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UK Chemical Industry: Regulatory Divergence

– in Westminster Hall at 4:29 pm on 26th February 2020.

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Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 4:29 pm, 26th February 2020

I beg to move,

That this House
has considered regulatory divergence in the UK chemical industry.

If we buy a car, house, cleaning products, food or clothes or visit the swimming pool or cinema, chemicals are involved in making the products we use. Chemicals are ubiquitous in our lives, and the chemical industry is a vital part of our national economic wellbeing. Chemicals are vital to the jobs of thousands of workers. Contract Chemicals is an SME in Knowsley that manufactures chemicals, and Blends is another that sells products made from chemicals. Both employ some of my constituents, whose livelihoods could be at risk if the Government do not get the chemical regulatory regime right. In the Liverpool city region, Jaguar Land Rover, Ford and Vauxhall employ thousands of workers in car production in which chemicals are vital components. Without a robust system of regulation, safety and quality will be compromised and our chemicals market will be open to the dumping of cheap chemicals from markets that do not have our high standards.

The consequences of poor regulation are spelled out in “Dark Waters”, which will be released on Friday in the UK. The film depicts what can happen to tens of thousands of people and to wildlife without adequate safeguards. In our addressing the climate crisis and moving to net zero, the chemical industry has a vital role to play in ending the use of fossil fuels, recycling plastics and finding sustainable alternatives, including for the types of forever chemicals depicted in the film.

The chemical industry employs 102,000 well-paid people in the UK, with 24,000 in the north-west alone. The industry is worth £31.4 billion in exports and £34.6 billion in imports, and its products feature in their thousands in the production of goods across the entire economy. Some 57% of those exports are into the EU. The importance of the industry around the country is also spelled out by the productivity of the sector compared with the rest of the economy. In the north-east, it is three times more productive; in the north-west, four and a half times more productive; and nationally, it is twice as productive. We cannot afford to undermine such a key part of our economy.

Chemicals are the subject of REACH—the registration, evaluation, authorisation and restriction of chemicals—the strict European-wide regulations that make sure the chemicals used here are the safest in the world and help to produce the highest quality products.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

My hon. Friend rightly says that REACH regulations are central to chemical production not only in this country but across Europe. Does he share my concern, and that of companies in my constituency, that without the same REACH regulations in Britain as in Europe, the movement of chemicals between countries will be inhibited?

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

My hon. Friend is absolutely right. I know he has a good relationship with the chemical industry in the north-east and has spoken many times on this subject and in support of people who work in the industry. I will come on to make the point that he touches on in more detail.

REACH regulations protect human health and the environment. In chemical regulation, the high standards for chemicals used in our manufacturing also sustain the reputation that encourages people around the world to buy British. Before the current Prime Minister took over, the Government indicated a willingness to negotiate associate membership of REACH, and that is still the preferred option for the industry. The system delivers assurance to the industry and its downstream operations, including our entire manufacturing sector, all of which uses chemicals at some stage of production.

Photo of Kate Green Kate Green Chair, Committee on Standards, Chair, Committee on Standards

I congratulate my hon. Friend on securing the debate. I too represent a number of chemical companies in my constituency. He is right to draw attention to the administrative benefits of remaining associated with the REACH regime, but also to the cost implications. Companies based in my constituency make the point that they have spent a considerable sum on REACH registration. Having to register for a new scheme at similar cost will make their businesses unviable in some cases, or may lead them to relocate to EU countries.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

My hon. Friend is absolutely right. I have been told that estimated costs of between £50,000 and £100,000 per chemical are likely if a UK REACH system is introduced in the way the Government appear to be proposing. I will cover that in more detail as well.

The Government have made clear their opposition to regulatory alignment in general, and given that UK REACH is the default option, they appear to not want to make an exception for the chemical industry. The British Coatings Federation speaks of the practical and real problems that businesses will face with such a system. For example, REACH will continue to apply in Northern Ireland at the end of the transition period, even if a separate UK-based regime applies in the rest of the UK. It is not yet clear how that would work in practice. There is obvious concern that EU and UK REACH will, in theory, apply at the same time in Northern Ireland and will contradict each other.

