EU Directive 2007/46/Ec

– in the House of Commons at 6:49 pm on 4 September 2013.

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Motion made, and Question proposed, That this House do now adjourn.—(Mr Evennett.)

Photo of Jonathan Reynolds Jonathan Reynolds Labour, Stalybridge and Hyde 6:13, 4 September 2013

On behalf of my constituents, I thank you for granting me this adjournment debate, Mr Speaker. I thank the Minister in advance for his response. I hope that we can achieve a positive outcome. I realise that this is a very specific topic. It is a technical and perhaps quite dry subject, and I doubt whether millions of people are at home, glued to BBC Parliament right now, but it is vital to small and medium-sized businesses whose working practices are now affected by this directive.

The issue that I want to raise and discuss is not the directive itself, which in principle I have no issue with and which does make sense. It will improve safety standards across Europe, and open up a wider market to UK manufacturers—both things that are, of course, advantageous. I want to focus on its implementation in the UK, which I believe could be done much better. In particular, I am very concerned that no further assessment or scrutiny has been carried out since the initial impact assessment back in 2009, just before the first part of the directive was due to come into effect. However, I do not simply want to criticise; I want to work with the Minister, to tackle some of the issues. I hope that the process can be made much easier for businesses in my constituency of Stalybridge and Hyde that have contacted me about it. I would like the Government to carry out another assessment on the directive now—this is paramount—before it is fully implemented next year, to address the issues that I will present this evening.

I have my own interest in this area. As vice-chair of the Associate Parliamentary Manufacturing Group, I work with colleagues across the House who share my passion for manufacturing. I have been keen to address this topic because it is hitting exactly the sort of businesses in my area that everyone wants to give more support to. I am talking about small and medium-sized manufacturing businesses, providing skilled, private sector jobs in the north of England.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Human Rights)

Is this directive not another example of EU legislation adversely affecting small and medium businesses? Does the hon. Gentleman feel that if the Government do not act, there will be lay-offs and businesses closing?

Photo of Jonathan Reynolds Jonathan Reynolds Labour, Stalybridge and Hyde

There is no doubt that my motivation in seeking this debate has been the news communicated to me about the impact that the implementation of the directive will have on businesses in my area. The goal of the directive is not a bad one, but if it is implemented incorrectly, there is no doubt that some manufacturers and some jobs might go.

The directive was introduced to ensure that automotive goods—including cars, vans, lorries, trailers, caravans and so on—meet a minimum EU-wide set of regulatory, technical and safety requirements. That is entirely understandable and a good thing, in terms of both safety and potentially opening up a bigger market for our manufacturers. However, the directive has meant that manufacturers have to do much more to ensure that their products meet the standard, drastically altering their previous processes. Instead of needing approval to work on a certain manufacturer’s product, businesses now need approvals for different vehicles from the same manufacturer, even though the differences between models might seem minor. In the original impact assessment, back in 2009, the previous Government had two options. They chose the right option by offering a lower-cost approval scheme to businesses that wish to sell only in the UK. I am pleased that the current Government stuck to that. However, four years later, more issues are appearing, which I shall now explain in more detail.

The first issue, unsurprisingly, is the increased costs that the directive has imposed on businesses. The number of approvals needed has spiked massively, and obtaining each type approval costs money. Whereas costs were managed by needing only a few approvals, with the new European Community whole vehicle type approval, as well as the number of approvals that come with it, costs have risen sharply and quickly. Many SMEs are struggling. I have heard reports of businesses that will either scale down the products that they offer or simply pack in altogether when the directive is fully implemented next year. That is not encouraging manufacturing—quite the opposite—and that should concern us all.

The staff hours involved in obtaining new approvals have also risen due to the complexity, the amount of new approvals needed and the length of the process to obtain just one approval. The Federation of Small Businesses has told me that its members feel that the process is confusing and burdensome. That is particularly true of SMEs, which find the paperwork—something that they have to go through every time they want to start work on a different product, even if the differences are fairly minor—demanding and discouraging. Other areas of the business then suffer, as staff are taken away from other roles to spend what they believe to be a disproportionately large amount of time on securing type approvals.

A lack of communication to businesses by Government and government authorities such as the Vehicle and Operator Services Agency and the Vehicle Certification Agency is another issue. Some businesses were not even aware of the initial impact assessment in 2009. They feel ill-informed and still in the dark about what is required from them and any help that they can receive. Businesses have told me that they feel abandoned. Some businesses have also told me about what they feel to be a lack of consistency, with the process frequently changing. One managing director described it as the “goalposts constantly being moved”. There is a lot of confusion and worry out there in the industry at the moment, which needs to be addressed.

