconstrained, and to some degree arbitrary, power where decisions are made, often by middle-ranking European Commissioners who are not accountable to anyone. Inadequate as the statutory instrument is, there is some mechanism of control here. But, as the noble Lord, Lord Dodds, just explained, we will have a situation where the state aid regime in Northern Ireland is being imposed by people who are completely outside the democratic process.
Now, I very much hope that this Bill goes through without these amendments. I realise that I am a very lonely supporter of it in these debates, but I hope that once it has gone through, Northern Ireland can become a bridge between the United Kingdom and the European Union, and a forum for co-operation. But that will be possible only if we live up not only to the Belfast Agreement but to the wider principles on which it rests: above all, representative government and a proper link between taxation, representation and expenditure.
My Lords, there has been much discussion today, and it goes back to the issue of democratic deficit and how we deal with what Northern Ireland’s public representatives cannot deal with. There is a very simple solution. Under the Good Friday Agreement and the Northern Ireland Act 1998, amended by the Northern Ireland (St Andrews Agreement) Act 2006, provision was made for the institutions according to a three-stranded approach: the Northern Ireland Executive and Assembly, the North/South Ministerial Council, and the British-Irish Council, with east-west, north-south, and internal to Northern Ireland being addressed.
At the moment, we have no Northern Ireland Assembly, no Northern Ireland Executive and no North/South Ministerial Council that would hold these matters to account and address that democratic deficit. I would say to the DUP: there is a duty and an obligation to ensure, working with all the parties in Northern Ireland and both Governments, that those institutions are up and running. That will allow all of these issues to be adequately addressed by the MLAs who were duly elected in May.
My Lords, I rise to support the noble Lord, Lord Leigh, but, before doing so, I repeat what I said the other day: I feel extreme discomfort about the extensive reliance on Henry VIII clauses in this legislation. I sit near enough to the Convenor to almost feel partly convened on the issue of Henry VIII legislation: he and the noble Viscount, Lord Hailsham, did suggest how this particularly egregious example of it could be constrained a little. However, I think neither was here when I posed the question of what the structural alternative was, in the context of negotiations, to relying on Henry VIII legislation. I still await a satisfactory answer to that question.
To return to the point made by the noble Lord, Lord Leigh, I share an interest with him in the EIS, because I was the Secretary of State who introduced them. I had forgotten that I was until he reminded me. Indeed, slightly earlier, when I was invited to speak on the 25th anniversary of their formation, I found that I was the warm-up act for Mike Yarwood at that event. But they are important and have been useful. They, at present, will cease under EU legislation unless that EU legislation ceases to apply in this country.
I want to make a general point, which I made earlier: the protocol is intrinsically temporary under European law. The Europeans themselves said, while we were negotiating the withdrawal agreement, that they could not, under Article 50, enter into a permanent relationship with the United Kingdom. Any arrangements reached under that agreement could only be temporary and transitional. Consequently, the protocol is transitional and temporary and not permanent. Indeed, in Mrs May’s protocol, it specifically said in the recital that the withdrawal Act, which is based on Article 50, does not aim to establish a permanent future relationship between the EU and the UK.
Subsequently, the noble Lord, Lord Pannick, wrote in a letter to the Times that
“the Protocol on Ireland/Northern Ireland states that the objective of the withdrawal agreement ‘is not to establish a permanent relationship between the Union and the UK’. If, therefore, the UK and the EU were unable to reach an agreement on Northern Ireland/Ireland, despite good faith negotiations … the UK would be entitled to terminate the withdrawal agreement under Article 62 of the Vienna convention on the Law of Treaties.”
It may be said that the final version did not include the recital that referred to Article 50. But it is still negotiated under Article 50. It still lacks any legal basis under Article 50. It is still temporary and transitional under Article 50. Therefore, if the noble Lord, Lord Pannick, is to be believed, it can be repudiated if, after good-faith negotiations, we cannot reach a satisfactory alternative.
Moreover, the final treaty omits not only the recital but the phrase that was in the original protocol but is not in the final one, that the provisions of the protocol shall apply
“unless and until they are superseded by a subsequent agreement.”
So it no longer contains that claim to permanence which the original protocol negotiated by Mrs May did.
So it is very clear that the original approach laid down in Article 50 was that you could enter into temporary and transitional arrangements which were necessary to ensure that, in case there was no final agreement, no subsequent TCA, there would be some appropriate arrangements for the Northern Ireland border. It was expected that if subsequently they could not enter into negotiations until they had completed the withdrawal agreement under Article 50, under the TCA that would deal with such things as subsidy arrangements. Largely, it did deal with such things as subsidy arrangements, and they should not be dealt with under a temporary protocol which ceases to have any validity if, after good-faith negotiations, we fail to reach an agreement. We should then repudiate it, accepting the advice of the noble Lord, Lord Pannick.
There are many difficulties with that argument, the first being that there are good-faith negotiations that the United Kingdom is involved in. One cannot assume that they will not succeed. We do have a protocol.
The noble Lord, Lord Dodds, made a point which has been made previously in Committee, concerning the democratic deficit in Northern Ireland. There is a provision in the protocol that expressly addresses democratic consent in Northern Ireland: Article 18. It sets out a detailed procedure to ensure that there is democratic consent, and it requires in detail provisions to ensure the consent, in due course, of both communities, the nationalist and the unionist. I am sure that the noble Lord, Lord Dodds, will say that it is far from perfect and that he does not like the detail set out there—but that is what we agreed. It simply cannot be said that the subject of democratic consent has been ignored. It was negotiated and it was agreed.
Does the noble Lord accept that the provisions of Article 18 are contrary to the agreement that was made between the European Union and the UK Government in December 2017? Article 50 of the joint report said that before there could be any regulatory difference between Northern Ireland the rest of the United Kingdom, there had to be the assent of the Northern Ireland Assembly and the Executive. The current arrangements are in breach of an EU-UK agreement and the process for giving consent is deliberately made a non-cross-community vote, contrary to the Belfast agreement.
It is elementary as a matter of diplomacy and of international law that a country is perfectly entitled to reach a new agreement in the circumstances as they then exist. That is what happened when the protocol was agreed. Both sides agreed a mechanism in Article 18 for ensuring democratic consent.
I am grateful to the noble Lord for effectively giving way. He rightly said, both in his letter to the Times and his remarks today, that, as long as there was good faith, fair enough, but if good-faith negotiations failed to reach an agreement—not if there was any lack of good faith, I think—we would be entitled under Article 62 to repudiate the treaty.
Certainly, the EU is showing a lack of fulsome good faith in two respects. First, it is refusing to accept in the current negotiations that any change to the protocol can be made—only to its implementation. Secondly, it is repudiating its original position that it could not enter into a permanent arrangement, which was the whole basis of the negotiations we entered into under Article 50. It is now trying to make something which was intrinsically temporary, and which it said could be only temporary and provisional, into something permanent. I would have thought that, in both respects, had the British Government taken such positions, he and his friendly noble Lords would have denounced it as an appalling demonstration of bad faith.
If the noble Lord’s position is that the EU is acting in bad faith, the United Kingdom, if it takes that view, is perfectly entitled to use the procedures set out in the protocol of independent arbitration—if it does not like that, it can go to the Court of Justice—to resolve any dispute. What the United Kingdom cannot do is ignore the dispute resolution mechanisms that are set out in the protocol and simply make an assertion that it thinks there is no good faith. Indeed, I had not understood it to be the position of the Government at the moment that there was no good faith. They are about to enter into negotiations.
My Lords, it is certainly my understanding that the negotiations are being undertaken in good faith on both sides, and it would be useful to have that confirmed by Ministers when they reply.
There are a few issues here, but I say first that it is very helpful to have the noble Lord, Lord Dodds, make his contribution on his concerns about chapter 10 of the protocol, because sometimes our discussions can get a little philosophical—that may be the wrong word—and it is very helpful to have them grounded in reality. His view is that he does not want a scheme that is any different to that which exists in the rest of the United Kingdom. That is understood and we know why he thinks that. We may not feel that it is realistic in the circumstances that we find ourselves in after Brexit, but there are most certainly good prospects to negotiate, come to agreement and perhaps find exemptions that would give him close enough to what he needs to be able to move us forward and give clarity and certainty to businesses in Northern Ireland, which is surely what we all want to see.
I am worried about the potential for retaliatory measures should Clause 12 of the Bill come into force. We know that this is something the EU is deeply concerned about. That does not mean that we cannot negotiate a much better position for ourselves, but there is the prospect of some form of retaliatory measure being forthcoming from the EU. I would like to know from the Minister what assessment has been made of the potential for this—although I am not quite sure which Minister to address my gaze to on this.
That is helpful, thank you. What kind of measures do we anticipate, and what would be their impact? It is all very well to play hardball and say, “This is what we will do”, but that will always have a consequence and we need to understand what that might be. Not to do so would be deeply irresponsible.
Then there is the issue of powers. A lot has been said and I agree with pretty much all of it. Clause 12(3), which the noble and learned Lord, Lord Judge, referred to, says
“may, by regulations, make any provision which the Minister considers appropriate in connection with any provision of the … Protocol to which this section relates.”