Let me quantify my hon. Friend’s point. BASF employs 5,000 people in the UK. It estimates that it will have to find up to £70 million to re-register all existing lines. Its alternative is not to offer many of its smaller volume products in the UK, but many are critical to manufacturing. In the car industry, an average of 1,300 different chemicals are used in the production of each vehicle. If many of those products are not available in the UK, car manufacturers will have to import them; it will fall to car companies to register the chemicals and to develop the skills and facilities for storage. This would apply to all chemicals where usage volume was more than 1 tonne per year. Registration costs of £50,000 to £100,000 per chemical are likely to apply, as the Government have confirmed. At that cost, chemical companies would find it uneconomic to continue the production or import of many chemicals. Meanwhile, car producers would find it much harder to compete with EU-located production facilities in the manufacture of vehicles destined for the EU market.

The chemical industry exports 57% of UK-manufactured chemicals to the EU27. A UK manufacturer will have to register its products to comply with UK REACH, as they are made here, and also EU REACH if they are exported into the EU. If our regulations diverge, as the Prime Minister appears to favour, and as may be required as the price of a trade deal with the United States, manufacturers would need not only to demonstrate compliance with both sets of regulations but have two production lines—one to comply with UK regulations, the other for the EU’s. The alternative is to move production to the EU for the EU-compliant product, meaning a loss of exports and jobs from the UK.

Photo of Kate Green Kate Green Chair, Committee on Standards, Chair, Committee on Standards

I am grateful. My hon. Friend rightly highlights cost issues and the potential need to register through two different regimes, which would bring additional administrative complexity. He will be interested to know that a chemical company in my constituency has also drawn attention to the need for extra testing if there is a need to comply with two different regimes, including extra testing on animals, which I think would be particularly unwelcome to the British public.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

I am glad my hon. Friend mentioned the real concern about animal testing, which we can minimise currently because we are members of EU REACH, so testing does not need to be repeated in the UK. The industry has raised that as a real concern, which I will return to.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

Both my hon. Friends are right to raise the issue of cost. One company in my constituency is already up against it trying to making any profit at all because the regime is changing for carbon credits. The current proposals mean it will soon no longer receive the relief it currently does. That company is a supplier to other chemical companies within my constituency and elsewhere, so if it falls over and that product is no longer available, there will be a knock-on effect on many jobs across the area. Does my hon. Friend agree that this is another reason that we cannot have the divergence that the Prime Minister seems to favour?

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

My hon. Friend has explained well that the problem goes across the economy because chemicals are crucial to every manufacturing process.

I was talking about the problem of having to comply with two different sets of regulations and the impact the industry predicts, including a loss of exports and jobs in the UK. Products cross borders multiple times during manufacturing. The integrated nature of supply chains in manufacturing is a big reason why it would be difficult to manufacture in the UK for the EU market in the event of different chemical regulations.

Despite the Government’s presumption in favour of regulatory divergence in general, the Minister may want to say that the Government do not intend to change the regulations that are introduced with a UK REACH. I am interested to hear her comments on that point. The suspicion that divergence is likely has been reinforced by part 8 of the Environment Bill, which gives the Secretary of State the powers to diverge. If the Government do not intend to change the regulations, why have that in the Bill? In his speech on Second Reading this afternoon, the Secretary of State did not mention the section of the Bill that deals with regulation of the chemical industry, which is disappointing because the industry is so vital to the wider economy. Likewise it is disappointing to the industry and those who rely on it that there is no news about a sector deal for the chemical industry.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

Perhaps that was not mentioned because the Government have seen sense and realised that they cannot have these tremendous changes. This is about not just day one—when we might say, “We will have the same regulations on day one”—but the future regulations, because every day something changes in the REACH regime, which means one part of a process may no longer be compliant in Europe and Britain at the same time. Therefore, we need to ensure we have common regulation across the piece.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

My hon. Friend has explained well why the industry is worried about this: sooner or later divergence leads to the problems that he and I have outlined.

Some 54.8% of cars produced in the UK are exported to the EU, so preferential access to the European market and avoiding regulatory divergence on chemicals is therefore extremely important. The automotive industry uses 13,000 chemical substances, only 1,181 of which are exclusively registered by UK companies. Many of the remaining 98,000 chemicals registered by the European REACH system could need to be re-registered in the UK. According to the Society of Motor Manufacturers and Traders, the cost to the automotive industry alone could be up to £1.3 billion. The Government have not denied those figures in their own analysis. The car industry is deeply concerned about the impact on its competitiveness and on the future of volume car manufacturing in the UK if we move away from a single European regulatory system.