Let me present the House with a case study from my constituency. This issue was brought to my attention by Truck Craft Bodies Ltd—a small to medium-sized business in Stalybridge. It is deeply concerned about the effect that the directive will have on its business once it is fully implemented and about the ability of such SMEs to survive. The business has told me that it has gone from simply needing one approval per manufacturer to needing up to 30 approvals for just one manufacturer.

Like me, the company agrees with the premise of the directive, but it is particularly concerned about the resulting costs and increased staff hours. It is also unhappy about the lack of help and support on offer. The help that it could receive from organisations such as the Society of Motor Manufacturers and Traders has so far been inadequate. The Government should be speaking to companies such as Truck Craft Bodies. They are the ones in the field, and what they have to say on implementation is invaluable.

That leads me to my main point, which is the lack of scrutiny or assessment of the directive’s implementation since the initial impact assessment more than four years ago. I am concerned that as the date for full implementation—November 2014—looms closer, the answers to a number of questions are still not known, purely because of the lack of scrutiny. First, does the system provide value for money? The Vehicle Certification Agency is the UK’s designated approval authority, and it needs to be cost-effective for the businesses that use it. Secondly, do the Government know how the implementation of the scheme is going, given that no assessment has been carried out since 2009? Are the Government aware of the problems that are being experienced by many businesses? How will they address those issues and provide further help to businesses that need it? We need to know the answers to those questions if we are going to help the SMEs that are facing a testing and uncertain time.

The point of this debate, however, is not for me to stand here and criticise the Government. That would be unfair, especially on a matter that is so technical and complex. I want the debate to achieve positive outcomes and improvements, as my ultimate aim is to help businesses that are struggling and that are worried about the effect of the directive on their trade and their ability to survive. I have no doubt that the Minister shares that view. There are potential solutions to the problems that I have outlined so far, and I hope that the Minister will give them serious consideration.

Most importantly, I firmly believe that the Government need to carry out another impact assessment before the directive is fully implemented in 2014, and I call on the Minister to do that at the earliest opportunity. The lack of scrutiny so far worries me deeply. This cannot wait until after the full implementation of the directive; it needs to be done as soon as possible. If we wait until 2014, it will be too late, especially as some businesses are planning to stop their current operations once the directive comes into full effect, unless there are changes. An impact assessment now would help properly to identify the hurdles that businesses are facing because of the directive, and it would do so in far greater detail than I can describe in the debate today.

Carrying out a new, updated assessment now would have numerous benefits, and I hope that I can convince the Minister to do so. It would offer solutions and ways of dealing with the problems that the directive has caused to businesses, not to mention giving the Government an idea of how the directive’s implementation is going and an opportunity to improve it. Most importantly, it would involve the manufacturers and businesses. After all, they are the ones that are most affected; they currently feel abandoned and are not sure where to turn. This is of course their industry, and they are the ones that know it best. Overall, I believe that a new assessment should be carried out as soon as possible and definitely before full implementation. I sincerely hope that the Minister will give that suggestion some serious thought.

Certain specific suggestions are worthy of consideration. Indeed, any new assessment might come to similar conclusions. They include changes such as making the granting of licences easier. As previously mentioned, the VCA is the only body in the UK that can grant type approvals to SMEs that want to operate only in the UK. There is scope to funnel down the process, which at present appears top-heavy and cumbersome, to give manufacturers and businesses more involvement. That would take some of the work load off the VCA and run down costs on both sides. Businesses that I have spoken to are unhappy with the current process that the VCA operates. For example, the agency already has a lot of the information that manufacturers have to supply. The duplication that the companies have to undertake costs money and time, and seems unnecessary. Perhaps this has been overlooked, and it could be identified by a new, updated assessment.

Furthermore, a common complaint from the industry is that the support offered to it has been found wanting. Manufacturers feel left out of the loop and abandoned, and are unhappy with the general lack of communication about a matter that is so vital to their continued existence. The Government need to communicate their plans better. It is also imperative that the Government look at the UK system and make it as easy as possible for small and medium-sized businesses, in particular, to comply with the new regulations. The FSB supports that proposal and believes that that should happen.

