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Road Vehicles and Non-Road Mobile Machinery (Type-Approval) (Amendment) (EU Exit) Regulations 2019

Volume 795: debated on Wednesday 20 February 2019

Motion to Approve

Moved by

My Lords, if it is convenient, in moving this Motion I shall speak also to the draft Road Vehicle Emission Performance Standards (Cars and Vans) (Amendment) (EU Exit) Regulations 2019. These draft regulations will be made, for the most part, under the powers conferred by the European Union (Withdrawal) Act 2018, and—in the case of the type-approval SI to align the definitions of type-approval certification used in Northern Ireland with the rest of the UK—under the powers conferred by the European Communities Act. These regulations will be required if the UK leaves the European Union without a deal.

I shall speak first to the type-approval regulations. Currently, motor vehicles can be registered and placed on the UK market only if they have a valid EU type approval. The legislation governing this is a mix of domestic and directly applicable EU regulations. Of the two SIs, the draft type-approval regulations were put forward originally as a negative SI and considered by the sifting committees of both Houses. Both committees recommended that they be upgraded to affirmative, given the potential impact on manufacturers. I thank the committees for their considerations of this and other statutory instruments.

The draft type-approval regulations under consideration ensure that we will continue to have control over the registration of vehicles in the UK while also ensuring that we minimise the burden on manufacturers. The SI achieves this by amending the Road Traffic Act 1988 in GB and the Road Traffic Order 1981 in Northern Ireland to create a UK approval scheme, enabling the Vehicle Certification Agency, the VCA, to issue provisional UK approvals to manufacturers holding a valid EU type approval, without requiring additional, costly retesting.

In addition, the SI amends the Vehicle Excise and Registration Act 1994 to provide that vehicles entering the UK after exit day can be registered only if they have a UK approval. Maintaining control over registration ensures that in the event of another VW emissions scandal, we would be able to prevent those vehicles from being put on the road. Minor amendments are proposed to the Road Vehicles (Approval) Regulations 2009, and to the three retained frameworks for motorcycles, agricultural vehicles and engines for non-road mobile machinery, to ensure that this retained EU legislation will remain operable after we leave the EU.

I assure noble Lords that we have consulted widely since last autumn on our proposals. This has been primarily with the major trade associations, such as the Society of Motor Manufacturers and Traders, as well as smaller, more specialised trade associations, such as the Wheelchair Accessible Vehicle Convertors Association.

I turn to the Road Vehicle Emission Performance Standards (Cars and Vans) (Amendment) (EU Exit) Regulations 2019. This instrument ensures that inoperabilities within the existing EU regulations will be corrected and there will continue to be a functioning legislative and regulatory regime for CO2 emissions from new cars and light commercial vehicles. These requirements have been a key contributor to the reduction of CO2 emissions since their introduction in 2009.

Currently, the European Commission sets a fleet average target to be met by all manufacturers registering new cars and vans in the EU. For cars, this target is 130 grams of CO2 per kilometre, which will reduce to 95 grams in 2020. For vans, the target is 175 grams of CO2 per kilometre, falling to 147 grams in 2020. Based on these headline targets, manufacturers then receive individual targets according to the average weight of their fleet. As a result, manufacturers can make vehicles with emissions above the EU target, provided they are balanced by vehicles below it. Fines can be levied if a manufacturer fails to meet its target.

The EU regulation contains a number of related provisions which provide manufacturers with flexibilities in meeting their target. These include derogations based on the number of vehicles manufactured, to ease requirements on those producing fewer vehicles; pooling, where manufacturers in a single group, such as the VW group, may pool their registrations and receive one target using the average weight of all their applicable vehicles; eco-innovations, where manufacturers can receive credits for technologies that reduce CO2, such as LED lighting; and super-credits, where manufacturers receive credits for registering ultra-low-emission vehicles.

These regulations would amend the EU regulations covering car and van CO2 emissions, to ensure that they continue to function correctly after exit day. This is essential to ensure that the regulatory regime in place after EU exit continues to align our national policy as closely as possible with existing EU regulations, to provide certainty to industry; to ensure that the UK regime is at least as ambitious as the regulations established in the EU; and to enable the UK Government to assume the obligations and functions exercised by the European Commission.

The SI maintains the current target-setting approach in a UK context, and ensures that all the related provisions that I have outlined will continue to apply in the UK after exit day. The instrument also ensures that minor deficiencies are corrected. For example, all the functions currently performed by the European Commission will transfer to the Secretary of State, and fines will be levied in pounds rather than euros.

While we want a deal that recognises the equivalence of UK and EU type-approval schemes, the changes made in both the type-approval SI and the car and van CO2 emissions standards SI will ensure that we retain control of the registration of vehicles, maintain continuity of vehicle approvals and emissions, minimise costs to industry and ensure that the legal framework continues to work after the UK’s withdrawal from the European Union in the event of no deal. This will enable the UK to ensure that only compliant vehicles are registered in the UK and that requirements on their environmental performance are applied. I beg to move.

