International Road Transport Permits (EU Exit) Regulations 2018 - Motions to Approve

– in the House of Lords at 11:54 am on 6th November 2018.

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Moved by Baroness Sugg

That the draft Regulations and Order laid before the House on 13 September and 9 October be approved.

Relevant document: 1st Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

My Lords, these draft instruments were laid on 13 September and 9 October following extensive industry engagement and consultation throughout this year. Together, they implement the majority of the proposals outlined during the passage of the Haulage Permits and Trailer Registration Act. The road haulage sector plays an integral role in keeping our economy moving and enabling businesses throughout the UK to trade with our international partners in the EU and beyond. In 2017, the UK haulage sector moved over 7.8 million tonnes of goods internationally. This is a crucial industry to the wider economy and the Government have been focused on putting in place the necessary arrangements for after we leave the EU in March 2019.

The International Road Transport Permits (EU Exit) Regulations 2018 will establish the framework and systems for the effective administration of a permit system. When the regulations come into effect, this regime will cater for our existing permit arrangements with non-EU countries and ECMT permits. From exit day, in the absence of a deal, it will cater for existing permit arrangements with EU member states, which are currently covered by EU law. The system will also be the basis for any future permitting arrangement which may arise from our negotiations with the EU. In those negotiations we are seeking reciprocal arrangements on road haulage. The current arrangements work well for both the haulage sector in the UK and hauliers in continental Europe. Our intention is to seek mutual recognition of international operating licences and access arrangements which do not restrict the current levels of trade.

However, the Government must prepare for all possible outcomes of our negotiations, including the prospect of no deal. As outlined in the technical notice on road haulage published earlier this year, in the event of no deal, hauliers will be able to use ECMT permits. In addition, we will seek to use existing bilateral agreements concluded prior to one or other of the parties joining the EU. There are 20 such agreements with EU countries which the Government expect to be reinstated once EU law ceases to apply, some of which require permits and others which do not. Where there is no existing bilateral agreement we will aim to conclude new arrangements with that country. Some existing agreements may need to be updated but we expect to have these arrangements, if required, in place to allow international road haulage to continue after exit day.

These regulations as they stand implement a permit scheme as it would operate on exit day if no new agreements were reached with the EU or member states. This will enable some continuity of road transport services in the event of no deal. Where new agreements are reached with the EU or individual member states that would require permits, we will amend these regulations to reflect the terms of these agreements. The regulations place a prohibition on undertaking international journeys without a permit where an international agreement requires one. It is important to note that these regulations by no means require the implementation of a permit regime with the EU or for any other international journeys. Rather, should an international agreement require that a permit is held by the operator and carried on the vehicle in question, these regulations allow that permit to be issued. Journeys that do not require permits are not within the scope of these regulations.

The regulations provide for how to make an application and how the Secretary of State will determine which applicants are allocated a permit where the number of permits available is limited. They set out matters that the Secretary of State must take into account when making a determination, and that are designed to deliver the greatest economic benefit from the permits, protect the interests of UK hauliers and apply a fair and consistent allocation process. This focuses primarily on how frequently a permit will be used and the proportion of an operator’s haulage that is international. The regulations provide some discretion in these criteria so that there is sufficient flexibility to respond to changing demands and ensure that permits are allocated fairly. They also require the Secretary of State to provide guidance on the process to ensure this it is transparent for applicants. This has now been published. The circumstances in which a permit may be cancelled and the process for appealing the cancellation of a permit are also covered.

The permit system will be operated by the Driver & Vehicle Standards Agency, building on the existing vehicle operator licensing system which operators will already be familiar with. The system will launch on 26 November to take applications for the ECMT multilateral annual permits, with permits subsequently being issued well ahead of exit day. There will be an application window for these permits and a fee of £10 will be applicable for each permit requested. Successful applicants will be required to pay a £123 fee ahead of the permit being issued. These fee levels mean there is no change in the cost of obtaining an ECMT permit.