Mr Speaker, I thank you once again for allowing this debate, and I look forward to the Minister’s response. I am sure that he and I both want the same thing: for manufacturing to thrive in the UK. The directive does not necessarily have to hinder manufacturing by firms such as Truck Craft Bodies. Improved safety and access to bigger markets are of course in everyone’s best interests. However, because the directive involves such a radical change from how manufacturers have previously operated, it is imperative that it should be monitored closely. That has not happened so far, as we have seen from the lack of any real assessment or scrutiny by the Government since the initial impact assessment in 2009. I sincerely hope that the Minister will take on board the suggestion to hold another assessment soon, before full implementation in 2014.

Photo of Stephen Hammond Stephen Hammond The Parliamentary Under-Secretary of State for Transport, Parliamentary Under-Secretary (Department for Transport) 7:24, 4 September 2013

I congratulate Jonathan Reynolds on securing this debate. He said in his opening remarks that he had a passion for manufacturing and for small and medium-sized enterprises, and he was generous enough to suggest that he suspected I shared those passions. He was right. He was also right that tonight’s debate provides an opportunity for us to discuss the effect on businesses of directive 2007/46/EC. I would like to thank him and his office for their assistance on some of the thoughts he might express tonight; I hope that my response will thus be more informed.

I am aware that the hon. Gentleman has recently asked a number of questions about this directive, so I am pleased to respond to this evening’s debate. Before

I talk about the directive, it would be right and proper to reflect on the significant progress made by the UK automotive sector. This is explained in the automotive strategy that was published in July, which was the culmination of work led by the Automotive Council. It is very encouraging for all of us to note and learn that the UK car industry is currently vibrant, particularly at a time when other European markets face significant challenges.

The UK produced 1.58 million vehicles in 2012, with £6 billion of investment in the industry by vehicle manufacturers over the last two years. That is good news for the UK. Some challenges have been presented at ports, and I am pleased to help the industry overcome them. I am sure that the hon. Gentleman—and, indeed, the Associate Parliamentary Manufacturing Group—would welcome that.

I turn, if I may, to the matter in hand. Clearly, the hon. Gentleman is concerned that the directive could have a detrimental effect on businesses. Just as he set out his concerns, I shall set out exactly how I think on the issue and briefly explain what the directive is all about. It concerns the approval of new road vehicles at EU level. It covers new road vehicles with four or more wheels, and there is a mandatory obligation on the UK, as on all member states, to apply its provisions.

The directive was implemented in the UK on 29 April 2009 by the Road Vehicles (Approval) Regulations 2009, SI No. 717. The hon. Gentleman was right to point out that the key element of the directive was to establish a single European market for motor vehicles, meaning that a vehicle approved to pan-European standards can be registered anywhere within the European Union, without further testing or obstruction to placing it on the market anywhere within the EU. The dates of application depend on the vehicle category: it has already been implemented for most vehicles, and will be fully implemented in October 2014, as the hon. Gentleman rightly said, for the largest goods vehicles.

Approvals under the directive are available from member states’ approval authorities. In the UK, this means the Vehicle Certification Agency, supported by the Vehicle and Operator Services Agency and the Driver and Vehicle Agency in Northern Ireland. Approvals are enforced through the registration scheme operated by the Driver and Vehicle Licensing Agency. Only motor vehicles with the appropriate certificate can be registered for use in the UK. Manufacturers can choose whether to use the UK approval authority or one from another member state for the pan-European approval.

Approval of the directive is a regulatory simplification matter, as it avoids manufacturers having to comply with potentially 28 different sets of national regulations and requirements. On that basis, it was supported at the outset by the high-volume producers. Producers of specialist and low-volume vehicles are also covered by the small series or the individual approval schemes created by the Department. These are essential provisions and are key to helping overcome the burden of EU-wide rules for UK SMEs, and throughout the process the Department has always sought to provide clear advice and assistance to such companies. If the hon. Gentleman has evidence that companies, including SMEs, have not considered that to be the case, I shall be delighted to consider his representation.

Prior to implementation, during 2007-08, officials worked closely with the various sectors affected by the new requirements. That included hosting, in conjunction with the Society of Motor Manufacturers and Traders, a road show involving 12 events around the United Kingdom to build engagement with industry.

At the time of the implementation of the national regulations, a full impact assessment was undertaken and published by the Department. Its objective was to determine how to implement the directive in a way that would minimise the burdens on UK businesses while maximising the safety and environmental benefits. Two options for implementation of the recast framework directive were assessed, the first being to implement only the pan-European scheme and to accept and issue only European approvals, and the second being to implement the pan-European scheme together with national schemes for small series approval and individual approvals.

