Amendment to the Motion

REACH etc. (Amendment etc.) (EU Exit) Regulations 2019 - Motion to Approve – in the House of Lords at 4:00 pm on 26th March 2019.

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Moved by Lord Fox

To leave out from “that” to the end and to insert “this House declines to approve the draft Regulations because Her Majesty’s Government has provided insufficient information on the impact of the proposed changes, in particular in relation to (1) the additional responsibilities being transferred to the Health and Safety Executive and its readiness to act as the national regulator, (2) the potential costs for the chemical and advanced manufacturing industries in the United Kingdom, (3) the potential duplication of testing on animals, and (4) the need to uphold environmental protections; and calls on Her Majesty's Government to lay new regulations following full consultation with the chemical, manufacturing and consumer goods industries, and the environmental sector, with the aim of delivering a regulatory regime of the highest standard”.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy)

My Lords, I declare my interests as in the register, but everybody in this Chamber has an interest because chemicals touch every part of everybody’s lives in this country. That is why the Minister is completely correct that it is vital for this country to have a safe and effective management regime for chemicals. Safety should be the primary concern, alongside environmental sustainability.

Along with other Peers, I worked on the Nuclear Safeguards Bill, which the Government rightfully decided deserved primary legislation, not least because it involved an international treaty but also because it is a complex and important safety regime. During the proceedings on that legislation, which the Government brought to this House and the other place, it was improved and full debate was had. The chemicals and chemical regulation regime is just as complex and important, if not more so, than nuclear safeguarding, and this should have been brought to your Lordships’ House and the other place as primary legislation. It is regrettable that this was not the case.

It is also extremely unfortunate, to say the least, that the Government have left it so late to bring this statutory instrument in front of your Lordships. When this was tabled it was anticipated that this could be three days before the measures in this statutory instrument would be required. Given its importance and complexity, that is beyond remiss and looks like brinkmanship. Despite the fulsome description of consultation, roadshows and so on, the response I have had from industry and civic society—a broad range of stakeholders—has been that this is not a satisfactory statutory instrument, which is why I have tabled this fatal amendment.

I will try to highlight some of the flaws. I am afraid to say it will not be a short speech, because there are quite a lot of flaws. I apologise—but not much, because this issue has to be laid before your Lordships and these issues need to put on the public record. I will ask a number of questions. As the Minister has set out, this regime is effectively ready to roll, so I am sure he will not have trouble answering these questions.

In the months and years to come, it is important people understand what the Government think they have laid before your Lordships in the regrettable event that we have to use this statutory instrument. However, there is another reason why this debate is important. The instrument clearly indicates the direction of travel. In his preamble, the Minister talked about the objective of having a common rule book, frictionless trade and co-operation—I am not sure that is the word the Minister used—with the ECHA. In the event that we leave the European Union, these are all ambitions I would share. However, none of them is a done deal, and this statutory instrument sets a direction of travel for what regime might follow in any case.

The Government have succeeded in unifying one part of the country: those involved in the manufacturing and use of chemicals in the industry are pretty united in their concerns about this statutory instrument. As the Minister set out, much time and effort has been invested in creating and delivering REACH—over more than a decade. Many in the industry and civil society feel that, just when this regime is beginning to deliver, we are walking away from it and potentially creating another parallel exercise. And those who have been involved in this will know what a big exercise it is. As we have said, the political agreement points to co-operation, but we cannot be certain we will get that.

Can the Minister confirm to your Lordships’ House that, as well as the process of discussion with the chemicals industry and green organisations, the concerns put forward by these bodies have been represented to Her Majesty’s Government? Can he confirm that those consultations have happened?

The economic impact on the UK of the development of an equivalent national chemicals regulation is considerable, and the Minister set out some of the complexities that will be taken on board by the United Kingdom. Furthermore, REACH substance evaluations and authorisations are not small affairs. The Minister mentioned substances of very high concern, or SVHCs. My understanding is that around 488 of those are being re-evaluated by REACH. At the moment, that process is shared across member states, and it is a long and complex process. If the United Kingdom is going to take on board that process individually and separately from the EU, it will take a great deal of time and money, and, frankly, it will require more tests, whether the Minister is seeking to avoid that or not. It is quite clear that, in taking this course, the United Kingdom will face a significant burden, taking on the duplication of a previously shared workload.

The Minister talked about preparation. I understand there is an IT framework, which cost around £5.8 million to create. In July 2018, in a parliamentary committee, a civil servant confirmed that it would not be fully functional on exit day, and I noticed that the language from the Minister was slightly hedged on that issue. The official said that some of the fuller functionalities would not necessarily be required on day one and are on a slower timescale. Perhaps the Minister can clarify what functionality will be available on exit day and what will not.

As the Minister said, Defra has confirmed that the HSE will run this database and lead the overall process. He set out, as Minister Coffey did when presenting this SI in the other place, that the Government anticipate a future budget increased by £13 million—I believe that was the figure. That equates to around 40 to 50 additional staff. Given that the number of chemicals used in the UK will not be drastically lower than the number used at EU level, the HSE will deal with a similar number of chemicals—the Minister talked about grandfathering, and we will come to that—to those under the jurisdiction of the ECHA. I should point out that its annual budget is €100 million and it has nearly 600 members of staff. Consulting with people in the industry, I am told that around 300 to 400 people would be a reasonable assumption of what the HSE would need in order to deliver the very complex tasks that the Minister has set before your Lordships. So I challenge the idea that £13 million would be sufficient resources to deliver this programme. Can the Minister comment on that particular supposition but also, within the framework of his own constraints, tell us how many people have been recruited already by the HSE in order to deliver this, because we could have been delivering this within a few days? I imagine that a recruitment process is already under way. Will the Minister update us on that?

On data, I completely agree with the no-data no-product rule set out by the Minister. It is essential that we have data and nobody on these Benches is proposing otherwise. As the Minister set out, data for REACH is jointly submitted by a consortia of companies. The problem of grandfathering becomes complex in this area. The Government state that the UK can download this data. That has clearly been confounded by copyright and ownership issues around data. Companies will need permission to reuse that data for the system. In some cases, the data neither belongs to them, nor to one other company, but to a chain of different companies. The copyright to the data belongs with those companies. The notion that somehow this data is transportable and all you need is for a trade association to agree to that is a naive view. A recent survey carried out by the Chemical Business Association revealed that three-quarters of major UK companies do not currently own the data that they need in order to get the registrations they would require under UK REACH, so I hope that the Minister understands that issue. It is all very well saying that the data can be ported and there is no need to duplicate it, but the data is owned.

Animal testing is an issue of great importance to everyone in your Lordships’ House and REACH has successfully minimised animal tests through data sharing and other measures. That point was heavily promoted by the British delegation when REACH was created. The organisation, Cruelty Free International, estimates the number of tests across REACH’s 11 years to be around 4 million. All of us would agree that that is far too many, but considerably fewer than would have been necessary without REACH. There is genuine potential for duplication. It is all very well the Minister saying that that will not happen but it will because there will be regulatory divergence when there are two systems. As soon as you have regulatory divergence, it is inevitable that the HSE in this country and the ECHA in the rest of Europe will demand different or parallel data. That will come to pass and that is the point at which more testing will be required, and some of that testing will be on animals. When pressed by a parliamentary committee, Minister Coffey admitted that there could be an increase in animal testing if the UK is no longer a member of REACH, and that is unacceptable.