The Trailer Registration Regulations 2018 will establish a regime for the registration of trailers used internationally, to support our ratification of the 1968 Vienna Convention on Road Traffic. The convention will come into effect for the UK on 28 March 2019 and will apply irrespective of the outcome of negotiations with the EU. Under the 1968 convention, access to foreign roads is guaranteed only for trailers weighing more than 750 kilograms if they are registered. As such, the registration of trailers is commonplace throughout most of continental Europe; this has previously been a source of disruption for UK trailers used on international routes. These regulations will allow us to implement a registration regime for trailers, allowing them to meet the standards outlined in the convention.

Regardless of the outcome of negotiations, registration will be compulsory for trailers used for international journeys to, or through, a foreign country that has ratified the 1968 Vienna convention if the trailer weighs over 750 kilograms and is used for commercial purposes or if it weighs over 3,500 kilograms and is used for any purpose. The use of unregistered trailers in these categories for journeys to continental Europe will be prohibited from 28 March—the day the convention comes into force. The registration system will be operated by the Driver & Vehicle Licensing Agency, and users can register their trailers from early January. This will allow three months for trailer-keepers to register ahead of the prohibition on the use of unregistered trailers for international journeys, which, as I said, comes into effect on 28 March. The fee for trailer registration will be £26.

Finally, the Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Order 2018 will support the enforcement of both these regimes when they enter into force. Later this month a further order subject to the negative procedure will be laid, which will designate offences for permits and trailer registration as offences for which a fixed penalty notice may be issued or a requirement to pay a financial penalty deposit imposed. The order that we are considering today will set the level of the financial penalties associated with these offences. Financial penalty deposits are an effective system for enforcing road traffic law where the offenders are not from the UK or have no fixed abode.

The DVSA can issue fixed penalties to non-UK residents and UK residents, and request a financial penalty deposit from any offender without a fixed UK address. As such, fixed penalties ensure that enforcement can be undertaken regardless of whether a driver is from the UK or elsewhere. The offences and deposit amounts under both regimes replicate the existing enforcement regimes for international haulage and motor vehicle registration. Penalty deposits for haulage permits offences will be £300. For trailer registration they will be £100 except for the offence of obstructing an examiner, which will be £300.

Noble Lords may be particularly interested in how these instruments will affect Northern Irish hauliers. The regulations do not require Northern Ireland hauliers to carry permits when on international journeys to or through Ireland. This is in keeping with our position in the Haulage Permits and Trailer Registration Act: that we will not introduce permits on the island of Ireland without the consent of the Government of Ireland. On trailer registration, Ireland has not ratified the 1968 Vienna convention so UK trailers do not need to be registered to be used in Ireland. The enforcement orders cover only Great Britain; enforcement in Northern Ireland is covered by devolved legislation. It will be for the Northern Ireland Executive and Northern Ireland Civil Service to decide whether they wish to enforce these offences using financial penalty deposits. Nevertheless, the absence of the Executive will not prevent the Driver and Vehicle Agency in Northern Ireland enforcing these offences through the Northern Irish court system.

Approval of these instruments is an important step in ensuring that the UK haulage industry is ready to keep goods moving after we leave the EU in March 2019. The sector is incredibly important to the wider UK economy and we are focused on delivering the measures necessary for it to continue operating successfully after we leave the EU. This package of instruments will take concrete steps to enable us to offer greater clarity to industry over the requirements that will apply for international haulage in the future. We are clear on our negotiation objectives and making good progress towards an agreement that delivers for the sector. But it is crucial that we progress with these proposals, which prepare us for a range of outcomes—both our desired outcome and the unlikely prospect of no deal. I commend the regulations and order to the House.

Photo of Lord Berkeley Lord Berkeley Labour 12:00 pm, 6th November 2018

My Lords, I am grateful to the Minister for introducing these three draft statutory instruments. She has done well in trying to explain them in a reasonably clear way. This is highly complex and I can see quite a few pitfalls ahead. The Minister rightly said that there are 7.8 million journeys between the UK and the EU per year. If they are all to be replicated by licences, that is quite a load on the DVSA. Can she confirm that it will be staffed to do this? What will be the maximum time it will take for applicants to receive their licence? It says in the Explanatory Memorandum that applications open in November and the licences become valid from 1 January, so one might assume that the return time will be one month, but I hope it will not be much longer than that. If I ask for a categorical assurance I will not get one, but I hope the Minister can give us some response.