UK REACH will either require access to the chemical testing data, as my hon. Friends mentioned, held by the European Chemicals Agency, or have to repeat and duplicate testing, hence the cost of registration for each substance, which I quoted earlier. Consortia of European companies own most of the data, and UK companies pay a fee for access to the data, which is held by the ECHA. Selling access to the data is a commercial decision not governed by EU data sharing rules.

The Health and Safety Executive, which is due to become the UK chemicals agency—perhaps the Minister can clarify when that will happen—will need to build its own database if it cannot access the ECHA database. According to the plans for UK REACH set out in the European Union (Withdrawal Agreement) Act 2020, basic data about the market and each substance will need to be submitted within 120 days of the end of transition, while full information appropriate to the registrant’s tonnage band will need to be submitted within two years. It took 10 years to build the ECHA database. How can that be replicated in two years, given that many companies will have to carry out testing from scratch and many importers are not specialists in the chemical industry?

Concerns have also been raised about the capacity of the HSE and the legal framework it will follow. It could either repeat the work of ECHA or rely on the work ECHA has carried out. The former would be hugely expensive, time consuming and dependent on a level of scientific expertise that may not be available. The latter could leave it open to challenge on the grounds that it should not be reliant on EU evidence and should have made its own assessment of risk. Either approach is potentially problematic.

An additional concern of the industry is that, as some registration of chemicals in REACH has relied on animal testing, a UK REACH would mean the introduction of animal testing—a point my hon. Friend the Member for Stretford and Urmston made earlier. Steve Elliot, the chief executive of the Chemical Industries Association, said

“The EU remains our biggest customer and supplier, so securing a tariff-free, frictionless free trade agreement is essential. Most crucially creating a parallel UK regulatory regime for chemicals, whilst still needing to meet the legal requirements of our biggest market place under EU REACH will, in our view, bring no commercial or environmental benefit and could put businesses and jobs at risk right across the country, including seeing a whole new programme of animal testing, something that none of us wants to happen.”

In a written answer on 4 February, the Under-Secretary of State for Environment, Food and Rural Affairs, Rebecca Pow, said that UK REACH will maintain the “aims and principles” of EU REACH. In the light of the industry’s importance, is that not an argument for staying part of the current system and avoiding the problems of implementing a separate version? In a recent British Coatings Federation members survey, 90% of members expressed their fear of having a duplicate set of chemical regulations through a UK REACH and all the extra bureaucracy and costs that would bring. The BCF said:

“We need government to understand the complexity of the integrated chemicals supply chain and come up with an appropriate free trade deal to prevent—or at least minimise—substantially added costs or disruption to our members.”

I place on record my thanks to the Chemical Industries Association, the British Coatings Federation, the Chemical Business Association, the Society of Motor Manufacturers and Traders, the ADS group, the CHEM Trust, BASF and multiple trade unions, as well as the specialists of the House of Commons Library. They have all helped with this complex, technically demanding subject. They have all helped confirm just how serious the issue is for our economy and for safety, too. I hope the Minister and her colleagues are listening to their advice.

Steve Elliott of the CIA said:

“The isolationist approach doesn’t work for us. I can’t think of a member company who isn’t exporting at least 50/60 per cent of its production.”

We have to remember that most of that exporting is into the EU. ADS gave me the example of potassium dichromate, which is a crucial chemical coating that protects aircraft structures from corroding. The example makes Mr Elliott’s case: there is no viable alternative to the use of that chemical in aircraft structures. It is produced in the UK and marketed in the EU. It is registered with REACH, so if the UK is removed from REACH, the registration would become non-existent and it would not be possible to import or sell it in the EU, to manufacture the mixture or to apply it to aerospace components. That would cause huge commercial damage to the aerospace industry in the UK and in the EU.

That story is repeated many times for UK-manufactured chemicals, so what is the plan for products like potassium dichromate and for aircraft manufacturing? What is the plan for the regions that rely on the chemical industry for their productivity? What is the plan for all other industries that rely on chemicals in their processes? What is the plan for multiple cross-border manufacturing supply chains? What is the plan for exports and imports, for safety, for data analysis, for testing and scientific expertise, including animal testing, for the creation of an alternative database, or for access to the existing ECHA database? What is the plan for capacity and expertise in the HSE? What is the plan for a sector deal? Tell us, Minister, what is the plan?