On operational costs, the chemical industry, as the Minister set out, is important, but this affects more than the chemical industry. It affects the cosmetics industry, the consumer industry, agriculture and, of course, all sorts of manufacturing. Clearly, as the Minister acknowledged, duplication of costs is more severe for SMEs than for larger companies. Right across all sectors we are seeing the creation of a parallel system. This does not chime with the mantra that Brexit would be about burning red tape. We are knowingly duplicating red tape.

Last week, the noble Baroness, Lady Buscombe, spoke to an SI which dealt with pesticides and GMOs and was in some ways a foretaste of this one. She made it clear that the HSE’s approach to them would be self-financing. In other words, it will charge industry for the cost of registration. I assume that we are looking at a similar model here. Will the Minister identify what costs have been factored into the HSE’s budget for this year and next year and what revenue generation has been put in the budget for that organisation over the next two years? This is not a self-financing system; it is a system that will be financed by industry and therefore ultimately by consumers in this country who will have to pay the price.

Grandfathering is very complex, and I will spare noble Lords too much detail, but there are clear holes in the approach. Companies based outside the EEA can appoint Europe-based only representatives to take over the tasks and responsibilities of importers when complying with REACH. This simplifies access to markets and to the chemicals needed for important activities in this country. My understanding is that UK companies acting as only representatives for REACH will be obliged to relocate from the United Kingdom to mainland Europe to continue to have that relationship with EU REACH. What is Defra’s position on that? Are there any ways around it?

The Minister referred to the transitional relationship, which is a two-year process. Two years is an interesting choice. It could have been one year or five years, so what was the modelling? What was at the heart of Defra’s decision to make it a two-year process?

While this is being presented as a like-for-like process, we are going to end up with some chemicals not being grandfathered across this system. My understanding is that with chemicals in the current EU REACH listing that are held by a non-UK organisation, there may be problems grandfathering, particularly where the process of approving those chemicals has not been completed. My friend in the other place Norman Lamb raised this. An application for EU authorisation submitted by a non-UK EEA entity on which a decision has yet to be made and on which a UK downstream user is dependent will not be grandfathered. Despite the fact that some chemicals have cleared that hurdle, it remains an issue. The point has been raised with Defra on many occasions. It continues to be ignored or not catered for. What is it about this issue that stops Defra allowing something else to happen?

What overall extra costs will industry face as a result of having to maintain two parallel chemicals processes? While all this consultation has gone on, it is not clear what the impact on industry will be. What effect does the Minister expect this to have on British business?

Scientists, too, are worried about this. Why would they not be? I am a chemistry graduate, although you would not know it to look at me. The Royal Society of Chemistry has expressed concern not just about the duplication issue, which I have gone on about ad nauseam, but about whether the HSE will have adequate scientific capability to take on the increased decision-making and responsibilities of acting as the national regulator. If this concerns the country’s leading chemists, does it not concern the Minister as well?

Finally, the Minister, rightly, talked about devolution. The Government have worked hard with the devolved Administrations, but there is one area where we could benefit from more information. What capability do the Government expect the devolved Administrations to have in order to be able to respond meaningfully to the HSE when regulatory issues are put to them?

I see the wrinkled faces of those opposite me and they will be glad to know that I have reached the end of this point. There are clearly many flaws in this statutory instrument. Some of them have been highlighted also by the Secondary Legislation Scrutiny Committee and I am sure that we will hear about others from my noble friend Lord Teverson. That is why I have tabled this amendment and I await the Minister’s response with interest. I beg to move.

Photo of Lord Geddes Lord Geddes Deputy Chairman of Committees, Deputy Speaker (Lords) 4:15 pm, 26th March 2019

I should inform the House that, if this amendment is agreed to, I cannot call either of the other amendments to the Motion on the Order Paper by reason of pre-emption.

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, in the light of that, I should like to speak to my amendment and to the contributions made so far. It is some time since I have found myself on the Front Bench, so I had better observe the niceties.

First, I thank the Minister for spelling out these complex regulations. No one denies the need, post Brexit, for robust regulation in this field. However, I contend that the way in which the Government are going about it is causing excessive bureaucracy and cost. The Minister rightly referred to the work that his department has done in talking to the industry, and the industry appreciates that, but he must be aware that there are still grave concerns among large sectors of the industry and firms, as well as downstream firms, about the situation post Brexit. I thank his department for all that work and I thank him for producing the latest UK REACH guidance yesterday, bringing together previous technical notes and updating them, but it is a little late given that these regulations were laid when we thought that by Friday we might be out of the EU.

I also thank the noble Lord, Lord Fox, for his amendment. I agreed with pretty much every word he said and I will try not to repeat his points—at least not at great length—but I disagree with the purport of his amendment. The regrettable fact is that we are in an unenviable position here. These regulations could have come into effect on Friday and might still come into effect in two and a half weeks’ time. As is the case with so many of the no-deal contingency regulations that we have been through, whatever we might think and whatever the ideal outcome might have been, industry, consumers and the workforce need some degree of certainty about what happens on Brexit day and the day after. If we do not have these regulations, as is the intention of the amendment of the noble Lord, Lord Fox, we will be in a legal vacuum. Given the complexity of this area, the potential danger and the hazardous nature of many of the chemicals covered by the regulations, as well as the legal and insurance situations, I suspect that a lot of trade will grind to a halt. That would be very dangerous for the environment and very expensive to the sector.

The Government should have taken a different approach to this, the central reason being that they should have sought in all post-Brexit circumstances to remain within the purview of the European Chemicals Agency. Some of us with long memories may recall that, during the rather lengthy passage of the withdrawal Bill, I became quite obsessive about the issue of EU agencies. I tried on several occasions to get Ministers to say what the future arrangements would be with those agencies post Brexit.

At one point in the protracted negotiations—during the Mansion House speech—I was greatly heartened when Theresa May said clearly that there were at least three agencies with which she felt we would need to maintain a relationship in all circumstances: aviation, medicines and chemicals. Continued participation in ECHA was the preferred solution of virtually the whole industry and the vast majority of the environmental groups that commented. I thought the PM understood this, and that we would therefore move to a situation in which we somehow maintain our relationship with ECHA, albeit on a temporarily or provisionally. But these regulations go down a different route: they go for replication and duplication here in the UK of what ECHA has done in this area, and REACH is the biggest single process that ECHA oversees.

There are circumstances in which the EU side has made the situation worse. In the event of a deal and our moving to a transition period, the EU has said we would no longer participate in these agencies albeit that the ECHA board includes as observers the representatives of the EEA EFTA countries, Norway, Iceland and Liechtenstein. A similar arrangement ought to have been available to us.

On other agencies mentioned in the Mansion House speech—for example, those relating to aviation, with which I am familiar from my Select Committee work looking at aviation changes and regulations and as vice-president of BALPA, an interest I must declare—the EU has proposed, and the UK has reciprocated, that for the first 12 months airlines will continue, with one or two exceptions, more or less flying their current routes. That gives leeway, even in a no-deal situation. But here we are immediately constructing a whole new edifice of UK duplication and replication of the ECHA situation.

The noble Lord, Lord Fox, has spelled out just what this means in many circumstances. There are a number of different situations; for example, those that already have ECHA authorisations and access to the UK market, to which the Minister is providing the opportunity for grandfathering rights. The difficulty is that access to the intellectual property, which has been lodged with ECHA to get those registrations, authorisations and restrictions, is not necessarily available either to UK operators or to people importing to the UK. That was not immediately obvious to the department, but it became clear that it would be extremely complex.