As I read it, Regulation 4 in Part 2 of the International Road Transport Permits (EU Exit) Regulations states that if you have a truck with goods on it heading out of the UK, it will be illegal to operate that truck in the UK if you do not have a licence. It says that,

“an operator must not use a goods vehicle for the carriage of goods on an international journey”.

The international journey starts in the UK. I hope the Minister can confirm that that is not the case and that operators will be free to get to Dover or wherever without fear or favour. The Minister also mentioned Northern Ireland and the Republic of Ireland. I think these regulations apply equally to that, so everybody will have to have the same licences for that.

My next question for the Minister is about the allocation of numbers. We discussed this a month or two ago and I was not wholly comforted. The allocation of numbers is obviously a bilateral arrangement and, as she said, it will probably have to be done separately with each member state. I do not know how much traffic will go to the non-member states listed in the regulations, but they still deserve negotiations. The Minister did not explain what all the exemptions for each country mean, probably mercifully for us. How will the allocation of permits be done fairly and transparently? As we know, about 80% of the trucks crossing between the UK and the EU are non-UK owned and operated. I think a large proportion are probably Bulgarian and Romanian. The Minister said that the process will be fair and transparent and that the Government will produce some guidelines. When will we receive those guidelines? What does the industry think about this? If this is not sorted out pretty quickly, the traffic jams at Dover that so many people are talking about could become a reality. The Minister and her colleagues have a mammoth task but, to keep traffic moving, it has to happen.

I have just one comment on the Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Regulations. I did not really understand the exemption that she mentioned between Northern Ireland and the Republic. There will of course be quite a few trucks that start in Northern Ireland, drive through the Republic and then catch a ferry to France. There are several ferry services operating at the moment and more will probably come. Will they be exempt from these regulations or not?

The penalties look pretty cheap to me; I imagine the drivers will just come with a few wedges of £100, and that will be all right. And who enforces these regulations? I expect the answer will be nobody and a blind eye will be turned to the whole thing. There is no point in putting all this time and effort into producing these lists of regulations and penalties if they are not enforced. If they are designed to discourage people from disobeying the law, they look pretty feeble. I look forward to the Minister’s response.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat

The Secretary of State visited Dover in the last few days. I preceded him by a few days and was absolutely shattered by the level of activity there, and how efficiently it is run. Some of the ferries go to France and back five times a day. They are unloaded with remarkable discipline, then loaded up again, and are on their way within 40 minutes or so.

Airy remarks have been attributed to various Ministers: things like “Oh well, we will divert the ships somewhere else”. This is absolutely impossible. The infrastructure at the Port of Dover is not replicated anywhere else. As for getting ships, even if we wanted them, there are very few ro-ro ships available. This sort of airy-fairy remark trivialises the importance of the industry. Everybody is waiting for concrete evidence that we will reach some sort of deal. A no-deal situation would be absolutely catastrophic for the haulage industry.

There is an article about this in today’s Times. It refers to the lottery, to which the noble Baroness also referred, and the fact that hauliers do not seem to know how a lottery will work. The big hauliers want the permits, if they are restricted in number, but the small hauliers want a fair share of the action. Everybody is crying out for fairness, but the idea that this will be conducted by some sort of Department for Transport lottery is very difficult to understand. The Road Haulage Association and the Freight Transport Association are pretty well in despair and do not know what they are to do if an agreement is not reached.

I also raise a point about foreign drivers. Britain’s road haulage industry is very dependent on foreign drivers, by 30% or 40%. Reaching an agreement that enables us to keep our own traffic moving is important. These are very important issues, rather than trivia that can be swept aside. They really matter and will matter even more from the end of March onwards, in ensuring that we continue to have food on our tables and spare parts in our factories.

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport) 12:15 pm, 6th November 2018

My Lords, buried in these bureaucratic-sounding regulations before us today is what really amounts to a time bomb for the haulage industry.

I shall start by talking about the international road transport permits. These regulations were subject to a report by the Secondary Legislation Scrutiny Committee. As the Minister explained, the regulations are required as part of preparations for a no-deal scenario. I think I am safe in saying that, when we discussed the Bill in Committee—or Act as it now is—we did not envisage that we would still be expecting no deal to be a real possibility come November this year.