Photo of Dave Doogan Dave Doogan Shadow SNP Spokesperson (Agriculture and Rural Affairs) 4:52 pm, 26th February 2020

I am very happy to sum up for the Scottish National party in this important debate, whose importance belies its attendance. In the first instance, I echo the sentiments of Bill Esterson, who secured the debate, by pointing out that little or no manufacturing takes place without almost total dependence on the chemical manufacturing sector and the regulation that underpins that—both domestically in the United Kingdom and, just as importantly, around the world.

Across all manufacturing sectors, we see the clearest indications from stakeholders, whether commercial, trade union or in processing, that we live in a world of very integrated international supply chains, and we have done for some time. They are dependent on regulatory alignment. It is also worth pointing out the amount of research and development money that goes into the chemical industry, much of it private—how that interacts with our higher education sector, the role the United Kingdom plays in that and how we discharge that role with our international partners, many of whom are in the European Union.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

The hon. Member mentions research and development, and we are of course dealing with multinational companies with plants all over the world. If they are going to do research and development, surely they will do that in areas where they have common regulations such as REACH, rather than in a future British chemical industry, which could be a backwater.

Photo of Dave Doogan Dave Doogan Shadow SNP Spokesperson (Agriculture and Rural Affairs)

The hon. Member is right, and the risk that the United Kingdom runs in seeking to pursue some alternate regulatory framework is exactly as he sets out: industry will produce its products to be compliant with the regulation consistent with the size of the market opportunity—it is not a blanket approach. If a market is subject to a particular regulatory framework, but that market is not big enough for the industry to comply with the framework, they simply will not comply and those products will not be available in a post-Brexit, post-REACH-regulation United Kingdom.

As we roll the dice on this issue, it is important to understand the slightly rarefied position occupied by the chemical industry in the United Kingdom. It has a turnover of £56.6 billion, but a very enviable gross value added of £19.2 billion. The Government must tread carefully and pay close attention to the members within trade organisations, such as the Chemical Industries Association and others, who are very clear with their call for regulatory alignment.

We have heard an awful lot about the cost of the re-creation of some successor to EU REACH, which is as yet unspecified, but I genuinely, thoroughly believe that the point is moot. As Members have said, the industry will offshore the UK manufacturing of chemicals. Other industries within the UK that rely on the products of the chemical industry will be subject to buying from another market. That will in all likelihood be the European Union, so we will then face the farcical situation of having dispensed with REACH regulations here—which will have cost us our industry, or a large part of it—and of then being in possession of the very same standard of product purchased from the EU, just without the £56.6 billion of turnover, or a large part thereof, and the jobs that went with it. The stakes are no lower than that! Having said that, were the UK to press ahead with some parallel regulatory framework for chemicals, the resultant animal testing, as others have mentioned, would be held in contempt by society, and rightly so. It is important to bear that in mind.

The regulation and supply of chemicals is yet another area of huge complexity in that Brexit ambition. Brexit will have an impact on the chemical industry driven by changing regulatory requirements, as others have mentioned, and by other trade barriers, potentially including tariffs and quotas. The REACH chemicals regulations are but one example of directly applicable EU legislation that is not straightforward to copy across into UK law. The principal objective remains, however, to ensure that those regulations still have priority in a post-Brexit United Kingdom dynamic. That is because the regulations rely on the European Chemicals Agency and are closely tied to the needs of the single market. The UK and EU chemical industries both want trade deals to ensure frictionless trade and regulatory consistency between the UK and the EU. That points to the complex supply chains that exist for the manufacturing sector.

I am very glad that the hon. Member for Sefton Central, who secured the debate, mentioned potassium chromate. As a former aircraft engineer, I still remember keenly the sweet smell of that sticky green substance which was difficult to get out from under the fingernails. Its role in preventing dissimilar metal corrosion in aircraft is well known and vital. That had the effect of taking me slightly down memory lane.

In conclusion, as a Scottish and a Scottish National party MP, I have no hesitation in supporting the ambitions of the hon. Member. The UK is a key global player in the chemical industries just now. As far as I can tell, the only chemical company in the UK in the top five chemical companies in the world is INEOS, which has a major presence in Grangemouth in Scotland. The Chemical Industries Association also covers the pharmaceutical industry, and I am very privileged to have in my constituency of Angus an extraordinarily large and important GlaxoSmithKline plant. Nowhere does interdependence and mutual reliance on common regulation apply more than in that plant.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

INEOS has been in my constituency as well, but it is actually closing down a plant there; the plant has finished because it is past its use-by date. INEOS can invest billions of pounds in the middle east, but nothing in Britain at this time. For me, the main issue is what the hon. Gentleman has talked about: the integrated nature of the chemical industry. The industry is losing a key component; if there are changes in regulations over time, more and more of those parts will disappear. We will therefore be reliant on the imports that the hon. Gentleman mentioned.

