Proposed Negative Statutory Instruments under the European Union (Withdrawal) Act 2018

Transcription

1 HOUSE OF LORDS Secondary Legislation Scrutiny Committee (Sub-Committee A) 13th Report of Session Proposed Negative Statutory Instruments under the European Union (Withdrawal) Act 2018 Includes 4 Information Paragraphs on 5 Instruments Ordered to be printed 21 January 2019 and published 23 January 2019 Published by the Authority of the House of Lords HL Paper 267

2 Secondary Legislation Scrutiny Committee (Sub-Committee A) The Committee s terms of reference, as amended on 11 July 2018, are set out on the website but are, broadly: To report on draft instruments and memoranda laid before Parliament under sections 8, 9 and 23(1) of the European Withdrawal Act And, to scrutinise (a) every instrument (whether or not a statutory instrument), or draft of an instrument, which is laid before each House of Parliament and upon which proceedings may be, or might have been, taken in either House of Parliament under an Act of Parliament; (b) every proposal which is in the form of a draft of such an instrument and is laid before each House of Parliament under an Act of Parliament, with a view to determining whether or not the special attention of the House should be drawn to it on any of the grounds specified in the terms of reference. The Committee may also consider such other general matters relating to the effective scrutiny of secondary legislation as the Committee considers appropriate, except matters within the orders of reference of the Joint Committee on Statutory Instruments. Members Baroness Bowles of Berkhamsted Lord Haskel Rt Hon. Lord Trefgarne (Chairman) Rt Hon. Lord Chartres Lord Hogan-Howe Rt Hon. Lord Walker of Gestingthorpe Lord Faulkner of Worcester Rt Hon. Lord Lilley Lord Wood of Anfield Baroness Finn Lord Sharkey Registered interests Information about interests of Committee Members can be found in the last Appendix to this report. Publications The Sub-Committee s Reports are published on the internet at seclegapublications The National Archives publish statutory instruments with a plain English explanatory memorandum on the internet at Committee Staff The staff of the Committee are Christine Salmon Percival (Clerk), Paul Bristow (Adviser), Nadine McNally (Adviser), Philipp Mende (Adviser), Jane White (Adviser), Louise Andrews (Committee Assistant) and Ben Dunleavy (Committee Assistant). Information and Contacts Any query about the Committee or its work, or opinions on any new item of secondary legislation, should be directed to the Clerk to the Secondary Legislation Scrutiny Committee, Legislation Office, House of Lords, London SW1A 0PW. The telephone number is and the address is hlseclegscrutiny@parliament.uk.

3 Thirteenth Report PROPOSED NEGATIVE STATUTORY INSTRUMENTS UNDER THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 Proposed Negative Statutory Instruments about which no recommendation to upgrade is made Export Control (Amendment) (EU Exit)

4 2 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) INSTRUMENTS OF INTEREST Draft Northern Ireland (Ministerial Appointment Functions) 1. In the absence of a devolved government, the Northern Ireland (Executive Formation and Exercise of Functions) Act 2018 ( the Act ) addresses the urgent need for key appointments to be made in Northern Ireland that would normally require Northern Ireland Ministers to be in office. The Act specified five offices in the policing and criminal justice field to include: Member of the Northern Ireland Judicial Appointments Commission; Member of the Northern Ireland Policing Board; Member of the Police Service of Northern Ireland above the rank of chief superintendent; Member, chair or deputy chair of the Probation Board for Northern Ireland; and Police Ombudsman for Northern Ireland. These Regulations add six further offices in respect of which the appointment functions of a Northern Ireland Minister may be exercised by the Secretary of State. These are deemed critical appointments and include: the Attorney General for Northern Ireland; Commissioner for Children and Young People for Northern Ireland; Member of the Commission for Victims and Survivors for Northern Ireland; Member, chair or vice-chair of the Northern Ireland Housing Executive; Member or chair of the Livestock and Meat Commission; and Member or chair of the Northern Ireland Local Government Officers Superannuation Committee. The Northern Ireland Office (NIO) has explained that the appointment process for each of these bodies (with the exception of the Attorney General) is regulated by the Office of the Commissioner for Public Appointment NI (CPANI). The NIO has assured us that in taking her decision on whom to appoint the Secretary of State will seek assurance on the robustness of the process, including how it has adhered to the CPANI code of practise. The Secretary of State will make these appointments in accordance with the CPANI Code of Practice, whilst also adhering to her Ministerial code. Although the Attorney General appointment is not regulated by CPANI code; in line with best practise the Secretary of State will also follow this code when making this appointment. Draft Pesticides (Maximum Residue Levels) (Amendment etc.) (EU Exit) Draft Plant Protection Products (Miscellaneous Amendments) (EU Exit) 2. These two sets of draft Regulations, laid by the Department for Environment, Food and Rural Affairs (Defra), propose the establishment of a standalone UK regulatory regime for plant protection products, as part of the Department s contingency preparations for a possible no deal EU exit. Defra says that the new regime is to mirror the current EU regime, with minimal modifications. The key changes proposed include the transfer of decision-making powers and legislative functions from the EU to national level, including in relation to the Maximum Residue Levels that are permitted in food and feed. The instruments also propose the creation of a new statutory register for the listing of approved so-called active substances (the active components against pests or plant diseases in a plant protection product) and the introduction of a new national power to establish a UK renewal programme for these substances to replace the current EU power, as their approval is time-limited. Furthermore, the instruments propose to