That is incredibly broad and we ask whether it is necessary for it to be so broad. If I have understood the amendment tabled by the noble Lord, Lord Leigh, correctly, he seeks to put some sort of frame around it. We are all very concerned about where those powers might lead us.
The problem is that we have to look at this in conjunction with the Subsidy Control Act, which is itself very broad, has powers for Ministers and lacks clarity about what the UK Government intend for Great Britain’s subsidy regime. We are compounding one unknown with another. That is quite a lot for noble Lords to swallow. We have been asked to show a lot of faith in Ministers when really what we need, and what the noble Lord, Lord Dodds, has signalled he would like too, is some more information and draft regulations. We want to know where we are going with all this so that we can assess whether it will be the right approach to benefit businesses in Northern Ireland and answer the challenge made by the DUP. At the moment, I can see a set of circumstances in which it would not.
It is right that these issues are resolvable only by negotiation; we all know that. We have to start accepting that and asking ourselves whether the Bill’s approach will assist those negotiations in reaching a positive outcome. My noble friend Lady Ritchie said that this is something where we want the voice of the Northern Ireland Assembly. We want to know what MLAs from all communities have to say. It really matters that we hear from all sides, because this is about solving problems, not making things worse. The Bill really does risk making things worse.
The only other thing I would add is that there is now a different subsidy control regime in Great Britain, but where are this interventionist Conservative Government, who are making use of their new powers up and down the country? Speaking as somebody from the north-east of England, we see lots of tinkering and plenty of things that we could have done whether we were in or outside the EU. I do not particularly see that there will be the massive difference that warrants the kind of tension this is leading to. I suggest that the amendments tabled by the noble Lord, Lord Purvis, and my own are designed to be helpful. These are issues that we will not make progress on through this Bill.
I agree with the noble Baroness that I was trying to create a framework, in a very amateurish way that is way above my normal pay grade. I take her point that she is trying to do the same thing with her Amendment 18, which is sensible, but does she think removing Clause 12 would weaken or strengthen our hand in the negotiations? If a vote on the clause standing part was to take place, what would be her plans for those people planning EIS investments in the future?
That is a very helpful question. I do not think the situation is about being with or without Clause 12. The Bill places the future of the regime in Northern Ireland in some doubt because nobody is clear about what is to be negotiated, what the outcome will be and what the rules will be. Even with Clause 12 in the Bill, we do not know the answer to those questions. The negotiations need to pick up pace, and they need political leadership as well as technical negotiations at official level. Experience tells us that you need that leadership—that buy-in and that clout—from the Prime Minister down. That is how you get resolution, and that is the approach I would take. I do not think the Bill, or this clause, are the make-or-break questions to resolve this issue.
My Lords, I thank all noble Lords who have taken part in this debate and fully acknowledge that there are issues that noble Lords have raised before. In particular, I refer to the noble and learned Lord, Lord Judge, who once again, in his usual forensic and specific way, highlighted with great brevity the main issue of concern. I acknowledge that this has been raised by noble Lords during the passage of the Bill. However, I will revert to the specific amendments and seek to provide answers to some of the questions raised. I caveat that by saying that we will review some of the specific technical questions relating to previous debates—and, indeed, to previous Bills and treaties—and ensure that we provide a comprehensive response.
I thank the noble Lord, Lord Purvis, for acknowledging the letter. I hope that having three Ministers on the Front Bench is better than one. It underlines the importance that we attach to your Lordships’ House on the Bill. I also want to say from the outset, on the issue that the noble Lord, Lord Purvis, raised about the extent of the EU mandate, that we shall ask it to change from its earlier negotiating position.
My noble friends Lord Dodds, Lord Lilley and Lord Hannan alluded to the essence of why the Bill is necessary. Of course these things are negotiated. Every contract and treaty is made in good faith. The noble Baroness, Lady Chapman, was right to gaze in my direction. We are of course negotiating in good faith. If we were not, it would be a non-starter—it is as simple as that. I mentioned that I was in the last call that we had with the European Commission. We want to pursue a negotiated settlement because we believe it is in the interests of all parties and, in particular, it takes forward the concerns to which my noble friend Lord Dodds alluded. I agree with the noble Baroness, Lady Chapman, that it is important that we hear a broad debate about all the concerns that exist, particularly among all the communities in Northern Ireland.
Turning to Amendment 16 in the name of the noble Lord, Lord Purvis of Tweed, the power in Clause 12(3), also referred to by the noble and learned Lord, Lord Judge, is in line with those contained elsewhere in the Bill, but it ensures the proper implementation of the regime set out elsewhere in Clause 12, including taking account of any developments that could arise as a result of changes to the subsidy control landscape.
My noble friend Lady McIntosh raised the issue of agriculture. To respond to her, my understanding is that Clause 12 applies to agricultural subsidies. The purpose of Article 10(2) was to provide the flexibility needed to avoid Northern Ireland businesses losing out from leaving the common agricultural and fisheries policies. Clause 12 achieves flexibility by disapplying EU state aid law, rendering the carve-outs unnecessary. Agriculture and fisheries will be dealt with under the domestic regime. The new domestic regime provides a single coherent framework for all sectors. The inclusion of agriculture and fisheries will protect competition and investment in these areas across all parts of the UK, as it does for other sectors.
My noble friend Lord Dodds also talked about the detail of the regulations. Of course, I accept the importance of the need for the regulations. There will be opportunities to look at the regulations and for them to be scrutinised through normal parliamentary procedures. However, I note the points that have been made by my noble friends and other Peers in this respect. As I indicated earlier in respect of the information that we will seek to provide—
I believe that my noble friend is talking about the ministerial powers that exist here. We have had this debate before as well. We believe that a broader nature is necessary, and that is why “appropriate” is being used: to allow the maximum level of flexibility that the Government believe will be required. Of course, I accept there are differing opinions and views on this. Indeed, in conversations I have had, including with the noble Lord, Lord Pannick, to which I have alluded previously, there have been various Bills that have gone through your Lordships’ House where this discussion about “appropriate” and “necessary” has taken place, particularly with regard to the powers of Ministers and how those might be exercised. Of course, I note the point my noble friend is making.
The issue raised by the noble Lord, Lord Purvis, on TCA structures and state aid continues. TCA structures allow disputes to be raised, and the withdrawal agreement also provides structures for consultations as well. That very much remains the case. The noble Lord, Lord Purvis, also asked why the Government concluded that they had to remove state aid requirements from the protocol. The Government have been clear about the problems caused in practice by Article 10 of the protocol. This was first raised in our Command Paper in July 2021.
The noble Baroness, Lady Crawley, talked about a trigger point. Partly, this has been a culmination of the evidence and the practical experience, as was articulated by my noble friend Lord Dodds. The current system of operating two subsidy control systems within one country has created complexity and uncertainty, which is impacting policy across the UK. Irrespective of how noble Lords are approaching this Bill, either in support of or against what the Government are proposing, we all recognise that what needs to be resolved is the situation in Northern Ireland. Article 10 has also placed considerable administrative and legal burdens on businesses; for example, facing detailed questions about their operations from authorities to establish whether subsidies could be in scope of the protocol itself.
I have already referred to the powers. Noble Lords have been very articulate in making their concerns about the powers known but, again, I have underlined the importance of the necessity of these powers. To demonstrate in detail, in the previous day in Committee, we alluded to what this would require if everything was put into primary legislation.
Turning to Amendments 17 and 19, tabled by my noble friend Lord Leigh of Hurley, I am grateful for my noble friend’s contribution and for his reaching out to officials before this debate. My noble friend has powerfully illustrated the problems arising from Article 10 of the protocol and how they can arise in unexpected places across the United Kingdom and our economy. Article 10 can lead to uncertainty and delays in the delivery of subsidy schemes in Northern Ireland in comparison with Great Britain. They are exactly the sorts of problems that Clause 12 is seeking and intending to resolve, including to unleash further investment, to which my noble friend alluded, across the whole of the United Kingdom. The concurrent operation of two subsidy control regimes is a fundamental challenge for public authorities and beneficiaries across the UK. The solution put forward in the Bill truly addresses the challenges the Government believe exist, and will provide certainty across the UK.
I do not think it is clear; I do not understand. If the wish of the Government is to apply UK state aid laws in Northern Ireland—and that would be the wish of the noble Lord, Lord Dodds —why does the Bill not say that? Why, instead, does it import this uncertainty, which would be continuing far into the future, because the regulations applying in Northern Ireland would depend on the whim of the Minister, as the noble and learned Lord, Lord Judge, pointed out?
I have listened again to the noble Lord and, if I may, just for clarity, I will ensure that I get a full response to this. I will check with my officials again and provide the added clarity that the noble Baroness and the noble Lord are seeking. If that needs to be followed up in writing, I will, of course, do so as well. Ultimately, I stand by what I said earlier, that what we are seeking to do here is to address the specific issues that there are in practical terms.
