Tenth Report Contents

Instruments of interest

Draft Fisheries (Amendment) (EU Exit) Regulations 2019

5.These draft Regulations seek to correct deficiencies in primary and secondary legislation in relation to the EU’s Common Fisheries Policy to ensure that the legislation can operate effectively, and that the UK fisheries sector can continue to be regulated in a sustainable way after the UK leaves the EU. While the Department for Environment, Food and Rural Affairs (Defra) states that the draft Regulations respect existing devolution settlements and do not propose substantive changes to policy, the Explanatory Memorandum (EM) provides limited information and evidence to support this assertion. The EM lists the different pieces of primary and secondary legislation that are to be amended, relating to sea fisheries, inland fisheries, marine management and food, but does not explain sufficiently whether the proposed changes will have any impact on the fisheries sector after EU exit. Defra has provided further explanation of the proposed changes to the Committee which we have asked the Department to reflect in a revised EM. The Committee urges the Department to ensure that in future the explanatory information provided in support of secondary legislation is sufficiently comprehensive to enable effective Parliamentary scrutiny.

Draft Market Abuse (Amendment) (EU Exit) Regulations 2018

6.In the Explanatory Memorandum (EM) to these Regulations, HM Treasury (HMT) says that, in 2014, the EU enacted more stringent legislation against market abuse, the Market Abuse Regulation (MAR).1 In order to increase market integrity and investor protection, the MAR contains prohibitions on insider dealing, unlawful disclosure of inside information and market manipulation, and provisions to empower the regulators of Member States to prevent and detect these.2

7.HMT says that the draft Regulations do not alter the policy approach of the current market abuse regime but make certain amendments to reflect the UK’s new position outside the EU. The principal amendment is to provide that financial instruments admitted to trading or traded on UK venues continue to be within scope of regulation in the UK after the UK leaves the EU, in addition to continuing to include those admitted to trading or traded on EU venues. In the EM, HMT says that the decision to keep instruments admitted to trading or traded on EU venues, rather than amending to a UK-only scope, was taken because of the close relationship between UK and EU markets.

8.We obtained further information from HMT about this decision, and the possibility that regulatory action might be duplicated, which we are publishing at Appendix 1.

Convention on the Simplification of Formalities in Trade in Goods (Cm 9746)

Convention on Common Transit Procedures (Cm 9748)

9.These two Conventions aim to maintain the speedy transit of goods across borders by allowing the collection of tariffs and duty liabilities inland (rather than at the border itself). Membership of the Convention on Common Transit Procedure (CTC) allows for the movement of goods under duty suspension across the Contracting Parties’ customs territories, provided a financial guarantee is in place to cover any potential duty liabilities, which are payable when the goods reach their final destination. The UK is currently a member of the CTC, as a member of the European Union, but this provision will fall on exit day in the case of ‘no deal’. These treaties will allow the UK to accede to the CTC in its own right. A number of statutory instruments support these arrangements but are for scrutiny by the Commons only.3 The companion Convention on the simplification of formalities in trade in goods performs much the same role but, in respect of trade with European Free Trade Association states, Turkey, Serbia and the Former Yugoslav Republic of Macedonia, introduces a single administrative document for use between all Contracting Parties. Whilst the governing Joint Committee voted in favour of the UK acceding to the Conventions on 4 December, the official invitation to accede is still awaited. The UK’s formal instrument of accession needs to be lodged by 31 January 2019 to ensure arrangements are in place by 29 March 2019.

Branded Health Service Medicines (Costs) (Amendment) Regulations 2018 (SI 2018/1255)

10.The cost of branded health service medicines is controlled through two schemes: the statutory scheme and the voluntary scheme. The voluntary scheme is agreed between the industry body that represents manufacturers and suppliers of branded health service medicines and the Secretary of State. Companies which choose not to join the 2014 Pharmaceutical Price Regulation Scheme, are subject to the statutory scheme.4 From 1 April 2018, a 7.8% payment percentage on sales was introduced to limit spend on branded health service medicines under the statutory scheme. However, the Department of Health and Social Care (DHSC) considers “a 7.8% payment percentage going forward does not deliver the Government’s objective of constraining branded medicines spending growth to within allowable limits and therefore payment percentages will have to be amended from 2019 onwards”. These Regulations amend the payment percentages so that certain manufacturers and suppliers of branded health service medicines pay to the Secretary of State 9.9% in 2019, 14.7% in 2020 and 20.5% in 2021 of their net sales income received for the supply of those medicines. Industry were opposed to an increase, as they say it would be detrimental to profitable supply of medicines in the UK. The changes are expected to reduce pharmaceutical company revenues of £152 million by 2021. However, DHSC considers that it has sought to establish what an appropriate measure is, to limit the growth of branded health service medicines to a level that secures the financial position of the NHS and balances the Government’s overall objectives for the statutory scheme. The policy is expected to reduce NHS costs by £152 million by 2021.