As the noble Lord, Lord Fox, says, some of these tests and intellectual property issues rest with consortia and companies, including some not in the UK or even in the EU but which have indirect ECHA registration. Acquiring all that information to register in a duplicate UK situation is both expensive and legally quite difficult.

Other groups are also affected. UK companies with a REACH organisation that wish to continue to export to the EU while also operating in the UK will themselves have to duplicate their REACH authorisations in the UK. New products and products in the pipeline, if destined to be used in both markets, will have to register in two places in the future as new chemicals, combinations and formulations come into play.

That is just the chemicals industry itself, in its broadest sense. The importer and user sectors, which range from aerospace, motor manufacturing and agriculture to sectors that, by and large, are made up of SMEs, such as furniture, clothing, printing and toys, have never had to do this, but will have to assure themselves that the products they are using, which could be as simple as paint, have at some point received a UK—and, if they export, an EU—authorisation. As I understand it, the department is now aware that one-quarter of REACH registrations cannot provide the data immediately as the ownership lies with a lot of other companies and consortia. That means that the granting of grandfather rights, while it sounds very cosy, will not operate at 100% even over the two-year period that they have been given for providing the full documentation.

I understand the road that the Government have gone down, but there was a much simpler way to try to maintain some engagement with ECHA. These regulations have had quite a bumpy ride: they went through a number of iterations by the department before they were produced and have had a rough ride with the House of Commons Environmental Audit Committee, our own Secondary Legislation Scrutiny Committee and, above all, the EU Select Committee, for which the noble Lord, Lord Teverson, who chaired the inquiry, is about to speak. I will leave his points until he does so.

On the possible duplication of animal testing, I understand the Minister’s reassurance but this could also fall foul of the complication of what the authorisation within ECHA has provided. For many substances there has been animal testing to get a REACH authorisation, and that may not be available directly to people who are going to try to produce a parallel authorisation in the UK. The history of all this is that it has been largely due to British influence that Europe has minimised animal testing and made it more humane. It would be an irony if some degree of duplication followed from the British decision to leave Europe and we had to repeat its work because we could not get hold of the information or were developing new products.

The other dimension that I will mention is the whole question of the resources and structure of the HSE. For a year I was the Minister for the HSE and I have a very high regard for it. I reflect that there have been large cuts to the HSE’s resources, manpower and scientific expertise over recent years, which it would have to build up again in this area. It is important to understand that the resources that need to be available to the HSE for it to genuinely parallel what ECHA has done are significantly greater than the Government have so far indicated. It is not entirely clear, given that it will obviously not have all the expertise in-house, quite how it will construct parallels to the committees and advice that ECHA has had over the years. Indeed, Mary Creagh, chair of the Environmental Audit Committee in the other place, said that there is no provision for committees of experts or other committees to help the HSE to form its opinion. How are we to ensure that the HSE has available capable systems of scientific advice, which it would have to build up from scratch?

This is a question of resources, access to scientific information and priorities. In effect, when we delete “EU” and substitute “UK”, the HSE will take on the role of the Commission in this regard, yet it will be a relatively new part of the HSE’s responsibilities, even when it is acting in concert with the Environment Agency and the devolved environment agencies. There is a really serious issue for the industry and it has been drawn to our attention by a wide range of environmental bodies, including the Royal Society of Chemistry and Greener UK.

I understand the position that the Government have got themselves into but there is an alternative way. Even at this stage, the Government should consider whether to adopt that other way and negotiate continuing involvement in the ECHA.

My amendment regrets this duplication and requires the Government to make sure they do what they have said they will do in other contingencies and make participation in the ECHA a negotiating goal. That goal should be there for a no-deal situation, as well as any other situation. We are going down the wrong road by spending money, resources and time on seeking to establish a completely replicate system in the UK.

Photo of Lord Teverson Lord Teverson Chair, EU Energy and Environment Sub-Committee 4:30 pm, 26th March 2019

My Lords, I have tabled an amendment to this Motion, and speak very much as the chair of your Lordships’ EU Energy and Environment Sub-Committee. We deal with Defra issues. We issued a report on Brexit and the chemicals industry which has not yet been debated on the Floor of the House, so that is why I want to bring up some of these issues here.

I will give a little background about the chemicals industry, because it is key to this debate. It is the second-largest manufacturing industry in the UK, after food processing. It has a total gross value added of something like £12 billion. It is extremely dependent on trade: some 60% of its output goes to the EU and some 80% of our chemicals imports come from there. It employs half a million people. Not just the chemicals industry but a huge proportion of industries in this country use chemicals in their supply chains. Therefore, it is not just the chemicals industry that is affected by this but all those other businesses that use chemicals in their processes, particularly those that are downstream in the manufacturing process. They do not import, export or manufacture chemicals themselves but they use them, so they are affected by the REACH regulations.

I will be more critical than I usually am, as chair of the committee. The committee found—and felt very strongly, if I am honest—that Defra was not on the front foot on this issue. Understandably, Defra focuses on agriculture, fisheries, flooding and stuff looked at by the Environment Agency; the EA obviously has a role in this. When we had Ministers and senior department officials in front of us, we felt very strongly that they did not understand the gravity, timescale and effect on industry of coming out of REACH. That is not the case now, but perhaps this SI is an example of trying to catch up and lay a statutory instrument that is sufficient for the industry’s needs, but not being able to do that quickly enough.

I will talk a little about the European Chemicals Agency. To give your Lordships an idea, it has 500 staff, a budget of around £100 million, and 21,000 registered substances, of which only about 5,000 are registered by UK companies and organisations. That is a serious operation. What I want to come back to is that all of its functions will now have to be replicated in the United Kingdom. That is essential after Brexit. There will still be 21,000 chemicals that the UK will want to use, which will have to be authorised, recorded and checked up on, to make sure that the regulations are applied.

The committee very much welcomed the Prime Minister’s view that we should remain part of the European Chemicals Agency. We agreed with that very strongly. But of course that is not possible if we are not in the single market or a member of the EU or EEA. That is just not on offer. We asked many times what the Government have managed to negotiate further with the EU on this. They are not able to, because the EU will not do that. It is not in the Government’s power to arrange that pre-Brexit, unfortunately. That is the situation: we cannot be part of the chemicals agency and the REACH regime if we are not part of the single market.

The committee was also struck by the absolute unanimity of the whole industry, NGOs and the scientific community—far more than on any other subject we have looked at, whether fisheries, biosecurity or food supplies—that we should try still to be part of the European Chemicals Agency; or, if not, we should have total alignment with its decisions, however we manage to do that.

My first question, coming back to those resources, is: how on earth can the HSE actually cope with this demand and need, this way of keeping the chemical industry and all those that are part of the supply chain actually moving? I understand that there is an extra budget of £13 million and that some 35 to 40 extra people are being recruited, but that is minuscule in comparison with the resources of the ECHA as it is at the moment. I would be very interested to hear from the Minister how that recruitment is continuing.