My noble friend’s concerns about the scope of the Bill’s delegated powers were raised by other noble Lords. I hope that I can reassure my noble friend that the power may already be exercised only to make appropriate provision in connection with the exclusion of Article 10 of the protocol and the domestic provision that Clause 12 places on it. This provides a clear and limited framework for what the power can do; providing further constraints would provide additional uncertainty to businesses and consumers. In this case, it would put off, and potentially circumscribe, the ability to facilitate an effective domestic subsidy control regime that applies to the whole of the UK, leaving Northern Ireland being treated unfairly compared with the rest of the UK.
The Government are aware that regulations with retrospective effect are exceptional. However, it is clear that the continuing application of the state aid acquis in Northern Ireland has led to a sense of disconnection for many people, particularly the unionist parties, and puts the re-establishment of power-sharing arrangements at risk. As the EU state aid acquis is removed, it may be necessary to ensure that actions granted under the regime are appropriately reconciled with the UK regime. Removing Ministers’ ability to make retrospective provision, which was mentioned by several noble Lords, could undermine the Government’s ability to ensure a single, coherent, domestic subsidy control programme throughout the UK. It would also, in the Government’s view, create further uncertainty for businesses in Northern Ireland and across the UK. Any such regulations would already be subject to the higher level of scrutiny in the House. I know that my noble friend is concerned about creating uncertainty for investors, to which he alluded in his contribution. I hope he is reassured by what I have said: that the Government’s intention in this case is only to provide certainty. There will be time to examine any subsequent regulations.
The amendment also seeks to ensure that the power can make incidental and transitory provision. I am happy to be able to inform my noble friend that this is already the case by virtue of the operation of Clause 22(2)(e). The amendment also seeks to make necessary regulations subject to annulment by Parliament. We will, of course, debate this further when we reach Clause 22, but the Government’s proposition is that this is appropriate when regulations are making retrospective provision or amending an Act of Parliament, but that it would not be the appropriate level of scrutiny for other instruments making what are likely to be smaller or more technical free-standing provisions. I hope, for these reasons, that my noble friend will be minded to not move his amendment.
The noble Baroness, Lady Chapman, spoke to Amendment 18. We have had these discussions before, and she will know that the Government’s position remains the same; my noble friend also alluded to this a few moments ago. The Government’s position remains that “appropriate” gives the correct degree of ministerial discretion, with substantial but constrained powers, which this House ultimately accepted on Acts including the EU withdrawal Act, the withdrawal agreement Act, the Trade Act and the sanctions Act. The use of those powers has shown that appropriateness stands the test and is resilient to the kind of abuse that noble Lords have alluded to and feared. I accept what my noble friend Lord Cormack said about the test for any Minister in government and the powers given by a government Bill to those who may be in power at some future point, but at the same time, as I said, previous Acts have been passed and have stood that test.
I move briefly to Clause 12 standing part of the Bill. Clause 12 provides the basis for a single, UK-wide subsidy control policy—a point on which the noble Baroness sought clarification—rather than two separate regimes, as currently provided for under the Northern Ireland protocol. Once commenced, this clause will provide legal certainty and confidence, on the basis of which businesses can receive subsidies. We believe it provides clarity in domestic law that Article 10 is disapplied. Any subsidies that would have been notifiable under Article 10 will no longer need to be notified to the EU.
The clause also amends Section 48(3) of the Subsidy Control Act so that UK subsidy control requirements apply in Northern Ireland. Clause 12(3) provides powers for a Minister to make appropriate provisions in connection with any part of the Northern Ireland protocol to which the clause relates. The Government believe this clause is vital in facilitating a single domestic subsidy control regime applying throughout the UK, thereby giving businesses in Northern Ireland and across the UK greater certainty, and I therefore recommend that the clause stand part of the Bill.
I know that more general issues have been raised in this debate and previously, and I am sure they will be raised in our future discussions in Committee. I hope I have provided detail, to the extent I can, on some of the questions, issues and concerns raised. Equally, I give the added assurance, as we have in previous Committee stages, that I shall write to the relevant noble Lords if there is further clarity or detail to be provided.
My Lords, I am very grateful for the Minister’s response. He knows that I respect him greatly, but he said the current scheme had complexity and uncertainty and, with great respect, I do not think he added simplicity and clarity regarding the successor scheme.
My lack of a social life will bear witness to the fact that I was in for every day of the Committee and Report stages of the Subsidy Control Bill, as I will be for this Bill. I asked about complexities and uncertainties. The Minister replied to me in February:
“To respond to the concern of the noble Lord, Lord Purvis, that state aid rules would continue to apply even if the UK’s negotiating position were accepted, these are specific and limited circumstances. I trust that this will allay the Committee’s concerns on this important issue.”—[Official Report, 2/2/22; col. GC 244.]
The Minister is now saying that those “specific and limited circumstances”, which the Government said would result if they were successful in their negotiations, will be impossible to secure, so they are now seeking sweeping powers. He did not indicate when that policy change happened. It is a major change, and I simply do not know when it happened.
That position is also contradicted. The noble Lord, Lord Dodds, referred to Invest NI. As I did at Second Reading, I will read from the Invest NI website:
“This dual market access position means that Northern Ireland can become a gateway for the sale of goods … This is a unique proposition … These additional benefits”.
Invest NI is using dual market access to promote Northern Ireland. The Government may be right that this is now acting to the disbenefit of Northern Ireland, and we have asked for evidence for this. If they are designing a new scheme, the real risk, as the noble Lord, Lord Kerr, indicated, is that uncertainty will have a major chill effect that will bring about the very things the Government say they are concerned about.
I agree with the noble Baroness, Lady Chapman, that we are asked to legislate for unknown unknowns. On Monday I called these “Rumsfeld clauses”. The Government are seeking powers for known unknowns, but if they get it wrong in the future—which they do not know about—they want powers to deal with it now. The problem is that none of the powers in this Bill, which is replacing the Subsidy Control Act, has any of the restrictions and requirements of the regulating powers of that Act. The breadth of the powers goes way beyond the Subsidy Control Act, which is now proposed to be a single element.
Supposedly, these powers are simply for what Ministers consider appropriate, but I am not sure that a Minister would ever think their actions inappropriate when they bring forward proposals. It is for the law to say what is not appropriate in regulations; that is our job. The noble Lord, Lord Pannick, is absolutely right: it is not about what just Ministers or even necessarily just opponents on the Opposition Benches might use. It might be their successors as Conservative Ministers—we have had a fair few of them—who completely change policy. This is so broad.
A point of substantial importance is that there is a deep inconsistency in the Bill. The Government seem to think that it is acceptable to have a dual regulatory regime for goods but one route for subsidised goods. I have seen no mechanism that might cover a subsidised good. I really do not know whether that situation is clear.
With the greatest respect to the Minister, I do not think the noble Baroness, Lady McIntosh, received a sufficient response to her question. She will make up her own mind about this, of course. Agricultural subsidies are not included in the Subsidy Control Act—we debated this long and hard—and although the Minister said that this will now be covered in the proposals, I do not know where. The danger is that there is now an enormous black hole in the provision of agricultural subsidies. Given the agricultural support scheme announced earlier this year, I do not think it fair to have these concerns.
I do not think the Minister has satisfied the Committee. I hope that he and his officials will reflect on Hansard and provide more of the information we want to see. Unless the Government’s proposals are made much clearer, significant doubt will remain. In the meantime, I beg leave to withdraw the amendment.
Amendment 16 withdrawn.
Amendments 17 to 19 not moved.
Clause 12 agreed.
Clause 13: Implementation, application, supervision and enforcement of the Protocol
Amendment 19A not moved.
We come to Amendment 20. If this amendment is agreed to, I cannot call Amendments 21, 21A or 21C on grounds of pre-emption.
20: Clause 13, page 7, line 27, leave out subsection (4)
Member’s explanatory statement
This is part of a series of amendments based on recommendations from the Delegated Powers and Regulatory Reform Committee which states that a number of subsections in the Bill “contain inappropriate delegations of power and should be removed from the Bill.”
My Lords, Amendment 20 is, in many ways, connected and therefore I need not be as long about this
Let me quote from the Delegated Powers and Regulatory Reform Committee on Clause 13:
“Parliament has no knowledge of the Government’s plans but is meanwhile expected to rubber stamp all the regulation-making arrangements.”
That surely is not a means by which we make good legislation. The committee is highlighting Clause 13(1), which states that
“Any provision of … the EU withdrawal agreement, is excluded provision so far as it confers jurisdiction on the European Court in relation to … the EU withdrawal agreement”.
As highlighted by the DPRRC and others, it is a stretch to say that the invocation of the defence of necessity would permit the extending to all parts of the exclusion of the European court. I should be grateful if the Minister could state in clear terms why the Government’s legal position, which does not clarify this, states so.
There is a policy concern, which was aired so well by Stephen Farry MP when this was considered in Committee in the Commons. If, as seems to be the Government’s position, there will still be Northern Ireland direct interaction with the EU single market—with north-south trade as a major part of the Northern Ireland economy—without the European court having application, it puts at risk what that genuine market access is for Northern Ireland. He made that point in clear terms and I need not add to it, because the case is very strong. The policy paper The UK’s Solution, when it highlighted the problems, did not suggest the removal of the court altogether either. So is this a red line in the talks for the Government?