The stark statistics are that there are likely to be 80,000 applicants for 1,224 ECMT permits. Even with the ingenious DfT solution of dividing them up into monthly permits, they would cater for only 5% of the needs of UK hauliers. Needless to say, monthly permits would be massively bureaucratic—hugely expensive to the Government, but hugely expensive in particular to the haulage industry. I should explain that ECMT permits are intended for our hauliers who go beyond the EU. That is why the numbers are so small.

The Secondary Legislation Scrutiny Committee has drawn the attention of the House to these draft regulations because,

“they may imperfectly achieve their policy objectives”.

That is a masterful understatement.

If any noble Lord is not yet persuaded of the devastating impact that Brexit uncertainty is having on the haulage industry, or not yet persuaded of the disaster that would unfold if there is no deal or we do not get a deal that mirrors what happens now, I would draw their attention to the evidence given last Thursday to the EU Internal Market Sub-Committee, of which I am a member. We took evidence from the haulage industry, and I beg noble Lords to read that evidence. I will give you just a brief flavour of it.

James Hookham, from the Freight Transport Association, said that plans being prepared by the Government,

“would probably not make a significant difference to the virtual collapse of trade across the channel in the event of a no-deal”,

scenario. The Road Haulage Association was represented by Duncan Buchanan. He said that no one within the industry, either in Britain or in the EU, is prepared for what is to come, and that without a transition period, “there will be chaos”. I recommend that the Minister, in particular, reads that evidence. It was very powerful. It was emotional to hear it. Most passionate of all was the owner of an SME who trades regularly across the channel. He said that he could not see how his company could survive in the following months.

The regulations create a framework for the granting of future permits, for a system currently covered by a single Community licence. As the Minister has made clear, there is a great hurry on this because permits will have to be issued this month for them to take effect on 1 January. If I may point out the blindingly obvious, this is far too late. As the noble Lord, Lord Berkeley, made clear, the timescale is ridiculously tight.

We discussed all this in Committee on the Bill in July. It is far too late for the DfT to be bringing forward such regulations at this stage while at the same time issuing plans with a huge gap in them. We have been waiting for detail about how the permits will be allocated, and that is the yawning hole at the heart of this. It is obvious that if we have to fall back on the ECMT permits, the vast majority of hauliers will not get one. Exactly what will the Government do to help the 95% of the industry that do not get a permit?

The regulations set out the broadest, vaguest of criteria. They refer to emissions. Exactly what will the rules be on emissions? If you have an older truck, is there any point in applying for a permit? We are also told that it will depend on the goods to be carried. Does that mean that only vehicles carrying staple, vital products will get permits? We are also told that frequency of use will be one of the criteria. Does that mean that only the big companies will get a permit, or does it refer to some other aspect that I have not yet thought of? Then there is the dreaded “random selection”—the government lottery for haulage—and, famously, “any other matters to be considered appropriate”. What else might the Government be thinking of taking into account? The big question is: when will the Government make up their mind on the details of the criteria? How will we be told about them? Above all, how will the haulage industry come to know them? Where and when will they be published?

Hauliers are being asked this month to drop an application into a black hole. When will the Government provide publicity to fill that black hole? Apparently, the DVSA is devising an IT system. Can the Minister update us on that? Is it ready? As this is the month when people will apply, is the IT system up and running?

The Government state that they expect to reach a bilateral agreement with the Republic of Ireland. How are discussions on that going? Are the Government still confident of that?

Then we come to costs, which are £10 per application for an ECMT licence and an issue fee of £123 per year. That does not square with the costs cited in the Explanatory Memorandum. Paragraph 12.1 states that the annual cost to business and voluntary bodies is £163,000 with a £13,000 familiarisation cost. How were those figures reached? The industry includes 80,000 hauliers.

The Government expect to make bilateral agreements with the EU 27, but that will leave—as they clearly fear, hence the monthly ECMT permits—a time gap. Can the Minister confirm that the Government are developing plans for that time gap while the discussions are going on?