My Lords, this SI relates to the type approval process and involves harmonised standards on safety and environmental protection, which are regularly updated. I understand and appreciate that action is needed to maintain standards in future, but I have concerns. Unlike other SIs, in respect of which it is agreed that we will continue as a nation to accept EU standards, in this case the UK will no longer accept EU approvals when vehicles are registered.

The SI establishes a UK system of approvals. There is an interim arrangement for a maximum of two years, after which there will be a comprehensive review and reworking of UK type-approval arrangements. The legislation is planned for the middle of this year. This came as a bit of a surprise when I read this because I was not aware that the Government were thinking of a whole new system. What do the Government have in mind? Clearly, ideas are pretty well developed, otherwise the Government would not be talking of bringing in legislation a few months.

There is the issue of uncertainty for manufacturers. There will be additional costs when working to two different standards. Surely, at the current moment of maximum uncertainty, it is not a good idea to add to that uncertainty. Changing the system undermines the assurance given to manufacturers of a smooth transition on standards. Even more surprising, the Government proposed originally that this SI should be dealt with through the negative procedure; it is here only because the Joint Committee on Statutory Instruments recommended that the affirmative procedure be used.

The EU type-approval frameworks affect passenger and goods vehicles, motorbikes, agricultural and forestry vehicles, and engines for non-road mobile machinery. That is a pretty comprehensive range of products. Paragraph 7.2 of the Explanatory Memorandum specifies that EU approvals will not be accepted in the UK without scrutiny and can be rejected. Perhaps the Minister can explain why we are not prepared to accept EU standards. EU standards on these issues are generally agreed to be the highest in the world and are being adopted by, for example, the Chinese as the exemplar of best practice. Why do we think there might be a problem with these standards?

The SI will give the VCA the power to act on evidence of compliance problems. Is the VCA not able to act in the current situation if it thinks there are compliance issues? Manufacturers that already have EU approval will be able to apply for provisional UK approval. While this will avoid double testing, it does not avoid double bureaucracy. The Minister may well say that all of this is to ensure higher standards. However, in paragraph 7.8 of the Explanatory Memorandum, reference is made to the National Small Series Type Approval, operated by the VCA, which allows the relaxation of standards for UK companies converting or building low numbers of vehicles. Paragraph 7.8 states that the scheme would be of limited use to manufacturers after Brexit because of limits on production. I cannot quite understand that. I read it several times but I could not understand why it would be unfair after Brexit but has been acceptable up to now. How has this situation changed? I was even more surprised by the Government’s response, which was to arbitrarily double the limits on production for this group of vehicles until the end of the year. Why? Why is it reasonable to double the number of vehicles this year but not next year? I cannot get any sense of the reasoning behind this. Although this is a small number of vehicles, they are being given an exemption from environmental limits, and there will therefore be an impact on emissions as a result.

Paragraph 7.10 of the Explanatory Memorandum makes the point that this SI will allow,

“new, full type approvals to continue to be issued”,

for motorbikes, agricultural vehicles and engines for machinery. We now have a difference in policy. In fact, we have three different policy approaches in this one SI. We have non-acceptance of EU approvals, so you have to get UK approval. Then, another section accepts EU approval, although it admits that it could be misleading in the short term. There is also a specific change of policy regarding manufacturers and operators that deal with small numbers of vehicles.

Even worse than having three different policies in one SI is the lack of formal consultation. The section dealing with impact says that more staff will have to be recruited to the VCA. How many and at what cost? It also says:

“Provisional UK type approval is being offered free of charge”.

I accept that that is very good for manufacturers, but can the Minister explain how much of a subsidy that will require from the Government?

I am very grateful to the noble Baroness for giving way. She cited the fact that there would be no formal consultation on this SI, as indeed on any other SI that has come before the House. Did she note that paragraph 10.1 also said that,

“the intention is to ensure that, as far as possible, the status quo is maintained”?

The noble Baroness has done a very good job in the last 10 minutes of explaining why the status quo is not being maintained in key respects. There is a contradiction in paragraph 10.1 regarding the justification the Government have given for not consulting. According to that justification, they should have made no changes at all but continued with the existing type-approval regime. Given that the Government have made those changes, and given the statement that they themselves made in paragraph 10.1, there should surely have been consultation.

I agree with the noble Lord that there should be consultation, because the Government themselves have admitted that there are aspects that could be misleading. That is what they say in the EM.

It is my understanding that gaining EU type approval is pretty expensive. It would be useful to know at least approximately how much it costs, so we can get some view of what the Government will have to undertake in future.

I turn now to the SI on emissions. These EU regulations establish mandatory fleet average CO2 emissions targets for all cars and vans in the EU, plus Iceland, Liechtenstein and Norway. They establish targets by which manufacturers must abide, based on a formula, and levy fines for non-compliance. EU states record and report new EU vehicle registrations to the EEA, which leads to the publication of emissions performance for individual manufacturers. Are we going to carry on with this system on a UK basis? Powers are being moved to the Secretary of State, but will the system of publication of performance continue? It is really important for public confidence. Small manufacturers can apply for derogations. In the SI, small manufacturers are defined as producing 300,000 cars and 22,000 vans. Are the Government going to divide that by 28 or something, to redefine a small manufacturer, or will the definition of a small manufacturer across the whole of the EU apply within the UK, in which context it will hardly be small?