Secondly, concern has been raised about human rights consideration. The Northern Ireland Human Rights Commission has highlighted the fact that the breadth of the powers in
“Clause 13 of the Bill would restrict the CJEU’s interpretive role in disputes relevant to Protocol Article 2”.
We discussed on Monday the need for that to be dynamic in relation to the obligations under Article 2, and its potential removal will create concern. I hope that the Minister is able to be clear, in response to the Northern Ireland Human Rights Commission, that there would be no diminution of rights.
Given that the Government have not made the case, and given the concerns about the impact on the operation of the single market and Northern Ireland’s position within that, as well as the human rights concern, I beg to move.
My Lords, I shall not repeat myself, but I shall draw attention to the fact that, in the debate on the previous group, the Minister kept telling us that the word “appropriate” had been used in circumstances like these, as if that was something to be greeted with joy. Each of those pieces of legislation was a dreadful abdication by Parliament of its responsibilities. Even if the Minister is right—I am not challenging his veracity or judgment; let us assume he is right—that so far none of them has caused any problems, it would be nice to know that and I take it from the Minister that none has, but that does not mean that they may not cause huge problems in the future, or that when we have a change of Government, which we may have, that will not cause problems when their Ministers decide that they are going to apply these regulations. I really find that argument “It has been done before; therefore it is a precedent”—and I am a lawyer—but I do not think all precedents are wise and that one is a particularly unwise one.
I know I am trespassing back on to the previous debate, but I have another concern. During his reply, the Minister offered a number of reasons why this regulatory-making power was needed. Fine, but why are they not then put in the legislation, so that we can have a look at what these regulatory powers, at any rate at the moment, are designed to address? For the purposes of this group, if there are matters which the Government have in mind which they think can be served by a regulatory-making power, fine, but let us see what the primary legislation should contain.
Finally, can we not address the question of some diminution in this wide-ranging power? We really ought to find a way. I find it astonishing that across all sides of the House there is concern about these powers. I know that the noble Lord, Lord Dodds, is approaching the issue from his concern about the fact that the EU has these wide-ranging powers. Speaking for myself— I am only speaking for myself—I do not think we should have given those powers to the EU, but it was a consequence of signing in. I also think that, having given those powers to the EU and having been obliged to pass the necessary legislation when the EU said so, we have become habituated to passing all sorts of secondary legislation without proper analysis. I think it has contributed to the habitual way we behave. With great respect, we are concerned here with whether this Bill should give this Minister, or that Minister or the Ministers to come these wide-ranging powers. For my part, I do not think they should.
My Lords, I speak to Amendments 21B, 21C, 23B and 23C, in my name and the names of my noble friends Lady Ritchie of Downpatrick and Lady Goudie. I am grateful for their support.
On Amendment 21B, Clause 13(1) removes the jurisdiction of the EU’s Court of Justice altogether, but the Court of Justice jurisdiction is essential to the operation of the single electricity market to keep the lights on in Northern Ireland, which the UK Government have said they wish to see remaining unaffected. This amendment ensures that there will be no inadvertent disruption to the single electricity market through the coming into force of this clause. Surely the Government should accept that.
On Amendment 21C, Clauses 13(4) and (5) allow a Minister of the Crown to make regulation in relation to any provision of the protocol relevant to the jurisdiction of the Court of Justice or the application, supervision and enforcement of the protocol. There is a possibility that this could inadvertently affect the operation of the single electricity market. This amendment requires the Minister to make and publish an impact assessment prior to regulating under this clause in order to prevent such a risk to the single electricity market. I do not see what the problem with my amendment might be; it seems to me entirely reasonable.
On Amendment 23B, the operation of the single electricity market on the island of Ireland comes under the jurisdiction of the Court of Justice of the European Union and is required to be interpreted in the light of case law of the CJEU. The scope of Clause 14 makes this impossible. This amendment would ensure that Ministers regulating in this area under Clause 14(4) would have to make and publish an impact assessment, prior to the regulation, in order to consider its possible negative implications on other aspects of the protocol that the Government wish to protect, including the single electricity market. Again, I cannot see what objection there might be to Amendment 23B.
On Amendment 23C, the operation of the single electricity market on the island of Ireland comes under the jurisdiction of the Court of Justice of the EU and is required to be interpreted in the light of its case law. The scope of Clause 14 makes this impossible and puts Article 9, on the single electricity market, at risk of being excluded from the protocol by accident, even though the Government say they wish to protect it. This amendment would ensure that the functioning of the single electricity market is specifically protected from the scope of this clause to maintain its operation, which is necessary for the electricity supply in Northern Ireland. Again, surely this is a no-brainer for all of us, including government Ministers.
By way of background, a wholesale electricity market is where electricity is bought and sold before being delivered to consumers. Market arrangements require generators and wholesale suppliers of electricity to forecast their generation and consumption and to bid at the price at which they are prepared to buy and sell. Competition between suppliers with equal access to a grid system should ensure value for customers, with a market price based on the minimisation of production cost.
Power markets have been evolving across Europe since the early 1990s. Since the entry into force of the Lisbon treaty in late 2009, the EU gained formal competences in energy and embarked on electricity market reform. A core part of this was the so-called third energy package. To enable cross-border trade in electricity and gas, each coupled market adopts a common set of rules and standardised wholesale trading arrangements so that system operators can work together to allocate cross-border capacity and optimise cross-border flows. This is what is at work in the integrated single electricity market on the island of Ireland.
The SEM is a cross-jurisdictional wholesale electricity market that came into being in 2007. It allows generators and suppliers to trade electricity in a single market across the island of Ireland. Fundamentally, it helps ensure that there is sufficient capacity to meet electricity demand at all times in both Ireland and Northern Ireland. Being part of an all-island market brings benefits to electricity customers in Northern Ireland by reducing electricity prices and increasing the security of supply. It was further cemented in 2018 with the integrated pan-European market design of the third energy package.
An intergovernmental UK-Ireland memorandum of understanding co-ordinates non-mandated market arrangements, but the SEM functions through an overarching European Union-mandated convergence of energy policy and market structures, as governed by certain parts of the European Union acquis. The Ireland/Northern Ireland protocol to the withdrawal agreement provides the basis for the continued operation of the single electricity market after Brexit by including the minimal amount necessary of EU laws on energy markets.
To do this, Article 9 states:
“The provisions of Union law governing wholesale electricity markets listed in Annex 4 to this Protocol shall apply, under the conditions set out in that Annex, to and in the United Kingdom in respect of Northern Ireland.”
Annexe 4 then lists seven Acts that apply to the
“generation, transmission, distribution, and supply of electricity, trading in wholesale electricity or cross-border exchanges in electricity.”
These key elements of European energy law applying in Northern Ireland are, notably, largely in devolved competences. For example, the EU’s regulation on energy market integrity and transparency—REMIT—prohibits insider trading and energy market manipulation and makes provision for the monitoring of the market by regulators. REMIT continues to apply in Northern Ireland through the protocol.
The application of these Acts entails circumscribed participation in the EU market, which requires acceptance of EU governance. In practice, this means that the ultimate arbiter of EU law is the Court of Justice of the European Union. An essential criterion for transposing EU law into single electricity market rules is that single market rules cannot be differentiated across jurisdictions and alignment must be guaranteed for the future.
Article 13 of the protocol states that
“the provisions of this Protocol referring to Union law or to concepts or provisions thereof shall in their implementation and application be interpreted in conformity with the relevant case law of the Court of Justice of the European Union.”
This includes the provisions listed under Annexe 4. This is to secure the governance of the internal energy market, as it covers the single electricity market. This is removed by the Northern Ireland Protocol Bill, Clause 13(1) of which sets out:
“Any provision of the Northern Ireland Protocol, or … the EU withdrawal agreement, is excluded … so far as it confers jurisdiction on the European Court in relation to … the Northern Ireland Protocol”.
The Explanatory Notes underline:
“That is the case whether the CJEU jurisdiction relates to excluded provisions or any other matter.”
With the removal of the CJEU and no means of referencing its case law or jurisprudence, the governance of the single electricity market is put in jeopardy and, thus, the continued functioning of the all-island market is as well. This is happening at a time when the pricing of electricity, security of supply and balancing supply and demand are at an almost unprecedented level of concern to consumers this winter on the island of Ireland and elsewhere in the world, including Great Britain.
A lot of concern has rightly been expressed about the unknowable consequences of the Bill, given that so much of its effect will come through powers that are neither clearly demarcated nor spelled out—the noble Lord, Lord Purvis of Tweed, has spoken at length on this. However, I draw to noble Lords’ attention the dangers in what we do know about the Bill’s actual, if unintended, effects. On coming into force, even this skeleton Bill will be powerful enough to undermine the foundations of the protocol completely, with direct, immediate and practical consequences for Northern Ireland. This is primarily because the Bill removes the Court of Justice of the EU from having a role in the oversight of the protocol. Clause 13(1) sets out that any provision of the Northern Ireland protocol or withdrawal agreement is excluded so far as it confers jurisdiction on the Court of Justice,
“whether the jurisdiction relates to excluded provision or any other matter”.