Electronic Monitoring (Responsible Persons) (Amendment) Order 2018 (SI 2018/1277)

11.Following up a previous pilot to test the effectiveness of electronic monitoring using GPS tags,5 as an alternative to jail, for persistent offenders given a community sentence, this instrument enables the extension of the pilot to those convicted with possession or use of a knife. The Order appoints Buddi Limited to monitor the tagged subjects. The proposed pilot is part of the London Mayor’s Office for Policing and Crime’s strategy to reduce knife crime in London. According to the Explanatory Memorandum, the pilot’s aims include: challenging offenders’ thinking around carrying a knife and providing a deterrent; disrupting gang activity; improving the protection of the general public; and increasing the subjects’ compliance with the conditions for their release on licence. The pilot will also test the response by decision-makers when imposing a GPS tag as a licence condition. The pilot is due to run for 12 months and it is anticipated that between 50 and 100 subjects will be tagged. The Ministry of Justice intends that the information gleaned from this pilot should inform the development of its new national electronic monitoring service.

Local Government (Structural and Boundary Changes) (Amendment) Regulations 2018 (SI 2018/1296)

12.In the Explanatory Memorandum (EM) to these Regulations, the Ministry of Housing, Communities and Local Government (MHCLG) says that they update four sets of existing Transitional Regulations6 with respect to changes in legislation and policy affecting the duties and functions of local authorities undergoing structural change; and that, in particular, they update provisions relating to finance and council tax made by the Local Government (Structural Changes) (Finance) Regulations 2008 (SI 2008/3022: “the 2008 Regulations”). MHCLG says that, while the Regulations are of general application, in the first instance they will apply to local government reorganisation in Bournemouth, Dorset and Poole; in East Suffolk and West Suffolk; and in Somerset West and Taunton.

13.As regards the first of these reorganisations, the Secondary Legislation Scrutiny Committee drew the draft Dorset (Structural Changes) (Modification of the Local Government and Public Involvement in Health Act 2007) Regulations 2018, and the draft Bournemouth, Dorset and Poole (Structural Changes) Order 2018, to the House’s attention in its 26th Report of this Session.7 The Committee noted the scale of opposition to the reorganisation proposal expressed both by Christchurch Borough Council and by its residents.

14.In the EM to the latest Regulations, MHCLG says that 26 representations were received from one MP, eight Councillors, and 17 members of the public “in one area in Dorset”, asking that the Regulations, rather than allowing local preference, should require council tax harmonisation on day one of reorganisation. In response to our questions, MHCLG has confirmed that the area mentioned is Christchurch.

15.We also asked whether the approach to council tax harmonisation in these Regulations was precedented. MHCLG has told us that “allowing local authorities to decide their approach to harmonisation within a maximum period set by government was the approach already enabled by the [2008 Regulations] which these regulations update. In the past, local authorities could choose what approach to take to harmonisation within five years and this approach was set in consultation with the local authorities at the time. These regulations extend the maximum timeframe allowed to seven years, following consultation with the affected local authorities undergoing structural and boundary change now. This allows all those shadow authorities who expressed their local preference to harmonise in accordance with that preference.”

European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2018 (SI 2018/1298)

16.The purpose of this instrument is to enable companies which are currently registered in the UK as so-called European Public Limited-Liability Companies (Societas Europaea or SEs) to automatically convert to a new legal entity (UK Societates), to ensure that they have a clear legal framework after the UK’s withdrawal from the EU. The Department for Business, Energy and Industrial Strategy (BEIS) says that approximately 49 SEs are registered in the UK at present, primarily in the insurance sector and including holding companies with no employees and companies with large operations elsewhere in Europe and only the head office in the UK. BEIS explains that the automatic conversion process of SEs to UK Societates will retain the structure of SEs and provisions relating to accounts, winding-up, liquidation, insolvency and cessation of payments, with the intention of providing legal certainty for those SEs which choose not to transfer their registered office to another Member State or convert to a UK public limited company before exit day. The instrument also makes provisions to facilitate the conversion of SEs into UK public limited companies, by removing current requirements for SEs to be registered in the UK for a minimum period of two years, or to have the first two sets of annual accounts approved.

1 Regulation (EU) No 596/2014 on market abuse.

2 The Secondary Legislation Scrutiny Committee published information about the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 (SI 2016/680), which amended UK law to ensure its compatibility with MAR, in its 5th Report of Session 2016–17 (HL Paper 25).

3 A list of the SIs, guidance and other relevant instructions are available at: HM Government, Customs, VAT and Excise regulations: leaving the EU with no deal (18 December 2018): https://www.gov.uk/government/collections/customs-vat-and-excise-regulations-leaving-the-eu-with-no-deal [accessed 18 December 2018].

4 The statutory scheme is set out in the Branded Health Service Medicines (Costs) Regulations 2018.

5 Global Positioning System (GPS) tagging is attaching a small transmitter to a person which sends a signal to the GPS satellite network, enabling it to be traced.

7 26th Report, Session 2017–19 (HL Paper 125).

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