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Public Bill Committees

Debated on Thursday 25 January 2018

Taxation (Cross-border Trade) Bill (Third sitting)

The Committee consisted of the following Members:

Chairs: † Ms Karen Buck, Mrs Anne Main

† Blackman, Kirsty (Aberdeen North) (SNP)

† Chapman, Douglas (Dunfermline and West Fife) (SNP)

† Dakin, Nic (Scunthorpe) (Lab)

† Davies, Chris (Brecon and Radnorshire) (Con)

† Dodds, Anneliese (Oxford East) (Lab/Co-op)

† Dowd, Peter (Bootle) (Lab)

† Hair, Kirstene (Angus) (Con)

† Hardy, Emma (Kingston upon Hull West and Hessle) (Lab)

† Hill, Mike (Hartlepool) (Lab)

† Kwarteng, Kwasi (Spelthorne) (Con)

† Menzies, Mark (Fylde) (Con)

† Morris, Grahame (Easington) (Lab)

† Reynolds, Jonathan (Stalybridge and Hyde) (Lab/Co-op)

† Rowley, Lee (North East Derbyshire) (Con)

† Rutley, David (Lord Commissioner of Her Majesty's Treasury)

† Stride, Mel (Financial Secretary to the Treasury)

† Stuart, Graham (Parliamentary Under-Secretary of State for International Trade)

† Sturdy, Julian (York Outer) (Con)

† Wragg, Mr William (Hazel Grove) (Con)

Colin Lee, Gail Bartlett, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 25 January 2018


[Karen Buck in the Chair]

Taxation (Cross-border Trade) Bill

Good morning, everybody. Before we start, I will read out a few paragraphs about Committee arrangements. Some people are extremely familiar with all of this and a few are not, so just bear with me. As a general rule, I and my fellow Chair do not intend to call starred amendments, which have not been tabled with adequate notice. The required notice period in Public Bill Committees is three working days. Therefore amendments should be tabled by the rise of the House on Monday for consideration on Thursday, and by the rise of the House on Thursday for consideration on Tuesday.

Not everyone is familiar with the procedure of Public Bill Committees, so let me briefly explain how we will proceed. The selection list for today’s sitting, which is available in the room, shows how the amendments selected for debate have been grouped together for debate. Amendments grouped together are generally on the same or a similar and related issue. The Member who has put their name to the lead amendment in the group is called first. Other Members are then free to catch my eye in order to speak to the amendments in that group. A Member may speak more than once depending on the subjects under discussion.

At the end of the debate on a group of amendments, I will call the Member who moved the lead amendment again. Before they sit down, they will need to indicate whether they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendments in the group to a Division, they will need to let me know. I will work on the assumption that the Government wish the Committee to reach a decision on all Government amendments.

Please note that decisions on amendments take place not in the order that they are debated, but in the order in which they appear on the amendment paper. Decisions on new clauses will therefore be taken at the conclusion of the line by line consideration of the Bill. Where it is not already indicated on the selection list, Mrs Main and I will use our discretion to decide whether to allow a separate stand part debate on individual clauses or individual schedules.

Clause stand part debates begin with the Chair proposing the Question, “That the clause stand part of the Bill.” There is no need for the Minister, or any other Member, to move that a clause stand part of the Bill. We now move to line by line consideration of the Bill.

Clause 1

Charge to import duty

Question proposed, That the clause stand part of the Bill.

Good morning, Ms Buck; it is a pleasure to serve under your chairmanship. It is also a pleasure to see some familiar faces on the Opposition Benches as we debate this important Bill.

Clause 1 provides that customs duty is to be charged with reference to the import of goods into the United Kingdom, in accordance with part 1 of this Bill; part 1, of course, deals with import duty. As members of the Committee will be aware, the UK’s current customs duty regime is set out in EU law. That legislation will cease to apply to the United Kingdom following our departure from the EU. This Bill makes provision for the establishment of a UK customs duty regime. The regime established by this Bill seeks as far as possible to replicate the effects of the existing EU provision. The aim of doing so is to ensure that on day one, operators who currently pay EU customs duty will see very little change in the process that is to apply following the establishment of the new UK regime. Clause 1 establishes the new charge to tax and provides that import duty is to be chargeable. Such a provision is a fundamental requirement of any tax regime.

Clause 2 provides the definition of chargeable goods, a term used throughout the provisions relating to import duty. The concept of goods being chargeable is fundamental to any import duty regime and therefore its meaning needs to be set out explicitly on the face of the Bill. As I explained, part 1 of the Bill sets out the UK’s new regime for import duty, which will be needed once we complete the process of withdrawal from the European Union. In doing so, it takes as its starting point the EU legislation, which currently provides the rules for import duty, and replicates them within domestic legislation. The virtue of doing so is that the majority of importers will see no change to the process by which they pay import duty. This principle applies to rules for determining which goods are liable for import duty or, to use the language of clause 2, to the way in which “chargeable goods” are defined.

Clause 2 is relatively straightforward. It sets out the basis upon which customs duty is to be charged. Clearly not all goods are liable for customs duty. The most obvious examples are goods that were made in the United Kingdom and have never left the country, or goods from abroad on which duty has already been paid. Clause 2 therefore uses the concept of domestic goods to define when goods are not to be treated as chargeable for the purposes of customs duty. It sets out that chargeable goods are any goods that are not domestic goods.

Domestic goods are defined in clause 33, and Members will have the opportunity to consider that definition in greater detail later in Committee. In essence, domestic goods are any goods on which no import duty is due, either because any duty has already been paid or because they were manufactured in, or originate in, the United Kingdom.

Clause 2 is straightforward. The concept of goods being chargeable forms a fundamental cornerstone of the UK’s import duty regime. I therefore recommend that both clauses stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Clause 3

Obligation to declare goods for a Customs procedure on import

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

That schedule 1 be the First schedule to the Bill.

That schedule 2 be the Second schedule to the Bill.

Clause 3 does two important things: first, it establishes an obligation to declare goods that are imported into the United Kingdom; and, secondly, it introduces the concept of declaring goods for a specific customs procedure. Those are the basic building blocks of the UK’s new import duty regime.

The need to declare goods for a customs procedure is fundamental to any import duty regime. The procedure for which goods are declared determines when liability to import duty arises. The clause goes on to introduce another fundamental part of a customs regime—the customs procedures for which chargeable goods may be declared.

The purpose of importing goods may be to make them available for use in the UK, in which case they can be declared for a procedure known as free circulation, at which point they incur a charge to import duty. However, it is not always the intention to make goods freely available when they are imported into the United Kingdom. Goods are often brought to the UK for different reasons, such as to put them into customs warehouses for the time being, or to transport them through the UK on the way to another destination outside the country. In situations such as those, a business may declare the goods for a special customs procedure.

Special procedures either defer when a liability to import duty is incurred, or reduce the rate of import duty applicable to goods, provided of course the relevant conditions have been satisfied. Without those procedures, a business would have no option but to declare imported goods for the free circulation procedure and incur any import duty up front.

UK businesses currently rely extensively on special procedures, which together provide reliefs worth hundreds of millions of pounds each month. The provision made by the clause is supplemented by the detailed rules set out in schedules 1 and 2, to which I shall now turn.

Schedule 1 sets out the obligations to present and declare goods to customs on import. Many of the matters covered are of an administrative nature, such as the information that a declaration must contain or the time limits for when it must be made. I am sure that the Committee would not wish me to explain all those matters in detail, but I should highlight one important matter in which I think the Committee will be interested.

Paragraph 3 of the schedule enables Her Majesty’s Revenue and Customs to specify when goods must be declared before they are imported into the UK. That is an important point. Steps might be needed to reduce the risk of disrupting the flow of traffic at locations where goods need to be cleared quickly through customs. An obvious case in point is a port such as Dover, where significant amounts of goods arrive on roll-on roll-off ferries. It would clearly be of great help, in a situation such as that, to require the goods in question to be declared before their arrival at the port. That situation is therefore addressed by the schedule.

Schedule 2 deals with special customs procedures. There are five in all, namely: storage, transit, inward processing, authorised use and temporary admission. I will briefly describe their purpose.

A storage procedure allows imported goods to be stored without incurring liability to import duty. The goods must be kept in an approved facility, such as a customs warehouse or a free zone. There are currently no free zones in the UK, but should an area be so designated, provision may be made under the Bill for its operation.

A transit procedure allows goods to move between two places in the UK without incurring import duty. For example, goods from another country can pass through the UK en route to another destination, or goods within the UK can move from a customs warehouse to a port for re-export without needing to be declared for free circulation.

An inward processing procedure allows goods to be imported into the UK with the purpose of undergoing a qualifying processing activity without incurring a charge to import duty at that point. Once the procedure is discharged, goods may be exported without any import duty being due. Alternatively, a business may decide to declare the processed goods for free circulation in the UK and incur duty at that point.

An authorised use procedure is designed to assist certain industries by allowing a zero or reduced rate of import duty to apply to goods brought to the UK for a specific use. Finally, a temporary admission procedure allows for a relief from import duty for goods that enter the UK temporarily and for a particular reason. For example, that procedure applies when artworks situated overseas are brought to the UK on loan for display in a public gallery.

Taken together, the special procedures I have outlined exist to support trade fluidity and facilitate the movement of goods into the UK. Provision made by and under schedule 2 will allow HMRC to operate these special procedures. The obligation to declare imported goods is essential to an effective customs regime, and an effective customs regime must include special procedures that offer businesses in the UK the simplifications and reliefs that they rely on.

It is a pleasure to serve on the Committee, and to take part in the scrutiny of this important piece of legislation.

The Minister is right to talk about the administrative nature of the clause and its associated schedules. It appears to be the Government’s position that the UK will choose to leave the customs union. We are not yet clear whether they will pursue another form of customs union with the EU, but if they do not, or if they do not manage to get a customs union with the EU, it is likely that significantly more customs declarations will be required because we will not have those coming from the EU.

My concern about the clause arises from Tuesday’s oral evidence sessions, and it would be useful for the Minister to provide an update on that. Various organisations expressed concerns about the resourcing of HMRC and Border Force. Border Force is the first line for many imports, ensuring that customs declarations are made appropriately and that all appropriate processes are followed.

On HMRC, the concern was that no customs officers will be based north of Glasgow or Edinburgh. If goods are coming in to places such as Inverness, it is a three-hour drive for people to get there and look at those goods. What assessment has the Minister made of the extra resourcing that HMRC will need to fulfil the obligations in the clause and the schedules? Reasonable concerns have been expressed by businesses and organisations.

I welcome the hon. Lady to the Committee and thank her for that initial contribution.

In terms of where the final deal with the European Union lands, whether we have a form of customs union with the remaining 27 members is subject to negotiation. The Government have made it clear that we wish the end point to be the facilitation of trade between ourselves and the remaining 27 members of the customs union. The Bill provides for that end point to be as close as possible to the existing rules and regulations around the Union customs code; that is very much what the Bill seeks to achieve. At the same time, the Bill retains the flexibility to ensure that we can put into effect the necessary and appropriate measures no matter where the deal lands—or, indeed, if there were to be no deal at all with the European Union, as we certainly do not expect.

The hon. Lady raised the important issue of HMRC resourcing. As we move towards our day one scenario—whatever that may finally look like—I assure her that the Government are vigorously engaged not just with issues around HMRC’s human resource requirements, but with other infrastructure requirements, whether for hard infrastructure or information technology systems such as the Customs Declaration Service, which will be important.

To address her particular issue, the head of HMRC has made it clear that his feeling is that we will need between 3,000 and 5,000 additional staff across HMRC to ensure that we cover off, wherever the day one deal lands. For an organisation of well in excess of 50,000 personnel, such an increment in staffing, particularly given that some will be reallocated rather than entirely new recruits, is perfectly manageable.

In terms of the money required to ensure that we are ready, in the Budget the Chancellor allocated £3 billion—£1.5 billion for each of the next two years—to ensure that we are sufficiently resourced. We are currently in conversation with HMRC to establish what further additional financial assistance it requires.

I am grateful to you for being in the Chair, Ms Buck. If I may, I will question the Minister on his explanation. I am grateful for it, but on Tuesday we learned that after HMRC’s ongoing restructuring programme there will not be a single HMRC hub north of Edinburgh and Glasgow, nor will there be one anywhere along the south coast, including Dover. We heard ample evidence in the witness sessions that that is the busiest and most concerning port from the point of view of customs procedures going wrong. In the light of that evidence, should we reconsider that HMRC reorganisation programme?

I welcome the hon. Lady to the Committee. She mentions the location of the new HMRC hubs as they are rolled out, and I will make two important points. First, Border Force, which is very much part of the frontline, is in the Home Office’s remit, not HMRC’s. Secondly, proximity to the hubs or otherwise is not critical in determining whether HMRC provides the support that Border Force and other agencies require. The absence of a hub close to a need does not mean that HMRC staff cannot be in proximity to that point; they do not need to be based constantly at any one hub.

May I pick up on that? I will not repeat what my hon. Friend the Member for Oxford East said, but try to reinforce the seriousness of the evidence witnesses gave on Tuesday. Mr Runswick said:

“HMRC is closing offices in places such as Southampton…So we think that there will be a real struggle to deliver the work that HMRC does with Border Force in that situation. My union believes that HMRC should pause the office closure programme until it is clear what the Government will need HMRC to do in a post-Brexit situation.”––[Official Report, Taxation (Cross-Border Trade) Public Bill Committee, 23 January 2018; c. 37, Q45.]

I want to tease out a little more from the Minister. Does he recognise that argument at all? It seems to be business as usual.

I welcome the hon. Gentleman to the Committee. He reiterates the point that the hon. Lady just made, so I will spare the Committee a repeat of every element of my answer. However, specifically with relation to the points made in the evidence session by Mr Runswick, the trade unions have been resistant to the changes to HMRC wholesale, right across the piece. Therefore, when it comes to arguments about whether HMRC can be effective in clamping down on avoidance, evasion and non-compliance, bringing in tax yield and so on, the argument has been run that we need a number of offices in multiple locations to do that.

The critical answer is that the very nature of running an efficient tax system and customs regime needs technology, the right skills and the right people. That lends itself to having a concentration of such individuals in hubs, where skills and IT can be developed and brought in to be effective. Without repeating my answer to the hon. Gentleman’s hon. Friend, the Government and HMRC are clear that the configurations of the new hubs will lend themselves to appropriately support the new customs regime.

Other than the resourcing, which the Minister has fully addressed, I am concerned about the geographical issue. We do not want people to be a number of hours’ drive from the customs officials. Can the Minister give us some comfort that even though there might not be hubs in the area, there will be customs officers based closely and able to respond on a 24-hour basis?

I can certainly assure the hon. Lady that the situation as it will pertain when we move to the new hubs—we are making some assumptions about what exactly the end point of the negotiations will be—will be sufficient to make sure we have a customs regime that works, that is low friction, and keeps trade moving and raises revenues on the duties that we may or may not apply.

On resourcing, to add to the points already made, I want to double-check this because the first time I saw it I did not believe it was true, but it is. In December you asked for volunteers to be deployed to help plug the gaps in the UK’s Border Force. There had already been an acknowledgment that it did not have the number of people needed and you called for volunteers, which was opposed by Conservative MPs, who said they did not want to see a return to a Dad’s Army protecting the UK. Are you still planning to plug the gap with volunteers or will people be employed?

I will take the hon. Lady’s references to “you” as not meaning the Chair of this Committee, but me. The issue that she has raised, which ran in the press a few weeks ago, relates to an issue for the Home Office and Border Force, not HMRC. It is outside the immediate scope of this Bill. I know that at least one Minister in the Home Office was able to refute those suggestions, but I will not dwell on that in this Committee.

The other thing that came out in the evidence was the concern about the loss of experience at a critical time. Is the Minister giving us a strong assurance—I think he is—that there will not be any problems as we move forward? If there are any problems, the Minister and HMRC will be jointly and severally responsible.

I thank the hon. Member for his very helpful intervention. Of course Ministers have responsibilities for the areas that they oversee. I can assure the hon. Gentleman that I have had discussions with HMRC staff, including the head of HMRC, and we have looked specifically at the right mix of skills and people, so I am confident that we will have the right team in place to meet the challenges ahead.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Schedules 1 and 2 agreed to.

Clause 4

When liability to import duty incurred

Question proposed, That the clause stand part of the Bill.

The clause determines when a liability to import duty is incurred. This is a necessary part of establishing a stand-alone customs regime as both businesses and HMRC need to know the point at which any money is due. The clause sets out a framework for determining the point at which liability to import duty is incurred. The general rule for importers wishing to release their goods for free circulation—that is, to discharge all customs obligations—is that the liability is incurred when HMRC accepts their declaration. For example, if a business were importing electronic goods from east Asia and declared the goods for free circulation, the liability for import duty would arise when HMRC accepts that declaration.

Similarly, the general rule when importing something under the temporary admission or authorised use procedures is that liability is incurred when HMRC accepts the declaration, but at a reduced rate. However, to facilitate trade and support businesses, liability can be deferred. In cases where goods are declared for a transit procedure, inward processing or a storage procedure, liability does not occur at the point when HMRC accepts the declaration, although liability may arise at a later date. The clause also makes further provisions governing these situations, including the consequences for liability purposes of the incorrect usage of the special procedures or their breach. The clause makes it clear when liability to import duty is incurred.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Goods not presented to Customs or Customs declaration not made

Question proposed, That the clause stand part of the Bill.