As such, Court of Justice jurisdiction is removed altogether. Furthermore, Clause 20 means that domestic courts and tribunals cannot refer any matter to the Court of Justice in relation to the Northern Ireland protocol, and that they will not be required to follow the jurisprudence of the CJEU from the day the Act comes into force.
This is not merely a theological matter. Article 12(4) of the protocol spells out what the Court of Justice of the European Union has been given jurisdiction over for Northern Ireland. This includes customs and the movement of goods entering Northern Ireland and technical regulations and certification for goods, but it also includes the single electricity market. In addition, Article 13 states that the implementation and application of the protocol provisions referring to union law, concepts or provisions should be
“interpreted in conformity with the relevant case law of the Court of Justice of the European Union.”
The EU has been absolutely clear that Northern Ireland’s free access to the EU single market is contingent on the jurisdiction and jurisprudence of the Court of Justice of the EU.
I am sorry that I am speaking at some length on this, but it is quite complex and important. To change the position of the Court of Justice as proposed in the Bill would immediately erode the basis for an open Irish border. It is either naive or disingenuous of the Government to claim that the single electricity market will be unaffected by the Bill: the position of the Court of Justice is absolutely essential to its operation. The prospect of the collapse of the single electricity market at one point led UK officials to consider putting generators on barges in the Irish Sea in the event of a no-deal Brexit, which tells us that this is deadly serious.
I remind the Government, keen as they are to claim sovereignty over Northern Ireland, that it is their duty, not the European Union’s, to keep the lights on in Northern Ireland. If the EU decides to prevent the continued free flow of goods and electricity across the Irish border because of the removal of the CJEU from the protocol, it would be not a sign of its malintent but rather a well-flagged consequence of the wanton recklessness of the Government in writing the Bill in this way.
I will refer to another skeleton analogy: the Government are trying to claim that the benefits of the standing, walking protocol can be retained at the same time as cutting off its head and removing several of its major bones. Equipping the Government to fashion new plastic limbs over time to fix the problems that the Bill is deliberately inflicting on the protocol is one thing, but removing the head, in the form of Court of Justice jurisdiction, will of course mean that the protocol simply cannot function, and thus neither can things that it sustains, such as the open border and the single electricity market.
I am not arguing that there could not conceivably be a situation in which Articles 12 and 13 of the protocol are adjusted to allow for some finessing of the Court of Justice’s position, but this would have to come through negotiation and agreement between the UK and the EU—and, for this, trust between them will need to be built. However, by its very existence, this Bill does quite the opposite: it destroys trust. By amending the Bill to avoid the removal of the Court of Justice’s jurisdiction having unintended consequences for the operation of the single electricity market—which the Government have been clear they wish to see kept fully functioning—we would at least ensure no disruption to electricity supplies in Northern Ireland, even if it loses free access to the EU’s single market for goods.
Finally, I appeal to Ministers to look again at the drafting of these amendments. If there are some technical issues, I am happy to discuss them. However, I do not see why they cannot accept the principle behind them, which is to keep the single electricity market functioning smoothly.
My Lords, in declaring an interest as chairman of the Climate Change Committee, I wish to follow on from what has just been said. As the Democratic Unionist Party knows, we have reached out to Northern Ireland particularly because of the difficulties the economics of that part of the United Kingdom have in meeting the climate change requirements. Indeed, I found myself in what my noble friends might well feel are the unusual circumstances of defending the Northern Irish Government against an assault by Sinn Féin and the Greens, demanding answers in Northern Ireland that were, in our view, not possible. The Climate Change Committee is clear that we do not ask of people things they cannot do. Therefore, Northern Ireland has a much more limited demand on it: to reach something like 85% of the 100% we want for net zero in 2050. That means that the rest of the United Kingdom must do better to make this possible.
I beg my noble friends the Ministers to recognise that, although they know that I am deeply opposed to this Bill in every aspect, I am asking for their help on this because the Bill presents a peculiar and particular difficulty: the single electricity market in Ireland is crucial to trying to meet the requirements that we place before it. First of all, it is crucial to keep the lights on Northern Ireland—I ask noble Lords to forget climate change for a moment because this is absolutely vital, and this is why it is set up in this way. I know this because I had to understand it to do the work that we did to help the DUP present its case to the Northern Ireland Assembly for not doing what most of us would love the Assembly to do: to reach the net-zero target that we have as a United Kingdom by 2050.
I beg the Minister to take this very seriously indeed, and to think of it differently from the way he wishes to think about the rest of the Bill. There will be issues if we interfere with the single electricity market; I cannot even see how we keep the lights on now. We must make enormous changes to meet the net-zero target, which the Prime Minister reaffirmed today as essential for our economic future as a United Kingdom. So if we are talking about the protection of the United Kingdom —the union—this is crucial to get right. This is not just about keeping the lights on; it is about ensuring that we can go on keeping the lights on without costing the earth. That is going to be very difficult for Northern Ireland to do—I recognise that. We have had extremely good conversations about how we might do it, but we will not be able to do it if we throw this bit of co-operation into debate or dispute, because Ireland as a whole—as an island—must meet this target together.
Indeed, one of the arguments properly put by the DUP when we were discussing all this was that the Republic of Ireland has not explained how it is going to meet its targets—we accepted that. We said that this does not excuse us from being detailed about meeting our targets. Instead, it means that we must recognise that those targets are not going to be met on a north of Ireland basis; they will have to be met by Northern Ireland within the context of the whole of Ireland meeting them.
The detailed examination of this, as put forward by the noble Lord, Lord Hain, is crucial in debating the Bill. In a sense, I wish that I liked the Bill, because that would enable my noble friend the Minister to see that I am being specific about this issue, wholly separately from the fact that I think the Bill gives the Government powers they should never have. The noble and learned Lord, Lord Judge, again pointed out that, every time we discuss any of these things, the big problem is that we are uncertain as to how these powers would be used. The problem here is not that, but rather, without excluding the single electricity market, we explicitly say that neither the European Court of Justice nor its previous decisions can be used in these circumstances. There is no way that the single electricity market can be run unless we maintain and protect the mechanisms which have in fact proven perfectly reasonable ever since they were put in place. Consequently, unless we maintain those mechanisms, there is no way we can keep the lights on because there is no way we can make that mechanism work.
Similarly, to those of us who are passionate about the serious issue we have so short a time to fight—climate change, the biggest physical threat to our society—I say that we are now throwing into doubt, maybe for years, the mechanisms without which we cannot do that job in Northern Ireland or Ireland as a whole. I plead with my noble friend the Minister to forget all the other arguments and recognise that there is something here that the Government must change in passing this Bill, whatever else happens. The Government know perfectly well that I hope the Bill will not pass and that I will do anything in my power to stop it passing, because it is a very bad Bill. However, this is so disruptive that it must be looked at, even by those who believe in the Bill.
If the Government want the co-operation they are hoping to get through this Bill, I hope the Democratic Unionist Party will explain to them why they must protect the electricity supplies. There is no way of doing that—or of ensuring that we fight climate change in Ireland—unless we accept that the electricity system be excluded from the operations of this Bill.
My Lords, I continue to be worried by the interrelationship between the trade and co-operation agreement and the withdrawal agreement. I mentioned this before in Committee on Monday, but I did not develop the point at all. The trade and co-operation agreement is 1,246 pages long. If you get to Part 7, “Final Provisions”, on page 402, you find a provision called “Relationship with other agreements”. I will just read it out because I think it is critical; we have been talking about Rumsfeld problems, but I think this is a kryptonite problem. It says:
“This Agreement and any supplementing agreement apply without prejudice to any earlier bilateral agreement between the United Kingdom of the one part and the Union and the European Atomic Energy Community of the other part. The Parties reaffirm their obligations to implement any such Agreement.”
This provision has been the topic of quite a debate around the place in articles, conferences and things, but it is an interlinking provision between the critical trade and co-operation agreement and the withdrawal agreement. As an interlinking provision, it means that, if something happens to the withdrawal agreement, that in turn—so goes the argument—could come back and torpedo part of, in some way, the trade and co-operation agreement, which, as I have said, is such a critical piece of our trade with our largest trading partner.
I feel that it is very important to consider that. First, I would like to ask the Minister—I am not sure who is answering this section; I now know it is the noble Lord, Lord Ahmad—whether he accepts that this an extremely important thing to consider. If by doing something to the Northern Ireland protocol and the withdrawal agreement you are causing damage to the trade and co-operation agreement, that could be very serious. Certainly, as you sought to make a change to the protocol, you would need to come back to a parliamentary process. You would need to stop and think very carefully about what would happen. That is why, when I look at Clause 13(4), naturally I agree with everything that the noble and learned Lord the Convenor said earlier about this, but I have an additional worry that any old Minister of the Crown could rush into making some regulations and not remember page 402 of the trade and co-operation agreement.