The committee has found from other areas that IT systems are often thought about rather late on in the Brexit process. I welcome the fact that the systems are in place, as I am sure the committee does, but in effect all we have is an empty spreadsheet. It cost us 5.8 million quid, but hey, we have a spreadsheet that is ready to operate but, I presume, completely empty. Industry has two years to fill it up, but one of the naive points that came over from the department was that it seemed to be under the impression that, on Brexit day, you could just paste all the information off the European system on to the British system and it would work. That was what the Minister and senior officials talked about. That forgets commercial copyright and intellectual property. In the end they agreed that this just could not happen. Yes, we have a two-year grace period, but it still means that all those businesses inside and outside the UK will have to fill that spreadsheet with the full details of those chemicals. That might be okay for those that are UK-owned, but a number of them are owned by more than one company, so all the UK registrations probably have EU companies as well where those intellectual property rights will be equally important. Reregistration will be a very difficult and expensive task.

I will quote one thing from our report, from a witness who approached a Conservative member of the committee. Their company has 50 products on the EU market and they set out the cost indications of leaving REACH:

“‘Even under a soft Brexit costs will increase because of a duplication of work to comply with REACH and BREACH [British REACH] even if this is simply in administration costs. Significant costs will occur if duplication of registrations and testing is required within the UK. Where the company sells into the EU costs will further increase due to the need to have either an [EU representative] or a subsidiary presence. Raw material costs and/or availability after Brexit will be a challenge and will also incur cost increases’”.

They stated that there would be,

“‘an initial annual cost of between £3m to £4.5m, with ongoing annual costs of between £0.5m to £1m’, adding that this could also have implications for the company’s continuing involvement in the EU market, potentially leading to the loss of 75–85 jobs”.

That is an actual quote that came to us from a medium to large business, because it was so concerned about the way this was going.

The timing is difficult in terms of two years. To get REACH to where it is at the moment took something like 10 years. The EU gave a Brexit window for British companies to register in the EU—between 12 March and 24 March—which has now ended. Does the Minister have any information about how many UK companies have been able to take up that opportunity, the EU being concerned about its own supply chains?

Animal testing has come up. I understand the Minister’s assurances, but many of these products are going to have to be retested—there is no question about that. In one of our evidence sessions, the noble Lord, Lord Krebs—who is in his place and, I hope, will speak soon—asked Thérèse Coffey, the Minister, about animal testing. She said, in the end:

“We would have to undertake a regulatory approach, and if that required animal testing that would require animal testing”.

I think the Minister agrees with us on that, and that to me is the logic.

This is a key sector of industry, which was neglected in the early days of Brexit. I am very pleased that Defra, as a ministry, has tried to catch up, but this is still an inadequate and weak SI. Our committee was very critical of the way in which this had been handled. Some of it has moved forward and improved, but I have to say to the Government that we are far from having a satisfactory regime at this time.

Photo of Lord Krebs Lord Krebs Crossbench 4:45 pm, 26th March 2019

My Lords, I speak as a member of the EU Energy and Environment Sub-Committee, so ably chaired by the noble Lord, Lord Teverson, who has just spoken. I do not wish to repeat all the arguments that we have heard expressed so eloquently by the noble Lords, Lord Fox and Lord Whitty, but I want to ask a question which follows from what the noble Lord, Lord Whitty, said. I have assumed all along that there must be some secret benefit of establishing a separate parallel UK system which duplicates the European system. I have yet to find anybody who can explain to me what this benefit is. Therefore my first question to the Minister is: what is the benefit? Do tell us. Reveal all, so that we can all enjoy the warm glow of appreciation.

I move quickly from that very general point to a much more specific point, which has been alluded to already by the noble Lords, Lord Fox and Lord Whitty, concerning scientific evidence to support risk assessment. To me, it would be really dangerous in the future, for confidence, for UK consumers and for the viability of our chemical industry and all the products that depend on chemicals, if we had a divergence in risk assessment between the European system—run by the European Chemicals Agency—and the UK system. Think what that would mean if, on one hand, we were told by the other 27 countries that chemical X is not safe to use but, on the other, we were told by our own national system not to worry about it and that it is safe. That leads us to the key question: how will these risk assessments be carried out? The SI does not provide for the replication of an independent standing committee of experts to carry out risk assessment.

We have asked Minister Coffey about this on more than one occasion. Just last week, on 19 March, in response to the question of why we cannot replicate the committee structure, she replied—if I can read her writing—that we want to ensure that,

“the HSE will have access to the best advice and would not be limited to the UK or even the EU—setting up a statutory committee is likely to reduce that freedom”.

Why does having a statutory committee reduce the freedom to seek advice from other experts? At one stage, I had the pleasure of serving as the chairman of the Food Standards Agency. We had numerous statutory committees advising us on novel foods, on microbiological safety, on nutrition and so on. But that did not prevent us seeking other expert advice, where necessary, from people who were not on those statutory committees. I simply fail to understand the logic.

Furthermore, whatever system the HSE has for providing risk assessment, what is key to public confidence is transparency. There is no point in the HSE coming up with a risk assessment that says “This is safe” or “That is not safe” if the public, NGOs or scientists in the academic community and elsewhere cannot understand in a fully transparent way how that decision was reached. One thing that has happened in many of the statutory advisory committees elsewhere in government—led, I believe, by the Food Standards Agency back in the early part of this century—is that these committees meet in public. People can actually see what the evidence was, what the arguments were and how the decision was reached. Can the Minister assure this House that whatever mechanism the HSE uses—and I certainly think it should have an independent statutory committee—its decisions will be fully transparent, and that the decision-making group will meet in public so that people can see how the decision is made?

I have focused on one minor detail, although I think it quite an important one, of the many concerns raised by the Select Committee that I sit on, as well as by the noble Lords, Lord Fox and Lord Whitty. Finally, I remind the House how pervasive chemicals are in our lives. It has already been pointed out that this is about not just the chemical industry but all the industries that depend on chemicals, whether for motor manufacturing, toiletries or furniture and so on. There is a food chain in this country—many noble Lords may even have bought food from this outlet—which claims that its food contains no obscure chemicals. There is a risk that it contains nothing at all because food is nothing but chemicals, and some of them are obscure. This is fundamental to everything in our lives and how we regulate the safety of chemicals is of absolute paramount importance to everything we do, including the food we consume.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative

My Lords, it gives me great pleasure to follow the noble Lord. I can speak only for myself, as I find that I am not on a committee so I have no expert knowledge in this regard. However, I pay tribute to the work done by the Secondary Legislation Scrutiny Committee in its 15th report, which I will refer to.

I know why this statutory instrument is being prepared; my noble friend the Minister set that out clearly in his opening remarks. In the impact assessment, the policy objective in paragraph 14 sets out the terms of the political declaration on the future relationship between the UK and the EU. Perhaps my noble friend can put your Lordships’ minds at rest this afternoon by showing that we will seek more than just a UK-EU free trade area for goods. The difficulty of our meeting to consider this two days before we were due to leave the European Union is that as we do not yet know the circumstances of our leaving, until the House of Commons has taken a view in this regard, we do not know whether we are leaving with no deal or whether there will be a transitional arrangement. In the event of the Prime Minister’s deal being agreed by Parliament, can my noble friend say how Defra and the Government intend to use a possible transition period to ensure continued co-operation between the UK authorities and EU agencies such as the European Chemicals Agency?

I agree with all those who have spoken on the questions raised in this 15th report about additional admin and the potential costs, and I have one request of my noble friend: since the report is strongly worded, and since neither the Expansion Memorandum nor the impact assessment have set out the costs and financial implications, it would be very helpful if he would set those out this afternoon.