Clause 5 deals with cases where goods imported into the UK are either not presented or not declared to HMRC. Where that is the case, it provides for the goods to be liable for forfeiture. It is essential to have rules that cater for situations in which someone fails to meet their obligations when they import goods into the UK. The clause provides such a rule: it makes imported goods liable to forfeiture if they have not been presented or declared to HMRC. That simply mirrors the existing position in EU law that applies in such cases.

The clause also makes it clear that such goods remain liable to import duty at the same time that they are liable to forfeiture. It is essential that appropriate sanctions are in place to deal with failure to meet the requirements of the import duty regime. That is what clause 5 provides in cases where goods are not present or declared to HMRC.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Person liable to import duty

Question proposed, That the clause stand part of the Bill.

Clause 6 establishes who is liable to pay any import duty on goods imported into the United Kingdom. It is essential to establish who is obliged to actually pay import duty when it becomes due. The clause establishes the series of rules that do just that.

The rules set out by the clause illustrate a fundamental principle of the import duty regime, namely the link between the making of a customs declaration and the liability to pay an import duty that might be due. In cases where procedures have been followed correctly and the information provided is accurate, the liability for duty falls upon the person named on the declaration, or on whose behalf the goods have been declared. That could be the importer of the goods and/or an agent appointed to act for them. The basic rule is supplemented by other rules that apply in less straightforward circumstances: for instance, in cases where goods are not declared, the liability to pay duty falls on the person who is in possession or control of the goods when they arrive in the UK.

The clause also caters for other situations in which the rules have not been followed. They include cases where someone has provided false information when they make a declaration, or where they have not followed obligations imposed upon them, such as those that are imposed when goods are subject to a special customs procedure. In such cases, a person who has provided false information or who has breached the obligation can be liable for import duty. The clause also makes it clear that where the liability falls to two or more persons, the clause provides that they are jointly and severally liable for the import duty. It is essential to establish who is liable to pay import duty in all circumstances in which such liability arises. That includes making those who provide false information in connection with declarations liable for import duty.

Clause 7 contains no powers, but introduces the clauses in the Bill that will be used to set the amount of import duty applicable. The customs tariff will apply in all cases, but may be amended or adjusted to change the standard rate of duty in certain circumstances. The clauses referred to in this clause ensure that. The customs tariff will set out the rate of duty applicable to imports of goods into the United Kingdom. The tariff is made up of import duty rates for product categories. The standard customs tariff that the UK currently applies as a member of the EU is made up of more than 17,000 tariff lines.

The customs tariff established under clause 8 will contain the duty rates that apply to all imports from every country unless varied by another clause. The following clauses in the Bill enable the variation of the standard rate of import duty. For example, the UK will be able to reduce import duty when goods are imported under a preferential trade agreement, where preferential rates are granted unilaterally to developing countries. Parliament will also be able to reduce duty rates for applying a tariff suspension or relief, such as for items imported for educational, scientific or cultural purposes.

There are also circumstances where we may apply higher duties. For example, additional import duties can be applied when imports are causing injury to UK industry, as long as such additional duties are applied in line with our obligations as a member of the World Trade Organisation.

Clause 7 introduces the provisions under which we will establish our own tariff regime on leaving the EU. I suggest that clauses 6 and 7 stand part of the Bill.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7 ordered to stand part of the Bill.

Clause 8

The customs tariff

I beg to move amendment 104, in clause 8, page 5, line 27, after “other”, insert “relevant”.

This amendment requires the Government to classify goods in regulations giving effect to the customs tariff only in relation to relevant factors.

With this it will be convenient to discuss the following:

Amendment 105, in clause 8, page 5, line 38, after first “the”, insert “number”.

This amendment clarifies that goods may be defined for the purposes of the import tariff simply by reference to their number.

Amendment 118, in clause 39, page 27, line 5, after second “to”, insert “number”.

This amendment clarifies that goods may be defined for the purposes of the export tariff simply by reference to their number.

I mentioned during Second Reading that the Law Society of Scotland had produced a paper on the Bill, and I offered to provide the Minister with a copy. If he does not yet have one, I am still happy to do that. The paper explains more fully the rationale behind these three amendments.

The amendments are not necessarily about changing the tack of the Bill; they are about making better law and ensuring that the law is clearer. I will quote a short extract from the paper submitted by the Law Society of Scotland. It states that,

“the power under clause 8(1)(a) to classify goods ‘according to their nature, origin or any other factor’ is a very broad one. At the very least, this should be limited to ‘any other relevant factor’ but it would be preferable to limit the scope of this provision by giving an indication of the types of factor which might be appropriate in this context.”

So, in our amendment, we have taken up the “very least” option suggested by the Law Society of Scotland. It seems a bit extreme for the Minister to be able to make changes or decisions on “any” factors, some of which may not be relevant. Adding the word “relevant” would ensure that, under the clause, the Minister was stuck to making changes or decisions in relation to relevant factors. It is simply a small technical change that would tighten up the way the law is written.

Similarly, amendments 105 and 118 are very small technical changes that the Law Society of Scotland suggests would be preferable or useful additions to the clause. It suggests that clause 8(3)(b) say, “the number, weight or volume of the goods or any other measure of their quantity or size.” Again, the aim is just to tighten up the language and ensure that the laws that we are starting off with in this wonderful Brexit Britain are as good and clear as possible and can be interpreted, if they need to be—by a court, for example—in the best possible way. As I said, they are very small technical changes, and I would appreciate it if the Minister would consider them.

Clause 8 requires the Treasury to establish and maintain a customs tariff. The rates of duties set under this clause will apply to goods from every country, unless varied by another clause. It enables the implementation of a range of tariff options, so that the UK can respond to changes in the global trading environment, both now and in the future.

The UK currently applies duty to imports to the UK under the Union customs code. The standard duty rates of the UK, as a member of the EU, are contained in the common external tariff. When we leave the EU, this Bill will require the Treasury to establish and maintain a customs tariff that will, among other things, specify the rate of import duty applicable to goods. The UK is working with the WTO to establish the UK’s bound tariff schedule. That schedule sets the maximum rate of import duty that a country may apply to imports. The UK can then choose what rate to apply, provided it is at or below the bound rate. Import duty rates specified under this clause must be consistent with those international obligations.

Clause 8 sets out what must be contained in the customs—

Order. May I remind the Minister that there will be an opportunity for a general debate on clause 8, but not necessarily at this point? He should be responding specifically to the amendment.

I am sorry, Ms Buck. I assumed that we were also debating that clause 8 stand part. My apologies. I will turn specifically to the amendments tabled by the hon. Member for Aberdeen North. Although she may see them as clarifying matters, the Government’s view is that they are additional and unnecessary amendments to areas where no further clarification is required.

Just to be clear, it is not just me who sees them as necessary in terms of clarification; it is the Law Society of Scotland, which, I assume, knows quite a lot about the law, and therefore feels that these are appropriate changes that would be helpful in terms of the actual law.

I thank the hon. Lady for that intervention and I fully appreciate that she is taking up recommendations made by the Law Society of Scotland, but let me comment on the two fundamental points she has raised.

First, relating to the relevance—that relevant considerations should be taken into account. The relevance of having the word “relevant” in there, prompts the question whether anybody would ever take decisions based on things that were entirely irrelevant, or at least not relevant. If one went down the road suggested by the hon. Lady, the word “relevant” would probably be inserted in multiple places throughout all the legislation that we ever pass in this House. It is understood that rational Ministers and others would take relevant decisions, rather than irrelevant decisions.

Secondly, before I go too far down this tongue-twisting route—

Will the hon. Lady indulge me for a second? Parliament—through secondary legislation and in many cases in this Bill—will have the opportunity to test whether any of these measures are being taken on the basis not only of relevant considerations, but of all sorts of other considerations that will be taken into account as to whether these measures that come forward should proceed.

As to the specific point about the amendment relating to the insertion of the numbers, that clause already refers to reference or consideration being made of the quantity of the goods concerned. I think the meaning of the word “number” is, in that context, subsumed by the meaning of the word “quantity”. The Government have received the opinion that the clause already does that which the hon. Lady would like to see it do, namely ensure that the number of goods is also relevant to the function of that particular clause in the legislation.

It is just a brief—the Minister may feel, facetious—comment, but in the Help-to-Save regulations that we recently discussed there is reference to sufficient proof of death from a GP being required. The Government apparently felt that the word “sufficient” was necessary in that context, but most people would think it was not necessary if there is proof of death. Therefore, if an expert body such as the Law Society of Scotland feels that a word such as “relevant” is required, perhaps I would take its word for it.

I am not a legal expert. I obviously appreciate that different words have different meanings in different legal contexts, but from the Government’s point of view, we are satisfied that there is not a requirement to have the word “relevant” inserted. That would be superfluous—to throw in another term—as would be the insertion of the word “number”, for reasons I have given to the hon. Member for Aberdeen North, because it would not affect the functioning or meaning of that clause.

I am not going to press the Minister on the word “number”, but on the word “relevant”, I think the Minister dug a hole when he was talking about “rational” Chancellors or Ministers in the Treasury. We are looking at ensuring that this regulation is future-proof, ensuring that if a Minister is not as reasonable as the one standing here, we can ensure that they are held to making relevant regulation. The clause states:

“The Treasury must make regulations establishing, and maintaining in force, a system which…classifies goods according to their nature, origin or any other factor”.

The Government are asking for this House to give them a significant level of delegated authority. They are asking for us to trust the Government, or any future Government that come after, in relation to making these regulations. In this case they are asking us to trust the Treasury. I think the Government can understand why there may be a lack of trust at the moment, given that we have been promised things that have not been followed through on. It would not be too much to ask to insert the word “relevant” into that clause, so that in future, if we do not have as rational a Minister as this one, we can ensure that they have to make the regulations on the classification of goods on relevant factors, rather than on ones that may be irrelevant.

I reiterate that the Government are not in the business of taking irrelevant factors into account when they make decisions. I give that assurance equally in respect of the Opposition and other parties when they are or have been in government.

The hon. Lady also raises the issue of delegated legislation. At the introduction of the tariff, delegated legislation will be in the form of an affirmative statutory instrument that will be fully considered by a Committee, passed or otherwise by it and agreed to or otherwise by the House. A higher level of delegated legislative scrutiny will also apply to every occasion on which a duty is increased, as opposed to decreased. There is provision in the Bill for a higher level of scrutiny for the introduction of the tariff and for elements of its operation thereafter.

I thank the Minister. I would like to press amendment 104, but not the other two in the group.

Question put, That the amendment be made.

I beg to move amendment 1, in clause 8, page 6, line 1, at end insert—

“(aa) the interests of manufacturers in the United Kingdom,”

This amendment requires the Treasury to have regard to the interests of manufacturers in considering the rate of import duty.

With this it will be convenient to discuss the following:

Amendment 78, in clause 8, page 6, line 6, at end insert “and

(e) the impacts on sustainable development.”

This amendment requires the Treasury to have regard to the impacts on sustainable development in considering the rate of import duty.

Amendment 106, in clause 8, page 6, line 6, at end insert “and—

(e) the public interest.”

This amendment requires the Treasury to have regard to the public interest in considering the rate of customs tariff in its standard form.

This amendment requires the Treasury to have regard to the interests of manufacturers in considering the rate of import duty. UK manufacturing makes a vital contribution to the British economy each year. According to House of Commons Library research published in 2017, it accounted for 8% of jobs in the UK, which is 2.7 million; £177 billion of economic output, which is 10% of the UK’s total; and 57% of UK imports, to the value of £243 billion. On a personal note, I remain one of the vice-chairs of the all-party parliamentary group on manufacturing. In my constituency, those figures are roughly double the national average.

Manufacturing industry is significantly exposed to Brexit in a number of ways, the first of which is the export relationship. The UK exported goods worth £134 billion to the EU in 2015. In other ways, manufacturing industry is more reliant on imports, as many goods are imported to be used in the manufacturing supply chain. It is well known that the UK has a negative balance of trade at present; in 2016, that deficit was £98.7 billion.

Secondly, keeping the supply chain flowing freely is essential and time-critical. For example, while giving evidence to the International Trade Committee in February 2017, Nissan said that its Sunderland plant—a place very close to my heart because that is where I grew up—holds only half a day’s stock and uses 5 million parts a day, 60% of which are imported. As such, Nissan has said that any disruption to its supply chains would be “a disaster”.

Thirdly, supply chain imports are also heavily exposed to movements in the price of sterling, which has become considerably more volatile since the referendum result, with the pound losing 15% of its value against the euro between June and October 2016. Sterling’s weakness against the euro continues, with the pound still 14% below its pre-referendum levels.

The fact that the UK is a member of the EU single market and customs union means that, at present, there are no tariffs on goods traded between member states. There are no quotas or limits on the quantity of goods that can be traded between member states. Non-tariff barriers to trade have been eliminated, which means that there are common technical specifications and labelling requirements throughout the EU, and all member states set the same tariffs for goods imported into the EU from non-EU countries. The result is that there is almost no need for customs checks for goods entering from the EU.

So we cannot underestimate the scale of the shift that is about to take place. There are major decisions to be made about how we approach trade remedies and duties, to allow British manufacturing to continue to succeed. For the first time in decades, those decisions will be taken away from the EU’s collective decision-making bodies and made here in the UK. It is therefore of central importance that we listen to what manufacturers are saying, as they navigate this process in parallel with the legislative movements we are making today.

The representatives of manufacturing industry who helpfully attended the evidence session on Tuesday 23 January, amply illustrated why this consultative approach is important by raising considerations best understood by those operating directly at the coalface. As Dr Laura Cohen of the British Ceramic Confederation explained, the ceramics industry holds major hesitations about the Bill, and those will need to be addressed as secondary legislation is introduced. The first of those is in regard to dumping. Dumping is a major issue, which the EU is working to combat, and which has in the past had a major impact on many aspects of the UK, most recently the UK steel industry, which I will go into more detail about shortly. As Dr Cohen highlighted, there are pressing concerns in her industry about how the dumping margin will be measured, and there is currently no methodology at all in the Bill in relation to that. Significant EU activity is currently under way with regard to dumping, but the challenge that we have is that because our policies on this issue have been led by the EU, the UK needs to develop its own institutional knowledge in this area.

As Ian Cranshaw of the Chemical Industries Association explained during the last evidence session, in his consultation with one German company it noted that it had no trade remedy personnel in the UK at all, and if it wanted advice on how to deal with a trade remedy issue, would need to consult headquarters in Germany. Obviously it would be wrong to extrapolate that the UK has no policy expertise at all in trade remedies, but it is worth noting that as our policies in this area have historically been developed in tandem with the EU, it stands to reason that we may need to invest in more capacity to ensure that we have the right bank of knowledge and expertise.

Ian Cranshaw noted that the exception is UK Steel, which has been active on this issue in recent years. That is because the UK steel industry has been especially vulnerable to dumping. Perhaps the most notable example was Tata Steel’s well-publicised difficulties in 2016, which were in part owing to imports of cheap Chinese steel. Some media commentators alleged that the UK was part of a blocking minority of member states that had resisted EU efforts to toughen anti-dumping legislation that would have allowed for retaliatory tariffs.

My hon. Friend is setting out the case for the measures he is arguing for very strongly. He may or may not agree, but it seems to me that it is important that, when considering what to do, the actions he is talking about need to be taken.

I agree. Every member of the Committee will recognise my hon. Friend’s constituency interest and expertise in this area. I felt that the evidence that UK Steel gave us earlier in the week was particularly helpful in being prescriptive as to where it believes the Bill falls short. As an industry, it is especially susceptible to gaps in trade remedy legislation given the historic damage that dumping has done to the sector.

The opportunity of leaving the European Union ought to be to speed up these processes, and to give greater confidence to the industry rather than less confidence.

That is absolutely the case. Gareth Stace from UK Steel told us last Tuesday:

“The Government can promise anything they like, but more than a third of all tariffs in place affect the steel sector and it hits us hard, therefore, if this system, when it comes out, is not appropriate for what it is trying to do.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 68-69, Q105.]

That will clearly result in huge problems for the sector.

UK Steel’s main reservation with the Bill is the lack of detail, as my hon. Friend has said, which is present on a number of fronts where it believes the industry needs more certainty. Secondary legislation is being relied upon to provide a huge amount of the practical information we need. One of UK Steel’s specific concerns is around investigations relating to the dumping of foreign subsidies that can cause injury to UK industry. As related by Dr Cohen in her testimony, to which I referred earlier, there is no information on how dumping margins are to be calculated.

UK Steel goes further and sets out a list of other considerations that should be taken into account, including how to assess whether a UK industry has been injured; how to determine if such injury has been caused by the dumped or subsidised imports; what principles may be used in defining the products covered by an investigation; how subsidies can be defined; what evidence an industry needs to produce to trigger an investigation; how to conduct an investigation, including any time limits; and how to require guarantees to cover possible future duties when provisional measures are required. It is a long list and I could go on, but in the interests of the Committee’s time I will not. However, it serves to illustrate the point that there are a number of multi-layered and complex considerations to take into account.

I also want to underline that this is not a matter of protectionism. As Gareth Stace also made clear in Tuesday’s evidence session:

“The steel sector thrives on free, liberalised trade. A third of all steel produced in the world is traded across borders.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 67, Q104.]

At present there are zero tariffs between developed nations for steel trade. It was his belief that, without trade remedies, there will be an increase in protectionism, as they are essential to allowing free trade to take place. I thoroughly endorse that message.