Photo of Dave Doogan Dave Doogan Shadow SNP Spokesperson (Agriculture and Rural Affairs)

Indeed. I am not here to defend or uphold the commercial decisions of INEOS, but what the industry more generally needs at this minute is clarity and certainty from Government, as far as that is possible. I look forward to the Minister explaining how the Government will give the industry the confidence and certainty that will enable them to invest in plants in Scotland and the rest of the UK. Those plants’ return on investment may take decades, and it is extremely important that we give them every opportunity to invest in infrastructure and jobs, with the attendant benefits that those bring to our communities.

Over and above the material contemporary considerations of the chemical industry, this issue is important for the livelihoods of many people in Scotland and in my constituency of Angus. Of course, industrial production of chemicals first began in Scotland, with the industrial production of bleach just north of Glasgow. We have moved a long way in the intervening 150 years, and I would hate for us to start moving back as a consequence of Brexit.

Photo of Ruth Jones Ruth Jones Labour, Newport West 5:01 pm, 26th February 2020

It is a pleasure to serve under your chairmanship this afternoon, Mr Sharma, and I pay tribute to my hon. Friend Bill Esterson for having secured this important debate. I also welcome the Minister to her new position; I know she takes a keen interest in green issues and in waste, and I look forward to hearing her response on chemical regulation in a post-Brexit UK. I expect it will be very interesting.

This has been an informative debate. Obviously, we have experts in the room: I bow before their expert knowledge, which has brought things together much more coherently for me. I will leave the Chamber with much more knowledge than I came in with, for which I thank the Members who have spoken.

One thing that we already knew before coming here was that our departure from the European Union would change how we do business, how our country functions, and how we ensure that chemical regulation in the UK is going to be fit for purpose in the years ahead. Although this may seem like a niche issue, it has been clearly articulated that chemical regulation is going to have a wide impact on the UK as a whole, so we must take that on board and make sure we deal with it carefully. We on the Opposition Benches echo the concerns of the chemical industry and the Royal Society of Chemistry. On this and many other issues, we ask the Government to be wise and careful when it comes to diverging from the standards and regulations that consumers, industry and our global partners have come to expect here in the United Kingdom.

As we have heard, chemicals manufacturing supply chains are well established, with materials often crossing the channel several times for some of the most complex products. Even the most minimal tariffs that would apply if the Government crash us out with no deal, combined with the requirement to respond to separate regulatory regimes and the need for documents to precede foods at borders, would have a negative impact on future manufacturing supply chains and strategies in the UK.

The Government are starting their approach to the coming months from the negotiating position that there will be no dynamic alignment with EU regulations in a new UK-EU trade deal, and have indicated that divergence will feature heavily. I am particularly concerned that the Government have not indicated an intention to seek close co-operation with the European Chemicals Agency. Regulatory divergence has the real potential to severely impact the quality and strength of public health and environmental protections. We should be levelling up, not cutting ties.

As the Royal Society of Chemistry and others have said, it is important for the Government to be conscious of divergent sources of data. Harmful divergence could occur if the evidence base is not harmonised, so a new and binding legal agreement is needed in order to continue sharing commercially sensitive data between authorities in the UK and the European Chemicals Agency.

I reiterate to the Minister and to Members on the Government Benches that hurried divergence, done in order to pretend to the British people that everything will be done and dusted by the end of 2020, will be dangerous and reckless. If all we see are quick, short-term economic international trade wins or speedily rolled-out innovations, the people out there will know what the Government are up to. I do not want lowered environmental protections or a risk to public health in Banbury, in Newport West, or in any other part of our United Kingdom.

I share the concerns of my colleagues on the Opposition Benches, particularly my hon. Friends the Members for Sefton Central, for Stockton North (Alex Cunningham) and for Stretford and Urmston (Kate Green), as well as those of Dave Doogan —it is a shame that his constituency does not also begin with an “S”; that would have been much more alliterative—about the economic impact on British industry if divergence leads to negative consequences for our ability to trade products with the European Union.