There are clearly major issues of approach here, because manufacturing of cars and other vehicles across the EU is a very uneven process. Some countries do not have an automobile industry; others have one that is concentrated upon a particular type of product. The very sad news this week about Honda, and the previous news about Nissan, shows how the closure of one plant, or the change of plans for investment of one plant, can alter the balance of what is produced in one country. The Government have tried to shoehorn the cross-EU approach to environmental limits and so on into a UK perspective and a UK-only set of statistics. An EU-wide view, which would be pretty comprehensive and would deal with very large numbers of manufactured vehicles, is then applied to the UK. This is a very important environmental issue. The advantage of having an EU-wide approach has been that we have been aiming to be better—to be among the best in the EU. Once you only have a UK approach, you are stuck on the platform you are currently on, simply aiming to be perhaps a bit better next year than you were this: you do not have incentives to improve.

Once again, the Government do not think that there will be a significant impact on business—although on this occasion there does at least appear to have been some sort of consultation. It is a very complex SI, involving a large number of regulations and so on, and my concern is that the Secretary of State has to have an incentive to publish figures, to improve and to encourage manufacturers to improve.

My Lords, the House is indebted to the noble Baroness, Lady Randerson, for doing an excellent, forensic job of exposing the issues in this statutory instrument. These entirely substantiate her point about the failure to consult, given the potentially far-reaching nature of the changes. Her last, broader point about the impact of Brexit on the motor industry is, of course, extremely well made.

If we were not in the midst of a very deep Brexit crisis, Parliament and the Government would be overwhelmed at the moment by the controversy and issues raised by the closure of the Swindon plant by Honda. This, together with Nissan’s decision to massively scale back production in Sunderland, amounts to a wholesale disinvestment by Japanese companies now taking place in this country. Indeed, one can join up the dots with Hitachi, a company I know well because I played a big part in persuading it to come here and start manufacturing trains 10 years ago. It has now pulled out of nuclear reactor manufacture at the plant in north Wales because of uncertainty in the decision-making process directly related to Brexit. It is deeply unhappy about what might happen in the European rail market at the moment. I am not absolutely sure that it will be staying in the UK for the long term either. We might be on the verge of seeing the reversal of 30 years of industrial policy in this country, all caused by Brexit, and this unravelling could have a lot further to go if the Brexit process proceeds.

The broader context of Brexit is dire for the motor industry, but the point narrowly focused on these regulations, made by the noble Baroness, Lady Randerson, is that we should not be doing anything with the regulatory framework that discourages the import and export of cars. I should have thought that the Minister, for whom I have a high regard, would accept that as a starting principle. I know that she, like me, is unhappy about the whole Brexit process and I am not expecting her to justify it in her reply to this debate: I suspect we would be in a large measure of agreement. If she accepts the starting point that there should be no change to the regulatory environment—certainly none imposed by the United Kingdom, because that would be an act of self-mutilation—can she explain more fully the two paragraphs that the noble Baroness, Lady Randerson, highlighted? These also struck me as I read them; they are paragraph 7.8 and paragraph 2.4. I have nothing to add to the noble Baroness’s remarks about paragraph 7.8. Like her, I simply do not understand it. If the doubling of the production limits referred to is necessary to ensure the continuation of trading conditions until the end of 2019, why is it not necessary beyond the end of 2019? That seems a straightforward question.

The point about paragraph 2.4 is that I simply do not understand the policy, because it is a policy change. I shall read the paragraph, because there are so many great minds in the House that they might be able to help the House before the noble Baroness replies. It concerns type approvals, a critical issue for the registration of cars, and it reads as follows:

“The UK will no longer accept EU-27 approvals when motor vehicles are registered, other than for motor vehicles that are in the UK prior to Exit day. A process will be established to issue UK approvals for holders of EU-27 approvals. Existing EU approvals issued by the UK’s VCA will remain valid. All of this is an interim arrangement valid for a maximum of two years, pending a comprehensive review and re-working of the UK’s type approval arrangements (with legislation planned for mid-2019)”.

As I read that, the implications seemed profound and I have some questions about it. If the aim is to have continuity, the obvious question is: why make any change at all? A golden rule in my experience of government, though it is being repudiated by the present Government all the time, is, “Where it is not necessary to change, it is necessary not to change”. Indeed, I always thought that was a cardinal Tory rule—it is Edmund Burke. So if the aim is to maintain the status quo, which is surely in the interest of the United Kingdom because we have such a large car manufacturing hub, why make any changes at all? Why not simply say that the United Kingdom will accept EU 27 type approvals hereafter?

