Quotas

Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 3:45 pm on 25th January 2018.

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

With this it will be convenient to discuss the following:

Amendment 11, in clause 32, page 19, line 32, after “which” insert

“section (Quotas: enhanced parliamentary procedure, etc)(7) applies and”.

This amendment is consequential on NC3.

New clause 3—Quotas: enhanced parliamentary procedure, etc—

(1) No regulations may be made by the Treasury in exercise of the power in section 11(1) except in accordance with the steps set out in subsections (2) and (4) to (6).

(2) The first step is that a Minister of the Crown must lay before the House of Commons—

(a) a statement on the matters specified in subsection (3); and

(b) a draft of the regulations that it is proposed be made.

(3) Those matters are—

(a) in respect of any case where the condition in section 11(2)(a) is met, a statement of the terms of the arrangements made with the government of the country or territory outside the United Kingdom;

(b) in respect of any case where the condition in section 11(2)(b) is met, a statement of the reasons why the Treasury consider it is appropriate for the goods concerned to be subject to a quota.

(4) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (2)(b)—

(a) the amount of import duty proposed to be applicable to any goods that are or are proposed to be subject to a quota; and

(b) the factors by reference to which a quota is to be determined.

(5) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).

(6) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4), give effect to the terms of the resolution referred to in subsection (5).

(7) No regulations may be made making provision on the matters in section 11(3)(c) unless a draft has been laid before and approved by a resolution of the House of Commons.

This new clause establishes a system of enhanced parliamentary procedure for regulations setting quotas under Clause 11, with a requirement for the House of Commons to pass an amendable resolution authorising the key provisions of the proposed regulations, and also requires that regulations establishing a licensing or allocation system are subject to the affirmative procedure.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Clause 11 makes provision for the purpose of establishing an independent quota regime for the United Kingdom. The clause specifies the circumstances in which a quota may be established and gives the Treasury the power to make regulations concerning the administration of the quota regime.

A range of tariff and quota regimes currently govern imports into the UK. The EU currently notifies more than 140 tariff rate quotas to the WTO. TRQs allow specified quantities of a product to be imported at a lower or zero tariff rate. They are often used where the introduction of particular products to the domestic market raises specific policy sensitivities, for example in the case of agricultural produce. Depending on the nature of the goods in question, TRQs may be administered in a number of ways, such as on a first come, first served basis, via a licence system or on a traditional/newcomer basis.

Clause 11 establishes the general rule that a quota may be set only if arrangements, such as a free trade agreement, have been made with another territory outside the UK for that purpose, or if the Treasury has determined that it is appropriate that the goods in question be subject to a quota. In addition, clause 11 gives a power to make regulations concerning the administration of the quota, the conditions subject to which the quota has effect, how the amount of the quota is to be determined and conditions of eligibility, including, where appropriate, a requirement that the quota be subject to a licensing system.

Any power to make regulations that make a quota subject to a licensing system are exercisable by the Secretary of State, and any other power to make regulations under clause 11 is exercisable by the Treasury, having regard to any recommendation made by the Secretary of State. As can be seen, clause 11 does not set specific quotas, but rather seeks to maintain the effect of the general framework by which quotas are set and administered under EU law. Maintaining the framework will help minimise any disruptions to trade as the UK establishes an independent customs regime.

New clause 3 and consequential amendment 11 seek to put in place additional parliamentary procedures for setting the amount of duty applicable to goods subject to a quota. The Bill introduces a comprehensive framework for a new stand-alone customs regime, which will be underpinned by detailed and technical secondary legislation. As I have said in relation to other, similar proposed amendments, the Bill ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the complexity of the regulations.

Tariff rate quotas are complex and varied in terms of how they arise and how they are administered. Regulations related to tariff rate quotas are lengthy. They will include, among other things, administrative provisions for the opening and management of quotas, conversion factors and details on import licence applications. For the powers under clause 11, the negative procedure will apply, which the Government consider appropriate and proportionate. The procedure provides a sufficient level of parliamentary scrutiny while having regard to the technical and administrative nature of quota regulations.