The Government also need to be careful about what their approach means for business and industry, because they could land up doubling the burden on business and industry through masses of extra regulation. For example, the REACH regulation refers to the EU regulations on chemicals, as has been clearly articulated by all Members who have spoken this afternoon. The extra cost to UK businesses of duplicating EU REACH in the United Kingdom after the transition period is estimated by the Chemical Industries Association to be in excess of £1 billion, without any environmental benefit and potentially forcing duplicate testing. We call on the Government to do all they can to avoid that sort of duplication and deliver the essential solutions required to grow the environmental, social and economic performance of our country.

I pay tribute to the Chemical Industries Association for its work on this issue. It has made clear that securing a deal with the European Union that guarantees tariff-free trade, regulatory alignment and access to skilled people continues to be of critical importance for the chemical industry, which will rely on our future relationship being as frictionless as possible.

I hope the Minister will address many of the concerns highlighted today, particularly about the willingness to inflict damage on our industries through a policy of divergence. I thank my hon. Friend the Member for Sefton Central for having brought this issue before the House, and look forward to working with him and the sector on this important issue in the weeks and months ahead.

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs 5:07 pm, 26th February 2020

It is a great pleasure to serve under your chairmanship, Mr Sharma. I welcome Ruth Jones to her place, and look forward to many happy hours spent together discussing interests that have always engaged us both, particularly those involving the environment and food waste.

I congratulate Bill Esterson on securing this important debate. As he made clear, our chemical sector is world leading and vital to a wide range of other key industries, such as pharmaceuticals, automotive and aerospace. He gave some good examples from his own constituency and demonstrated his knowledge of how important that is, as did other Members present. We all know that the chemical industry is an important one, and want to ensure it continues to succeed.

In 2018, the total trade in chemicals in the UK, including chemical products, was worth £60.2 billion. The UK chemical sector directly employs more than 100,000 people. That sector is an important part of the economy in all the UK regions, with some major chemical clusters that are, unsurprisingly, represented in the Chamber today. They include Teesside, Humberside, Southampton, Grangemouth—mentioned by Dave Doogan, whom I welcome to his place—and north-west England, which has the highest number of employees in the sector, with some 24,000 people in the region working in the chemical industry.

Leaving the EU provides us with a unique opportunity to develop a regulatory environment that will not only deliver the high standards mentioned by the hon. Member for Newport West, but be flexible according to our current and future needs. Now that we have left the EU, our priority is to maintain an effective regulatory system for the management and control of chemicals, to safeguard human health and the environment, and to respond to emerging risks. We need to ensure that our chemical industry continues to flourish in the UK and abroad, building on our strong trading links with the EU and seizing new export opportunities now we have the freedom to trade with the rest of the world.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

I, too, welcome the Minister to her place. I hope that she will accept an early invitation to Teesside, which I extend to my hon. Friend Ruth Jones. As a lawyer, the Minister knows that the EU REACH regulation is extremely complicated. What on earth are the impediments to simply adopting it? What is the additional flexibility that she talks about that we actually need to trade with the rest of the world?

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

As a lawyer, I tell the hon. Gentleman that that is an extremely long and complicated question, to which I will endeavour to provide some of the answers, but not all, because, as he knows, it is a live negotiating situation. I recognise that that brings uncertainty for business—I really do—which is uncomfortable for many of us, but it is important that the country voted to leave the EU and through various—[Interruption.] The hon. Gentleman has been here for the last few years, as I have.

Through various emanations, we have reached a position where we are definitely leaving the single market and the customs union, and we will no longer participate in the ECHA or the EU regulatory framework for chemicals. I will set out what the Government’s position is in the immediate future. I ask the hon. Gentleman to accept that we do not have all the answers, but I emphasise that my door, and the door of the Minister with responsibility for the issue, will be open as we go through the negotiations this year.

Photo of Dave Doogan Dave Doogan Shadow SNP Spokesperson (Agriculture and Rural Affairs)

It is helpful and candid of the Minister to clarify that the Government do not have all the answers. In pursuit of those answers, may I ask whether the Minister and her officials will give due cognisance to the fact that the scale of the European chemical industry, and the regulation that underpins it, is the global benchmark? A UK post-Brexit chemical industry would divest from that at its peril.

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

In many ways, the hon. Gentleman will find that we are on exactly the same page, so I ask him to listen to the rest of what I have to say. We can then discuss the position as it emerges in the negotiations this year.