The noble Lord, Lord Teverson, referred to the gross value added. I add that 95,000 jobs were recorded as directly relying on this sector in 2017. Perhaps what is not widely known is that, of the 2,800 chemical businesses, 97.5% are either small and medium-sized businesses or micro-businesses. I think noble Lords are united in being aware of the consequences of our leaving the European Union for that category of SME and micro-business: this sector is especially important in that regard.

Photo of Lord Teverson Lord Teverson Chair, EU Energy and Environment Sub-Committee 5:00 pm, 26th March 2019

I absolutely endorse that: we often think of this industry as dominated by large corporates and internationals; it is not. There is a huge SME sector which is just as important in this.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative

I am most grateful.

In paragraph 17 of the 15th report the department is recorded as replying to one of the concerns thus:

“Should it become clear that we are in a ‘no deal’ scenario, staffing levels will be scaled up as required over a period of several years, allowing time for recruitment and training”.

The question has to be asked: as we are on the eve of a potential no deal, what is the position now and how far advanced are we with the scaling up? Are the officials coming from the industry and from other departments? What certainty can we have that the officials who are being asked to prepare for exit day under no deal are in place and have the knowledge in this regard?

My heart sank when my noble friend said that the dedicated IT system had been tried and tested and was ready to go. Successive Governments have found themselves in an embarrassing situation where we have a new, swanky IT system in place, it has been tried and tested and is ready to go, but it has proved to fail. I think the two examples I am going to choose actually reflect badly on my own Government. One relates to the Rural Payments Agency, where we not only introduced a new system of farm payments but, at exactly the same time, introduced a new IT system which had been tried and tested—and failed. The other IT system that caused great distress throughout the country was rolled out by the Child Support Agency. Again, we had a new IT system that had been tried and tested and proceeded to fail, with devastating consequences for families across the country. I hope that my noble friend will be proved right that this IT system is indeed ready to go.

At paragraph 27 of its 15th report, the committee raises concern about the possibility of failure and disruption:

“We remain concerned … that there may be disruption to the UK chemical industry, supply chains and wider economy as a result of new requirements to register chemicals from the EU after exit”.

That is certainly something noble Lords would wish to be satisfied on this afternoon.

My final point is that the House is incredibly grateful to Secondary Legislation Scrutiny Sub-Committee B for its work in preparing us for this debate on a very important SI.

I am rather concerned that the noble Lord, Lord Fox, might be at my dinner. We were at breakfast together this morning, as indeed was my noble friend Lady Byford and a number of others. We are now together—almost—post-lunch. I pray that we might be at dinner together this evening, but perhaps we might both have a reprieve. He mentioned the need for reassurance about ongoing consultation, and that all the groups are united. It is quite a challenge to unite such disparate groups as the Green Alliance and the broader environmental groups, the health companies, the animal rights charities and indeed the chemical industry. I conclude by asking my noble friend to give the House an assurance that the consultations are indeed ongoing and will continue throughout any transitional period.

Photo of Viscount Hanworth Viscount Hanworth Labour

My Lords, much of what I intended to say has already been said, and said very well. Nevertheless, I will add further testimony that reaffirms the comments of my committee colleague, the noble Lord, Lord Teverson.

The experience of serving on the Energy and Environment Sub-Committee of the European Union Committee has highlighted a crisis in government that affects both politics and administration. Modern government is highly complex. Mundane matters of daily life and of trade are surrounded, as they must be, by regulations and legislation, and it can take a great intellectual effort to understand all the circumstances. Minor incremental changes to legislation can usually accommodated. If a small mistake is recognised, the matter can be amended. The changes proposed by the Brexit agenda are of a very different order. In this connection, Ministers and their civil servants have often had only a tenuous grasp of the matters at hand, and they have sometimes demonstrated before our committee an astonishing oversight.

The EU REACH regulations have proved to be a case in point. Here, we face some of the perplexities and absurdities of the Brexit agenda. It has been unclear whether under any circumstances the UK could continue after Brexit to remain a member of the REACH organisation, albeit that this has never been clear until recently.

The initial proposal put to our committee by the Minister in charge, who was flanked by a Civil Service adviser, was that the establishment of a UK REACH system—or a “BREACH” system, as we have heard it called—could be achieved easily by cutting and pasting the contents of the REACH database, which is owned by the European Chemicals Agency, into our own national database. It was pointed out to them that this was not generally possible. The information in the REACH database is also owned by commercial enterprises that have contributed to it. Some of it is subject to commercial secrecy. The data would have to be acquired via negotiations. Moreover, given that the data is often subject to joint ownership, such negotiations would be difficult and protracted.

In effect, the ambition of the Brexit agenda has been to acquire the fruits of a co-operative enterprise without having to co-operate with others. It has become clear that, in order to remain in business, UK companies will have to transfer their registrations to European Union-based companies, or parties, at least. They will have to bear the cost of registering with both the UK and the European Union. Moreover, unless they already have a presence in the European Union—other than in the UK—they will be depending for such registrations on the good will of rival enterprises. This is hardly a case of regaining national control.

The preponderance of the output of our chemical industry is exported. Some 61% of our chemical exports went to the European Union in 2017, and 73% of our chemical imports came from the European Union. If the Brexit agenda is fulfilled, we shall be looking at the likely demise of a significant British industry.

The chairman of our committee wrote to the Minister expressing our anxiety at the lack of preparation for these eventualities. In reply, the Minister told us that there has recently been a flurry of activity aimed at alerting industry to the need to prepare for Brexit. It is difficult to measure the extent of these activities, but it is clear that Defra has had other things on its mind.

This brings us back to a point that has already been made. The Conservative Party is in favour of small government and light-touch regulation, yet it has proposed changes far beyond the capacity of politicians and civil servants to accommodate. Its maladministration of the nation’s affairs amounts to an utter dereliction of duty.

Photo of Lord Trees Lord Trees Crossbench

My Lords, I strongly support the amendment of the noble Lord, Lord Whitty, and will address the issue of animal testing, which has already been referred to by several noble Lords.

The amendment calls on Her Majesty’s Government to seek continued participation in REACH as a priority in negotiations with the EU. This is particularly important with respect to the use of animals for the safety assessment of chemicals. As was referred to earlier, animal welfare is of great concern to the public, but I believe that the vast majority understand the need, under strict regulation, to use some animals to ensure human safety.

However, all interested parties—the public, the scientists involved and the welfare organisations—expect observance of what are called the three Rs in experimentation. That is, to refine, to replace and to reduce the number of animals used. That concept has been pioneered in the United Kingdom. The REACH guidelines explicitly require minimal use of animals, and permit it only after all other alternatives are exhausted. Most importantly, having a single registration and regulatory portal for the EU avoids any repetition of animal testing.

The instrument under debate today will require an independent UK chemical regulatory process centred on the HSE and the Environment Agency. Notwithstanding the terrific logistical challenges that that presents, which have been well articulated by the noble Lords, Lord Teverson and Lord Fox, this is essential in the event of no deal, and indeed in the event that the EU will not accept the UK’s continued participation in REACH. I should point out that, to date, no third-party membership has been admitted to the REACH system.