My Lords, I want to make yet another appeal to my noble friends on the Front Bench to pause this ridiculous Bill. We heard a very powerful speech from my noble friend Lord Deben, following another powerful speech from the noble Lord, Lord Hain. Although I understand what both of them said and endorse what both of them said, nothing that they said can make this Bill any better than it is—and it is useless.
In fact, it is worse than useless because on the one hand the Government are saying to us, “We prefer and want to have a negotiated settlement”. Amen to that. But how can you have proper negotiations if at the same time you are obliging Parliament to put you in a straitjacket—one that also confers on you frankly uninhibited powers. The whole thing is contradictory in so many ways.
Yes, we accept that the protocol is not perfect, although it was thrust on us by the Government and willingly entered into by them. Every amendment that comes before us shows that, yes, you can tinker here, you can tinker there, but you cannot make this Bill a good Bill. All the scrutiny from all the learned minds, including that of my noble and learned friend Lord Judge, cannot make this pig’s ear into a silk purse. It is impossible. If we are going to have unfettered negotiations, then for goodness’ sake let us pause the Bill and, as I said the other day, not continue, frankly, to waste Parliament’s time.
I strongly urge my noble friends to accept the good sense of this proposition. Yes, negotiate. You say you want to negotiate. Well, negotiate. Negotiate without tying your own hands or obliging others to tie them, and go forward in a spirit of genuine desire for reconciliation and agreement. My noble friend Lord Deben just pointed out that, in this one vital area of climate change, the supply of electricity to the island of Ireland, the lifeblood that it needs and without which it cannot survive, is something that this Bill can only make more difficult and make the whole situation one that becomes increasingly impossible to overcome. To quote those famous words, we have “sat too long” on this one and it is time we moved on.
I keep hoping that the noble Lord, Lord Cormack, will say something with which I can disagree—but he keeps on letting me down. I strongly support Amendment 20, of course, for the obvious reasons that I need not repeat. I also support Amendment 21B, put forward by the noble Lord, Lord Hain, and strongly supported by the noble Lord, Lord Deben.
I ought to declare an ex-interest. I used to be a director of a power company and, if I remember right, Northern Ireland is a net importer of electricity but a large net exporter to the Republic. The trade with the Republic is less than the trade that comes in from Scotland on the interconnector. It follows that, if the Bill goes through in the form it is in now, unamended by the noble Lord, Lord Hain, the collapse of the common electricity market will do very grave damage to the Republic as well as to Northern Ireland. For Northern Ireland, it is important for security of supply and to keep costs down; in the Republic, it is much more important because the Republic is a net importer; it is very short of generating capacity.
So I say to the Minister that I really hope he will buy Amendment 21B from the noble Lord, Lord Hain —I cannot see any reason why he should not. If he does not buy it, would the Government please produce before Report a clear statement of the discussions they will by then have had, if they have not already had them, with the Government in Dublin about how the crisis that this would create for the Government in Dublin is to be avoided or mitigated.
I will also add a word on the very important point made by the noble Earl, Lord Kinnoull. He made it very gently. There is no doubt that the European Union means what it says when it says that, if we put this Bill in its present form on our statute book, the TCA bets are off. We are heading for a trade war if we do this. I hope the DUP will bear that point in mind because, although the trade war would be acutely damaging to the whole United Kingdom, it would do particular damage to the economy of Northern Ireland.
I understand what the noble Lord is saying—that the European Union would likely invoke some kind of trade war—but does he understand that, for many people in Northern Ireland, this Bill is the only thing that is giving them some hope that there will be real change? A trade war is very worrying, but there are also very worrying signs in Northern Ireland of deep unrest, concern and instability. That is why the suggestion from the noble Lord, Lord Cormack, that we should get rid of this Bill would be deeply damaging to relations in Northern Ireland.
With great respect to the noble Baroness, that is not what the public opinion polls are telling us. At present, they seem to be telling us that what a majority of people in Northern Ireland, and a great majority of younger people in Northern Ireland, are looking for is certainty, and they are reasonably content with the protocol.
I have no expertise to match that of the noble Baroness. But I do think we need to remember that, in the last Northern Ireland election, the voting for the DUP was about one in five of those who voted—and, since the turnout was about 60%, it was a pretty low proportion of the electorate. It is worrying, or at least curious, that the DUP, which constitutes, on its voting last time around, 0.4% of the UK electorate, should be able, it seems, to wag the dog. It is a very small tail that is wagging the dog—and, if we all end up in a trade war with the European Union, it will be the tail that gets the most pain.
Will my noble friend accept this, just to get the two noble Lords together—if I may put it like that? The fact is that nobody in Northern Ireland is going to accept measures that turn the lights off. Most people in Northern Ireland actually want to do something about climate change; the polls are absolutely clear about that. This Bill will mean that we will not be able to fight climate change properly, and the lights are certainly in danger—and, if the lights went off, I do not think that people would thank the DUP for that.
My Lords, I rise to support Amendments 21B, 21C and 23C in the name of my noble friend Lord Hain. It is a pleasure to follow him as well as the noble Lord, Lord Deben, the noble Earl, Lord Kinnoull, and the noble Lord, Lord Kerr.
I am in absolutely no doubt, and all the research indicates, that the protocol is essential to allowing the lights to stay on in Northern Ireland and on the island of Ireland—because we have been in a single electricity market since 2007. The evidence is there to suggest the support of young people for ending political and economic uncertainty, plus their support for action on climate change. I declare an interest as a member of your Lordships’ protocol committee; we took evidence in Northern Ireland and from community groups, and the most important issue to them was not the protocol: it was addressing the cost of living crisis and the cost of doing business crisis.
The noble Baroness, Lady Hoey, referred to the fact that a significant proportion of people are opposed to the protocol. I acknowledge that there is unionist opposition to the protocol, but I also acknowledge that a large majority of Members of the Northern Ireland Assembly who wrote to the then Prime Minister, Boris Johnson, indicated their support for the protocol—and, in so doing, indicated their support for an end to that political and economic uncertainty. One way in which we can have economic certainty in Northern Ireland is through the continuation of the single electricity market, which deals with issues to do with decarbonisation and climate change. It is essential that the lights keep functioning, but it is fundamental to our businesses on the island of Ireland.
It is worth noting that the protocol provisions addressing the single electricity market on the island seek to ensure the continued operation of that wholesale electricity market from the end of the transition period. That is to be achieved by Northern Ireland continuing to align with a number of European Union directives on wholesale electricity. A report from the House of Commons some years ago indicated that Article 9 of the protocol, alongside Annexe 4, secures the continuation of Northern Ireland’s participation in the single electricity market on the island of Ireland. In that 2017 parliamentary report on Brexit and energy security, the parliamentary committee expressed its support for the preservation of the single electricity market, noting that it benefited Northern Ireland in energy security, decarbonisation and energy prices.
For those reasons, I make a special plea, as a resident in Northern Ireland, to support the amendments proposed by my noble friend Lord Hain. I urge the Government to accept them, because it is vitally important that there is a means to prevent unintentional and indirect negative consequences of excluding the jurisdiction of ECG on the functioning of the single electricity market. In that respect, I look forward to the Minister’s response.
The noble Baroness, Lady Hoey, referred to a large section of the population not supporting the protocol. We took evidence this morning from Peter Sheridan, the chief executive of Co-operation Ireland—and I freely admit that I am a member of that board. It was excellent evidence that clearly highlighted the fact that yesterday he was talking to loyalists and, in their evidence, they did not highlight any particular issues about any return to violence. He had a very constructive meeting with them, from what he told us. So things are not as acrimonious or about to tip into violence as some would suggest.
I urge support for the amendments and, in so doing, support to underpin the single electricity market, which has been an excellent product since 2007.
My Lords, I wonder whether we should stop and think for a moment. The electricity issue that has just been raised is the most serious—but not the only—disastrous situation that will occur if this Bill is passed in its present form. Since we appear to be having the opportunity for constructive discussions between the United Kingdom—or parts of it—and Ireland and the EU, rather than killing the Bill, which I would like to do, perhaps we might look pragmatically at what might be achieved. Perhaps the Government would seriously consider not proceeding with the Bill until they can see whether the current constructive discussions are bearing fruit. If they do not bear fruit, perhaps they could bring the Bill back in a considerably altered form.
I will add one small point to the splendid speech of the noble and learned Lord, Lord Judge, about necessity or appropriateness. It may just be that the Government could think about whether they could not require “appropriateness” in every single clause. There must be some clauses where “necessity” would be the reason for changing. I understand why we do not have a Bill with a great deal of information, because it might cut across the negotiations that are being made—but, while they think about how they could improve the Bill, if they were prepared to pause it, they could look at this point about why much of what they are asking by way of regulation could not be by necessity and not appropriateness.