As I said, we are leaving the single market and the customs union, so we need to prepare for life outside at the end of this year. Many in the sector have already started to prepare and we will help them as much as we can. First, we must create our own independent regulatory regime, which is called UK REACH, as we have heard. Hon. Members will note that that is not a million miles away from the name of EU REACH. That will ensure continuity and minimise disruption for businesses and consumers, and will give us the freedom to do things differently where we consider that in our best interest. UK REACH will be our own framework but will retain the fundamental approach of REACH, including its aims of ensuring a high level of protection for human health and the environment, and of enhancing innovation and competitiveness. We have developed transitional measures, such as grandfathering and downstream user import notifications, that address the industry’s concerns about maintaining continuity of supply between the UK and Europe.

The building blocks of REACH will all remain. Through the Environment Bill, we will make provision to allow us to amend REACH in future to ensure that our chemicals management remains fully up to date. All change will remain consistent with the fundamental aims and principles enshrined in EU REACH. There will also be a series of protected provisions that cannot be changed, such as the last resort principle on animal testing, which will be included in the Environment Bill, as has been said. The UK will, of course, continue to be at the forefront of opposing animal tests where alternative approaches can be used. We have led the way on that in the EU system to date.

I recognise the concerns that several hon. Members have raised during the debate about the UK diverging from the approach taken in the EU to the regulation of chemicals, which are obviously shared by all our stakeholders. We will not diverge for the sake of it. If we diverge, it will be done in the best interests of the UK and the environment, and of course we will take account of the impact on industry. What matters is that the decisions we take will be our own, reflecting our new autonomy. Robust scientific evidence lies at the heart of the decisions we take, and that will continue, as provided for in the UK REACH legislation. As I said, we are continuing to develop the proposals, to make sure that we take decisions transparently and with stakeholder engagement. I am keen that we go forward in that vein.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

I bear in mind what the Minister is saying, but it frightens the life out of me, because the regulation changes every day. I do not know how we will manage to keep pace with that in Britain. Industry will incur considerably greater costs as a result of the changes. What assistance will the Government give to chemical companies and the chemical industry as a whole to overcome the additional burden that the Government are placing on them?

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

While I am unable to tell the hon. Gentleman exactly where we will end up, I am also unable to answer that question as fully as it deserves. If I may, I will continue to tell him where we are now. As matters progress with the negotiations, I remain willing to talk to him about specific industry difficulties, and I am sure the Department for Business, Energy and Industrial Strategy will too.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

The hon. Gentleman is not happy.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

I am grateful to the Minister for giving way. She says that she cannot answer the questions, but they are the questions that the chemical industry is asking us. We are talking about a matter of months before the changes actually kick in and affect industry in this country. That involves thousands of jobs in my constituency and tens of thousands across the country, so I am naturally anxious, and I can understand the industry being anxious as well. When are we going to get some answers?

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

I understand the hon. Gentleman’s anxiety. What I will say to reassure him, in so far as I can in a live negotiating situation, is that we will avoid change for change’s sake. We will do our best. We are fully cognisant of the need to minimise the burdens on business. That lies at the absolute heart of all that we are doing to put UK REACH in place.

Let me give the hon. Gentleman an example. In building the UK REACH IT system, we have made sure that it will work very much like the ECHA REACH IT system, including the same software requirements and many of the processes that businesses have been using and understand. I am aware that we will require businesses to provide us with the data that supports their registrations. I understand the concern that that may not be as straightforward as they would like and may generate costs. That is why we have introduced the transitional arrangements that I mentioned earlier, which give businesses two years, starting from the end this year, to provide that information. We will keep those timeframes closely under review.

We are often asked why we need the data and why information that has already been provided to the ECHA needs to be reprovided to UK REACH. In short, we need it because we will not be able to rely on the fact that the data has already been sent to the ECHA. Registration is how a company shows its understanding of the hazards and risks of a chemical. It does not mean that the ECHA has, in legal terms, approved a chemical or endorsed it as safe. The data is necessary for any regulator, such as the Health and Safety Executive, to operate an effective regulatory regime, to understand the hazards and risks of chemicals, and to ensure their safe use. We are making sure that the HSE as the UK regulator, the Environment Agency and the Department for Environment, Food and Rural Affairs have the resources and evidence they need to ensure the safe management of chemicals and to protect public health and the environment.

With the UN projecting a doubling in the size of the global chemicals industry by 2030, it matters more than ever that the UK continues to be a world leader in the management and regulation of chemicals. Our internationally recognised scientific expertise and evidence-led, risk-based approach give us a strong and influential voice as we advocate for ambitious global action on chemicals and waste management after 2020.

