Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 9:25 am on 30th January 2018.
With this it will be convenient to discuss the following:
Amendment 138, in clause 13, page 9, line 8, leave out “public notice” and insert “regulations”.
See explanatory statement for amendment 137.
Amendment 139, in clause 13, page 9, line 17, leave out “public notice” and insert “regulations”.
See explanatory statement for amendment 137.
Good morning, Ms Buck. It is a pleasure to begin the second week of our Committee’s consideration of the Bill.
The amendments, like many that the Opposition have tabled, concern the democratic deficit in the Bill. As we have covered in numerous evidence sessions and in our discussions so far, the Bill is far too reliant on secondary legislation. The scrutiny of Delegated Legislation Committees—especially those that consider instruments laid according to the negative procedure, as the majority will be—is insufficient for taxation matters of such potential magnitude. Parliament will have the option to raise objections to the instruments, but they will not be debated on the Floor of the House as a matter of course.
The amendments are important because the Bill introduces an even more troubling concept: that of making law by public notice. After Second Reading earlier this month, the House of Lords Delegated Powers and Regulatory Reform Committee published a report that probed the most worrying aspects in detail. The report emphasises that the concept of public notice, on which the Bill is heavily reliant, is effectively a modern form of rule by proclamation that removes the opportunity for parliamentary scrutiny. It states:
“For Ministers and others to make law by ‘public notice’, without any recourse to Parliament, is highly unusual and such provisions should attract strict surveillance by Parliament.”
It also notes that
“the Treasury’s Delegated Powers Memorandum says that such notices will only make provision that is purely technical or administrative in nature. Nonetheless, clause 32(9) of the Bill allows anything that can be done under public notice to be done by regulations, implicitly acknowledging the importance of things done by public notice.”
It identifies the Bill as a throwback to the Statute of Proclamations 1539, which
“gave proclamations the force of statute law…it was repealed in 1547 after the death of Henry VIII”.
We should all be grateful for the institutional memory of the House of Lords.
Equally problematic are the mechanics by which public notice takes place. As the Delegated Powers and Regulatory Reform Committee emphasises, under clause 37(5) the only qualification for public notice is that the person who issues it has selected a channel that they consider appropriate, but a definition of “appropriate” is absent from the Bill. Public notice could therefore mean anything from a full-page advert in the Financial Times to a small ad in a trade journal or perhaps even a tweet. Clause 24 permits Her Majesty’s Revenue and Customs to establish a system for making rulings to determine the customs code and the place of origin of particular goods, both of which have an impact on the duty. Other rulings could affect the rights and liabilities of an individual.
The Delegated Powers and Regulatory Reform Committee recommends
“the creation of a generally applicable system for making determinations which are capable of affecting an individual’s legal position should ordinarily be dealt with by legislation, subject to scrutiny by Parliament, rather than by public notice without any such scrutiny”—
checks and balances. The Opposition agree wholeheartedly —hence our amendments.
The Government’s manoeuvres are deeply concerning. We would be failing in our duty of scrutiny if we did not step in to raise our anxieties about how powers of proclamation may be used. We are well aware of the volume of new legislation that needs to be produced to create and implement a new customs code, and of the temptation to create or take advantage of constitutional shortcuts to facilitate the process. However, protecting the rights of the individual must come first. Where matters of taxation are concerned, the parliamentary process is usually more rigorous with respect to the reasons for setting the duty.
As I have already said, the secondary legislation process is not optimal, and we believe that the balance between primary and secondary legislation in the Bill is unsound. However, using delegated legislation for these matters instead of creating regulations by public notice would surely be the least-worst option. It would allow for a bare minimum of parliamentary involvement and oversight of new tax and customs law. Even the negative procedure gives Parliament the option to reject a statutory instrument, although no formal debate takes place. Where possible, more significant matters should surely be considered via the affirmative procedure, so that at least there would be the basis for debate.
The Opposition believe that, without such debate, we will be at risk of setting a dangerous precedent that allows the ruling Executive to make regulation by public notice as it pleases, potentially even beyond the scope of the Bill. Therefore I call upon all members of the Committee to support the amendment, to ensure that we can continue to perform our vital role providing checks and balances in the structure of taxation and customs law in the UK.