It is getting late—we are almost at dinnertime, I hope. The point is about international law. Clause 13 would exclude the jurisdiction of the Court of Justice of the European Union, which is conferred by the protocol. The test of necessity under international law requires consideration of the necessity for resiling from the protocol by reference to each individual provision: we do not look at it as a whole, we ask whether there is a necessity for this or that. My question to the Minister is: what is the necessity in international law for excluding the jurisdiction of the European Court of Justice? What is it about the European Court of Justice that so concerns Ministers?
We have debated at some length, and I agree with all the speeches that have been made on the subject, the difference between “appropriate” and “necessary”, but the test in international law is necessity. Ministers may well think it is appropriate, for political reasons, to exclude the jurisdiction of the European Court of Justice—I well understand why that may be the case—but can the Minister please tell me how it satisfies the test of necessity to exclude that jurisdiction?
My Lords, this is the third day we have been debating the Northern Ireland protocol and I know Members may be tired or exhausted, but it seems from a unionist point of view that a lot of Members of this House are either tone deaf or totally blind—because they desire to be—about the reality of the situation with the protocol. I do not know how many times Members have to be told that the protocol is totally unacceptable to any unionist elected representative, any unionist within the Northern Ireland Assembly, or indeed any unionist Member who sits in either of the Houses here. That seems to have been just cast aside.
A few moments ago, we listened to the noble Baroness, Lady Ritchie, who stressed how important it is that the protocol is not just re-established but is put fully into operation. Then she stressed how important it is that the Northern Ireland Assembly is given its place to support this protocol. I say gently to the noble Baroness, for whom I have a personal respect, having known her for many years in the other place and in the Northern Ireland Assembly, that maybe she has forgotten that majority rule is no longer in existence in Northern Ireland. In fact, the behest of her community, and indeed the marches on the streets and other activities by others she would not necessarily associate herself with, ensured that majority rule was no longer in existence in Northern Ireland. She is basing her remarks upon the acceptance of the Northern Ireland Assembly, debating and then supporting the protocol with Sinn Féin, the SDLP, the Alliance, the Greens and a few other parties, but not one unionist.
Maybe the Committee needs to learn this fact: the very basis of the Belfast agreement was predicated upon cross-community support, not majority rule. That was decided, and indeed lauded and applauded, by every part of this House. We are also constantly reminded that nothing, but nothing, must be done to undermine the Belfast agreement. I noticed that when the noble Lord, Lord Kerr, was speaking, he mentioned the polls and what the polls are saying. I suggest we should be very careful about what the polls are saying, because they certainly got it wrong on Brexit and it seems that they got it wrong on the election in Israel just yesterday. I suggest that, since we listened to the Secretary of State say that Northern Ireland is heading to the polls, rather than telling us what the polls are saying, when the people of Northern Ireland speak we will find out what the unionist community believes about the Northern Ireland protocol.
It may surprise noble Lords, but there is a party in this House that when it takes a manifesto to the people, actually stands by its manifesto. I know that is a novel thing for the Government Benches over the years, but it is not novel for the Democratic Unionist Party. I suggest that noble Lords refrain from telling us, because to be honest, I am fed up with people telling us what the people of Northern Ireland want. Let the electorate speak. The Minister, or rather the deputy at the Northern Ireland Office, has told us that we will shortly hear the date of the Northern Ireland election. Therefore, the Northern Ireland protocol will be put to the electorate and we will see what the unionist population believes concerning that protocol.
I note, before I finish, that on a previous occasion when I was speaking the noble Lord, Lord Kerr, said that it was novel for us to support or base our opinions on the Belfast agreement when we opposed that agreement. I remind him why we opposed it. It was because the Belfast agreement was putting unreconstructed terrorists into government who would not support the police or law and order. In fact, it took another agreement, the St Andrews agreement, to bring them to the place where they had to say that they would give up their weapons, that the IRA weapons would have to go and that they would actually support the police and call upon their community. So, when noble Lords mention that we did not support the Belfast agreement, that was on the basis of the Belfast agreement at that time bringing in unreconstructed terrorists.
As one who suffered from those terrorists, I say without apology to the noble Lord and to the Committee that I did not agree at that time, but I am also long enough in public life to know that the Belfast agreement is an international agreement and therefore this House has constantly told us that we must do nothing to undermine that agreement. I can tell the Committee clearly that, day by day, those who say that the protocol must continue are undermining the Belfast agreement within the unionist community. I trust and pray that the Government will wisely accept that the Bill is not perfect, but it is certainly better than anything I have heard anyone else suggest we should move forward on.
My Lords, this group of amendments brings us to the role of the European Court of Justice, with Clause 13 classifying any provision of the protocol or withdrawal agreement that confers jurisdiction on the ECJ as “excluded provision”. When the Government negotiated and signed the withdrawal agreement, they agreed to a limited role for the ECJ in certain cases. This clause ends ECJ jurisdiction, even when it does not directly relate to excluded provision, and there is a question mark about whether the Government are acting in bad faith on this matter.
Subsections (4) and (5) have been included, according to the Explanatory Notes, to allow Ministers to make arrangements for the sharing of relevant information with the EU. Can the Minister say more about this? To our knowledge, the UK has still not given the EU access to real-time customs data, as required under the withdrawal agreement.
The scope of the power in Clause 13 is very wide. The DPRRC said:
“Parliament has no knowledge of the Government’s plan but is meanwhile expected to rubberstamp all the regulation-making arrangements.”
This point has been made by a number of noble Lords, not least the noble and learned Lord, Lord Judge.
Amendments 21B to 23C, tabled by my noble friend Lord Hain and the noble Baroness, Lady Ritchie, on the potential consequences for the operation of the single electricity market, are very important. I hope the Minister will be able to clarify the legal position. I also hope he will rise to the challenge put to him that the UK Government have every intention of maintaining an all-Ireland electricity market. I look forward to the Minister’s response.
My Lords, I thank again all noble Lords who have spoken on this issue. I will approach the question on the single market in electricity, and I am grateful to the noble Lord, Lord Hain, for tabling his amendments in this respect. I will start with Amendment 20, in the name of the noble Lord, Lord Tweed of Purvis.
Did I say “Lord Tweed of Purvis”? It is written in my notes as “Tweed of Purvis”. It is getting late. I am picking up on the noble Lord, Lord Campbell—it is catching. Maybe there is a suggestion in there—I would be the noble Lord, Lord Wimbledon of Ahmad. My apologies to the noble Lord.
The Government have references to the potential use of powers in Clause 13(4), which several noble Lords mentioned. In short, these would ensure an effective assurance and enforcement regime that could give confidence in the protection of the UK and EU markets. This includes fulfilling our ongoing commitment to provide data to, and to co-operate with, the EU, an intrinsic part of the overall model. The noble Lord, Lord Ponsonby, also raised the issue of data sharing and I will come to that in a moment.
The noble Lord, Lord Purvis, rightly raised the protection of Article 2. I assure the noble Lord—I believe I said this on one of the previous Committee days and my noble friend Lord Caine also answered on this—that my noble friend Lady Altmann and I have discussed this, and we have made sure that the response is fully integrated. The UK is committed to ensuring that rights and equality protections continue to be upheld in Northern Ireland, in line with the provisions of Article 2 of the protocol. That is why Article 2, as my noble friend Lord Caine also made clear, is explicitly protected from being made an excluded provision in Clause 15. My noble friend discussed this with and responded to the noble Baroness, Lady Ritchie, and I know from exchanges between the two departments that we will respond in writing to the noble Baroness, as promised. We will share that with noble Lords, placing a copy in the Library. I assure noble Lords that this point is not lost. As I have said, where further clarity can be provided during the passage of the Bill, my colleagues and I will seek to provide it.
I thank the noble Earl, Lord Kinnoull, for pointing out the importance of one treaty and its relation to the others. He has drawn attention to an important point, particularly when it comes to the TCA. If I may, I will write to confirm that fact specifically. To my mind, it is necessary that when we bring forward legislation we reflect on its importance and its impact on existing treaties, particularly those with key partners. The point is well understood and I will confirm in writing to the noble Earl.
As set out in the Northern Ireland protocol, the UK’s solution is to put in place a trusted trader scheme and share data on its operation and data from relevant customs systems. This is an integral part of providing assurance, the need for which I understand, to the European Union on the operation of the new regime and the protection of its single market, while recognising that arrangements within the United Kingdom should be a matter for the UK Government. If I heard correctly, the noble Lord, Lord Hain, who speaks with great insight and experience, said that the British Government were seeking sovereignty. That is the crux. Northern Ireland is an integral part of the United Kingdom and the concerns raised about the protocol and its operation are exactly why the Government are seeking to act in the way that the Bill would introduce. At the same time, we understand that we must work constructively with the European Union, which is why I have alluded previously—and do so again—to the constructive nature of our engagement with EU partners. I accept that these are highly complex arrangements that will require sufficiently flexible powers to be effective, as technology and our relationship with the EU evolve.
I turn now to Amendment 21, in the name of the noble Baroness, Lady Chapman of Darlington. I think we have covered this but, at the risk of repeating myself, the Government have made their position very clear, although I look to the noble and learned Lord, Lord Judge, on this issue. I heard what he said about its importance and I take on board the fact that previous Bills may have passed and may also be working. The point is understood about the nature of the debate we have had, and will continue to have, over “necessary” and “appropriate”. However, the Government feel that to allow maximum flexibility, “necessary” is the avenue they are pursuing.