A “small firms impact test” considered the financial and business implications for the companies. Some 250 SMEs were consulted as part of a telephone survey, and face-to-face interviews were conducted with 20 members of an overall group of 35 SMEs that had been carefully selected from the sub-sectors to provide a representative and balanced assessment. In addition, the Department sought the views of the Small Business Service and its successor, the Enterprise Directorate, in the Department for Business, Enterprise and Regulatory Reform, as well as the views of the Federation of Small Businesses and a number of other stakeholders.

The SMEs that were consulted advised the Department that type approval would be too onerous for some companies, and it was therefore important to have the option of national approval schemes. It was clear that the EU-wide scheme could have a fairly major adverse impact on SMEs, which are defined as businesses with fewer than 250 employees, so UK regulations were developed to incorporate option 2—the national approvals option—alongside the mandatory pan-European scheme.

I accept that, on the face of it, the provision of national schemes under option 2 would appear to be gold-plating, as it goes beyond the EU minimum. However, I agree with the hon. Gentleman that the last Government adopted the correct course of action, which the present Government have continued. It does have a beneficial impact on SMEs.

I have engaged in correspondence with the hon. Gentleman about Truck Craft Bodies Ltd and the effect that the directive has had on its business. As he will recall, I explained in a reply to him in May that the cost that the company had incurred for the approval of its vehicles was significantly less than the original estimate. I think he will accept the macro-point that the cost burden on UK business of accepting option 2 is significantly lower than the pan-European option would have been.

Officials at the VCA met representatives of Truck Craft Bodies Ltd on 8 November 2012. I believe that they have supported the company and helped it to prepare the relevant documentation for its product range. Two more other site visits were made to the company’s premises in April and May 2013 to carry out approval work. The company now has seven vehicle types approved, with a fee cost for work by VCA of less than £11,000. On the basis of its current rate of production, that indicates an average certification cost of £18 per vehicle over three years. It is worth noting that the VCA fees are set on a cost reimbursement basis, following the public consultation. That reflects the cost of providing the approval service to industry.

The hon. Gentleman made several comments about the impact assessment. I can assure him that the VCA does not request information that it already holds. Again, I make the offer that if he can produce evidence that the VCA has asked for information that he believes it already holds, I will be happy to consider that. However, we do not believe that the agency requests information it already holds. It is also true that every vehicle converter must have a commercial relationship with the original vehicle manufacturer, and there are competition and confidentiality issues if information supplied to one company is made freely available to another. That would have an impact on any decision to undertake a further impact assessment.

This is a matter that the wider motor industry and trade associations may wish to address, rather than have Government create more rules or regulations. The Department and its agencies continue to work with industry, both directly and through its trade bodies, to identify any matters where there is a lack of clarity in the application of regulations or a need for administrative adjustments.

It is important to recognise that the directive was finalised six years ago and the UK regulations were created four years ago, so the opportunity for any changes before the regulations are fully implemented is relatively minimal. However, the Government are not complacent about our commitment to removing unnecessary regulatory burdens, and if there is evidence that that is not happening I will instruct officials to redouble their efforts. Indeed, there will be a meeting between the VCA and the industry trade bodies to discuss that on 30 September.

The hon. Gentleman should also by now have received a reply from my colleagues at the Department for Business, Innovation and Skills about whether any funding was available to help mitigate the costs that Truck Craft Bodies Ltd has incurred. I understand that information has been provided on checking for possible sources of funding and on the business link helpline, which provides advice to those who wish to improve and grow their operations.

To summarise, under its European obligations the UK had to implement the directive. The Department worked towards doing that in a manner which offered a high level of consultation and of assurance in respect of safety and environmental aspects, while limiting the burdens on UK businesses. There is a long history of regulating certain aspects of safety and environmental protection on road vehicles to provide a level playing field for industry, and in order to protect consumers, road users and society in general.

I hope I have satisfactorily explained the Government’s position on the approval of new vehicles. I have invited the hon. Gentleman to write to me about any evidence he feels he has about any specific occasions, and I will be delighted to see it. We are aiming to limit the impact of the directive wherever possible. We are aiming to limit the burdens on industry, and I hope the hon.

Gentleman will be reassured by what I have said, but if he has any further issues he wishes to raise, I will gladly respond to them.

Question put and agreed to.

House adjourned.