Thank you for the opportunity to speak and for chairing the meeting, Ms Buck. I would like to speak briefly around the amendments. One of my earliest questions about the Bill was: what is a public notice and how does one justify that it has been made sufficiently public? The Opposition raised that case clearly. On the definition of public notice and the fact that the person making the public notice has to make that judgment call, particularly in relation to clause 13, which concerns the dumping of goods, foreign subsidies and increases in imports, and given that the UK has not had provision to make regulations and rules, it seems sensible to say that a public notice is not the best way. Parliament should have some say. We have raised concerns previously that, although Brexit is apparently about taking back control, it appears that control is being taken back to the Executive rather than to Parliament as a whole. I will therefore support amendments 137 to 139 if they are pushed to a vote.
It is a great pleasure to serve under your chairmanship again, Ms Buck, and to welcome back the hon. Member for Stalybridge and Hyde. This group of amendments would require trade remedies measures to be imposed and given legal effect by regulations. I appreciate the concerns in relation to the use of public notices, which were raised by both Her Majesty’s Opposition and the Scottish nationalist party representative. I am grateful for the opportunity to set out why this is an entirely appropriate procedure for imposing trade remedies measures.
If you were cynical, Ms Buck, you might think that, because the Opposition have decided to make parliamentary scrutiny the central theme of their critique of the Bill, they are leveraging that into every single argument at every single stage. I am not a cynic, and take the concerns at face value, as the genuine ones that I am sure they are.
The imperative is to act quickly once the Trade Remedies Authority has identified the need to tackle injury to UK industry. I would have hoped that Members on both sides of the Committee would recognise that the imperative is to act quickly when injury to UK producers has been identified, and to move as swiftly as possible to put that right. Measures will be calculated and recommended by a fully expert and independent body, following an extensive investigation that is governed by strict World Trade Organisation rules. Our priority has to be to ensure that those recommended measures are imposed quickly, to provide relief to industries suffering injury.
The additional proposed process would delay our ability to apply measures precisely at a time when UK industry is suffering injury, and when it has been independently established that that is so. It would run counter to the calls we have heard from industry for a swift process. The use of public notices to implement trade remedies measures is consistent with the approach taken in comparable WTO countries such as New Zealand and Australia, and is therefore in line with international good practice.
Therefore I say to the hon. Member for Stalybridge and Hyde that, to suggest that this use of public notice is untoward and could lead to further government by proclamation, even outwith the Bill, is disproportionate. The reality is that this set of amendments, as with so many put forward by the Opposition, would in fact undermine the very principles that they say they are interested in: namely, to protect UK industry to ensure that we have a proportionate and speedy response to unfair dumping or use of subsidy and make sure that injury to British industry is put right. It is a shame that, collectively, the Opposition’s amendments suggest that their priorities are somewhere else.
The Minister’s case is that this needs to be used for reasons of speed. Can he give us detailed information about how long it takes to prepare a statutory instrument to be brought before the House, given that that does not need parliamentary time in the Chamber—it cannot be that extensive? Exactly how much time will be saved by this proposed new form of parliamentary process?
The hon. Gentleman has been in the House for some time. I would have thought he would be familiar with the calendar of the parliamentary year, with long periods of recess when Parliament does not sit. Why on earth would Her Majesty’s Opposition, so often accused, doubtlessly unfairly, of being in hock to the producer interest and blind to wider society and the interests of the consumer and the ordinary citizen—though I decry that attitude—because of their links to the trade union movement, wish to put delays in place?
The hon. Gentleman knows full well the delays that can come with secondary legislation. To have that at the end of that extensive, independent and exhaustive expert assessment that has established injury, why on earth would the Labour party, or indeed the Scottish nationalist party, want to get in the way of swift, effective and proper defence of British jobs, British workers and British business?
I am pleased that the Government are now concerned with ensuring that such things are put in place incredibly quickly if there is injury to UK industry. In that case, will the Government bring forward amendments to speed up other parts of the process, given that they will now be taking longer than the EU’s similar processes?
I apologise for getting the name of the hon. Lady’s party wrong—it is the Scottish National party. We have put forward a proportionate and swift system, and hope that we would be able to deliver a speedier, more proportionate and balanced response than that of the EU. That is certainly our aim. I note again that amendments tabled by the hon. Lady’s party and Her Majesty’s Opposition suggest that their priority is entirely different.