TRQs are an integral part of the UK’s existing customs regime, particularly for agricultural imports. Clause 11 sets out the necessary provisions to allow us to establish the UK’s quota regime post-EU exit. I therefore commend the clause to the Committee.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

Quotas have concerned us for some time, particularly the question of how they will happen post-Brexit. I understand what the Minister is saying, and I have read the clause and understood what it says about the regulations and how quotas will be put in place by this Government, but I am still not entirely clear how those quotas will be decided in advance and what circumstances will be used to decide an appropriate level of quota. I am not sure if the plan is for that to follow in regulations. I have tried to work it out from the legislation before us; it may be in the Trade Bill rather than this Bill.

Quotas are important, particularly on agricultural products. If our farmers can only produce a certain percentage of the beef consumed, we must allow a certain amount of beef into this country, but not so much that our farmers will be squeezed. We must protect our farms here. It is about ensuring balance.

The UK and the EU Commission agreed in September 2017 how they would divide the quotas currently in place. They agreed that the tariff rate quotas lodged with the WTO would be divided on the basis of consumption. For example, there is a tariff rate quota for sugar cane. Sugar cane is consumed mainly by the UK—the EU generally uses not sugar cane but sugar beet, which it grows itself—so it makes sense for a more significant proportion of the quota to go to the UK than to the EU. Division by consumption seems like a relatively sensible way to do it.

Photo of Julian Sturdy Julian Sturdy Conservative, York Outer

Actually, a lot of sugar beet is produced in the UK, as well as in Europe.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

That is absolutely the case, but generally the sugar cane that comes into the UK and the EU is consumed in the UK; very little of it is consumed in the EU. This is specifically about the consumption of sugar cane, rather than about the production of sugar beet. I understood that probably most of the sugar beet produced in the UK is not for human consumption, but I could be wrong in that regard. I am happy to chat to the hon. Gentleman afterwards, if he is keen.

Photo of Julian Sturdy Julian Sturdy Conservative, York Outer

I will have to be careful what I say here but, without promoting British Sugar too much, if someone sees Silver Spoon in the supermarket, that is British sugar produced by British Sugar.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I thank the hon. Gentleman for that clarification. I appreciate that his knowledge of sugar is better than mine.

On quotas in particular, the situation is that the UK and the EU Commission have now decided how to divide the quotas and the amount that is lodged as a schedule with the WTO. However, in September 2017, Uruguay, Canada, Thailand, Argentina, Brazil, New Zealand and the US wrote a letter to say that they contested the way in which the UK and the Commission had decided to divide up the quotas, and that they had a concern about the decision taken. I can understand that concern.

For example, let us say that beef is coming into the UK and the EU. If we have a collapse in the beef market in one of those places, the beef cannot simply be redistributed to other countries. That is particularly so in the case of the UK. If the UK ends up with a tenth of the EU’s quota for beef, and the quota allows for 100 tonnes of beef, 10 tonnes of that are a quota allocated to the UK. If something strange happens in the UK, everyone decides that they do not want beef burgers or steaks any more and the market collapses, the country exporting the beef to the UK cannot just send it to another country, because the UK schedule will be the UK schedule alone.

I can therefore understand why countries are unhappy with how that division is working and why they have come back to say that they do not think it is a technical rectification. That is a serious thing in the WTO, because if the change of quota is not a technical rectification but a modification of the schedule, it needs to go through more of a process in order to be agreed.

My big concern is that none of that seems to be in this legislation. None of the way in which the UK Government will be dealing with the WTO on quotas or defending itself against challenges brought to the WTO seems to be in the Bill. While I am on the subject, to throw the cat among the pigeons, I have not seen anything in the European Union (Withdrawal) Bill, in this Bill or in the Trade Bill that gives the UK Government the power to lodge schedules with the WTO. I hope the UK Government have not missed that and it is written somewhere in one of the pieces of legislation, because it would be rather unfortunate if the UK Government were, post-Brexit, unable to lodge schedules with the WTO or to have its most favoured nation tariffs lodged with the WTO.

I hope that that power is in one of the pieces of legislation—I am happy for the Minister to come back to me and mention it afterwards—because clearly we want to be in a situation in which, post-Brexit, the UK continues to be a functioning country and is able to have tariffs, not just preferential ones but most favoured nation ones as well. Generally, I have concerns about the provisions on quotas because I am not sure that they adequately fulfil all the things that the UK will need to do on quotas.