I have three questions for the Minister. First, will he reassure us that the UK systems replacing REACH will harmonise with it as much as possible and will take all measures to avoid the need to generate separate data for registration? The Minister has told us that current registrations will continue to be accepted, but that all UK registrants will have to resubmit their registration dossier to the UK competent authorities within two years. So will the current animal safety testing data be accepted at that time without the need for further testing? Conversely, for UK firms importing products from the EEA that are currently registered by an EU member state, will the existing data for animal testing suffice when they are required to register within two years of Brexit?

Bearing in mind the problems of intellectual property, what assessment has Defra made of the problem of intellectual property and the ownership of data in the context of its transferability? Finally on future registrations of new products, will Her Majesty’s Government negotiate with the EU the mutual recognition of animal testing data so as to avoid the need to duplicate animal testing, whether for EU registrants to export to the UK or for UK registrants to export to the EU?

Photo of Baroness Bakewell of Hardington Mandeville Baroness Bakewell of Hardington Mandeville Liberal Democrat Lords Spokesperson (Environment, Food and Rural Affairs)

My Lords, I thank the noble Lord, Lord Fox, for setting out in such detail the issues around the statutory instrument. I also thank the Minister for his time and that of his officials for the briefing that we had at the beginning of the month.

I have read the Explanatory Memorandum three times and each time I have become more concerned. I have dealt with a number of SIs during this exit process, but the EM on REACH is the longest I have dealt with. It is an extremely complex subject. The stated purpose of the SI is to correct deficiencies in retained EU law. I remain unconvinced that this will happen.

As we have heard, REACH and the European Chemicals Agency operate on a no data, no market basis. The industry is also responsible for managing the risks from its use of chemicals. This seems sensible, but there are significant pitfalls and costs for some of our smaller companies and businesses operating in this area. Paragraph 2.4 of the EM assures us that the UK regulatory system for chemicals will be “similar” to the current EU system. Similar is not “identical”, nor “the same as”. This is open to interpretation and confusion. Although it is important to achieve value for money for the UK taxpayer, ensuring public safety should have an equal status with value for money.

The European Chemicals Agency is responsible for the effective registration system for chemicals. As we have heard, once exit day has passed, this responsibility will pass to the Health and Safety Executive as the UK competent authority. The HSE will run a database for applicants for new chemical registrations. Like the noble Baroness, Lady McIntosh of Pickering, my heart sank when I read in paragraph 7.18 of the Explanatory Memorandum:

“A UK IT system will facilitate the operation of the UK REACH system”.

Government does not have a good track record on setting up new IT systems, as the noble Baroness so eloquently said. Those applying for registration and being refused will have recourse to the First-tier Tribunal, instead of the ECHA board of appeal. Like my noble friend Lord Fox, I am extremely concerned about the lack of capacity in personnel within the HSE and the tribunal to deal with this extremely complex subject.

As the Minister also said, the SI includes an amendment to the definition of used PCBs. This rolls easily off the tongue and means very little. It actually refers to the various environmental protection regulations for the disposal of polychlorinated biphenyls and other dangerous substances. PCBs are one of the most toxic pollutants affecting rivers, schools and fish and are a persistent organic pollutant. Will the amendment to the definition of PCBs be more stringent or more lax? Perhaps the Minister can reassure us.

The long list of what is being done and why is extremely concerning. Can the Minister explain what the,

“alternative methods for assessing the hazards of substances”,

are likely to be? As for the Environment Agency providing expertise in relation to environmental science, I am again concerned about the organisation’s capacity. Both the Environment Agency and the Health and Safety Executive have been asked to take on many additional functions as a result of the myriad statutory instruments which this House has debated in recent months. Each one glibly says that the powers will be dealt with by those organisations, but there is no mention of capacity building or additional resources to help. Each SI cannot be seen in isolation but must be seen in the context of all the other duties passing over. There is a cumulative effect, and the system must be robust.

I live in an area with a big manufacturing company which used to be British-owned but is now Italian-owned. As we have heard, the system of registering to trade in chemicals is often that the larger company applies and the smaller contractors operate under that registration—that is, it is grandfathered over. This has not been a problem while the main holder was an EU-based company. It will not be a problem when the registration is held by a UK company, but it will be a significant problem for those small engineering companies operating under the registration of an EU-based or worldwide company that does not hold a UK registration.

Years ago, I worked for a small engineering company that did subcontract work for other local companies. Often, parts had to be electroplated, which was done in Bath by another small company. These small operators, which often use extremely toxic chemicals, are likely to be hit the hardest by this legislation. Sadly, despite my noble friend Lord Fox’s many meetings with them, Defra officials have failed to grasp the implications and make any amendments to the SI to mitigate the consequences.

Paragraphs 7.14 to 7.23 of the Explanatory Memorandum give details of the interim arrangement for UK registrations into the UK REACH system. It is cumbersome, with cost and safety implications. I am concerned at the fate of many of our small companies, which are the lifeblood of our economy.

Moving on to the consultation undertaken, the EM states that 23 stakeholders from a range of organisations were consulted in a series of eight meetings. That represents less than three consultees per meeting. The Minister indicated that wider consultation subsequently took place. Can he say how many small companies were consulted during this process and how many industries they covered? I am concerned that insufficient weight has been given to their views.

Dani Loughran, the managing director of Aston Chemicals, has given me permission to use her example of how this SI will affect smaller companies. Aston Chemicals employs 36 people and imports chemical ingredients from around the world used in personal care products, such as shampoo, toothpaste, skincare and cosmetics. It brings its products into the UK by boat or air and supplies them to manufacturers in the UK and the rest of Europe. The UK has been a gateway to Europe with cost-efficient freight routes landing at UK ports.

REACH is causing another huge problem for the chemical industry because it will mean that we are no longer a member of the European Chemicals Agency, or ECHA. We all know that it manages all chemical regulations, including the EU’s landmark REACH regulation. Chemical manufacturers all over the world have spent millions testing their chemicals and providing extra safety data to meet the REACH requirements, with access to the massive EU single market as a reward. After Brexit, the UK wants to replicate this regulation with UK REACH. It would mean manufacturers having to do the whole thing again—with more testing and more enormous costs—but, this time, just for access to our market in the UK. For most chemical companies, this will not be worth while as the size of the UK market simply will not justify the huge costs involved, resulting in products being withdrawn from sale in the UK. UK manufacturers will not be able to manufacture without these ingredients, and as chemicals are at the top of the supply chain for many industries, they will all be affected. EU manufacturers, however, will be fine, so the logical outcome is for these industries to move out of the UK and into the EU, losing more UK jobs and tax revenue. Aston Chemicals is not alone; thousands of UK companies are having to do the same.

I understand that we do not live in a perfect world. We often have to make compromises, but some compromises need to be weighed up very carefully. If this fatal Motion is passed, the UK will be left without any framework within which to operate on this sensitive issue, and businesses and the public will suffer. If we support this SI, which has some significant flaws, the UK will operate under an imperfect regime, the consequences of which have been highlighted this afternoon. There are several phrases to describe this situation: “between a rock and a hard place” or “between the devil and the deep blue sea”. I know that the Minister is listening to the arguments put forward, but I suspect that his hands are tied by those in the other place. However, I look forward to what he has to say and hope that we can find a way forward.