The upshot of such deputations is that manufacturers are not asking for special measures from the outset, but pointing out that we are on the cusp of a complex world post-Brexit and they need more detail. It has been the Government’s choice not to include such detail in the Bill and it is too late to make that change now. It is clear, however, that the lack of certainty that results has not been optimal for our manufacturing sector and has inhibited its ability to make plans and prepare for the future.

As UK Steel has highlighted, the legislation lays out the bare minimum needed, delegating all detail to secondary legislation. It is true that we are on a tight timeline for negotiations, but there is a wealth of global legislation that could have been drawn upon to help inform the Bill, such as the US Tariff Act of 1930, the Canadian Special Import Measures Act, the EU Regulations 2016/1036—

Order. The Member is straying slightly outside the remit of the amendment and needs to bring it back.

Well, Ms Buck, I am just pointing out that it was possible to put in detail. If that is not in the Bill, we have to have amendments that allow for the detail to be included.

The Opposition are asking for the Government to offer reassurance to manufacturers by enshrining consultation into subsequent procedures. Clearly there are a great many things to consider, which may be made clear only by close consultation with the industries themselves. We are concerned that there is potential for an abuse of power by subjugating the process to secondary legislation, which is subject to considerably less parliamentary scrutiny. For the final time, I refer to UK Steel’s words:

“UK industry needs to be able to ascertain what its rights in domestic courts will be to challenge the decisions of the Trade Remedies Authority and the Secretary of State”—

Order. I repeat that talking about the secondary legislation matter is not within the scope of the amendment. Please come back to the scope of the amendment.

Okay. I will take your advice on that, Ms Buck.

Over the course of the Committee’s remaining days, given the amendments we are due to consider, I believe there will be a fuller debate about the issues I have mentioned. However, as things stand, we appear to be shackled to this process and it is therefore vital to enshrine a right of consultation for manufacturers to guarantee the future of UK industry and the 2.7 million jobs bound up within it. No one wants to see a Brexit underpinned by a race to the bottom, leaving the UK susceptible to a repeat of the events that punished Tata Steel in 2016. We cannot risk these being repeated in the rest of the UK manufacturing sector. Parliament must work with and listen to those on the front line, consider their input and let them guide us on what we need to succeed as a global economy in a post-Brexit world, drawing on existing best practice from around the world.

I call on the Committee to support the Opposition’s amendment, to enshrine the right to consultation, to protect British jobs and British manufacturing, and to guarantee that our post-Brexit economy does not leave British industry out in the cold.

This aspect of the clause is about

“considering the rate of import duty that ought to apply to any goods”,

and we have tabled amendments. The Government have chosen not to include in this provision a reference to “any other factor” or even the preferable “any other relevant factor”, but have laid down a number of factors that they are believe are relevant in this case. Both the Scottish National party and the official Opposition, with amendments 1, 78 and 106, are trying to increase the number of factors that will be considered when the rate of import duty that ought to apply is being considered. The clause already includes

“the interests of consumers…the desirability of maintaining and promoting…external trade…the desirability of maintaining and promoting productivity…and…the extent to which the goods concerned are subject to competition.”

On amendment 1, I associate myself with many of the shadow Minister’s remarks about the importance of manufacturing. It has been concerning that the Government have not taken into account the interests of manufacturing in many of the actions that they have taken. Therefore, it would be useful for the House to have the comfort that the Government would have to consider the importance of manufacturing when they were making these decisions.

The Scottish Government are in a much better place in that, in relation to steel and Tata Steel specifically, we have saved the Lanarkshire plants, and we have worked with BiFab. If the UK Government had previously taken actions like that, we would be in the much better position of feeling that they would be likely to protect the interests of manufacturing. We are therefore happy to associate ourselves with the Labour amendment.

Amendment 78 has been suggested by Traidcraft. I will talk about exactly why Traidcraft says that it is important. The UK has signed up to the sustainable development goals. They are incredibly important for the future of the world—for our children and our children’s children—in ensuring that there is sustainable development. Traidcraft says:

“It is therefore vital that consideration of sustainable development is contained in primary legislation to avoid the potential for the UK to inadvertently contravene its global commitments…If sustainable development were added to this list it would ensure the Government were able to fulfil its global commitments.”

That is a strong message from Traidcraft about this aspect of the clause. Because, as I said, the Minister has not included in it “any other relevant factor”, we want to be clear that the Government are protecting the interests of manufacturers, but also the interests of the future of the planet.

Amendment 106 is in my name and that of my hon. Friend the Member for Dunfermline and West Fife. Again, the factors that the Minister is required to consider when setting the rate of import duty are not wide enough. We suggest including a reference to the public interest generally, so that the Minister and the Treasury, in making these decisions, would be required to look at whether the public interest generally would be served by the rate of import duty that they were imposing.

All three proposals are relevant considerations for the long-term future of manufacturing which, given the not-very-good productivity in the UK, is hugely necessary and something that we need to protect. I do not know how anybody could argue with looking at sustainable development, given that the future of our planet is at stake. On the point about the public interest in general, we are all here to represent our constituents—we are here to ensure that their views are heard in this place—so it is completely reasonable that the Minister and the Treasury, in making any rules under this aspect of the clause, would consider the public interest generally, as well as the other four factors already mentioned.

In opening the debate, the Minister helpfully said that the intention was to introduce things in a way that did not disrupt things that were currently going on. The advantage of amendment 1 is that it would help to bring that about by adding in “the interests of manufacturers” as part of the test. It would give confidence to manufacturing areas.

I speak as somebody who represents a steel town. The confidence of manufacturers and the people who work there, who are also significant consumers in the local economy, is important because those manufacturing sectors desperately need investment in capital and in new ways of working to remain competitive in a competitive world.

The Minister and the Government would do well to consider that, because it would assist in delivering continuity—the outcome that the Minister set out at the beginning—and the confidence necessary for the investment we need. We cannot delay investment, although that might happen, because that would mean delayed opportunity. One of the Government’s overriding responsibilities is to put confidence into the system so that the risks of leaving the European Union are diminished and the opportunities are enhanced.

I shall speak to amendment 78, which has already been referred to. To be clear, we already have a list in the Bill of different considerations that ought to apply when calculating the rate of import duty for goods in a standard case, which includes,

“the interests of consumers…maintaining and promoting the external trade…maintaining and promoting productivity…the extent to which the goods concerned are subject to competition.”

That is why we suggest that we should have a holistic look at other matters that should be considered.

That is particularly important when it comes to the calculation of import duties with a view to environmental sustainability. When the current chief co-ordinator at the World Trade Organisation, Christiane Kraus, was at the World Bank, she spelled out reasons why environmental considerations might be relevant to the setting of trade parameters, in the absence of other mechanisms for promoting global environmental common goods. We may well be entering a period where it is very difficult to get international agreements on environmental matters, not least because of the direction of the American Administration, so it seems sensible to retain the possibility of so-called eco-tariffs in the Bill.

In addition, even inside the EU’s customs regime, there is evidence of illegal waste trading. Revelations from the Environmental Investigations Agency concerning the toxic trade in cathode ray tubes from the UK to Nigeria and Ghana make for very disturbing reading.

It is absolutely appropriate that we refer to sustainable development in relation to import duties, and to refer to it in this clause would rectify the fact that there is no mention in the rest of the Bill—I was very surprised by this—of the many factors relating to sustainable development that are otherwise covered by the EU customs regime. There is no mention of the environment, aside from the competitive environment; of forestry, aside from in relation to trading stamp schemes; or of chemicals, waste or wildlife. That is a significant departure from the EU customs regime.

The EU’s rules around authorised economic operators indicate that, for a company to become a member of that scheme, it needs to show that it does not have a record of serious infringements, including infringements against environmental legislation. EU legislation is clear that that status can be suspended if there is a threat to public safety, the protection of public health or the environment.

Many other areas in the customs regime that reference or have cross-connections with accompanying EU legislation are not picked up in the Bill. EU forest law enforcement, governance and trade—FLEGT—covers a licensing scheme for timber. That is relevant to import duty costs, because the importer is liable for the cost of the verification of any licences and of the translation of any paperwork related to its enforcement. Illegal, unreported and unregulated fishing is strictly controlled through EU regulation. Trans-boundary shipments of waste must comply with the 2006 EU waste shipment regulation.

The CITES treaty applies to wildlife, so we would still be covered by that when we leave the EU, but the EU goes further—that is incorporated in the overall customs regime. For example, there are regulations about documentation and labelling and a longer list of species upon which import controls are applied for the EU compared with under CITES. Finally, when it comes to measures about trade in environmentally-damaging chemicals, we have EU-level quotas on ozone-depleting substances and carbon-producing F-gases, and a notification procedure for other potentially dangerous chemicals.

I accept that in all those areas we could be asking for lots of different amendments to try to rectify some of these problems—I am sure Members will try—but having that environmental sustainability criterion for assessing import duties in the Bill, and placing it near the start, will raise its profile, which the Government sadly seem not to have considered at all when putting the Bill together. That is worrying given the prominence of these matters within the EU’s existing customs regime.

It is a pleasure to serve under your stewardship, Mrs Buck. I hope that, as in the sessions on the Finance Bill, we will have a major climbdown—the Minister and other members of the Committee will note that from that Bill.

The SNP amendment 106 would require the Government to have regard to the public interest in considering the rate of customs tariffs on our exit. It would add a public interest test to the four existing conditions that the Bill requires the Treasury to have regard to when deciding to apply customs tariffs to goods entering the United Kingdom. Those existing conditions in the Bill are the interests of consumers, the desirability of promoting external trade, the desirability of promoting productivity in the UK and the extent to which goods are subject to competition.

Members will note that, throughout the passage of the Bill, we have been seeking to ensure parliamentary scrutiny. We will continue to do so. In one of the evidence sessions, we heard from one witness, Kathleen Walker Shaw, the European officer of the GMB union, who said that she spent many evenings drafting her union’s response to the trade White Paper only to find eight hours later that the Bills had been published. I think that it is fair to say that that was not a particularly isolated view in the session.

The Opposition have concerns about the specifics of the SNP amendment, which means we take a slightly different approach. We believe that, in key sections of the Bill, the public interest is being used as a mechanism to widen the powers of the Secretary of State. That is perhaps most pronounced in schedule 4, which empowers the Secretary of State to reject a recommendation of the Trade Remedies Authority based upon a belief that it is not in the public interest. I respect people’s beliefs, but in this forum they have to be based on evidence, and I am not sure that we will get much of that. We have tabled a number of amendments of our own, and I want to dwell on them.

It is incumbent on me to point out that public interest is not defined in the Bill. That leaves a good deal of room for manoeuvre for the Secretary of State to determine the public interest, without appropriate parameters about precisely what it means. Precision is not one of the endearing features of the Bill. We are happy for the Government to have powers to take the public interest into account in certain circumstances, but only on the basis that it is concretely defined in primary legislation. That is yet another lacuna in the Bill, and a stubborn point that will be addressed time and again in these proceedings.

The Minister used the example of national security in the evidence session on Tuesday. That does seem a useful definition of public interest, and we believe that national security should provide an explicit limit to the definition of public interest in the Bill. We know, after all, that the Secretary of State has some novel ideas about what the public interest might be. They are views that ostensibly focus on the needs of the consumer over the producer. However, it has to be said that that is a one-dimensional approach taken by the Government, which was laid bare in the witness session. In response to the Financial Secretary’s question about consumers potentially being disadvantaged compared to producers, Ms Crawford responded:

“Consumers are also workers who are employed in some of these industries, and they will not benefit from having unfair trade practice disadvantage them and the quality of their goods. That is something we must bear in mind.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 42, Q53.]

That is a more sophisticated definitional approach than the Government’s.

Although we support the efforts of the Scottish National party to introduce checks and balances, we have concerns at this stage. In that regard, we cannot support the amendment. I hope the hon. Member for Aberdeen North will take our statement in good faith.

We have had a wide-ranging debate on this group of amendments, much of which covers matters that we will come to later in the Bill. I will focus my remarks on the details of the amendments and the clause.

The hon. Member for Scunthorpe rightly pointed out that I said earlier that the Government’s intention was to ensure that we had a minimum of change in the regime, for the obvious reason of providing familiarity and certainty to businesses. That is an important point and it is why clause 8(5) takes precedent from the Treaty on the Functioning of the European Union. It is very much grounded in where we currently are, as opposed to venturing out to pastures new, some of which would be unfortunate or inappropriate, or so the Opposition would have us believe.

The hon. Member for Oxford East mentioned authorised economic operators, which we will come to in clause 22, to make the general point that a number of things do not appear in the Bill, such as our habitats and various other things in existing EU legislation. On AEOs, the Bill introduces powers in clause 22 that will allow us to address exactly those elements when HMRC and the Treasury come to lay regulations as to, for example, what qualifications there might be to become registered as a certified AEO. Those kinds of issues can be picked up at that time and scrutinised further by the House.

The meat of clause 8 is in subsection (5), which states:

“In considering the rate of import duty that ought to apply to any goods in a standard case, the Treasury must have regard to…(a) the interests of consumers in the United Kingdom”


“(b) the desirability of maintaining and promoting the external trade of the United Kingdom”.

It is hard to see how that would not have to take into account the manufacturing element and the health of the manufacturing sector. Subsection (5)(c) states that the Treasury must have regard to

“the desirability of maintaining and promoting productivity in the United Kingdom,”

It is very difficult to see how the manufacturing sector, which represents around 10% of the UK economy, could be entirely ignored or in any sense neglected. Subsection (5)(d) states that the Treasury must have regard to

“the extent to which the goods concerned are subject to competition.”

I suggest that manufacturing would be core to any decisions on the setting of duties made in that context.

Subsection (6) states:

“In considering the rate of import duty that ought to apply to any goods in a standard case, the Treasury must also have regard to any recommendation about the rate made to them by the Secretary of State.”

As the Committee will know, the term “Secretary of State” refers to any Secretary of State in any Department, so on concerns relating to sustainable development, the relevant Department—

Actually, subsection (7) goes on to say that the Secretary of State

“must have regard to the matters set out in subsection (5)(a) to (d)”,

and not to other factors such as sustainable development.

The hon. Lady has pre-empted my next point. Although subsection (7) does say that, it does not say that the Secretary of State cannot have regard to any other matter—it does not exclude. It would be strange if a Secretary of State was told that they had to have regard to those four aspects when considering an issue and they took that to mean that they could not consider any other aspect. I draw the Committee’s attention to that aspect of the Bill.

On the specific case of sustainable development, we will debate and scrutinise the provisions in the Bill that accommodate setting up our unilateral trade preferences, which are extremely important in the context of sustainable development. On those grounds, I urge the Committee to reject the amendments.

Specifically on what the Minister has said, it is clear from various evidence we have received that the Government have not chosen simply to replicate things such as the Union customs code. In some places they have chosen to replicate it, but in others they have chosen not to. The concern is that the Government’s judgment has not been great in choosing which parts to replicate and which parts not to replicate. The measure has clearly been drafted in a hurry. From the Minister’s argument in relation to what the Secretary of State would have regard to, it is clear that this section of the legislation has not been particularly well thought through.

Opposition Members are not asking for unreasonable things. Having regard to sustainable development is completely reasonable. If the Minister is clear that that will be looked at anyway, or if the Secretary of State decides to get involved in any decision, it does not cost anything to add that into the Bill. If the Minister is clear that the Government will consider the interests of manufacturers because they are integral, it does not cost anything to add that into the Bill. It would be useful and helpful to businesses and would be a nice sign of confidence in businesses. It would be great for the Government to not just talk about increasing productivity, but to say to manufacturers, “We will support you and ensure that your interests are protected.” If the Minister is clear that such things are going to happen anyway, it would not cost the Government anything and they would lose nothing, but it would ensure that people feel more positively about the Bill.

I will be brief because the Committee is anxious to make progress and move on to some important clauses. I will not repeat the earlier comments that I made other than the overarching comment, which is that the provisions in the Bill as drawn are very broad and will pick up on the concerns that the hon. Lady has raised.

I appreciate the Minister’s response and his words of reassurance, but if he were being fair-minded he would acknowledge that there is still significant uncertainty and concern in UK industry, particularly in the manufacturing sector. As the evidence session showed the other day, there are more known unknowns than anything else in this area, and amendments that seek to mitigate that and provide more reassurance are reasonable and prudent, so we would like to press the amendment to a vote.

Question put, That the amendment be made.

I beg to move amendment 2, in clause 8, page 6, line 9, at end insert—

“(b) by a relevant select committee of the House of Commons, or

(c) contained in a resolution of the House of Commons.”

This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering the rate of import duty.

With this it will be convenient to discuss the following:

Amendment 3, in clause 11, page 8, line 18, at end insert—

“(b) by a relevant select committee of the House of Commons, or

(c) contained in a resolution of the House of Commons.”

This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering the rate of import duty.

Amendment 4, in clause 12, page 8, line 40, at end insert—

“(b) by a relevant select committee of the House of Commons, or

(c) contained in a resolution of the House of Commons.”

This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering whether to exercise the power to set lower rates of import duty.

I will endeavour to take a little less time on amendment 2, Ms Buck. My enthusiasm and enjoyment of a Bill Committee perhaps gets the better of me at times.