I am grateful for the infusion of energy that the amendments have brought to the Committee. The Minister’s bluster revealed a lot. I noticed that he did not actually answer my question. If the Government’s concern is the wish to bring a trade remedy during recess, they have to invent a new constitutional procedure to do that. I am afraid that is a very thin case and the Minister did not provide a reason why the new process is required in the interests of brevity. He was not able to give us any clear information, so we will push the amendment to a vote.
New clause 5—Dumping of goods and related activities: enhanced parliamentary procedure, etc—
“(1) No regulations may be made by the Secretary of State in exercise of the power in section 13(5) except in accordance with the steps set out in subsections (2) to (5).
(2) The first step is that a Minister of the Crown must lay before the House of Commons a draft of the regulations that it is proposed be made.
(3) 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), the amount of import duty proposed to be applicable to any goods that are or are proposed to be subject to a quota.
(4) 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).
(5) 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).
(6) No regulations may be made under the following provisions unless a draft has been laid before and approved by a resolution of the House of Commons—
(a) paragraph 1(3) of Schedule 4 (definitions and determinations in relation to goods being “dumped”);
(b) paragraph 5 of Schedule 4 (determination of certain matters relating to “injury” to a UK industry);
(c) paragraph 26(1) of Schedule 4 (provision for suspension of anti-dumping or anti-subsidy remedies);
(d) paragraph (1)(2)(c) of Schedule 5 (defining a “significant” increase)
(e) paragraph 2 of Schedule 5 (definitions relating to “serious injury” to a UK industry);
(f) paragraph 22(1) of Schedule 5 (provision for suspension of safeguarding remedies).”
This new clause establishes a system of enhanced parliamentary procedure for regulations setting quotas under Clause 13 to give effect to recommendations of the TRA, with a requirement for the House of Commons to pass an amendable resolution authorising the quota provisions of the proposed regulations, and also requires that certain regulations under Schedules 4 and 5 are subject to the affirmative procedure.
The Bill ensures that the UK customs regime is ready for EU exit. A key part of our readiness for exit day is our ability to operate our own trade remedies system. Trade is good for the UK. It can lead to higher wages, stimulate business efficiency and productivity and improve consumer choice. Analysis by the OECD suggests that a 10% increase in openness is associated with a 4% increase in income per head.
Will the Minister clarify whether the Government have done a comparative impact assessment of the processes involved with the EU and the processes they are trying to put in place in terms of speed and timeliness, which we are all concerned about?
I am grateful to the hon. Gentleman for that question. I will seek at some point in the debate to address his point.
Free trade does not and should not mean trade without rules. Trade remedies are an important safety net. They can help enforce the rules that make free trade work by addressing injury to a domestic industry caused by unfair trading practices or unforeseen surges in imports. That is why all major WTO members have a trade remedies regime, and why we are taking forward the measures in the Bill. The European Commission currently carries out trade remedies investigations and imposes measures on our behalf. Once we leave the EU, we will need to be able to do that for ourselves. Clause 13, together with schedules 4 and 5, sets up the UK framework to allow us to do just that.
These proposals fall under the international framework set by the WTO. We are legislating for the full suite of powers permitted under that framework, which will enable us to impose additional duties on imports that cause injury to UK industry. The message is clear: free trade and the benefits it brings are welcome, but the UK will act decisively to address trade that causes injury to our domestic industries.
We cannot forget the wider ecosystem of our economy. Tackling injury is the priority, and the Bill makes clear that there is a presumption in favour of imposing additional duties when UK industry suffers injury as a result of unfairly dumped or subsidised imports. In recent years, trade remedy measures have protected UK industry and its employees, particularly in the steel and ceramics sectors but also in the chemicals, biofuels and glass industries. Considering that manufacturing contributes around 10% of UK gross value added and 8% of employment, the need for the UK to have a trade remedies system once we leave the EU is apparent.
Without the ability operate our own trade remedies regime, the UK would be exposed to unfair trading practices and unforeseen surges in imports, with potentially damaging consequences for UK industry and the economy more widely. However, there must also be a mechanism for ensuring that imposing such duties is not contrary to the best interests of the UK as a whole. Duties on imports can increase costs for downstream industries that use those imports to create their products. They can also hit the purses of consumers. That is why the Bill ensures that any duties are set at the level needed to address injury to UK industry and no higher. That levels the playing field without causing unnecessary harm to downstream users and consumers.