Photo of Lord Selkirk of Douglas Lord Selkirk of Douglas Conservative 5:15 pm, 26th March 2019

My Lords, I will be extremely brief. This has been a remarkably good debate, and I strongly congratulate the sub-committee Chairman, the noble Lord, Lord Teverson, the noble Lords, Professor Lord Krebs and Professor Lord Trees, and the noble Viscount, Professor Lord Hanworth, each of whom made extremely relevant and important points. While we were considering this, I was struck by how many are employed in the chemical industry; I understand the figure is far above 50,000. I hope it will be strongly borne in mind that their expertise is absolutely essential for our country, especially when there is the possibility of wide-scale duplication.

The other point I make is that a restriction on the availability of medicines would cause grave concern. I hope that the Minister will exercise a watching brief and that an independent statutory committee will be created, as called for by the noble Lord, Lord Krebs. This will take no more than a lot of hard work, understanding and, if I may say so, openness and transparency.

Photo of Lord Gardiner of Kimble Lord Gardiner of Kimble The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

My Lords, in this debate noble Lords with considerable experience have made extremely valuable contributions, certainly for me. I also found it immensely valuable having meetings earlier to get abreast of some of the key, essential points that noble Lords have made today.

I reiterate what the noble Lord, Lord Teverson, and my noble friend Lady McIntosh said, as well as the noble Baroness, Lady Bakewell, when talking about Aston Chemicals. I feel confident mentioning the name, as the noble Baroness mentioned it. So many of these businesses are in the small business sector, and how essential it is. I acknowledge the importance of the chemical industry and its contribution. I think we all agree how essential it is to have a regime—we can discuss what would be the optimum regime—where we can all have confidence in the use of chemicals. There have been strong expressions on matters that I entirely respect and understand, but I have a responsibility to your Lordships to say—and these are not just my riding instructions from the other place—that we need this statutory instrument if we are to have an operable system, which the chemical industry acknowledges.

I have counted and I think I may have had 45 to 50 questions. It would be impossible to indulge your Lordships and answer every one in great detail, but I will endeavour to answer as many as I can. The noble Lord, Lord Fox, opened by asking if Her Majesty’s Government—Defra and other departments—are concerned about these matters. I say emphatically yes, for the two reasons I opened with that noble Lords raised. This is a major commercial interest of this country. We also have the great responsibility of ensuring that our country is safe, and indeed that products from our country are safe for others to use.

On IT, the first thing to say is that I could never have invented any of it—so I can safely say that I would not have been in any positon to say whether this will work—but I am assured that for day-one functionality we are ensuring that industry will be able to register new and imported chemicals and to provide authorities with information required for maintaining the validity of existing registrations. Post day one, we will enable joint registrations for industry and build back-end functions for the HSE. I acknowledge what the noble Lord, Lord Fox, the noble Baroness, Lady Bakewell, and my noble friend Lady McIntosh said about IT, but this has been tested with industry and I can only report what I have heard on the success of that testing.

The noble Lord, Lord Fox, asked about the position on the UK-based only representatives relocating to the EU. For UK-based manufacturers or ORs to maintain their EU REACH registration, they must transfer their registration to an EU-based entity. This is the policy of the EU and the ECHA, over which we have no control. That is the position. However, only representatives are not obliged to relocate; they can set up a subsidiary in the EU or leave a subsidiary in the UK. Even if they relocate, they will be grandfathered into the UK. These chemicals therefore would not be lost to the UK market.

The noble Lord, Lord Fox, asked about the two-year grace period. He conceded that the “no data, no market” principle is central to REACH. The new UK REACH IT system will need to be populated by data provided by industry. The transitional arrangements in the instrument mean that the industry has grace periods in which to supply this data, but it is important that we preserve the “no data, no market” principle.

As I said in my opening remarks, we will keep matters under review. But we have to balance the needs of industry, on the one hand, with the need to have the data to protect health and the environment, on the other. We will work with the industry on this; it is important that the relationship is strong. I assure noble Lords that it is my understanding that our work with the industry, BEIS and the HSE has been very strong. To the noble Lord, Lord Teverson, I say this: I am sorry we have not yet had our debate, but quite a lot of things have happened since that very helpful and important report.

The noble Lord, Lord Fox, asked about the capability of the DAs. We are working with the devolved Administrations, the HSE and the Environment Agency so that we can develop a UK framework for managing chemicals. We recognise that the DAs’ resources are currently relatively limited and we will work with them individually to see how that should be addressed. That is an important point.

The noble Lord, Lord Fox, mentioned making data available and relying on what trade associations say. It is not naive to rely on EU trade bodies such as Cefic; indeed, Cefic’s model contract has been widely used across the EU. I did not realise it, but Cefic is a very influential body and is widely listened to.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy) 5:30 pm, 26th March 2019

I was not implying that there was something wrong with the trade association. My point was that it is wrong to hide behind that statement and not acknowledge that there are serious copyright and confidentiality issues around this data which make the whole cut-and-paste exercise much more complex and expensive than the Minister seemed to present.

Photo of Lord Gardiner of Kimble Lord Gardiner of Kimble The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

I understand the point from the noble Lord. However, as I said in my opening remarks, it is the case that Cefic and other bodies are working extremely constructively, as there is a mutual benefit.

As a prelude to today, I read last Thursday’s Hansard—my noble friend Lady Buscombe was very helpful in taking me through that interesting debate. To be pedantic, let me be clear that the 488 approvals mentioned are part of a programme under the biocidal products regulation and not REACH. All of government is looking in great detail at what needs to be done and what resources are necessary to make sure it happens.

The noble Lord, Lord Krebs, and my noble friend Lady McIntosh asked about the benefits of a UK system. I have said already—and will say again, because the noble Lord, Lord Whitty, raised it—that our preference is obviously to maintain participation in the European Chemicals Agency. That is the Government’s aim, and I will go into further detail on it. However, we are here because we have to consider all eventualities. In his report, the noble Lord, Lord Teverson, made it very clear that although sometimes we do not wish to be in a certain place, we have to do the responsible thing. Indeed, his committee considered how we deal with all scenarios.

The noble Lord, Lord Teverson, also asked how many UK companies have taken advantage of the Brexit window. I do not have any details from the ECHA on that, but if I receive any further information, I will make sure it is passed to the noble Lord.

The noble Lord, Lord Fox, mentioned the duplication of costs. It is the case that, unfortunately, if there is no deal and we have to set up a UK REACH system, or if at the end of the negotiations participation is not possible, we would, as other countries do, have to have a regulatory system. However, I emphasise that, through our transitional measures, we are seeking to minimise the costs; for companies registering new chemicals, the requirements will be the same.

I understand the concerns of business and civil society. That is why we have had such a considerable number of discussions, as I referred to in my opening remarks, with business, all representatives who have an interest and Ministers in BEIS.

I was struck by last Thursday’s intervention from the noble Lord, Lord McKenzie of Luton. He described the Health and Safety Executive as,

“one of the jewels in the crown of our regulatory firmament”,—[Official Report, 21/3/19; col. 1602.] and said he had no doubt about its intellectual capability. I agree with the noble Lord and with the points made by the noble Lord, Lord Whitty: no other organisation is better placed than the HSE to act as the UK agency.

As I said, we intend to scale-up resources to £13 million at full operation. I say to my noble friend Lady McIntosh that this funding is primarily for human resourcing in Defra, the HSE and the Environment Agency, to make sure that: we have the necessary levels of technical specialist input into risk and socioeconomic assessments of chemicals for the UK; first-rate policy advice can be provided; we can increase engagement with UK businesses and appropriate international fora; and we can take forward legislation as we seek to become a global leader in promoting the sound management of chemicals. As the noble Lord, Lord Teverson, rightly identified, the HSE will at this stage take on about 35 to 40 people. We will have a strong and effective regulator by building on the expertise of the HSE and the Environment Agency to operate REACH in the UK. As for the estimated number of staff, we think we will need 135 full-time equivalents across the three organisations of Defra, the EA and the HSE for the work I have outlined.