Secondly, unless I have misunderstood it, paragraph 2.4 seems to envisage a kind of zombie land for vehicles. It says that the UK will no longer accept EU 27 type approvals for vehicles that are in the UK, registered after exit day—that is my understanding—and a process will be established to decide what the regime will be after two years, which stands to reason because it would take two years to decide what that process is. Therefore, it is my understanding that that could lead to retrospective action because there will still be vehicles coming into the UK with those type approvals in that two-year period. However, it says that the UK will no longer accept those approvals, other than for motor vehicles that are in the UK prior to exit. If the United Kingdom chooses to change the rules, it might create a category of vehicles that have perfectly legally received type approval after exit day but which the Government retrospectively decide no longer meet the approvals. On my reading of paragraph 2.4, that must be a possibility. If that is not the case, why does it not say that the UK will accept EU 27 approvals until the new regime comes into force, which will be after the comprehensive review? Is the Minister following my point? I do not understand what looks to be a zombie period between the completion of the review and exit day.

Thirdly, why is the planned legislation necessary unless the United Kingdom is planning to set up a wholly new and separate type-approval regime? Surely, the only reason for setting up such a regime is that we envisage that our type-approval regime and standards might be different—potentially radically different—from those on the continent.

This leads to my fourth question, which is the big industrial policy question underlying all this: if we diverge from the EU 27 type-approval regime, as appears to be envisaged by paragraph 2.4, will that not, in itself, create a significant impediment to trade? Is that not profoundly against the interests of the United Kingdom, given that we are a massive exporter of cars to the European Union? It may be that all this is redundant because the devastation that Brexit causes to our car industry—just to extrapolate from the events of the last month—is so great that we no longer export large numbers of cars to the EU. It may be that by destroying this great industry we do not have the problem of continuing to mimic EU 27 type approvals.

However, many of us in the House hope that we will continue to have a car manufacturing base in this country after Brexit. Surely, it is in our interests that we do not erect new barriers to trade in cars and that we maintain the status quo as far as possible. In which case, paragraph 2.4 appears to act contrary to that policy, unless the noble Baroness can reassure me in her reply that my concerns are entirely misconceived.

My Lords, I, too, appreciate the explanations given by the noble Baroness, Lady Randerson, about her anxiety about a number of key features of this statutory instrument. I am commenting on the second of the two documents rather than the first one, although the first has a number of significant question marks. I thank the noble Baroness for her thoughts on those matters. As the noble Lord, Lord Adonis, said in agreeing with the noble Baroness, a number of questions need to be answered comprehensively today by the Minister.

However, it is not just that but, once again, the anxiety we all feel about the huge accumulation of SIs going through inadequately, badly considered, all in a rush, in not enough time to be considered properly. It comes back to the much more fundamental issue that one always needs to remember in this whole business, of the flaws in the original referendum and the failure to prepare properly immediately after the result for all the things that are now flowing through in the last minute—literally the last few weeks—in the painful process of the disintegration of this country’s membership of the EU. This is now causing more anxiety and concern among many members of the public as they wake up to these realities, not having been given any guidance by the Government immediately after the result. It is not a matter of disrespecting the result of that vote. We know that it was flawed for various reasons. The construction of the referendum was wrong. British citizens who had lived in other European countries for more than 15 years were excluded automatically, so were the youngest voters, who should be entitled to be on the register for future occasions. There were many other mistakes as well. It was really the fault of the Government immediately afterwards—

With the greatest respect to the noble Lord, this does not seem to be much to do with this statutory instrument.

It is indeed because I am coming on to that in a second, but I am just giving noble Lords the background to this. It needs to be repeated again and again. It is quite legitimate for me to say these things and I will come to the points there. I have already iterated strongly that I agree with the noble Baroness, Lady Randerson, and the noble Lord, Lord Adonis.

Does the noble Lord not think it is slightly insulting to assume that we do not know the background?

That is the reality that is now hitting members of public—and not just the press in article after article, comment after comment—as people interviewed say that they were not given sufficient warning.

On the detailed policies, this might seem to be a minor matter, and in one way it is, but it is of great importance to the environment and to the health of the motor vehicle industry in this country, which faces such a gloomy prospect now in view of the most recent developments. The point I was making, which I think is entirely valid, is that after the referendum result, and at least before the 8 June 2017 election when the Prime Minister completely lost the mandate to continue “Brexit means Brexit”—which needs to be remembered as well, but she carried on regardless—the Government should have started going through all the legislative responsibilities they needed to enact. This would have reassured the public that if there was continuity of any kind in policy formation, if we thought that the EU policy system, of which we were devoted members for 45 years, was sufficient, it would be protected.

I come now to the quick points I want to make to cement my agreement with what the noble Lord, Lord Adonis, was saying as well. I, too, cannot understand why there is no proper explanation of paragraph 2.4 of the Explanatory Memorandum. Further, paragraph 2.5 says:

“The proposed changes are designed to ensure that the CO2 emissions of new cars and vans registered in the UK after the UK’s withdrawal from the European Union continue to be regulated in a manner that is at least as ambitious as current arrangements. If these changes are not made, then the retained EU legislation would have no legal impact on newly registered cars and vans in the UK”.

That, too, would cause a certain amount of alarm unless it was properly explained by the Government. I also agree with the question marks raised about paragraph 7.

Consultation was conducted on the second document, at least. According to the Explanatory Memorandum:

“There were seven responses to the consultation all of which were broadly supportive of the proposals”.