We are also building in a safety valve to ensure that measures are not imposed where they are not in the overall interests of the UK. The economic interest test will consider whether duties would have a disproportionate impact on a particular area of the UK or on particular groups in the UK. The test will also consider issues such as the impact on the longer-term competitive environment in the UK.
Businesses can have full confidence that that test, and investigations as a whole, will be objective and impartial. The new Trade Remedies Authority, which will be established through the Trade Bill, will have the independence and technical expertise to determine complex matters of fact. When the authority concludes that measures are justified, it will make independent recommendations to Ministers, who will then reach a final decision. Ministers will be able to reject recommendations to impose duties where they consider they are not in the public interest. Where Ministers do so, they will do so transparently, and they will have to make a statement to Parliament setting out their reasons.
As Monckton Chambers noted in its response to the trade White Paper, that structure ensures that
“the complex judgments made in such cases are, and are seen to be, made independently”.
It strikes a delicate balance between ensuring that the investigation and the calculation of proportionate duties is carried out by impartial experts, and ensuring that there is an opportunity for Ministers to intervene if duties are not in the public or wider economic interest. We believe that these provisions are therefore fundamental to establish a robust but proportionate trade remedies system for the UK.
New clause 5 and amendment 12 seek to put in place a further parliamentary process for imposing trade remedies measures and to change the parliamentary processes for some of the regulation-making powers in schedules 4 and 5. As I have explained, the use of public notices to implement measures is entirely appropriate and I am pleased that the Committee came to that conclusion too. It enables independently recommended duties to be implemented quickly and effectively and is in line with international good practice.
In relation to the regulation-making powers for indirect tax matters, it is common to have framework primary legislation supplemented by detailed and technical secondary legislation. The trade remedies framework contains a great deal of such technical detail. The secondary legislation made under the Bill will comply with WTO rules. That is why we propose that the regulations are subject to the negative procedure.
The additional processes proposed could both delay our readiness for operating an independent trade remedies framework at the point of EU exit and affect the responsiveness of our framework to subsequent developments, such as best practice and WTO case law. Taken together the amendments would hamper the UK’s ability to act swiftly to provide an important but proportionate safety net to domestic producers. I commend the clause to the Committee and urge Members to withdraw the amendments.
It is lovely to serve under your chairmanship again today, Ms Buck. The Minister has clearly had three or four Weetabix today, given his assertions. I say to him: legislate in haste and repent in court at leisure—for these are the sort of things that will be challenged in the courts. Unless the judges in those courts are going to be enemies of the people, we are best to get it right first-hand. Lord Judge made that very point today, and he was formerly Lord Chief Justice; so we cannot ignore parliamentary scrutiny on this particular issue.
New clause 5 establishes a system of enhanced parliamentary regulations for setting quotas under clause 13 to give effect to recommendations of the TRA, with a requirement for the House to pass an amendable resolution authorising the quota provisions of the proposed regulations. It also requires that certain regulations under schedules 4 and 5 be subject to the affirmative procedure.
I have made this point in the past and make it again. The new clause seeks to introduce a scrutiny role for Parliament in this crucial area of taxation and trade policy. The current provision in clause 13 gives the Secretary of State powers through regulation to introduce a tariff rate quota to determine the amount of import duty applicable to certain imported goods, after he has accepted a recommendation from the Trade Remedies Authority. It also gives the Secretary of State the power to revoke or suspend the tariff rate quota.
New clause 5 would instead ensure a democratic and open process, by making sure that Parliament has that power—not just the Secretary of State. The enhanced parliamentary procedure also ensures that there is a failsafe in the event that the Trade Remedies Authority makes a recommendation for the suspension of a quota and the Secretary of State refuses. In that instance Parliament has the ability to overrule the Secretary of State and side with the expert recommendation of the Trade Remedies Authority if it so decides.
I am sure that hon. Members of the Committee are hearing echoes from last week in relation to the issue of parliamentary scrutiny. We have heard about it today, and that is our job on this side of the Committee. I am not sure whether the Minister thinks we should not do that, but we will continue to do it. We are concerned that if we do not have parliamentary scrutiny and oversight and the expertise that comes with that, we will end up in the courts. The Minister’s wish that things do not get delayed will be thrown out of the window by the approach that the Government seem to be taking.