The amendment would require the Treasury to have regard to the recommendations of any relevant Select Committee or those contained in a resolution of the House of Commons in considering the rate of import duty. This goes to the heart of how the Bill is constructed and how we will seek to scrutinise it. For reasons we have already covered, the Bill is very much an outline framework Bill, the details of which must be added at a later date. That relates to the way in which the negotiations have progressed. We must think about how to ensure that there is no democratic deficit in how the detail of the Bill is filled in, and that the core objective of Brexit—greater democratic control for the House of Commons—is achieved.

The Opposition recognise the need for the Government to make the necessary preparations to create the UK’s customs and tariff regimes post-Brexit, but we do not accept that that means allowing the Government to concentrate all those powers in the Executive. It is the Opposition’s view that, in this instance, the Conservative interpretation of taking back control has simply meant moving it from Brussels to Whitehall. That is true not just of this Bill but of many parts of the Brexit legislation. In our view, tariffs should undergo the same parliamentary process as taxation, with similar levels of parliamentary scrutiny.

In the evidence sessions on Tuesday, we heard about the sheer diversity of areas that could be affected and that will need input into the detail of the Bill. We believe that Select Committees could play a crucial parliamentary role in providing some of that detail. If the Select Committees were allowed to engage with a wide range of stakeholders to contribute to the Government’s evidence base, we believe that it would widen the debate. It would also provide for a critical role in holding the Government to account. Select Committees’ ability to compel witnesses to appear to give evidence would allow them to interrogate Ministers about the consequences of some of the details of the secondary legislation and process as it unfolds, which could be invaluable. It could also help build political consensus by identifying common ground between different groups of politicians, which is especially important given how divisive Brexit has been thus far.

Lastly, Select Committees could engage with the media and public, which would be a key contribution to the transparency of the process, accountability and scrutiny. Where there is potential in the Bill for trade decisions to be made seemingly unilaterally by the Secretary of State, having public and transparent debates through parliamentary Select Committees could be critical. I therefore urge the Committee to vote in favour of the amendment, which would be a significant step towards ensuring that we make every effort to handle this once-in-a-generation event with the parliamentary scrutiny, accountability and checks and balances that it demands.

I have previously complained about the composition of Public Bill Committees, given the UK Government’s gerrymandering so that they can have a majority in Bill Committees despite not having a majority in the House. The change would mean that scrutiny would be done effectively, and not just by Committees with a majority of Government representatives who will win every vote by 10 to nine. The amendment is incredibly important and would ensure effective and appropriate scrutiny, and make for better legislation.

Amendment 2 would require the Treasury to consider recommendations made by a relevant Select Committee or a resolution of the House of Commons when considering the rate of import duty that ought to apply in the standard case.

The Treasury will listen closely to recommendations from a range of interested parties, including relevant Select Committees and, of course, Members of the House. In addition, Select Committees already have the power to question Ministers on policy within their departmental remit, and the Treasury will answer any questions from relevant Select Committees. Therefore, the Government believe that it is not necessary to include that in the Bill.

Amendment 3 would place the same obligation on the Treasury when considering what provisions to include in regulations related to quotas, such as determining the rate of import duty applicable to goods that are subject to quotas, and amendment 4 would introduce that requirement when making regulations concerning tariff suspensions. For the same reasons that I set out in relation to amendment 2, the Government do not believe that it is necessary to include such provisions in the Bill.

I have one final point in response to the point made by the hon. Member for Aberdeen North about scrutiny and needing provisions in the Bill. This Bill will, of course, have Report stage, which will be an opportunity for scrutiny by a far wider group than a Committee on which the Government might typically have a majority of one. Every Member of the House will have an opportunity to participate in that debate and consideration of further amendments.

The amendments seek to ensure that the Treasury must have regard to any Select Committee recommendations or House of Commons resolutions in two circumstances: first, when setting the rate of import duty on a specified good; and secondly, when lowering the rate of import duty on specific goods. Through the amendments, we seek to improve the mechanisms of accountability and ensure that any decision taken by the Treasury on duties and tariffs is taken on the basis of a democratic approach to the management of our economy, with a full and proper place for Parliament and its constituent parts.

We want the UK to have a full and functioning customs system in place when we leave the European Union. The powers transferred in the Bill give the Chancellor, the Secretary of State or others the ability to restructure the entire economy at a few strokes of a pen, without any consultation with those affected by changes to our customs regime. That is deeply concerning for anybody.

Since the Government failed to win a majority at the recent general election, we have seen numerous attempts to centralise power within ministerial portfolios, reducing the role of Parliament and the scrutiny of Government decisions, as has been alluded to on a number of occasions today. The Bill is yet another example of that trend. As the Lords Delegated Powers and Regulatory Reform Committee made clear, the current trend is towards a “massive transfer of power” to the Executive and away from Parliament. Every parliamentarian in this room should be deeply concerned about that because, at the end of the day, we get £75,000 a year to come here and scrutinise the Government and we are not being allowed to. We are therefore seeking to introduce the checks and balances necessary to ensure that a future customs framework and its operation continue to have proper democratic scrutiny and oversight. Stakeholders should be brought into the process.

The amendments would introduce an advisory capacity for Select Committees or the House in the process of determining import duties. That would broaden the number of those who have a democratic role in supporting and informing decision-making. That is what we are here for. Currently, as the Lords Committee made clear, the Bill provides 150 separate powers to make tax law. We are merely suggesting that widening the number of parliamentarians who can influence those decisions is a matter of building a genuinely rigorous democratic process.

Crucially, as hon. Members are aware, Select Committees are made up of Members from across the House. That cross-party approach can only support a proper decision-making process on the important issue of customs tariffs. We hope therefore that Members will consider the benefits of including the expertise of a Committee or the House in general within the vital process of examining evidence and providing independent advice— the Government may not wish to hear that advice, but it should nevertheless be given to them. Ultimately, that can only help to support the work of the Treasury in achieving the best outcome, regardless of party concerned.

It is reasonable in distillation to assert that Mr Blackwell from the Hansard Society said that there is a problem that

“the balance between Parliament and the Executive...has always been on the side of the Executive”––[Official Report, Taxation (Cross-border) Public Bill Committee, 23 January 2018; c. 51, Q71.]

This is a chance to rebalance that. Given the extent of delegation to Ministers set up in this Bill and other Brexit Bills, the role of Parliament is being downgraded. The Government know that; Members in this room know that; consumers know that; and producers know that and the public know that. The Government should think on that. Frankly, they should come clean, have the courage of their convictions, acknowledge it publicly and, in so doing, stop hiding behind what for many people are the vagaries of procedure—negative, affirmative and so on. We ask the Committee to support our amendments today in the interests of democratic scrutiny.

Question put, That the amendment be made.

Ordered, That further consideration be now adjourned. —(David Rutley.)

Adjourned till this day at Two o’clock.

Trade Bill (Third sitting)

The Committee consisted of the following Members:

Chairs: † Philip Davies, Joan Ryan, James Gray, Sir David Crausby

† Badenoch, Mrs Kemi (Saffron Walden) (Con)

† Bardell, Hannah (Livingston) (SNP)

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

† Cummins, Judith (Bradford South) (Lab)

† Esterson, Bill (Sefton Central) (Lab)

† Gardiner, Barry (Brent North) (Lab)

† Hands, Greg (Minister for Trade Policy)

† Hughes, Eddie (Walsall North) (Con)

† Keegan, Gillian (Chichester) (Con)

† McMorrin, Anna (Cardiff North) (Lab)

† Prisk, Mr Mark (Hertford and Stortford) (Con)

Pursglove, Tom (Corby) (Con)

† Rashid, Faisal (Warrington South) (Lab)

† Smith, Nick (Blaenau Gwent) (Lab)

† Stewart, Iain (Milton Keynes South) (Con)

† Vickers, Martin (Cleethorpes) (Con)

† Western, Matt (Warwick and Leamington) (Lab)

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

† Wood, Mike (Dudley South) (Con)

Kenneth Fox, Committee Clerk

† attended the Committee


Gary Stephenson, Director of Global Regulatory and Quality Affairs, Devro plc, and Vice Chair, Food and Drink Federation Scotland

Sarah Dickson, Director (Global Affairs), Scotch Whisky Association

Elspeth Macdonald, Deputy Chief Executive, Food Standards Scotland

Gordon MacIntyre-Kemp, Chief Executive, Business for Scotland

Jonathan Hindle, Chairman, British Furniture Confederation

David Scott, Senior Director, Tepnel Pharma Services at Hologic Ltd

Public Bill Committee

Thursday 25 January 2018


[Philip Davies in the Chair]

Trade Bill


That the Order of the Committee of 23rd January be amended by substituting “12.15” for “12.00” in the Table entry for 25th January. —(Greg Hands.)

Examination of Witnesses

Gary Stephenson, Sarah Dickson and Elspeth Macdonald gave evidence.

I welcome our witnesses. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme order. We therefore have until 12.15 pm for this session. Will the witnesses please introduce themselves for the record?

Gary Stephenson: I am Gary Stephenson. I am the global regulatory affairs director for Devro, which is a collagen casing manufacturing company based in Scotland that exports to more than 100 markets. I am also chair of the Food and Drink Federation Scotland, which is a member-funded organisation that looks after manufacturers in Scotland. Its main focus is EU and UK regulatory influencing.

Sarah Dickson: I am Sarah Dickson. I am the international director at the Scotch Whisky Association. We represent 68 Scotch whisky manufacturers, producers and bottlers. Whisky is the UK’s largest food and drink export: whisky exports were worth £4 billion in 2016, and Her Majesty’s Revenue and Customs figures coming out soon should show an increase in that. We export to 180 different markets, and have done so for the past 150 years.

We only need brief introductions. We do not need the full life story of every company.

Elspeth Macdonald: I am Elspeth Macdonald. I am the deputy chief executive of Food Standards Scotland.

Thank you, Mr Davies. May I wish everyone a very happy Burns day? So that our Welsh colleagues do not feel left out, I understand that it is also St Dwynwen’s day—I hope I pronounced that correctly—so let me say a very happy St Dwynwen’s day, too.

Q 151 Let me begin with Sarah Dickson. In your association’s view, does the Bill set out the consultation and scrutiny processes that you would like? Does it set out proper processes for the conduct of our international trade? Did the way the Government prosecuted the lead-up to the Bill—the way they took on board the representations of your industry and the wider business community—engender trust?

Sarah Dickson: For us, transparent and participative trade policy is really important. As an exporting organisation, we have been dealing with trade policy decisions in countries around the world for many years. We find that the best way to make trade policy is to involve people, consult them in that process and gather views, because you will find that some people will do better out of an agreement than others, and decisions will need to be made. Only by having a wide consultation on that and involving people in the process do you really get to a good outcome that it is then possible to implement and pass.

The Trade Bill as written at the moment—we do not know if there is more legislation to come—does not really cover that point in a statutory way. Of course, you do not have to consult and use statute to do that, but it concerns us that trade policy has been with the EU for many years and the UK has not done it. When it comes to having confidence—it is about confidence, rather than trust—in what the process is and when you would get input into that to have your say, we would be encouraged if we had more detail in a statutory instrument.

Q Do you have that confidence yet?

Sarah Dickson: Not at the moment.

Gary Stephenson: I see the Bill as a sort of framework for future implementation of more specific regulations. I think the challenge is in the detail. If we look at key sectors such as animal-derived products, which represent 70% of the food exports from Scotland, there are some specifics there that will be required, on, say, animal health, protection and regulations in regard to which countries are permitted to export to different markets. There is registration for different markets. There are export health certificates and border inspection posts for imports of those materials. All that is fairly complex and detailed. We would hope that we would be consulted on any more specific legislation. It is difficult at this stage to say whether it is heading in the right direction or not. It depends on that ability to consult. There will need to be consultation in the devolved Governments, as well as with the UK.

Q So to put that same final question, do you have confidence yet in the framework that the Government have set out?

Gary Stephenson: I am an optimist, so I would like to think that I have confidence that we would be engaged in consultation, yes.

Elspeth Macdonald: From Food Standards Scotland’s perspective, the part of the Bill that engages most with us relates to implementation of trade agreements going forward. If current trade agreements between the EU and third countries are carried over in their current form, that may not change matters significantly. If those trade agreements down the road start to change, or there is a desire or a wish to start to change them, the transparency on how that would happen is not yet evident. Overriding all of that, of course, in the devolved context, is the issue about the constraints in competence that the Bill would bring on Scottish Ministers and the Scottish Parliament, and therefore on ourselves, to be able to provide assurances to consumers in Scotland about standards, and assurance in relation to international trade.

Q I want to ask each of you whether you think that the Bill is sufficient to do what it needs to do, bearing in mind that it is not about future trade deals, but is about facilitating the carry-over of deals that are already in place?

Gary Stephenson: It is difficult to tell with the Bill as it stands, because the devil is in the detail. There are 40-plus EU free trade agreements. Some are very small—economically they are not too important—but there are some very big free trade agreements within those. Clearly, we cannot do them all at once, and the key bit will be whether there is some sort of Government prioritisation of those agreements, perhaps from the standpoint of size of markets. There are some very big ones in there: Japan, Mexico, South Africa, South Korea, Ukraine, Turkey and Egypt are very large markets that are certainly important for UK-Scottish producers.

Q If I may, though, the question was about this particular Bill and whether you think it will facilitate carry-over of those trade agreements set out in it.

Gary Stephenson: There is uncertainty, because of the transitional phase within those discussions. If we are in a transitional phase, we are out of the EU but we are still controlled by the customs requirements. It very much depends. If there is good will on both sides, then things should progress acceptably. If any of these markets want to change the agreement with the UK, that puts us in a difficult position, because we have certainly got a fairly weak position during the transition period, where we are bound not to agree any future agreement but are still tied to the European requirements, though we are outside the EU. I am not sure how that will be resolved, and it is not detailed in the legislation.

Sarah Dickson: We are probably in a slightly different position, in that we think this Bill has the basics that you would need to carry over existing agreements. Also, because of the time pressure, we could understand that with existing agreements there may not be time for the sort of consultation and other discussion that you would want with new agreements, or if these agreements were to be changed. For an existing agreement, where the terms are to all intents and purposes similar, we can see that this Bill has the basics to do that.

For new agreements, or agreements that were changing, as Gary has mentioned, you would need a much more detailed consultation process, with scrutiny, and that is probably the bit of the legislation that it feels like the Trade Bill is missing. What happens with future deals or if deals change? How would that process work?

Q Do you have a different view?

Elspeth Macdonald: No. As I understand it, this Bill provides for the carry-over of those existing trade deals between the EU and other countries. I think there is also—

Could you speak up, please?

Elspeth Macdonald: Yes. This Bill provides for carry-over from existing trade agreements between the EU and third countries. I think that the European Union (Withdrawal) Bill has some influence on this process, too.

Q Gary Stephenson, in your 2016 annual report, you said:

“the proposed new international trading arrangements…may be on disadvantageous terms compared to the current conditions.”

Could you say what your concerns are about the trade agreements covered in this Bill, and where you see the possibility of them being included on disadvantageous terms?

Gary Stephenson: I assume that refers more to the EU situation, in that in Scotland, a large proportion of our exports are to the EU, and we are clearly looking potentially at more challenging conditions from the standpoint of, “Will the UK be added to the EU list of approved countries?”, and registration of approved establishments. At the moment, it is probably the sheer volume of materials having to pass through customs and border inspection posts and so on that is likely to cause increased trading challenges, unless we get that right, and that is a critical piece.

Q I asked about a slightly different issue: the agreements being moved over to between the UK and the 40 or so partners.

Gary Stephenson: For the EU free trade agreements, I do not necessarily see them being as challenging. The only issue would be—take Korea. We used to export to Korea before the free trade agreement. The free trade agreement came in and basically removed the tariff, so the only difference, hopefully, would be that we are back to a tariff situation, which we did not have during the free trade agreement.

Q Sure. We had evidence on Tuesday that the EU will still have a say, or that it will be relevant to include the EU in discussions about the so-called roll-over—the move to corresponding agreements, as a different way of putting it. What is your take on that? Some deals are tripartite, rather than bipartite.

Gary Stephenson: I think the issue here is that the EU will still have a say in this. To what extent do we want to negotiate bilateral agreements with these free trade association countries? Or do we want a trilateral-type agreement, which would be a sort of joint EU-UK-third country negotiation?

Q What is your view, for this process?

Gary Stephenson: My view would be that a trilateral would be a better option, because you are not looking at changing anything.

Q Can I ask Elspeth Macdonald about tariff rate quotas? What concerns does your sector have about the potential changes to the UK’s current share of TRQs and any changes to regulatory standards that would allow overseas producers to access UK markets as a result of a copy-and-paste approach to the existing free trade agreements?

Elspeth Macdonald: Certainly, in relation to regulatory standards—technical standards—for food, industry and consumers are generally fairly confident and satisfied with the standards in the current EU regulatory framework. Certainly, when we talk to businesses and the public about the regulatory standards governing the food that they eat, and the food that they buy and use in their businesses, in Scotland, there is a generally high degree of satisfaction with EU standards. Any changes in future that began to change those regulatory standards away from those that currently provide a high degree of public health protection and consumer protection would be of some concern.

Q On the tariff rate quotas, we have heard from other countries that they want not just the current level of quotas to be maintained between the EU and the UK, and the split that the UK Government have proposed, but additional quotas.

Elspeth Macdonald: My organisation’s perspective on this is probably more around the non-tariff side. Certainly, businesses that we regulate in Scotland will be concerned to ensure that they have as little disruption as possible to their access to markets.

Q But what if one of the consequences of the negotiations to produce corresponding agreements was additional quotas that increased imports in your sector? Do you have a view on that?