However, no detail is given, unless one gets the full government documentation. It sounds very strange that there were only seven responses to the major matter of the future of the motor vehicle industry. Once again, it probably indicates inadequate time for people to be able to consider these things.

Finally, paragraph 11.1 says:

“Detailed guidance on how the regulations will function and how the various flexibility mechanisms should be applied for will be provided to manufacturers, and made available on line, as soon as it practicable to do so”.

Is this future legislation or just extensions of regulations? When is it going to be? We urgently need guidance now from the Government on all these matters.

My Lords, I will be briefer than I had intended, mainly because most of the points I wanted to raise have already been made. I am afraid there will inevitably be some degree of repetition.

As the Explanatory Memorandum says in relation to the first SI:

“EU law requires manufacturers of road vehicles and engines for non-road mobile machinery to be type approved before production can begin”.

It goes on to say:

“The proposed changes are designed to ensure that the type approval regime is effective after EU withdrawal”.

We then come on—and the noble Baroness, Lady Randerson, already referred to this—to the reason for the proposed changes. It says:

“If these changes are not made the legislation will not be operable after EU withdrawal because the UK would be required to continue to accept motor vehicles entering the UK market which have a type approval granted by one of the EU 27 approval authorities, and would have no formal way to challenge the validity of the approval”.

I think the question has already been asked but I will ask it again: how many challenges have there been so far under the existing arrangements if this is now being put forward, as it almost seems to be the sole major reason for making the changes we are now discussing?

I had also intended to read out paragraph 2.4, but I will not as my noble friend Lord Adonis has already done so. It makes reference to the interim arrangement that will be introduced, which is valid,

“for a maximum of two years, pending a comprehensive review and re-working of the UK’s type approval arrangements (with legislation planned for mid-2019)”.

I put it to the Minister that if we are talking about introducing an interim arrangement for a maximum of two years, with uncertainty as to what will happen after two years, does that not create quite a lot of uncertainty for the motor industry going forward? This SI may or may not clear up uncertainty for a short period of time, but it certainly does not do so over a much longer period of time. Perhaps the Minister could comment on that.

As I say, the Explanatory Memorandum makes reference to the interim arrangement, under which there will be a need for,

“manufacturers holding an EU approval from an EU-27 approval authority … and producing motor vehicles on or after Exit day … to apply for a Provisional UK type approval from the VCA in order to be able to register their motor vehicles in Great Britain or Northern Ireland”.

How quick is this process for applying for a provisional UK type approval? After all, we are getting pretty close to 29 March, so how many of these motor vehicle manufacturers have already applied for one; how many applications are we expecting; is there loads of paperwork to fill in; is it a formality; and on what basis would an application be accepted or rejected? Presumably, that in itself might create a further degree of uncertainty for the motor industry in this country.

My noble friend Lord Adonis has already raised the issue of consultation and read out the bit from paragraph 10.1 that says:

“No formal consultation has been undertaken, as the intention is to ensure that, as far as possible, the status quo is maintained”.

I share his view that that is not a very good reason for not holding a consultation. Surely the consultation, or at least one key part of it, would be on whether what is in front of us achieves the objective of maintaining the status quo, since maybe some of the manufacturers or others involved in the industry might think that it does not. But since no formal consultation has taken place, presumably they were not invited on a formal basis to offer their views on that particular, rather key issue.

Is there not a more fundamental point, which is that the regulation emphatically does not maintain the status quo? On the contrary, it envisages a completely new type-approval regime being set up. How can the Government say that they are not consulting because that maintains the status quo when the regulation itself emphatically does not maintain the status quo?

That is the point I was trying to make—that in fact, if the Government had held a consultation, they might have had people coming back and saying that it was not maintaining the status quo, but the Government did not give them a chance to say that because they did not hold the consultation in the first place. Paragraph 10.2 seeks to get round that by referring to the fact that there were,

“a series of focused meetings”—

I do not think anyone would expect a series of unfocused meetings to take place—

“with stakeholders such as the Society of Motor Manufacturers and Traders … the Motor Cycle Industry Association … the Agricultural Engineers Association … and the European Engine Manufacturers Association … Numerous smaller trade associations have also been provided with information, and a number of manufacturers have been contacted directly”.

Were they contacted directly on whether what is in front of us in fact maintains the status quo? That is what the Government are saying their objective is, so did they speak to manufacturers about whether they thought this maintains the status quo? As we have already heard in some detail, quite a case can be made for saying that this certainly does not maintain the status quo, which is what Government have said is their objective.

In addition, bearing in mind that the Explanatory Memorandum talks about focused meetings, I know that the Secretary of State is not exactly a fan of trade unions, but I notice that when the Explanatory Memorandum refers to who the focused meetings have been held with, it does not seem to include the trade unions involved in the motor industry. Is this simply a reflection of the Secretary of State’s view that the people who work in the industry, as opposed to the people who own and manage the industry, have nothing whatever to contribute as far as the future is concerned? It would be helpful if we could have a reply on that. I am sure that the Minister will not be surprised that, bearing in mind the content of some of the other SIs that we will go on to deal with, there seems to be a similar silence there on whether those who work in the industry and the organisations that represent them have been consulted.