Suffice to say that, if the Government are arguing that this is a money Bill, which it is, and it goes to the House of Lords— who will probably have to watch it go past as though it was a bus—they are tacitly accepting that the measures contained here are essentially fiscal. It is therefore appropriate that statements made to the House of any regulatory changes in relation to fiscal matters are Parliament’s responsibility and duty, as they have been for centuries, and we believe that there should be a vote if appropriate. The system outlined would provide a very robust means of doing that. I know that virtually every Minister, not just this Minister, would not want to have that level of scrutiny, but it comes with the job; scrutiny has to be there. Of course, an annual fiscal statement, such as that expected in the spring, with subsequent parliamentary authority could also prove a mechanism for us to test it out.
I hope that Conservative Members will not take a blasé approach and brush aside the issue of parliamentary democracy on the grounds that the Opposition somehow want to drag the matter out in the future. We do not; we want to make sure that this works properly. We all accept that we have to have a process in place, but let us get it right and hold Ministers to account.
The Government have asked for an awful lot of trust. They are asking us to trust them to make the right decision. Given that they do not have a track record of making such decisions over a very long number of years, it is very difficult for us to trust the Government on that. There is also the fact that the Government said that they would table amendments to clause 11 of the European Union (Withdrawal) Bill, and then they did not.
I do not think that the Conservative Government have quite recognised what they are doing with all their decisions to hold power in the Executive over any number of things. When the Conservatives are inevitably no longer in government there will be another Government in place, and they will be in opposition saying, “Why are so many decisions being made by the Executive without parliamentary scrutiny?”
The UK is at a point where we are choosing how our future looks in relation to Brexit. We are choosing how things will go in this Parliament, and into the future. We are choosing how much say we will have over trade policy, so it is vital how we decide to go about this. The way that the Government are setting this up is absolutely wrong. There should be parliamentary scrutiny of such things, and democratically elected Members should have the opportunity to look at them, to have an input and not just have them done by public notice.
The Opposition parties protest too much. As we all know, the point of a trade remedies system is to be balanced, proportionate and move swiftly to protect British industry. That is why we are setting up, through the Trade Bill, the specialist body to do that: the Trade Remedies Authority. We are talking about the implementation of the Trade Remedies Authority’s recommendations. Why on earth, after that exhaustive effort, with the appropriate, balanced tests in place, would anyone want to create burdensome, parliamentary oversight? It does not make any sense.
The TRA makes the decision. If the Secretary of State disagrees with it, they will have to come to Parliament and make a statement, so there will be the opportunity to deal with that. When the TRA has made an assessment and wants to help British industry, why on earth would the Opposition parties want to make a wider political point about lack of scrutiny, just for the sake of it, when it is totally inappropriate for this measure? I leave outsiders to judge whether that is for political interests or for the interests of either British consumers or producers.
If the Trade Remedies Authority will be so good at making decisions, why will the Government simply have to make a written statement to the House if they disagree with it, rather than go through some kind of regulation procedure? If the Trade Remedies Authority is set up in such a great way that it will always make the best decisions, why will the Minister be allowed to disagree with it simply by written statement, and not by any sort of parliamentary procedure?
The legislation makes it clear that the Secretary of State should look at it, and various people who have commented on the structure have said that it is right that, although the main body of work should be conducted by experts, ultimately it should be a politician accountable to Parliament, part of a democratic process, who should make that decision. Were they in any way to disagree, they would have to come to Parliament to make a statement. That is appropriate and proportionate, and why on earth the Opposition parties would want to go to such lengths to try to stop us bringing in effective remedy to protect British producers, I cannot imagine.
Very briefly, why can the Minister not give us any detail about the methodology by which injury will be calculated, or any of the basic details that the US and the EU have already put in primary legislation? He cannot tell us how that will be because it is not in the Bill. Surely, we need some parliamentary safeguards about what the decisions will be, because the Minister cannot tell us the process that will be followed.
Our purpose here is to be probed, so even when that probing is redundant or tiresome, one should deal with it in as fair a way as one possibly can. As we know, this is a framework Bill; the secondary legislation, which will have parliamentary scrutiny, will bring in the details as it does in most other jurisdictions. We will follow a balanced, proportionate and effective basis to ensure that we assess that injury in the right way, and we will do so under the aegis of the WTO. Efforts to cut and paste aspects of the WTO system on to the face of our legislation when we are subject to WTO rules anyway are unhelpful and unnecessary.