Gary Stephenson: That is probably more in the food manufacturers’ area, because how the tariff rate quota is divided up is obviously for negotiation between the UK and the EU. I know that the World Trade Organisation has some influence on how it is divided up. This is where the specific industry sector should be consulted on what it believes would be the fair quota. Any of us is probably not in a position to set out a position on any specific quota. Take lamb as an example: what is a suitable quota that the UK would take back from the EU? It is a complex area, and I think it is best to ask that question of the sector responsible.

Q Happy Burns day to everyone, and I thank the witnesses for joining us today. Following on with the issue of cost, the meat sector is potentially looking at WTO tariffs on meat processors at 60%. If that is coupled with HMRC saying that 130,000 companies have never filled out a customs declaration, what impact, from a food and drink and meat processing perspective, do you think there will be on the sector, broadly and in terms of bureaucracy and staffing? Do you feel that adequate investigation and consultation has taken place?

Gary Stephenson: Wow, that is a big one. There are a number of elements to this. My company is in a fairly unique position in the food industry, in that we already import product into the EU, so we understand the complexities of that process. It is about whether the region you are from is authorised on the EU legislation side. Is your business registered within the EU as a registered business to produce that product? Other countries have similar issues. The US has similar legislation, which requires overseas suppliers to be registered with the Food and Drug Administration.

There is an additional piece: the export health certificates, which are not needed for the EU at present, but will be. Each one of those costs the business. It is not just the cost of the certificates—the vet must come to inspect. Have we got enough vets in the UK to provide that service? That is an additional challenge.

Q Can you talk specifically about the vets?

Gary Stephenson: Yes. Every single shipment requires a certificate, which we get from Carlisle, from the Animal and Plant Health Agency. You would have an official vet come in to sign that certificate. For example, in our case, if we need four times more certificates after Brexit than we are currently using, that is four times the cost. I am not saying that the vet would come four times more often, but he would certainly be in there twice as often, so you would be looking at twice the cost. Some businesses have not yet been exporting and will need an export health certificate. All this is going to be new for them. They are going to need a new certificate, and they are going to need to pay the vet to come and sign that certificate.

The additional piece involves shipping agents and border inspection posts. If you are using a shipping agent to export your product, in order to get all the paperwork right and so on, that is going to cost you. As you mentioned, most businesses have not exported in a way that requires customs declarations and so on, so that is an additional cost to businesses that they are probably not very aware of. I cannot give an exact figure for how much more, but it is an extra cost.

Q Is there not also a risk, given that we have 40 free trade agreements with 60 countries through the EU, that if we have not done all those bilaterals—with the greatest will in the world, it seems incredible that we would manage to do so, unless the Government have some magic up their sleeves—there will be additional bureaucracy with those individual countries? We have inspectors in each of those countries already inspecting products. Elspeth, can you talk about that?

I remind witnesses to speak up. Some of those at the back are finding it difficult to hear. Please speak up as best you can.

Elspeth Macdonald: Gary makes some really valid points about the increased burdens and bureaucracy for business, but it is also important to be reminded that the additional level of checking and assurance that may be required in future is also likely to have a significant impact on local authorities, for example. They have an important function in providing assurance about standards and compliance with legislation in food businesses that export to other countries. There is absolutely the potential for a significant impact of a new requirement for veterinary checks and so on, but also, should more checks be needed in future than now, there could be significant impacts on local authorities.

Sarah Dickson: From a Scotch whisky perspective, we may not need the vets, but we benefit from the tariff reductions, the intellectual property protection and the non-tariff barriers given to us by the agreements. About 10% of our exports go to a country covered by an EU free trade agreement. One thing that we have been talking to Department for International Trade officials about is how business can help. We would be more than happy to see if there is any contribution we can make to make sure these agreements are carried over.

Gary Stephenson: There is an additional piece from Elspeth’s comments. Currently, importing countries’ manufacturing sites are visited by an EU vet to assess their suitability and whether they are meeting European standards. When we are outside the EU, that will become a UK responsibility. We do not have the resources available today to conduct those checks.

Q On the protections, Sarah, we are all aware of the geographical indicators and their vital importance across different sectors, particularly for Scotch. What would be the impact if we lost our geographical indication?

Sarah Dickson: I am working on the basis that, because we will have the carrying over of all EU legislation into the UK, we will not lose the GI and an intellectual property system will be there to protect protected names such as Scotch whisky. We use it in all markets all over the world to make sure that people do not copy our product and produce lookey-likey fakes and that kind of thing. That is very important to our industry. We are working on the basis that that comes across lock, stock and barrel.

We have a maximum of 20 minutes left and at least six people still wanting to ask questions. If we have short questions and concise answers, we can get as many people in to ask a question as is possible.

Before I ask my question, can I just point out an important error in some of the official documents? Whisky is spelled with an “e” on some of the documents, and that is a very different product from Scotch whisky. On Burns night, I thought it was appropriate to point that out.

Q I would like to get a sense from the witnesses of what the impact would be on the food and drinks sector, particularly in Scotland, if this Bill did not happen and we left the EU without the carry-over of the existing EU free trade agreements. Have you quantified the value of transferring over what we already have into our domestic legislation?

Sarah Dickson: For us, 10% of our exports go to those countries and benefit from them. I cannot give you an overall figure, but obviously, if you are not paying the tariff, you are not paying the tariff and you do not have that cost. It would make a difference to about 10% of our exports, and our exports were £4 billion in 2016.

Elspeth Macdonald: I do not have figures in front of me, but I think the document the Scottish Government published recently, “Scotland’s Place in Europe”, about business, jobs and the economy, touched on exactly those issues and put some economic analysis around some of that in terms of trade.

Gary Stephenson: All I can say is that I think about 37% of exports of food from Scotland are to non-EU countries, but we have not quantified exactly what the impact would be and how much of that is going to countries with a free trade agreement. I cannot give an exact answer, but it will have an impact.

Q My question relates to non-tariff measures, which you have all spoken about in varying ways; of course there are food standards, phytosanitary standards and so on. What level of consultation do you think is appropriate for the Government to carry out with the sectors affected, prior to any negotiation on those provisions?

Gary Stephenson: There has to be deep consultation. The people with the expertise are the ones shipping the products, so they need to be consulted in detail on those provisions, which are very specific. You mentioned phytosanitary; obviously seed potatoes are a big product for Scotland, and they are highly dependent on phytosanitary requirements.

Potatoes are?

Gary Stephenson: Yes.

Sarah Dickson: Our experience is that we are often the ones working with the EU to draft the provisions on whatever it might be—labelling, or other requirements that would be needed for a mutual recognition—so we currently work closely with the EU negotiators to provide them with the advice and support that they need.

Elspeth Macdonald: There is a more fundamental issue from my perspective. There are specific exemptions from reservation through the Scotland Act that make it a devolved function for technical standards to be set in relation to food. There is a fundamental question above: it is about not just the Government, but Governments having those discussions with businesses.

Q I have a two-part question, if that is okay, Chair. Gary, coming back to tariff-rate quotas, you suggested that different sectors should be able to have input. Do you have any concerns about devolved Administrations and their need for input, and about how, even if tariff-rate quotas are agreed via subdivision, those quotas will be allocated to the different nations in the UK?

Gary Stephenson: I think it is critical, particularly looking at some sectors, that the devolved Governments consult with sectors, and that there is a unified approach. This is too important to get parochial about. It is an important issue for the whole UK, but there is a higher impact in some sectors, particularly in Scotland and Wales; I am thinking of hill farming products and that type of thing.

Q Does that mean that we need greater clarity on how that will work?

Gary Stephenson: It would help.

Q I have one more, Chair, if that is okay. Elspeth, I believe that you have come out as backing the Scottish and Welsh Governments’ decisions to withhold a legislative consent motion. Will you outline your concerns and say what you would like changed in the Bill to alleviate those concerns?

Elspeth Macdonald: The principal issue with the Bill that causes us great difficulties is the way in which it constrains the ability of the Scottish Parliament and Scottish Ministers, and consequently our ability, to act and regulate in ways that are considered appropriate for businesses and the public in Scotland. The fundamental issue is essentially the same as in the case of the constraints imposed through the European Union (Withdrawal) Bill; it is a similar matter of high principle that overarches the Bills.

Q May I return to geographical indications and EU rules? Sarah Dickson, can you tell us a little more about your concerns on this? What if, for example, South Korea raised objections on geographical indications in a new trade agreement?

Sarah Dickson: When the EU negotiates a trade agreement, it always looks to protect geographical indications. It does that in different ways. Not every agreement has exactly the same provisions, but it is always what they call an offensive interest of the EU to make sure that geographical names are protected. Where we think that an agreement with that intellectual property protection—that is basically what a geographical indication gives us—does not exist anymore, we will have to find other means, which means spending time and resources trying to work the country’s system. All countries, via their TRIPS—trade-related aspects of intellectual property rights—agreement, should have intellectual property; it is just that the easiest, clearest way to do this is through a free trade agreement.

We have already started work, in countries where there is an EU trade agreement, on making sure that we double up, so to speak, and work through the Government system to try to make sure that there is no intellectual property gap.

Q Are you concerned that there could be a compromise on the definition of whisky, for example, in future trade agreements?

Sarah Dickson: Looking at future trade agreements, I would hope not, because I would assume that the UK Government would give the same priority to protecting its geographical indications, like Scotch whisky.

Q May I ask Ms Dickson a question about the process for engagement on trade policy through the EU’s market access strategy, and the market access advisory committee? How do those compare with the frameworks in place for engagement with the UK Government?

Sarah Dickson: I think the engagement with the UK Government is the missing piece of the puzzle, but we assume that it will happen at some point, and that we will have more detail on it. The market access advisory committee is a great way for us, the industry, to feed in our views formally to all the member states. We regularly attend it. It has a spirit-specific working group that we are able to contribute to. It feels very much like a partnership. We explain the problems we face in markets around the world and the EU then works out how it can respond to that. It has to prioritise, but because you have all the sectors contributing in that way and it is quite an open, transparent process, you know that you are at least being listened to and included in its strategies.

Q That is very useful; thank you very much. In your experience, do ad hoc mechanisms for stakeholder engagement work or do they need to be structured by statute?

Sarah Dickson: We would feel more confident at the moment to have that laid out formally by the Government, in terms of what they are planning to do and how it will work. Ad hoc can work where you have developed personal relationships. We used to know everybody who did trade policy in the British Government, but that is not true anymore. Now there are 500, 600 or 700 people across Government doing it. When there used to be 40, it was much easier. As that grows and changes, having a very clear structure, so we know how to feed in and when and how, would be very helpful for us.

Q Excellent. That is very useful. To Ms Macdonald, in your opinion will it be possible, as the Government claim, to simply copy and paste the existing agreements without any substantial changes and without the need for consultation and scrutiny? Surely that has not been possible in the case of Switzerland, Norway and Turkey.

Elspeth Macdonald: I do not think I am equipped to answer that question. It is almost more of a legal question, in terms of how the Bill would apply.

Q The question is, do you think that it is possible to copy and paste existing agreements without any scrutiny, if changes are being made?

Elspeth Macdonald: Certainly, in terms of being able to provide the public with assurances that the trading relationships that the UK will have in future when it leaves the EU will provide the same degree of public confidence and public health protection, scrutiny is critically important.

Mr Stephenson, can you comment on that?

Gary Stephenson: I was going to jump in there anyway. It is an optimistic view that it is just a lift and shift. If you go for trilateralism, you are more likely to get there; if you go for bilateral agreements, you are more likely to get some differences.

Q This is a question for Ms Dickson. The Scotch Whisky Association has set out a framework for consultation set in statute through a UK trade policy advisory network. Could you explain what that proposal is?

Sarah Dickson: It would be very similar to what the US does. It has cleared advisers. When you are into a negotiation, I know one thing that this House has talked about before is how you talk about a negotiation while it is ongoing and how you consult on those provisions without revealing what is a moving target. What the US does is to have cleared advisors in statute; they are people it is able to talk to to work out how to make a success of a provision within a negotiation. We can see that there might be a role for legislation in this area, where you want to be able to talk to people on a formal basis about what is essentially a Government-to-Government discussion.

Q What principles should the system of consultation and engagement with stakeholders follow, in your opinion? Does the current Bill embody those principles?

Sarah Dickson: We believe that the more open and transparent trade policy is, the better. That means wide consultation. So we are not just talking about business in this—you need a wide range of stakeholders involved. We think you will need to define what that looks like, because there are going to be time limits and speed limits in doing the negotiations when you are trying to get something achieved. The wider and more comprehensive you can make that, the easier it will then be to pass and implement afterwards. We think it is very important that those principles are part of UK trade policy going forward.

Q Can I quickly return to geographical indications and ask Ms Macdonald a question? Given the ambiguity of the Government’s position to ensure that GIs are awarded to UK producers in trade agreements—they did not list a single one in the comprehensive economic and trade agreement—what are your concerns about the representation of your interests in trade agreements?

Elspeth Macdonald: Our interests in terms of geographical indications are that consumers know what they are buying and that, whatever system is in place—the Government’s stated intention is that things will be the same after exit—people can have confidence that products are not being misdescribed in terms of their geographic origin. There is confidence in the current system because it is a robust and well-regulated system that is set out in statute. Our particular interests are ensuring that, when businesses trade and when people buy products that are advertised and described in a particular way, those claims, whether they are about origin or anything else, are accurate.

Q I want to marry up two things that Mr Stephenson and Ms Dickson said. I was struck by your phrase, Mr Stephenson, that there will be no “lift and shift”. In that context, looking at the way the existing agreements have to be transposed into corresponding agreements, I wonder whether you might comment on the Government’s ability to do that, given their red lines with the Norwegian agreement and the Turkish agreement. One of those currently involves the European economic area and free movement of people, and the other involves the customs union.

I want to marry that up with what you said, Ms Dickson, about the roll-over of terms. When you were asked about South Korea, you did not actually narrate the history of your association’s difficulty with South Korea, which of course was very resistant to the geographical indicator when you presented it on behalf of the Scotch Whisky Association. Do you think there is a possibility that South Korea might use this opportunity to reverse the progress that was made? There is one question for each of you.

Sarah Dickson: I would love to be in the head of the South Korean Government and to know quite where they will take this process. The conversation between the EU, the UK and the South Korean Government will have to be for them. Is it impossible that third countries might try to use this opportunity to reopen agreements? It is not impossible, but I hope that is not the case. When the UK has left the EU and is having its own bilateral trade policy conversations with third countries, we will undoubtedly get into these conversations about what they might want to change.

Q Why would the South Koreans not use this opportunity, while we are under pressure to do things within a limited timescale, to negotiate better terms, as they see them? They tried very hard to negotiate those terms with the EU in the first place, did they not?

Sarah Dickson: The flipside is what South Korean businesses are saying to them about the benefits they gain from the trade deal. That is the judgment in all trade deals: who is benefiting, how much they are benefiting, and whether the things they do not benefit from outweigh the benefits they get. As I said, that is really a judgment for the South Korean Government. That is partly why we are trying to protect our GIs as best we can in addition to agreements.

Gary Stephenson: I will build on that. You are exactly right: there is an opportunity for them to renegotiate, and the UK, given the set-up it will be in, will be in a weaker position to defend against that. It would be ideal if the transition were just an extension of article 50, but we know it will not be. We will be out of the EU and trying to negotiate in a transitional period in which we are not supposed to be negotiating and are not supposed to have a final agreement, we want to get things delivered on time, and we do not have all the necessary resources. How do we prioritise everything? I think there are a lot of things rolled into your scepticism, but I share that scepticism.

Order. That brings us to the end of the time for questions. May I thank the witnesses, on behalf of the Committee, for your evidence? We are very grateful.

Examination of Witnesses

Gordon MacIntyre-Kemp, Jonathan Hindle and David Scott gave evidence.

I remind everyone that we have until 1 o’clock at the latest for this session.

I declare an interest as a vice-chair of the all-party parliamentary furniture industry group, for which the British Furniture Confederation provides the secretariat.

Thank you. Would the witnesses introduce themselves for the record, starting from our left?

David Scott: I am David Scott, senior director of Tepnel Pharma Services.

Jonathan Hindle: I am Jonathan Hindle, chairman of the British Furniture Confederation—coming from the industry.

Gordon MacIntyre-Kemp: I am Gordon MacIntyre-Kemp, chief executive of Business for Scotland.

Can I also ask the witnesses to speak up? We seem a long way away back here. I invite Barry Gardiner to begin.

Q I seek your thoughts on what seems to be an increasingly complex part of international trade agreements. As we have seen with Canada, negotiating partners are increasingly demanding that any potential difficulties with implementation, when devolved competence matters may be involved, are dealt with up front—for example, in the Canadian situation, the provinces were engaged right at the beginning of the process—and that there are assurances that the final agreed text of any agreement may be delivered. With that being the case, what is your view on the important role of consultation prior to agreements? Do you believe that the Bill sets out a suitable framework for such consultation? In addition, what would the implications be if the devolved Administrations had some measure of consent reserve that implied a veto on the implementation of our internationally agreed obligations? That is quite a complex question in two or three parts, but your response will be of considerable interest to the Committee.

Jonathan Hindle: I certainly do not feel qualified to be commenting on devolved Administrations—it is not part of my remit or where our industry is particularly clustered, so I do not feel qualified to answer that. I defer to the two gentlemen beside me, who probably know more.