The noble Lord, Lord Whitty, raised the matter of independence. As the UK agency, the HSE must also draw on independent expert scientific advice when developing its opinions on restrictions and authorisations. This will add to the robust evidence and analysis underpinning its opinions. If there are reasons the HSE does not commission independent advice—for example, where ECHA has already published a robust opinion on a chemical—it must publish its justification.

The noble Lords, Lord Fox, Lord Teverson and Lord Whitty, raised the potential costs to industry. The instrument puts in place transitional arrangements to provide business continuity. We are bringing all UK registrations automatically into UK REACH, so there is no break in market access. We are making sure that companies can continue to buy chemicals from the EU from day one. Grandfathering means that there will be no break in industry’s duty to identify and apply the appropriate risk management measures in businesses. We will not weaken the “no data, no market” principle because that is fundamental to REACH. But we have engaged closely with industry stakeholders about costs and how to mitigate them. As I said, the UK Chemical Industries Association and Cefic have published their joint recommendation that data used to register under REACH should be available for UK REACH at no extra charge.

On grandfathering, we acknowledge the existing ECHA registrations. That is why we have the grandfathering system and will accept reduced information for the first two years. But that is not a tenable position in the long term if we want to have an effective regulatory system that protects human health and the environment.

A number of noble Lords, particularly the noble Lord, Lord Trees, mentioned animal testing. This instrument preserves the built-in mechanisms to reduce the amount of animal testing. This is the last-resort principle that means that companies and the regulator can turn to animal tests only if they have exhausted all other ways of getting the information they need to complete the understanding of the chemical. There is also the testing proposal mechanism, which means that in many cases industry cannot proceed with animal testing unless it gets the regulator’s agreement first. The UK’s regulations preserve these provisions. Without this instrument, we would not have those powers to stop animal testing.

The UK’s record on these matters is acknowledged internationally, which was mentioned by the noble Lord, Lord Whitty. The UK has been the forefront in ECHA in opposing animal tests where alternative approaches are available. I should say to the noble Lord, Lord Trees, that we will aim to harmonise as much as possible. We will accept existing animal tests produced for EU REACH. We will not ask for new ones. Looking forward, we will work on the basis of mutual acceptance of data and the EU follows the same principle.

The noble Lord, Lord Fox, raised the important issue of environmental protections. The Government have repeatedly made clear their commitment to environmental standards. The policy paper that we published alongside the environment Bill in December last year reinforces the regulatory provisions throughout REACH that are fully preserved in the instrument today.

I also say to the noble Lord, Lord Krebs, that we will continue to need robust scientific evidence to make sure that we are properly protecting human health and the environment. That is why we have put in place strong arrangements for scientific advice. The HSE must seek external knowledge and advice when forming its opinions or otherwise justify why it has decided not to. It must act in a way that ensures a high level of transparency and it must publish its opinions. The HSE will have access to the best advice and will not be limited to the UK or even the EU. Indeed, we think by contrast that a UK statutory committee runs the risk of rather narrower membership and limiting our access to expertise. We are also committed to transparent processes. We will have arrangements in place in UK REACH to allow stakeholders to observe discussions and considerations where independent scientific advice is provided and to read publicly available minutes of these meetings.

The noble Lords, Lord Krebs and Lord Fox, raised divergence. It is the case that industry and NGOs have expressed views on that matter. First, the UK will not diverge from EU regulatory standards, at least not if that means reducing our standards. In other words, that we will retain the highest possible standards is the whole basis of this regulation. We will look very closely at what the EU does, but it is right that our regulators should apply their own judgment based on independent, expert advice on individual chemicals.

My noble friend Lady McIntosh asked about IP and continued co-operation with the EU. Again, we have recognised the importance of continued co-operation. We will work through the negotiations to achieve that.

In speaking to his amendment, the noble Lord, Lord Whitty, raised the issue of the Government making continued United Kingdom participation in the European Chemicals Agency and REACH an objective in negotiations with the European Union. The Government’s objective is exactly that. Having read the sub-committee report of the noble Lord, Lord Teverson, that principle was welcomed by the committee. But we cannot unilaterally provide for that in UK legislation. The purpose of this SI is to make the legislative arrangements for a stand-alone UK chemicals regime in the event of our leaving without a withdrawal deal, although as I emphasised to my noble friend Lady McIntosh, the Government’s aims for chemicals in a negotiated future relationship with the EU were set out in the White Paper. The White Paper looks forward, as has been said, to participation by the UK in agencies such as the European Chemicals Agency, a common rulebook for sectors such as chemicals and continued participation.

This is an important debate, but my noble friend the Chief Whip has told me that I am taking too much time. May I take a number of points because they are important?

I naturally regret the observations of the noble Lord, Lord Teverson—and the noble Viscount, Lord Hanworth—about Defra and its response. However, I know that my honourable friend the Parliamentary Under-Secretary of State for the Environment is in regular correspondence with the noble Lord. Work began on this in 2016, so I can assure noble Lords that a huge amount of work has gone into this.

I would also say to the noble Viscount, Lord Hanworth, and the noble Lords, Lord Krebs and Lord Teverson, and my noble friend Lord Selkirk, that I learnt about the professors on the noble Lords’ committee. I found that report a great assistance in assessing the issues.

I can assure noble Lords that the importance of the chemical industry is fully understood. Alongside this, we all want to have a regime in place that gives us confidence about the responsible use of chemicals. As far as I have been informed, industry has been clear, whatever reservations it has about certain elements, that it needs this instrument on the statute book.

I will assess the quite considerable number of other questions that I have not been quick enough to handle, but I respectfully say to the three noble Lords, all of whom I know have a deep understanding of this issue, that it would be much appreciated if they felt able not to press their amendments and to support the instrument.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy) 5:45 pm, 26th March 2019

My Lords, I thank the Minister for his response. He should not apologise for going to length. This is an important issue and it could shape the future regulation of a very important part of our national life. My noble friend Lord Teverson said that his committee had the impression that Defra did not grasp the scale of the undertaking of chemical regulation. After noble Lords’ contributions today, that will not be the case with the Minister or with Defra. All noble Lords contributed something different in setting out the problems with this statutory instrument. There are problems with cost duplication. There is a likelihood that the number of animal tests will increase. There is no assurance that the HSE has the resources or systems to deliver this.

Tied to all this is that it has been left too late. This statutory instrument is not fit for purpose, yet by running it down to the wire, by literally leaving it to the last possible moment, as my noble friend Lady Bakewell said, there is not time to replace it with something that is fit for purpose. The purpose of this debate is to set out the big issues that face this statutory instrument. This is Defra’s statutory instrument, the Government’s statutory instrument and, frankly, the Minister’s statutory instrument. I hope we never have to see it in action because I believe it to be deeply flawed and that the country would suffer. I shall not press this amendment to a vote today because I think the Minister can live with this statutory instrument in the future. I beg leave to withdraw my amendment, but I shall support the noble Lord, Lord Whitty, if he presses his amendment.

Amendment to the Motion withdrawn.