5 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) 3 remove provisions for parallel trade permits, which allow a plant protection product that is authorised in one Member State to be authorised in another and which, according to Defra, will become inoperable after exit. The Explanatory Memoranda to the draft Regulations, and a shared assessment of their impact, refer to additional costs for government from operating the new national regime, but do not quantify these costs. The Department told the Committee that the extra costs are expected to amount to less than 10 million per year and will be funded through taxation. Defra also said that a separate statutory instrument will be laid before Parliament in due course to make minor adjustments to some of the fees that the Health and Safety Executive, as the UK s national regulator, charges for its plant protection work. Draft Solvency 2 and Insurance (Amendment, etc.) (EU Exit) HM Treasury Impact Assessment - Correspondence 3. In the Explanatory Memorandum (EM) to these Regulations, HM Treasury (HMT) says that the Solvency 2 Directive, 1 which implemented a harmonised prudential framework for insurance and reinsurance firms in the EU, has been transposed into UK law by statutory instrument 2 and through the Prudential Regulation Authority Rulebook. Current UK Solvency 2 legislation is drafted on the basis that the UK is a member of the EU, and treats countries in the EEA differently to other third countries. This instrument will amend the legislation implementing Solvency 2 so that it operates effectively in a UK-only context. 4. In the EM, HMT refers to the possibility that, as a result of changes made by these Regulations, some UK insurers could face higher capital requirements unless they divest themselves of European Economic Area risk-weighted assets and exposures which will no longer be given preferential treatment. HMT has laid an Impact Assessment (IA) with these Regulations, but this offers no quantification of the costs that might arise to UK insurers if that possibility came to pass. HMT has told us that the impact of removing the preferential treatment of EU assets and exposures will depend on the exposures of individual firms. We do not hold this information and unfortunately it was not possible to quantify the estimated impact on the insurance industry in the time available. As we were unable to estimate the impact, it is not reflected in the table on pages 47 and 48 [of the IA] as this covers only the monetised nonfamiliarisation costs of the various SIs. 5. HMT laid the same IA alongside the draft Credit Rating Agencies (Amendment, etc.) (EU Exit), which we previously drew to the attention of the House. 3 We wrote to the Economic Secretary to the Treasury about that IA, and have now received a reply. We are publishing that correspondence at Appendix 1 to this report. 1 Directive 2009/138/EC, together with Delegated Regulation EU No. 2015/35. 2 Solvency 2 Regulations 2015 (SI 2015/575). 3 11th Report, Session (HL 260).

6 4 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) Sanctions (Amendment) (EU Exit) Regulations (SI 2019/26) 6. This instrument, laid by the Foreign and Commonwealth Office, maintains elements of the existing UN arms embargo regimes in respect of Afghanistan, the Central African Republic, Lebanon, Somalia, and Sudan, which currently operate through EU Council Regulations. In particular, it relates to the prohibitions on providing technical assistance, financing or brokering services in relation to arms. This instrument will ensure continuity of these sanctions regimes between exit day and new regulations being made under the Sanctions Act 2018 to replace these regimes substantially. Existing prohibitions on the sale, supply, transfer or export of arms are contained in EU Council Decisions (which will not be retained EU law), and so will continue to be implemented domestically using the Export Control Order 2008 (SI 2008/3231) after exit day. A separate instrument to maintain assetfreezing measures will be also be brought forward shortly.

7 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) 5 INSTRUMENTS NOT DRAWN TO THE SPECIAL ATTENTION OF THE HOUSE Draft instruments subject to affirmative approval Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Judicial Pensions and Fee-Paid Judges Pension Schemes (Amendment) Northern Ireland (Ministerial Appointment Functions) Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Pesticides (Maximum Residue Levels) (Amendment etc.) (EU Exit) Plant Protection Products (Miscellaneous Amendments) (EU Exit) Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Draft instruments subject to annulment Alteration to the provisions of Rule 160 of the Highway Code 2019 Instruments subject to annulment SI 2018/1393 Nagoya Protocol (Compliance) (Amendment) (EU Exit) Regulations 2018 SI 2019/26 Sanctions (Amendment) (EU Exit)