I will not go through the issue that has been raised with regard to paragraph 7.8 and mention that all again, because clearly the Minister will reply to that. I just want to check that what we have in front of us will meet, at least for a period of time, one of the issues that has been drawn to my attention. A motor manufacturer in this country says that it has a long run-in time of some months for production of the particular vehicle it makes. If it does not have type approval, it cannot complete the car—the type approval for the vehicle concerned, which is manufactured in this country, is done from its headquarters in another European country. It indicates that that could potentially lead to hundreds of almost-finished models of that car being stuck in the plant in this country. I am told that the company is creating extra parking spaces near the plant—which is certainly a waste of money but perhaps quite sensible for this reason we are talking about today, as well as because of potential customs delays, which one might argue is a separate issue. Can the Minister at least say that, provided that the manufacturer can get one of these provisional licences or approvals, what we have here would meet that potential difficulty for a major manufacturer in this country that needs a long run-in time for production of the particular vehicle it produces, and can she confirm that its headquarters where the type approval is done, which are in another European country, would not be in any difficulties as a result of anything in this statutory instrument? If in the short term that would not be the case, because the manufacturer will have no difficulty in getting the provisional certificate or arrangement, what will happen to it in two years’ time, bearing in mind that the Government are not able to tell us what the situation will be then, and does this SI not mean uncertainty for it, at least after two years, if not earlier?

I will ask one or two questions on the other SI, on vehicle emissions, to check what some of the wording means. I am looking at the Explanatory Memorandum, and I am sure the Minister will know why I am referring to it—basically, I cannot make head nor tail of what the statutory instrument itself says. There is a reference in paragraph 2.7 to a summary of the changes being made to the current legislation, and then it sets them out. It says:

“Minor amendments to restate retained EU legislation in a clearer and more accessible way, such as omitting time-limited obligations”—

which one might think was not quite the same as expressing something in a clearer and more accessible way. Could the Minister outline the time-limited obligations that are being omitted? What is the significance of their omission?

Paragraph 2.8 of the Explanatory Memorandum—again, I simply want to check what the wording means, because it could be an almighty get-out to allow changes—says:

“The eight (EC) Regulations and twenty-five Implementing Decisions mentioned in paragraph 6.5 will all become retained EU law on exit day, and will all be retained and amended in order to ensure that all of the obligations and commitments listed within continue to apply in a sensible and effective manner after the UK’s withdrawal from the EU”.

Why was it necessary to add,

“in a sensible and effective manner”,

rather than just saying that the obligations and commitments listed would,

“continue to apply after the UK’s withdrawal from the EU”?

Which bits will not apply in future because they are not deemed sensible or effective? It would be helpful to have some clarity on that, because it may mean nothing at all, or it may mean that someone could try to drive a coach and horses through the existing arrangements.

There is another place where we have to ask: does it mean nothing at all or does it mean a great deal? Paragraph 3.1 says:

“Additionally, there are a number of sub-delegated clauses within the Regulations that allow for updates to the legislation to be made, such as updating the formula that sets manufacturers’ targets to reflect changes to the weight of the relevant vehicle fleet”.

I would be grateful for an explanation of exactly what that means. What will updating that formula mean? How will the Government define what is an update and what is a straight change in the present arrangements? Clearly, the word “update” could be interpreted in a very loose way, and used to justify almost anything the Government sought to do.

Paragraph 7.4 says:

“Currently, manufacturer targets are established by formulae which compare the mass of all newly registered cars and/or vans in a manufacturer’s fleet against the average mass of all such vehicles in the European Union … At the point of exit, the average mass figure that all other vehicles are compared against will be retained in order to ensure continuity for vehicle manufacturers. At the first such update to the average vehicle mass after the UK’s withdrawal, the mass will be amended to reflect the average mass of all relevant vehicles registered within the United Kingdom only”.

Mercifully, I do not have to try to explain what that means, but I would be grateful if the Minister could. What I am really getting at is this: if the formula is to be changed in some way at that first update—there is a reference to an amendment—will it make the CO2 emissions targets weaker or tougher? That is the key issue that arises from the wording. What is the significance of that wording?

Finally, I come to consultation, which is covered by paragraph 10. Again, I ask whether the trade unions in the industry were consulted. They may have a view on emissions targets, and they may have some helpful information. They are involved in constructing and building the vehicles, so they may have some ideas about what is going on at the moment that have not come to light, as we found out with VW, in another country, that things were not going precisely as they should be.

Were environmental organisations consulted? I think that the noble Lord, Lord Dykes, raised that issue, and there have not been many responses. How many organisations were invited to comment directly? Were environmental organisations invited to do so? The Explanatory Memorandum says that key issues were raised about whether UK CO2 targets would be weakened. I know that the Government will want to say that that is not the case; no doubt the Minister will wish to confirm that.

Will the possibility of simplifying the arrangements for approving eco-innovations, which is also referred to in the document, lead to a weakening of the present arrangements in that regard? As I understand it, although I do not think this could be described as a derogation, if someone wants to be dealt with under that heading because they are introducing new technology and so ought not to be assessed in the same way as everybody else, at present the European Commission has to approve that. In future, presumably, that will be done on a UK basis. If I am correct—I may well not be—and that power of approval will be transferred from Europe to this country, who will exercise it here?