David Scott: I am not convinced I am able to answer either, but the consultation is definitely a good thing. There is a voice that needs to be heard and various parties look for representation, not necessarily to veto anything, but certainly to ensure that the best interests of all parts of the UK are represented.

Gordon MacIntyre-Kemp: Business for Scotland was founded in 1996 to campaign for devolution and to set up the Scottish Parliament, so protecting the powers of devolution is one of our key remits. It is an area we have been investigating. This is one part of the whole Brexit process. The European Union (Withdrawal) Bill centralises about 100 Europe-influenced powers in Whitehall after Brexit, even though many of those cross over with the responsibilities of the devolved Parliaments and Assemblies. The deadline to amend clause 11 of the withdrawal Bill was missed, and that means we are sitting here without proper protections in place. The Trade Bill seems to suggest that it puts the power to act almost unilaterally in the hands of a single Minister—a single Minister who has what has been labelled a “hard Brexit agenda”—without clear protections on the public right to consult, scrutinise or stop trade deals.

At best, that means that a great deal of confusion remains over how trade negotiations will be handled where they overlap with the devolved Assemblies and Parliaments, and that is damaging to business. At worst, it looks like a deliberate attempt to delay the transfer of EU-held powers in particular to the devolved Parliaments until after the UK Government has had free rein to agree deals that you could say run roughshod over the devolution agreements that currently exist in these islands.

To give a key example, if we are going to do an instant trade deal, which we want to do with the Americans and which has to be the highest priority, the Transatlantic Trade and Investment Partnership is a great guide to what we can do with them. It is quite progressed; the key reason that TTIP did not make progress in the EU was that the EU wanted to put in protections to allow Governments to maintain public services such as the NHS, and our NHS is something that the United States is very likely to want to have access to.

I do not know much about trade negotiations, but I was trained in negotiation by a FTSE 100 company and by an American top 500 company, and the very first rule of negotiation is, “Make sure the person you’re negotiating with has the ability to say yes to the deal you’re presenting.” If we have devolved Parliaments who have control over the NHS, the Americans will look at that and say, “Well, you don’t have the ability to agree a trade deal with us,” so devolution is ipso facto incompatible with rapid trade deals, especially done under a World Trade Organisation agreement. I see that as being a problem and potentially creating constitutional issues not just in Scotland, but particularly in Northern Ireland.

Thank you. That was an extremely interesting response, and I am sure one that will help our deliberations this afternoon, when we come to the first set of amendments. You have raised a number of very serious constitutional questions. It may be that the Minister has clear answers to them, but I think we will all be keen to hear what they are.

Q Mr Scott, in the notes we have been provided with, there is a section titled “Your views on the Bill”. It says that you recognise that

“the government is committed to maintaining the existing trade relationships, effectively preserving the status quo.”

You go on to say:

“It therefore seems that there is the potential to spend a significant amount of time, effort and expense to deconstruct the current processes”

and introduce a new process to bring us back to the same place. The way I read them, those two statements are somewhat contradictory. Surely what we are looking at in the Bill is the provision to ease that transition to provide the status quo?

David Scott: From my perspective—I speak for my company, which has 60 individuals in Scotland working in the pharma services sector—there are established regulations and ways in which we currently work with the European Union and with global pharmaceutical companies. The Bill would suggest that, while we seek to maintain those, we reserve the right to deconstruct them and come back to the same position. That is how I read it; I may be wrong, and I do apologise if I have misconstrued that. It is important, from my business perspective, that we maintain our relationship as it currently is, because that is a major way in which we trade with European countries on behalf of the pharmaceutical industry.

Q But if changes were required, surely you would want to be a part of that? It is perfectly possible that we could construct a better system.

David Scott: I appreciate that, but I do not believe that we can. I think the current system works in the best interests of the UK. The Medicines and Healthcare Products Regulatory Agency is regarded as a powerhouse within the regulatory sphere. If we tried to set up a secondary or different regulatory system, it would not be to the benefit of the UK in terms of how we operate in the global marketplace for some pharma services.

Q Gordon MacIntyre-Kemp, can I come back very briefly to the question that you were answering from Barry Gardiner? You said that devolution was incompatible with the production of rapid trade deals. Does that also apply to what this Bill is attempting to do by creating corresponding agreements to the current EU free trade agreements?

Gordon MacIntyre-Kemp: Yes, and I think there is a great deal of confusion around it. I do not believe that there is sufficient clarity in the Bill about what is defined as a free trade agreement, for instance. If you do a deal with a nation that has multiple elements including an element of free trade, does that mean that the Minister would have full powers to do a deal that runs contrary to or overruns devolved powers? What is a specific trade deal? That needs to be defined, so as to limit the scope of the regulatory powers being granted by the Bill. A lot more clarity needs to come through in terms of the legal writing of it.

Q This is a question for all three of you. We have just been asking about consultation with devolved Governments. What about consultation with business, particularly sectors such as pharmaceuticals, chemicals and medical supplies, on non-tariff measures? What do you believe should be the consultation before a negotiation takes place, particularly on the provisions of the Bill, with the creation of corresponding agreements?

David Scott: From my perspective, it would be good to engage with Life Sciences Scotland, the industry leadership group there, to understand the concerns and any wishes likely to be put forward. There is also the Scottish Lifesciences Association. There are a number of bodies in Scotland that should be spoken to and asked to come provide evidence from that perspective, so you can get a wider perspective on how Scotland’s life sciences community feels, not just in pharma and chemical but in animal health and across the broad remit of research and all these sorts of things, and get some information from the whole body of Scotland that is representative of the wishes of industry and business from that perspective.

Jonathan Hindle: I do not have a particular Scottish perspective on this. Generally speaking, the furnishing and furniture industry is keen to achieve what I am hearing from a lot of other industries: stability and consistency, equivalence and mutual recognition across the process. We are keen to advocate dialogue wherever we can have it to achieve that transition as smoothly as possible.

Q What are your concerns about consistency?

Jonathan Hindle: I cannot say that our industry is concerned at the moment that there will not be consistency; in everything that we are reading, we are told that attempts are being made to make that transition as smooth as possible. We do not currently endure any significant issues. There are some issues with policing and surveillance of some of the standards that we have mutually agreed; that is a current scenario and a problem now. I am hoping that the formation of the Trade Remedies Authority will allow for some more robust investment in policing and surveillance of the standards where we currently endure problems, but I would not say that we are suffering from dumping in the fullest sense of its description in this context, although we are a very substantial net importer. There is a big trade gap that we as a nation endure in our industry.

Gordon MacIntyre-Kemp: You have raised an important point. Business for Scotland represents mainly small and medium-sized enterprises in Scotland. We surveyed 758 businesses and asked for their opinions on how the trade deals in Brexit have been processed and handled. There were 199,000 employees, half of the companies exported, and 41% had at least one non-UK-born EU national on their staff. We found that only 8% of Scottish business owners trusted the UK Government to deliver a deal that works best for Scottish business. Interestingly enough, 76.81% to 77% thought that calling a halt to Brexit would be beneficial to the Scottish economy. I think you have got an issue there: business does not really understand what is going on and there is a great deal of uncertainty. There is more uncertainty and more negativity towards Brexit in Scotland because Scotland voted to remain, and therefore there is less confidence in business as a direct result of that; so you will see that follow through.

I think the period between the point where we are still talking about deals and the point where we can actually start looking at trade deals has to be used for a massive consultation exercise with all the sorts of bodies that David mentioned before, but right across the UK. If we are going to do that we need to be preparing for it now. We need to be talking about it now. We need to be saying, “How are we actually going to deliver this?” Business for Scotland will be able to help, from a Scottish perspective, as much as we possibly can.

Q Again, when you are talking about trade deals, remember that the Bill is about the creation of corresponding deals. You are applying what you say to the provisions of the Bill as much as anything else.

Gordon MacIntyre-Kemp: Yes.

David Scott: Can I echo that? I think uncertainty is a killer at this point, specifically for my customers, whom I trade with on a global basis. They have a global supply chain and have to make contingency plans to ensure that whatever medicines they make are available to patients. Those contingency plans cannot wait until the eleventh hour or the last minute of any negotiations of any sort. I can tell you that they are starting to put those contingency plans in place now, and that they will have a massive effect on companies such as mine, and companies across the UK that support pharmaceutical R&D and the development and release of products on to the European market.

Q Thank you for attending, and happy Burns day.

Perhaps I can start with you, David, and pick up on what has been said about confusion. The way I read your comments was that you were talking about concerns about legislative change under the Bill, and the ability to make changes in primary legislation. As we know, the Law Society of Scotland has raised issues concerning the timescale that that might mean for your organisation and sector. Could you talk about that a bit? Also, I notice from your photograph that you are MHRA and Food and Drug Administration approved. On the impact of leaving, and potential disjoint—we have already lost the European Medicines Agency to Amsterdam—can you talk about the impact on your sector and company?

David Scott: Yes, the potential impact is massive. The whole of the medicines regulation is about harmonisation and working under one single set of standards, which are beneficial and mean that the speed to market of life-saving medicines is reduced. If we try to come up with a different set of regulations or way of working, and have duplication of effort, which is what would happen under the current proposal if we became a third country outside the EEA, pharma will look at us and think, “Is the market big enough?”

We are now a net exporter of pharmaceuticals into the European Union and have a trade surplus. We want to avoid anything that puts us into a deficit. If we cannot get some harmonisation and cannot stick with the current harmonisation, I am concerned that we will lose our reputation—or not our reputation, because the MHRA is one of the best in the world, as far as I am concerned, but the ability to get joined-up connectedness. That would have a massive impact on my industry and my company, without question. I would then be forced, contingency-wise, to say “What do I do? I can’t serve some of my customers’ needs in a different regulatory system.” It is a massive thing for us.

Q Gordon MacIntyre-Kemp, I know that you did a survey recently that said businesses—your members—did not have faith in the UK Government to act on their behalf. Can you talk about the findings of that survey? You mentioned some of the concerns earlier. The definition of free trade agreements was mentioned by the Law Society of Scotland in its briefing. We know from history some of the challenges and impacts on Scotland, for example on fishing, from trade being negotiated on Scotland’s behalf. Can you talk a bit about the importance of the Scottish Government and business having a say and an active role in those trade deals?

Gordon MacIntyre-Kemp: For sure. In the survey we did, we did not just want to survey our members; we surveyed companies across Scotland. The feedback was surprising to us as an organisation. We had sensed that Scottish business was not happy with how this was being handled, but we have some quotes from non-members of Business for Scotland. A director of a FTSE 100 company said:

“When the virtually inevitable car crash happens the Scottish end of the business will most probably be moved to Europe which is a crying shame as the expertise at home is unsurpassed in our market segment. However with no likelihood of stability it will be a logical step to move.”

A director of a New York stock exchange limited company with 800 employees in Scotland said:

“Stop now and ask the people, do they want to continue with this process, knowing what they know now?”

A director of a UK bank left a pithy statement. He just said: “Absolute bloody shambles.” That was the sort of feedback we were getting. Some 79% want a second EU referendum after the deal is done.

In terms of the Trade Bill itself, what I am finding is that Scottish business is not engaging with the detail of Bills such as this. The information they are being asked to understand is so confusing that the only answer they have psychologically is to keep their heads down and hope that it will all be okay. That is why I suggested that through the whole process there has to be a lot more consultation.

In terms of fisheries, food standards and health, which I mentioned before, there are lots of areas where promises have been made. There are issues around tariffs and protections. For instance, I was told during one debate that it is far better to do a trade deal with India because it is so big and so on, but the wages in manufacturing in India are about 79p an hour, and we are approaching £8 an hour here. If a trade deal is done that opens up markets without the right level of consent from devolved Parliaments and industry groups, that will not be a trade deal but a bonfire of manufacturing in the United Kingdom. There have to be checks and balances in that. Multiple sectors will have to feed that in, because if we do not know that, we are going to be signing trade deals that will have unforeseen consequences, and I think that will be very damaging to the UK economy.

Q I have just one final question for Jonathan on control over standards. I understand that standards are one of the key aspects for the furniture industry and the manufacturing of furniture, particularly in respect of fire retardancy and flammability. There have been many stories in the press over the years on the dangers of not maintaining those standards. What are your feelings on what the Bill does and the potential impact of leaving the European Committee for Standardisation? What are the threats or, indeed, the opportunities?

Jonathan Hindle: We have made recommendations to the Department for Business, Energy and Industrial Strategy for some updating of and amendments to the flammability regulations in particular. On a more broad basis, I understand that the British Standards Institution is looking to remain a member of the European Committee for Standardisation and the European Committee for Electrotechnical Standardisation, for example, to keep that continuity. That is what the industry is looking for. By and large, those standards, if they remain in place, are adequate. It is our ability to police, surveil and properly address transgressions that has much more been the issue for the industry. A plethora of products are making their way into the country that do not meet our stringent standards.

Q Is there an issue that if we lose the ability to monitor that, we could be looking at substandard products?

Jonathan Hindle: That would be a big concern for the industry. It already is under the current regime, and we are looking for improvements.

David Scott: To Gordon’s point specifically, there is a complexity here that we do not really understand. As you said, my company knew nothing about the Trade Bill or these sorts of things until we were asked to look into this. We focus on our bits. I think that Gordon is absolutely right: if we put in a trade Bill, there will be unforeseen consequences for certain sectors that you cannot foresee at this point in time.

Part of that is the safety element. Regulated drugs are there for a reason. If we start to loosen those regulations to make trade easier, then we open ourselves up to all sorts of problems, in terms of the fitness for purpose of the products that are brought into this country for use by patients.

Q I have two questions, if I may. First, I just want to ask David a question. You said earlier that it would be a disaster if the pharmaceutical industry did not operate under the same regulatory framework as Europe—that would be a disaster for pharmaceuticals in this country. Correct me if I heard wrongly. However, is it not true that no matter what country you want to deal with, as an industry you have to comply with the regulation of whatever country you are dealing with anyway? So why on earth would you, as an industry, put yourself at risk anyway and not comply with EU regulations, whether we were in or out of the EU?

David Scott: We would always want to comply with the highest standards of good manufacturing practices—GMP—for the pharmaceutical industry. What we do not want is to see any easing-up of the requirements of that to make trade easier with other parties. That is what I was trying to say. We need to be part of a harmonised system that works on a global basis, because if we have our own system then it becomes much more—not difficult to trade with us or to get things regulated, but we would set up an extra set of barriers. Currently, 60% of all medicines that are used in Europe are released from the UK.

Q So there is absolutely no reason why you as an industry would not conform to that regulation anyway, and consequently this is not really a trade issue.

David Scott: No, absolutely—it is not a trade issue. We would continue to work to the highest standards, but I would be concerned that things being imported into the UK might not meet the same standards as we would look to use ourselves.

Q Which is a different thing all together. Gordon, may I just ask you a question? I fully understand your nationalistic views on why we should or should not be in the EU; like everybody, we are all entitled to our view and of course voted whichever way we felt at the time. For the purposes of today, though, that is not what we are here to talk about; what we are here to talk about, of course, is the Bill that we are considering. The Bill is a facilitating Bill for the current trade agreements that have already gone through a process of transparency through the EU system. My question to you is this: for the purposes of that and that alone, would it be fair to say that this Bill does exactly what is on the tin?

Gordon MacIntyre-Kemp: The Bill itself does not supply sufficient detail to be safe to pass, in my view. The evidence that I am offering is not based on any nationalistic principles; in fact, I think Brexit is also a nationalistic principle, but that is not what we are here to talk about, as you say.

There is one particular thing about standards, in that it is not really defined which ethics and standards will constrain trade Bills. You talked about pharmacy. I worked for Scottish Enterprise for many years and led a mission out to the States to look at poultry processing over there, and chlorine-washed chicken is one of the issues. Everyone was focusing on the fact that there was going to be chlorine-washed chicken as though that is a bad thing. Actually, it is not that bad a thing; it is just that their process is completely different.

If you wash chicken at the end of the process with chlorine, then you do not actually have to have all the high standards in every single process right through, until you get to the point that you have finished. You have then got a product that is a lot less expensive to create. If that is allowed to be imported into the United Kingdom, it will destroy poultry jobs, and therefore we have to think about this question: “Does this Bill actually have sufficient protections to mean that the unforeseen consequences will stop the loss of jobs in the UK as a result of the free hand that has been given?” I do not think it will.

Q Just for clarity, I do not understand what you mean by “free hand”. The Bills that we are talking about transferring over have already gone through all the European processes for identifying Bills. This is purely a Bill to enable the Government, when we leave the EU, to put into law what is already in law.

Gordon MacIntyre-Kemp: Except the wording of one of the points—I am sorry, but I do not have it in front of me—is that the Minister and the devolved Administrations will have the ability to act, where appropriate. That gives a huge free hand without the right level of scrutiny and professional input. That in itself is the danger of the Bill. That is very specific to this Bill, and the point is about what it allows and how it can be read.

Q If I may, Chair, I have one final question: do you understand how the statutory instrument process works?

Gordon MacIntyre-Kemp: I understand that this is largely about rewriting—or, if you like, cutting and pasting—from European rules into British law, but elements of the Bill are ill-defined and could, like the Henry VIII powers, direct too much power—

Q So let me ask the question again: do you understand what these so-called Henry VIII powers are and how they work?

Gordon MacIntyre-Kemp: Inasmuch as I have read about them and have written newspaper articles about them, but I am not a lawyer, if that is what you are getting at. Am I able to give you a complete legal run-down of them? No, but I do not think you would have the time if I were able to.