Finally, ECMT permits are intended for use in 43 countries, many of which are well beyond the EU. There are hauliers who make their living by transporting goods to those countries. They currently use ECMT permits; they never have a problem getting them because not many hauliers are making that sort of journey. However, they are going to be in stiff competition if EU-designated hauliers are going to be using the permits as well. What are the Government doing to guarantee an income and a livelihood for those hauliers who rely on ECMT permits?

I turn to the Trailer Registration Regulations, which are also part of the Brexit preparations. The Government estimate that, by next March, 80,000 trailer users will be required to register their trailers for international use for the first time. Most, but not all, of these are commercial operators. In contrast with the previous SI, there are very precise details here on the required size, placing and visibility of the registration plate. It is complex: you are going to need two registration plates—one for the trailer, one for the vehicle—you need to register your trailer, show relevant documents when you go to get your plate, and so on. The big question is the level of awareness across the very diverse haulage industry, and beyond, that will be affected by these regulations. There may not be many non-commercial trailers in this size category but, as the Government state, there are some. What have the Government already done to make trailer owners aware of what is coming? What are they planning to do, how and when?

In Committee, I raised the issue of the existing registration scheme run by the National Caravan Council. There is a real danger of confusion here, if the Government do not make their explanations crystal clear. Trailer owners who are already registered with the NCC could think that they do not have to register a second time. What discussions have the Government had with the NCC on the integration of these schemes and on making it absolutely clear that trailer users and owners will be required to register again?

On the road safety SI, I request an explanation on the territorial application, which is an issue I have raised before. It clearly says that it applies to Great Britain—hence it does not apply to Northern Ireland; that is clear—but why is Scotland picked out and Wales not mentioned? I draw attention to the fact that the Haulage Act applies to Northern Ireland, so there is going to be some confusion about the territorial application. I am sure that there is a technical tradition as to why Wales is not mentioned, but I wish the Government would abandon that as it is very confusing. This is becoming a serious issue because we have an avalanche of new legislation falling on the haulage industry and people wishing to travel, for whatever reason, from one country to another. Small businesses are trying to keep abreast of the industry. They may not belong to one of the big representative organisations that do a very good job of alerting their members. It makes it very confusing for them if it is not absolutely clear what applies in which bit of the UK.

Photo of Lord Rosser Lord Rosser Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Transport) 12:30 pm, 6th November 2018

I too thank the Minister for setting out the content and purpose of these draft regulations and order. I share the concerns already expressed, and will revisit only some of them due to the time constraints that I know we are under today.

The draft international road transport permits regulations are laid, as are the others, under the Haulage Permits and Trailer Registration Act 2018. That Act allows arrangements to be put in place to enable international road haulage to continue after departure from the EU. Those arrangements create a framework for a single permit scheme that will deal with bilateral permit arrangements between the UK and non-EU countries, the multilateral European Conference of Ministers of TransportECMT—permit scheme and any future permit scheme that may be agreed with the EU. The draft order also includes provisions on applying for and granting a permit, along with provisions on cancellations, appeals and charging.

As has already been said, the ECMT permit scheme provides for a limited number of permits to be available to the UK. It is not much used at present, as the Community licence covers haulage to EU member states. However, if there is no deal for EU countries, Community licences will no longer be recognised from exit day, in which case UK hauliers will need either an ECMT permit for journeys to, in or through the EU, or a bilateral permit under an existing agreement with an individual EU member state to carry goods to, from or through the territory of that member state. But the number of ECMT permits available is limited, and demand for ECMT is expected to significantly exceed supply. Can the Minister say by how much demand for ECMT permits is expected to exceed supply in the event of no deal, and with which EU states there are existing bilateral agreements covering the carriage of goods—or alternatively, with which EU states there are no existing bilateral agreements?

The Explanatory Memorandum says that these regulations provide for an objective and transparent way of selecting which applications should be allocated permits. But what happens to those applicants who are not allocated permits from the limited number available to the UK? What will be the impact on them, and on our economy? If there is no deal or no satisfactory deal, how many applicants is it expected there will be who will not be able to get either an ECMT permit or a bilateral permit? How many UK hauliers currently have a Community licence? How will the Government assist operators who are not granted a permit and who may experience an adverse impact on their business as a result?