My Lords, I thank noble Lords for their consideration of the draft regulations. The regulations will ensure that we can continue to control the registration of vehicles in the UK and also to combat climate change in the transport sector after we leave the European Union. I shall now respond to some of the points raised.

The issue of type approval and the standards that apply was raised by many noble Lords. Future changes to the standards that apply to vehicles approved and registered in the UK will be laid before Parliament for approval in the form of statutory instruments. At the point when we leave the EU, all existing standards, including those for safety and environmental performance, will continue to be applied to new vehicles registered in the UK. There will not be a drop in standards or a resultant effect on road safety or environmental performance when we leave the EU.

As for future decisions on remaining aligned with EU standards, it will be for the Government to propose legislation for Parliament’s consideration, and the process by which the legislation will be considered will be an SI, subject to the affirmative procedure, establishing a new full UK approval scheme. As discussed, that will be laid later this year. I reassure noble Lords that, as has been highlighted, the SI will create an interim arrangement, which will be valid for a maximum of two years. The department is undertaking a comprehensive review and reworking the UK’s type-approval arrangements in the case of a no-deal outcome, in order to ensure continuity for manufacturers. This absolutely is about maintaining the status quo. That is why we are having the interim measure for two years.

The review is not intended to make policy changes. We would remain aligned with existing standards, but we would amend the retained EU legislation on type approval, which runs to 3,700 pages, to eliminate remaining deficiencies and, if possible, to streamline the legislation to make it more accessible. There will, of course, be a formal consultation on that process, to ensure that we get it right. This is an interim measure for two years, maintaining the status quo pending a large piece of work with a formal consultation to ensure that, should we leave with no deal, we would have the best possible functioning type-approval system.

But what is the point? Why not simply continue to maintain EU 27 approvals? If we do not intend to diverge, what is the point of this big piece of work?

By leaving the European Union through the European Union (Withdrawal) Act, we will take EU legislation on to our statute book. So we are carefully looking at that legislation to make sure that it functions in the best way for us. As I said, this is not intended to make policy changes and is intended to remain aligned with existing standards. But there are more than 3,700 pages of type approvals, and we want to make sure that they function correctly on our statute book. That is a significant piece of work, which we will be doing alongside a formal consultation to make sure that this continues to function.

The consultation on type approval was conducted by discussions and working groups, largely through the main UK trade bodies covering the various categories of vehicle that require type approval. We have had a range of meetings that included members of the SMMT, the Motorcycle Industry Association and the Agricultural Engineers Association. Through these meetings, we refined our proposals and addressed sector-specific issues as well as informing people what is expected in a no-deal scenario. Obviously, we have also spoken to the European trade associations.

I ask this in a genuine spirit: I hope that the Minister will accept that. If there were meetings and discussions with the bodies that she just mentioned, which are referred to in the EM, did they agree that what is in front of us today maintains the status quo—because they would have been told that that was the objective? Can I just check, because the Minister did not mention it, that the trade unions were not consulted?

I am afraid that I do not have an answer on trade unions; I shall have to get back to the noble Lord on that.

The organisations we consulted do not wish for no deal—I should be very clear on that—but we are attempting a pragmatic approach to make sure that we continue trade with the EU should we have a no-deal exit. They are supportive of the proposals. The SMMT told the Lords Select Committee on the EU Internal Market that the department had put in place a system of temporary type approval, initially, which is probably as sensible as we can have during the interim period. The Motorcycle Industry Association confirmed that it had no immediate concern with the proposed text, which it expects to alleviate some of the short-term pressures on manufacturers and importers arising from the UK leaving the European Union without a deal. So I think that it is fair to say that industry does not want no deal but, in the event of no deal, it accepts that this interim measure is the right way forward. We published our technical notice of the changes to type approval last September.

On the question of the cost of type approval asked by the noble Baroness, Lady Randerson, the total cost to manufacturers of provisional approval is estimated to be around £800,000. That includes their internal administration costs and familiarisation costs. Normally, to obtain type approval for a single model costs at least £250,000, including the hire of test facilities, internal costs and fees to the VCA. It takes the VCA a couple of hours to prepare a UK approval following an application. As noble Lords would expect, the VCA has engaged extensively with industry and is well placed to issue provisional UK approvals. It has recruited additional temporary staff to manage the additional workload. So far, it has taken on 23 additional staff and is on target to have 40 in place by mid-March. The assessment found an estimated annual cost of the VCA of £800,000 per year, which would be recovered from manufacturers—so, combined with the administrative costs of using the scheme, the estimated total cost to business is £1.6 million per year.

I thank the noble Baroness for those details, but I am still not clear about why the Government are suddenly so suspicious of EU type approvals. What grounds do they have to need to do this all over again rather than simply accepting, certainly for the first two years, that vehicles can come in with EU type approval, which we have trusted in the past and could trust for the next couple of years?