Q I understand that, but what I am trying to establish, Gordon, is this. You mentioned the Henry VIII powers—the SI process—and you are saying that it is not transparent enough. However, I am asking whether you understand that process so that you can make a judgment call about whether it is or is not transparent enough.

Gordon MacIntyre-Kemp: Yes, I do.

Q As you are probably aware, the Bill does not make provision for the involvement of Parliament or others in the scoping negotiations or any ratification of new trade agreements. What provisions do you think it should make on future free trade agreements?

Jonathan Hindle: A very quick answer from the furniture industry point of view is that we would want to see as much scrutiny as possible. You referred to parliamentary scrutiny; whether that is the most effective form of scrutiny is another matter. We would certainly want the TRA to be made up of appropriate individuals to provide good-quality scrutiny.

Q The Government always said that they would set out a major consultation mechanism for new free trade agreements. Do you not think that that should be provided for in the Bill?

David Scott: As I said at the start, consultation is absolutely essential. You have to start with the industries and then bring it to yourselves from that point of view. If it being in the Bill would force that to happen, I would certainly say that that is a good thing from my perspective. I guess that what we do not want is one or two people making a decision for the populous.

Gordon MacIntyre-Kemp: Very quickly, that was my point in response to Mr Esterson’s question. Yes, it should be in the Bill.

Q Are you aware of any consultation system in any other country that we can adopt as a starting point?

Gordon MacIntyre-Kemp: I am not an expert on other nations. For almost all my life, we have been in the EU. We did not need to study what other people did. We are just making it hard for ourselves now.

Q Mr MacIntyre-Kemp, you spoke about your concern that the Bill is not clear on the Government’s powers to conclude trade deals, and you talked about chlorinated chicken from the United States. I just want to check that you understand that the Bill is perfectly clear that it would not give any powers to the Government to conclude any trade deal with the United States, regardless of whether it included any type of chicken.

Gordon MacIntyre-Kemp: You are talking specifically about it not allowing anyone to do a deal to do with chicken, but I was using that as an example to point out that the actual wording of the Bill seems to allow a significant amount of power in one particular place and to not have sufficient levels of consultation. Basically, afterwards, it would indeed be applicable across many different sectors, food being one of them.

Q Just to go back to my point, it does not allow any type of deal containing anything for the United States.

Gordon MacIntyre-Kemp: In my opinion, what it allows is too free a hand post-Brexit to do deals without the right level of consultation. Sorry if that has not been clear, but I have said it four or five times.

Q I do not know whether I am not making this clear. You seem not to be quite answering the question. You do understand that this Bill covers only those countries with which the European Union currently has a trade deal, which does not include the United States? There is nothing in the Bill that would give the Government any powers to conclude any trade deal with the United States.

Gordon MacIntyre-Kemp: Right. I understand what you mean now.

Q I have a question for David. Looking forward, as well as establishing the trade agreements that the Bill is meant to carry over, am I correct in thinking that your industry has an understanding of the licensing arrangements that will be put in place with the EU, and the research and access to labour issues that need to progress as well to give the industry an overall view?

David Scott: Absolutely. I would refer you to the Industry Leadership Group position paper written by Dave Tudor, the chair of the Industry Leadership Group for Life Sciences Scotland. There are four key points. One is regulation, which we have talked about already: maintenance of regulation on a harmonised basis. There is trade and supply, which we are obviously talking about today. Access to talent is a key thing. In Scotland, we are a diverse community. Research and development are best done using a diverse set of people, so that freedom of movement and the ability to attract people not just into Scotland but into the UK is fundamental for us. That is not to downplay our abilities, but a mix of different people helps us bring the best ideas to the table.

Again, from a Scottish point of view, we have a heritage of innovation in the medical sciences that we are very proud of, and we want to continue to use our talent base and other talent to help us achieve that.

Q March 2019 is looming fast. In what kind of timescale does the industry need to see the other arrangements that you are looking for clarity on?

David Scott: In my opinion, we are too late. People are starting to put processes in place and to make contingencies. We need some clarity on the issue as soon as possible.

Q On access to labour, I assume that you would agree that perhaps some immigration arrangements need to be agreed on a sectoral basis. Would there also be merit in Scotland being able to control its own immigration?

David Scott: Again, as much clarity as possible on that is good. I have some European nationals who work for me. They are concerned about their position and whether or not they will continue to work for me as we go forward. As soon as we can get clarity on that, an agreement would be fantastic. If that were within the powers of the Scottish Government, I would welcome it, but it is about understanding as quickly as possible how to get clarity so that we can allay the fears of our own people and go out to our customer base to allay their fears and stop any potential actions before they happen.

Does anyone else want to add to that?

Jonathan Hindle: The furniture industry has a similar exposure to migrant workers. We have a high degree of Polish migrant workers in the industry, particularly with sewing and upholstery skills. The unknown quantities about all of this have meant that some of them are leaving, so there is concern in the industry to provide some clarity, once again, about how we would deal with migrant issues for industry.

Gordon MacIntyre-Kemp: Again, some of our members have expressed concerns. In particular, highland hotels are saying that 65% to 70% of their staff during the summer are EU nationals and so on. There are significant issues in Scotland. I think that this shows, in terms of the overall remain vote, that immigration is seen radically differently in Scotland in terms of an opportunity to engineer the age of our society and bring skills to Scotland.

Q I have a quick question for Mr MacIntyre-Kemp. The very first line of the Bill says that the Bill is to

“Make provision about the implementation of international trade agreements”.

To elaborate on the point you were making earlier, what do you understand that to mean?

Gordon MacIntyre-Kemp: What do I understand the “international trade agreements” to be?

Q Yes. Do you think that is exclusive or—

Gordon MacIntyre-Kemp: Sorry. What do I understand “international trade agreements” to mean? They are basically agreements between countries that facilitate trade, such as TTIP and CETA and so on, and they have significant impacts on the different sectors, in terms of what sectors are opened up to particular trade deals. Now, regarding the EU, it already has trade deals with South Korea, Canada and so on. I think that is kind of basic.

However, there could be difficulties if there is not an exact definition in the Bill of what a trade deal is; I refer to evidence from legal experts on this issue, as well. It could mean that deals that are not specifically seen as trade deals can come under the remit of the Bill.

Q Right. So you see this as being fairly open? I think that is what you are saying.

Gordon MacIntyre-Kemp: More open than it possibly should be; not as restrictive as it—

It could be open?

Gordon MacIntyre-Kemp: Yes. It could be seen that way. I am just asking for it to be tightened up a little bit.

Q I have a question for Mr Hindle, just in relation to the British Furniture Confederation. I want to explore rules of origin and the complexity of supply chains. I have a particular manufacturer in my area; I know that a lot of its components come from Europe and a lot come from the UK. I just want to explore something. If our European content is no longer under the same rule of origin, what impact do you think that will have on future trading relationships for these companies or for us in markets other than Europe?

Jonathan Hindle: Fairly limited, inasmuch as when most people look for certificates of origin in tendering processes and evidence of supply chain in that regard, they ask for either an EU reference or a UK reference. If we were to devolve to a UK reference as a source of origin, it would carry equal weight in the minds of those in the particular markets that I am familiar with who often require that evidence.

Regarding the quantities coming out of the EU versus the UK, normally we are asked to make a judgment on a split and err towards the country of origin being where the majority of the material originates or where the bulk of the manufacture occurs. There are some guidelines that we tend to follow, along those lines. I am not hearing any concerns from our industry that that will present any problems. We continue to adhere to the current remit for declaring origin.

Q So you do not think that if, say, there was 60% of material from Germany or Scandinavian countries going into the components of British manufactured furniture, that would be an issue for your members?

Jonathan Hindle: Offhand, I cannot see it impacting the ability to trade effectively, or our competitiveness, or how we are perceived in any way; no, I cannot see that and I am not getting anything from our industry, as we poll it, to suggest any specific concerns on that particular point.

Of course, we have all the problems that we have had with a weak currency and all the inflationary impact that that has had, because most of our industry relies for a large part of its materials on continental Europe and elsewhere in the world. Weak sterling has had an impact and countered, if you like, the benefits that we might otherwise have enjoyed as an exporter from having a weaker currency on the other hand. It has been a double-edged sword in that regard.

Q Finally, would you very much like your sector to be involved in any TRA?

Jonathan Hindle: Very much so, yes. We would certainly welcome having someone on that TRA that understands our sector and all the nuances and complexities that have been alluded to—absolutely.

Q Very briefly, Mr MacIntyre-Kemp, I understood your example about chlorinated chicken not to be because you did not realise that this Bill was not about doing a trade deal with America, but to be talking about the need for the devolved Administrations to be involved in determining what are in those trade agreements, because of the way in which they may impact upon the implementation of what are devolved competencies. Do you believe—and do you believe that it is the Scottish Government’s position—that there should not only be consultation but consent at that level for the trade agreements before they are implemented?

Gordon MacIntyre-Kemp: Yes, exactly, and as food safety is a devolved issue in Scotland—

Order. I apologise to the hon. Member, but we have come to the end of the time allotted to the Committee for questions. May I thank the witnesses on behalf of the Committee for your evidence today? The Committee will meet again at 2 o’clock this afternoon in Committee Room 12.

Ordered, That further consideration be now adjourned. —(Craig Whittaker.)

Adjourned till this day at Two o’clock.

Trade Bill (Fourth sitting)

The Committee consisted of the following Members:

Chairs: † Philip Davies, Joan Ryan, James Gray, Sir David Crausby

† Badenoch, Mrs Kemi (Saffron Walden) (Con)

† Bardell, Hannah (Livingston) (SNP)

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

† Cummins, Judith (Bradford South) (Lab)

† Esterson, Bill (Sefton Central) (Lab)

† Gardiner, Barry (Brent North) (Lab)

† Hands, Greg (Minister for Trade Policy)

† Hughes, Eddie (Walsall North) (Con)

† Keegan, Gillian (Chichester) (Con)

† McMorrin, Anna (Cardiff North) (Lab)

† Prisk, Mr Mark (Hertford and Stortford) (Con)

† Pursglove, Tom (Corby) (Con)

Rashid, Faisal (Warrington South) (Lab)

† Smith, Nick (Blaenau Gwent) (Lab)

† Stewart, Iain (Milton Keynes South) (Con)

Vickers, Martin (Cleethorpes) (Con)

† Western, Matt (Warwick and Leamington) (Lab)

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

† Wood, Mike (Dudley South) (Con)

Kenneth Fox, Committee Clerk

† attended the Committee

Public Bill Committee

Thursday 25 January 2018


[Philip Davies in the Chair]

Trade Bill

We now begin line-by-line consideration of the Bill. The selection list for today’s sitting, which is available in the room, shows how the selected amendments have been grouped for debate. Grouped amendments generally deal with the same or similar issues. Please note that decisions on amendments take place not in the order they are debated, but in the order they appear on the amendment paper. The selection list shows the order of debate; decisions will be taken when we come to the clause an amendment affects.

I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules following debates on relevant amendments, but it will certainly help if right hon. and hon. Members, including Ministers and shadow Ministers, stand if they wish to speak on clause stand part.

Clause 1

Implementation of the Agreement on Government Procurement

I beg to move amendment 33, in clause 1, page 1, line 15, at end insert—

“(1A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.

(1B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”

This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.

With this it will be convenient to discuss the following:

Amendment 34, in clause 2, page 2, line 40, at end insert—

“(7A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.

(7B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”

This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.

Amendment 36, in schedule 1, page 7, line 24, at end insert—

“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.”

This amendment would give the Scottish and Welsh Ministers power, by regulation, to amend direct EU legislation that forms part of domestic law on and after exit day in devolved areas.

Amendment 37, in schedule 1, page 8, line 5, at end insert—

“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.

Requirement for consultation in certain circumstances

3A (1) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 1(1) or 2(1) so far as the regulations are to come into force before exit day unless the regulations are, to that extent, made after consulting with a Minister of the Crown.

(2) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 2(1) so far as the regulations make provision about any quota arrangements or are incompatible with any such arrangements unless the regulations are, to that extent, made after consulting with a Minister of the Crown.

(3) In sub-paragraph (2) ‘quota arrangements’ has the same meaning as in paragraph 3.”

This amendment would replace the requirement for the Scottish and Welsh Ministers to obtain the consent of the UK Government when acting alone under section 1(1) or 2(1) with the need to consult before making such regulations.

It is a pleasure to kick off what I think we all agree is a hugely important debate. We are pleased that the amendments were selected.

It is important to say at the outset that our amendments to clauses 1 and 2 would ensure that the principles of devolution are safeguarded in the Bill as the UK leaves the EU. Just over 20 years have passed since devolution, and it is important to pause for thought. There has been a lot of discussion—on Second Reading and in the public discourse—about how the cross-party agreement that brought us devolution and the Parliaments and Assemblies of the devolved nations of the UK all those years ago is threatened. Much in the Bill drives a coach and horses through the cross-party agreements that brought huge changes to the devolved nations of the UK. I say to fervent defenders of the United Kingdom that by threatening devolution and devolved powers—the Scottish National party has set out 111 areas in which they are under threat—the Bill threatens to undermine the Union.

We agree with the provision in clause 1 that aims to ensure continued access to Government procurement markets after the UK leaves the EU, but we believe that UK Ministers should have to seek consent, not just to consult. During our debates on the European Union (Withdrawal) Bill, the Prime Minister promised that the devolved nations of the UK would be consulted. As we know, it has not been possible to seek proper consultation in Northern Ireland because of the situation there; we look forward to seeing what happens in Northern Ireland and what threat that poses. However, I think it is fair to say that the devolved nations do not really feel that consultation has happened. For us, consultation and consent are absolutely the bottom line.

Amendment 33 would ensure that the consent of the Scottish Ministers or the Welsh Ministers is required for any regulations made under clause 1 that deal with matters within the competence of devolved authorities in Scotland or Wales. The Library briefing for the Bill states:

“If responsibilities for much of procurement law move from the EU to the UK with Brexit, there are questions about who takes on these responsibilities. At present, responsibilities for procurement are generally either devolved or set at the EU level.”

The devolved legislatures in Scotland and Wales implement EU directives directly.

Let me draw on a specific example. Procurement is probably quite a dry and technical subject to many people, but it is very important. Back in 2008, we had a big challenge with superbugs and sickness in hospitals in Scotland, as did much of the UK. Through Government procurement measures, we were able to take contracts with private firms back under Government control. That was absolutely vital. If our amendments are not agreed to and we are unable to guarantee our procurement rights, there is a risk that they will be lost in the 111 areas I mentioned.

My Labour colleagues should think very carefully, given that it was their party that was instrumental in devolution. Labour should be congratulated on that. Labour Members must reflect on the impact of the Bill and the opportunity presented by the amendments, which have been laid with a degree of cross-party consensus and support. If we choose to push the amendment to a vote—obviously we will listen to the full debate—it would be excellent to have their support, and perhaps that of some Government Members. They might deem the promises made to Scotland in the past to lead not leave the UK, to be an equal partner—all those words and rhetoric—to be not rhetoric, but something that Members actually stand by.

On amendment 34, we agree with the provision in clause 2 that aims to provide continuity to existing trade deals that the UK is part of by virtue of its EU membership. There are about 40 trade deals, with more than 60 countries. We have heard a huge amount of evidence from a number of different organisations, including today from Devro, a company that makes sausage skins—we might argue that there will be no breakfast after Brexit if Devro is not able to produce the skins for sausages. We also heard from Hologic, a company I visited some time ago that operates in my Livingston constituency. Its representative spoke about the importance of consultation and consent and the involvement of the devolved nations.

We believe that UK Ministers ought to seek the consent of devolved Ministers when amending the law in devolved areas. The amendment would assure that the consent of Scottish or Welsh Ministers is required for any regulations made under the provisions of clause 2 that deal with matters within the competence of devolved authorities in Scotland and Wales.

I ask colleagues on both sides of the Committee to think about when trade deals are being negotiated. I know the Bill is about transferring current deals across, but it is also about what happens beyond that; it is about the framework that is put in place and ensuring that that framework is good and robust for everybody in the UK, wherever their business is and wherever they live. It is incredible to think that we would not get support, particularly from our Labour colleagues, on ensuring that the devolved Administration in Wales, whoever that may be, would have a say and would be able to give consent on the decisions that are made for those businesses.

Let us say a major treaty was going forward that was in the interests of Scottish whisky, for example. Is it the hon. Lady’s position that Welsh Ministers should be able to veto that?

Those are things that can be discussed. I am not going to draw on particular areas—if it were Welsh lamb, for example, should we have a veto?—and say that we should be interfering. I would like to think that if it came to that situation, the Welsh Government—whoever was in power in Wales—would take a sensible approach and realise it was the right thing that the Government in Scotland, whichever colour they may be, should be able to consent and be consulted on the products of their nation. We should have an even hand across the UK.

I note that the hon. Lady said no to that. In other words, as it stands, what she is saying about consent means that the treaty in question could not go forward. I put the question to her again: what if there was a major interest in Scotland that, under her amendment, was vetoed by Welsh Ministers? Is that what she intends?

No, that absolutely is not the intention. We all live in a world at the moment where we can put scenarios forward and say this or that might happen.

And the point of the amendments is that in relation to goods coming from whichever part of the UK, we do not create a democratic deficit. That is what the Bill creates. The amendment rectifies that.