The Government have said that they are working to have bilateral agreements in place by exit day. Is that a bilateral agreement with each EU member state, and are the Government giving an assurance that such agreements with each member state will be in existence and effective by exit day? The Government have said that there are nearly 3,000 monthly ECMT permits. How will the operation of these monthly permits work in practice? Will UK hauliers have to reapply on a monthly basis, and how will the Government assist hauliers who need longer-term plans for their operations than monthly permits can provide?

The regulations grant the Secretary of State discretion to determine the allocation of permits where they are oversubscribed. How will the Government ensure that there is a fair and consistent approach, in particular over “random selection”, which is referred to in the regulations and which has already been referred to in today’s debate.

I will not go into the Trailer Registration Regulations 2018 at any length, except to say that I very much share one of the concerns in particular that the noble Baroness, Lady Randerson, expressed, on the level of awareness issue.

The road safety financial penalty deposit amendment order 2018 sets out the monetary amount of the financial penalty deposit—the FPD—for specified offences relating to the use of goods vehicles and trailers without the appropriate authorisation, FPDs or registration. FPDs can be taken immediately from a person without a UK address who is believed to have committed a specified offence. A separate order will designate specified offences relating to haulage permits, trailer registration and community licences as FPD offences. The specified offences under the Haulage Permits and Trailer Registration Act 2018 relate to failing to produce a permit when required to do so by an examiner, obstructing an examiner or breaching a prohibition on the use of a goods vehicle on an international journey.

Will the Minister say how the conclusion was reached that the level of deposits shown in the SI is appropriate for the offences in question, bearing in mind for example that,

“wilfully obstructing an examiner exercising powers”,

and carrying out an inspection attracts an FPD of just £300; likewise, a similar amount for “breaching a prohibition” or,

“causing or permitting a breach of a prohibition …on taking a vehicle to a country without reasonable excuse”.

We are talking about goods vehicles, trailers and safety issues since this is a road safety order. How wilful has the obstruction of the examiner got to be, and how blatant a breach of a prohibition, before an FPD is not considered appropriate? Once the requirement to pay an FPD has been imposed under the terms of this draft instrument, what further action will be taken in the light of the offence?

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

My Lords, I thank noble Lords for their consideration of these draft regulations. Throughout the passage of the Haulage Permits and Trailer Registration Act there was valuable debate, which allowed us to refine and improve the Act and ensure that it laid out the necessary framework. I am grateful once again for the opportunity to consider the detail of this legislation. I shall attempt to answer all the questions, although I am not sure I will be able to in the time allowed. If there are questions I do not get to, I will follow up in writing.

On the requests for current haulage industry figures: there are 8,400 standard international licences currently in use and 32,000 Community licences. Our figures show that if hauliers were to make one trip per week on each permit, around 20% of current activity by UK HGVs could be facilitated on ECMT permits alone. However, 20% is not enough and we do not expect to rely solely on ECMT permits. These regulations and the published guidance refer only to ECMT permit applications. We do not yet know the outcome of negotiations, so we are not able to provide further information to hauliers on that. Whether with the EU or with member states, it could be that no permits are required at all. In that case, obviously these regulations will not come into force.

I will say a little more on the permit application process—

Photo of Lord Berkeley Lord Berkeley Labour

I am grateful to the Minister for giving way. She is outlining what she probably thinks is the best case. If we get the worst case—no deal—there may be no trucks going across the Channel apart from the small number with the permits that she has just outlined. Will we be allowing Bulgarians—or Romanians, or anyone else—to come in and drive trucks, or will we just be cut off?

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

My Lords, we will certainly not be cut off. The case I outlined—20%—is the worst-case scenario for UK hauliers under the ECMT permits. What happens with EU hauliers coming in—80% are non-UK hauliers—would depend on the negotiations. We have not yet made an agreement with the EU or member states but, of course, traffic goes the other way too.