I turn now to Amendments 21B and 23C in the name of the noble Lord, Lord Hain. I am grateful to the noble Lord for bringing this important issue before the Committee. Let me put on record that the Government have always been clear that we want to cement the provisions in the protocol that are working. I heard very clearly the passionate remarks and insights of my noble friend Lord Deben about the importance of the single electricity market. Irrespective of where we are sitting or what perspectives we have, no one would disagree with the noble Lord, Lord Hain, about the benefits the single electricity market provides to all citizens across the island of Ireland including, importantly, citizens in Northern Ireland. It is precisely for this reason that we assure my noble friend Lord Deben, the noble Lord, Lord Hain, and all noble Lords, that the Bill does not seek to exclude Article 9 or Annexe 4 of the protocol, which would maintain the single electricity market.
It is the Government’s view that it is inappropriate for the CJEU to be the final arbiter of certain disputes between the UK and EU law under the protocol. The Bill removes the effect in domestic law of the jurisdiction of the CJEU in enforcing or interpreting law that applies in Northern Ireland. The Government are confident—notwithstanding the remarks made by the noble Lord, Lord Pannick, which ignited my response, if I may continue with the bad jokes at this hour—in the ability of UK courts to interpret the law which applies in Northern Ireland. But, of course, the powers in the Bill enable the Government to deal with any issues that might arise in relation to the interpretation of EU law underpinning—
I have given the Government’s position, and I am going to totally digress at this point from my speaking notes. I am reminded of something my noble friend Lord Howard, who is not in his place, said to me during my introduction back in 2011, regard people’s various insights. This also relates to the point made by the noble Lord, Lord Kerr. I remember a debate on the withdrawal Bill, taken by my noble friend Lord Callanan, during which certain specific issues were discussed and we talked about the case against the Government at that time. I remember the interventions that were made as I sat next to my noble friend. One was in reference to the actual case. The noble Lord, Lord Pannick, corrected the Minister, saying that, actually, as lead counsel on the case, perhaps he could provide an insight. As my noble friend fought the defence of Article 50, the noble Lord, Lord Kerr, stood up and suggested, “What would I know? After all, I only wrote Article 50”. So, on this issue, where I am testing a principle of law, I repeat what the Government’s position is but I take note of what the noble Lord has said in this respect.
The Minister has been very generous and kind in saying that he was grateful that I raised the single electricity market, but he has not addressed any of the issues I put to him. If he is not going to do so in his closing speech, could he write to me and say in what way, apart from seeking not to jeopardise the single electricity market, which nobody wants to do, obviously, he is going to prevent it being jeopardised, for the reasons I enunciated?
I do not know if I disappoint or please by saying that there are several more pages in my speaking notes which may address in part what the noble Lord, Lord Hain, said, and this relates also to his amendments on the issue of assessments on non-excluded provisions. To make a general point, whether it is the perspective of the Government in introducing the Bill or the sentiments we have heard from our noble friends, including those within the DUP, and the noble Baroness, Lady Hoey, I think we are all coming at this with the end objective of ensuring that the benefits there have been from the market should be protected. I am quite happy to discuss the specifics with the noble Lord, together with officials, after the debate to see if there is a specific insight we perhaps have not picked up on in respect of these amendments, and how we can have a further discussion in this respect. I fully accept the key principle—I think we all do—regarding the protections that have been afforded and the gains that have been made. Of course, no one wants any lights going off anywhere.
It is the Government’s view that Amendments 21C and 23B, in the name of the noble Lord, Lord Hain, would prevent any regulation being made under the powers in Clauses 13 and 14 before an impact assessment had been carried out with regard to the regulation’s effect on non-excluded provisions of the protocol. Regulations under Clauses 13 and 14 should not be presumed to have any impact on non-excluded provisions of the protocol. They are not excluded and will continue to apply—indeed, they will continue to attract the benefit of the EU law principle of supremacy.
However, if the noble Lord is simply after a more general economic impact assessment—this is where I am saying that a discussion may be helpful—I am not sure that these amendments are required either. Regulations under the specified clauses could be highly technical, with little economic impact. For example, Clause 13(5) specifies that regulations under Clause 13(4) may make provision about arrangements with the EU relating to the operation of the Northern Ireland protocol, including information sharing. As such, the Government could be forced to provide an impact assessment on, for example, a data-sharing system between two competent authorities, which has little or no impact on wider parts of the protocol or economic operators—or, indeed, any impact outside of government at all.
I assure noble Lords that the House will have the opportunity to scrutinise any regulations in the usual fashion, and that the Government will provide all the usual accompanying material under the normal parliamentary procedures, including economic impacts where relevant. However, it is the Government’s view that mandating by statute that impact assessments must be provided for every single regulation under Clauses 13 and 14 would be overburdensome, and it does not tally with the standard principles for impact assessments. To add to the point I made earlier, on the specifics that have not been covered in my concluding remarks, I will write to the noble Lord, Lord Hain. As I said, I believe that there is a common cause to be had here, so if time allows, I am quite happy for us to schedule a discussion on this as well.
Clause 13 outlines the exclusions that seek to redress the feeling that a democratic deficit is created by the arrangements for the implementation and enforcement of the protocol. First, via subsection (1), it provides that any provision of the protocol which confers jurisdiction on the CJEU over the arrangements in Northern Ireland is an excluded provision. This means that CJEU decisions, including infractions, will no longer have effect in domestic law across the entire protocol. Secondly, via subsections (2) and (3), it assists in restoring the Government’s sole oversight of arrangements on the ground in Northern Ireland, providing that the provisions relating to the powers and presence of EU representatives are excluded. Finally, to address the point raised by the noble Lord, Lord Ponsonby, via subsections (4) and (5) it allows for the establishment of replacement arrangements, which provide the ability to put in place new supervisory and data-sharing arrangements with the European Union. This will support assurance processes to protect both the UK and EU markets and facilitate co-operation between UK and EU authorities. That is why we believe that the clause should stand part of the Bill.
Again, I am grateful for the discussions and debate on this group. While I am not suggesting that all noble Lords will have been fully satisfied by my response, I hope that they will be minded not to press their amendments at this time.
My Lords, I am grateful for the Minister’s response. I reassure him that I am not precious either about my name or my title. My former constituency was Tweeddale, Ettrick and Lauderdale, and I was once introduced to the Massachusetts state assembly by the Speaker as, “Jimmy Purve from Twiddle, Ettick and Louder”. He managed to get every single word wrong, and then he kept asking, “So, where is Twiddle, Jimmy?”
I am grateful to all noble Lords who have taken part in this debate and for the Minister’s remarks on Article 2 rights. The point stressed by the Northern Ireland Human Rights Commission was that the rights are only ongoing rights if they can be both interpretive and dynamic. If you remove the court of justice’s ability to do that, they stop being rights. We are obliged to make sure that they are “ongoing interpretive”, but the power in the Bill puts that at risk. It would be quite straightforward to simply say that that can carry on.
I am grateful to the noble Lord, Lord Hain, for outlining the second aspect regarding the electricity market in very clear detail. The point that has been stressed is that the electricity market is of such significance that it is probably—I am happy to be corrected—an issue of consensus among the political parties in Northern Ireland that it carries on, and that it should carry on in a seamless, undisturbed manner. I do not want to fall foul of the warning from the noble Lord, Lord McCrea, that there are things I am not aware of, but that is my understanding.
For these Benches, it would be helpful if the Minister could write to the noble Lord, Lord Hain, and put the correspondence in the Library, rather than just having a dialogue, so that we are able to test it. If he does that, I would be grateful if he could outline what formal contact the Government have had with the SEM Committee, which operates the wholesale market for the regulator in Northern Ireland and the regulator in Dublin. That body is tasked with regulating that market and the Government must have consulted it; it would be an astonishing admission of failure if they have not formally consulted the regulatory body that operates this.
We know that the Europeans are concerned—this is linked to the previous group on subsidy—that if a GB-subsidised electricity company wishes to enter the wholesale market, that puts at risk the operation of that market. This is now potentially at risk because of the Government’s removal of the court’s competence in these areas. It is of the most significant importance, alongside the issue raised by the noble Earl, Lord Kinnoull, on interconnectedness—I am glad I am not the only one who reaches for page 402 when I read documents.
We have reached some very significant and important issues in the consideration of this Bill. I hear what the noble Lord, Lord Cormack, and the noble and learned Baroness, Lady Butler-Sloss, said about pausing it. I do not know whether we should put this Bill into limbo or purgatory. I would rather pause it before it goes to hell than have it going to heaven. In the meantime, before it goes to either limbo or purgatory, I beg leave to withdraw the amendment. However, I hope the responses from the Minister to these very important points will be substantial and thorough.
Amendment 20 withdrawn.
Amendments 21 to 21C not moved.
Clause 13 agreed.
House resumed. Committee to begin again not before 8.18 pm.