8 6 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) Appendix 1: CORRESPONDENCE ON IMPACT ASSESSMENT WITH ECONOMIC SECRETARY TO THE TREASURY Letter from Lord Trefgarne, Chairman of the Secondary Legislation Scrutiny Committee, to Mr John Glen MP, Economic Secretary to the Treasury The Committee considered these Regulations, and the Impact Assessment (IA) laid alongside them, at its meeting on 7 January. We are bringing the Regulations to the special attention of the House in our Report this week, and also commenting on the IA. The IA details the impact on financial services businesses not only of this instrument, but of nine others, all but one of which have already been laid before Parliament. The Committee had concerns about the adequacy of the IA and the reliability of the estimate of some 140 million as the total cost to financial services businesses of implementing these instruments. In the IA, your Department states that no IA was prepared for consultation with those affected, and also that the time available made it impossible to engage with the financial services industry in sufficient detail to monetise the costs associated with the SIs. It also states that most of the direct costs to business result from familiarisation with the amended legislation. While the formulae used for calculating such costs are given, the resulting level of costs seems surprisingly low, at least in the case of some of the instruments. We would be interested to know more about the evidence base which your Department used for the IA, particularly given the limitations described on consultation with those affected. I would be grateful if you could respond on this issue, and the other points made in this letter, by close on Tuesday 15 January. 8 January 2019 Letter from Mr John Glen MP to Lord Trefgarne I am writing in response to your letter of 9 January In your letter you noted that the Secondary Legislation Scrutiny Committee had brought the above Regulations to the special attention of the House, and commented on the above associated impact assessment. This letter expands on the evidence base and assumptions used by HM Treasury in preparing the impact assessment. The impact assessment covers the above Regulations and another eight statutory instruments being laid before Parliament by HM Treasury in preparation for the UK s departure from the European Union. HM Treasury has worked at pace to prepare a comprehensive impact assessment whilst also undergoing the necessary scrutiny prior to publication, engaging extensively with the financial regulators (the Financial Conduct Authority and the Bank of England/ Prudential Regulation Authority). The impact assessment received a fit for purpose rating from the Regulatory Policy Committee on 19 November 2018 and was published shortly thereafter. Unfortunately, this meant that for several debates the impact assessment was not available for reference.

9 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) 7 The impact assessment assesses the impact of the changes made by these instruments to fix deficiencies in existing legislation, compared to the UK statute book as it is expected to be prior to the UK leaving the EU. The impact assessment does not consider the broader impact of the UK s departure from the EU, which will necessarily entail additional costs. The impact assessment details several instruments because the impact of these provisions on business is best understood when considering them as a package of interlinked reforms. Additionally, the full impact of these instruments is necessarily dependent on the wider circumstances of the UK s departure from the EU, including other instruments made under the European Union (Withdrawal) Act 2018, amendments to other related legislation, and subsequent action taken by industry, the financial regulators and the European authorities. The impact assessment states that it has not been possible to undertake a formal consultation with industry on the instruments, and therefore no Consultation Stage Impact Assessment was prepared. However, HM Treasury has engaged extensively with industry throughout the drafting process. Industry stakeholders are supportive of the Treasury s work to ensure that there will be a functioning financial services regulatory regime at the point where the UK leaves the EU in any scenario, including if no deal is agreed. These instruments are not intended to make policy changes, but to amend deficiencies in retained EU legislation that arise as a result of the UK leaving the EU. Therefore, the instruments being prepared by HM Treasury in preparation for the UK s departure from the EU are intended to broadly preserve the status quo. The impact assessment details the assumptions and limitations of the analysis presented. As these instruments are not intended to make policy changes, but rather amend deficiencies in order to ensure a functioning regulatory regime for financial services once the UK has left the EU, the estimated costs presented in the impact assessment primarily comprise of familiarisation costs. Where additional direct costs to business have been identified, such as changes to IT systems or changes to reporting requirements, these have been indicated and quantified where HM Treasury and the financial regulators have been able to provide this information. Familiarisation costs have been provided as an indication of the impact of these instruments on business. However, the impact of each instrument will vary depending on the nature of firms affected, the types of activities these firms undertake, and how firms choose to respond to the changes introduced by these instruments. These variations, and the complex interdependencies between these and other related instruments, make it difficult to identify distinct impacts and provide an assessment of what firms will be affected and how. However, despite these limitations we believe the impact assessment provides a good overview of the impact of these instruments. Without these instruments, the UK financial services sector would face far greater costs and far greater uncertainty due to defective legislation and subsequent risks to financial stability, and potential disruption to market access. I therefore believe that these instruments deliver significant benefits and ensure there will be robust regulatory oversight of the financial services sector following the UK s departure from the EU.

10 8 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) I hope this addresses the Committee s concerns and I am happy to answer further questions. I will deposit this letter in the House Libraries. 16 January 2019

11 SECONDARY LEGISLATION SCRUTINY COMMITTEE (SUB-COMMITTEE A) 9 Appendix 2: INTERESTS AND ATTENDANCE Committee Members registered interests may be examined in the online Register of Lords Interests at The Register may also be inspected in the Parliamentary Archives. For the business taken at the meeting on 21 January 2019, Members declared the following interests: Draft Pesticides (Maximum Residue Levels) (Amendment etc.) (EU Exit) Draft Plant Protection Products (Miscellaneous Amendments) (EU Exit) Lord Walker of Gestingthorpe Gestingthorpe Farming Company Limited (arable farming in north Essex) Attendance: The meeting was attended by Lord Chartres, Lord Faulkner of Worcester, Baroness Finn, Lord Hogan-Howe, Lord Lilley, Lord Sharkey, Lord Trefgarne and Lord Walker of Gestingthorpe.