On the permit application process, we have been working closely with the DVSA to build on existing IT systems for the online permit application system. As I have said, that is currently for ECMT but may be for other bilateral permits if we agree a permit scheme bilaterally. To apply for the permit, hauliers have to be registered on the vehicle operator licensing scheme—some 87% are already registered. The permit application scheme has been tested extensively with hauliers, who found it straightforward to use. I have seen the system myself and can attest to its user-friendly manner. Therefore, we are well prepared for that. As I said, the guidance that we have provided has given advance notice of the information that is needed, and we have tried to keep that information very simple to help the application process.

The noble Lord, Lord Berkeley, asked about the timing. Permits will be allocated and notifications will be made in good time to ensure that permits are with the successful applicants by January 2019. They will receive an email notification as soon as the permits are allocated and the system will allow applications to be considered promptly. However, as I said, this is for ECMT permits, and until we know where we are with the wider negotiations or bilateral agreements, that is the only information we are able to give.

The noble Lord, Lord Rosser, asked about monthly permits. We will have around 2,800 monthly permits, which will be available for mostly Euro 6, as opposed to Euro 5, vehicles. The noble Baroness, Lady Randerson, asked about the emissions criteria. It is purely a case of whether a vehicle is categorised as Euro 5 or Euro 6. We have chosen to take out the maximum number of monthly permits, as we think that that will give us the maximum possible flexibility. Exactly how these permits will be used will depend on the outcome of negotiations with the EU or with member states. As yet, we have not reached a firm decision on how they will be allocated. The guidance published yesterday related to annual permits. We will begin to take applications for annual permits later this month and will offer monthly permits closer to exit day.

The noble Lord, Lord Berkeley, asked about international journeys. Hauliers who plan to travel to the EU will need a valid permit to make an international journey, and they should not start that journey if they do not have the appropriate documents. They will be subject to the usual checks, although we would not specifically check for an international permit because they are not needed domestically. As I said previously, 80% of haulage is undertaken by international hauliers, and these regulations refer only to UK hauliers. Subsequent decisions about EU hauliers will be published at a later date when we see the outcome of the deal.

The noble Lord, Lord Bradshaw, was quite right to point out that we rely on foreign drivers. We have already said that we will recognise EU-issued driver qualifications, such as the CPC, so that foreign drivers can continue to work for UK hauliers. That was set out in our technical notices.

Specifically on the bilateral agreements, as I said, we remain confident of getting a good multilateral deal with the EU. There is obviously a clear mutual interest in reaching a good agreement that benefits both our haulage industries, but we are preparing for other outcomes. With regard to the number of bilateral deals, in the past we have concluded 26 such agreements with EU member states. Of those, the Government consider the agreements with 20 EU countries to be extant, with the other six having been terminated.

Some of those bilateral agreements will require permits, although a number are liberalised. We are expecting to have to update them and are preparing for that. In practice, we need to work with the member states on the agreements, so at this stage I am not able to give detailed information about them. However, should we get to the point where we go down that route, we will of course share that information. Any future agreement will be brought into force under the permits SI through the negative procedure simply by adding a member state—if permits with it are required—to the list under Regulation 1. However, obviously any bilateral agreement will be properly scrutinised and brought before Parliament.

We will be using the criteria that we have decided on to deliver the principles of obtaining the greatest economic benefits from the permits, protecting the interests of UK hauliers, and applying a fair and consistent process. To achieve that, we will consider the exhaust emissions, the goods that will be carried, how frequently the permit will be used and what proportion of the applicant’s haulage is international. Again, all that is set out in the guidance, which has now been published. It shows the exact questions that we will be asking and the specific measurable data that hauliers will need to provide. As I said, we have designed the guidance alongside research with hauliers so that it is clear for them and so that the system is straightforward.

Assessment of the criteria will be based on the numerical data that hauliers provide, and the IT system will automatically assess the applications. The criteria are included in broad terms, as we think that these are the key considerations for the permits to be allocated effectively. The regulations will ensure that the Secretary of State continues to consider the relevant guidance, and he must also provide guidance on how they will be applied.

Random selection was brought up by many noble Lords and we discussed it at length during the passage of the HPTR Bill. There are many objectives of the allocation criteria. Scoring purely on other criteria without that random element could mean that only a few hauliers got all the permits they applied for and others got none at all. Not only would that be that uncompetitive; it would also mean that smaller international hauliers who still use these permits intensively would get none, which we think is unfair. It is important to have as large a number of UK hauliers as possible to be able to continue to haul goods internationally in the unlikely case that we have to rely on the ECMT.