I am proud of the Labour Government’s role in delivering devolution to Scotland and Wales, and I appreciate the hon. Lady mentioning that role. Can she set out when she sees there is a need for the consent of the devolved Administrations and when there is a need to consult them? Perhaps she could give some examples to demonstrate the difference.

To be honest, the point is that we have the powers and we can have that discussion on an issue-by-issue basis. We have many examples of where we have worked well with the UK Government on trade and on rights, but we can consider other things—workers’ rights, for example. I know that when the Bill that became the Trade Union Act 2016 came to Parliament, many Members in the hon. Gentleman’s party and in other parties had huge problems with it, and it was hotly debated and discussed. Unfortunately, what we have seen is a rolling-back, despite the fact that there was opposition.

If we turn that on its head and say, “Could there be vetoes from other parts of the UK?” or, “Could we be in a position where one country is blocking a trade deal on a particular product over another within the United Kingdom?”, I would like to think that people will not use those powers in the way that the UK Government have often used their powers to impose legislation on devolved nations against their will. The whole point is that the rights, protections and opportunities, the access to and membership of the single market and the customs union are so vital to Wales, Scotland and the rest of the UK that we must not row back on those things and not give the devolved nations the opportunity to consent and be consulted. We could pick any particular issue and we could all have a discussion about whether there should be consent or consultation. The point is that we have the powers and they are powers for a purpose, and we should not have powers taken away.

Amendment 36 would amend schedule 1, which provides that Scottish and Welsh Ministers have

“No power to modify retained direct EU legislation etc.”,

such as EU regulations, or to make regulations that would create inconsistencies with any modifications to retained law that the UK Government have made, even in devolved areas. However, those restrictions are not being placed on UK Ministers. We believe that, as a matter of principle, devolved Ministers should have the same power in respect of matters falling within devolved competence as UK Ministers are being given. That is not is an unreasonable request. We are in a Union and we have devolved powers and devolved Governments; Ministers in each of those countries should have the same power as any UK Minister. Amendment 36 would remove the restrictions placed on the Scottish and Welsh Ministers’ ability to amend directly applicable EU law incorporated into UK law, bringing the powers into line with those being given to UK Ministers.

Amendment 37 would replace requirements imposed on Scottish and Welsh Ministers to seek UK Ministers’ consent when

“acting alone under section 1(1) or 2(1)”

with a requirement to consult UK Ministers before making those provisions. We have heard from stakeholders on this matter. I am sorry I was not here at the earlier evidence sessions; I was at the Council of Europe, but I have watched and read the contributions that were made. As we know, stakeholders were invited to give evidence and discuss their concerns. Chris Southworth from the International Chamber of Commerce UK said,

“Overall...I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations—or the regions, I have to say—to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations, where there are vulnerabilities on a whole range of different industries.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]

That is not SNP Members or Members of other parties just making political points; it is what we have heard in the Committee.

Today, we heard Elspeth Macdonald from Food Standards Scotland say that one of the reasons her organisation is supporting the Scottish Government on withholding a legislative consent motion is that it feels there could be a lowering of food and drink standards. Given that Scotland’s food and drink industry has grown at twice the rate of that of the rest of the UK and is a leading light of our exports, that is something.

On Scotch whisky, an interesting point was raised by a number of hon. Members about the vital place of geographical indicators. I know that no Minister in the UK Government wants Scotch to lose its GI; I absolutely believe that. However, we have to ask ourselves this question: once we get into trade deals and into a situation where these things are being debated and we are going back and forth, with a number of competing priorities, how do we know that, without the protections of the EU, those things will not be denigrated? We simply do not. The thought of it happening and of the impact it would have seems incredible, but Sarah Dickson said that the Scottish Whisky Association was having to look at what the impact would be. It is spending vital time, money and energy on all of this—unnecessarily, I would argue.

Michael Clancy of the Law Society of Scotland said:

“There is clearly an issue about how the Sewel convention or legislative consent convention is interpreted in respect of that…any proposals in UK Parliament legislation that seek to alter the legislative competence of the Parliament or of Scottish Ministers require the consent of the Parliament.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 56, Q107.]

Professor Winters, from the UK Trade Policy Observatory, said,

“Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 58, Q111.]

In written evidence, of which we received a huge amount, the Fairtrade Foundation, Trade Justice Movement, Global Justice Now and Traidcraft all clearly expressed the need for devolved Administrations and Chambers to be given a formal role in the UK’s future trade policy. I have met with about 50 different businesses and volunteer organisations in the last eight months, and all agree not only that the threat is significant, but that the devolved nations should have that vital role. They did not all necessarily agree that we should have the right to veto, but many of them could see it from our perspective.

I hope that our Labour colleagues will take our amendments in the positive spirit in which they are intended. Devolution has delivered for all the devolved nations. It has brought us greater rights and protections and a unique and distinctive voice in the world. While Brexit sadly diminishes the UK’s reputation in the world, it would also diminish the powers of the devolved nations. We cannot let that happen.

It is a pleasure to serve under your chairmanship, Mr Davies. I will make a few remarks on the principle of devolution and the amendment that has been tabled.

During one of the evidence sessions the hon. Member for Corby threw out the proposition that Opposition Members should not have voted against Second Reading of the Bill, even though we believed it to be flawed. He suggested that we should have voted for it and tabled amendments in Committee. Well, the proof will be in the pudding now. How many amendments will the Government back? Will we be back at square one and left with a flawed Bill?

The blunt reality is that both the Welsh and Scottish Governments have said they will withhold their legislative consent motions if the Bill remains as it stands, so it certainly needs amending if it is to get buy-in from the Scottish and Welsh Governments. Our amendments were drafted in agreement with the two devolved Administrations. That is why, as my hon. Friend the Member for Livingston said, it is slightly disappointing that Labour MPs have not backed an amendment that was drafted by the Welsh Government.

We also heard in the evidence sessions a number of witnesses agree that the Bill in its current format excludes input from the devolved Administrations. As a result, agreements could be forced on devolved Administrations. The UK Government can legislate and make regulations that affect devolved competences. During the witness sessions we heard about tariff rates and quotas, which could be an issue; the subdivision of quotas within the UK will need to be considered, as will rules on origin. That is why it is critical, in the spirit of co-operation, that the devolved Administrations have to give consent to agreements or regulations that the UK Government put forward.

We are constantly told that the Scottish Parliament is the most powerful devolved Parliament in the world, but that is incorrect. We heard during our evidence sessions about the devolved Government of Wallonia in Belgium, which was able to veto the entire comprehensive economic and trade agreement with Canada. That is a devolved Parliament with real power. It is vital that we hold on to and do not allow any erosion of the powers of the Scottish Parliament and the Welsh Assembly.

We were promised that clause 11 of the European Union (Withdrawal) Bill would be amended to protect the devolved nations. That did not happen. That is why we need to amend this Bill and to get agreement from the UK Government that they are willing to work with the Scottish Parliament and the Welsh Assembly. It is essential that their competences are protected.

I think that is all I need to say in support of the amendments. I am interested to hear what the Minister has to say.

It is good to have you back in the Chair, Mr Davies. I look forward to the Committee making progress under your guidance.

The Labour party brought forward and delivered the devolution settlements when it was in government, so we absolutely support the rights and powers that are conferred on the devolved Administrations by their respective devolution settlements. Matters of devolved competence must not be subject to overreach by Ministers of the Crown who seek to amend or overrule the will of the people, as expressed through their devolved Governments. For Labour, that is absolutely the starting point of this debate. We believe that the powers of those devolved Governments must be enforced and, indeed, reinforced where appropriate.

That said, we have real concerns about some of the implications of this group of amendments in the context of implementing our legally binding obligations under international law. The amendments might, in effect, create a veto power, which in turn might result in the UK failing to deliver on its binding obligations under a treaty. We have a conundrum. Often in Committees like this we have what are, in effect, set-piece debates, but this is a real debate about a profoundly complex constitutional issue, which I do not think will be easily resolved. Let me try to set out what I think is at the heart of it.

I pay tribute to the hon. Member for Hertford and Stortford, whose question went to the heart of the matter. Interestingly, the spokesperson for the SNP, the hon. Member for Livingston, used the words consult and consent in the same sentence as if they were interchangeable. The difficulty is that, in law and in effect, they are not.

I will happily give way after I have made a little more progress. I do not seek a point-scoring debate, because we have to get to the heart of some extremely technical and complicated issues, but I will of course give way in due course if the hon. Lady wishes me to.

In respect of the devolution settlements, trade agreements and the negotiation thereof remain exclusively reserved to the UK Government. International treaties are also the exclusive reserve of the UK Government. I have no doubt that the devolved Governments recognise that and supported that approach when the relevant devolution Acts were passed. Our membership of the European Union has meant that the competence for trade has been exercised by the EU under the common commercial policy—in effect, it has been taken up a level from the UK Government to the EU. That relationship has meant that no devolved Government—nor, indeed, the national UK Government—has been able to legislate in any way that contravenes EU law. In respect of trade agreements, that has meant that we have amended our domestic legislation where required to align it with the terms of agreements concluded on our behalf by the European Union. No devolved Government therefore has any effective veto on the implementation of those agreements, nor have they ever had such a veto.

Of course, the Bill prepares us for life outside the European Union, when that common commercial policy will no longer apply and the competence for trade will be returned to the United Kingdom. Similarly, the obligation on the devolved authorities to ensure compliance with EU law may also no longer apply. That, in effect is the crux of the issue.

The amendments would, in some respects, extend upwards powers of devolved Governments that they might not currently have in respect of international trade agreements. It was telling to hear from the gentleman from Business for Scotland this morning—I am delighted that you managed to squeeze me in to ask my question at the last minute, Mr Davies. In his response to whether the Scottish Government or a devolved Assembly should, in effect, have the right to consent regarding the content of the trade agreement, with reference to his chlorine-washed chicken example, he said that, yes, he thought there should be a consent power at that level.

Whether the Bill is about an agreement with America is completely by the bye. That was a thought experiment to show the sort of situation that could arise. If we want to bring it slightly closer to home, we could talk specifically about one of the agreements the Minister proposes to have a corresponding agreement with through the good offices of the Bill: CETA. Of course, one of Canada’s main objectives when negotiating with the European Union was to be able to get chlorine-washed beef and chicken into the European market. It failed in that endeavour, because that was not agreed to by the European Union in the eventual treaty. However, it is not beyond the wit of any of us—we heard this on many occasions from our witnesses—to construct a situation in which Canada might do what other countries at such a juncture might do, which is seek to reopen the negotiations in a particular way to its advantage, to try specifically to achieve with the European Union that which previously it had not been able to.

That brings the example much closer to home, and to the Bill in particular. The key point is that, as was said by Business for Scotland’s witness, the Scottish Government’s view is that they should have the power of consent to the substantive measures of the international treaty. We recognise that there are clear implications for what might be set out in the international trade agreements on matters of devolved competence. Agricultural policy, food safety, fisheries, the environment and so on are all areas that are touched upon by modern trade agreements. They are all areas where trade agreements will of course have an impact.

We tend to talk about trade agreements as if they are only about tariffs and quotas, but that is a very old-fashioned view of what a trade agreement is about. In the modern world, they are much more about non-tariff measures, often referred to as non-tariff barriers. Those non-tariff measures are the very standards of food safety and certification and so on that we believe make for the sort of society in which we want to live. That is why we have those regulations. The thought that they can be affected at the level of international trade by the substantive embodiments in the agreements is something that we have to understand ramifies throughout every layer of our society.

The Bill ostensibly seeks to replicate the terms of agreements that we are currently party to, albeit with notable exceptions—I am sure the Minister does not wish to replicate all of the terms of the treaties with Norway or Turkey, for obvious red-line reasons that his Government have made very clear to the public. However, the Government are asking us to take in good faith their word that the new agreements will be the same as those that are currently in place. Many witnesses told us this week that they are sceptical about that and believed that it was not a given.

In the explanatory notes to the Bill, there is explicit provision made where the Government accept that there can be substantive changes. That is one of the reasons that they have put the very strong powers into the Bill—the Henry VIII powers that Ministers would have—in the event that such substantive changes were necessary.

The agreements must be different. They will of course be “legally distinct”, as the Government recognise in the explanatory notes, but may also be “substantively” and substantially different, as they have also recognised. The existing agreements with Turkey or Norway, for example, cannot simply be rolled over. In respect of other agreements, where EU bodies are referred to or have been established for regulatory oversight, those will have to be replaced. Those are the substantive changes that will be made. All those changes may well be in areas that are currently recognised as devolved competences.

I take on board the hon. Gentleman’s point. The notion of consent is an interesting one. Let me just expand a little on my take on it. The idea of consent—not just consultation—for us is that we cannot have certain aspects of our regulatory framework, or deals done, that go against the principle of devolution.

The memorandum of understanding concordat from devolution was binding

“in law, but promises cooperation on exchanging information, formulating UK foreign policy, negotiating treaties and implementing treaty obligations.”

In our view, the Bill goes across that.

For the sake of argument, say that Scotland or Wales could not give consent to a trade agreement. That would force the UK Government to go back and look at why consent could not be given, and hopefully bring something forward. If we only have the power of consultation—we could argue that consultation is not really a power—we are at the mercy of whatever the UK Government of the day do. It could be argued that the power of consent is absolutely vital in negotiating trade deals.

It is not that I do not understand the force of the position the hon. Lady is taking and the way in which she is trying to express it, but of course those powers are powers that the devolved Administrations do not currently possess vis-à-vis the European Union. That is why, as I said, the levels at which we consider this, and the change in those levels, are absolutely material to the discussion we have today.

The hon. Lady is absolutely right to say that if the substance of a trade agreement or any of the corresponding agreements that the Minister is seeking to roll over from our existing EU trade agreement is substantively changed, it may well have an impact on areas that are devolved competences. But that is the substance of what is agreed at the international level. Trade is a reserved matter. Treaties are a reserved matter. Therefore, the question of the implementation comes in two ways. I do not want to depart from my notes too much, but I am seeking to respond to the hon. Lady’s intervention in the spirit in which she made it.

The difficulty is that our legislative language is poor. We talk about implementing an international agreement in UK law and we also talk about implementing the terms of the agreement within the devolved competence. It is very easy to have a confusion about which implementation we are talking about. I will progress the argument, because it seems to me that it is not cut and dried. There are serious issues here that we need to consider as a Committee.

I cannot say that I normally say this, but I very much look forward to listening to what the Minister says on this occasion, because I trust he has had the benefit not only of parliamentary counsel, but of constitutional legislators, who will have looked at the matter very carefully when they saw the amendments. I look to what the Minister is going to say in the Committee to guide us on these matters.

Picking up from where I left off talking about the substantive changes, new institutions may be required—institutions that might otherwise be within the devolved competence of the Scottish and Welsh Governments. That simply arises from the changes that will be made to the free trade agreements, because they might specify the European Food Safety Authority and that would need to be changed. New institutions may have to be established to fulfil the competences that the European Food Safety Authority or any other such agency had, and they would have to be designated in the roll-over Bill.

Of course, it may be that the Minister specifies the Food Standards Agency in England as the body that will now make the specifications. It might be better to use Food Standards Scotland, which we heard from earlier today. It is absolutely right that there is a process of consultation between the devolved Administrations and the Minister at that point to say, “You’re proposing to specify that body, but actually there are far more relevant skills in this other body.” Consultation is absolutely essential to try to ensure that they get this right.

In one moment. I hope the hon. Lady will intervene in a moment, because this is the question I think she may wish to respond to. Imagine a situation where Wales said, “We believe our agency should be the certification body,” Scotland said, “No, it should be our agency,” and because both had the power of consent and not simply the right to consultation, the Minister and the UK were unable to fulfil our international obligations under an international treaty.

The hon. Lady may say, “Surely no devolved Ministers would be so pig-headed as to say, ‘It’s got to be ours.’” The Westminster Minister may well be the one who is being pig-headed—who knows? However, I cannot imagine that it is right for the Committee to pass an amendment that could give rise to a situation in which we were unable to fulfil our international treaty obligations.

I guess the simple answer is that they would have to consult each other. I argue that what is proposed drives a coach and horses through many aspects of devolution, and others also have serious concerns. If the hon. Gentleman believes that there is an overreach in the amendments, what answers does he propose? Given the supposed “consultation” that was part of the European Union (Withdrawal) Bill process, does he really have faith in that aspect of today’s legislation? I know that I do not.

I said at the beginning that I was not going to engage in point scoring, so I will not take up the hon. Lady’s invitation to beat the Minister over the head about the lack of consultation. The witnesses have amply displayed their dissatisfaction with the consultation process, but she has, in effect, made my point for me. She said, “Well, they would have to consult.” Of course they would; that is why I believe that it is vital that consultation with the devolved Administrations is statutorily required, in a way that is not transparent on the face of the Bill. Consent, however, which could bring about the sort of impasse I referred to, should not be built into the legislation.

It is one thing to imagine legislation working in a benign, perfect scenario where people have good will, are engaging with each other and want to come to an agreement. Sadly, that is not always the case, and we must make our legislation such that it survives not only when things go right, but when things go wrong and a way through an impasse is necessary. The danger in the amendments is the reaching upwards into what would currently be seen as the competence and the rights of the European Union to negotiate the substance of those trade agreements. That is why I am fearful of the route down which the amendments would take us.

Has the hon. Gentleman discussed this with the Welsh Government, and explained that his concerns about the devolved Administrations “reaching upwards”, in his description, outweigh his concerns about the UK Government being able to impose regulations on them?