I want to finish by saying something about the chemicals strategy we are developing, which will set out our priorities and approach to domestic regulation now that we have left the EU. It will be our first such strategy for 20 years. We aim to drive sustainability, circularity and innovation in the chemicals industry, while protecting human health and the environment from harmful chemical exposure. A call for evidence will be published very shortly—this spring—and we will then undertake a public consultation on a draft strategy before its final publication, which is scheduled for 2021-22. We genuinely want to hear from the industry.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

I am grateful for some of the answers that the Minister has given, but one of the points she has not addressed is exports. Some 57% of UK chemical exports and 54% of car exports go to the EU market; the role of chemicals with the correct regulatory registration will be vital, as will approval for the European market. Will she address the export problem that is faced both directly in the chemical industry and, more generally, in industries whose products contain chemicals—not just the car industry—in having these two systems?

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

As the hon. Member says, the export market is very important. There are exports worth £28.3 billion, with 57% of that going to the EU and 43% going elsewhere. It is clearly important that we get to the end of our trade negotiations as soon as possible, so that certainty can be provided. He knows as well as I do that the situation is fluid at the moment, and I am unable to give him all the answers he seeks. What I can say is that we have a new and exciting chemicals strategy, on which we will be consulting.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

I have a very simple, straightforward question. Will we accept European REACH regulations for imported goods, or will they also have to be compliant with the UK REACH regulations? Will we just accept that products coming in are fine because they are covered by EU REACH, when we have our own independent regime as well?

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

As a new Minister, I am not sure that I am qualified to answer that question properly.

Photo of Victoria Prentis Victoria Prentis The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

Yes, absolutely. I undertake to write to the hon. Gentleman with the correct answer. It is really important that we do not misspeak at this point of a live trade negotiation. I am also conscious that the matter is not directly within my brief but within that of the Secretary of State for Environment, Food and Rural Affairs, who is currently leading the debate on Second Reading of the Environment Bill in the main Chamber. I do not want to answer that question without full instructions, for which I apologise.

I thank the hon. Member for Sefton Central for securing a debate on this important industry at this critical time in the negotiations and for stressing that it is important that we do not diverge for the sake of it, and that we ensure we have a regulatory regime that works for us and fulfils all the aims we hope for, and that makes life as easy as we can for people who work in the chemical industry, including those in his constituency.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 5:24 pm, 26th February 2020

I thank all hon. Members who have taken part in the debate for their comments. I appreciate the Minister’s difficulty in giving fuller answers, and I take her point that it is important not to speak in the middle of negotiations. I am glad that we are in the middle of negotiations and that they have actually started, because the reports lead us to question whether we are even at that stage. Time is rapidly running out—an important point that needs to be reiterated.

The Minister talked about divergence. Is not one of the problems that once we give ourselves the ability to diverge, the assumption is that clarification can be given to enable the import and export of chemicals, or anything containing chemicals, only through having two sets of regulations? That is one of the main reasons why the industry is so concerned about moving away from being part of EU REACH, either as an associate member or through some other close relationship. I encourage the Minister to pursue those avenues, because the chemicals industry and everybody who relies on it need clarity.

Investors need certainty. They are making decisions about where to locate and whether to continue investing in this country or to put alternative arrangements in place, particularly in the EU27, with a cost for jobs and an impact on our economies, especially in the nations and regions of the UK outside London. It is therefore vital that all attention is given to getting this right in a way that protects and enhances our industry, and does not undermine it.

I thank Dave Doogan for his comment about potassium dichromate. I hope that was not the cause of the injury he described—it seems a little unlikely. He made some excellent additional points, as did my hon. Friends the Members for Stretford and Urmston (Kate Green) and for Stockton North (Alex Cunningham). I thank my hon. Friend Ruth Jones for her contribution.

The chemical industry is fundamentally important for pharmaceuticals and across manufacturing. Anything we do to undermine it we do at our peril. It is a high-profile, high-quality and world-leading industry in the UK, and every effort must be made to listen to the concerns being voiced by the relevant organisations. There is unanimity in what is being said across the piece by the industry, trade unions and the environmental lobby—it is almost unheard of. The Government will do well to take that on board. I am glad the Minister said that if a longer timescale is needed to get this right, the time will be taken, but to be frank the industry needs assurances now; it cannot wait to make decisions. I hope the Minister will take on board all the points made this afternoon.

Question put and agreed to.

Resolved,

That this House
has considered regulatory divergence in the UK chemical industry.

Sitting adjourned.