The random element acts to distinguish between very similar applications while preserving the basic principle that the most intense users of permits, and the hauliers most reliant on international work, have a greater chance of being allocated permits. To be clear, this does not mean that permits will be allocated by chance and without considering those criteria. It is not a lottery. Applicants who use permits more intensely and who perform a greater proportion of international haulage will always be more likely to get permits. We will look at the proportion of goods currently carried internationally when allocating them. Modelling that the department has done suggests that at least four times as many different hauliers will be awarded permits under this system than would be without the use of random allocation.

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport) 12:45 pm, 6th November 2018

Can the Minister explain how small businesses are going to be taken into account according to those criteria? You could be a small business doing 100% of your business with the EU but have only one lorry. You are therefore going to be at a huge disadvantage in the numbers game, compared to big companies. A small business could well go to the wall as a result.

Photo of Lord Berkeley Lord Berkeley Labour

May I ask a question supplementary to that? If the criterion is going to be the greatest economic benefit, how can the Government identify something vital for a small business, as the noble Baroness suggested—25 tonnes of oranges, or the parts for a major car manufacturer who says, “If I do not get the parts today, I am going to close the whole thing down”—when we are only going to get a quarter or so of the permits we need at the moment? It seems there is going to be chaos either way. Does the Minister have a solution?

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

My Lords, it is of course incredibly important that we protect the interests of small businesses. The impact of the legislation on small businesses has been carefully considered. We are very aware of the tight operating margins the sector faces. As we said in the impact assessment, a large majority of the sector is made up of small and medium businesses. In the case of the permits regime, we are looking at the proportion of business that is international. The criteria have been designed not to disadvantage smaller operators. For example, the number of international journeys made by a haulier is measured per permit rather than by the actual number of journeys. The inclusion of an element of random selection also ensures that small businesses are not disadvantaged.

On the point made by the noble Lord, Lord Berkeley, we are aiming to replicate the current mix of goods carried by hauliers, and we will do that as we issue the permit allocations. We have worked carefully with the haulage industry on that throughout the passage of the Act and in the run-up to the publication of the guidance and the legislation. We will continue to work closely with the trade associations—the Freight Transport Association and the Road Haulage Association—as well as lots of industry associations and small business. Industry supports our negotiation objective to maintain and develop the existing access for commercial haulage. I will read the evidence mentioned by the noble Baroness, Lady Randerson, but I am very clear where industry is. It is very keen to continue with the open access we have now, and that is our negotiating position. It also welcomes that the Government are working to ensure we have the right system in place and are able to allocate the ECMT permits, should we need to rely on them.

The noble Baroness, Lady Randerson, also briefly mentioned caravans. This does not replace the NCC scheme. We are working very closely with it on the CRiS scheme, and with it and caravan council members to make sure they understand how this will affect them. We also have a communications campaign aimed at both hauliers and those with trailers to ensure that they are aware of this.

The noble Baroness also mentioned Wales. I looked into this thinking that it might come up again, and it is a standardised text, as England and Wales are a single legal jurisdiction. It is therefore not referred to separately. The standardised language is to show that EVEL does not apply. However, I will go back and reiterate her point that that could cause confusion.

These instruments represent an important stage as the Government progress with plans for leaving the European Union. We all agree that we do not want to rely on ECMT permits, and that is not the Government’s position. Haulage is of course a key industry and integral to the success of our wider economy. It is this that led to our focus earlier this year on bringing forward the primary legislation underpinning these regulations and the technical systems for implementation. If we do end up with just the ECMT, we will be ready, but, as I said, that is not where we want to end up. Whether it be through an agreement with the EU, which we are optimistic for, or through updated or new bilateral agreements with other member states, it is clear that that is in our mutual interest. We are keen to get that in place as early as possible to provide certainty for all the haulage companies that contribute so much to our economy. As I said, our negotiating position with the EU is clear as we look to achieve a deal with reciprocal arrangements that work for the industry. However, we are putting in place solid preparations for a range of outcomes, including the unlikely event of no deal.

Motions agreed.