I have thrown an awful lot of things at the Minister—not literally, I hasten to add for anyone reading this later—and I am happy for some of them to be dealt with at a future sitting. My concern, however, is that because we are leaving the EU and doing so in a short period of time, so legislation has been hastily drafted, some things might be missing. If that is indeed missing, that would be amusing because it is pretty fundamental going forward. I will appreciate the Minister’s providing some clarification, if he can, on the clause.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

Our new clause 3 would require the House of Commons to pass an amendable resolution authorising the key provisions of the proposed regulations. It would also require that regulations establishing a licensing or allocation system are subject to the affirmative procedure.

As with the other related new clause we have discussed today, there are four steps set out in our proposed process. First, the Minister lays a statement to the House along with the draft regulation that is proposed to be made. Secondly, the Minister lays a motion setting out the various duties and tariffs that the Government wish to impose. Thirdly, the House would have to pass a resolution on that motion. Finally, the regulations will be made. Amendment 11 is consequential on the above, making a small technical change to clause 32 to accommodate our proposals.

Ultimately, however, we are less concerned with the exact steps for any process for ensuring parliamentary oversight. We just want to see that the Government are acting on the principle that Parliament should have an extended role in scrutinising the changes in this regard. As I have said previously in relation to the other clauses, we seek to guarantee an enhanced parliamentary process. The logic is pretty undisputable. The Government have tabled this Bill as a financial Bill, as I referred to earlier on. In that regard, the House of Lords does not have any capacity to scrutinise it and the Commons does not have the same capacity it usually would. We ask, therefore, that as in all other financial matters a case is presented to the House for a debate and a vote.

It would be a very unfortunate outcome if the Treasury was to acquire powers to alter the rate of taxation without such basic democratic processes. The Government really should think a little longer than this—it is not a short-term matter. It is of course more conceivable that they may be in opposition sooner than they think. They should be looking to construct a fair process for scrutiny, with, in effect, cross-party agreement as to what that would be, in the light of this significant change that we are about to face in one way or another, maybe within the next 12 months or so, possibly a little longer, but the reality is that we are facing change. This House has to face up to the fact that scrutiny processes need looking at, especially with regard to finance.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Kirsty Blackman rightly raises the issues around quotas. First, we have to work out what those quotas will be. We have existing arrangements through the European Union and we are currently in discussions regarding, as she has suggested, how the various quotas should be allocated, whether that be on the basis of consumption, or consumption and other issues that we might consider. The point I would make on that is that this Bill is enabling, in that sense, rather than prescribing or seeking to suggest any particular outcome to those discussions.

In the hon. Lady’s second point she raised an example of 100 tonnes or 100,000 tonnes of beef, and a certain amount coming by way of a quota to the UK, and then circumstances of that changing not to our liking, and asked what we would do in such a situation. That prompts the question as to where the quota itself originated.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I am sorry; I was obviously not particularly clear when I was making that case. I was suggesting that this was why third countries are upset about how the division might work, because 90 plus 10 is not the same as 100 in a bigger area, because they cannot just redistribute that in the event of a market collapse in the UK, because the 10 is for the UK and they cannot just send that to the EU, because the quota for the EU is now only 90.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

I think I have the gist of the point. In terms of the overarching point about what one would do if the arrangements come to be seen, in the way they are measured, as being inappropriate, that prompts the question where the quotas originate in the first place. If it is in the schedule of concessions at the WTO, I guess we would have to revisit that aspect of it. If it comes from provisions within a free trade agreement, I guess we would attempt to renegotiate that aspect, or perhaps trigger some provisions within that agreement to resolve the issue at hand. If it was a so-called autonomous quota in which we had decided to implement a quota regime or quotas at the request of a third country, I imagine that we would be able to reverse or change that in some way through secondary legislation as well, depending on the precise nature of that agreement.

The final point relates to our being in a quota situation or a situation of imports coming in at a rate that we were uncomfortable with. We will come on to other provisions in the Bill on trade remedies around safeguarding, which might be relevant. It is important to recognise that this is an enabling Bill rather than one that attempts to answer all the legitimate questions that the hon. Lady has posed.

The hon. Member for Bootle and I have gone round the issue of enhanced procedure a few times.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

I am grateful to the hon. Gentleman for reasserting his arguments, but our arguments remain as I set out in my earlier remarks.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12