Under no deal, EU-based manufacturers will also need to obtain UK approval from the VCA. That will be granted on the basis of a valid EU approval. The VCA retains the right to retest in the unlikely event that there are doubts about the authenticity of the EU approval. There are certainly no grounds for suspicion on that, but, if we leave the EU, it is only right that we have our own approval. We will no longer be a member of the EU, so we will no longer recognise its type approval.

On the VCA’s progress, as I said, engagement is continuing. It is actively working with customers and manufacturers on approvals from EU countries selling into the UK to ensure that they can deal with this. The VCA has already obtained approval data from manufacturers. Used cars and vans make up 99% of new registrations, and that engagement continues, so it is well placed.

The noble Baroness, Lady Randerson, also asked about the powers. The VCA currently has powers but, in the event of a no-deal exit, it will lose its powers as we will no longer be an EU member. That is what the SI brings in.

Several noble Lords asked about the national small series type-approval limits. They are being doubled for this year, and only for this year, because by next year we will have this new statutory instrument in place which will have our new type-approval process.

Can the Minister explain why they are being doubled? On what grounds is their historic level now inappropriate?

Before, it was for the whole of the EU. Now it will be for the UK only, so this is a temporary measure until the new type-approval statutory instrument comes in.

The Minister referred to a statutory instrument, but the regulation refers to legislation. What is the relationship between the legislation, which is scheduled for mid-2019, so will be introduced very shortly, and the statutory instrument to which she referred?

The new type-approval regime will be a piece of legislation through a statutory instrument, which will be affirmative and will follow full consultation before it is published. A statutory instrument is the methodology by which it will come in.

I turn to emissions, on which, happily, we did consult. They were the subject of public consultation in November last year, and the Government’s response was published on 18 December. In parallel to that, we offered meetings with any stakeholders who wanted to discuss the proposals further. Again, I shall have to get back to the noble Lord on the specific point about trade unions. In addition to that formal consultation, DfT officials have been in regular contact with stakeholders for many months to help develop proposals to make sure that we have consistency with the existing EU regime. In the government response to comments from stakeholders, we provided clarification on the pooling and eco-innovation arrangements and set out a worked example of how a vehicle manufacturer’s target under the proposed UK regime might be established.

Through the statutory instruments, there are no specific impacts on UK manufacturers. If we were to leave the EU without a deal, the new UK regime would continue to operate as the EU regulation does for any vehicle manufacturer that registers new cars or vans in the UK. Manufacturers’ CO2 emission reduction targets would be calculated in the same manner, and they would still be expected to meet the existing headline reduction targets and report new registrations, as they do now. UK manufacturers’ vehicles registered in the EU would count towards the EU’s regime, as they do now.

I am very grateful to the Minister for giving way, and I apologise for interrupting at this stage. Would she forgive me if I again raise the point that has just made by the Opposition Front-Bench spokesman about trade unions being included in the consultations? I note that she has now said twice that she does not know the answer to that, but I should have thought that her team would have provided her with a list of people who were consulted, so she could refer to it. Is it not a matter of alarm if the trade unions were not included, bearing in mind that in the high-technology motor industry, it is well known, as we see from the tragedy of the Honda closure in Swindon, that car workers are not just workers in a general sense: they are highly skilled operatives and proud of their long years of training. Therefore, they often know more than those owning or running the company and managing them about the intricacies of motor vehicle production and manufacture. The trade unions therefore really need to be consulted.

I take the noble Lord’s point and of course agree that the staff who work in the manufacture of vehicles play a really important role, and we should ensure that their views are taken on board.

We expect the cost of moving to a UK regime for CO2 emission reduction standards to be minimal. The registration of vehicles and the collection of required data is already handled by the DVLA on behalf of the DfT, and that will not change after EU exit.

With regard to emissions standards, the Government remain committed to our international and national environmental obligations. When we leave the EU, we will maintain them. If there is no deal, the SI we are considering will ensure that existing CO2 emission reduction standards are maintained. The formula to set those CO2 reduction targets and the headline targets themselves will be retained by the statutory instrument.

The noble Lord, Lord Rosser, asked about vehicle mass changes. As the UK average vehicle mass is above the EU average—we make heavier vehicles than the EU, on average—one consequence of adopting the current regime is that the sum of individual manufacturing targets in the UK will be slightly higher than the sum of targets in the EU. That might appear to be a slight loosening of standards, but that impression is incorrect. The goal that manufacturers must achieve remains the same. The SI specifically retains the headline targets that manufacturers must achieve by 2020. It maintains the level of effort that manufacturers must make under the current regime and ensures that regulations are as ambitious as under the existing arrangements.

On improving CO2 standards, as per the terms of the withdrawal Act, amending SIs must only correct a deficiency. However, the Government are still committed to ensuring that the standards will be as high as or higher than those required to allow importation into the EU.

I hope that I have addressed the points that were raised in the debate. If I have missed any, I will follow up in writing. Maintaining vehicle approval and emissions standards is vital to the broader government commitments to tackle climate change and improve road safety. These SIs are essential to ensure that we maintain control of vehicles on UK roads and that the system of vehicle type approvals and emissions standards continues to function from day one after exit. I beg to move.

Motion agreed.